March 28, 2018August 24, 2023

Real Estate Should Be Put in a Trust

In most cases, real estate has to go through the probate process after the owner passes away. That can be avoided. There is a good way and a bad way to do so.

Many Americans could avoid having their estates go through probate, if they did not own their homes. For many people, their home is their most valuable asset. Without the home, their estate would be small enough to avoid probate.

In most places, all real estate must go through probate after the owners pass away. Otherwise, the deed will not be properly changed and recorded. Some people seek to avoid this problem by adding someone else’s name to their deed before they pass away. This is usually a child or maybe a grandchild, but it is almost always a bad idea.

The Daily Republic discussed this matter in “All Things Real Estate: Living trust best way to pass house to children.”

Among other problems, adding someone’s name to your real estate deed makes it available to that person’s creditors. That sometimes does not become a problem. However, when it does, it is normally a big one.

A much better way to avoid having real estate go through probate, is to create a revocable living trust. The real estate can be transferred to the trust and will not have to go through probate, after the owner passes away.

If you would like to create a trust for your home, contact an estate planning attorney about it and other probate avoidance ideas.

Reference: Daily Republic (March 3, 2018) “All Things Real Estate: Living trust best way to pass house to children.”

December 28, 2017October 25, 2023

Incapacity Planning

It is important that you make plans for what will happen to your family and your possessions after you pass away. It is also important to plan for what will happen to them, if you are incapacitated.

You might be aware that you need a will or a trust, so you can make sure your family is taken care of after you pass away. Getting a will or trust also lets you determine what happens to your property after you pass away.

If you have not done so, you really should see an estate planning attorney to get a will or trust as soon as possible, just in case.

While you are at the attorney’s office, you should also get plans for what might happen if you become incapacitated, as the Times Herald-Record discusses in “Make plans in case you are incapacitated.”

The issue is that if you are incapacitated, someone else needs the legal authority to act on your behalf.

Someone will need to be able to handle your bills and to make medical decisions for you, should it be necessary.

If you do not plan ahead, it can be a difficult process for someone else to get the legal authority.

Someone will have to hire an attorney and go to court to get a judge’s permission to act as your guardian.

Fortunately, planning for what will happen if you become incapacitated is not difficult.

You just need a general durable power of attorney and a health care power of attorney.

The estate planning attorney can prepare both of them for you.

Reference: Times Herald-Record (Dec. 12, 2017) “Make plans in case you are incapacitated.”

October 13, 2017

Cutting a Child Out

Wealthy parents often have extremely high expectations for their children. They want their children to go to school, get a good job, raise a family and do all of the things that made the parents so successful.

However, sometimes a child just does not live up to those expectations.

Sometimes there is a black sheep who does everything the parents would not want him or her to do.

If the problems are severe enough, then the parents might even stop contact with the child and seek to cut him or her out of their estates.

The latter is often a bad idea, as the Globe and Mail discusses in "Think twice, wealthy family, before cutting the black sheep out of your will."
One big thing to consider is that a child who receives nothing has no incentive to not cause problems.

A no-contest clause can prevent someone who does receive an inheritance from challenging an estate plan that they do not like, but it cannot prevent someone from doing so who is set to receive nothing or very little from an estate.

This can make cutting a child out of an estate plan a very expensive proposition. This is because the child has no reason to not launch legal fights.

A black sheep child can also be more easily controlled by using an estate plan to incentivize that child into desired behaviors.

An estate planning attorney can help you create a trust, for example, that only distributes money to the child when certain actions are taken by the child.

Reference: Globe and Mail (Sep. 19, 2017) "Think twice, wealthy family, before cutting the black sheep out of your will."

June 14, 2017

Consider a SLAT for an Uncertain Future

It is currently difficult to know what the best possible estate planning method might be in the near future, since tax reform is uncertain. A spousal lifetime asset trust can be used as a way to plan around that uncertainty.

Given recent events in Washington, it is understandable if wealthy people are more than a little nervous about their estate plans. Just as it appeared that Congress was about to turn its attention to long-promised tax reform, President Trump has been distracted by ongoing investigations into his campaign.

While a special counsel has been appointed to oversee that investigation, a continuing steady stream of leaks has kept the pressure on lawmakers. This casts doubt over their plans for tax reform, since it is a contentious issue that has many in Congress deeply divided.

It is not clear what the President wants on some of the key items of reform.

All of this makes it difficult for many wealthy people to know how effective their estate plans might be and how to make changes to them.

Recently, Wealth Management offered a solution to the uncertainty in the form of a spousal lifetime asset trust in "SLATs Provide Flexible Plans for Many Clients."

Like any other trust, SLATs do not have to go through probate. They also offer estate tax and capital gains tax benefits.

They key thing about them, is that they are an extremely flexible form of trust. They are more adaptable to changing circumstances than many other trusts.

That makes them a great tool for uncertain times, when no one can be certain what the tax future will look like.

If you are interested in a SLAT or want to know what your other current estate planning options are, talk to an estate planning attorney.

May 15, 2017

The Danger of Wills

It is easier to get wills today than it ever has been, since forms can be downloaded and filled out on your own. However, that ease has led to many people not understanding the potential dangers of wills.

That everyone should have an estate plan is a principle which most people understand when the reasons are explained to them. Estate plans, even as simple as a will, at the very least can help prevent families from fighting over estates.

Since you do not know when you will pass away, you should go ahead and get an estate plan.

While most Americans still do not have a will, a greater percentage of Americans have them than ever before. It is easy and cheap to get wills today, since you can purchase downloadable forms from several different services.

However, there are some hidden dangers in doing that, as The New York Times explained in "Wills Can Avert Family Warfare, but Have Their Own Hidden Traps."

The biggest issue is that the probate process is different in every state.

Submitting a will to probate for administration, in some states, is very expensive and can take a long time. That suggests that probate avoidance strategies should be used, which could lead some people to utilize a trust instead of a will as their primary estate planning vehicle.

Trusts, however, are more expensive to get than wills and in some states probate is relatively quick and inexpensive. Consequently, trusts may only be needed for people with larger estates.

There are other probate avoidance strategies that can be used, but they also have their drawbacks. For example, retitling an asset as joint property with a child, which is a common tactic, can make the asset vulnerable to the child's creditors.

The best thing to do is to hire an experienced estate planning attorney in your state, so that attorney can help you with the best estate planning strategy for your state and your estate.

Reference: New York Times (April 21, 2017) "Wills Can Avert Family Warfare, but Have Their Own Hidden Traps."

February 10, 2017

Trump’s Choice for Secretary Nominee Has a Dynasty Trust

President Trump's choice for Treasury Secretary has created some controversy as ethics disclosures have revealed that he has placed assets into a dynasty trust.

President Obama has repeatedly asked Congress to address dynasty trusts. These are trusts designed to keep wealth in one family for many generations. Properly designed and administered, these trusts can help to legally avoid paying estate taxes for generation after generation, while continuing to generate wealth.

Some lawmakers view this as taking advantage of tax loopholes, while others believe that allowing dynastic wealth for generation after generation is bad in itself.

For his part, President Trump would make such trusts a thing of the past. He has said that he would eliminate the estate tax entirely, which makes dynasty trusts unnecessary.

His choice for Treasury Secretary Steven Mnuchin, however, has brought the issue to the forefront, since it has been revealed that Mnuchin created a dynasty trust for his family.

This is reported by Financial Advisor in "Trump's Treasury Pick May Have Used Tax Loophole Obama Attacked."

It is actually true that dynasty trusts exist because of something of a loophole.

Congress never intended for them to be created. For centuries, the English common law inherited by the U.S. prohibited trusts that violated the rule against perpetuities. This rule is extremely complicated and limits the duration of trusts.

When Congress last worked out the basic structure of the federal estate tax, it assumed the rule would be in place. At the time, the rule was the law in every state.

Over the years, however, several estates have repealed the rule against perpetuities in an effort to entice trust business into their states.

That made dynasty trusts possible.

Reference: Financial Advisor (Jan. 12, 2017) "Trump's Treasury Pick May Have Used Tax Loophole Obama Attacked."

November 22, 2016February 23, 2022

Do You Want a Will or a Trust?

One of the first things that people have to decide when they start thinking about estate plans is whether they want to use a will or a trust. Both have their advantages.

If you start asking your friends and family or look on the Internet for estate planning advice, then you are likely to receive a lot of conflicting advice. Should you get a will or a trust? Nearly everyone seems to have an opinion one way or another. You can find out more about the basics of estate planning on our website.

Normally, the opinion of non-attorneys is rooted in which of the two options was best for the person giving the advice. It may or may not be the best advice for you.

To help decide the better option to use as the primary legal instrument in your estate plan it is helpful to know the basic differences between the two.

This was the subject of a Motley Fool article titled “Wills vs. Trusts: Which Are Better?” We also

A will determines who gets your possessions after you pass away. It has no legal effect until then. It is a roadmap for what you want to happen later. The rules for wills vary from state to state, but they need to go through probate court and the details are made public. For people with small estates they can be cost-effective.

Trusts, on the other hand, have legal effect as soon as they are executed. Property is placed in the trust while you are still alive. While trusts can be more costly to obtain and maintain, they do not ordinarily have to go through probate after you pass away and the details are not made available to the public. Trusts are normally preferred to wills for larger estates.

If you are uncertain whether a will or trust is a better option for you, that is okay. You probably should not decide between the two before talking to an estate planning attorney who can help you make the decision. Schedule a consultation if you would like to learn more.

Reference: Motley Fool (Nov. 8, 2016) “Wills vs. Trusts: Which Are Better?”

November 9, 2016October 25, 2023

Putting Your Home in a Trust

If you have decided to get a trust it often makes sense to put your big assets, such as your home, in the trust.

People who get living trusts always have questions about what kind of assets they should put in their trusts, especially whether or not to put their home in it.

Recently, FOX News discussed this in “Why Should I Put My Home in a Living Trust?”

To understand the answer to the question, it is important to understand the main purpose of most living trusts.

Most people who get living trusts do so to avoid having their estate go through probate after they pass away, which is necessary if someone passes away with or without a will.

Probate can be costly and time-consuming, especially when there is a dearth of practical information left behind regarding where the legal documents and assets are.

With a living trust people can use their assets while they are alive and then after they pass away those assets can be distributed to the beneficiaries of the trust without going through probate.

The trustee, not a probate court, is responsible for making sure everything is handled appropriately. It can be faster and cheaper. The most valuable asset for many people is their home, so it only makes sense to include that in the trust rather than having it go through probate.

Of course there are many other reasons to get a trust, such as for estate tax purposes. There are also many different types of trusts that can be used for other purposes.

If you would like to know more about living trusts and what you can do with one, talk to an estate planning attorney.

Reference: FOX News (October 5, 2016) “Why Should I Put My Home in a Living Trust?“

October 18, 2016

Life Insurance Trusts

Life insurance is a great way to provide your family with liquid assets after you pass away, but if the policy benefits would put your estate over the estate tax exemption, then you might consider a trust.

When planning the estate of a family's primary breadwinner one of the biggest concerns is providing the necessary cash assets for the rest of the family to live on while everything else gets settled. This is especially the case if the estate is expected to go through probate or if most of the estate assets are difficult to sell quickly.

One of the best ways around this problem is through the use of life insurance. The policies pay out in cash almost immediately. However, as Forbes points out in "3 Considerations for an Irrevocable Life Insurance Trust" the solution is not always perfect.

One of the problems with life insurance policies is that the benefits can be counted for estate tax purposes. This is especially problematic if the benefits would put your estate over the exemption limit when it would not be otherwise.

One way to get the advantages of life insurance while avoiding the estate tax problem is to create an irrevocable life insurance trust. The trust becomes the owner and the beneficiary of the life insurance policy and keeps the benefits out of the estate tax calculations. However, if you transfer ownership of an existing life insurance policy, then you must live for three years to avoid having the IRS include the death benefit value in your estate anyway.

If you have questions about irrevocable life insurance trusts or other ways to provide liquid assets to your family after you pass away, then speak with an estate planning attorney about the options.

Reference: Forbes (Sept. 19, 2016) in "3 Considerations for an Irrevocable Life Insurance Trust."

October 6, 2016

What Is Your Estate Planning Attorney Talking About?

Estate Planning Attorneys talk about a lot of different legal documents. You need to know what those documents are.

When you visit with an estate planning attorney, the attorney is likely to mention the names of several different legal documents. If you want to understand what the attorney is talking about, then you will need to know what those documents are.

Most attorneys would be happy for you to ask if you do not know. Answering questions is what the attorney is there for. However, if you are not comfortable asking basic questions, then you should learn some basics beforehand.

Recently, the Ventura County Star published a list of basic estate planning documents and what they do in "Get to know estate planning documents." The list includes:

Advance Directive – Tells doctors and other health care professionals what procedures not to perform if you are terminally ill and have no chance of recovery.
Asset Inventory – A list of all of your assets to let your estate executor know what you have after you pass away.
Beneficiary designations – Life insurance, retirement accounts, and other financial accounts you designate to go to a specific person after you pass away.
Power of Attorney – Allows for someone else to handle your finances if you are incapacitated.
Power of Attorney for health care – Allows for someone else to make medical decisions for you if you are incapacitated.
Record of Locations – A list of where your heirs can find all the important financial and legal documents after you pass away.
Trust agreement – A method of passing assets to others while having those assets maintained by a third person.
Will – The most common estate planning document that says how assets should be distributed after you pass away via probate.

A qualified estate planning attorney can help you decide the best legal documents to use for your unique circumstances.

Reference: Ventura County Star (Sept. 17, 2016) "Get to know estate planning documents."

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Tag: Trust