FAQ: Why are the documents so long and complicated looking?

Jody sues Jerry over a few words in a will because Jody thinks she should get all of the property. The judge makes his ruling. Jody does indeed get it all in spite of the desire of the testator to split it evenly. Now, every trust and will has to have language added to cover this case.

Blame our lawsuit happy society. Every time a lawsuit is decided, language needs to be added to the documents to answer the questions that came up in the lawsuit.

It is also much better to define terms in the documents and spell out powers and responsibilities as much as possible. That way, the documents are not so specific to a particular state.

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Top 12 Benefits of Estate Planning – #5

Another great benefit of estate planning is that the person is able to protect the inheritance of his or her children in the event that his surviving spouse gets remarried after his death with someone who has children. If the will is planned carefully then the inheritance of the children is protected while the surviving spouse is still provided for. By doing this, the worry factor about the children or stepchildren from a later marriage claiming the part of the estate is been eliminated. An estate attorney knows how to make sure your belongings go to your children only.

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10 Types of Trusts: A Quick Look

Considering the myriad of trusts available, creating an estate plan that works can seem daunting. However, that’s what we, as estate planning attorneys, do every day. We know the laws and will design a plan which addresses your specific situation.

Here’s a look at the basics of ten common trusts to provide a general understanding. There will not be a quiz at the end. All you need to do when we meet is share your goals and insight into your family and financial situation, we’ll design a plan that incorporates the best documents for your situation.

1. Bypass Trusts. Commonly referred to as Credit Shelter Trust, Family Trust, or B Trust, Bypass Trusts do just that: bypass the surviving spouse’s estate to take advantage of tax exclusions and provide asset protection.

2. Charitable Lead Trusts. CLTs are split interest trusts which provide a stream of income to a charity of your choice for a period of years or a lifetime. Whatever’s left goes to you or your loved ones.

3. Charitable Remainder Trusts. CRTs are split interest trusts which provide a stream of income to you for a period of years or a lifetime and the remainder goes to the charity of your choice.

4. Special Needs Trusts. SNTs allow you to benefit someone with special needs without disqualifying them for governmental benefits. Federal laws allow special needs beneficiaries to obtain benefits from a carefully crafted trust without defeating eligibility for government benefits.

5. Generation-Skipping Trusts. GST Trusts allow you to distribute your assets to your grandchildren, or even to later generations, without paying the generation-skipping tax.

6. Grantor Retained Annuity Trusts. GRATs are irrevocable trusts which are used to make large financial gifts to family members while limiting estate and gift taxes.

7. Irrevocable Life Insurance Trusts. ILITs are designed to exclude life insurance proceeds from the deceased’s estate for tax purposes. However, proceeds are still available to provide liquidity to pay taxes, equalize inheritances, fund buy-sell agreements, or provide an inheritance.

8. Marital Trusts. Marital Trusts are designed to provide asset protection and financial benefits to a surviving spouse. Trust assets are included in his or her estate for tax purposes.

9. Qualified Terminable Interest Property Trusts. QTIPs initially provide income to a surviving spouse and, upon his or her death, the remaining assets are distributed to other named beneficiaries. These are commonly used in second marriage situations and to maximize estate and generation-skipping tax exemptions and tax planning flexibility.

10. Testamentary Trusts. Testamentary Trusts are created in a will. These trusts are created upon an individual’s death and are commonly used to provide for a beneficiary. They are commonly used when a beneficiary is too young, has medical or drug issues, or may be a spendthrift. Trusts also provide asset protection from lawsuits brought against the beneficiary.

There are many types of trusts available. We’ll help you select which trusts, if any, are a good fit for you. Call today. We’re waiting to hear from you.

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FAQ: Can I keep my children from squandering the money?

Leo’s parents passed after a car accident when he was 18 years old. Leo really did not have a lot of life experience managing money. However, his parents had a $1,000,000 life insurance policy that he was the beneficiary of. Leo took a lot of trips (first class of course), bought gifts for his friends, bought a sports car, etc. At the end of two years Leo had a used sports car, no education, and the start of a large debt load.

If you think that sounds out of the ordinary, the average for a lawsuit settlement is 2.5 years until spent. This is regardless of the size of the settlement. Why should an inheritance be any different?

The answer is to put the money into a trust that guides how the money is to be spent until a person matures and has more experience in managing money. One of the author’s favorites is to pay children an allowance and for education until they reach a more mature age.

WHERE MAY I SEND YOUR FREE BOOK WITH ANSWERS?

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Wills vs. Trusts: In Plain English

Everyone has heard of wills and trusts. Most articles written on these topics, however, often presume that everyone knows the basics of these important documents. But, in reality, many of us don’t – and with good reason – as they’re rooted in complicated, centuries-old law.

Let’s face it, if you’re not an estate planning attorney, these concepts tend to remain merely that – concepts. So, if you’re “fuzzy” about wills and trusts, know that you are not alone. After we show you the difference between these two documents, we’ll tell you why a trust is the better choice.

Wills vs. Trusts: Defined

Let’s take a minute and define both “will” and “trust”:

 

Will. A will is a written document that is signed and witnessed. A will is considered a “death” document as it only goes into effect when you die.
A will:

• provides for the distribution of assets owned by you, but not assets directed to others through beneficiary designations (e.g. life insurance or retirement benefits)
• sends assets in your individual name or payable to your estate through the probate process
• allows you to appoint permanent guardians for your minor children
• names the person you wish to settle your estate (e.g. executor or personal representative)
• doesn’t always include protective trusts for beneficiaries and tax planning because many wills are simple 2-3 page documents
• permits you to revoke or amend your instructions during your lifetime
• tends to cost less than a trust on the outset but costs more to settle during court proceedings after death

Trust. A trust is a legal document, signed and witnessed, and effective during your lifetime, during any period of disability, and after death. Because the trust is effective during your lifetime and you can change it, it’s referred to as a “living” document.

A trust:

• has lifetime benefits
• provides for the distribution of your assets
• avoids probate if fully funded
• provides for a successor trustee upon your death or incapacity
• allows for the management of your property – even if you’re incapacitated
• can address appointing disability guardians for minor children
• often includes protective trusts for beneficiaries and tax planning
• permits you to revoke or amend your wishes during your lifetime
• costs more than a simple will on the outset but much less upon administration, while typically providing significantly more value

The Probate Process: A Key Element in Deciding Between a Will and Trust
One key element in deciding between a will and a trust is understanding the probate process. The term “probate” – which literally means “proving” – refers to the process wherein a decedent’s will must be authenticated, outstanding legitimate debts paid, and assets transferred to the beneficiaries.

The downside is that probate can take a long time – even years – it’s expensive in many places and the entire process is completely public, meaning your nosey neighbor Nancy and evil predator Paul both know exactly who got what and how to contact them. In virtually all cases, the only upside of probate is that creditor claims are cut off.

• Probate Guaranteed with a Will. If you use a will as your primary estate planning tool, you own property in your individual name, or property is made payable to your estate, probate is guaranteed.
• Probate Avoided with a Trust. If you use a fully-funded trust as your estate planning tool, probate is avoided – saving your family time and money.

The Bottom Line on Wills vs. Trusts
HOW TO DECIDE: As everyone’s situation is different, it’s important to analyze every aspect of your situation – and what the future may hold – so that you can determine what’s right for you and whether probate avoidance, incapacity planning, and trust protections have value to you and those you love. Most people receive the greatest overall benefit from having a trust.

ACT NOW:  Without an estate plan in place, you and your family are left completely unprotected. Call our office now and we’ll help you determine whether a will or a trust makes sense for your situation. You don’t have to make these decisions alone.

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Wills vs. Trusts: A Quick & Simple Reference Guide

Confused about the differences between wills and trusts? If so, you’re not alone. While it’s always wise to contact experts like us, it’s also important to understand the basics. Here’s a quick and simple reference guide:

What Revocable Living Trusts Can Do – That Wills Can’t

• Avoid a conservatorship and guardianship. A revocable living trust allows you to authorize your spouse, partner, child, or other trusted person to manage your assets should you become incapacitated and unable to manage your own affairs. Wills only become effective when you die, so they are useless in avoiding conservatorship and guardianship proceedings during your life.

• Bypass probate. Property in a revocable living trust does not pass through probate. Property that passes using a will guarantees The probate process, designed to wrap up a person’s affairs after satisfying outstanding debts, is public and can be costly and time consuming – sometimes taking years to resolve.

• Maintain privacy after death. Wills are public documents; trusts are not. Anyone, including nosey neighbors, predators, and unscrupulous “charities” can discover the details of your estate if you have a will. Trusts allow you to maintain your family’s privacy after death.

• Protect you from court challenges. Although court challenges to wills and trusts occur, attacking a trust is generally much harder than attacking a will because trust provisions are not made public.

What Wills Can Do – That Revocable Living Trusts Can’t                     

• Name guardians for children. Only a will – not a living trust or any other type of document – can be used to name guardians to care for minor children.

• Specify an executor or personal representative. Wills allow you to name an executor or personal representative – someone who will take responsibility to wrap up your estate after you die. This typically involves working with the probate court, protecting assets, paying your debts, and distributing what remains to beneficiaries. But, if there are no assets in your probate estate (because you have a fully funded revocable trust), this feature is not necessarily useful.

What Both Wills & Trusts Can Do:

• Allow revisions to your document. Both wills and trusts can be revised whenever your intentions or circumstances change so long as you have the legal capacity to execute them.

WARNING: There is such as a thing as irrevocable trusts, which cannot be changed without legal action.

• Name beneficiaries. Both wills and trusts are vehicles which allow you to name beneficiaries for your assets.

• Wills simply describe assets and proclaim who gets what. Only assets in your individual name will be controlled by a will.
• While trusts act similarly, you must go one step further and “transfer” the property into the trust – commonly referred to as “funding.” Only assets in the name of your trust will be controlled by your trust.

• Provide asset protection. Trusts, and less commonly, wills, are crafted to include protective sub-trusts which allow your beneficiaries access but keep the assets from being seized by their creditors such as divorcing spouses, car accident litigants, bankruptcy trustee, and business failure.

While some of the differences between wills and trusts are subtle; others are not. Together, we’ll take a look at your goals as well as your financial and family situation and design an estate plan tailored to your needs. Call us today and let’s get started.

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Top 12 Benefits of Estate Planning – #4

You may have some heirs who are inexperienced when it comes to managing their inheritance.

If such is the case then the inheritance may not be long-lasting and it might be spent on impractical things. By doing the planning beforehand, a person will be able to specify that what the inexperienced heirs should do with the assets which they have inherited to make sure that it is used for getting important things like good education, a nice house, making wise investments and others. Estate planners know how to implement estate law to protect them from themselves.

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