Will-Trust and Estate Planning

Estate Planning Items Everyone Needs

Many people mistakenly believe that estate planning is only necessary for the wealthy. In reality, a basic estate plan is essential for everyone, regardless of income or net worth, because we all want to minimize confusion, unnecessary costs, and stress for loved ones after a death. Estate planning can be a difficult topic for many families to address, but it’s a necessary one. Without proper preparation and documentation, assets—like houses, retirement plans and savings accounts—can end up in limbo for years, sometimes requiring expensive legal assistance to straighten matters out

At a minimum, everyone should have the following items in place:

An up-to-date will or trust.

If you don't have a Will, fate of your savings is in the hands of government, not in the hands of your children.

Wills are easy to create, but they require the distribution of assets to go through probate. Probate is a legal process that involves
• Validating a deceased person’s will;
• Identifying, inventorying, and appraising the deceased person’s property
• Paying debts and taxes;
• And ultimately distributing the remaining property as the will directs.

The probate process often requires a lot of technical paperwork and court appearances, and the resulting legal and court fees are paid from estate property—reducing the amount that’s passed on to heirs.

A trust can be more expensive to set up and requires professional assistance, but it provides benefits that a will cannot. First, when they’re structured properly, trusts will help avoid guardianship or conservatorship if you become incapacitated. A will only works after you've died; a trust, by contrast, works all the time, including periods of incapacity before death.

Trusts usually avoid probate, which helps beneficiaries gain access to assets more quickly as well as save time and court fees. Depending on how it’s structured, a trust may also reduce estate taxes owed and can protect an estate from heirs’ creditors.

A durable power of attorney.

A power of attorney is a written authorization that allows someone else to make financial and legal decisions for a person if that person should become hospitalized, disabled or otherwise incapacitated.

Not all powers of attorney are created equal. Some are put in place for short periods of time only—while a person is vacationing overseas but dealing with legal matters at home, for example. That’s why it’s important to have a durable power of attorney in place, which simply means that the agreement is not for a temporary period of time. It may be valid immediately when it’s signed, or it may go into effect at a later point. But what makes it “durable” is the fact that it will survive your later incapacity. (If a power of attorney is not durable, it is revoked when you become incapacitated – the very moment when you need it most.)

Powers of attorney for property should only be given to trusted individuals, ideally those who are good with financial and legal matters.

Medical powers of attorney can be separated and given to someone else, if desired

Updated beneficiary designation forms.

Beneficiary designation forms on life insurance policies, 401(k) accounts and other assets will generally override any conflicting provisions within a will or trust. It’s essential to make sure all forms are checked and updated regularly, ideally on an annual basis.

Why do I need a Will?

If you don't have a will, a court decides who gets your assets.

A will is a device that lets you tell the world whom you want to get your assets. Die without one, and the state decides who gets what, without regard to your wishes or your heirs' needs.

Why You May Need a Living Trust?

A living trust is an excellent way to avoid probate.

Probate is the legal process that inventories and distributes a person's property after death. Many people aim to avoid probate because it is time consuming and expensive.

Why should I assign Power of Attorney?

When you can't control your financial life, make sure someone you trust will by assigning power of attorney. No one is immune from aging or the loss of mental clarity that may come with it. And you're never immune to health crises that may leave you unable to handle the business of your life: paying bills, managing investments or making key financial decisions.

When Would I Need a Medical Power of Attorney?

A Medical Power of Attorney is used when you become unable to make healthcare decisions for yourself. For example, if you are unconscious after a car accident and you need a blood transfusion; if you are under anesthesia and you need to have a more extensive procedure than you initially consented to; or if you become mentally incompetent as a result of Alzheimer’s disease and you need medical treatment..

Important Questions & Answers about Will and Living Trusts

Why do I need to legally prepare Will and Trust Agreement?

Every four minutes someone dies unexpectedly in the United States—not from age or sickness but unexpectedly. Lack of preparation needlessly adds cost, effort and distraction at a time when your family should be focused on mourning your loss.

What is a will?

A will is basically a letter of instruction to the court about what to do with your property after death. A will can do nothing until you are dead. Every will must go through probate. There is no exception.

What is probate?

Probate is the legal system’s solution for what happens to someone’s property after they die. The court determines whether there is a valid Will and appoints someone (the “personal representative”) to manage the estate. The Notice of the probate is given to the public and to creditors and the assets of the estate is determined. Creditors are paid and assets are disbursed to the heirs named in the Will or according to the priority established by law. Finally, documents are filed with the court to close the probate.

What is wrong with probate?

Probate is public so your affairs will be public records. Creditors or disgruntled family members can easily dispute, disrupt and delay the management and disbursement of the estate. Probate always involves the court and limits what your loved ones can do. Probate takes at least four to eight months but sometimes years. Probate can be expensive, especially if it is contested. Probate always costs much more than preparing a trust centered estate plan.

Does joint tenancy avoid probate?

Joint tenancy is a type of joint ownership in which the entire asset is transferred to the one joint owner upon the death of the other joint owner. It is true that this transfer does not require probate but if both owners die at the same time or if the second joint owner dies without proper planning, then probate will still be required.

What problems are there with joint tenancy?

When you add a joint owner you lose control of your property. If the joint owner is sued, the judgment will be a lien on your property. Joint tenancy often results in greater taxes. If the joint owner becomes incapacitated or a judgment is entered against the co-owner, you may end up controlling the property with a stranger. Joint tenancy does not allow the transfer on death to be flexible to account for future changes in your circumstances. It is not simple or easy to make wise decisions about joint tenancy. By the time you and your lawyer work through the possibilities and probabilities of the future it would have been simpler, easier, and more effective to have created a trust centered estate plan.

What if I become incapacitated?

Guardianship and conservatorship are the legal system’s solutions for what to do with a person who cannot make decisions regarding themselves or their property. A guardian has to report to the court and family members about the decisions that are made, usually for the rest of the person’s life. Therefore, being appointed guardian and reporting take time and money.

What is a durable power of attorney?

A “power of attorney” is a document in which you appoint someone to act for you. If it is “durable” that person continues to act for you even if you lose the capacity to make your own decisions. Durable powers of attorney are powerful legal documents and can be very useful, especially when they are part of a trust centered estate plan.

What is a trust?

A trust is an agreement to hold property for the benefit of another. The law treats a trust as a separate legal “person.” Like a will, a trust can contain provisions for distribution of your assets to your loved ones after you die but the assets are distributed without probate. While you are alive you maintain possession and control of your assets. A revocable living trust is simple, convenient and affordable.

Are trusts new?

No. Trusts have existed for hundreds of years. They are so powerful that Teddy Roosevelt was elected as a “trust buster” to break up the powerful trusts used effectively by the extremely wealthy of the day. What is relatively new is using trusts to benefit people of more ordinary means.

How does a trust avoid probate?

Unlike a will, a trust can own property. And, the trust doesn’t die when you do. Instead, a successor trustee automatically replaces you and begins to manage the assets owned by the trust. The successor trustee can also distribute the assets to your loved ones. For a will to be as powerful as a trust, it must create a trust upon your death. To do so requires court involvement.

What happens if I become incapacitated and I have a trust?

If you become incapacitated, a successor trustee replaces you and manages the assets owned by the trust.

Who controls my assets in a trust?

You do. As the grantor and trustee of the trust you have absolute control over your assets. You can continue to use them, sell them or even borrow against them.

How do my assets get into my trust?

Real property is transferred to the trust by deed. Money in bank accounts will be transferred to the trust upon your death when the trust is named as “P.O.D.” (“Paid on Death”). Life insurance, 401K, and other accounts will be transferred to the trust when the trust is named as a beneficiary.

How much time does it take to legally prepare the documents?

It takes much less time, effort and money than it will take to deal with death and disability if you do not prepare. You will meet with the lawyer to discuss your needs, desires and particular circumstances. The lawyer will prepare the documents. A few days later you will meet again to sign the documents.

If I die or become disabled, who will control my assets?

Usually, your spouse will control your assets. If you don’t have a spouse, a successor trustee, someone of your choosing, will control your assets.

Who should be a successor trustee?

A trustee should be honest and responsible. No other particular qualification is necessary. A trustee does not have to be an accountant or a lawyer. Often, the best choice is a child or sibling. You should name a successor trustee in case your first choice cannot serve. Your lawyer will help you make the proper choice but the choice is yours.

Can my trust keep going after I die?

After you die your trust can continue to be managed by the trustee you selected. The trustee will distribute assets according to your direction. For example, the trust can hold assets for a child’s education or for a child who is not ready to manage the assets himself or for a child with disabilities. You can direct the trustee to do just about anything you want with your assets.

What about estate taxes?

The Congress may change the taxes, so ask your lawyer. If the law changes or your estate is larger and you are married, special provisions in your trust can still protect your estate from taxes.

Should a lawyer prepare my trust?

Absolutely! Would you want a surgeon to remove your appendix or would you figure out how to do it yourself from a book or the internet? Therefore, comprehensively plan for whatever the future may hold takes competent legal counsel and experience. It is inexpensive and much less costly than mistakes.

Do I need a will?

A trust centered estate plan includes a particular type of will called a “pour-over” will. In most cases the will won’t be used. If it is used, it puts all assets into your trust. Your trustee can then distribute the assets to your loved ones, as you directed.

What is a "living will"?

A living will directs physicians to stop life support that is unnaturally keeping you alive if your condition is terminal. It shifts the burden of decision from the health care provider to you so that your wishes can be followed without inappropriate delay.

What is a health care directive?

This gives someone else the ability to make health care decisions for you if you are unable to do so yourself. Therefore, preventing delay.

What is a Trust Centered Estate Plan?

It is a plan prepared by an experienced lawyer that includes a revocable living trust, pour-over wills, durable powers of attorney, living wills, health care directives and deeds. It should be comprehensive, administratively easy and affordable.

How do I choose a lawyer?

Ask the right questions:
• How long have you been practicing?
• How many trust centered estate plans have you prepared?
• Have your plans been tested in the crucible of death?