Estate Planning Documents
Don’t be tempted to use do-it-yourself software programs or “free” legal services that could overlook an important element pertaining to your unique situation.
The purpose of having a Trust is to avoid probate and estate taxes.
Revocable Living Trusts: “The land and the money”
If your estate is over $150,000 at your death, and you do not have a Trust, then it will have to go through Probate, which may be expensive, time-consuming, and painful for your beneficiaries. Probate can eat through a modest inheritance due to the amount of legal work and court costs involved.
Setting up a Living Trust is imperative if your assets are over $150,000, or may become so in your lifetime. Owning your home or other real property virtually guarantees the need for a Trust. A Trust keeps your assets out of probate and can reduce or eliminate estate taxes entirely.
A Trust will not impede your access to your own assets in any way. You will still have full control of your assets. For a married couple, there are various types of trusts that can provide more or less control over assets for a surviving spouse, and that may be necessary to protect larger estates from taxation.
In a Trust, you may make specific bequests of items such as real property, cash, and business interests, and provide for the distribution of the remainder of your estate to individual(s) or charities. You can also set up separate share trusts for your children and grandchildren, so that you don’t have to worry about them inheriting a large amount of money before they can handle it responsibly.
You’ll also appoint the successor Trustee(s) of the Trust, who will be given the responsibility to distribute the assets in the trust after your death, and may act as successor Trustee in the event of your incapacity, as determined by a physician. The trust provisions specify Trustee powers and duties.
Trusts are also private documents that are not lodged with the court as your Will is when you die. So you don’t have to worry about prying eyes.
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“Now read me the part again where I disinherit everybody.” – New Yorker Cartoon, Peter Arno (1940)
If your estate is very large, you may consider an Irrevocable Trust to give a large asset to a child, and to protect it from estate taxes. These Trusts are commonly used for large life insurance policies or for other assets.
Special Needs Trusts
If you have a child or other beneficiary named in your Living Trust who is receives public benefits, then you will need to set up a Special Needs Trust for that person, so that they may inherit assets without losing their public benefits. This is a very complex addition to a trust that should not be attempted without an experienced estate planning attorney. Improper handling of this type of trust can be disastrous for the beneficiary.
Qualified Domestic Trusts (QDOTs)
For married couples who are both United States citizens, there is no estate tax due at the first spouse’s death, as long as all of the decedent’s assets go to the surviving spouse. However, this is not the case if one spouse is not a U.S. citizen. It is very important that such couples have a QDOT in place to ensure that they will enjoy such benefits. This is another complicated situation that requires document preparation by an experienced estate planning attorney.
Everyone needs a Will, no matter the size of their estate.
Pourover Wills – “The diamond rings”
If you have a living trust, then you need a “pourover” Will, which transfers any assets outside the trust into the the trust upon your death. You will name beneficiaries ofyour personal property; the executor(s), who will distribute that property according to your wishes; and the guardians of any of your children who may be minors at your death.
If your estate is small (well under $150,000, and you don’t own any real estate or businesses), then a simple Will may be appropriate for you. This document distributes your entire estate to the persons you name as beneficiaries. It also appoints the executors who will administer your estate and guardians of your minor children.
DURABLE POWERS OF ATTORNEY
These documents give another individual the power to act for you as your “agent”, while you are living. They are “durable”, meaning that they do not expire.
Health Care Power of Attorney: “Who pulls the plug?”
This document gives your chosen agent(s) the power to make health care decisions for you, should you be unable to do so. It states your wishes regarding health care choices, which your agent is legally bound to follow. This document can be made effective upon your incapacity, or effective immediately if you are facing a serious health issue. It is your choice. Once it is signed, you should give a copy to your doctor and the hospital you use most frequently.
Power of Attorney for Asset Management: “Who pays the bills?”
This document gives another person the power to manage your finances should you become incapacitated. This includes paying bills and dealing with any other financial transactions. As with the Health Care Power of Attorney, it can be made effective upon your incapacity (as determined by a physician) or immediately. A finding of incapacity can be reversed by a physician, when you are able to manage your affairs again.
Simply creating a Trust is not enough. If you do not “fund” the trust by transferring assets into it, then it cannot protect those assets from probate and estate taxes.
Deeds to Real Property
Your home may be your largest asset, or you may own rental property, or maybe you have just inherited a ranch in Texas from your rich uncle. You need to get that property into the name of your living Trust in order to keep it out of probate at your death. We have the experience and knowledge to transfer real property in every state of the union, and will make sure that this is done correctly.
Transfers of Financial Accounts
Many law firms skip this step, but we believe that it is an integral part of full service estate planning. Just how are you supposed to get your bank accounts into the name of your trust? We will prepare the necessary forms and letters of instructions to the financial institutions at your request. Our standard fees allow for up to five such transfers.
These interests can take many forms, from sole proprietorships to large corporate holdings. Be sure to bring any information regarding these assets, such as K-1s, Operating Agreements, and stock certificates, to your appointment, and we will prepare the necessary documentation to assign your interests to your Trust. If you have a closely held corporation, we can also help you remain compliant with the Secretary of State.