Category - Estate Planning

How Can A Living Trust Benefit Me?

The main benefit to a Living Trust is to avoid probate. To understand the Living Trust you must understand all the roles that each person involved in the trust will play. There are essentially four different parties to the trust:

1. Grantor. The Grantor is the individual who sets up the trust to protect their assets. They may also be referred to as the Settlor, Trustor, or Creator.

2. Trustee. This is the individual(s) established by the Grantor to manage the estate. This is usually the same as the Grantor so they may continue to control his estate in the manner he is accustomed. Some choose to name a Trustee other than themselves to manage the trust if his circumstances prevent him from being able to do so.

3. Successor Trustee. This is the individual(s) established to take over the original Trustee’s responsibilities if they are unable to do so for any reason, usually death or disability.

4. Beneficiaries. These are the individuals or companies that are to receive the benefits of the trust once the Grantor has passed away. Beneficiaries are mostly spouses and children, but can also be friends, other family members, charities, etc.

Once these roles have been established the trust is executed and must be funded. Funding the trust is a very important step in creating the trust. The trust must hold the assets that will be distributed at the time of death. In order to fund the trust the assets must be re-titled into the name of the trust. This is a very easy process and can be done quite quickly. This is crucial to having your estate avoid the timely and costly process of probate.

Upon the death of the Grantor the Trustee or Successor Trustee will act in the same manner as a representative would in distributing a Will. They will carry out the terms, conditions and instructions stated in the Revocable Living Trust. This usually will entail payment of taxes, bills, and distributing the assets.

Be sure to speak to an Estate Planner at Legal Awareness for Seniors to properly set up your trust and avoid probate.

A Will Isn’t The Only Way

Over your lifetime you’ve been used hard work, discipline, vision, and long-range planning to build an estate to pass on to your children and grandchildren. But have you taken steps to protect that wealth from being whittled away by legal fees and other costs associated with probate after you die? Probate – the time-consuming, and often expensive, process of proving in court the validity of a will – can be side-stepped by drafting a living trust. In establishing a trust, the bulk of your assets are transferred into the trust; you no longer personally hold the title. You still control all the assets and derive all income and other benefits from those assets. But when you die, your property doesn’t go through probate because the property isn’t in your name.

There are many advantages to avoiding probate, experts say, including savings in time and money. Even in a simple estate probate usually takes from 10 months to two years. Only after the estate has been appraised, taxes paid, and contested claims settled is the property distributed to the beneficiaries. And during all this time, a lawyer’s meter is running. Fees are generally a percentage of the value of the estate. A typical fee is five to ten percent on an estate.

If yours is a large estate, a living trust also may provide tax advantages over probate. Although Arizona has no estate tax, there is a federal tax on estates in excess of $600,000. A married couple could split their property into two trusts and protect up to $1.2 million from estate taxes. Yet the surviving spouse has the right to all the income from the principal of the trust.

A living trust also provides more privacy than a will. Probate is a public process. While a will details your wishes only up on your death, a living trust can help manage your affairs should you become disabled. A living trust can turn over your assets, and your instructions on how they are to be managed, to a successor trustee should you become unable to manage your own affairs.

In order to provide for disability, experts recommend that the trust be funded while you are still living. Many who draft a living trust fail to transfer assets to the trust. You’ve got the box, but it’s empty. Almost everything should be in a trust except the automobiles.

I suggest to my clients that they review their trust annually just to make sure it keeps up with their current needs. The trust should be reviewed by a professional every three to five years to make sure it is current with tax laws. And any additions to your family, such as children or grandchildren, or additions to your wealth will necessitate amending the trust. The main thing is to make sure it meets your desires. It ought to do what you want it to do.

Although a trust does many of the chores generally associate with a will, it doesn’t replace the need for a will. You must have that back-up document just in case there are changes in your life that aren’t included in the trust. Although a trust should be your main estate planning document.

Beware of Joint Tenancy Deeds

Many people have this idea that they can eliminate probate simply by owning their assets with joint tenancy. Well, that works sometimes, but you have to be careful to make sure that the asset is held in ‘joint tenancy with right of survivorship‘. Those are the magic words that have to be on the document, on the deed, on the bank account. Without the words ‘with right of survivorship‘ the property does not automatically go to the other joint tenant without probate.

Too many times people have come to me and said, “I have this deed. Real estate is being held by me and by my deceased wife as joint tenancy, but the title company won’t let me keep it in my name or sell it without going through probate. They say it needs to have some additional language.” I have to agree with them. The magic clause ‘with right of survivorship’ is missing. That means it will require probate.

Joint tenancy simply postpones probate. Even if that magic phrase is on the deed — it’s held as joint tenants with right of survivorship — this simply means it postpones the probate until the second death. Sure, it will avoid the probate on the first death. With right of survivorship means the property automatically belongs to the survivor. But at the death of the second person, this property is still subject to probate. So it does not avoid it altogether.

Never hold property in joint tenancy with anyone other than your spouse. I recommend that you never hold any kind of property in joint tenancy with anyone other than your spouse. Now I hate to use that word “never.” It seems that there is always an exception. But I haven’t found the exception to this one, yet, because joint tenancy also means joint liability. Now with your spouse, that’s not so bad. You usually have joint liability anyway, but with anyone other than a spouse, do you want to be held accountable for their liabilities?

Your Will and the Public

A will is a unique legal document that has absolutely no effect until you’re dead. And so to carry out the terms of your will it has to be presented to the court and the court supervises the distribution of your estate under the terms of your will.

Now, it’s a court process. That means it’s open to the public. Anybody has access to the court records. And so you can have people looking at your court records that you would never have invited to in the first place. It could be just a nosy neighbor or a newspaper reporter, which is what happened to Natalie Wood’s estate. The Wall Street Journal sent a reporter after her death to look at her probate records. Now they found that she had an estate worth about six million dollars, and that included 29 fur coats and various other things. Her estate became public because there was an article printed in the Wall Street Journal. So her estate was more public than most of ours will be, but that’s what happens in the probate of an estate. It is public record.

Now, you will be interested to know that in the newspaper the last several years there have been ads promoting looking at probate records as a way of finding real estate that might be up for sale at a lesser cost. So people can buy it at “fire sale” type rates. That’s all public record and now it’s being promoted as a way for other people to make money off your estate when you’re looking to sell your parents’ goods so you can just have a cash inheritance. Probate records are not private.

We’re going to take a glimpse at some of the estates of some of these famous people, just so you can get an idea. It’s kind of fun to see what happened.

Marilyn Monroe

When she died in 1962, she was actually deeply in debt, but over the next 18 years her estate gained some royalties and other payments, and so it accumulated about a million and a half more dollars. The estate was settled and, at the end, the net estate – the amount that was finally able to be distributed to her heirs — amounted to about $370,000. So out of that one and half million dollars that her estate accumulated, most of it was eaten up in taxes, court costs and lawyers’ fees.

Robert F. Kennedy

The Kennedy Family is full of tragedies. Of course, we know about the assassination of President John F. Kennedy, but do you remember his younger brother, Robert Kennedy, was also assassinated while he was running for president? Robert F. Kennedy was a lawyer and he had been the U.S. Attorney General. So, you’d think he would know about planning his estate. But when we look at the settlement of his estate it appears he had a gross estate of about 1.6 million dollars — a pretty good sum in those days. And that the costs in settling his estate amounted to just over a million dollars. So the total shrinkage in his estate was 63%. Now this is from someone who should have known about planning for his estate. He was a senator, a U.S. attorney, a learned gentleman with a wealthy background, and yet the shrinkage of his estate was huge.

Elvis Presley

It’s always fun to talk about the rock star, Elvis Presley. While he was alive, he accumulated an estate over 10 million dollars in value. Of course, he didn’t expect to die when he did. But he left an estate full of debts and costs of settlement, and didn’t really plan for passing his estate onto his heirs. Now they’ve made a lot of his estate, but I think if Elvis were to come back now, he would say “Don’t be cruel.” They took a lot of his money in settling his estate. The total costs of his estate were over 7 million dollars. Imagine if he had planned a little bit and left more to his family what Graceland would amount to now, and his other assets. They’re huge, as it is, but they were cut way down at his death. The shrinkage was about 73%.

It is wise to prepare an Estate Plan including a Trust in order to keep your estate private and allowing it to transfer without fees to your heirs. Let Legal Awareness for Seniors help set up the right estate plan for you.

Caring for Aging Parents with Your Siblings

Caring for an aging parent can be a struggle alone, but add in your siblings and things can get stressful. It is important to work together as a team to support your parent. You may each have a different idea of how your parent should be taken care of which can cause stress and tension. At the same time your parent is aware that they are relying more and more on their children and are probably not happy about it.

Caring for a parent is a shared responsibility. It is important, however, to assign a primary care provider. Consider who is the most dependable, has the most time to devote to their parents care, and who is emotionally prepared to fill this role. Once that is established you can decide what the other siblings roles will be and what they can provide.

It may be best to schedule a family meeting. Make sure everyone has time to discuss their feelings and how they see the care being handled. If you feel there will be contention it may be best to host the family meeting with a facilitator such as a social worker, family friend or other trusted person outside the family. To have a productive meeting try these guidelines:

  • Set an agenda for the meeting.
  • Focus on the now – try not to bring up issues from the past.
  • Share how you feel instead of accusing others (keep your sentences using ‘I’ instead of ‘you’).
  • Listen and respect what others are saying. Give everyone time to speak.
  • Find a way to come to a compromise. Everyone may not get their way, but at least you can all come to an understanding. Everyone may have to give a little.

If you find that anyone in particular doubts that their parent needs care have them spend a week or even a day with the parent to see a first hand view of the issues.

It is also important to have your parent draw up an Advanced Health Care Directive. They have an idea of who they want to make their major decisions and they should have a choice in the matter.

Creating A Trust With A Blended Family

With divorce becoming more prevalent so are remarriages with blended families. Finding a way to create a trust with a blended family must be handled delicately. It is important that you and your new spouse discuss what you would like to have happen when you each pass away. Relying on your spouse and children to work it out is not a plan. We have gathered some tips to help guide you along your journey.

1. Make A List. Each of you should create a list of what you would like to leave to each of your children. Look at each others list in order to discuss and compromise. You may want to list items as “yours,” “mine,” and “ours” to help divide the assets appropriately between the spouse and each of the children. Many times having an Estate Planner present to review your lists together can help alleviate arguments.

2. Create A Trust. If you are lucky enough to agree on how assets will be distributed you can create a trust together. You may create a testamentary trust that becomes irrevocable upon the death of the first spouse in order to protect your children. Or you may create separate trusts so that if the wife passes first her estate will be divided among her children and current husband and same for the husband.

3. Use Life Insurance. A common practice to assure your children will receive something at the time of your passing is to name them as beneficiaries to a life insurance policy. This will give your children some definite financial security at the time of your death.

4. Prenuptial or Post-Marital Agreements. Couples usually have an easier time figuring out these things ahead of time. Knowing what assets will go to who can ease your mind throughout your marriage.

5. Update your accounts. When you re-marry you may want to look over all your assets and ensure that they are properly adjusted. You don’t want to inadvertently leave property or an account to your ex because you didn’t update your accounts.

6. Change Your Beneficiaries. This is another situation that can easily be overlooked. You may want to leave an IRA to your new spouse, but never updated it from your ex’s name. It is important to review your beneficiaries every three years or so. However, if you are ordered by the court to leave the account to your ex than you must follow those court orders.

Each family is different and requires individual planning. Our Estate Planners have helped many couples resolve issues and set up a trust that pleases everyone.

How To Avoid Fights Over Your Estate

We have all heard horror stories about families falling apart after their parents passing. This is not always the case and doesn’t need to happen to you. Arguments can most likely be avoided by using a few simple techniques.

  • Avoid Surprises. Let your heirs know why you are making the decisions for your estate distribution. You may have specific reasons why you are leaving certain assets to particular heirs or non-profit organizations. Letting them all know ahead of time that you made these decisions thoughtfully can help set expectations.
  • Give Guidance. When dealing with sentimental items you may want to leave a specific list of how to divide them and who should be in charge of overseeing the distribution. Even though you may instruct to have your assets divided into equal shares it may be hard to put a value on some of the sentimental items.
  • Don’t Assign Co-Owners. Some choose to add a child as a co-signer on an account. Legally the account with go to that child at your passing. If you intend the account to be divided up among your heirs this could cause problems. Before you add a child on an account you will want to speak to your Estate Planner.
  • Keep Estate Documents Up To Date. If it has been years since you have revised your estate documents it could easily be contested that you meant to change it. You should update these documents every few years or whenever you have a major life change such a marriage, divorce, new child, or death of a beneficiary.
  • Prearrange Funeral Details. Making the decision on your funeral arrangements may avoid conflict as well as strong emotions rising in the decision making process for your children. Pre-planned and detailed funeral instructions can avoid controversy and angst.
  • Choose Your Executor Carefully. Don’t just assign the oldest child to be the executor. You will need to assign someone that you trust, is responsible, hardworking, organized and good at communicating. It may not even be a child that you choose, maybe a family friend, an estate or financial planner.
  • Get Input From Your Children. After all, they will be left without you. Ask if there are any particular items that they value or hold special meaning to them. It is much better to have these issues surface now while you are able to help manage the decision making of who will receive specific items.

How To Fairly Divide An Estate

Many times when an estate is being divided among heirs emotions get tied in with greed and arguments may ensue. When siblings are dividing their parent’s estate childhood jealousy, resentment and hurt feelings may resurface during the process causing fights. Some get out of hand, while others are manageable. We have found a few tricks to assist in calmly dividing an estate.

  • Mark the items. Have each of the heirs have a different color sticker or post-it note and go around to mark which items they would like to have. Those items that only have one sticker will be awarded. Those that have multiples can take turns choosing. You can even integrate the next trick when choosing who gets what.
  • Take turns picking. To make this fair put numbers in a hat to draw the order. It would also be a good idea to switch up each round by allowing the person who went second to go first on the next round. For example if there are 3 people use the following order: round one: 1, 2, 3; round two: 2, 3, 1; round three: 3, 1, 2 etc.
  • Make copies. When it comes to personal movies and photographs you can make copies so that everyone gets a set and therefore no one has to choose.
  • Get appraisals. With items that are worth more, many heirs may feel distribution can be unfair. If you were to get the high value items appraised, add the value together then distribute “estate buck” (such as monopoly money) evenly to hold an auction for the items. You can even have heirs pay into the estate with their own money in order to acquire an item they truly desire.
  • Bring in a mediator. When the conflict doesn’t seem to be getting resolved it may be time to bring in a mediator in order to help settle the estate.

Many times these tips are used together or can be hand selected for your specific situation. It is important to remember to do your best to keep your emotions out of the decision making. It may be a good idea to have decisions made while your parents are still living.

Many times parents want to leave specific items to specific heirs. Having a list made up of who will receive what can help alleviate many of the sibling squabbles after their passing.

The Value of Charitable Giving

For many, charitable giving has been a way of life, something that has been done year after year. It may be to a school they attended, an organization that has touched their life, or a cause they feel passionate about. Charitable giving is a win-win, not only will the charity receive financial support, but will give you an estate tax break.

There are many ways to give to charity:

1. Lifetime giving. Giving to a charity through financial means or assets in which you give to them on a yearly basis in order to support them. Many do this not only to be altruistic, but because they receive a tax break every year. However, before you make any kind of sizeable gift, be sure to seek tax advice.

2. Outright gifts in your Will or Trust. This requires a paragraph that names the charity and the amount of your gift. You will want to have this drawn up by an Estate Planner to assure accuracy.

3. Gift Annuity. Basically a large one time amount will be given to a charity to purchase an annuity. The annuity would pay the charity a percentage of the money every year and the remaining value will be paid out at the time of the donor’s death. This allows donors to receive a lifetime income stream and immediate tax deduction.

4. Beneficiary of an IRA or retirement plan. Retirement assets are among the highest taxed assets and therefore could be a good candidate for charitable bequest. The charity would not have to pay income taxes on your donation and it will decrease the estate tax burden on your family. You will want to check that your beneficiary designations are up to date; if there is any missing information the asset may have to go through probate first.

5. Charitable Remainder Trust. This allows you to receive income until you pass away, at which time the remainder of the trust will be given to one or more charities of your choosing. You will need to seek the help of an Estate Planner to create this type of document.

Remember, when making the decision to donate to charity you should speak with a professional to assure that you are making the correct choice for your specific situation.

Problems of Assigning Co-Trustees

You may think that all of your children get along perfectly, which may be the case while you are living. Once you are removed from their lives the dynamic may change. Therefore, it could be better to name only one child as a Trustee instead of multiple. Not only would it prevent arguments, but it can also be more efficient. One Trustee can control the comings and goings of the trust much easier than if two or more Trustee’s were named.

Some other problems that may arise when assigning more than one trustee are:

  • There is potential for work to be duplicated because they both believe it is their job to take care of something.
  • There is potential for work to not be taken care of because they believe the other Co-Trustee is taking care of it.
  • There could be a disagreement over an important trust issue that can’t be resolved. This could bring the court into the process causing a delay in the trust distribution as well as added costs.
  • One Co-Trustee could be liable for the other Co-Trustees actions if they are negligent.
  • Many financial institutions, mainly banks, will either not work with Co-Trustees and only recognize one of them as Trustee and give them entire access. Or they will make things more difficult and not consent to anything without them both being present.

With this being said, if your children get along and you would still like to name them Co-Trustees it may be beneficial. If they have different skills it may be helpful for them to split up the work according to their expertise. If there is an odd number of Co-Trustees they could use majority rules to come to an agreement on disagreements. In the end it is your decision on how you would like your estate handled.