Estate Planning

Everyone has an estate plan, whether you have done anything about it or not. However, that estate plan is established by the laws of your state. If you want to be able to control who gets what and how they get it after you have passed on, you need to create your own estate plan. The options vary widely and we are happy to assist you in getting one that works for you and your family.

Estate Planning Frequently Asked Questions

Why do I need an estate plan?

Having an estate plan is important for several reasons, as it helps ensure that your wishes are carried out and your assets are distributed according to your preferences after your death. Here are some key reasons why you might need an estate plan:

Asset Distribution: An estate plan allows you to specify how your assets, including property, investments, and personal belongings, should be distributed among your heirs or beneficiaries.

Caring for Minor Children: If you have minor children, an estate plan allows you to appoint guardians who will take care of them in the event of your death. You can also establish trusts to manage and protect their inheritances until they reach a certain age.

Healthcare Directives: Estate planning often includes documents like a living will or healthcare power of attorney, which specify your medical preferences and appoint someone to make healthcare decisions on your behalf if you become incapacitated.

Financial Management in Case of Incapacity: Through documents like a durable power of attorney, you can appoint someone to manage your financial affairs if you become unable to do so yourself.

Minimizing Taxes: An estate plan can help minimize the tax implications on your estate, potentially saving money for your heirs.

Business Succession Planning: If you own a business, an estate plan can address the transfer of ownership and management in the event of your death or incapacity.

Avoiding Family Disputes: Clear instructions in your estate plan can help prevent disputes among family members over your assets, reducing the likelihood of legal battles.

Philanthropic Goals: If you have charitable intentions, an estate plan allows you to make provisions for donations to your chosen charities or causes.

Peace of Mind: Having a comprehensive estate plan can provide you with peace of mind, knowing that your affairs are in order and your loved ones will be taken care of according to your wishes.

Keep in mind that estate planning is not only for the wealthy; anyone, regardless of wealth, can benefit from having a well-thought-out plan.

This is a question we must all ask ourselves from time to time. As we grow older, our needs change and our estate plans should change to reflect those needs. When we were younger, our biggest estate planning concerns may have been providing for our spouse or children if something happened to us. Perhaps later we were more concerned about avoiding probate or preserving one’s estate from the cost of long-term care. Our priorities change over time and so, too, should our estate plans.

Unfortunately, too many people have just kept putting off making any decisions for themselves, doing nothing except watch what has happened to friends and family. Eventually, we may get to the point where we think about the possibility of someday needing help in handling our affairs, staying out of a nursing home, or our protecting assets from long-term care costs. This is the time to see if your estate plan still meets your needs.

With over 20 years of experience, attorney Darren Watts can help review your existing estate plan, help you determine whether it still reflects your wishes, and if not, come up with a new one. He has the knowledge you need to make the right choices to define and reach your goals.

Asset Distribution: The primary purpose of a will is to specify how a deceased person’s assets should be distributed among those that the deceased has named beneficiaries. The assets can include real estate, personal belongings, money, investments, and other valuable items. The distribution can be as specific or general as a person desires.

Appointment of Personal Representative: In a will, the person creating the will (testator or testatrix) appoints a personal representative, which is also referred to as an executor or executrix. The personal representative is responsible for carrying out the instructions in the will, including the distribution of assets and settling debts.

Guardianship for Minor Children: If the deceased person has minor children, a will allows them to designate a guardian or guardians who will take care of the children in the event of the testator’s death. This is a crucial aspect for parents to address in their will to ensure the well-being of their children.

Debts and Taxes: A will may address the payment of debts and taxes from the deceased person’s estate. It can specify how these obligations should be settled and which assets should be used for such purposes.

Contingency Plans: Wills often include contingency plans in case beneficiaries or heirs named in the will pass away before the testator. This ensures that the estate distribution remains in accordance with the deceased person’s intentions.

Challenges and Disputes: While a will is designed to express the testator’s wishes clearly, disputes may arise. A well-drafted will can help minimize the potential for legal challenges by addressing possible issues and providing clarity. However, contrary to popular belief, many states do not allow for disinheritance based on a challenge to a will.

A will, more formally known as a last will and testament, is a legal document that outlines how a person’s assets and possessions should be distributed after their death. It is a crucial component of estate planning and serves several important purposes. Here are the key elements and functions of a will:

Asset Distribution: The primary purpose of a will is to specify how a deceased person’s assets should be distributed among those that the deceased has named beneficiaries. The assets can include real estate, personal belongings, money, investments, and other valuable items. The distribution can be as specific or general as a person desires.

Appointment of Personal Representative: In a will, the person creating the will (testator or testatrix) appoints a personal representative, which is also referred to as an executor or executrix. The personal representative is responsible for carrying out the instructions in the will, including the distribution of assets and settling debts.

Guardianship for Minor Children: If the deceased person has minor children, a will allows them to designate a guardian or guardians who will take care of the children in the event of the testator’s death. This is a crucial aspect for parents to address in their will to ensure the well-being of their children.

Debts and Taxes: A will may address the payment of debts and taxes from the deceased person’s estate. It can specify how these obligations should be settled and which assets should be used for such purposes.

Contingency Plans: Wills often include contingency plans in case beneficiaries or heirs named in the will pass away before the testator. This ensures that the estate distribution remains in accordance with the deceased person’s intentions.

Challenges and Disputes: While a will is designed to express the testator’s wishes clearly, disputes may arise. A well-drafted will can help minimize the potential for legal challenges by addressing possible issues and providing clarity. However, contrary to popular belief, many states do not allow for disinheritance based on a challenge to a will.

Probate is a legal process through which the court validates and administers the distribution of a deceased person’s estate, or the compilation of property owned by the deceased person at the time of their death. The purpose of probate is to ensure that the deceased person’s debts are settled, and their assets are distributed to the rightful heirs or beneficiaries according to the terms of the will or, if there is no will, according to state laws.

Here are the key aspects of the probate process:

Validation of the Will: If the deceased person left a will, the first step in probate is to validate the authenticity of the will. The court reviews the document to ensure that it meets legal requirements and was executed in accordance with the law. This process may involve witnesses attesting to the validity of the will.

Appointment of Personal Representative (Executor): If the deceased person has named a personal representative in the will, the court typically appoints that individual to carry out the terms of the will. If there is no will or no executor is named, any interested party may apply. Any person can contest the appointment, but the basis for any contest must comply with court rules.

Determining Guardianship of Minor Children or Incapacitated Adults: If the deceased person was responsible for the care of minor children or had been serving as the guardian of an incapacitated adult and there was no co-parent/guardian, the court will need to determine the guardianship of anyone who is in need of it. This is considered by many to be the most important function of a probate court.

Inventory of Assets: The executor or administrator is responsible for creating an inventory of the deceased person’s assets, including real estate, bank accounts, investments, personal property, and other valuables.

Notification of Creditors: Creditors of the deceased person are notified of the death, and they are given an opportunity to make claims against the estate to settle outstanding debts. The personal representative is responsible for paying valid debts from the estate’s assets and may call on the court to determine the validity of any claimed debts. State law sets forth the time limits for notifications and any claims to be made, which are usually much shorter than creditors normally have in an attempt to allow closure of estates within a reasonable time period.

Distribution of Assets: Once debts and taxes are settled, the remaining assets are distributed to the heirs or beneficiaries according to the terms of the will or, if there is no will, according to state laws.

Closing the Estate: After all debts have been paid, and the assets have been distributed, the executor or administrator may petition the court to close the estate. The court reviews the final accounting and, if satisfied, issues an order to close the probate proceedings.

Many states now have streamlined processes for small estates in which probate may not even be required. Additionally, the probate process is a matter of public record, which means that details of the estate, including the will, become accessible to the public.

While probate serves the important purpose of settling a deceased person’s estate and distributing assets, there are certain drawbacks and challenges associated with the probate process. Here are some reasons why individuals may be concerned about or seek alternatives to probate:

Costs: Probate can be expensive, involving court fees, legal fees, and other associated costs. These expenses can reduce the overall value of the estate, leaving less for beneficiaries. A good rule of thumb is 5%, but with any conflict that amount can increase exponentially.

Time Consuming: Probate proceedings can be time consuming, often taking several months or even years to complete. Studies show the average probate lasts about 18 months. During this time, beneficiaries may face delays in receiving their inheritances.

Public Nature: Probate is a public process, and the details of the estate, including the will and asset distribution, become a matter of public record. Some individuals value privacy and may be uncomfortable with the public nature of probate.

Court Involvement: The court oversees the entire process, although many states allow the court to forgo its oversight through an informal probate process. decisions may be subject to court approval. This can lead to additional delays and potential disputes.

Potential for Disputes: Probate can lead to disputes among family members or other interested parties. Disputes may arise over the validity of the will, the interpretation of its terms, or the distribution of assets. Many states, including Utah, do not recognize no contest clauses in wills.

Rigid Procedures: The probate process follows established legal procedures, and deviations may require court approval. This can limit flexibility in handling certain aspects of the estate. Some states have one or more mandatory court appearances, which drives up the cost of probate.

Complexity for Multi-State Property Owners: If the deceased person owned property in multiple states, it may require separate probate proceedings in each state. Probate laws and procedures vary by jurisdiction, even by judicial district within the same state, adding complexity and cost to most estates that consist of property in more than one state.

Impact on Business Interests: For individuals who own businesses, probate can disrupt operations and create uncertainty about the future of the business. Business succession planning may be challenging within the probate framework.

Limited Access to Assets: Prior to and in the initial phases of probate, assets, including bank accounts and other fund sources, of the deceased person are inaccessible. This can be a concern, especially if immediate access to funds is needed, such as for a funeral, final medical bills, ongoing household expenses, and even filing the probate case.

Potential for Unintended Consequences: In some cases, probate may lead to outcomes that are not in line with the deceased person’s wishes, either due to legal complexities, family disputes, or other factors.

Because of the issues listed, many individuals explore estate planning strategies to minimize or bypass the probate process. However, not all probate avoidance solutions are created equally. We can help you determine what is best for you and your family.

Yes, to a degree. Joint tenancy is a form of property ownership that can help avoid probate for the jointly owned property. When property is held in joint tenancy, the ownership typically includes the right of survivorship. This means that when one joint tenant passes away, their share of the property automatically transfers to the surviving joint tenant(s) without the need for probate.

Here are the key features of joint tenancy and how it relates to probate:

Right of Survivorship: The right of survivorship is a crucial aspect of joint tenancy. When one joint tenant dies, their interest in the property automatically passes to the surviving joint tenant(s). This transfer happens outside of the probate process.

Avoidance of Probate: Because the property passes directly to the surviving joint tenant(s), it does not go through the probate process. Probate is the legal process of validating a will and administering the distribution of a deceased person’s estate.

Quick and Seamless Transfer: The transfer of ownership in joint tenancy is typically quick and seamless. It doesn’t involve court proceedings, or the time delays associated with probate.

Simplicity: Joint tenancy is a relatively simple way to transfer ownership of property at the time of death. It is a common method for married couples, family members, or business partners who want to ensure a smooth transition of property without the complications of probate.

With all those advantages, joint tenancy may not be the preferred solution when examined as a whole. The next question addresses some concerns with relying primarily on joint tenancy for your estate planning.

While joint tenancy offers the advantage of avoiding probate and providing for the seamless transfer of property to surviving joint tenants, there are potential drawbacks and challenges associated with this form of ownership. It’s important to carefully consider these issues before choosing joint tenancy as part of an estate planning strategy. Here are some problems or concerns associated with joint tenancy:

Loss of Control: When property is held in joint tenancy, each joint tenant has an equal and undivided interest in the property. This means that decisions regarding the property must be made jointly, and individual control over the property may be limited.

Potential for Unintended Transfers: Adding someone as a joint tenant gives them ownership rights to the property. This can lead to unintended consequences, especially if the joint tenant has different ideas about the use or disposition of the property. A joint tenant can decide to partition the property and sell their interest with or without the consent of the other joint tenant.

Creditors’ Claims: Because of the undivided interest in the property of all joint tenants, a creditor of any tenant can use legal process to collect a debt by forcing the sale of the property, regardless of when that joint tenant was added onto the title.

Tax Implications: Joint tenancy may have tax implications, especially regarding capital gains taxes. The step-up in basis that is typically available in the context of inheritance is effectively eliminated by adding a joint tenant that would otherwise be an heir, leading to higher capital gains taxes upon the sale of the property, especially if the added joint tenant did not reside in the property.

Family Disputes: Joint tenancy can sometimes lead to family disputes, especially if there are disagreements among joint tenants or if the intentions of the original owner are unclear.

Incompatibility with Estate Plan: Joint tenancy may not align with an individual’s broader estate planning goals. For example, if an individual wants to leave specific assets to different beneficiaries, joint tenancy may not allow for that level of specificity. Also, if one heir is made a joint tenant with an expectation that the heir will share the proceeds of the property with other heirs, there is no obligation for the joint tenant heir to do that.

Impact on Medicaid Eligibility: Transferring property into joint tenancy may have implications for Medicaid eligibility. In some cases, it can be considered a gift and affects eligibility for Medicaid benefits.

Divorce or Relationship Changes: If joint tenants experience relationship changes, such as divorce or estrangement with a non-tenant, the joint tenant’s interest in the property is considered part of the marital assets to be divided.

If you become incapacitated and are unable to make decisions for yourself, it’s important to have legal documents in place that appoint someone to act on your behalf and make decisions regarding your healthcare, financial matters, and other important aspects of your life. Here are key legal documents that can address incapacity:

Durable Power of Attorney for Finances: A durable power of attorney for finances allows you to appoint someone (an agent or attorney-in-fact) to manage your financial affairs in the event of your incapacity. This document remains valid even if you become unable to make decisions for yourself.

Advance Healthcare Directive (Healthcare Power of Attorney): An advance healthcare directive, also known as a healthcare power of attorney or medical power of attorney, enables you to designate a trusted individual to make healthcare decisions on your behalf if you are unable to do so. This document often includes your preferences for medical treatment and end-of-life decisions.

HIPAA Authorization: The Health Insurance Portability and Accountability Act (HIPAA) protects the privacy of your medical information. A HIPAA authorization allows you to designate individuals who are authorized to access and receive your protected health information. This is important for your chosen representatives to communicate with healthcare providers.

Revocable Living Trust: While primarily a tool for managing and distributing assets after your death, a revocable living trust can also be used to plan for incapacity. The trust document can specify who takes over the management of trust assets if you become incapacitated, as well as directions for providing for you and anyone for whose care you are charged, providing a seamless transition without the need for court intervention.

Designation of Guardian for Minor Children: If you have minor children, a document called a Designation of Guardian allows you to nominate someone to assume guardianship if you are unable to care for your children.

Having these legal documents in place can provide clarity and guidance during challenging times, and they empower trusted individuals to act on your behalf according to your wishes. Regularly review and update these documents as needed, especially if there are changes in your personal circumstances or preferences. By not having any one of these documents in place, you place yourself at the mercy of the court as well as those who will bring any case, and could be left in the care of people you would prefer to not have care over you.

A durable power of attorney (DPOA) is a legal document that grants someone (referred to as the “agent” or “attorney-in-fact”) the authority to make financial and legal decisions on behalf of the person creating the power of attorney (referred to as the “principal”). The term “durable” indicates that the power of attorney remains effective even if the principal becomes incapacitated.

Here are key features and aspects of a durable power of attorney:

Durability: The durability provision is a critical element of a durable power of attorney. It ensures that the authority granted to the agent continues to be effective even if the principal becomes mentally or physically incapacitated. In contrast, a regular (non-durable) power of attorney may become ineffective upon the principal’s incapacity.

Scope of Authority: The durable power of attorney can be broad or specific, depending on the wishes of the principal. It may grant the agent authority over various financial matters, including banking, real estate transactions, investment decisions, and more. The scope of authority is defined in the document itself.

Agent’s Responsibilities: The agent appointed in a durable power of attorney has a fiduciary duty to act in the best interests of the principal. This includes managing financial affairs responsibly, keeping accurate records, and avoiding conflicts of interest.

Activation Trigger: A durable power of attorney can be effective immediately upon execution or it can be triggered by a specific event, such as the principal’s incapacity. It is important to clearly specify the conditions under which the power of attorney becomes effective.

Revocability: The principal typically has the ability to revoke or amend the durable power of attorney as long as they are mentally competent. This flexibility allows the principal to make changes based on evolving circumstances or relationships.

Enduring Through Incapacity: One of the primary purposes of a durable power of attorney is to address situations where the principal becomes unable to manage their financial affairs due to illness, injury, or other reasons. It provides a mechanism for a trusted individual to step in and handle financial matters on the principal’s behalf.

Legal Requirements: The creation of a durable power of attorney is subject to legal requirements that vary by jurisdiction. It is advisable to work with an attorney to ensure that the document complies with local laws and meets the specific needs and intentions of the principal.

A durable power of attorney is a valuable tool in estate planning, offering a practical and flexible way to address financial matters during periods of incapacity. It is crucial to carefully choose a trustworthy and responsible agent and to communicate openly about the scope of authority granted in the document. It is also important to note that it is not a substitute for a complete estate plan, due to the fact that the durable power of attorney is only valid as long as the principal is alive. Additionally, individuals should periodically review and update the durable power of attorney as needed.

A trust is a legal contract in which a person (the “grantor” or “settlor”) transfers property or assets to a separate legal entity known as a “trust” for the benefit of one or more individuals or entities (the “beneficiaries”). The trust is managed by a “trustee” who is appointed by the grantor or specified in the trust document. Trusts are commonly used in estate planning to manage and distribute assets in a way that aligns with the grantor’s wishes.

Key components of a trust include:

Grantor/Settlor: The person who creates the trust and transfers assets into it can be known as the grantor or settlor or trustmaker. The grantor establishes the terms and conditions of the trust. This person may also be able to change those terms and conditions, depending on the nature of the trust.

Trustee: The trustee is responsible for managing the trust assets and administering the trust according to the terms specified by the grantor. The trustee has a fiduciary duty to act in the best interests of the beneficiaries, pursuant to any instructions provided in the trust.

Beneficiaries: Beneficiaries are the individuals or entities who are entitled to receive the benefits of the trust. They may receive income generated by the trust, use of trust property, or other specified benefits.

Trust Property: The assets or property transferred into the trust by the grantor become trust property. This can include anything that any person or entity can own, such as: real estate, financial assets, personal property, etc.

Terms of the Trust: The trust document outlines the specific terms and conditions of the trust, including how the assets are to be managed and distributed, the powers and duties of the trustee, and any conditions or restrictions imposed by the grantor on any distribution.

There are many different types of trusts. Types of trusts include:

Revocable Living Trust: This is the most common estate planning trust, and some say the backbone of most estate plans. The grantor retains the ability to modify or revoke the trust during their lifetime and is usually the initial trustee and beneficiary as well. This type of trust is often used for probate avoidance and incapacity planning.

Irrevocable Trust: The terms of an irrevocable trust cannot be easily changed or revoked once established. It may offer certain tax advantages and asset protection benefits. Revocable living trusts become irrevocable upon their grantor’s death.

Charitable Remainder Trust: Provides income to the grantor or other beneficiaries for a specified period, with the remaining assets going to a charitable organization upon the termination of the trust.

Special Needs Trust: Designed to provide for the needs of a person with disabilities without jeopardizing their eligibility for government assistance programs.

Testamentary Trust: Created within a will for purposes of managing assets of the grantor’s estate upon the death of the grantor.

Trusts can serve various purposes, including asset protection, tax planning, avoiding probate, and ensuring the orderly distribution of assets. The choice of a trust type depends on the specific goals and circumstances of the grantor.

No, trusts are not a new concept; they have a long history dating back many centuries. The concept of trusts can be traced to English common law. Since then, the principles underlying trusts have evolved and been adapted in legal systems around the world.

Key points about the historical development of trusts include:

English Common Law: The origins of the trust can be found in medieval England. Feudal lords wanted to make sure that their lands were effectively managed while they were off to war due to many ownership laws that would not allow certain actions regarding the land to occur without an owner’s agreement. As a solution, they developed the concept of the trust, which allowed them to transfer legal ownership of property to a trustee while retaining beneficial ownership for themselves or their heirs.

Equitable Jurisdiction: The development of trusts was closely tied to the jurisdiction of equity, a branch of English law that sought to provide fair and just remedies when the common law courts fell short. Trusts were a key feature of equity, and the Court of Chancery became a primary venue for resolving trust-related matters.

Evolution and Expansion: Over time, the concept of trusts evolved and expanded. Trusts became valuable tools for managing property, providing for family members, and achieving various legal and financial objectives.

Colonial America: The principles of trusts were carried to the American colonies by English settlers. Trusts played a role in shaping property law and estate planning practices in the United States.

Modern Legal Systems: Trusts continue to be an integral part of legal systems in many countries. While the specific rules and requirements for trusts vary, the fundamental principles of creating a legal entity to hold and manage property for the benefit of beneficiaries have endured.

Today, trusts are widely used for various purposes, including estate planning, asset protection, charitable giving, and business succession planning. Different types of trusts have been developed to address specific needs and objectives, and the legal framework for trusts has been codified and refined in many jurisdictions.

How does a trust avoid probate?

First, we need to briefly recall what probate is. Probate is how a deceased person’s legal title to property is passed to their heirs. A trust can help avoid probate by allowing assets held in the trust to pass directly to beneficiaries without the need for the probate process. Here’s how a trust achieves this:

Ownership of Assets: When you create a trust, you transfer ownership of certain assets from yourself (the grantor) to the trust. These assets become trust property.

Legal Title vs. Beneficial Interest: In a trust arrangement, there is a separation between legal title and beneficial interest. The trustee holds legal title to the trust assets, but the beneficiaries have beneficial interest – they are entitled to the benefits and use of the assets.

Probate Only for Non-Trust Assets: When a person dies, the probate process typically applies to assets that are solely in their name and do not have a designated beneficiary or joint owner. However, assets held in a properly funded trust are considered outside the probate estate.

Smooth Transition of Assets: Since the trust owns the assets, there is no need for probate court involvement to transfer ownership. The trust document dictates how the assets are to be distributed to beneficiaries.

Privacy: Unlike probate, which is a public process, the administration of a trust is generally a private matter. The details of the trust, including its terms and the distribution of assets, remain confidential.

Time and Cost Savings: The probate process can be time-consuming and costly. By avoiding probate, the distribution of trust assets can be more efficient, with fewer court-related delays and expenses.

Continuity of Management: If the grantor becomes incapacitated, the successor trustee named in the trust document can step in and manage the trust assets without the need for court-appointed guardianship or conservatorship.

It’s important to note that the effectiveness of probate avoidance through a trust depends on the proper funding of the trust. This involves ensuring that assets are formally transferred into the trust’s name. Assets not properly funded into the trust may still be subject to probate.

Common types of trusts used for probate avoidance include revocable living trusts. In a revocable living trust, the grantor retains the ability to modify or revoke the trust during their lifetime. The trust becomes irrevocable upon the grantor’s death, and the successor trustee follows the instructions in the trust document to distribute assets to beneficiaries.

Regular reviews and updates to the trust may also be necessary to accommodate changes in circumstances or preferences.

If you become incapacitated and have a trust in place, the trust can play a crucial role in managing your financial affairs and ensuring a smooth transition of responsibilities. Here’s what typically happens when a person with a trust becomes incapacitated:

Successor Trustee Takes Over: The trust document designates a successor trustee who will assume control over the trust and its assets if the original grantor becomes incapacitated. This person is often a family member, friend, or professional advisor named by the grantor.

Management of Trust Assets: The successor trustee has the authority to manage, invest, and distribute trust assets according to the terms outlined in the trust document. This includes paying bills, managing investments, and making financial decisions on behalf of the incapacitated grantor.

Avoidance of Conservatorship: If a person becomes incapacitated without a trust, a court might appoint a conservator or guardian to manage their financial affairs. With a trust, the need for court intervention can be avoided because the successor trustee is already designated to take on these responsibilities.

Continuity of Financial Management: The trust provides a seamless transition of financial management. The successor trustee can step in immediately, helping to ensure the ongoing financial stability of the trust and the well-being of the incapacitated individual.

Specific Instructions in the Trust Document: The trust document should contain specific instructions for the successor trustee regarding the grantor’s wishes, the management of assets, and any special considerations or limitations. These instructions guide the successor trustee in carrying out their responsibilities.

Regular Reporting and Accountability: The successor trustee is typically required to provide regular accounting and reports to the beneficiaries of the trust, ensuring transparency and accountability in the management of trust assets.

Healthcare Decisions: While a trust primarily addresses financial matters, the grantor’s wishes for healthcare decisions during incapacity are often outlined in a separate healthcare directive or living will. The person appointed as the healthcare agent or proxy can make medical decisions in accordance with the grantor’s preferences.

It’s important to note that the effectiveness of the trust in managing incapacity depends on the proper drafting and funding of the trust. Assets must be properly transferred into the trust, and the

In a trust, the control and management of assets are typically carried out by the trustee. The trustee is a person or entity appointed by the grantor (the person creating the trust) to administer and oversee the trust according to the terms specified in the trust document. The trustee’s responsibilities include managing, investing, and distributing trust assets for the benefit of the trust beneficiaries.

Here are key points regarding control of assets in a trust:

Grantor’s Control During Lifetime: While the grantor is alive and mentally competent, they typically serve as both the grantor and the initial trustee of a revocable living trust. In this case, the grantor retains full control over the trust assets and can make changes to the trust or revoke it entirely.

Successor Trustee During Incapacity: If the grantor becomes incapacitated, the trust document designates a successor trustee who assumes control over the trust assets. The successor trustee manages the assets on behalf of the incapacitated grantor, ensuring the continued financial stability of the trust.

Terms of the Trust Document: The trust document outlines the powers and duties of the trustee, as well as any specific instructions or limitations imposed by the grantor. The terms of the trust document guide the trustee’s actions and decisions.

Fiduciary Duty: The trustee has a fiduciary duty to act in the best interests of the trust beneficiaries. This duty includes managing the assets prudently, avoiding conflicts of interest, and making decisions that align with the grantor’s intentions as outlined in the trust document.

Distribution of Assets: The trustee is responsible for distributing trust assets to the beneficiaries according to the terms of the trust. This may involve regular income distributions, specific bequests, or other instructions provided by the grantor.

Investment Decisions: The trustee may have the authority to make investment decisions on behalf of the trust. The trust document specifies the investment powers granted to the trustee, and investment decisions should be made in accordance with applicable laws and the trust’s objectives.

Recordkeeping and Reporting: The trustee is required to keep accurate records of trust transactions and provide regular reports to the beneficiaries. This transparency helps ensure accountability in the management of trust assets. However, the grantor is not required to report to anyone else if occupying the office of trustee and is the sole beneficiary as well.

It’s important to note that the grantor can have significant flexibility in defining the powers and limitations of the trustee in the trust document. Additionally, the grantor may choose to name co-trustees or institutional trustees to share or delegate responsibilities. The control of assets in a trust is designed to provide a mechanism for the orderly management and distribution of assets while addressing the specific goals and intentions of the grantor.

Transferring assets into your trust is a crucial step in the process of establishing a trust and ensuring that it functions as intended. This process is often referred to as “funding the trust.” The specific steps to fund a trust may vary based on the type of assets involved, but here are general guidelines:

Identify Assets: Create a comprehensive list of assets that you want to include in the trust. This may include real estate, bank accounts, investment accounts, personal property, and other valuable items. This is usually done prior to or concurrent with the creation of the trust.

Change Ownership of Real Estate: For real estate, you will need to sign and record a deed transferring the real estate into the trust. Depending on the use of other real estate, you may want to either transfer additional properties to the trust or into a company owned by the trust.

Change Ownership of Bank Accounts: Contact your financial institution to change the ownership of bank accounts to the trust. This may involve re-titling the accounts in the name of the trust. Provide the bank with a copy of trust documentation and any required forms.

Transfer Investments to the Trust: For investment accounts, contact your broker or financial advisor to transfer ownership to the trust. This may involve completing specific forms provided by the financial institution.

Assign Personal Property: For personal property such as artwork, jewelry, or other items, consider creating a written assignment of personal property that transfers ownership to the trust. Some states may require specific documents or filings for certain types of personal property.

Update Beneficiary Designations: Review and update beneficiary designations on life insurance policies, retirement accounts, and other assets with beneficiary designations. In some cases, naming the trust as the primary or contingent beneficiary may be appropriate.

Document the Transfers: Keep clear records of all transfers into the trust. This documentation can include copies of deeds, account statements, written assignments, and any correspondence with financial institutions.

Regularly Review and Update: Periodically review your assets and update the trust as needed. Changes in financial circumstances, acquisitions of new assets, or other life events may require adjustments to the trust.

It’s important to note that the process of funding a trust may involve legal documents, filings, and interactions with various institutions. Working with professionals can help ensure that the transfers are done correctly and in compliance with applicable laws. Failure to properly fund the trust may result in assets being excluded from the trust’s terms, potentially leading to unintended consequences and the need for probate for those assets. Regular reviews and updates to the trust document are advisable to keep it aligned with your wishes and changing circumstances.

The time it takes to prepare an estate plan, including the drafting of legal documents and related tasks, can vary based on several factors. These factors include the complexity of the trust, the specific legal requirements of the jurisdiction, the involvement of legal professionals, and the efficiency of the process.

Here are some considerations that may influence the time required:

Complexity of the Trust: The complexity of the trust itself can impact the time needed for its preparation. A simple revocable living trust may be quicker to draft than a more complex irrevocable trust with specific conditions and provisions.

Consultation and Decision-Making: The process may involve consultations with the attorney to discuss your goals, preferences, and specific details of the trust. The time it takes to make decisions and provide necessary information can influence the overall timeline.

Customization and Tailoring: The level of customization and tailoring of the trust document to your specific needs can impact the time required. Drafting a trust that addresses unique family situations, tax considerations, and asset protection needs may take longer.

Review and Revisions: After the initial draft, there may be a review process where you and your attorney go over the trust document to ensure accuracy and alignment with your intentions. Revisions may be needed, and the time required for this process can vary.

Funding the Trust: The time it takes to transfer assets into the trust, a process known as funding the trust, is a separate consideration. This step may involve additional legal steps, such as changing property deeds or updating financial account information.

Legal Formalities and Filing: Depending on the jurisdiction, there may be legal formalities or filings required to establish the trust. The time it takes to complete these steps can vary.

Attorney Workload and Availability: The workload and availability of the attorney can impact the scheduling of consultations, document drafting, and the overall pace of the legal preparation.

Given these variables, it’s challenging to provide a specific timeframe that applies universally. Some trusts can be prepared relatively quickly, while others may take several weeks or even months, especially if there are complex legal and financial considerations. Your attorney can help establish a timeline that meets your needs and expectations.

The control of your assets in the event of your death or disability is typically addressed through the mechanisms you establish in your estate planning documents.

Here’s how it works:

In the Event of Death: If you pass away, the distribution and management of your assets are typically governed by your will or, if you have a trust, by the terms of the trust document. In your will, you can name an executor who will be responsible for carrying out the instructions in the will, including the distribution of assets to beneficiaries.

If you have a trust, the successor trustee named in the trust document will take over the management and distribution of trust assets. The successor trustee has the authority to administer the trust according to your wishes without the need for probate court involvement.

In the Event of Disability or Incapacity: If you become disabled or incapacitated, the control of your assets is typically addressed through a durable power of attorney and, if applicable, a revocable living trust.

Durable Power of Attorney: A durable power of attorney for finances allows you to appoint someone (an attorney-in-fact or agent) to manage your financial affairs if you become unable to do so. The person you appoint can make decisions on your behalf, such as paying bills, managing investments, and handling other financial matters.

Revocable Living Trust: If you have a revocable living trust, the successor trustee named in the trust document can take over the management of trust assets in the event of your incapacity. The trust provides instructions for the trustee on how to handle financial matters and distribute assets for your benefit or the benefit of your dependents.

It’s important to carefully choose individuals to serve in these roles and to clearly outline your wishes in your estate planning documents. Here are key points to consider:

Executor or Personal Representative: This person is responsible for administering your estate after your death. Choose someone trustworthy and capable of carrying out the responsibilities outlined in your will.

Successor Trustee: In the context of a revocable living trust, the successor trustee steps in if you become incapacitated or pass away. Choose someone who is organized, responsible, and understands your financial situation.

Agent in a Durable Power of Attorney: If you become incapacitated, the person you appoint as your agent in a durable power of attorney should be someone you trust to handle financial matters on your behalf. Discuss your wishes and preferences with this individual.

It’s important to keep your estate planning documents up to date and to review them periodically, especially if there are changes in your family, financial situation, or preferences.

Choosing a successor trustee is a critical decision in the estate planning process, especially if you have a revocable living trust. The successor trustee assumes responsibility for managing and distributing trust assets in the event of your incapacity or death.

Here are considerations to help you select an appropriate successor trustee:

Trustworthiness: The successor trustee should be someone you trust implicitly. This person will have significant responsibilities, including managing your financial affairs, following the terms of the trust, and acting in the best interests of the beneficiaries.

Organizational Skills: A successor trustee should be well-organized and capable of handling financial matters. This includes keeping accurate records, managing investments, and ensuring that the terms of the trust are carried out efficiently.

Financial Acumen: Ideally, the successor trustee should have a good understanding of financial matters. This is important for making informed decisions about investments, taxes, and other financial aspects of trust administration.

Availability and Accessibility: Consider whether the chosen successor trustee will be readily available to handle the responsibilities of the role. Accessibility is crucial in case prompt action is needed, especially during times of incapacity or after your passing.

Familiarity with Your Wishes: The successor trustee should be familiar with your wishes and intentions as outlined in the trust document. Communication is key, and you may want to discuss your expectations, values, and any specific instructions with the chosen successor trustee.

Ability to Work Well with Beneficiaries: The successor trustee may need to work closely with beneficiaries, providing information, addressing concerns, and making decisions that align with the best interests of the beneficiaries. A person who can communicate effectively and maintain positive relationships is valuable.

Legal and Financial Knowledge: While not a strict requirement, having some legal or financial knowledge can be beneficial. It can help the successor trustee navigate complex legal and financial issues that may arise during trust administration.

Willingness to Serve: Before naming someone as a successor trustee, confirm that the individual is willing to take on the role. Serving as a trustee involves responsibilities, and the person should be willing to accept those duties when the time comes.

Contingency Planning: You should always name at least one alternate or contingent successor trustees in case the primary choice is unable or unwilling to serve when the time comes. Having contingency plans ensures that there is a designated person to step into the role.

Potential candidates for successor trustee may include family members, close friends, or professional advisors. In some cases, individuals may choose to appoint a corporate trustee, such as a bank or trust company, especially if they require professional expertise and impartiality.

Yes, a trust can be designed to continue after your death, providing for ongoing management and distribution of trust assets for the benefit of your chosen beneficiaries. The ability of a trust to continue after the death of the grantor (the person who created the trust) depends on how the trust is structured.

The specific terms and provisions of the trust document will determine its duration, purpose, and the rules for the ongoing administration of trust assets. By carefully designing a trust that continues after your death, you can provide for the long-term well-being of your beneficiaries and specify how your assets should be managed for generations to come.

Estate taxes are taxes imposed on the transfer of a person’s estate upon their death. The taxation of an estate can vary based on the total value of the assets and applicable tax laws. Proper estate planning, including the use of trusts, can help minimize the impact of estate taxes. Here are some key points to consider:

Federal Estate Tax: In the United States, the federal government imposes an estate tax on the transfer of an estate with a total value exceeding a certain threshold. The estate tax is applied to the taxable portion of the estate, which includes the value of assets owned by the deceased person at the time of death.

As of January 2024, the federal estate tax threshold is quite high, $13.61 million per individual. Therefore, most estates are not subject to federal estate tax. The threshold is adjusted for inflation but is also set to be cut in half through a sunset provision in the law on January 1, 2026. However, tax laws can change, and one never knows what it will be when they die.

Estate planning strategies, such as the use of trusts, can be employed to minimize the impact of federal estate taxes.

State Estate Taxes:

Currently 14 states impose their own estate taxes with varying thresholds and rates. State estate tax laws differ, and the impact on an estate depends on the state in which the deceased person was a resident. As with the federal tax laws, state tax laws change from year to year and you never know what the laws will be when you die, so estate planning should take into account both federal and state estate tax considerations.

It depends. Should you take out your own appendix? Should you drill your own cavities? Yes, having a lawyer prepare your trust is generally advisable, especially for complex legal documents such as trusts used in estate planning. Estate planning involves intricate legal and financial considerations, and a knowledgeable attorney can provide valuable assistance in ensuring that your trust is properly drafted, legally sound, and aligned with your specific goals and wishes.

Attorneys specializing in estate planning have the necessary legal expertise to draft trust documents that comply with relevant laws and regulations. They can navigate the complexities of state and federal laws governing trusts, taxes, and probate.

Each individual’s situation is unique, and a lawyer can tailor the trust to meet your specific needs and objectives. They can address your concerns, consider family dynamics, and incorporate provisions that reflect your intentions.

Estate planning documents, including trusts, must be precise and free of errors to be legally valid and effective. A lawyer can help avoid common pitfalls, errors, and ambiguities that could lead to unintended consequences or legal challenges.

Laws related to trusts, taxes, and estate planning can change over time. A lawyer stays informed about legal developments and ensures that your trust remains in compliance with the latest regulations.

Estate planning often involves more than just the creation of a trust. A lawyer can help you develop a comprehensive estate plan that may include wills, powers of attorney, healthcare directives, and other documents to address various aspects of your financial and personal affairs.

A lawyer can provide professional advice based on your unique circumstances. They can assess your financial situation, family dynamics, and long-term goals to recommend appropriate legal strategies.

Estate plans involve specific legal formalities, and an attorney can ensure that all of the documents are executed correctly, meeting the legal requirements of your jurisdiction.

While it is possible to find generic trust forms online or use DIY estate planning tools, these may not account for the intricacies of your specific situation. A lawyer’s expertise ensures that your trust is legally valid, tailored to your needs, and provides the intended benefits for you and your beneficiaries.

Before selecting an attorney, consider their experience in estate planning. Just like there are many different specialties in the medical or financial world, there are many different kinds of lawyers as well. There are many attorneys who are good in their realm who think that a template or two makes them an estate planning attorney as well. Find a dedicated estate planner.

Having a will is generally advisable as part of a comprehensive estate plan. A will, also known as a last will and testament, is a legal document that outlines your wishes regarding the distribution of your assets, the appointment of guardians for minor children, and other important matters after your death.

Here are some key reasons why having a will is important:

Asset Distribution: A will allows you to specify how you want your assets to be distributed among your beneficiaries after your death. Without a will, state laws (intestacy laws) determine how your assets are distributed, which may not align with your preferences.

Guardianship for Minor Children: If you have minor children, a will provides an opportunity to name a guardian for them in the event of your death. This is a crucial decision, and a will allows you to express your wishes regarding who should care for your children if both parents are unable to do so. In that regard, for parents of minor children, a will may be the most important part of your estate plan.

Executor Appointment: In your will, you can appoint an executor (personal representative) to manage the administration of your estate. The executor is responsible for ensuring that your wishes are carried out, debts are settled, and assets are distributed according to the terms of the will.

Avoiding Intestacy: If you die without a will (intestate), state laws determine the distribution of your assets. This may lead to outcomes that differ from your intentions. A will provides clarity and control over the distribution process.

A pour-over will is a type of will that works in conjunction with a revocable living trust as part of an estate plan. The primary function of a pour-over will is to ensure that any assets not already transferred to the trust during the grantor’s lifetime are “poured over” into the trust upon the grantor’s death.

The use of a pour-over will as part of an estate plan allows for comprehensive planning that integrates the advantages of a living trust with the simplicity of a will. This combination provides for efficient asset management to the extent possible. It’s important to note that while the pour-over will can help capture assets not initially placed in the trust, it does not eliminate the need for probate entirely. Probate may still be required for assets that were not effectively transferred to the trust or for assets subject to specific legal requirements, however probate will require much less hassle and time when a trust is combined with a pour-over will.

An advance healthcare directive, also known as a medical directive, is a legal document that provides instructions about an individual’s medical treatment preferences and healthcare decisions in the event they become unable to communicate or make decisions for themselves. Healthcare directives are a type of advance care planning tool that allows individuals to express their wishes regarding medical care and treatment.

Key components of a healthcare directive include:

Medical Treatment Preferences: An advance healthcare directive typically outlines the individual’s preferences regarding medical treatments, interventions, and procedures. This may include decisions about resuscitation, mechanical ventilation, surgery, medication, and other medical interventions.

End-of-Life Decisions: Individuals may use an advance healthcare directive to specify their preferences regarding end-of-life care. This can include decisions about life-sustaining measures, palliative care, and hospice care.

Appointment of Healthcare Agent(s): Advance healthcare directives include a designation of a healthcare agent or proxy. This individual, appointed by the person creating the directive, is authorized to make medical decisions on their behalf if they are unable to do so. The healthcare agent is typically guided by the preferences outlined in the directive. Alternate or successor agents can also be appointed.

Communication with Healthcare Providers: It’s crucial for individuals to communicate the existence of their advance healthcare directive to healthcare providers, family members, and the designated healthcare agent. This ensures that the document is accessible and can be honored in the event of a medical situation.

Advance Healthcare Directives are legally recognized documents, and healthcare providers are generally obligated to respect the documented wishes of the individual. In the absence of a healthcare directive, medical decisions may be made by family members or based on default legal guidelines.

Creating an advance healthcare directive is an important aspect of advance care planning, allowing individuals to have a say in their medical care even if they are unable to communicate.

Choosing an estate planning lawyer is a critical decision that can have long-term implications for your financial and personal affairs. Here are some steps to help you choose the right estate planning lawyer:

Identify Your Needs: Clarify your estate planning goals and needs. Whether you’re creating a will, establishing a trust, or addressing specific concerns, understanding your objectives will guide you in finding a lawyer with the appropriate expertise.

Specialization in Estate Planning: Look for a lawyer who specializes in estate planning. Estate planning is a complex area of law, and a specialized attorney is more likely to have in-depth knowledge and experience in handling issues related to wills, trusts, probate, and other estate planning matters.

Experience in Estate Planning: Consider the lawyer’s experience specifically in estate planning. An attorney with a track record of successfully handling estate planning cases is better equipped to navigate complexities and provide tailored solutions.

Credentials and Certifications: Check the lawyer’s credentials and certifications related to estate planning. Memberships in professional organizations, certifications in estate planning law, and participation in relevant continuing education programs are positive indicators of expertise.

Initial Consultation: Schedule an initial consultation with the lawyer. Use this meeting to discuss your estate planning needs, ask questions, and assess the lawyer’s understanding of your goals. Pay attention to their communication style and whether they address your concerns thoroughly.

Fee Structure: Understand the lawyer’s fee structure. Estate planning lawyers may charge a flat fee for specific services or an hourly rate. Clarify the fees for drafting documents, consultations, and any additional services.

Communication Style: Choose a lawyer with a communication style that suits your preferences. Effective communication is crucial for understanding legal concepts, discussing your goals, and staying informed about the progress of your estate plan.

Accessibility and Responsiveness: Consider the lawyer’s accessibility and responsiveness. You’ll want a lawyer who is available to address your concerns, answer questions, and provide updates in a timely manner.

Compatibility: Assess the compatibility between you and the lawyer. A good working relationship is built on trust, and you should feel comfortable discussing personal and financial matters with the attorney.

Local Knowledge: If your estate planning involves state-specific laws, choose a lawyer with local knowledge. State laws can vary, and a lawyer familiar with the local legal landscape may provide more effective guidance.

Taking the time to research and interview potential estate planning lawyers is crucial in finding the right fit for your unique needs. A well-qualified estate planning attorney can help you create a comprehensive and effective plan that aligns with your goals and provides peace of mind for you and your loved ones.

What are the dangers of a trust that is less than 15 pages?

The length of a trust document alone does not necessarily determine its quality or effectiveness. The key is the content and the legal provisions included in the trust. However, an extremely short trust document, particularly one that is less than 15 pages, may pose certain risks and shortcomings. Here are some potential dangers:

Inadequate Detail: A very brief trust document may lack the necessary level of detail to accurately convey the grantor’s intentions. This could lead to ambiguity and misunderstandings among beneficiaries, trustees, and other involved parties.

Failure to Address Specific Circumstances: A short trust document might not adequately address specific circumstances or contingencies that could arise, such as the death of a beneficiary, changes in family dynamics, or the need to address unique asset distribution scenarios.

Limited Flexibility: A concise trust may lack provisions for flexibility or changes. As life circumstances evolve, a trust should be able to accommodate modifications, additions, or amendments to reflect the grantor’s current wishes.

Incomplete Asset Funding Instructions: The process of funding the trust involves transferring assets into the trust’s name. A brief trust document may not include comprehensive instructions on how to fund the trust properly, potentially leaving some assets subject to probate.

Inadequate Incapacity Planning: A short trust might not include detailed provisions for managing trust assets in the event of the grantor’s incapacity. This could create challenges in ensuring the seamless transition of trust management in such situations.

Lack of Specific Distribution Instructions: A concise trust may lack specificity in terms of how trust assets should be distributed among beneficiaries. Detailed instructions can help prevent disputes and ensure that the grantor’s wishes are carried out accurately.

Omission of Important Clauses: Certain important clauses, such as no-contest clauses, spendthrift provisions, or clauses addressing tax planning, may be omitted in a short trust. These clauses can play a crucial role in achieving specific estate planning goals.

Risk of Misinterpretation: A brief trust may be more susceptible to misinterpretation or varying interpretations by beneficiaries, trustees, or other parties involved. Clarity and precision in language are essential to avoid confusion.

Potential for Legal Challenges: A lack of specificity or completeness in the trust document may increase the risk of legal challenges from disgruntled beneficiaries or other interested parties. A well-drafted trust should anticipate and address potential challenges.

Failure to Address Future Contingencies: Life is dynamic, and a trust should be designed to address future contingencies. A very short trust may not adequately account for changing family dynamics, new assets, or other circumstances that may arise over time. I was once told that many parts of legal documents, such as trusts and contracts, are never used. Some estimate up to 80% of the documents are not used. However, the reason for much of the language that is included in these documents is because when preparing them we cannot know which 20% or more will be used.

It’s important to note that the appropriate length of a trust document can vary based on the complexity of the grantor’s estate and their specific goals. While brevity can be a virtue, it should not come at the expense of clarity, comprehensiveness, and the ability to adapt to changing circumstances. When creating a trust, it is advisable to work with an experienced estate planning attorney who can tailor the document to meet the individual needs and goals of the grantor.

While trusts can be valuable estate planning tools for many individuals, there are situations where a trust may not be necessary or may not provide significant benefits. Here are some scenarios in which you might not need a trust:

Simplicity of Estate: If your estate is relatively small and uncomplicated, and you have straightforward wishes regarding asset distribution, a simple will may be sufficient. In some cases, a will can effectively address the distribution of assets without the need for a trust.

No Concerns About Probate: If you are not concerned about the probate process, which is the legal process for validating a will and administering the estate, you may not feel the need for a trust. Some estates do not need to go through probate.

No Minor or Special Needs Beneficiaries: If you do not have minor children or beneficiaries with special needs, and the distribution of your assets is straightforward, a trust may not be as essential. A will can be used to specify how your assets should be distributed to beneficiaries.

No Concerns About Incapacity Planning: If you are not concerned about planning for the possibility of incapacity, and you are comfortable relying on other legal tools like powers of attorney and healthcare directives, a trust’s incapacity planning features may be less relevant.

It’s important to note that the decision to use a trust or not depends on individual circumstances, goals, and preferences. I have told many clients that they do not need a trust and have just prepared wills for them. While a trust may be more profitable to me, I refuse to be a one size fits all attorney.