Guardianship

When Do I Need a Revocable Trust?

A will is a legal document that states how your property should be distributed when you die.  It also names guardians for any minor children. Whatever the size of your estate, without a will, there’s no guarantee that your assets will be distributed, according to your wishes. For those with a desire to simplify asset transfers after death and avoid probate, those with substantial assets, more complicated situations, or concerns of diminished capacity in later years, a revocable trust might also be considered, in addition to a will.

Revocable trusts have many benefits
A revocable trust is useful for anyone who wants to simplify the transfer of their assets or avoid probate.

Forbes’ recent article, “Revocable Trusts And Why Should You Consider One,” explains that a revocable trust, also called a “living trust” or an inter vivos trust, is created during your lifetime. On the other hand, a “testamentary trust” is created at death through a will. A revocable trust, like a will, details dispositive provisions upon death, successor and co-trustees, and other instructions. Upon the grantor’s passing, the revocable trust functions in a similar manner to a will.

A revocable trust is a flexible vehicle with few restrictions during your lifetime.  You usually designate yourself as the trustee and maintain control over the trust’s assets. You can move assets into or out of the trust, by retitling them. This movement has no income or estate tax consequences, nor is it a problem to distribute income or assets from the trust to fund your current lifestyle.

A living trust has some advantages over having your entire estate flow through probate. The primary advantages of having the majority of your assets avoid probate, is the ease of asset transfer and the lower costs. Another advantage of a trust is privacy, because a probated will is a public document that anyone can view.

Even with a revocable trust, you still need a will. A “pour over will” controls the decedent’s assets that haven’t been titled to the revocable trust, intentionally or by oversight. These assets may include personal property. This pour-over will generally names the revocable trust—which at death becomes irrevocable—as the beneficiary.

Another reason for creating a revocable trust is the possibility of future diminished legal capacity, when it may be better for another person, like a spouse or child, to help with your financial affairs. A co-trustee can pay bills and otherwise control the trust’s assets. This can also give you financial protection, by obviating the need for a court-ordered guardianship.

Talk to an experienced estate planning attorney about the best options for your situation to protect your estate and provide the peace of mind that your family will receive what you intended for them to inherit, with the least possible costs and stress.

Reference: Forbes (March 11, 2019) “Revocable Trusts And Why Should You Consider One”

As a New Parent, Have You Updated (or Created) Your Estate Plan?

You just had a baby. As a new parent you’re sleep-deprived, overwhelmed, and frazzled. Having a child dramatically changes one’s legacy and makes having an estate plan all the more necessary, says ThinkAdvisor’s recent article, “5 Legacy Planning Basics for New Parents.”

If you have a baby, estate planning is a must
After you have a baby, putting an estate plan in place is one of the most important and effective things you can do to protect your child.

Take time to talk through two high-priority items. Create a staggered checklist—starting with today—and set attainable dates to complete the rest of the tasks. Here are five things to put on that list:

  1. Will. This gives the probate court your instructions on who will care for your children, if something happens to both you and your spouse. A will also should name a guardian to be responsible for the children. Parents also should think about how they want to share their personal belongings and financial assets. Without a will, the state decides what goes to whom. Lastly, a will must name an executor.
  2. Beneficiaries. Review your beneficiary designations when you create your will, because you don’t want your will and designations (on life insurance policies and investments) telling two different stories. If there’s an issue, the beneficiary designation overrides the will. All accounts with a beneficiary listed automatically avoid probate court.
  3. Trust. Created by an experienced estate planning attorney, a trust has some excellent benefits, particularly if you have young children. Everything in a trust is shielded from probate court, including property. This avoids court fees and hassle. A trust also provides some flexibility and customization to your plan. You can instruct that your children get a sum of money at 18, 25 or 30, and you can say that the money is for school, among other conditions. The trustee will distribute funds, according to your instructions.
  4. Power of Attorney and Health Care Proxy. These are two separate documents, but they’re both used in the event of incapacitation. Their power of attorney and health care proxy designees can make important financial and medical decisions, when you’re incapable of doing so.
  5. Life Insurance. Most people don’t think about purchasing life insurance, until they have children. Therefore, if you haven’t thought about it, you’re not alone. If you are among the few who bought a policy pre-child, consider increasing the amount so your child is covered, if something should happen.

Reference: ThinkAdvisor (March 7, 2019) “5 Legacy Planning Basics for New Parents”

Why Do I Need A Will?

You might ask yourself, “Why do I need a will?” After all, writing a will isn’t exactly one of life’s most pleasant tasks. Maybe that is why only 36% of American adults with children under 18 have estate plans in place.

Why do I Need a Will?
Asking yourself “Why do I need a will” is the first step to protecting your assets and your family.

The Boston Globe’s recent article, “The end may not be near, but you still need a will,” says that estate planning is essential, because dying without a will means that certain property is subject to intestate succession laws. That’s where the state distributes your assets to your heirs according to state laws, instead of your wishes.

Assets for which you’ve assigned a beneficiary, like your 401(k) or life insurance, won’t meet the same end, because these are outside of probate. However, non-beneficiary accounts, like checking accounts or property, could. Even if you’re not wealthy, it’s important to plan ahead. Consider these thoughts:

  • A will. If you have assets that you want to leave to another person, you need a will. It’s your instructions on what should happen upon your death. You’ll also name an executor or a personal representative who’s responsible for tending to your assets, when you pass away. And a will is the only way you can name a guardian to raise your children is you’re unable to.
  • Beneficiary designations. Some assets don’t pass through a will, like life insurance and retirement plans. For these, you must name a beneficiary.
  • Health care proxies and powers of attorney. An estate planning attorney will help you with healthcare directives, HIPAA forms and durable power of attorney. The power of attorney lets someone else handle your legal and financial matters. The healthcare directive lets a trusted person make decisions about your medical care, when you’re unable to speak for yourself.
  • Guardian for minor children. Select a person who shares your values and parenting style, regardless of their financial background.
  • A living will. A living will is a type of advanced healthcare directive. It states your wishes concerning not wanting life-prolonging medical intervention and allowing you to pass away naturally.

Finally, discuss your plans with your family and make certain that your will and other documents are safely stored and easily accessible. You should also be sure that you’ve given your power of attorney and health care agent copies. Your physicians should also have a copy of your health care proxy and living will, and your attorney should keep a copy on file.

Read more about getting your will and other estate planning documents taken care of and becoming a client of Mastry Law here.

Reference: Boston Globe (February 25, 2019) “The end may not be near, but you still need a will”

Why Is a Revocable Trust So Valuable in Estate Planning?

There’s quite a bit that a revocable trust can do to solve big estate planning problems for many families.

As Forbes explains in its recent article, “Revocable Trusts: The Swiss Army Knife Of Financial Planning,” trusts are a critical component of a proper estate plan. There are three parties to a trust: the owner of some property (settler or grantor) turns it over to a trusted person or organization (trustee) under a trust arrangement to hold and manage for the benefit of someone (the beneficiary). A written trust document will spell out the terms of the arrangement.

One of the most useful trusts is a revocable trust (inter vivos) where the grantor creates a trust, funds it, manages it by herself, and has unrestricted rights to the trust assets (corpus). The grantor has the right at any point to revoke the trust, by simply tearing up the document and reclaiming the assets, or perhaps modifying the trust to accomplish other estate planning goals.

Revocable Trust
A Revocable Trust is one of the most useful estate planning tools

After discussing trusts with your attorney, he or she will draft the trust document and re-title property to the trust. The grantor has unrestricted rights to the property and assets transferred to a revocable trust and can be reclaimed at any time. During the life of the grantor, the trust provides protection and management, if and when it’s needed.

Let’s examine the potential lifetime and estate planning benefits that can be incorporated into the trust:

  • Lifetime Benefits. If the grantor is unable or uninterested in managing the trust, the grantor can hire an investment advisor to manage the account in one of the major discount brokerages, or he can appoint a trust company to act for him.
  • Incapacity. A trusted spouse, child, or friend can be named to care for and represent the needs of the grantor/beneficiary. They will manage the assets during incapacity, without having to declare the grantor incompetent and petitioning for a guardianship. After the grantor has recovered, she can resume the duties as trustee.
  • Guardianship. This can be a stressful legal proceeding that makes the grantor a ward of the state. This proceeding can be expensive, public, humiliating, restrictive and burdensome. However, a well-drafted trust (along with powers of attorney) avoids this.

The revocable trust is a great tool for estate planning because it bypasses probate, which can mean considerably less expense, stress and time.

In addition to a trust, ask your attorney about the rest of your estate plan: a will, powers of attorney, medical directives and other considerations.

Any trust should be created by a very competent trust attorney, after a discussion about what you want to accomplish.

Reference: Forbes (February 20, 2019) “Revocable Trusts: The Swiss Army Knife Of Financial Planning”

Kids Grown Up? Protect Adult Children with These Three Documents

Without the right documents in place, you do not have the legal right to protect your own children once they turn 18, says The National Law Review in an unsettling but must-read article titled “Three Critical Legal Documents Every Parent Should Get in Place Now to Safeguard Their Adult Children.”

There are only three documents needed to protect adult children and they are fairly straightforward. There is no reason not to have them in place. If your adult child was incapacitated by an accident or an illness, you would want to speak with the medical staff to find out how they are and what decisions need to be made. Whether you were making a phone call or arriving at the hospital, a nurse or doctor would not be permitted to speak with you about your own adult child’s condition or be inv

Protect Your Adult Children
Without basic planning you can’t make decisions for your adult children or even speak with their healthcare providers.

olved with making any medical decisions.

It sounds unreasonable, and perhaps it is, but that is the law. There are steps you can take to ensure that you are not in this situation.

HIPAA Authorization Form gives you the authority to speak with healthcare providers about your adult children. This is a federal law (Health Insurance Portability and Accountability Act of 1996) that safeguards who can access an adult’s private health data. HIPAA prevents healthcare providers from revealing any information to you or anyone else about a patient’s status. The practitioners could face severe penalties for violating HIPAA.

This is why you want to have a HIPAA authorization signed by your adult child and naming you as an authorized recipient.  This will give you the ability to ask for and receive information about your child’s health status, progress and treatment. This is especially important, if your child is unconscious or in an unresponsive state. The alternative? Going to court. That’s not what you want to be doing during a health emergency.

A Healthcare Power of Attorney needs to be in place to protect adult children, so you can be named his or her “medical agent” and have the ability to view their medical records and make informed decisions on their behalf. Without this (or a court-appointed guardianship), healthcare decisions will be in the hands of healthcare providers only. That’s not a bad thing, if you implicitly trust your child’s doctor. However, if your child is incapacitated in an out-of-town hospital with healthcare providers you don’t know, you will want to be able to make decisions on his or her behalf.

Note that physicians prefer a single medical agent, not a handful. The concern is that if time is a critical factor and a group of family members do not agree on care, it may compromise the healthcare services that can be provided. You can name multiple agents in priority order. A mother might be listed as the medical agent, and if she is unable or unwilling to serve, the second person would be the father.

The third document needed to protect adult children is a General Power of Attorney. This would give you the right to make financial decisions on your child’s behalf, if they were to become incapacitated. You would have the legal right to manage bank accounts, pay bills, sign tax returns, apply for government benefits, break or apply a lease and conduct activities on behalf of your child. Without this document, you won’t be able to help your child without a court-appointed conservatorship.

Keep in mind, to properly protect adult children these documents need to be updated every few years. If you try to use an older document, the bank or hospital may not accept them. Your adult child also has the ability to revoke these documents at any time, just by saying they revoke them or by putting it in writing. If you have an adult child living out of state, you want to have these documents prepared for your home state and their state of residence.

Finally, this is not a time to download forms and hope for the best. An estate planning attorney will know more specifically what forms are used in your state and help you make sure that they are prepared correctly.

Reference: The National Law Review (Feb. 11, 2019) “Three Critical Legal Documents Every Parent Should Get in Place Now to Safeguard Their Adult Children”

Why Do I Need Estate Planning If I’m Not Rich?

Most people spend more time planning a vacation than they do thinking about who will inherit their assets after they pass away. Although estate planning isn’t the most enjoyable activity, without it, you don’t get to direct who gets the things you’ve worked so hard for after you pass away.

Estate Planning isn't only for the rich
An Estate Plan will protect your assets and your loved ones

Investopedia asks you to consider these four reasons why you should have an estate plan to avoid potentially devastating results for your heirs in its article “4 Reasons Estate Planning Is So Important.”

Wealth Won’t Go to Unintended Beneficiaries. Estate planning may have been once considered something only rich people needed, but that’s changed. Everyone now needs to plan for when something happens to a family’s breadwinner(s). The primary part of estate planning is naming heirs for your assets and a guardian for your minor children. Without an estate plan, the courts will decide who will receive your property and raise your kids.

Protection for Families With Young Children. If you are the parent of small children, you need to have a will to ensure that your children are taken care of. You can designate their guardians, if both parents die before the children turn 18. Without a will with a guardianship clause, a judge will decide this important issue, and the results may not be what you would have wanted.

Avoid Taxes. Estate planning is also about protecting your loved ones from the IRS. Estate planning is transferring assets to your family, with an attempt to create the smallest tax burden for them as possible. A little estate planning can reduce much or even all of their federal and state estate taxes or state inheritance taxes. There are also ways to reduce the income tax that beneficiaries might have to pay. However, without an estate plan, the amount your heirs will owe the government could be substantial.

No Family Fighting (or Very Little). One sibling may believe he or she deserves more than another. This type of fighting happens all the time, and it can turn ugly and end up in court, pitting family members against each other. However, an estate plan enables you to choose who controls your finances and assets, if you’re unable to manage your own assets or after you die. It also will go a long way towards settling any family conflict and ensuring that your assets are handled in the way you wanted.

To protect your assets and your loved ones when you no longer can do it, you’ll need an estate plan. Without one, your family could see large tax burdens, and the courts could say how your assets are divided, or even who will care for your children.

Reference: Investopedia (May 25, 2018) “4 Reasons Estate Planning Is So Important”

Should I Use an Online Will Service?

More than 50% of Americans don’t have a will, according to a 2017 survey by Caring.com. Spelling out how your assets should be divided, is an essential start to estate planning that can be easily overlooked.

A U.S. News & World Report’s article asks “Should You Make a Free Will Online?” According to the article, before writing your will or using an online service, you need to know the legal requirements in your area. In many instances, this is best left to a legal professional in your state.

There are plenty of online tools that will help you create a will. However, before clicking on a website’s promise, you need to evaluate the available options. There are three main ways to write a will:

  1. Do it yourself;
  2. Use a do-it-yourself program; or
  3. Get help from a qualified estate planning attorney.

If you draft a will on your own, you’ll need to be absolutely certain you understand all of the applicable probate, tax and property laws in your state.

If you use an online service, you’ll have access to software that walks you through the process. In this case, you’ll need to be sure that the software company has all the applicable laws covered, as required for your state. You also want a program that lets you make updates later, if your situation changes.

However, if you engage the assistance of an experienced estate planning attorney, you’ll have the opportunity to have an expert help you think through the details. The result will be a well-drafted will. Yes, it will cost a bit more, but for many situations—like those with blended families, families with minor children, complex investments, or property in several states—it’s worth it.

Remember that the probate laws can vary widely from state to state. For example, the basic form requirements may allow a handwritten will in some states, but in other states the will must be typewritten. Some states require only two witnesses, and others require that the will be witnessed, notarized and typed.

If you have a larger estate or heirs with medical conditions, it may be wise to work with an attorney who can counsel you on the best solutions for your situation. For example, if you have a child with special needs receiving government benefits, you should have an attorney create a trust so their inheritance doesn’t negatively impact their benefits.

You should also use an attorney if you want to reduce your exposure to probate fees. Some people transfer their assets into a revocable living trust, so they are not subject to probate fees. An online service can’t give you this type of attention or personalized service.

If you have a complex situation, you may end up paying less by using an attorney. An experienced estate planning attorney has helped numerous families. He or she can offer insight into setting up guardians for minor children or appointing an individual to be in charge of the distribution of the estate. There are frequently estate and gift tax considerations about which the average person doesn’t know or monitor.

Reference: U.S. News & World Report (January 9, 2019) “Should You Make a Free Will Online?”

Why Did the Hawaii Attorney General Oppose a Change to the Trust of a Hawaiian Princess?

Attorney General Russell Suzuki claimed in a court filing that 92-year-old Native Hawaiian princess Abigail Kawananakoa’s amendment to her trust is too complex and invalid based on a prior court ruling, according to The Honolulu Star-Advertiser.

The Clay Center Dispatch reports in the recent article, “Attorney general opposes Hawaiian princess’ trust amendment,” that Judge Robert Browning ruled last fall that Kawananakoa doesn’t have the mental capacity to manage her $215 million trust, after she suffered a stroke in 2017. The judge appointed First Hawaiian Bank to serve as trustee and removed Jim Wright, her longtime attorney who stepped in as trustee following her stroke.

Kawananakoa has indicated that she is feeling okay. She fired attorney Wright and then married Veronica Gail Worth—her girlfriend of 20 years.

Kawananakoa is considered a princess, because she is a descendant of the family that ruled the islands before the overthrow of the Hawaiian Kingdom in 1893.

The princess inherited her wealth as the great-granddaughter of James Campbell, an Irish businessman who made his fortune as a sugar plantation owner and one of the state’s largest landowners.

The Hawaiian princess says she also wants to create a foundation to benefit Hawaiians and exclude board members appointed by Wright. She previously created a foundation to benefit Native Hawaiian causes.

“I will not contribute any further assets to that foundation because I do not want those individuals having anything to do with my trust, my estate and any charitable gifts I make during my lifetime or at my passing,” she said in the amended trust.

Her current foundation has requested a judge to appoint a guardian for Kawananakoa.

In his filing, Attorney General Suzuki wrote that the proposed changes will substantially alter the estate plan Kawananakoa executed before her mental capacity came into question.

In this case, the state represents the public interest in the protection of the trust’s charitable assets, Suzuki said.

A court hearing on the trust amendment is scheduled for next month.

Reference: The Clay Center Dispatch (January 3, 2019) “Attorney general opposes Hawaiian princess’ trust amendment”

A Will is an Essential Component of Estate Planning

Drafting a will is a fundamental and essential component of estate planning.

Drafting a will with an experienced estate planning attorney helps avoid unnecessary work and perhaps some stress, when a family member passes away. A will permits the heirs to act with the decedent’s wishes in mind and can make certain that assets and possessions are passed to the correct individuals or organizations.

The Delaware County Daily Times’ recent article, “Senior Life: Things people should know about creating wills,” says that estate planning can be complicated. That’s the reason why many people use an experienced attorney to get the job done right. Attorneys who specialize in estate planning will typically discuss the following topics with their clients.

  • Assets: Create a list of known assets and determine which of those are covered by the will and which have to be passed on according to other estate laws, such as through joint tenancy or a beneficiary designation, like life insurance policies or retirement plan proceeds. A will also can dispose of other assets, such as photographs, mementos and jewelry.
  • Guardianship: Parents with minor children should include a clause regarding whom they want to become the guardians for their underage children or dependents. (For more about this, download Mastry Law’s FREE report A Parent’s Guide to Protecting Your Children Through Estate Planning.
  • Pets: Some people use their will to instruct the guardianship of pets and to leave assets for their care. However, remember that pets don’t have the legal capacity to own property, so don’t give money directly to pets in a will.
  • Funeral instructions: Finalizing probate won’t occur until after the funeral, so wishes may go unheeded.
  • Executor: This individual is a trusted person who will carry out the terms of the will. She should be willing to serve and be capable of executing the will.

Those who die without a valid will become intestate. This results in the estate being settled based upon the laws where that person lived. A court-appointed administrator will serve in the capacity to transfer property. This administrator will be bound by the laws of the state and may make decisions that go against the decedent’s wishes.

To avoid this, a will and other estate planning documents are critical. Talk to an estate planning attorney or download a FREE copy of our estate planning book, Failing to Plan is Planning to Fail.

Reference: The Delaware County Daily Times (January 7, 2019) “Senior Life: Things people should know about creating wills”

Here’s Why You Need an Estate Plan

It’s always the right time to do your estate planning, but it’s most critical when you have beneficiaries who are minors or have special needs, says the Capital Press in the recent article, “Ag Finance: Why you need to do estate planning.”

While it’s likely that most adult children can work things out, even if it’s costly and time-consuming in probate, minor young children must have protections in place. Wills are frequently written, so the estate goes to the child when he reaches age 18. However, few teens can manage big property at that age. A trust can help, by directing that the property will be held for him by a trustee or executor until a set age, like 25 or 30.

Probate is the default process to administer an estate after someone’s death, when a will or other documents are presented in court and an executor is appointed to manage it. It also gives creditors a chance to present claims for money owed to them. Distribution of assets will occur only after all proper notices have been issued, and all outstanding bills have been paid.

Probate can be expensive. However, wise estate planning can help most families avoid this and ensure the transition of wealth and property in a smooth manner. Talk to an experienced estate planning attorney about establishing a trust. Individuals can name themselves as the beneficiaries during their lifetime, and instruct to whom it will pass after their death. A living trust can be amended or revoked at any time, if circumstances change.

With a trust, it makes it easier to avoid probate because nothing’s in an individual’s name, and the property can transition to the beneficiaries without having to go to court. Living trusts also help in the event of incapacity or a disease, like Alzheimer’s, to avoid conservatorship (guardianship of an adult who loses capacity). It can also help to decrease capital gains taxes, since the property transfers before their death.

If you have minor children, an attorney can help you with how to pass on your assets and protect your kids.

For more information about how to best protect your minor children, download a copy of Mastry Law’s FREE report, A Parent’s Guide to Protecting Your Children Through Estate Planning.

Reference: Capital Press (December 20, 2018) “Ag Finance: Why you need to do estate planning”

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