Fixing an Estate Plan Mistake

Estate Planning, Inheritance, Probate, Trustee, Trusts, Wills / Decanting, Estate Planning Lawyer, Inheritance, Irrevocable Trust, Power of Appointment, Probate Attorney, Probate Court, St. Petersburg Estate Planning Attorney, Trust Protector, Trustee

When an issue arises, you need to seek the assistance of a qualified and experienced estate planning attorney, who knows to fix the problems or find the strategy moving forward.

For example, an irrevocable trust can’t be revoked. However, in some circumstances it can be modified. The trust may have been drafted to allow its trustees and beneficiaries the authority to make certain changes in specific circumstances, like a change in the tax law.

Those kinds of changes usually require the signatures from all trustees and beneficiaries, explains The Wilmington Business Journal’s recent article entitled “Repairing Estate Planning Mistakes: There Are Ways To Clean Up A Mess.”

Another change to an irrevocable trust may be contemplated, if the trust’s purpose has become outdated or its administration is too expensive. An estate planning attorney can petition a judge to modify the trust in these circumstances when the trust’s purposes can’t be achieved without the requested change. Remember that trusts are complex, and you really need the advice of an experienced trust attorney.

Another option is to create the trust to allow for a “trust protector.” This is a third party who’s appointed by the trustees, the beneficiaries, or a judge. The trust protector can decide if the proposed change to the trust is warranted. However, this is only available if the original trust was written to specify the trust protector.

A term can also be added to the trust to provide “power of appointment” to trustees or beneficiaries. This makes it easier to change the trust for the benefit of current or future beneficiaries.

There’s also decanting. This is when the assets of an existing trust are “poured” into a new trust with different terms. This can include extending the trust’s life, changing trustees, fixing errors or ambiguities in the original language, and changing the legal jurisdiction. State trust laws vary, and some allow much more flexibility in how trusts are structured and administered.

The most drastic option is to end the trust. The assets would be distributed to the beneficiaries, and the trust would be dissolved. Approval must be obtained from all trustees and all beneficiaries. A frequent reason for “premature termination” is that a trust’s assets have diminished in value to the extent that administering it isn’t feasible or economical.

Again, be sure your estate plan is in good shape from the start. Anticipating problems with the help of your lawyer, instead of trying to solve issues later is the best plan.

Reference: Wilmington Business Journal (Jan. 3, 2020) “Repairing Estate Planning Mistakes: There Are Ways To Clean Up A Mess”

How Do I Incorporate My Business into My Estate Plan?

Estate Planning, Power of Attorney, Probate, Trusts, Wills / Business Succession Planning, Estate Planning Lawyer, Financial Planning, Power of Attorney, Probate Attorney, Probate Court, Retirement Planning, St. Petersburg Estate Planning Attorney, Tax Planning, Trust, Trustee

When people think about estate planning, many just think about their personal property and their children’s future. If you have a successful business, you may want to think about having it continue after you retire or pass away.

Forbes’ recent article entitled “Why Business Owners Should Think About Estate Planning Sooner Than Later” says that many business owners believe that estate planning and getting their affairs in order happens when they’re older. While that’s true for the most part, it’s only because that’s the stage of life when many people begin pondering their mortality and worrying about what will happen when they’re gone. The day-to-day concerns and running of a business is also more than enough to worry about, let alone adding one’s mortality to the worry list at the earlier stages in your life.

Business continuity is a big concern for many entrepreneurs. This can be a touchy subject, both personally and professionally, so it’s better to have this addressed while you’re in charge rather than leaving the company’s future in the hands of others who are emotionally invested in you or in your work. One option is to create a living trust and will that outs parameters in place for a trustee to carry out. With these decisions in place, you’ll avoid a lot of stress and conflict for those you leave behind.

Let them be upset with you, rather than with each other. This will give them a higher probability of working things out amicably at your death. The smart move is to create a business succession plan that names a successor to be in charge of operating the business, if you should become incapacitated or when you pass away.

A power of attorney document will nominate an agent to act on your behalf, if you become incapacitated, but you should also ask your estate planning attorney about creating a trust to provide for the seamless transition of your business at your death to your successor trustees. The transfer of the company to your trust will avoid the hassle of probate and will ensure that your business assets are passed on to your chosen beneficiaries.

Estate planning may not be on tomorrow’s to do list for young entrepreneurs and business owners. Nonetheless, it’s vital to plan for all that life may bring.

Reference: Forbes (Dec. 30, 2019) “Why Business Owners Should Think About Estate Planning Sooner Than Later”

What Estate Planning Do I Need With a New Baby?

Estate Planning, Guardian, Inheritance, Life Insurance, Protecting Children, Trusts, Wills / Asset Protection, Beneficiary Designations, Estate Planning Lawyer, Guardianship, Inheritance, Life Insurance, Probate Court, St. Petersburg Estate Planning Attorney, Trustee, Trusts, Wills

Congratulations, you’re a new mom or dad. There’s a lot to think about, and there is one vital task that should be a priority. That is making an estate plan. People usually don’t worry about estate planning, when they’re young, healthy and starting a new family. However, your new baby is depending on you to make decisions that will set him or her up for a secure future.

What estate planning do I need with a new baby — Having an estate plan is the only way to legally name a guardian for your child.

Motley Fool’s recent article, “If You’re a New Parent, Take These 4 Estate Planning Steps” says there are a few key estate planning steps that every parent should take to make certain they’ve protected their child, no matter what the future holds.

Purchase Life Insurance. If a parent passes away, life insurance will make sure there are funds available for the other spouse to keep providing for the children. If both parents pass away, life insurance can be used to raise the child or to fund the cost of college. For most parents, term life insurance is used because the premiums are affordable, and the coverage will be in effect long enough for your child to grow to an adult.
Draft a Will and Name a Guardian for your Children. For parents of minor children, the most important reason to make a will, is to name a guardian for your children. When you designate a guardian, select a person who shares your values and who will do a good job raising your children. By being proactive and naming a guardian to raise your children, it’s not left to a judge to make that selection. Do this as soon as your children are born.
Update Beneficiaries. Your will should say what happens to most of your assets, but you probably have some accounts with a designated beneficiary, like a 401(k), and IRA, or life insurance. When you have children, you’ll need to update the beneficiaries on these accounts for your children to inherit these assets as secondary beneficiaries, so they will inherit them in the event of your and your spouse’s passing.
Look at a Trust. If you pass away prior to your children turning 18, they can’t directly take control of any inheritance you leave for them. This means that a judge may need to appoint someone to manage assets that you leave to your child. Your child could also wind up inheriting a lot of money and property free and clear at age 18. To have more control, like who will manage assets, how your money and property should be used for your children and when your children should directly receive a transfer of wealth, ask your estate planning attorney about creating a trust. With a trust, you can designate an individual who will manage money on behalf of your children and provide instructions for how the trustee can use the money to help care for your children, as they age. You can also create conditions on your children receiving a direct transfer of assets, such as requiring your children to reach age 21 or requiring them to use the money to cover college costs. Trusts are for anyone who wants more control over how their property will help their children, after they’ve passed away.

When you have a new baby, working on your estate planning probably isn’t a big priority. However, it’s worth taking the time to talk to an attorney for the security of knowing your bundle of joy can still be provided for, in the event that the worst happens to you.

Reference: Motley Fool (September 28, 2019) “If You’re a New Parent, Take These 4 Estate Planning Steps”

How Does an Irrevocable Trust Work?

Estate Planning, Irrevocable Trust, Life Insurance, Trustee / Beneficiaries, Estate Planning Attorney, Irrevocable Life Insurance Trust, Revocable, Trustee

There are pros and cons to using a revocable trust, which allows the grantor to make changes or even eliminate the trust entirely if they want to, and an irrevocable trust, which doesn’t allow any changes to be made from the creator of the trust once it’s set up, says kake.com in the article “How an Irrevocable Life Insurance Trust (ILIT) Works.”

Revocable trusts tend to be used more often, since they allow for flexibility as life brings changes to the person who created the trust. However, an irrevocable life insurance trust may be a good idea in certain situations. Your estate planning attorney will help you determine which one is best suited for you.

This is how an irrevocable trust works. A grantor sets up and funds the trust, while they are living. If there are any gifts or transfers made to the trust, they are permanent and cannot be changed. The trustee—not the grantor—manages the trust and handles how distributions are made to the beneficiaries.

Despite their inflexibilities, there are some good reasons to use an irrevocable trust.

With an Irrevocable Life Insurance Trust (or “ILIT”), the death benefits of life insurance may not be part of the gross estate, so they are not subject to state or federal estate taxes. They can be used to cover estate tax costs and other debts, as long as the estate is the purchaser and not the grantor. (Just bear in mind that the beneficiaries’ estate may be impacted by the inheritance.)

Minors may not be prepared to receive large assets. If there is an irrevocable trust, the death proceeds may be placed directly into a trust, so that beneficiaries must reach a certain age or other milestone, before they have access to the assets.

The IRS notes that life insurance payouts are typically not included among your gross assets, and in most instances, they do not have to be reported. However, there are exceptions. If interest has been earned, that is taxable. And if a life insurance policy was transferred to you by another person in exchange for a sum of money, only the sum of money is excluded from taxes.

An ILIT should shield a life insurance payout and beneficiaries from any legal action against the grantor. A key aspect of how an irrevocable trust works is that the ILIT is not owned by the beneficiary, nor is it owned by the grantor. This makes it tough for courts to label them as assets, and next to impossible for creditors to access the funds.

However, there are some quirks about ILITs that may make them unsuitable. For one thing, some of the tax benefits only kick in if you live three or more years after transferring your life insurance policy to the trust. Otherwise, the proceeds will be included in your estate for tax purposes.

Giving the trust money for the policy may make you subject to gift taxes. However, if you send beneficiaries a letter after each transfer notifying them of their right to claim the gifted funds for a certain period of time (e.g., 30 days), there won’t be gift taxes.

The biggest downside to an ILIT is that it is truly irrevocable, so the person who creates the trust must give up control of assets and can’t dissolve the trust.

Speak with your estate planning attorney to learn more about how an irrevocable trust works and if an ILIT is suitable for you. It may not be—but your estate planning attorney will know what tools are available to reach your goals and to protect your family.

Reference: kake.com (July 19, 2019) “How an Irrevocable Life Insurance Trust (ILIT) Works”

What Are the Basics About Trusts?

Estate Planning, Estate Tax, Inheritance, Tax Planning, Trustee, Trusts / Asset Protection, Estate Planning Lawyer, Estate Tax, Inheritance, Tax Planning, Trustee, Trusts

Forbes’s recent article, “A Beginner’s Guide To Reading A Trust,” says that as much as attorneys have tried to simplify documents, there’s some legalese that just can’t be avoided. Let’s look at the basics about trusts and a few tips in reviewing your trust.

Basis about trusts — Understanding basic trust terms is essential.

First, familiarize yourself with the terms. There are basic terms of the trust that you’ll need to know. Most of this can be found on its first page, such as the person who created the trust. He or she is usually referred to as the Donor, Grantor or Settlor (here in Florida we use the term Settlor). It is also necessary to identify the Trustee and any successor trustees, who will hold the trust assets and administer them for the benefit of the Beneficiaries.

You should next see who the Beneficiaries are and then look at the important provisions concerning asset distribution. See if the trustee is required to distribute the assets all at once to a specific beneficiary, or if she can give the money out in installments over time.

It is also important to determine if the distributions are completely left to the discretion of the trustee, so the beneficiary doesn’t have a right to withdraw the trust assets. You’ll also want to check to see if the trustee can distribute both income and principal.

The next step is to see when the trust ends. Trusts usually end at a specific date or at the death of a beneficiary.

Other important basic trust provisions include whether the beneficiaries can remove and replace a trustee, if the trustee has to provide the beneficiaries with accountings and whether the trust is revocable or irrevocable. If the trust is revocable and you’re the settlor, you can change it at any time.

If the trust is irrevocable, you won’t be able to make any changes without court approval. If your uncle was the donor and he passed away, the trust is most likely now irrevocable.

In addition, you should review the basic trust boilerplate language, as well as the tax provisions.

Talk to an estate planning attorney about any questions you may have and to help you interpret the basic trust terms.

Reference: Forbes (June 17, 2019) “A Beginner’s Guide To Reading A Trust”

What Should I Keep in Mind in Estate Planning as a Single Parent?

Estate Planning, Guardian, Inheritance, Protecting Children, Trustee, Trusts, Wills / Asset Protection, Beneficiary Designations, Estate Planning Lawyer, Guardianship, Inheritance, IRA, Life Insurance, Probate Court, St. Petersburg Estate Planning, Trustee, Trusts, Wills

Most estate planning conversation eventually come to center upon the children, regardless of whether they’re still young or adults. So what should you keep in mind in estate planning as a single parent?

Talk to a qualified estate planning attorney and let him or her know your overall perspective about your children, and what you see as their capabilities and limitations. This information can frequently determine whether you restrict their access to funds and how long those limitations should be in place, in the event you’re no longer around.

Kiplinger’s recent article, “Estate Planning for Single Parents” explains that when one parent dies, the children typically don’t have to leave their home, school and community. However, when a single parent passes, a child may be required to move from that location to live with a relative or ex-spouse.

After looking at your children’s situation with your estate planning attorney to understand your approach to those relationships, you should then discuss your support network to see if there’s anyone who could serve in a formal capacity, if necessary. A big factor in planning decisions is the parent’s relationship with their ex. Most people think that their child’s other parent is the best person to take over full custody, in the event of incapacity or death. For others, this isn’t the case. As a result, their estate plan must be designed with great care. These parents should have a supportive network ready to advocate for the child.

Your estate planning attorney may suggest a trust with a trustee. This fund can accept funds from your estate, a retirement plan, IRA and life insurance settlement. This trust should be set up, so that any court that may be involved will have sound instructions to determine your wishes and expectations for your kids. The trust tells the court who you want to carry out your wishes and who should continue to be an advocate and influence in your child’s life.

Your will should also designate the child’s intended guardian, as well as an alternate, in case the surviving parent can’t serve for some reason. The trust should detail how funds should be spent, as well as the amount of discretion the child may be given and when, and who should be involved in the child’s life.

A trust can be drafted in many ways, but a single parent should discuss all of their questions with an estate planning attorney.

Reference: Kiplinger (May 20, 2019) “Estate Planning for Single Parents”

What If My Beneficiary Isn’t Ready to Handle an Inheritance?

Estate Planning, Executor, Financial Planning, Inheritance, Trustee, Trusts, Wills / Estate Planning Lawyer, Financial Planning, Inheritance, Probate Court, St. Petersburg, Trustee, Trusts, Wills

A recent Kiplinger article asks: “Is Your Beneficiary Ready to Receive Money?” In fact, not everyone will be mentally or emotionally prepared for the money you wish to leave them. Here are some things estate planning attorney’s suggest you consider:

The Beneficiary’s Age. Children under 18 years old cannot sign legal contracts. Without some planning, the court will take custody of the funds on the child’s behalf. This could occur via custody accounts, protective orders or conservatorships. If this happens, there’s little control over how the money will be used. The conservatorship will usually end and the funds be paid to the child, when they become an adult. Giving significant financial resources to a young adult who’s not ready for the responsibility, often ends in disaster. Work with an estate planning attorney to find a solution to avoid this result.

The Beneficiary’s Lifestyle. There are many other circumstances for which you need to consider and plan. These include the following:

A beneficiary with a substance abuse or gambling problem;
A beneficiary and her inheritance winds up in an abusive relationship;
A beneficiary is sued;
A beneficiary is going through a divorce;
A beneficiary has a disability; and
A beneficiary who’s unable to manage assets.

All of these issues can be addressed, with the aid of an estate planning attorney. A testamentary trust can be created to make certain that minors (and adults who just may not be ready) don’t get money too soon, while also making sure they have funds available to help with school, health care and life expenses.

Who Will Manage the Trust? Every trust must have a trustee. Find a person who is willing to do the work. You can also engage a professional trust company for larger trusts. The trustee will distribute funds, only in the ways you’ve instructed. Conditions can include getting an education, or using the money for a home or for substance abuse rehab.

Estate Plan Review. Review your estate plan after major life events or every few years. Talk to a qualified estate planning attorney to make the process easier and to be certain that your money goes to the right people at the right time.

Reference: Kiplinger (April 1, 2019) “Is Your Beneficiary Ready to Receive Money?”

When Should I Review My Estate Plan?

Estate Planning, Executor, Guardian, Health Care, Personal Representative, Power of Attorney, Protecting Children, Retirement Planning, Tax Planning, Trusts, Wills / Estate Planning Lawyer, Executor, Guardian, Life Insurance, Medicaid, Power of Attorney, St. Petersburg Estate Planning, Trustee, Will

As life changes, you need to periodically review your estate-planning documents and discuss your situation with your estate planning attorney.

WMUR’s recent article, “Money Matters: Reviewing your estate plan,” says a common question is “When should I review my documents?”

Estate Plan Review — You should review your estate plan each time a major life event occurs or every 5 years, whichever comes first.

Every few years is the quick answer, but a change in your life may also necessitate a review. Major life events can be related to a marriage, divorce, or death in the family; a substantial change in estate size; a move to another state and/or acquisition of property in another state; the death of an executor, trustee or guardian; the birth or adoption of children or grandchildren; retirement; and a significant change in health, to name just a handful.

When you conduct your review, consider these questions:

Does anyone in your family have special needs?
Do you have any children from a previous marriage?
Is your choice of executor, guardian, or trustee still okay?
Do you have a valid living will, durable power of attorney for health care, or a do-not-resuscitate to manage your health care, if you’re not able to do so?
Do you need to plan for Medicaid?
Are your beneficiary designations up to date on your retirement plans, annuities, payable-on-death bank accounts and life insurance?
Do you have charitable intentions and if so, are they mentioned in your documents?
Do you own sufficient life insurance?

In addition, review your digital presence and take the necessary efforts to protect your online information, after your death or if you’re no longer able to act.

It may take a little time, effort, and money to review your documents, but doing so helps ensure your intentions are properly executed. Your planning will help to protect your family during a difficult time.

Reference: WMUR (January 24, 2019) “Money Matters: Reviewing your estate plan”

What is the Best Way to Leave an Inheritance to a Grandchild?

Asset Protection, Estate Planning, Guardian, Inheritance, Protecting Children, Trust / Assets, Conservatorship, Estate Plan, Inheritance, Settlement, St. Petersburg Estate Planning Attorney, Trust, Trustee

Leaving an inheritance to a grandchild requires careful handling, usually under the guidance of an estate planning attorney. Specially if your grandchild is under the age of 18. The same is true for money awarded by a court, when a minor has received property for other reasons, like a settlement for a personal injury matter.

Use trusts when leaving an inheritance to your grandchild — Leaving an inheritance to your grandchild in a trust will protect the child and the inheritance.

According to the article “Gifts from Grandma, and other problems with children owning property” from the Cherokee-Tribune & Ledger News, if a child under age 18 receives money as an inheritance through a trust, or if the trust states that the asset will be “held in trust” until the child reaches age 18, then the trustee named in the will or trust is responsible for managing the money.

Until the child reaches a stated age (say, 25 or 30 years old), the trustee is to use the money only for the child’s benefit. The terms of the trust will detail what the trustee can or cannot do with the money. In any situation, the trustee may not benefit from the money in any way.

The child does not have free access to the money. Children may not legally hold assets in their own names. However, what happens if there is no will, and no trust?

A child could be entitled to receive property under the laws of intestacy, which defines what happens to a person’s assets, if there is no will. Another way a child might receive assets, would be from the proceeds of a life insurance policy, or another asset where the child has been named a beneficiary and the asset is not part of the probate estate. However, children may not legally own assets. What happens next?

The answer depends upon the value of the asset. State laws vary but generally speaking, if the assets are below a certain threshold, the child’s parents may receive and hold the funds in a custodial account. The custodian has a duty to manage the child’s money, but there isn’t any court oversight.

If the asset is valued at more than the state threshold, the probate court will exercise its oversight. If no trust has been set up, then an adult will need to become a conservator, a person responsible for managing a child’s property. This person needs to apply to the court to be named conservator, and while it is frequently the child’s parent, this is not always the case.

The conservator is required to report to the probate court on the child’s assets and how they are being used. If monies are used improperly, then the conservator will be liable for repayment. The same situation occurs, if the child receives money through a court settlement.

Making parents go through a conservatorship appointment and report to the probate court is a bit of a burden for most people. A properly created estate plan can avoid this issue and prepare a trust, if necessary, and name a trustee to be in charge of the asset.

Another point to consider: turning 18 and receiving a large amount of money is rarely a good thing for any young adult, no matter how mature they are. An estate planning attorney can discuss how the inheritance can be structured, so the assets are used for college expenses or other important expenses for a young person. The goal is to not distribute the funds all at once to a young person, who may not be prepared to manage a large inheritance.

For more information about leaving assets to children, download Mastry Law’s free book or estate planning reports.

To learn more about how to transfer assets to your grandchildren using a trust, schedule a complementary consultation with Mastry Law.

Reference: Cherokee-Tribune & Ledger News (March 1, 2019) “Gifts from Grandma, and other problems with children owning property”

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

Asset Protection, Estate Planning, Executor, Guardian, Protecting Children, Trusts, Wills / Asset Protection, Beneficiary Designations, Capacity, Estate Planning Lawyer, Executor, Guardianship, Inheritance, Intestacy, Life Insurance, Probate Court, St. Petersburg, Trustee, Trusts, Wills

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:

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.
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.
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.
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.
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”