Estate Planning (view Wills pdf, view Living Will pdf, view Durable Power of Attorney pdf)

You’ve worked hard, and you want to be sure as much as possible of your
estate goes to your family or favorite charity when you are gone. You accomplish that by avoiding expensive probate proceedings, by minimizing or eliminating taxes, and by keeping control of your assets during your lifetime. We are available to analyze your family’s needs, and make recommendations about methods to meet your estate plan goals, and offer a one hour free consultation for this purpose. Remember, we are local lawyers helping local people, and not a national or big city firm where you are just a number and not a name!

Here are some commonly asked questions and answers:

1. What is a Revocable Living Trust? A trust is a contract where one person (“Settlor”) transfers property to another person (“Trustee”) for the benefit of a third person (“Beneficiary.”) NOTE: The law allows you to be all three! Example: X transfers property to Y, to manage for the benefit of Z. If the creator of this arrangement sets it up during his or her lifetime, it is called a living trust. If the creator retains the right to dissolve this trust, it is a revocable living trust.
   
   A living trust avoids probate. This is the most advertised advantage of a living trust; and may result in great savings.
   
   A living trust avoids publicity. Estates which pass through probate with a will are public record. Anybody who wants to can see it.

2. Does a bank or trust company have to be involved? No, the law doesn't require a corporate trustee. You, your spouse or children may be the trustee. However, in some cases, a corporate trustee is advisable.

3. If I set up a trust, is a will also required? Yes, a "pour over" will is drafted along with the trust; it acts as a safety net. If you forget to put your assets into the trust, the will directs that those assets be transferred into your trust from a probate estate.

4. Can a living trust save on estate taxes? Yes, a living trust can save a great deal in estate taxes for a married couples if their assets are in an amount that would otherwise be subject to death taxes.

5. Can a living trust save on income taxes? Yes, in many cases, by transferring certain assets to your beneficiaries from your trust after your death, the beneficiaries will receive the benefit of a "step-up" basis that will save income taxes on the sale of those assets.

6. Must I transfer all of my assets into the trust? No, but to avoid probate you may want to transfer all of your assets into the trust. Assets sometimes not transferred into the trust are personal checking accounts and automobiles. These can be transferred to your heirs by simply using the Uniform Non-probate Transfers Act.

7. Does a living trust make sense for a single person? Yes, these trusts are just as effective for a single person, in many cases, as they are for married persons.

8. Does a trust make sense for an estate with assets less than the amount that would result in death taxes? Yes, because you can still avoid the problems of probate. On an estate of $300,000 probate fees (for attorney and court) can be as high as $18,000. Trusts can be set up for any size estate, and the cost of doing is normally dramatically less than potential probate costs.

9. Is the living trust a new idea? No, it has been in existence for hundreds of years. As consumers become more educated on estate plan issues, it has become a more common estate planning tool.

10. The living trust is sometimes known by other names. (a) The A-B Trust; (b)The Marital Deduction Trust;(c) The Self-Declaration Trust; (d) The InterVivos Trust (means living trust in Latin).

11. Does the living trust prevent me from selling, adding or borrowing against assets in trust? No, the law allows all this. However, lenders may want to see a copy of the trust, and may have policies that apply.

12. Does the Living Trust protect me from my creditors? No, the living trust doesn't act as a shield to protect you from creditors.

13. Why didn't my attorney tell me about a living trust? Many attorneys are not knowledgeable about living trusts because they don't practice estate planning. It may have been that you told the attorney you only wanted a will, the least expensive plan initially (but possibly the most expensive in the long term).

14. Revocable or Irrevocable? A living trust can be either revocable or irrevocable. Revocable means that you can cancel or change its terms, giving you flexibility to meet future changes and needs. Irrevocable, of course, means that it cannot be changed and is therefore inflexible.

15. Why doesn't everyone have a living trust? The majority of consumers don't know anything about a living trust. Most people don't plan for the future; they are hesitant to discuss what happens at their death.

16. Must special income tax forms be filed? Not usually, so long as husband and wife, or one alone, receives all the income from the trust and act as trustee(s).

17. Why is it important to transfer assets into the trust? To avoid the problems of probate. It will save money, may save time, and will achieve privacy. The correct way you transfer your assets into the trust is by changing title from you as an individual to you as the trustee of your trust. It isn't enough to just list assets on the schedule attached to the trust. You must actually transfer your assets to the trust by the appropriate transfer documents. This is what is called “funding the trust.”

18. What rights does the surviving spouse have in the trust assets? If the surviving spouse is the trustee, he or she may have the right to sell or buy or transfer any of the assets. The surviving spouse may be given freedom to do whatever he or she sees fit with the assets in the trust.

19. Does my will avoid probate? No, the will doesn't avoid probate. All the assets passing through the will go through probate. Once again, probate may be expensive, lengthy and open to the public. The majority of people want to avoid it. You can avoid the problems of probate with a revocable living trust. Remember proper planning can save a lot of $$$$.

20. Who are the parties to the trust? (a) The creator of the trust, most times referred to as the settler or the grantor; (b) The manager of the trust, called the trustee; (c) The beneficiary; this is you and the others who now, or in the future, benefit from the trust.

CONSIDERING AN ESTATE PLAN FOR A PET

 For many of us, pets are an important part of our daily lives, more like members of the family than just “animals.” For people living on their own, especially, they can take on even greater significance serving as a constant source of companionship and unconditional love.

           According to Professor Gerry W. Beyer, professor of Law at Texas Tech University School of Law, Lubbock, Texas, and a well-respected authority on estate planning for pets, the number of individuals who own pets is staggering. As many as 43.5 million households in the United States own dogs and 37.7 million own cats. What’s more, studies show that between 12% and 27% of pet owners include their pets in their wills.

No legal protection?

            Interestingly, courts of old in England looked favorably on pet owners who sought ways to provide care for their pets after their death.  Historically, that concept has not been the case in the U.S. Attempts to make bequests or gifts aimed specifically at providing for the future care of pets have not been considered legally enforceable by most courts.  And, currently, no state permits pet owners to leave any part of their estates directly to an animal.

            Traditionally, pet owners have been limited to some rather less-than-satisfactory choices. The most common approach is to give money outright to an individual, extracting a promise that the pet will be provided with shelter, food and care in the same manner that the pet enjoyed with its owner.  Although this is a simple solution, it provides hardly any protection.  There is now legal way to enforce that promise in court.

            Another approach has been to establish what is known as an “honorary trust.” The pet owner names someone as trustee to receive funds for the care of the animal. The trustee then either may honor the terms of the trust by using the funds for the animal’s care or relinquish the funds to the beneficiaries of the pet owner’s estate who would have received the funds if the pet had predeceased the owner. Here, the problem is that the human beneficiaries are the only ones entitled to enforce the honorary trust. Thus, if the trustee does turn the funds over to the pet owner’s beneficiaries, they cannot be required to use the funds for the pet’s care.

The new “pet trust”

            Beginning in the 1990s, under guidelines established by the National Conference of Commissioners on Uniform State Laws, legislatures and courts have been addressing the concerns of pet owners wishing to establish an estate plan for their animals in the same manner as people plan for their spouses and children. Today many states have adopted legislation that permits the creation of trusts for designated pets and their offspring.

            Generally speaking, a pet trust is set up by the animal’s owner either by way of a living trust or a trust in the owner’s will. In the former case, the trust is already in operation when the pet owner dies – ensuring that there are funds immediately available for the animal’s care during the time between the owner’s death and the probating of the will and subsequent funding of the trust. On the other hand, a trust established in the pet owner’s will, springing to life only after the pet owner’s death is usually a less expensive approach in terms of start-up costs and administration expense. Nor does the pet owner have to fund the trust immediately with this approach.

            In either case, if the pet owner has not delivered the animal to the beneficiary/caretaker already, the owner formally will bequeath the pet to the trust, leaving the appropriate instructions to the trustee concerning delivery to the beneficiary/caretaker.

Planning considerations and questions

            A pet owner will have several other important choices to make in addition to determining when to establish the trust.

            For instance, he or she must choose the caretaker who will serve as the actual beneficiary of the trust. The caretaker will have the legal right to enforce the trust if the trustee fails to carry out the pet owner’s directions. As a result, a caretaker/beneficiary needs to have some knowledge of how the trust works, in addition to showing a willingness to take on the responsibilities of a pet owner.

            Similarly, the trustee should be chosen with care. The pet owner should make certain that the trustee is willing to serve in that capacity and understands the responsibilities that the job requires. The trustee, whether individual or corporate, must be willing to administer and manage the trust and make the time and effort to carry out the paperwork and technical details. As a safety measure, an alternate trustee should be chosen in the event that the named trustee is unable at some future date to continue to serve.

            The pet owner will be faced with a number of important questions to answer: How much should be transferred to the trust for the care of the pet? What should be provided in additional funds to pay to the caretaker or trustee, if necessary? What language should be used to describe the type of care that the pet should receive and the expenses for which the caretaker be reimbursed? How should funds in the trust be dispersed-for example, should there be a fixed amount paid per month (or on some other regular schedule)or should the caretaker be reimbursed only  when he or she submits receipts that can be reviewed by the trustee? How long should the trust last? Finally, who should receive the funds in trust after the death of the pet?

For further information

            There are many other steps, beyond the scope of this discussion, that pet owners may want to take in order to craft a plan that will ensure that their animals will be well provided for when they cannot take care of them anymore.

            Fortunately, there is a wealth of information available to provide guidance. For pet owners seeking quick access to information online, consider visiting www.estateplanningforpets.org.

 

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