Estate Planning

1What is estate planning?

Estate planning is the process of getting your estate assets in order and establishing a plan to bequest those assets to particular individuals known as beneficiaries. Estate planning consists of putting together estate planning documents such as a will or a trust to carry out your objectives/intent.

2Why is it important to establish an estate plan and what happens if you do not have an estate plan?

One of the main reasons you want to establish an estate plan is to avoid the probate court process. The probate court process is a lengthy and costly process where the personal representative of your estate would have to administer your estate under court supervision and according to the court's timeline. This process is public and your estate planning documents become public through the probate court. Establishing a trust and funding the trust can avoid probate court, the costs involved, and the headaches that come with it. It is also important to establish an estate plan to ensure that your intent is carried out and your assets are protected and/or given to the beneficiaries you want them to go to. Also, if you do not have estate planning documents, your assets get divided according to the laws of the state that you live in. This means that state law will dictate who gets what of your assets and how much they get, through the probate court process. Overall, estate plans carry out your goals and structure the way you want your assets distributed. They also provide tax advantages, flexibility, privacy, and trust-based estate plans can be administered without probate court supervision.

3What does my estate include?

Your estate is simply everything that you own which includes the following:

  • Any real property such as your residence
  • Any businesses or interests in those businesses
  • Bank accounts
  • Stocks, bonds, and mutual funds
  • Life insurance policies
  • Personal property including vehicles, boats, etc.
4Which is the better estate planning document, a will or a trust?

A will does not avoid probate court and is less flexible than a trust. Although a will is typically less costly than a trust to draft, it may be more costly to have a will as your controlling estate planning document because your personal representative would have to admit your will to the applicable probate court. That means that your personal representative will likely have to hire a lawyer to help with the process, which can be lengthy and includes court fees. Trusts are more advantageous than wills in several regards. Trusts are private documents and do not need to be registered. They can be administered privately. Trusts are flexible in that you can choose to give your beneficiaries the assets of your estate either outright after you pass away, at certain age intervals (i.e. 25% at age 25, 25% at age 30 and the remaining at age 35), or keep the assets in a lifetime trust to protect the beneficiaries against their current or future creditors. There are many more advantages to having a trust than a will.

5What estate planning documents should I have?

An ideal estate plan should at the very least consist of the following documents: a trust; a pour-over will; a durable power of attorney for health care (also known as a patient advocate designation); and a durable power of attorney for finances. There are other ancillary documents such as a funeral representative document, assignments of business interests, a certificate of trust, and more that should also be included in your estate planning portfolio.

6When should you consider having a lady bird deed?

If you are looking for a cost-effective approach to estate planning that is cheaper than a trust and avoids probate court upon your passing, a lady bird deed may be that alternative but only in specific situations. Lady bird deeds are effective and often used only if your main valuable asset is a home, you may not want to pay for a trust, you have adult children, and you want your family to avoid probate court upon your passing. This special deed gives your beneficiaries tax advantages upon your passing, and more importantly, allows you to keep control over your home throughout your lifetime; but once you pass away it automatically gets transferred to your beneficiary, unlike when you pass away without having lady bird deed language in your typical warranty or quitclaim deed, which would typically have your family go through probate court to transfer it out of your name after your passing. Lady bird deeds are not flexible though, and may not offer benefits that a trust and will do but they are useful in certain situations. Lady bird deeds are also used in Medicaid planning where you can avoid Medicaid Estate Recovery upon your passing so that Medicaid cannot come after your home after you pass away for providing you with long-term care services during your lifetime.

A lady bird deed is a deed that changes the title of your real estate. Although you maintain full control of your property, the language of your deed changes significantly. An attorney should advise you with these types of deeds.

Revocable Living Trusts

1What is Probate and why does everyone want to avoid it?

Whether your loved one passed away with or without a will, his or her estate assets typically go through probate court. During this process, a personal representative will be appointed to carry the administration of the estate. It is only after all funeral and burial expenses, attorneys' fees, and the decedent's debts are paid that the beneficiaries will receive their portion of whatever is left of the estate. Most people elect to create revocable living trusts to avoid the probate court process of court supervision, court costs, and the length of time it takes to administer a decedent's estate.

Every probate estate is unique, but most involve the following steps:

  • Filing a petition or application with the applicable probate court
  • Notifying the interested parties/heirs of the decedent of the petition or application for probate
  • Appointment of the personal representative or the executor of the estate
  • Notifying the decedent's appropriate creditors (typically by publication) and also publishing to the court the worth of the decedent's estate
  • Statutory payment of probate administration fees
  • Distributing the estate assets to the beneficiaries of the decedent's estate
  • Closing out the estate and filing the appropriate documents with the probate court
2What are Revocable Living Trusts?

Trusts are simply an arrangement where one party holds property on behalf of another party. Trusts are created by the person doing the estate planning (the grantor), who authorizes another person (the trustee) to manage the assets for the benefit of a third party (the beneficiaries). There are many reasons for establishing trusts including creditor protection, tax minimization or providing for the needs of underage beneficiaries.

If you do not fund your trust then your trust document may be meaningless. In order for your trust to hold your assets, those assets must be retitled into the name of your trust or your trust must be listed as a beneficiary of your assets (such as with your life insurance policy, etc.). Your assets will be owned by your trust only if it is properly funded.

3What are the advantages of having a Revocable Living Trust?

Trusts are private documents and avoid probate court when properly funded. Wills become public documents through the probate court process and do not avoid probate court. Unlike a will which just allows you to distribute your assets to your beneficiaries outright after you pass away, a trust allows you to keep your assets in trust for lifetime and to distribute assets to your beneficiaries when they are in need of it. This allows your beneficiaries to maintain creditor protection against any current or potential creditor such as through a divorce or a lawsuit. A trust also allows you to distribute your assets to your beneficiaries at different ages, instead of keeping the assets in a lifetime trust. Common misconceptions about trusts are that only need them if you are wealthy. That is false. If you have minor children, you need a trust. If you want to maintain flexibility with regard to the disposition of your assets, you need a trust. If you want to maintain privacy, you need a trust. If you want to lower estate, income, or other potential taxes, you need a trust. If you want to have creditor protection, you need a trust. There are many benefits to a trust.

4Will I lose any control over my property if I create a Revocable Living Trust?

No. As the grantor (creator) of the trust, you will have full control and power to amend the trust at any time during your life, as long as you have the mental capacity to do so. A revocable living trust is simply that, revocable, and because of that you will not lose control over property.

Special Needs Planning

1What is the purpose of a Special Needs Trust?

The primary purpose of a special needs trust is to use your trust assets to pay for items that are not provided for by SSI, Medicaid, or other similar sponsored government programs. If you had a will and left your special needs beneficiary an inheritance that would be above his/her limit to maintain government benefits then that beneficiary would be disqualified from receiving those government benefits. A special needs trust allows your beneficiary to maintain government benefits while supplementing those benefits with assets you left for them.

2What benefits can a Special Needs Trust provide if the beneficiary is receiving government benefits?

A special needs trust can add benefits to supplement those benefits already being received by government agencies which include but are not limited to: non-food groceries and sundries; attendance of religious services; educational needs and supplies; medical services not covered by government benefits; transportation (including purchase of a vehicle); prepaid funeral and burial arrangements; tickets to cultural or sporting events; membership in recreational clubs, cultural institutions; apparel, including maintenance and repair of same; pet, service animal and supplies, veterinary services; academic or recreational courses or classes; therapies not covered by benefits programs; and domestic and personal care services.

Planning for Incapacity

1What is a Durable Power of Attorney?

A Durable Power of Attorney is a document that allows an agent/attorney-in-fact to make medical or financial decisions for you during your incapacity. These kinds of Durable Powers of Attorney survive incapacity unlike a general non-durable powers of attorney which do not. Also, Durable Powers of Attorney avoid the lengthy, frustrating, and costly probate court process of appointing a guardian and conservator to make those decisions on your behalf.

2What is a Durable Power of Attorney for Health Care?

A Durable Power of Attorney for health care allows an agent/patient advocate to make financial decisions on your behalf, during your incapacity. Without a Durable Power of Attorney for health care, it may be necessary for one of your loved ones, including your spouse or adult child to petition a court to be appointed guardian in order to make medical decisions for you when you are incapacitated. This guardianship process is time consuming, expensive, often costing thousands of dollars and it can be emotionally draining for your family.

3What is a Durable Power of Attorney for Finances?

A Durable Power of Attorney for finances allows an agent or an attorney-in-fact to make financial decisions on your behalf, during your incapacity. Without a Durable Power of Attorney for finances, it may be necessary for one of your loved ones, including your spouse or adult child to petition a court to be appointed conservator in order to make financial decisions for you when you are incapacitated. This conservatorship process is time consuming, expensive, often costing thousands of dollars and it can be emotionally draining for your family.

4Can my Spouse or Family Members just make my Medical or Financial Decisions without a Durable Power of Attorney?

No. If you become incapacitated your family members will have to petition the probate court in your applicable jurisdiction to make financial and/or health care decisions on your behalf. Your spouse or children do not automatically make those decisions for you just because they are your family. A court ordered guardianship or conservatorship must be entered in order to make those decisions.