In a prior blog post, (Life Care Planning – Bridging the Gap), I told part of the story of the journey of Mom’s stroke and ultimate death. In this post, I tell the rest of the story. Even though I had practiced Elder Law for 20 years and had advised many people about the legal process, when my own Mom had a stroke on January 1, 2005, I felt helpless. When it’s your parent or your spouse, it’s different. You need help.
After her stroke, Mom was in a hospital for several weeks, then was discharged to a skilled care nursing home. Even though the nursing home that she was in provided good care, she was not getting any better. As a matter of fact, every few months she was taken back to the hospital for a week or so to kill off new infections that had developed.
At the end of her last hospital stay, a nurse pulled me aside and asked me whether I had heard about hospice. I said that I had and was reluctant to seriously even think about it – I felt that by placing her in the care of hospice, I was giving up on her. Only later after she had received hospice care for a while did I find out how wrong I had been!
Hospice not only provided excellent care for my Mom during her last few months on earth, but they helped me through it as well. Watching a loved one die is not easy. Hospice can help. If you or a loved one needs hospice care, give them a call. They may be able to help more that you know.
But the rest of the story is that you can help too. By having adequate health care documents (discussed in next blog post) and other estate planning documents, you can take the legal and emotional load off your family. It is difficult and sometimes impossible to make health care decisions for a person who has not planned adequately. Adequate estate planning may also preserve assets for the benefit of a surviving spouse or children. The key is to do it before you need it.
Many time people have told me that “My kids know what I want.” That may be true – but unfortunately, unless you have proper legal documents, spoken words are not good enough. If you haven’t done proper planning, give us a call before it’s too late. But if you have a spouse, child or other loved one who has not planned and is receiving hospice care now, call us anyway. We can often make a substantial difference even when time is not on your side.
Saturday, October 17, 2009
Thursday, October 15, 2009
Time Out Workshop - The Day After
Actually, this is Thursday, 2 days after - but since I was in a post-workshop haze yesterday, that doesn't count. At any rate, this year's workshop was fantastic. I say this not because of anything that we did, but because of the following groups of people:
1. The Attendees - Despite the rain (especially the down-pour that happened when most were arriving), all attendees arrived on time with a cheerful, expectant attitude. Whoever said that "attitude is everything" had it right. The attendees made the day. I hope they gained as much as they gave.
2. The Speakers - What can we say, but WOW! What a great job. I knew what attendees thought of the presentations before I even reviewed the evaluation sheets. The speakers had "Hit one out of the park!" This year's speakers were: Dr. Neal Wyatt, Dr. Morgan Sauer, Carol Randolph, APN and Dr. Kim Curseen.
3. The Vendors - This year we had 15 terrific vendors. Most arrived the night before to set up and arrived early the day of the workshop. They did a great job of interacting with participants and generally made for a great time. If it were not for the sponsorship, input and effort expended by our vendors, this workshop would not happen.
This year's vendors were: Home Instead Senior Care, Home Care Professionals, Catlett Care, Alzheimer's Association, Arkansas Hospice, Baptist Health Rehabilitation Institute,
Presbyterian Village, Inspirations, Senior Care at Harris Hospital, Stonehaven Assisted Living,
Arkansas Health Care Association, Convacare, Amedisys Home Health, Life Care Advocates and Fox Ridge Assisted Living Communities.
Cindy & I extend our heartfelt thanks to each member of the above three groups. You made it happen and we are very grateful! Thank You!
1. The Attendees - Despite the rain (especially the down-pour that happened when most were arriving), all attendees arrived on time with a cheerful, expectant attitude. Whoever said that "attitude is everything" had it right. The attendees made the day. I hope they gained as much as they gave.
2. The Speakers - What can we say, but WOW! What a great job. I knew what attendees thought of the presentations before I even reviewed the evaluation sheets. The speakers had "Hit one out of the park!" This year's speakers were: Dr. Neal Wyatt, Dr. Morgan Sauer, Carol Randolph, APN and Dr. Kim Curseen.
3. The Vendors - This year we had 15 terrific vendors. Most arrived the night before to set up and arrived early the day of the workshop. They did a great job of interacting with participants and generally made for a great time. If it were not for the sponsorship, input and effort expended by our vendors, this workshop would not happen.
This year's vendors were: Home Instead Senior Care, Home Care Professionals, Catlett Care, Alzheimer's Association, Arkansas Hospice, Baptist Health Rehabilitation Institute,
Presbyterian Village, Inspirations, Senior Care at Harris Hospital, Stonehaven Assisted Living,
Arkansas Health Care Association, Convacare, Amedisys Home Health, Life Care Advocates and Fox Ridge Assisted Living Communities.
Cindy & I extend our heartfelt thanks to each member of the above three groups. You made it happen and we are very grateful! Thank You!
Saving the Farm - Part 2
In our last blog post, we discussed the need to plan ahead to protect major assets, often called “Legacy Assets” that people have inherited from their parents, and wish to pass down to their children. This type of planning, which is often called “Succession Planning” is desirable as a tool to ensure that the assets seniors have inherited or have accumulated through their hard work and labor goes, at death, to their loved ones and is not eaten up during life or death by either attorneys fees, probate or taxes or the costs of long term care.
Why do Succession Planning? Most seniors are concerned with the dual goal of providing for their children, grandchildren and other loved ones while also protecting their assets from being spent down for long term care. Succession Planning gives seniors the peace of mind in knowing they can accomplish these goals.
Succession Planning is accomplished by the use of a special type of an Irrevocable Trust. The primary purpose of the trust is to help achieve the client’s estate planning objectives. Often a trust is the central mechanism required to pass your assets to the people you want, when you want and how you want – all while maintaining control and protecting assets in case of catastrophic illness or need for long term care.
After meeting with the family and determining their estate planning goals, we set up an estate plan that helps the client achieve their goals. Although all families are different, the things that most people have in common are the following:
1. They want to protect their surviving spouse (if they are still living)
2. If anything is left at the second spouse’s death, they would like everything to go to their children
3. They want to keep Legacy Assets in the family.
4. If they establish a Trust, the senior would like to (a) retain income for life; (b) establish controls over how the funds are spent; (c) choose the trustee that controls the money and property.
5. If a trust is established, they would like for the trust to avoid risks associated with the children, such as creditors, bad marriages etc.
6. They would like for their family to receive any significant tax advantages to putting the money in a trust rather than outright transfers.
7. After the 5 Year-Look-Back Rule, the senior would be eligible for Medicaid.
By following this plan, seniors position themselves to ensure that the assets they have accumulated though their hard work and labor goes, at death, to their loved ones and is not eaten up during life or death by either attorneys fees, probate or taxes or the costs of long term care.
Why do Succession Planning? Most seniors are concerned with the dual goal of providing for their children, grandchildren and other loved ones while also protecting their assets from being spent down for long term care. Succession Planning gives seniors the peace of mind in knowing they can accomplish these goals.
Succession Planning is accomplished by the use of a special type of an Irrevocable Trust. The primary purpose of the trust is to help achieve the client’s estate planning objectives. Often a trust is the central mechanism required to pass your assets to the people you want, when you want and how you want – all while maintaining control and protecting assets in case of catastrophic illness or need for long term care.
After meeting with the family and determining their estate planning goals, we set up an estate plan that helps the client achieve their goals. Although all families are different, the things that most people have in common are the following:
1. They want to protect their surviving spouse (if they are still living)
2. If anything is left at the second spouse’s death, they would like everything to go to their children
3. They want to keep Legacy Assets in the family.
4. If they establish a Trust, the senior would like to (a) retain income for life; (b) establish controls over how the funds are spent; (c) choose the trustee that controls the money and property.
5. If a trust is established, they would like for the trust to avoid risks associated with the children, such as creditors, bad marriages etc.
6. They would like for their family to receive any significant tax advantages to putting the money in a trust rather than outright transfers.
7. After the 5 Year-Look-Back Rule, the senior would be eligible for Medicaid.
By following this plan, seniors position themselves to ensure that the assets they have accumulated though their hard work and labor goes, at death, to their loved ones and is not eaten up during life or death by either attorneys fees, probate or taxes or the costs of long term care.
Sunday, October 11, 2009
Saving the Farm - Part 1
In our last blog post, we were discussing the concept of asset protection, or as it is commonly asked, “How do I keep the Nursing Home from taking Momma’s farm” (or house, or money or whatever).
As we mentioned in that blog post, the Nursing Home doesn’t have the power to “take” anything. When you move into a Nursing Home, you are really just renting a room with nursing services included. If you rented a room for a night at your local Holiday Inn, the issue of “will I have to pay this” would never come up. You would know up front what the cost was and you would know that you had to pay for the room if you were going to stay there for a night.
The owner of a nursing home is like the owner of the hotel – he just wants to be paid for the room. He knows that there are 3 primary ways he will be paid: (1) If Mom goes to the hospital first, stays there for at least 3 nights, then is discharged to the Nursing Home, Medicare will pay for up to 100 days (see separate blog post on Medicare Qualification); (2) After Medicare runs out, the resident will “private pay” meaning personally pay for the room out of their pocket until they have spent much of their money or other assets . (See separate blog post on Medicaid Qualification); (3) After they have paid most of their money to the nursing home for rental of a room, and otherwise qualified, they Medicaid will start paying the nursing home bill each month.
Now, all of that was a pre-curser of what we’re talking about today, which is how to I protect what I’ve got so I don’t have to spend it all down to get Medicaid. The answer is to plan ahead, meaning - do your estate planning at least 5 years before you move into the nursing home. Of course you don’t know if or when that will happen, so you have to be proactive and do your estate planning way in advance.
On February 8, 2006, President Bush signed into law, the DRA (Deficit Reduction Act). Among other things, one of the provisions of the act was a 5 year look-back rule. This means that if you give your assets to your kids (or anyone else) within 5 years of the time you apply for Medicaid assistance, they can “look-back” and pull that gift up to today. The result is that Mom won’t be able to get Medicaid for a while (figure according to a complicated formula) as a result of having made that gift. If your parent is in that situation, there are things we can do, but none of them are as good as the results we can get if you plan ahead.
One great way we can be proactive, plan ahead and protect assets, such as the family farm, is by use of a special kind of Irrevocable Trust that we will discuss in Part 2 of this post
As we mentioned in that blog post, the Nursing Home doesn’t have the power to “take” anything. When you move into a Nursing Home, you are really just renting a room with nursing services included. If you rented a room for a night at your local Holiday Inn, the issue of “will I have to pay this” would never come up. You would know up front what the cost was and you would know that you had to pay for the room if you were going to stay there for a night.
The owner of a nursing home is like the owner of the hotel – he just wants to be paid for the room. He knows that there are 3 primary ways he will be paid: (1) If Mom goes to the hospital first, stays there for at least 3 nights, then is discharged to the Nursing Home, Medicare will pay for up to 100 days (see separate blog post on Medicare Qualification); (2) After Medicare runs out, the resident will “private pay” meaning personally pay for the room out of their pocket until they have spent much of their money or other assets . (See separate blog post on Medicaid Qualification); (3) After they have paid most of their money to the nursing home for rental of a room, and otherwise qualified, they Medicaid will start paying the nursing home bill each month.
Now, all of that was a pre-curser of what we’re talking about today, which is how to I protect what I’ve got so I don’t have to spend it all down to get Medicaid. The answer is to plan ahead, meaning - do your estate planning at least 5 years before you move into the nursing home. Of course you don’t know if or when that will happen, so you have to be proactive and do your estate planning way in advance.
On February 8, 2006, President Bush signed into law, the DRA (Deficit Reduction Act). Among other things, one of the provisions of the act was a 5 year look-back rule. This means that if you give your assets to your kids (or anyone else) within 5 years of the time you apply for Medicaid assistance, they can “look-back” and pull that gift up to today. The result is that Mom won’t be able to get Medicaid for a while (figure according to a complicated formula) as a result of having made that gift. If your parent is in that situation, there are things we can do, but none of them are as good as the results we can get if you plan ahead.
One great way we can be proactive, plan ahead and protect assets, such as the family farm, is by use of a special kind of Irrevocable Trust that we will discuss in Part 2 of this post
Sunday, October 4, 2009
Revocable Living Trust - Part 3
Here is the third and final part of the series on Revocable Living Trusts. This part focuses on when it is appropriate to use a Revocable Living Trust.
The first question goes something like this, “You have told me all of the advantages to a Revocable Living Trust, now what are the disadvantages”? Fair enough – here are the answers:
1. A Revocable Living Trust based plan usually cost more initially than a will. You remember the old Fram oil-filter commercial where they say “Pay me now or pay me later” – it’s the same way with an estate plan. A will is cheap and easy up front but at the death of the second spouse there is usually a probate. The cost of the probate and the related hassle associated with it could all have been avoided by doing a Revocable Living Trust up front.
2. There is no Court proceeding at death with a Revocable Living Trust. You may think that this is a positive thing, but some estates are so complicated or so messy, the family needs a Court to “clean up the mess”. If your estate is complicated or messy and you can’t clean it up during your lifetime, you may need a Court to do the dirty work after your death. If this is the case, the cost of probate would have been justified. In most cases however, paying 3% or so to probate a will is an unnecessary cost that could have been avoided.
The second question is, “Does a Revocable Living Trust protect Momma’s farm from the nursing home”? The question is flawed, as I will explain below, but the quick answer is NO.
The primary flaw in the question is the way that it is asked. The nursing home has no power to take anything. They are just a vendor. They are “selling a room” + nursing services each month in exchange for money. They know that (1) If Momma comes to them straight from the hospital, that Medicare may pay for up to 100 days; (2) After that, you pay until you are almost broke (we will have future blog articles on Medicaid qualification); (3) Then, you will qualify for Medicaid, which will pay for long term care. Again, the nursing home can’t take anything you have. They just want to be paid. It may just seem like they take assets because sometimes people have to sell things, like the farm, to use this money to keep a parent in a nursing home.
There is a way, however, to protect treasured assets, like the family farm. The secret way to do this will be revealed in our next blog.
The first question goes something like this, “You have told me all of the advantages to a Revocable Living Trust, now what are the disadvantages”? Fair enough – here are the answers:
1. A Revocable Living Trust based plan usually cost more initially than a will. You remember the old Fram oil-filter commercial where they say “Pay me now or pay me later” – it’s the same way with an estate plan. A will is cheap and easy up front but at the death of the second spouse there is usually a probate. The cost of the probate and the related hassle associated with it could all have been avoided by doing a Revocable Living Trust up front.
2. There is no Court proceeding at death with a Revocable Living Trust. You may think that this is a positive thing, but some estates are so complicated or so messy, the family needs a Court to “clean up the mess”. If your estate is complicated or messy and you can’t clean it up during your lifetime, you may need a Court to do the dirty work after your death. If this is the case, the cost of probate would have been justified. In most cases however, paying 3% or so to probate a will is an unnecessary cost that could have been avoided.
The second question is, “Does a Revocable Living Trust protect Momma’s farm from the nursing home”? The question is flawed, as I will explain below, but the quick answer is NO.
The primary flaw in the question is the way that it is asked. The nursing home has no power to take anything. They are just a vendor. They are “selling a room” + nursing services each month in exchange for money. They know that (1) If Momma comes to them straight from the hospital, that Medicare may pay for up to 100 days; (2) After that, you pay until you are almost broke (we will have future blog articles on Medicaid qualification); (3) Then, you will qualify for Medicaid, which will pay for long term care. Again, the nursing home can’t take anything you have. They just want to be paid. It may just seem like they take assets because sometimes people have to sell things, like the farm, to use this money to keep a parent in a nursing home.
There is a way, however, to protect treasured assets, like the family farm. The secret way to do this will be revealed in our next blog.
Friday, October 2, 2009
Revocable Living Trust - Part 2
In our last post, we talked about the 3 parties to a Revocable Living Trust. In this post, we're going to take about some of the advantages to this type of trust.
1. Probate Avoidance - For illustration purposes, assume a trust is a box that holds title to all of the assets that you put in to the trust. The goal is to get all assets in that box so that it (and not you) holds title to everything. When this is done properly, you own nothing individually, so when you die, you have nothing to probate. All of your assets are owned by your trust, which didn’t die, so there is no need for a probate. The key to this whole process is funding. Assets do not magically “jump into the box” – you have to put them in there. The way we do this is to re-title each asset from our individual name to the trust name. This is called “funding the trust”.
2. Incapacity Trustee – One big advantage to a revocable living trust it the ability to appoint an Incapacity Trustee. This person (usually your spouse or child) will step in your shoes if and when you become incapacitated, and will be empowered to use any and all assets in the trust for your benefit. They can also manage and care for the assets during your incapacity. If you get better, you simply start taking care of your own business again, without the necessity of Court approval.
3. Estate Taxes – This is the government’s “last bite at the apple”. When you die, Uncle Sam wants to know the date of death value of all of your assets. If they are over a certain amount, you will most likely owe federal state tax. The amount of money that you can leave to your kids without paying federal estate tax continues to change and will continue to do so in the future. In 2011 the amount that you can pass without paying federal estate tax is $1 million dollars. This seems like a lot, but by the time you add up the full, fair market value of all assets, you may be surprised. The amount that you can pass without paying tax is the exemption amount. If you are married and set up a trust with appropriate tax planning, each spouse can exempt the full allowable amount at their death and can pass this to their kids, estate tax free.
4. Control – Some people may feel a bit squeamish about putting everything in a trust. They have worked hard for what they have and they want to control it. Well, the good new is that they can! With a Revocable Living Trust, you are the Trustor (you own it); you are normally the initial trustee (you control it); and you are the initial beneficiary (use have the right to use and spend it). If you are married, both spouses normally fulfill these positions jointly – at the death of the first spouse, the surviving spouse normally becomes the sole surviving Trustee and Beneficiary.
5. Distribution – otherwise referred to as “who gets my stuff when I die?” Most people think that they need a will to distribute assets at their death. Actually, if you have a trust and it is fully funded, you do not need a will. For safety’s sake, we always prepare a “pour-over” will, which “pours over” any assets to the trust that a person forgot to put in the trust while they were living. However, rarely use it because if a person has put everything in the box, there is no need for a probate - everything is distributed directly from the trust to the persons named therein as beneficiaries. You can state who you want to get assets and when they get their share – for example money is held for college expenses, then they get the balance at age 25. You can also state how they receive assets: Beneficiaries can get assets immediately upon your death, at some set time in the future, or incrementally, such as so many dollars per month. Finally, you can state what they get. For example of you had two children, you could state that they shall receive a 50% - 50% distribution of all remaining estate assets at my death. Practically speaking, your children would then decide who gets what – the only stipulation would be that it is equal. You could also specify what they get. For example, “Bob gets the North 40 acres of the farm plus my brokerage account. Sally gets the South 40 acres plus my CD at the bank. All other assets are to be equally divided 50% - 50%, per stirpes. Per stirpes means that, if a child predeceases you, then their share would be distributed equally to their children, by right of representation.
Summary: Obviously, there is a lot to estate planning, but a well qualified estate planning attorney can easily walk you through the process. This article contains many of the major issues that you need to consider. Sit down with your family, discuss this, then call your estate planning attorney TODAY! Procrastination or the fear of acting can cause your family a lot of time, trouble and grief down the road.
1. Probate Avoidance - For illustration purposes, assume a trust is a box that holds title to all of the assets that you put in to the trust. The goal is to get all assets in that box so that it (and not you) holds title to everything. When this is done properly, you own nothing individually, so when you die, you have nothing to probate. All of your assets are owned by your trust, which didn’t die, so there is no need for a probate. The key to this whole process is funding. Assets do not magically “jump into the box” – you have to put them in there. The way we do this is to re-title each asset from our individual name to the trust name. This is called “funding the trust”.
2. Incapacity Trustee – One big advantage to a revocable living trust it the ability to appoint an Incapacity Trustee. This person (usually your spouse or child) will step in your shoes if and when you become incapacitated, and will be empowered to use any and all assets in the trust for your benefit. They can also manage and care for the assets during your incapacity. If you get better, you simply start taking care of your own business again, without the necessity of Court approval.
3. Estate Taxes – This is the government’s “last bite at the apple”. When you die, Uncle Sam wants to know the date of death value of all of your assets. If they are over a certain amount, you will most likely owe federal state tax. The amount of money that you can leave to your kids without paying federal estate tax continues to change and will continue to do so in the future. In 2011 the amount that you can pass without paying federal estate tax is $1 million dollars. This seems like a lot, but by the time you add up the full, fair market value of all assets, you may be surprised. The amount that you can pass without paying tax is the exemption amount. If you are married and set up a trust with appropriate tax planning, each spouse can exempt the full allowable amount at their death and can pass this to their kids, estate tax free.
4. Control – Some people may feel a bit squeamish about putting everything in a trust. They have worked hard for what they have and they want to control it. Well, the good new is that they can! With a Revocable Living Trust, you are the Trustor (you own it); you are normally the initial trustee (you control it); and you are the initial beneficiary (use have the right to use and spend it). If you are married, both spouses normally fulfill these positions jointly – at the death of the first spouse, the surviving spouse normally becomes the sole surviving Trustee and Beneficiary.
5. Distribution – otherwise referred to as “who gets my stuff when I die?” Most people think that they need a will to distribute assets at their death. Actually, if you have a trust and it is fully funded, you do not need a will. For safety’s sake, we always prepare a “pour-over” will, which “pours over” any assets to the trust that a person forgot to put in the trust while they were living. However, rarely use it because if a person has put everything in the box, there is no need for a probate - everything is distributed directly from the trust to the persons named therein as beneficiaries. You can state who you want to get assets and when they get their share – for example money is held for college expenses, then they get the balance at age 25. You can also state how they receive assets: Beneficiaries can get assets immediately upon your death, at some set time in the future, or incrementally, such as so many dollars per month. Finally, you can state what they get. For example of you had two children, you could state that they shall receive a 50% - 50% distribution of all remaining estate assets at my death. Practically speaking, your children would then decide who gets what – the only stipulation would be that it is equal. You could also specify what they get. For example, “Bob gets the North 40 acres of the farm plus my brokerage account. Sally gets the South 40 acres plus my CD at the bank. All other assets are to be equally divided 50% - 50%, per stirpes. Per stirpes means that, if a child predeceases you, then their share would be distributed equally to their children, by right of representation.
Summary: Obviously, there is a lot to estate planning, but a well qualified estate planning attorney can easily walk you through the process. This article contains many of the major issues that you need to consider. Sit down with your family, discuss this, then call your estate planning attorney TODAY! Procrastination or the fear of acting can cause your family a lot of time, trouble and grief down the road.
Wednesday, September 30, 2009
Revocable Living Trusts - Part 1
There has been a lot of information floating around these days about the use and misuse of Revocable Living Trusts. The purpose of this three-part article is to separate fact from fiction about the use of this estate-planning tool. In Part 1 we will look at the parties to a Revocable Living Trust and in Part 2 we will look at some trust advantages. In Part 3, we will look at when it is appropriate to use a Revocable Living Trust.
A Revocable Living Trust is a popular estate planning tool, because in the right situation, it will enable a person to (1) Avoid probate; (2) Reduce the chances of a guardianship upon incapacity; and (3) Reduce or eliminate estate taxes; (4) Maintain control of assets; (5) State a plan of distribution of assets at the death of the second spouse.
We will talk about these obvious advantages of a Revocable Living Trust in a minute, but for now, lets look at the three parties to a trust:
1. Trustor – Sometimes also referred to as settlor or trust-maker. This is the person who owns the assets and contributed or re-titled all assets to the revocable living trust (“put them in the box”). If Husband and Wife joint own all assets, they would both be Co-Trustors of their joint trust.
2. Trustee – This is the person who manages the assets contained in a trust. Typically the initial trustee is the person who sets up the trust. If Husband and Wife established a Revocable Living Trust, both Husband and Wife would be co-trustees of the Husband and Wife Living Trust. Upon the death of either spouse the other would be the remaining initial trustee.
Upon the death of Husband and Wife, a successor trustee would be named. The successor trustee could be a person, such as the child or children of the Trustor. You can name more than one child as successor trustee. The question of whether this is a good idea has to be decided by you!
Finally, the successor trustee could also be a corporate or institutional trustee, such as a bank trust department. Since corporate trustees are not emotionally tied to any family member, they can be relied on to carry out your wishes contained in the trust. Most banks charge a small fee for this service (usually around 1%) but the fee is not normally charged until they start work, which is after your death or incapacity.
3. Beneficiary – These are the persons that are designated to receive your money and other property at your death. Normally no assets are distributed until after the death of the second spouse. At that time, assets can be immediately distributed to any beneficiary that you have named in the trust. However, if you wish, your assets can be held in trust and can be distributed according to your plan. For example you can state that the money is to be used for a child’s college expenses or held for their retirement.
In tomorrow's blog, we will talk about some trust advantages - see you then!
A Revocable Living Trust is a popular estate planning tool, because in the right situation, it will enable a person to (1) Avoid probate; (2) Reduce the chances of a guardianship upon incapacity; and (3) Reduce or eliminate estate taxes; (4) Maintain control of assets; (5) State a plan of distribution of assets at the death of the second spouse.
We will talk about these obvious advantages of a Revocable Living Trust in a minute, but for now, lets look at the three parties to a trust:
1. Trustor – Sometimes also referred to as settlor or trust-maker. This is the person who owns the assets and contributed or re-titled all assets to the revocable living trust (“put them in the box”). If Husband and Wife joint own all assets, they would both be Co-Trustors of their joint trust.
2. Trustee – This is the person who manages the assets contained in a trust. Typically the initial trustee is the person who sets up the trust. If Husband and Wife established a Revocable Living Trust, both Husband and Wife would be co-trustees of the Husband and Wife Living Trust. Upon the death of either spouse the other would be the remaining initial trustee.
Upon the death of Husband and Wife, a successor trustee would be named. The successor trustee could be a person, such as the child or children of the Trustor. You can name more than one child as successor trustee. The question of whether this is a good idea has to be decided by you!
Finally, the successor trustee could also be a corporate or institutional trustee, such as a bank trust department. Since corporate trustees are not emotionally tied to any family member, they can be relied on to carry out your wishes contained in the trust. Most banks charge a small fee for this service (usually around 1%) but the fee is not normally charged until they start work, which is after your death or incapacity.
3. Beneficiary – These are the persons that are designated to receive your money and other property at your death. Normally no assets are distributed until after the death of the second spouse. At that time, assets can be immediately distributed to any beneficiary that you have named in the trust. However, if you wish, your assets can be held in trust and can be distributed according to your plan. For example you can state that the money is to be used for a child’s college expenses or held for their retirement.
In tomorrow's blog, we will talk about some trust advantages - see you then!
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