A trust is a powerful estate planning tool, but how much do you know regarding what a trust can accomplish within an estate plan?

First, to review how a trust works:

A trust is a legal entity that is set up by a “grantor” to hold and manage property for the benefit of beneficiaries named within the trust documents.  Nearly any type of property can be owned by a trust, including stock, life insurance policies, cash, real estate and even personal property.

Why would a trust be used in an estate plan?  A trust can accomplish several goals for your estate plan, such as:

• Avoiding probate – since the trust legally owns the property rather than the deceased, the property avoids probate and can be transferred much more quickly.
• Allowing confidentiality – since trust property does not need to be probated, there is no public record of the probate court proceeding.
• Retaining control – a trust allows you to retain some control over how assets are managed and distributed after you pass away by appointing other persons or entities to manage the trust when you are no longer alive.
• Managing property in case of incapacitation – a living trust allows you to have a successor trustee who can manage your trust property in the event of your incapacitation.
• Reducing estate taxes – some types of trusts can be formed to reduce the tax burden of an estate.

Many are familiar with a living trust, as they have become heavily advertised over the past decade, but there are several types of trusts:

• Living Trusts – A living trust becomes effective during the grantor’s lifetime and can be used as part of an incapacitation plan to manage your property should you no longer be able to do so on your own. It can also be effective after you pass away.
• Testamentary Trusts – Testamentary trusts are created by a will and they are only formed upon the death of the grantor.  They are often used to create a trust for minors to manage property until they reach an age specified within the trust documents.
• Marital Trusts – A marital trust helps married couples minimize estate taxes  by ensuring that the estate tax exemption amounts of both spouses are fully used and holds all assets available to the surviving spouse for his or her needs.

To determine if a trust fits into your estate plan, work with an estate planning attorney to ensure that you are using the tools that meet your family’s needs and goals.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

A will trust is a trust that is literally contained within a will and created upon the death of the testator, the person who created the will.  A trust is a legal arrangement in which a ‘grantor’, the person creating the trust, transfers ownership of property to the trust and selects a trustee to manage it. The trustee may be a family member, a friend, professional trustee or a trust attorney, and in the case of a living trust, the grantor may also be the trustee, and they invest, distribute or manage the property for the beneficiaries named within the trust. 

A will trust, which is also known as a testamentary trust, is often funded by the proceeds of a life insurance policy.  It is often used to ensure minor children receive an income and property is held until they are able to handle the finances on their own, which is an age usually specified within the trust documents.  A will trust may also be used to ensure the care of a loved one with special needs, since it allows oversight over the trustee, as a probate court supervises the trustee during the life of the trust. 

While a testamentary trust is a powerful estate planning tool, particularly when it comes to children and those with special needs, it takes away one of the primary advantages of a living trust, which is avoiding probate.  Another drawback to a will trust is that it is an irrevocable trust, meaning the terms of the trust cannot be modified or changed once the trust is created upon the death of the grantor.  Up until that point, the trust terms may be changed by an update or change to the will.

Using a will trust within an estate plan can meet a family’s goals and needs in certain circumstances, but it important that you work with an estate planning attorney to make sure that all aspects of the estate plan coordinate to use this tool successfully.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

During the estate planning process, you hope your family will accept your final wishes, and it helps to discuss your estate plan with them so there are no surprises.  But following the death of a loved one, hurt feelings and misunderstandings can become magnified by the emotions and stress, which can lead to a will contest.  Here, we discuss one of the legal arguments used in contesting a will, that of capacity.

Family dynamics, feeling slighted, as well as blended family issues are often motivating factors for contesting a will.   But these emotional issues are not actual legal, valid reasons for a will contest.  A valid reason for contesting a will often focuses on the capacity of the person creating the will, who is called the testator.  In order to sign a valid will, a person must have the mental capacity to do so, which is known as testamentary capacity.  The testator must be able to understand:

• That they are creating a will;
• The value of their assets;
• The relationship of close relatives and friends; and
• The logical distribution of their property according to the first three elements above.

Contesting a will using a lack of capacity normally involves proving that the testator lacked the mental capacity to make a will due to dementia, senility, illness or insanity.  Adults are presumed to have the capacity to make a will, and it is normally up to person challenging the will to prove otherwise.

An estate planning attorney can assist you with creating a will that can better stand up to a will contest, as well as take steps to establish the capacity of the testator when creating the will.  An estate planning attorney can also assist with preparing a comprehensive estate plan to meet your estate planning goals and the needs of your family.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

Two very important tasks when creating a will are naming the executor of your estate as well as naming a guardian for minor children.  What happens if either of these people is unable or unwilling to serve in that capacity?

Taking on executor duties for an estate or guardianship duties for children is a huge responsibility.  It’s important to discuss these choices not only with family members, but with those appointed, prior to drafting a will.  You may find that your choice for an executor or guardian is not comfortable with taking on that challenge. 

It is also important to keep a will updated to make sure you still have viable candidates for these appointments.  For instance, if you have appointed your parents as guardians for their grandchildren, they may not be up to the task in later years.

You should always have a backup plan included in your will, both in the case of appointing a guardian and appointing an executor for your estate.   Having a successor guardian as well as a successor executor named within your will can keep this decision in your hands, rather than allowing this decision to be made in probate court.  While a probate court will always make these decisions with the best interests of children and the estate in mind, as well as allow input from loved ones, naming a successor in both cases allows the decision to remain yours.

Estate planning, including creating a will, naming executors and naming guardians for children, allows you to maintain a semblance of control over what happens to your family should the unthinkable occur.  Since one of the goals in estate planning is easing the burden of your passing on loved ones, naming successor guardians and executors is an important aspect of it.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

Charitable trusts are a gift that keeps on giving.  Not only can they fund a meaningful cause, but they can also reduce estate taxes and capital gains taxes in the process.    To review how a trust works:  A trust is a legal arrangement in which an individual (the grantor) gives control of property to a person or institution (the trustee) to manage for the benefit of beneficiaries.

With a charitable trust, a donor signs over an asset or group of assets to create a charitable trust. The assets are held and managed by the trustee of the trust for a specified period of time, with some or all income that the assets produce, or the assets themselves,  going to the charity.  Charitable trusts are irrevocable, meaning the trust terms (except in some trusts, the charities which will receive the assets of the trust) cannot be altered nor terminated.  A charitable trust can be set up two ways, as a charitable remainder trust, which is more often used, or a charitable lead trust.

A charitable remainder trust will have two beneficiaries. Normally, the grantor, the person creating the trust, is one beneficiary, and the other a qualified charity or tax-exempt organization.  During the grantor’s lifetime, he or she receives a set percentage of income from the charitable trust.  Once they pass away, the charity then receives whatever is left over.  With a charitable lead trust, the charity receives an income from the trust for specified period of time, while the principal of the trust usually passes to the children of the grantor.

Why would someone set up a charitable trust rather than simply donate money to a charity?  There can be a significant tax break, particularly for an asset like stocks which can appreciate and lead to capital gains issues and estate taxes if retained in the estate of the grantor.   

If you wish to make smaller donations to fund numerous causes that are meaningful to you, then donations or bequests within a will may be a better estate planning option.  But if you wish to fund a cause with a significant asset that can offer a tax break while fulfilling a purpose, then speak with a trust attorney regarding this estate planning tool.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

Creating a will is the cornerstone to creating a comprehensive estate plan.  Before you have a will drafted, there are three steps you should take to make the process much smoother.

1.         Determine your Net Worth

You’re probably worth more than you realize, with retirement accounts, life insurance and home ownership, your net worth may be higher than you thought it would be.  Make an inventory of all of your assets, which are anything of value that you own.  Include real estate, vehicles, personal property, jewelry, stocks, retirement accounts, life insurance death benefits and anything else with a value.

Now make a list of your liabilities, which are anything that you may owe.  This should include your mortgage, credit card debt, home equity loans, personal loans or any other type of debt.  To determine your net worth, simply subtract your total liability from your total assets.

Use this inventory and valuation to help create your will.

2.         Choose an Executor

An Executor is responsible for many tasks in administering the estate of a deceased.  Many choose a spouse to act as an Executor, but remember, many of their Executor duties will occur during a time of grief, so the obvious choice is not always the optimum choice. 

3.         Choose a Guardian

If you have children who have not attained the age of majority, this may be the hardest step to take to prepare to draft a will.  In fact, it stops many parents in their tracks, for they cannot imagine their children being raised by another person.  But consider the more daunting prospect, should anything happen, the Guardian of the children would be chosen by the Court should you not have a will.  While a Court would certainly act within the best interests of the children, wouldn’t you rather have the say in choosing their Guardian?

With these steps taken, work with a estate planning attorney to create a will that will complement a comprehensive estate plan to not only handle your assets upon your death, but manage them for you later in life.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

Living trusts and a Durable Power of Attorney are both powerful estate planning tools – but which is best for your estate plan to manage assets later in life?

A revocable living trust allows you to transfer assets such as a home, financial accounts and personal property to a trust. These assets are then managed for your benefit during your lifetime, and either continue to be held and managed or transferred to your beneficiaries when you die.  Living trusts have become popular not only to avoid probate, but to help manage your assets later in life. 

A living trust’s greatest advantage is probably its use in managing property in the event of your incapacity. Establishing a revocable living trust now can prevent the need for a guardianship of your estate and property later.  The trustee of a living trust can be given the responsibility of managing your income-producing properties, such as investment assets and business interests. You can choose a trustee with expertise in those areas, such as a bank or a law firm, or even a family member to handle the Trustee duties.  In fact, living trusts are can also be used not only in the event of incapacitation, but also if you do not want to spend your time managing assets.   In addition, assets you place in trust while you are alive and able to transfer them will avoid probate. 

A Durable Power of Attorney, on the other hand, is a less formal estate planning tool that can be used in incapacity planning.  A Durable Power of Attorney is a document that allows you to appoint a person or professional to handle your affairs while you are unable to do so. The person or organization you appoint is referred to as an “Attorney-in-Fact” or “Agent.”

A Durable Power of Attorney can provide a simpler and more inexpensive method for managing your assets should you become incapacitated.  Your chosen agent must be someone you can trust to act in your best interests, as your only recourse for improper acts by your agent will be either to revoke the agency or, if you are unable to do so because of incapacity, for your family to seek legal intervention.

Many who have smaller estates find that a Durable Power of Attorney meets their needs, while more complex estates may benefit from the formality of living trust.  An estate planning attorney with expertise in living trusts can best advise you on the proper estate planning tool to meet your specific needs.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

Creating a will allows a parent to not only name a guardian for minor children, but provide for them financially as well.  Here is a brief summary of the legalities of leaving money to minors, since minors cannot legally own property.  If your will leaves money or other property to a minor, you should also arrange for someone to manage their inheritance, should they receive it while they’re still too young to manage it themselves.   This can also be handled within a will.

 If you do not address your beneficiary’s status as a minor, anything left to them could potentially result in a court-appointed guardianship or in a restricted bank account as dictated by a Probate judge under Ohio state law. 

Specifically, Ohio has adopted the Ohio Transfer to Minors Act (OTMA) which authorizes you to name in your will an adult custodian and successor custodian to supervise property you leave to minors. The custodianship ends, and any remaining property must be turned over to the child outright, when the child reaches the age of 21, which is specified by Ohio’s OTMA law.

On the other hand, addressing the issue while planning your estate allows you to better control the inheritance and supervision of the property.  For example, establishing a trust to manage property until the child reaches a certain age.  An alternative is to name a guardian of the estate for your children within a will, which allows you to choose someone to handle the property on their behalf.  While this person may also be the ‘guardian of the person’, the caretaker of the children you name within the will, it can also be another person or even an institution for larger estates.

Planning for these situations allows you to maintain control of issues that may come up upon your passing.  Estate planning allows you to address these issues and relieve the burden of your death on your loved ones.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

Creating a last will and testament is one of the cornerstones of estate planning.  Not only does it allow you to control how your estate is handled and distributed, but it saves money.  How? 

Quite simply, it is more expensive, as well as time consuming, to settle an intestate estate, one without a will, than to probate a will.  When a will is drafted, an Executor is named to administer the estate.  The Executor’s duties normally are entrusted to a family member or close friend.  While the Probate Court monitors the administration of the Estate, the Executor may not be required to post a security deposit or bond to guarantee their performance if you say so in your will.  That provision alone will save your family money.

On the other hand, should you die with no will, a Probate Court appoints an estate Executor.  That person will be required to post a bond, and the expense is paid by the estate.  In many cases, this bond costs more than having a will prepared.

This bond is required as an Executor has the duty of a fiduciary, meaning they have the responsibility to handle financial matters for the estate.  The bond is required to ensure that the estate is protected financially if the fiduciary were to misuse their authority.  The bond required may be as much as double the value of the estate.   

On the other hand, a will naming an Executor may have a bond waiver in the section that names the estate’s Executor.  Not only does it allow an Executor to not have the headache of obtaining a bond, but it saves the estate the expense.

Estate planning is a process that eases the burden of your passing on your loved ones.  Drafting a will with an estate planning attorney ensures that legal documents meet the needs of your family and can save you money in the long run.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

A living trust is a legal arrangement that manages a person’s property during their lifetime and disperses it according to their wishes upon their death.  A”‘grantor” transfers ownership of property to the trust and selects a trustee to manage it. The trustee may be a family member, a trust attorney, or even the grantor.  Upon the disability or death of the grantor, a successor trustee will take over (if the grantor was the trustee) and distributes or manages the property according to the terms of the trust.

We address the most frequently asked questions of this popular estate planning tool, as many “fly by night” firms have been using living trusts as marketing ploys, prompting several government agencies to issue warnings.

Why would someone set up a living trust instead of just using a will to transfer the property when they pass away?

There are several powerful estate planning benefits of a living trust – the property held by a trust does not go through the probate process when the grantor dies.  Not only does this save time and money on probate costs, but probate proceedings are  public records which are open to viewing by anyone, but a living trust is a private, confidential document which is not a public record.  There may also be tax benefits for living trusts as well as asset protection. Finally,  a living trust can be used to provide for a surviving spouse or child while protecting the interest of that person from predators and creditors.

Why have there been warnings issued on living trust scams?

Living trusts can be a powerful and valuable estate planning tool, but some unscrupulouse companies often target older Americans, in particular, with promises such as living trusts are for everyone.  Such companies target the concerns of the elderly  that their estates will be subject to a long, expensive probate process, and  these firms often misrepresent the costs and benefits of trusts versus wills.  Although many trusts are simple, a trust can also be a complex legal arrangement, and it’s in your best interest to use a Living Trust Attorney or Estate Planning Attorney to make sure a living trust is appropriate for  your estate plan.

Would I benefit from a living trust?

If you own valuable property, such as a house or a large amount of stock, using a living trust to avoid probate may save your estate time and money. On the other hand, a basic will may be enough for some estates. It’s always best to consult an estate planning attorney to complete a comprehensive estate plan, even for modest estates, as these can often benefit from having an estate plan that is specifically designed for you.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.