9 (Potential) Problems with Your Trust

February 25, 2014

All trusts should be reviewed every few years to make sure that they are up-to-date with the law and meet your goals today. Following is a checklist of trust features you can review yourself. But be aware that these only refer to revocable “living” trusts, not to irrevocable trusts.

  1. Do you have the right successor trustees? Typically you will be the trustee of your own revocable trust with your spouse as co-trustee (if you’re married). Trusts should name one or more successors in the event the original trustee or trustees are unable to serve. Make sure that you still want the successors you originally named. Also, do you want them to come on and begin acting as trustee now? And if you and your spouse are co-trustees, do you want the successor or successors to step in when the first of you becomes incapacitated or passes away, or not until neither of you can serve?
  2. Who can remove trustees? You can always change the trustees of your revocable trust. But do you want your heirs to have this right after you pass away? This can often avoid problems if there are communication problems or disagreements with the trustee. On the other hand, you might want to limit this to some extent to make sure heirs aren’t just looking for a trustee to do whatever they say.
  3. Can your spouse change the ultimate distribution of trust assets after you have passed away? Many trusts give surviving spouses a so-called power of appointment to redirect trust assets at their death. This can be important to provide for flexibility to respond to changes in family circumstances. However, this usually doesn’t make sense in second marriages. In a Massachusetts court case, the second wife used her power to give everything to her children instead of to the original beneficiaries: her deceased husband’s children. Even in the case of a first marriage, removing this provision from the trust can provide protection for children and grandchildren in case the surviving spouse remarries and becomes estranged from his family.
  4. Does your trust protect your children and grandchildren from lawsuits and divorce? You have the option of drafting your trust to continue for your children’s lives to provide creditor and divorce protection.
  5. Have you funded your trust? We often see great trust documents that don’t do all that’s intended because the clients’ assets are still titled in their names. You can avoid probate and make sure that the estate tax protections in your trust operate as planned through retitling assets in the name of the trust.
  6. Who is named as beneficiary of your retirement plans and other investments? Often clients spend hours with their attorneys crafting an estate plan to match their goals and then circumvent it through naming individuals as beneficiaries of retirement plans and investment accounts. Make sure these are all coordinated.
  7. At what age will children and grandchildren receive their inheritance? Most trusts provide that funds will remain in trust until those inheriting reach a certain age, often 21 or 25. But you can set any age you choose and even permit them to withdraw a portion of the trust at set ages, say half at 25 and half at 30, or a third each at 25, 30 and 35. This doesn’t mean that they can’t benefit from the trust assets in the meantime, but that distribution decisions are made by the trustees until children and grandchildren have more financial experience.
  8. Does your trust have provisions providing for maximum tax deferral if it is named the beneficiary of a retirement plan? While you may choose to have your retirement plans go directly to your heirs — and often this is the simplest approach — if they are going to your trust, it must have special provisions to stretch out the annual required distributions for as long as possible.
  9. Is your trust up-to-date for estate tax purposes? Congress and many states have changed the estate tax laws several times in recent years. If your trust is more than five years old, or if you lived in a different state when it was drafted, it should be reviewed by an estate planning attorney to make certain it is still current.

You can check many of these questions on your own. In fact, it’s a useful exercise to make sure that you understand what is in your trust. Other issues, particularly those related to tax issues, will require consulting with an estate planning professional.

To discuss estate planning and other elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

Advertisements

Probate v. Non-Probate: What Is the Difference?

February 16, 2014

When planning your estate it is important to understand the difference between probate and non-probate assets. Probate is the process through which a court determines how to distribute your property after you die. Some assets are distributed to heirs by the court (probate assets) and some assets bypass the court process and go directly to your beneficiaries (non-probate assets). 

The probate process includes filing a will and appointing an executor or administrator, collecting assets, paying bills, filing taxes, distributing property to heirs, and filing a final account. This can be a costly and time-consuming process, which is why some people try to avoid probate by having only non-probate assets.

Probate assets are any assets that are owned solely by the decedent. This can include the following:

  • Real property that is titled solely in the decedent’s name or held as a tenant in common
  • Personal property, such as jewelry, furniture, and automobiles
  • Bank accounts that are solely in the decedent’s name
  • An interest in a partnership, corporation, or limited liability company
  • Any life insurance policy or brokerage account that lists either the decedent or the estate as the beneficiary

Non-probate assets can include the following:

  • Property that is held in joint tenancy or as tenants by the entirety
  • Bank or brokerage accounts held in joint tenancy or with payable on death (POD) or transfer on death (TOD) beneficiaries
  • Property held in a trust
  • Life insurance or brokerage accounts that list someone other than the decedent as the beneficiary
  • Retirement accounts

When planning your estate, you need to take into account whether property is probate property or non-probate property. Your will does not control the distribution of non-probate property. Check the ownership of your property and your accounts to make sure jointly owned property will be distributed the way you want it to. It is also important to review your beneficiary designations.

To determine whether your property is being distributed the way that you want it to, or to discuss other elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

For more information on probate, click here.

For more information on estate planning, click here.

 


Durable Power of Attorney for Health Care: A Gift of Love

February 3, 2014

As Valentine’s Day approaches, many will be thinking about the perfect gift for their loved one(s).  Flowers and chocolate are likely the most popular Valentine’s Day gift.  However, for those of you who have not yet created a Durable Power of Attorney (DPOA) for Health Care, you may wish to add the creation of one to the top of your gift list.

A DPOA for Health Care is a document which allows you to decide who you would like to make decisions regarding your health care, should you ever become incapacitated and unable to make such decisions for yourself.  The person you appoint is called your agent, and the form allows you to designate back-up agents, in the event your first-named agent is unable to act on your behalf.  In addition, when creating a DPOA for Health Care, you can include specific directions regarding your wishes, including but not limited to your wishes regarding organ donation and life support issues.  Although the requirements for creating a valid DPOA for Health Care vary from state to state, a common requirement for creating this document is that you must be competent.  When a POA is made “durable,” the document will remain in effect upon your (the principal’s) incompetency.  An individual who is no longer competent will not be able to create a valid DPOA for Health Care.  In those circumstances, the individual’s loved ones will have to pursue other options to assist the individual with necessary health care decisions, such as guardianship.

Of course, each of us hopes that we remain competent until our last breath and that we never, ever need a DPOA for Health Care.  Our life experiences, however, tell us that many of us will, at one time or another, need assistance with our health care decision-making.  Thus, creating a DPOA for Health Care is a thoughtful and loving gift to give our loved ones, so they will know both who we want to make our health care decisions and our specific wishes.

So, for those of you who have not, yet, created a DPOA for Health Care, we at the Elder Law Center, P.C. encourage you to add it to the top of your gift list for Valentine’s Day.

©Copyright 2014 by Constance Burnett Renzi. All rights reserved.

To discuss durable powers of attorney (life care planning), estate planning, and/or elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

Follow us on facebook @ http://www.facebook.com/pages/Elder-Law-Center-PC/285067291548844

Follow us on twitter @ https://twitter.com/#!/ElderLawPC