Simpleshowing's article discusses the pros and cons of putting your home in a revocable living trust.
“Once you become a homeowner, estate planning needs to include what will happen to your house after you pass away. If you don’t put those intentions in writing, your intended recipient may have to spend a lot of time and money in order for that to happen, or they could even end up losing it altogether. This is why you may want to put your home in a trust.”
Charles Schwab asked three of their own professionals important questions regarding the differences between wills and trusts.
A trust is a fiduciary arrangement that specifies how your assets are to be distributed, usually without the involvement of a probate court. They can be structured to take effect before death, after death, or in case of incapacitation. In contrast, wills take effect only upon death and typically need to be authenticated by a probate court, which can take time and involve additional costs.
Trusts can be arranged to accomplish a variety of different goals. For example, you can use a trust to transfer property, help minimize estate taxes, preserve assets for minors until they are adults, or benefit a charity.
Real Simple explains what singles need to know about estate planning, according to experts.
“Everyone needs a financial plan, and everyone also needs an estate plan,” says Amy Richardson, a certified financial planner with Schwab Intelligent Portfolios Premium. And yes, that includes singles without obvious heirs—i.e., kids of your own. Of course, the cornerstone of any estate plan is a will, which at its core is a document aimed at outlining how you would like your life on earth to be closed out.”
MarketWatch recommends every adult should have the following six estate planning documents:
“Durable power of attorney
Health care directive or medical power of attorney
Will
Revocable trust
Beneficiary designations
Guidance letter to family”
Most of our estate planning clients create a trust because they want to leave assets to children and loved ones in a trust that protects the assets from the child's or loved one's creditors and ex-spouses. When we are hired to prepare an estate plan with a trust we prepare a revocable living trust that contains language that causes the successor trustee to create a beneficiary controlled asset protected trust (a BCAPT) for each child or loved one on the death of the trust maker or death of the second spouse if the trust is a joint trust. See the contents and prices of our two estate plan packages.
If the future beneficiary of the BCAPT ever got sued the creditor could not touch the assets in the trust. If the future beneficiary were to marry and get divorced the ex-spouse could not get any of the assets in the trust. You cannot predict if your child or loved one will ever have a creditor or ex-spouse problem, but it is prudent to protect against these two problems.
It is also possible to create a BCAPT while you are alive if you want to transfer valuable assets to your child or loved one now before you die. We prepare BCAPTs for people who want to give valuable assets to their children or loved ones now and protect the assets from their future creditors and ex-spouses. To learn more about the BCAPT see my article called “Beneficiary Controlled Asset Protected Trusts.”
Investopedia discusses how to set up a trust fund if you're not rich:
Trust funds are designed to allow a person's money to continue to be used in specific ways after they pass away, and to avoid their estate going through probate court (a time-consuming and expensive legal process). But trusts aren't only useful for ultra-high-net-worth individuals, the middle-class can use trust funds as well, where setting one up isn't out of financial reach.
Democrats want to return federal estate taxes to their historic norms, which means taxpayers need to act now before Congress passes legislation that could adversely impact their estates. Currently, the federal estate and gift tax exemption is set at $11.58 million per taxpayer. Assets included in a decedent’s estate that exceed the decedent’s remaining exemption available at death are taxed at a federal rate of 40 percent (with some states adding an additional state estate tax). However, each asset included in the decedent’s estate receives an income tax basis adjustment so that the asset’s basis equals its fair market value on the date of the decedent's death. Thus, beneficiaries realize capital gain upon the subsequent sale of an asset only to the extent of the asset’s appreciation since the decedent’s death.
If the Democrats get control of the Senate it could mean not only lower estate and gift tax exemption amounts, but also the end of the longtime taxpayer benefit of stepped-up basis at death. To avoid the negative impact of these potential changes, there are a few wealth transfer strategies it would be prudent to consider before the year-end.
With the threat of a lowered estate and gift tax exemption amount, a spousal lifetime access trust (SLAT) allows donors to lock in the current, historic high exemption amounts to avoid adverse estate tax consequences at death. The donor transfers an amount up to the donor’s available gift tax exemption into the SLAT. Because the gift tax exemption is used, the value of the SLAT’s assets is excluded from the gross estates of both the donor and the donor’s spouse. An independent trustee administers the SLAT for the […]
A domestic asset protection trust (DAPT) is an irrevocable trust established under the laws of a state that adopted a DAPT statute. Currently 17 states have passed DAPT statutes. These states are Alaska, Delaware, Hawaii, Michigan, Mississippi, Missouri, Nevada, New Hampshire, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Virginia, West Virginia and Wyoming. Unfortunately Arizona does not yet have a DAPT statute.
A DAPT is an irrevocable trust that allows the trust maker to be a discretionary beneficiary and the trust's assets are protected against claims made by the trust maker's creditors. The trustmaker retains access to the trust's assets, but the assets are protected against many types of creditor claims.
A lawyer on a list serve I follow wrote:
“Why do people still push DAPTs? There are so many cases defeating them. And they are part of the bankruptcy estate unless they've been in existence for 10 years. I feel like it's the 1970s again, and everyone is telling each other how stupid seat belts are and that cigarettes are healthy and help with weight loss. Talking about Wyoming vs. South Dakota vs. Alaska vs. Nevada is like discussing which brand cigarette is healthier. None of them are good. And there are much better options that have tons of case law backing them … like special power of appointment trusts.”
The following text was written by Nevada DAPT attorney Steve Oshins in response to the above comment. Steve is a friend and my choice as the best domestic asset protection trust lawyer in the United States.
“I substantially agree with your comments about regular DAPTs for residents of non-DAPT states. However, not for residents […]
Above the Law discusses the importance of having a Last Will And Testament, Power Of Attorney, And Healthcare Proxy:
Like an annual physical exam or dental cleaning, we know we must, but we often delay. Fear, anxiety, cost, and time are all factors in delaying that which all adults, regardless of familial structure and net worth, should accomplish. Executing estate planning documents, specifically a last will and testament, power of attorney and healthcare proxy, need not be a tremendous production, especially in the precarious times in which we live. At a minimum, we should all execute three basic documents, thus mitigating any future drama.
This article in the Herald Mail Media states:
“the most important document people should be getting right now is the equivalent of a medical power-of-attorney. The document's name depends on the state. . . . First, appoint an agent or decision-maker for healthcare decisions in case you are unable to make or communicate an informed choice yourself . . . . Second, the document should express your wishes in case you end up in a terminal condition or persistent vegetative state. Do you want interventions or not?”
This article in Kiplinger starts with “Smart Insights from Professional Advisors” then says:
“An estate plan is a necessary tool that allows you to protect, maintain and manage your property if you become ill or pass away. But more than that, it can also help people make sure their minor children are protected in the event of an emergency or minimize taxes paid on assets by beneficiaries. . . . So, why do so many hardworking people fail to take the time and effort to build an estate plan and preserve their hard-earned assets? . . . a common misconception most people have is that estate planning is for those who are older or possess substantial wealth. Many people also assume that the process will be complex, time intensive and pricey. But some — if not all — of the problems mentioned aren’t true the majority of the time.”
Ron Wynn writes in Culver City News:
“People often try to put certain things that are not so pleasant on the back burner and say, “I will get to it.” If that is you, you are no different than anyone else. One of the things that people often put aside is estate planning. We all think that we have plenty of time to do that, and that is not our biggest priority.
And then of course, when people get unfortunately ill, it becomes a scramble. Set everything up early in advance when it comes to how you want your estate handled. It’s not a pleasant thing, but it’s something that has to be done and the sooner you do it, the better off you are.
The first thing you want to do, assuming you have assets, is to contact an estate planning attorney and listen to his/her advice. The likelihood is if you own property and other sizable assets, they will suggest you create a family trust. They will explain the kind of family trusts there are, including a revocable trust and an irrevocable trust, and they will also explain to you what the benefits of each are and how they work.
Very informative article in Business Insider says, “I've worked with more than 1,200 families as a Certified Financial Planner, and I see people make the same estate-planning mistakes over and over again. Not having a will is a major problem. After that, though, you also need guardianship documents for minor children, updated beneficiaries, and a properly funded trust.”
Chambliss: “If you have it to give, you certainly can, but there may be consequences should you apply for Medicaid long-term care coverage within five years after each gift. The $15,000 figure is the amount of the current gift tax exclusion (for 2018), meaning that any person who gives away $15,000 or less to any one individual in one particular year does not have to report the gift to the IRS, and you can give this amount to as many people as you like. If you give away more than $15,000 to any one person in a single year (other than your spouse), you will have to file a gift tax return. However, this does not necessarily mean you’ll pay a gift tax. You’ll have to pay a tax only if your reportable gifts total more than $11.18 million (2018 figure) during your lifetime.”
Market Watch: “Creating an estate plan is a gift to the people you leave behind. By expressing your wishes, you’re trying to guide your loved ones at a difficult, emotional time. All too often, though, well-meaning people do things destined to create discord, rancor and resentment among their heirs. What looks good on paper may play out disastrously in real life, says estate and trust attorney Marve Ann Alaimo, partner at Porter Wright Morris & Arthur in Naples, Florida. “People want to think everybody will be nice and do right,” Alaimo says. “Human nature is not always that way.” You can reduce the chances of family discord by doing these four things:”
NEWS: “One of Prince's many nicknames was The Purple One. It was reportedly his favourite colour, and after the success of Purple Rain its use defined his image and his legacy. Now, it is set to do so in perpetuity, as the late singer's estate looks to claim ownership over the use of “the colour purple” in films and live and recorded music. Paisley Park Enterprises, his company, filed an application earlier this month with the US Patent and Trademark Office to do just that.“
FOX: “The daughter of the late legendary football star and sportscaster “Dandy Don” Meredith dealt with abuse and neglect after her stepmother took guardianship of her trust following Meredith's death, relatives said. Meredith, a former Dallas Cowboys quarterback, “Monday Night Football” commentator and TV pitchman who often referred to himself as “Jeff and Hazel's baby boy,” set up a trust to ensure lifetime care for his youngest child, Heather, now 49, who was born with physical and intellectual disabilities.”
JDSUPRA: “Divorce is a fact of life in America. It should come as no surprise that it can be a difficult process and can cause other aspects of a person’s life to be ignored while it is happening. It is important, though, that a divorcing individual involve his or her estate planning attorney in the divorce process to make sure that any settlement agreement and estate plan comport with post-divorce reality. In many cases, a divorce will automatically eliminate a former spouse from receiving any benefits under the other spouse’s will or revocable trust. This may not be the case in all states, though. Moreover, the divorce may not affect assets that have beneficiary designations, such as life insurance and retirement benefits (and, more commonly now, bank and brokerage accounts). Thus, a careful review of all of an individual’s assets is essential.”
The Washington Post: “First things first: Quadruple-check your ticket after Tuesday’s Mega Millions drawing. Then do it again. Do they match the winning numbers (5-28-62-65-70, with a Mega Ball number of 5)? No? Skip to here. Yes? Lock the deadbolt and read on. Congratulations! So, you’ve done it. Beaten the odds — one in 302,575,350 — and won the largest Mega Millions jackpot in history. And it’s yours alone, so you’re almost certainly about to enjoy an astronomical spike in wealth. Now what? Before you shout from the rooftops or broadcast your excitement on social media, take a deep breath and keep some practical advice in mind. To sign or not to sign the back of the lottery ticket? There are plenty of people who will advise you to sign the back of the lottery ticket right away — including lottery officials in South Carolina, where Tuesday’s winning ticket was sold. After all, what would happen if, heaven forbid, you lost the ticket? Or worse yet, if an unscrupulous person in your life took the unsigned ticket and claimed it as his or hers?”