Does A Trust Offer Asset Protection?

There are numerous different reasons why it might make sense to establish a trust for the purpose of meeting your estate planning goals. Far too many people misunderstand how trusts can be appropriately used and this means that the trust never gets funded and therefore is never able to pass on the assets to the intended beneficiaries.

Because of all the complicated issues involved in crafting a trust that addresses all of your issues and is followed through so as to be viewed as valid under state law, you must work with an estate planning lawyer.

One of the most common reasons that people choose to use trust is because these enable asset protection. A revocable trust established during your lifetime becomes irrevocable after you pass away. If the assets are still inside the trust for the lifetime of your children, those assets are protected from litigation that could be filed against your children.

Another good reason to use a trust is because it can help to provide for children from multiple marriages. A trust is an outstanding tool to provide assets for your spouse during the course of his or her lifetime after you pass away, then enabling any remaining assets to be passed on to your children from your first marriage. This helps to protect your children as well as your grandchildren who might ultimately receive your assets.


Are You Ignoring These Digital Assets?

There are plenty of different studies and toolkits that recommend incorporating digital estate planning but it is only as good as the value of your comprehensive planning. Overlooking common digital accounts could lead to major mistakes if you were to suddenly pass away.ThinkstockPhotos-636230500 (1)
Research found that many participants have digital media assets in the form of emails, banking records and social media accounts but they can also include medical records, iTunes account, bitcoins, and online businesses.
Online service providers each have their own unique approach to how they deal with somebody’s account when that person passes away. In many cases if they are informed that someone has passed away, they will all automatically close the account. In other cases, family members must provide documentation indicating that they have the right to terminate such an account.
You may not wish to close these accounts immediately because they have information that your family members may wish to save, such as a social media account that includes all of your digital photos. Having clearly articulated plans and verifying that they are incompliance with the rules of that particular service provider is strongly recommended.
Having a consultation with an estate planning attorney can further illuminate you about the critical issues involved in digital estate planning and the steps that you should take to ensure that you have considered all of your accounts and have clearly articulated instructions and compliance rules associated with passing these on. While you may want these accounts closed immediately after you pass away, having a plan can make things easier for your family when they are already struggling with the loss of a loved one.

Do You Have Inherited Assets? Estate Planning is Even More Important

Estate planning can be complicated no matter who you are, but knowing how your assets and investments will be divided among your beneficiaries after passing on can give you a lot of peace of mind and it can also decrease your stress level about the potential pitfalls that your beneficiaries might have to cope with due to lack of planning.ThinkstockPhotos-645670208
One common issue for many people is wondering how their stock portfolios will be transferred from one individual to another when a person dies and who should have access to those investments before or after this occurs. If the stock portfolio is part of an individual’s trust, then the choice may be out of your hands and you may not be able to add another individual to the account even if you wanted to. Another important component is where the person lives when they pass away. Inheritors could be tied up in the court system, trying to obtain rightful assets with a revocable trust if the proper planning procedures have not been taken.
Receiving an asset as an inheritance someone else is a special opportunity, but if you’re not going to exhaust that inheritance while you’re still alive, you should consider how you’ll add it to your own estate planning.
If you have inherited assets, you need to think not just about how these will be used over the course of your lifetime but how you intend to pass them on to others. Consulting with an experienced estate planning attorney is one of the most important steps that you can take to protect your interests.

More Americans Are Passing Away with Debt Than Ever

A recent study of 220 million consumers in Experian’s File One database, indicated that up to 73% of consumers are passing away with debt in high numbers. For those individuals who do not have a home loan, the average debt was $12,875. However, consumers with a mortgage carried approximately $61,554 in debt.
You may assume that debts are no longer your issue if you pass away, but that’s not true if there are assets inside your estate that may cover a portion or all of these debts. If you have communicated to your loved ones that you intend to give them particular assets, but those are seized and sold as part of your estate plan, you may wish to discuss your options for changing your estate plan with an experienced lawyer.
thumb_alternateThe types of debts most common included credit card balances, mortgage debt, auto loans, personal loans and student loans. Debt belongs to the deceased individual when he or she passes away. That means that creditors can pursue asset sold in the estate as part of their payment.
If there aren’t enough assets to satisfy debts, then creditors may lose out on all or some of their payments. But in the event that there are assets in the estate to pay out creditors, then your beneficiaries may actually receive nothing. This is why it may be important to discuss other opportunities such as a life insurance policy or advanced planning strategies with your knowledgeable estate planning attorney.

Without A Will, Legislature’s Guesses Hold Sway

Last Will and Testament

Last Will and Testament

Most people should say that when it comes to dying without a will, there’s no way.
But far too many folks manage do find a way, and this can have potentially devastating consequences, according to the American Bar Association.
“If you die intestate, without a will, your state’s laws of descent and distribution will determine who receives your property by default,” according to the association. These laws vary from state to state, but typically the distribution would be to your spouse and children, or if none, to other family members. A state’s plan often reflects the legislature’s guess as to how most people would dispose of their estates and builds in protections for certain beneficiaries, particularly minor children.
“That plan may or may not reflect your actual wishes, and some of the built-in protections may not be necessary in a harmonious family setting. A will allows you to alter the state’s default plan to suit your personal preferences. It also permits you to exercise control over a myriad of personal decisions that broad and general state default provisions cannot address.”
A will, whether a simple one or a document of significant complexity, reflects the will of the person who signs his or her name to it, and can provide a lasting last memory for family and friends left behind.
Sometimes, however, the ABA warns, a will alone might not be enough to ensure a descendant’s wishes are fully and properly carried out.
“In many instances, consumers prepare wills believing that the will governs who will inherit their assets when in fact, the title (ownership) of various accounts or real property, for example, as joint tenants, or beneficiary designations for IRAs, life insurance and certain other assets control the distribution of most or even all assets,” the article states. “This is why merely addressing your will is rarely sufficient to accomplish your goals.”

Widows Face Special Issues In Financial Planning

Close-up of documents

Close-up of documents

Many older couples, those approaching or even well past retirement age, have wisely made financial plans for the rest of their lives together.
What few do, because it’s just too emotionally difficult in most cases, is make further plans for one or the other of them to carry on alone.
More often than not, it is going to be the woman who survives in a married couple, and women face much more difficulty in planning for a secure future, as noted in a recent article in The New York Times.
“The household income for widows typically declines 37 percent after a spouse dies, far more than the 22 percent income drop that men experience, according to government figures,” the story stated . “The assets of widows also tend to fall substantially more than widowers’.
“Women also typically live longer than men. One in four women from 65 to 74 are widows, according to census figures. When women reach 85, three out of four are widows.”
“Many people do not plan for income needs after the first death in a couple,” David Littell, program director of the American College of Financial Services, which offers financial education for securities, banking and insurance professionals, was quoted as saying. “And retirement planning is more of a struggle because life expectancy is longer.”
There is, however, some good news.
“Often neglected in the past, women are receiving more attention from banks and other financial institutions,” the article noted. “Regions Bank, which covers a 16-state area in the South and Midwest from its headquarters in Birmingham, Ala., for example, devotes a portion of its website to women and wealth management, with videos and other information.”
“More and more women control wealth,” said Amanda Weeks, a Regions private banker and wealth manager, “so they have to know their sources of income and how to manage their assets.”
“That includes figuring out when the mortgage will be paid off if it hasn’t been already, whether there is a pension plan or 401(k) for one or both spouses and whether there are other bank accounts or property. Often, one of the most complex issues is determining how to obtain the maximum payment from Social Security, a major income pillar for many older women.”
“When a spouse dies, it is an emotional time,” Weeks said. “It can take some time to find the information and make a plan. And everyone has their own timetable.”

Special-Purpose Trust Can Help Parents Of Troubled Adult Children

Parents who find themselves at their wit’s end in trying to help troubled adult children, whether it’s due to mental illness or substance abuse, can at least take some definite actions to reduce the sorrow – their children’s and their own.
According to a recent article in The New York Times, what are called “special-purpose trusts” can help a great deal in these difficult situations.

I can always help you honey

I can always help you honey

“There are many painful, emotional issues surrounding crises like mental illness and addiction that affect children,” according to the story  “But there are concrete financial steps parents can take that won’t worsen their child’s condition, enable their child’s addiction or, in the case of mental illness, run afoul of limitations on the number of assets a person can have and still qualify for government benefits.
“One starting point is a special-purpose trust, which can provide care for the suffering child and peace of mind for the parent.”
Such trusts, the article quotes Karen Francois, the chief personal trust officer at Evercore Trust Co., as saying are different from special-needs trusts, which are often used to pay for the extra things needed by those who are receiving government benefits.
“Special-purpose trusts can be used to provide children a semblance of the life they might have enjoyed without mental illness or addiction,” the story states.
“You might be working with a situation where, with an addictive individual, you could have some good years and some bad years,” Francois told the newspaper. “You want that latitude to make changes with the distributions.”

Leaving Assets To a Minor Can Be Tricky

Samuel Johnson once said, “Hell is paved with good intentions.”

He might have been talking about what can sometimes happen when people seek to leave assets to minor children, as was pointed out on the website
“Every parent wants to make sure their children are provided for in the event something happens to them while the children are still minors,” according to the article “Grandparents, aunts, uncles and other relatives often want to leave some of their assets to young children, too. But good intentions and poor planning often have unintended results.
“For example, many parents think if they name a guardian for their minor children in their wills and something happens to them, the named person will automatically be able to use the inheritance to take care of the children. But that’s not what happens. When the will is probated, the court will appoint a guardian to raise the child; usually this is the person named by the parents. But the court, not the guardian, will control the inheritance until the child reaches legal age, 18 or 21. At that time, the child will receive the entire inheritance. Most parents would prefer that their children inherit at a later age, but with a simple will, you have no choice; once the child attains the age of majority the court must distribute the entire inheritance in one lump sum.”
A better option, the site states, than relying on the courts is establishing a trust within a will and naming a trusted individual to manage the inheritance for the child.
“You can also decide when the children will inherit,” the site states. “But the trust cannot be funded until the will has been probated, and that can take precious time and could reduce the assets. If you become incapacitated, this trust does not go into effect, because a will cannot go into effect until after you die.
“Another option is a revocable living trust, the preferred option for many parents and grandparents. The person(s) you select, not the court, will be able to manage the inheritance for your minor children or grandchildren until they reach the age(s) you want them to inherit—even if you become incapacitated. Each child’s needs and circumstances can be accommodated, just as you would do. And assets that remain in the trust are protected from the courts, irresponsible spending and creditors, even divorce proceedings.”

Tax Law Revisions Allow Couples To Say ‘I Love You’ In Estates

Time was, one from Column A and one from Column B and a couple’s estate planning was pretty much a done deal.
Times change.
According to a recent article on the investment website, changes in tax laws may have rendered an estate planning approach made famous by actor Humphrey Bogart obsolete.

“For decades, lawyers routinely recommended A/B estate plans for married couples,” according to the story by attorney and award-winning journalist Deborah L. Jacobs .
“Many clients dutifully followed their advice, even though these plans can be convoluted. However, A/B plans that were put in place years ago could have negative tax consequences. If you haven’t reviewed your estate plan recently, it might be time.
“A key component of the A/B plan is dividing an estate into two major parts, a classic technique used by Hollywood icon Humphrey Bogart. In his will, signed eight months before he died in 1957, Bogart left all of his personal possessions to his wife, Lauren Bacall, outright. Bogart provided that after gifts to two of his servants were dispensed, half of the rest of his estate would go into a trust to benefit Bacall (Part A). Taxes would come out of the other half of the estate. Whatever remained after taxes were paid would go into a separate trust (Part B) for the couple’s two children, who were young at the time. This is called a bypass, or credit-shelter, trust. Because the funds did not belong to Bacall, they would be sheltered from tax on her estate. Such arrangements were designed to preserve the first spouse’s estate tax exemption, which would be lost if it wasn’t used when that person died.”
However, Jacobs goes on to say that changes in tax law that took effect in 2013 “make another alternative more appealing for couples that are in stable first marriages and trust each other to manage their joint wealth.”
“These couples can leave all their assets to each other directly in ‘I love you’ wills,” the article continues. “Then, the survivor can carry over the spouse’s exemption, a process tax geeks have dubbed ‘portability.’ At 2015 rates, this system enables married couples to transfer $5.43 million apiece, $10.86 million together, tax-free. Just as under the old law, you can leave a citizen spouse or a charity an unlimited amount, without worrying about tax.”
“Many A/B plans are less attractive today than they once were because the federal estate tax exemption is now so large that the credit-shelter trust is not likely to save heirs any estate tax and is potentially going to cost them income tax,” Walter R. Morris, a lawyer with Wyatt Tarrant and Combs in Lexington, Ky., was quoted as saying.

Joint Accounts Can Offer More Pitfalls Than Practicality

While having joint bank accounts with family members or business associates offers some convenience, a recent article on the website points out that there are a variety of risks to the practice.

“Most consumers sock away cash into bank accounts, checking, savings, certificates of deposit, to maintain liquidity,” according to the item. “But opening a joint bank account, whether with family members or business associates, has potential pitfalls even as it offers convenience. While pooling your money may imply love or trust, the ramifications of joint accounts can elude both parties.”
“You can have a joint account with anyone in the world, but once we’re jointly on that bank account, once we sign the papers, both of us have 100 percent rights to that account,” the article quotes Sandra M. Radna, a family attorney with Radna and Androsiglio in New York. “In the eyes of the law, you’re equal holders.”
“There is no protection for either party with a joint account,” offered Brent Adams, senior vice president at Private Bank of Buckhead in Atlanta. “There is nothing (the bank) can do to protect either party if the other person comes in and withdraws all the money.”
The article offers this advice from financial advisers:

  • Keep minimal amounts of money in joint bank accounts for day-to-day use.
  • While they are more common with commercial accounts, set up criteria for account transactions requiring two signatures through the bank.
  • Use online banking alerts to monitor account activity.