There is nothing that requires you to work with the attorney or the law firm that originally prepared your estate planning documents. Any qualified attorney can amend the trust. We, of course, hope that you will return to our firm to do any work in the estate planning area, based upon our philosophy of being of service to our clients and being there when we are needed.

The first step in the estate planning process is for you to come in for your initial consultation. At that time, you will meet with one of attorneys at the firm. We will work with you and, of course, draft all of the documentation to implement your estate plan. We do also have specially trained paralegals in our law firm, who do specific jobs such as asset collection and funding and things of that nature, as well as the notarization of the appropriate documents. You will meet them as your estate plan takes shape.

The benefit of working with our firm is that we have several attorneys who do estate planning. Therefore, in the unlikely event that the firm is not around, I am sure that we will have joined with another firm in order to carry on the business and to be able to serve our clients. If there are changes in the firm, we will in all likelihood contact you to let you know about them and how to contact us in the future.

Estate planning/Wills/Trusts

NO. You should choose an attorney whose practice is focused on estate planning. Members of the American Academy of Estate Planning Attorneys receive continuing legal education on the latest changes in any law affecting estate planning, allowing them to provide you with the highest quality estate planning service anywhere.

YES. In fact, all real estate should be transferred into your Living Trust. Otherwise, upon your death, depending on how you hold the title, there will be a death probate in every state in which you hold real property. When your real property is owned by your Living Trust, there is no probate anywhere.

Anyone can hire an attorney to question how legal affairs have been arranged. So, in theory, anyone can attempt to contest a trust. In practice, however, it is much more difficult than contesting a will. As all wills must be probated, any interested party can easily join the routine probate court proceedings and contest the will at that time. In contrast, someone who wants to contest a trust must take the initiative to begin his or her own lawsuit, complete with court and attorney fees.

A law firm or an attorney at a law firm is permitted to be the trustee.

Property taxes remain the same when real estate is transferred into a Living Trust.

During the lifetime of both spouses there is no asset protection provided by a revocable living trust. However, there may be some protection for the survivor after the first spouse dies. The trust can also be created to provide creditor protection for other beneficiaries of the trust.

At our firm our main goal is to educate clients about their options in estate planning. We then give our clients our judgment as to what is best for them. If it is appropriate a will may be prepared.

Time-shares are transferred based upon the type of ownership you have. Some time shares are a contract and are transferred to the trust by an assignment of the contract. Other time shares are a fee-simple, which means you have absolute ownership. Therefore, it is transferred by deeding it to the trust.

An outright gift at death qualifies for the unlimited marital deduction for estate taxes and, therefore, there will be no tax paid on the amount left to the surviving spouse. However, the $1.5 million exemption on the estate of the first deceased spouse is lost when the second spouse dies.

An actual change to the terms of a trust is called an amendment to the trust. An example would be changing the distribution from two children to just one child. A trust can also be changed by a total restatement of the trust if multiple changes are involved.

Funding a trust entails transferring assets you own as an individual into the name of your trust. For some assets, our law firm makes the transfers and prepares the documents for you to sign, for example, real estate. For other assets that our law firm is unable to change for you, we will give you instructions as to how title is changed, and will provide you with the necessary paperwork. For example, to fund your trust with bank accounts, a letter is prepared for you to take to the bank to change title of your accounts. You will have to go to the bank in person to sign a new signature card as trustee of your trust.

Liquidity planning is part of estate planning. Generally, it is necessary to look at the estate and see if there is enough cash to pay taxes, administrative expenses, and support dependent family members. There are generally two ways to deal with the liquidity issue, either by reducing taxes and expenses which require cash, or by increasing the cash and liquidity of the estate. Techniques which reduce taxes include fully using the $2 million exemption at death (for the year 2006), making annual gifts, and using planning techniques such as GRITs and QPRTs. Other techniques which reduce expenses include avoiding probate and using a Living Trust. Of course, increasing the liquidity of the estate can be done through conversion of assets as well as life insurance.

Trusts are rarely revoked. Most of the time, once a trust is set up, no one wants to revoke it. However, there are situations where it does occur, primarily in the case of divorce. A brief written agreement is prepared, indicating that the trust is now revoked. The assets are removed and put in the name of the individuals, who are free to establish new trusts if they so desire.

Death revokes a power of attorney. You may also cancel your power of attorney by signing a revocation. The best way to revoke a power of attorney is to destroy all copies. If the power is a non-durable power of attorney it will terminate upon your incapacity, while a durable power of attorney survives your incapacity.

Your agent presents the power to the other party involved in the transaction and signs any necessary documents needed for such transactions on your behalf. Your agent normally signs his or her own name, adding thereafter “Attorney in Fact for Mary Smith”.

Out-of-state property is transferred into the trust by using a local attorney in that state working with our law firm. We are a member of the American Academy of Estate Planning Attorneys, a national organization with members in all 50 states. Therefore, we can contact another member attorney in the state where your property is located to have it transferred to your trust with a minimum of delay.

The government allows every individual a credit against estate taxes. In the year 2006, the Unified Credit is equal to $345,800, which equals an exemption from estate taxes of $2 million in assets. This means that estate taxes will not be owed at the time of an individual’s death unless the net value of the estate exceeds $2 million.

In our firm, we like to complete the work within four weeks of our first client meeting.

YES. But your family may not like it. The government’s estate plan is called “Intestate Probate” and guarantees government interference in the disposition of your estate. Documents must be filed and approval must be received from a court to pay your bills, pay your spouse an allowance, and account for your property–and it all takes place in the public’s view. If you fail to plan your estate, you lose the opportunity to protect your family from an impersonal, complex governmental process that can become a nightmare. Then there is the matter of the federal government’s death taxes. There is much you can do in planning your estate that will reduce and even eliminate death taxes, but you don’t suppose the government’s estate plan is designed to save your estate from taxes, do you? While some estate planners favor wills and others prefer a Living Trust as the Estate Plan of Choice, all estate planners agree that dying without an estate plan should be avoided at all costs.

YES. In fact, people who create most Living Trusts act as their own trustees. If you are married, you and your spouse can act as co-trustees. And you will have absolute and complete control over all of the assets in your trust. In the event of a mentally disabling condition, your hand-picked successor trustee assumes control over your affairs, not the court’s appointee.

Estate Administration/Probate

There are several. One is using a durable power of attorney. Another is a court-supervised proceeding referred to as a guardianship or conservatorship. Another alternative is the use of a living trust where assets are funded into the living trust.

Yes, but this unfortunately has several problems associated with it. There is no guarantee that the surviving spouse will have time to set up a trust after the first spouse dies, or, more to the point, will actually get around to setting up a trust, regardless of the amount of time available. This method also loses the $1.5 million exemption tax advantage, because, like an outright gift, joint tenancy lumps all the assets in one spouse’s estate. In addition, the survivor will not see the increase in basis for the survivor’s interest as would happen in a community property state.

Probate can be avoided with careful planning. There are a number of different techniques for doing so which can be used alone or in combination.

Your share of the assets held in the trust does get a step-up — or step-down — in basis upon your death. Your spouse’s share of community property assets held in trust also receives a step up– or step-down — in basis at your death. There will be another step up– or step-down — in basis of your spouse’s share of the trust assets at the death of your spouse.

Yes, we love to do probates because of the fees we receive. The fact is, not everyone will do a trust. Many people will procrastinate and never do proper estate planning. So, if you know anyone who needs that type of help we are happy to meet with him or her.

If you die intestate, the transfer of your property is accomplished through a court-supervised proceeding called probate that frequently takes a minimum of six months, typically a year or more. These proceedings generally are expensive and time-consuming and tie up your property for several months. Probate can be avoided with proper estate planning.

Unfortunately, you would be subject to “living probate,” also known as a conservatorship or guardianship proceeding. If you become mentally disabled before you die, the probate court will appoint someone to take control of your assets and personal affairs. These “court-appointed agents” must file a strict accounting of your finances with the court. The process is often expensive, time-consuming and humiliating.

A primary disadvantage to a guardianship is that it is a public proceeding, thereby exposing the incapacitated individual to embarrassment as the details of their incapacity are discussed at length. It is also expensive, and is a restrictive procedure. In addition, there is no guarantee that the end result will be in accordance with the incapacitated person’s wishes, and someone unacceptable to the incapacitated person could be placed in charge of his or her affairs. A major advantage to a guardianship is that the courts watch every move the guardian makes in relation to the assets. Some feel this provides increased protection as well as establishing the authority of a guardian as third parties must deal with the guardian due to the court’s supervision.

When a single individual passes away, whoever is named as successor trustee usually contacts our office. In most cases, the trustee is instructed that assets need to be collected, debts need to be paid and then ultimately the distribution of assets will be made pursuant to the terms of the trust. In essence, the terms of the trust are carried out.

When one spouse passes away, at that time, the surviving spouse should contact our office so that we can set up a meeting. At that meeting we explain what needs to be done in order to follow the terms of the trust. We need to inventory all assets so that we know what is in the trust in order to divide the assets into the A trust and the B trust — the survivor’s trust and the family trust, if applicable. There are tremendous tax benefits associated with the A/B type of trust, which is why a snapshot is taken of the assets at the date of death of the spouse.

This is a court-supervised proceeding which names an individual or entity to manage the affairs of an incapacitated person. A guardianship may also include the duty to care for the incapacitated person.

A step-up — or step-down — in basis is an adjustment for tax purposes to an asset’s fair market value at the date of the death of the owner of the asset. For example, if you bought a share of stock for $100 that increased in value to $500 at the time of your death, your tax basis was $100 but increases to $500 at the time of death. This increase is known as a step-up in basis. If you bought the stock for $500 and it was worth $100 at the time of your death, it would be a step-down in basis. In community property states, each spouse’s share of community property receives the adjustment.

Probate is the court procedure used to change title to assets from the name of an individual who has passed away into the name of the living beneficiaries. It is also where all creditors of a decedent file claims to collect their debts and where interested parties who have a complaint regarding the deceased can file their complaint (a will contest). Even without a contest, probate can be costly and time-consuming. Probate is a public proceeding.

We charge an hourly fee based upon the time we work on the matter. It varies from client to client depending upon the nature of the assets and the complexity of the financial situation. Our fees range anywhere from in a simple situation to several thousand for a larger estate and more complicated financial picture.

The nomination of a guardian occurs when an individual seeks court approval to act on behalf of someone who is incapacitated. This is avoided through the creation of a power of attorney that can be used to name a guardian in the event one is needed.

If you die without a will or trust, the state determines who will be your ultimate heirs. This distribution plan can be found in the intestacy statues of each state. The applicable state can be either the location of your legal residence (personal property), or the state in which your assets are located (real property). In the state of California, for example, the law requires that without a valid will or trust in place, community property goes entirely to the surviving spouse, and separate property goes to the surviving spouse and children (if any), in this order: If the decedent had only one child, the spouse gets half and the child gets half. If the decedent had more than one child, the spouse gets one-third and the children divide two-thirds among them equally. (The children, if any, of predeceased children take their parent’s share.) If the decedent leaves no spouse or direct lineal descendants, parents (or their lineal descendants if they are predeceased) would take the estate.

Advanced Planning/ILITS, LLC’s

A “C Trust” or “QTIP Trust” (QTIP stands for Qualified Terminable Interest Property) is a control trust. This is where one spouse owns more than $1.5 worth of assets and wants to control that additional amount of money after he or she passes away, yet also defer the tax on the amount above $1.5. By putting the amount above $1.5 into a QTIP trust, estate taxes are deferred until the surviving spouse passes away. An important issue, often overlooked, is who pays the estate tax on the QTIP assets (the surviving spouse). A QTIP trust is also used in connection with maximizing what is called the generation-skipping transfer tax exclusion amount.

A Charitable Remainder Trust permits a donor to defer the income tax consequences on the sale of a capital gain property and make a charitable gift. The donor transfers property to the trust, retaining the right to receive a stream of annual payments for a term chosen by the donor. At the donor’s death the remaining assets go to the charity. Two common types are Charitable Remainder Annuity Trusts and Charitable Remainder Unitrusts.

A Crummey power is a special power regarding gifts in trust. It was named for a court case of some years ago. In order for a gift in trust to qualify for the annual gift tax exclusion, the individual recipient must have a right to withdraw the money for some certain period of time. The right to take the gift from the trust during the period of time indicated is known as the Crummey power.

A Family Limited Partnership is a partnership made up of family members and is used in many cases to facilitate asset management, tax planning and gifting. Generally, the parents are the general partners, controlling the partnership and making all decisions. The limited partners are often children or grandchildren who receive gifts of partnership interests. This is a very popular and effective estate planning tool.

This is a trust into which an individual transfers property and retains the right to receive annual payments from the trust for a term of years. This is a tax planning technique to reduce the size of an estate and the amount of the resulting estate tax.

A QDOT trust (QDOT stands for Qualified Domestic Trust) is a special trust set up when a non-citizen spouse is the surviving spouse. The tax law generally does not allow an individual to obtain the marital deduction when leaving assets to a non-citizen spouse. The marital deduction is obtained if the property is held in a QDOT trust.

This is an irrevocable trust into which a personal residence is transferred. The individual or couple who created the trust retains the right to use the property for the term of the trust. This is a tax planning technique to remove the asset from the estate of the individual making the trust. If the grantor survives the term of the trust, then the asset is not part of the estate.

ILIT stands for Irrevocable Life Insurance Trust. This is an estate planning technique, often used to ensure that life insurance proceeds will not be subject to federal estate tax. It can be used effectively to reduce the size of the taxable estate and to provide a source of tax-free funds that may be used to pay any death taxes due at the death of the insured.

The annual gift tax exclusion is an amount that can be given away annually without resulting in gift tax on the transfer. In the year 2005, the annual gift tax exclusion amount is $11,000 per recipient. There is no limit on the number of recipients to which qualifying gifts can be made.

Living Trusts

In today’s electronic age it is tempting to use the internet for everything – even locating estate planning legal forms. Before you succumb to temptation, take a minute to contemplate the likely results of using a DIY trust agreement for your trust. Without the advice of an experienced estate planning attorney during the drafting of your trust agreement, the likelihood of you ending up with an agreement full of errors and omissions increases considerably. Even a relatively minor mistake in a trust agreement can lead to a complete failure of the entire agreement and may put the trust assets at risk.

All trusts fall into one of two main categories – testamentary or living trust. A testamentary trust is one that does not become active until the death of the Settlor. Typically, a testamentary trust is triggered by a provision in the Settlor’s Last Will and Testament. A living trust, formally known as a “inter-vivos” trust, activates as soon as all of the formalities of creation are complete and the trust is funded. Living trusts can be further divided into revocable and irrevocable living trusts. As the names imply, a revocable living trust can be revoked or terminated by the Settlor at any time and for any reason whereas an irrevocable living trust cannot be revoked or terminated by the Settlor after the trust becomes active.

For most people, a Last Will and Testament serves as the foundation of their original estate plan. As that plan grows, however, the option to switch to a trust as the primary distribution method is often considered. Whether you want to use a Will or a trust to distribute your estate is something that can truly only be decided after consulting with an experienced estate planning attorney; however, there are some common considerations when deciding whether a Will or a trust should be used. If your estate is small enough to qualify for small estate administration, and you do not have minor children (nor plan to have any in the near future), a simple Will may be all you really need. If, however, your estate is large enough that probate avoidance is a consideration and/or you do have minor children who will inherit from your estate, you may wish to consider relying on a living trust as your primary distribution tool within your estate plan.

The Trustee of a trust administers the trust which requires the Trustee to take on a wide range of duties and responsibilities, including:

  • Following all trust terms unless they are illegal or unconscionable.
  • Communicating with beneficiaries.
  • Investing trust assets using the “prudent investor” standard.
  • Managing trust assets.
  • Distributing trust assets.
  • Keeping trust records.
  • Preparing and filing trust taxes.
  • Defending the trust against legal challenges.

Put simply, a trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, also referred to as a Grantor or Maker, who transfers property to a Trustee. The Trustee holds that property for the beneficiaries designated by the Settlor in the trust agreement. The average person enters into trust agreements on a regular basis without even realizing it. For example, imagine that you want to give your niece some family heirlooms you recently came across. Your niece is only 17 though and you feel she should be a bit older before giving her the heirlooms. You, however, must leave the country indefinitely. Therefore, you ask your sister to hold onto the heirlooms until your niece is old enough to give them to her. In that scenario, you have created a trust agreement wherein you are the Settlor, your sister is the Trustee, and your niece is the beneficiary of the trust.

A trust agreement is the name of the document used to create a trust. Within the trust agreement are the terms, created by the Settlor, that dictate how the trust will operate. Trust administration refers to the Trustee’s job of overseeing the terms of the trust in action. As a general rule, the more complex and/or valuable the trust assets are, the more time consuming and complicated it is to administer the trust.

A living trust can help achieve a wide range of estate planning goals; however, some of the more common uses for a living trust include:

  • Avoiding probate
  • Incapacity planning
  • Protecting assets
  • Medicaid planning
  • Planning for parents with minor children
  • Special needs planning
  • Protecting a non-citizen spouse
  • Providing for a blended family
  • Pet planning

One of the most common mistakes Settlors make when creating a trust is to appoint someone close to them, such as a spouse or friend, as the Trustee of their trust without taking sufficient time to contemplate the individual’s suitability for the job. Ideally, your Trustee should have experience in the legal and/or financial field because many of the Trustee duties require a knowledge of law and finance. Instead of simply appointing someone you “trust” as your Trustee, appoint someone who can administer the trust efficiently and economically. You may even wish to consider appointing a professional Trustee.