What Do I Really Need to Know About Trusts?
Living Trust

What Do I Really Need to Know About Trusts?

A trust is an agreement between two parties, the settlor and a trustee. They may be used for many purposes nut all of them require the trustee to accept, manage and protect assets delivered by the trustmaker, administer those assets according to the trustmaker’s instructions, and distribute the income and principal only for the benefit of those that are named.

Kiplinger’s article “Trusts 101: Why Have a Trust?” explains that the trustee is a fiduciary and must act with reasonable care in administering the trust and selecting trust investments. She also must avoid any conflict of interest or self-dealing in holding, purchasing and selling trust assets, and diligently avoid breaching any of the trustee’s duties to the settlor and beneficiaries.

The trustee must follow the trustmaker’s terms. She must also be wise in making investment and administrative decisions and be objective and transparent.

Trusts can be created for several reasons, such as the following:

  • To oversee spending and investments to protect beneficiaries from poor decisions;
  • To avoid court-supervised probate of assets;
  • To allow for privacy;
  • To shield assets from the beneficiaries’ creditors;
  • To keep premarital assets from a division of assets between divorcing spouses;
  • To earmark funds to support the settlor, when incapacitated;
  • To manage unique assets that aren’t easily divisible, such as a vacation home or a pet;
  • To manage closely held business assets for planned business succession;
  • To hold life insurance policies, pay premiums and collect the tax-free proceeds to care for beneficiaries, fund closely held stock redemptions or purchases and provide liquidity to the estate;
  • To provide structured income to a surviving spouse that shields trust assets for descendants, if the spouse remarries; and
  • To decrease the amount of income taxes or to shelter assets from estate and transfer taxes.

A trust can be set up to achieve specific goals and give tools for the trustee to balance those goals with investment and economic factors.

The most common type is a revocable living trust. It’s usually not funded until your death. It will include your instructions for how you want your estate divided among your beneficiaries and how each person’s share is managed, administered and distributed. They are flexible, so that as children grow into adulthood, you may make changes to reflect life events.

Talk with an estate planning attorney and create your estate plan with a will and a trust.

Learn about the many benefits of a revocable living trust.

Reference: Kiplinger (June 11. 2019) “Trusts 101: Why Have a Trust?”

Does Good Estate Planning Prevent Family Fights over Personal Items?
Good Estate Planning Prevents Fights Over Personal Items

Does Good Estate Planning Prevent Family Fights over Personal Items?

A few years after her death in 2014, Joan Rivers’ family put hundreds of her personal items up for auction at Christie’s in New York. Do families fight over personal items? Can good estate planning minimize the chances of fighting? Good estate planning is critical to family harmony over the small stuff.

As The Financial Times reported in “Why an art collector’s estate needs tight planning,” a silver Tiffany bowl, engraved with her dog’s name, Spike, made headlines when it sold for thirty times its estimated price.

This shows how an auction house can generate a buzz around the estate of a late collector, creating demand for items that, had they been sold separately, might have failed to attract as much attention.

A problem for some art and collectible owners is that their heirs may feel much less passionately about the works, than the person who collected them.

A collector can either gift, donate or sell in their lifetime. He or she can also wait until they pass away and then gift, donate, or sell posthumously.

The way a collector can make certain his or her wishes are carried out or eliminate family conflicts after their death, is to take the decision out of the hands of the family, by placing an art collection in trust.

The trust will have the collector’s wishes added into the agreement, and the trustees are appointed from the family and from independent advisers with no interest in a transaction taking place.

Many collectors like to seal their legacy, by making a permanent loan or gift of art works to a museum.However, their children can renege on these agreements, if they’re not adequately protected by trusts or other legal safeguards after a collector’s death.

Even with a trust or other legal structure put in place to preserve a legacy, the key to avoiding a fight over a valuable collection after the death of the collector, is to have frank discussions about estate planning with the family well before the reading of the will. This can ensure that their wishes are respected.

Learn more how a last will and testament can lay out your wishes and set expectations about personal items.

Reference: Financial Times (June 20, 2019) “Why an art collector’s estate needs tight planning”

Here’s Why a Basic Will Doesn’t Work
A Will Often is Not Enough

Here’s Why a Basic Will Doesn’t Work

It’s true that an effective estate plan such as a will should be simple and straightforward, if your life is simple and straightforward. However, few of us have those kinds of lives. For many families, the discovery that a will that was created using a basic form is invalid leads to all kinds of expenses and problems, says The Daily Sentinel in an article that asks “What is wrong with using a form for my will or trust?”

If the cost of an estate plan is measured only by the cost of a document, a basic form will, of course, be the least expensive option — on the front end. On the surface, it seems simple enough. What would be wrong with using a form?

Actually, a lot is wrong. The same things that make a do-it-yourself, basic form seem to be attractive, are also the things that make it very dangerous for your family. A form does not take into account the special circumstances of your life. If your estate is worth several hundreds of thousands of dollars, that form could end up putting your estate in the wrong hands. That’s not what you had intended.

Another issue: any form that is valid in all 50 states is probably not going to serve your purposes. If it works in all 50 states (and that’s highly unlikely), then it is extremely general, so much so that it won’t reflect your personal situation. It’s a great sales strategy, but it’s not good for an estate plan.

If you take into consideration the amount of money to be spent on the back end after you’ve passed, that $100 will becomes a lot more expensive than what you would have invested in having a proper estate plan created by an estate planning attorney.

What you can’t put into dollars and cents, is the peace of mind that comes with knowing that your estate plan, including a will, power of attorney, and health care power of attorney, has been properly prepared, that your assets will go to the individuals or charities that you want them to go to, and that your family is protected from the stress, cost and struggle that can result when wills are deemed invalid.

Here’s one of many examples of how the basic, inexpensive form created chaos for one family. After the father died, the will was unclear, because it was not prepared by a professional. The father had properly filled in the blanks but used language that one of his sons felt left him the right to significant assets. The family became embroiled in expensive litigation, and became divided. The litigation has ended, but the family is still fractured. This was not what their father had intended.

Other issues that are created when forms are used: naming the proper executor, guardians and conservators, caring for companion animals, dealing with blended families, addressing Payable-on-Death (POD) accounts and end-of-life instructions, to name just a few.

Avoid the “repair” costs and meet with an experienced estate planning attorney in your state to create an estate plan that will suit your needs.

Learn why a revocable living trust often is more effective than a will.

Reference: The Daily Sentinel (May 25, 2019) “What is wrong with using a form for my will or trust?”