Estate Planning 101

After thirty (30) years of being an Elder Law Attorney, people still ask me the question, "Who should do estate planning?"

My answer is always the same, "Anyone with $1.00 and two relatives!"

You might laugh at that but it is true.  Anytime there is money and people who believe that they are entitled to a share of that money, there needs to be a plan (1) to eliminate as much as possible, family fights, (2) to avoid the Probate proceeding which comes about if there is no estate planning or if there is a will, and (3) to move the estate where you want it to go, when you want it to go.

In order to speak to each of these issues, we use Living Trusts, either revocable or irrevocable.  A Living Trust is one written while the Trustmaker(s) is alive and capable of planning.  It is possible to write a Testamentary Trust in a will but it is only activated through the Probate process.  We want to avoid probate so we use a Living Trust.

There are three (3) characters acting in this type estate planning, (1) Trustmaker or Settlor or Grantor--the person(s) creating the Trust, (2) the Trustee, the person managing the assets in the Trust, and (3) the beneficiary.  Usually the person(s) setting up the Trust will be all three, the Trustmaker, the Trustee and the Beneficiary but they will not always be the Trustee.  There will come a time when they are no longer able to act for themselves in managing their assets in the Trust.  They will cease to be the beneficiary at death.  The children or grandchildren or whomever they choose will then be the beneficiary of the Trust assets.

Picture a Trust as if were a box.  Your Elder Law Attorney, who practices exclusively in this area of the law, will know how to create the documents to set up your trust.  Into this legal entity (box), the attorney will assist you in transferring ownership of your home and other properties, including your brokerage accounts, bank accounts, stocks, bonds and other assets.  It's all in your trust or this fictional "box", owned and managed by the Trustee (usually the person(s) creating the Trust).  

At death, there are no assets that belong to the person individually.  Everything belongs to the Trust, thus there are no assets to go through the Probate Court. The successor Trustee (someone appointed in the Trust document to carry out the distribution of the Trust assets at the death of the Trustmaker without costs or delays). 

The two different kinds of Living Trusts are Revocable and Irrevocable.  The Revocable Trust are written during life but with the ability to amend them, revoke them or completely restate them.  

The Irrevocable Trust can be written to change the Trustees during the life of the Trustmaker but do not allow for changes in the named beneficiaries, though it is possible to change the amounts going to each of the beneficiaries.  The main goal for these types of Trusts is asset protection.  Not only do my clients want to avoid probate and set up their distribution to send their assets where they want them to go, when they want them to go, but to avoid future creditors in the case of lawsuits or creditor claims, including Medicaid claims (often the largest creditor in an estate) in case of a nursing home stay.

Irrevocable Trusts are often written to move assets in order to create eligibility for the V.A. Aid and Attendance Pension.  This Pension, for veterans over 65 who served 90-days active duty, one (1) day which fell in a wartime time period with an honorable discharge can pay to a veteran and spouse $2000+ tax free per month, or $1788 to a single veteran or even $1100 a month to a surviving spouse of a veteran, all tax-free.

Living Trusts, if properly prepared can protect the children's inheritance from their creditors, lawsuits, bankruptcy, divorce or even the child's own nursing home stay.  There are no other vehicles out there that do as much to protect family assets and keep family money in the family as a Living Trust.  Everyone with a dollar and two relatives needs a Living Trust to protect the "whole" family.