The Trust

The Foundation of a Modern Estate Plan

A trust is the best foundation for a modern estate plan. This applies to young, single working adults, parents with kids of any age, or seniors.  A trust tailored to your needs provides substantial benefits over a simple will.  These benefits are worth the slightly greater initial investment, in both economic terms and intangible terms.  In legalese, most individuals and couples create a revocable living trust.  At any time, the original people that established the trust may revoke it.

Imagine the Trust as a Can

I encourage clients to think of their trust as a can.  The can holds all of the clients’ assets.  The can also gives directions for what to do with the assets.  At first, both spouses hold the can.  (In legal terms, they are the trustees.)  When one spouse dies, the can passes to the other spouse.  When the surviving spouse dies, the can passes to another individual the spouses have selected, the successor trustee.  The successor trustee reads the can’s directions written by both spouses and acts accordingly.

A Trust Doesn’t Require Court Proceedings

In almost all cases, upon the passing of the spouses that formed the trust, the successor trustee implements the wishes of the spouses without any court intervention.  Often, the successor trustee will find a trust lawyer to obtain some advice about following the terms of the trust.  But, following the terms of the trust does not require court intervention  This means the estate incurs significantly reduced expenses and the successor trustee can resolve the estate in significantly less time.  A trust-based estate might require a few months to resolve the estate.  A standard will-based estate might require a probate proceeding that drags on for more than a year to resolve the estate.

A Trust Provides Financial Privacy

Because having a trust avoids court probate proceedings it provides superior financial privacy.  A will-based estate plan requires probate proceeding after death to disburse estate assets under court supervision.  The probate proceedings require that the administrator of the estate file a full inventory report of all estate assets and their values.  Because all court proceedings are public records, any third party can obtain this inventory report.

But, a trust-based plan does not require a probate proceeding.  Therefore, only the successor trustee and the beneficiaries wreceive an inventory of trust assets.  The inventory does not become a public record.  This provides financial privacy for all the beneficiaries of the trust.  This discourages identity theft.  It also discourages scam artists that might otherwise try to take advantage.

So, for a slightly greater investment up front, a couple and their estate beneficiaries obtain significant benefits provided by a trust.

What Makes a Good Estate Plan?

Don't Leave Anything to Chance, Decide in Advance

legal-signature A Good estate plan accomplishes four objectives.

First, a good estate plan lets you control your property during your life as long as you’re able. But, at some point, you might become incapacitated or disabled.

Second, a good estate plan provides for you and your loved ones if you become incapacitated or disabled. Your estate plan designates individuals you choose to make personal, financial and medical choices when you’re not able to do so.

Third, a good estate plan lets you give your property to whom you want, the way you want, when you want. For example, if you give property to a child with a career in a lawsuit-prone profession, you can ensure that your child’s creditors can never reach this inheritance.

Finally, a good estate plan minimizes the professional fees, court costs, and taxes otherwise associated with your estate.

A good estate plan consists of at least four key documents: a revocable living trust, a will, a durable power of attorney, and an advanced health care directive. Stay tuned, and we’ll discuss the role each document plays in your estate plan and how they work together.

New IRS Valuation Rules Have Bright Side for Asset Protection Planners

black locked wallet on the white background

The IRS’ new valuation rules have a bright side for asset protection planners.  Recently, the IRS adopted new rules barring the steep discounting of an asset transferred to a family limited partnership.  These transfers make up a staple of estate planning for wealthy families and individuals.  However, guru Jay Adkisson says the new rules will make it harder to set aside fraudulent transfers.  Now, an individual transferring assets to a family limited partnership entity  can argue they received reasonably equivalent value.  Family limited partnerships and limited liability companies are excellent asset protection vehicles.  A judgment creditor can reach assets of the partnership only through a charging order, one of the least effective collection techniques in a collection attorneys’ arsenal.

Should You File For Bankruptcy?

Should i file for bankruptcyMost importantly, determine whether it will solve your problems

Before deciding whether you should file, understand what bankruptcy will and won’t do for you. It won’t solve every problem or get rid of every debt.

You should determine whether your debts are a symptom of a different problem.  If you’ve been unemployed, you might not want to file until you’re employed again.  If you have a spending problem, you might not want to file until you discipline yourself to handle your money better.  You may want to consult with an experienced bankruptcy lawyer to help you analyze this.

Understand the different types of debts

Whether bankruptcy is the right choice depends in large part on the type of debt you have. There are two main types of debts: secured and unsecured.  The most common secured debts are home loans and car loans. Filing will discharge most unsecured debts.  But, to keep your home or car with secured debts, you must keep paying your loan. It is important to know the difference between the types.  Some debts are both secured and unsecured.

Understand what debts a bankruptcy will discharge

It may not get rid of all your debts, but it will get rid of credit card debt, past utility bills, medical bills, court judgments and wage garnishments. Other debts, as well as any past due payments, such as home loans and car loans, can be paid through a Chapter 13.

Understand what debts a bankruptcy will not discharge

Some debts won’t be discharged through bankruptcy.  Common debts that survive include alimony and child support, student loans and recent taxes, as well as debts incurred through fraud. You might be able to get rid of tax debts older than three years.

The National Association of Consumer Bankruptcy Attorneys (NACBA) provides more information on its website.