How Do Trusts Work in Your Estate Plan?

A trust can be a useful tool for passing on assets, allowing them to be held by a responsible trustee for beneficiaries. However, determining which type of trust is best for each family’s situation and setting them up so they work with an estate plan, can be complex. You’ll do better with the help of an estate planning attorney, says The Street in the article “How to Set Up a Trust Fund: What You Need to Know.”

Depending upon the assets, a trust can help avoid estate taxes that might make the transfer financially difficult for those receiving the assets. The amount of control that is available with a trust, is another reason why they are a popular estate planning tool.

First, make sure that you have enough assets to make using a trust productive. There are some tax complexities that arise with the use of trusts. Unless there is a fair amount of money involved, it may not be worth the expense. Once you’ve made that decision, it’s time to consider what type of trust is needed.

Revocable Trusts are trusts that can be changed. If you believe that you will live for a long time, you may want to use a revocable trust, so you can make changes to it, if necessary. Because of its flexibility, you can change beneficiaries, terminate the trust, or leave it as is. You have options. Once you die, the revocable trust becomes irrevocable and distributions and assets shift to the beneficiaries.

A revocable trust avoids probate for the trust, but will be counted as part of your “estate” for estate tax purposes. They are includable in your estate, because you maintain control over them during your lifetime.

They are used to help manage assets as you age, or help you maintain control of assets, if you don’t believe the trustees are not ready to manage the funds.

Irrevocable Trusts cannot be changed once they have been implemented. If estate taxes are a concern, it’s likely you’ll consider this type of trust. The assets are given to the trust, thus removing them from your taxable estate.

Deciding whether to use an irrevocable trust is not always easy. You’ll need to be comfortable with giving up complete control of assets.

These are just two of many different types of trusts. There are trusts set up for distributions to pay college expenses, Special Needs Trusts for disabled individuals, charitable trusts for philanthropic purposes and more. Your estate planning attorney will be able to identify what trusts are most appropriate for your situation.

Here’s how to prepare for your meeting with an estate planning attorney:

List all of your assets. List everything you might want to place in a trust: including accounts, investments and real estate.

List beneficiaries. Include primary and secondary beneficiaries.

Map out the specifics. Who do you want to receive the assets? How much do you want to leave them? You should be as detailed as possible.

Choose a trustee. You’ll need to name someone you trust implicitly, who understands your financial situation and who will be able to stand up to any beneficiaries who might not like how you’ve structured your trust. It can be a professional, if there are no family members or friends who can handle this task.

Don’t forget to fund the trust. This last step is very important. The trust document does no good, if the trusts are not funded. You may do better letting your estate planning attorney handle this task, so that accounts are properly titled with assets and the trusts are properly registered with the IRS.

Creating a trust fund can be a complex task. However, with the help of an experienced estate planning attorney, this strategy can yield a lifetime of benefits for you and your loved ones.

Call us (228) 460-5243 or email us at info@perklawgroup.com to find our how your estate planning attorney can help you.

Legal disclaimer: The information in this article is provided for information purposes only and should not be construed as legal advice. Your should not act or refrain from acting on the basis of any content included in this article or on our website (www.perklawgroup.com) without seeking legal or professional advice.

Reference: The Street (July 22, 2019) “How to Set Up a Trust Fund: What You Need to Know”

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What Are the Biggest Estate Planning Questions I Need to Answer?

If you have a family, you can probably benefit from estate planning, regardless of your asset level. The Montrose Press published an article, “Estate plans can help you answer questions about the future,” that answers some of the big questions:

What will happen to my children? As part of your estate planning, you should name a guardian to take care of your children, if you pass away. You can also name a conservator–sometimes called a “guardian of the estate”–to manage the assets that your minor children inherit.

Will there be a battle over my assets? If you fail to put a solid estate plan in place, your assets could be subject to the time-consuming, expensive and public probate process. During probate, your relatives and creditors can get access to your records. They may even challenge your will. However, with proper planning, you can maintain your privacy.

Who will control my finances and my living situation, if I’m incapacitated? You can sign a durable power of attorney. This permits you to name someone to manage your financial affairs, if you’re incapacitated. A medical power of attorney lets the person you choose handle health care decisions for you, if you’re not able to do so yourself.

Will my family feel cheated if I leave significant assets to charities? As part of your estate plan, you have options. You could establish a charitable lead trust. This will provide financial support to your chosen charities for a set period. The remaining assets will then go to your family members. On the other hand, a charitable remainder trust will provide a stream of income for family members for the term of the trust. The remaining assets will then be transferred to one or more charitable organizations.

Careful estate planning with the help of an experienced estate planning attorney can answer many of the questions that may concern you.

Once you have your plans in place, you can face the future with greater clarity, peace of mind and confidence.

Call us (228) 460-5243 or email us at info@perklawgroup.com to find our how your estate planning attorney can help you.

Legal disclaimer: The information in this article is provided for information purposes only and should not be construed as legal advice. Your should not act or refrain from acting on the basis of any content included in this article or on our website (www.perklawgroup.com) without seeking legal or professional advice.

Reference: Montrose Press (July 7, 2019) “Estate plans can help you answer questions about the future”

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How Does a Life Estate Work?

Life estates are used for a number of estate planning purposes. However, the most frequent strategy is to use a life estate where a parent transfers a home to a child and retains a life estate for themselves.

nj.com’s recent article, “How does a life estate work to transfer a home to a child?” explains that as a result of the transfer, the child becomes the owner of the home but the parent has certain rights and responsibilities.

The most critical right retained with a life estate is the exclusive right to reside in the property. A child cannot force the parent to move out, and likewise, the child doesn’t have any right to live there. The child can live with their parent, but the deed doesn’t give the child the legal right to live there.

With a life estate, the parent must pay the property taxes and all the regular maintenance connected to the property. Typically, the life tenant is responsible for repairs—but not improvements.

This can be hard to determine, but usually the life tenant must maintain the property in the same condition as when the life estate deed was signed. So, if the parent moves out, and the property is rented, the parent has the right to receive all of the rents.

When the parent passes away, the life estate automatically ceases, and the child now has all of the rights associated with the property.

As far as income tax, when the parent dies, the property receives a “step up” in basis to the date of death value. If the property is sold after the parent dies, the capital gain or loss is calculated by deducting the date of death value from the sales price. It’s a very important tax advantage if the parent has owned the home for a long time, and the property has a low basis.

Retaining the life estate can help the child avoid the capital gains tax more effectively than just transferring the property outright to the child.

However, in contrast, if the property is sold while the parent is still alive, part of the proceeds will be allocated to the parent and part will be allocated to the child.

Only the percentage that’s allocated to the parent will be excluded from income under the federal tax laws. The part that’s allocated to the child may be subject to capital gains taxation.

Every family’s situation is different, so it would be wise to speak with an estate planning attorney to explore whether or not a life estate would be the best situation for you and your family.

Call us (228) 460-5243 or email us at info@perklawgroup.com to find our how your estate planning attorney can help you.

Legal disclaimer: The information in this article is provided for information purposes only and should not be construed as legal advice. Your should not act or refrain from acting on the basis of any content included in this article or on our website (www.perklwagroup.com) without seeking legal or professional advice.

Reference: nj.com (July 12, 2019) “How does a life estate work to transfer a home to a child?”

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Why It’s Always Better to Plan Ahead

Two stories of two people who managed their personal lives very differently illustrate the enormous difference that can happen for those who refuse to prepare themselves and their families for the events that often accompany aging. As an article from Sedona Red Rock News titled “Plan ahead in case of sudden sickness or death” makes clear, the value of advance planning becomes very clear. One man, let’s call him Ben, has been married for 47 years and he’s always overseen the family finances. He has a stroke and can’t walk or talk. His wife Shirley is overwhelmed with worry about her husband’s illness. Making matters worse, she doesn’t know what bills need to be paid or when they are due.

On the other side of town is Louise. At 80, she fell in her own kitchen and broke her hip, a common injury for the elderly. After a week in the hospital, she spent two months in a rehabilitation nursing home. Her son lives on the other side of the country, but he was able to pay her bills and handle all the Medicare issues. Several years ago, Louise and her son had planned what he should do in case she had a health crisis.

More good planning on Louise’s part: all her important papers were organized and put into one place, and she told her son where they could be found. She also shared with him the name of her attorney, a list of people to contact at her bank, primary physician’s office, financial advisor, and insurance agent. She also made sure her son had copies of her Medicare and any other health insurance information. Her son’s name was added to her checking account and to the safe deposit box at the bank. And she made sure to have a legal document prepared so her son could talk with her doctors about her health and any health insurance matters.

And then there’s Ben. He always handled everything and wouldn’t let anyone else get involved. Only Ben knew the whereabouts of his life insurance policy, the title to his car, and the deed to the house. Ben never expected that someone else would need to know these things. Shirley has a tough job ahead of her. There are many steps involved in getting ready for an emergency, but as you can see, this is a necessary task to start and finish.

First, gather up all your important information. That includes your full legal name, Social Security number, birth certificate, marriage certificate, divorce papers, citizenship or adoption papers, information on employers, any military service information, phone numbers for close friends, relatives, doctors, estate planning attorney, financial advisor, CPA, and any other professionals.

Your will, power of attorney, health care power of attorney, living will and any directives should be stored in a secure location. Make sure at least two people know where they are located. Talk with your estate planning attorney to find out if they will store any documents on your behalf.

Financial records should be organized. That includes all your insurance policies, bank accounts, investment accounts, 401(k), or other retirement accounts, copies of the most recent tax returns, and any other information about your financial life.

Advance planning does take time, but not planning will create havoc for your family during a difficult time.

Call us (228) 460-5243 or email us at info@perklawgroup.com to find our how your estate planning attorney can help you.

Legal disclaimer: The information in this article is provided for information purposes only and should not be construed as legal advice. Your should not act or refrain from acting on the basis of any content included in this article or on our website (www.perklwagroup.com) without seeking legal or professional advice.

Reference: Sedona Red Rock News (July 9, 2019) “Plan ahead in case of sudden sickness or death”

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What Debts Must Be Paid Before and After Probate?

Everything that must be addressed in settling an estate becomes more complicated, when there is no will and no estate planning has taken place before the person dies. Debts are a particular area of concern for the estate and the executor. What has to be paid, and who gets paid first? These are explained in the article “Dealing with Debts and Mortgages in Probate” from The Balance.

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‘Someday’ Is Sooner than You Think

The cause for sleepless nights for many, now comes from worrying about aging parents. As parents age, it becomes more important to talk with them about a number of “someday” issues, advises Kanawha Metro in the article “Preparing for someday.” As their lives move into the elder years, your discussions will need to address housing, finances and end-of-life wishes.

Where do your parents want to spend their later years? It may be that they want to move to an active retirement community not far from where they live now, or they may want a complete change of scenery, perhaps in a warmer climate.

One family made arrangements for their mother to take a tour of a nearby senior-living community, after their father passed. By showing their mother the senior-living community, they made an unknown, slightly intimidating thing into a familiar and attractive possibility. Because she saw the facility with no pressure, just a tour and lunch, she knew what kind of options it presented. The building was clean and pretty, and the staff was friendly. Therefore, it was a positive experience. She was able to picture herself living there.

Money becomes an issue, as parents age. If the person who always handled the family finances passes away, often the surviving spouse is left trying to figure out what has been done for the last five decades. A professional can help, especially if they have had a long-standing relationship.

However, when illness or an injury takes the surviving spouse out of the picture, even for a little while, things can get out of control fast. It only takes a few weeks of not being able to write checks or manage finances, to demonstrate the wisdom of having children or a trusted person named with a power of attorney to be able to pay bills and manage the household.

As parents age and their health becomes fragile, they need help with doctor appointments. Having a child or trusted adult go with them to speak up on their behalf, or explain any confusing matters, is very important.

Having an estate plan in place is another part of the business of aging that needs to be accomplished. It may be helpful to go with your parents to meet with an estate planning attorney to create documents that include a last will and testament, durable power of attorney and advanced health care directive. Without these documents, executing their estate or helping them if they become incapacitated will be more complex, and more costly.

Eliminate a scavenger hunt by making sure that at least two siblings know where the originals of these documents are.

One of the more difficult conversations has to do with end-of-life and funeral arrangements. Where do your parents want to be buried, or do they want to be cremated? What should be done with their remains?

What do they want to be done with their personal belongings? Are there certain items that they want to be given to certain members of the family, or other people they care for? One family used masking tape and a marker to write the names of the people they wanted to receive certain items.

Finally, what do they want to happen to their pets? If there is a family member who says they will take their parent’s pet, can that person be trusted to follow through? There needs to be a Plan A, Plan B and Plan C so that the beloved pet can be assured a long and comfortable life after their owner has passed.

Yes, these are difficult conversations. However, not having them can lead to far more difficult issues. Knowing what your loved ones wish to happen, and making it enforceable with an estate plan, provides everyone in the family with peace of mind.

Reference: Kanawha Metro (May 29, 2019) “Preparing for someday”

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How Do I Choose a Guardian in My Estate Plan?

Selecting a guardian to care for your minor child after you die isn’t a lot of fun. Who wants to think about a situation where their young children are left to mourn their parents and live with friends or relatives? However, choosing a guardian to raise your children and manage their inheritance is crucial. If you don’t do it, you leave the decision to the court.

U.S. News and World Report’s recent article “How to Choose a Guardian for Your Child” says that, at worst, forgetting to name a guardian can mean a long court proceeding. This can be expensive, cause stress in family relationships and put your children in guardianship limbo.

There are two types of guardianship to consider when deciding who will care for your children: guardian of the estate and guardian of the person. The guardian of the estate is a person who’ll manage the minor child’s inheritance on their behalf. It’s a fiduciary responsibility, and this guardian must make sure he or she carefully and appropriately manages accounts, keeps receipts, reports back to the court and doesn’t commingle the child’s assets with his or her own. Another option is for a parent is to set up a trust and have a trustee manage the funds for the child. This can allow the parent more control over how and when money is distributed, especially if you anticipate leaving a substantial inheritance.

The guardian of the person is the daily caretaker who’ll make sure your child gets health care, educational, housing and has all other needs met.

These two guardians can be the same person or different people, depending on the skills and abilities of your family members and friends. A separate person managing the estate can provide a series of checks and balances that can help, if you are concerned about the misuse of your child’s funds.

You may want the guardian of the estate to have good money-management skills. The guardian of the person may be someone who shares your same values, has the energy to raise a child, and is close by so that your child doesn’t have to lose the familiar comforts of their school and neighborhood.

You should also name backup guardians, in the event that the primary guardian is unable or unwilling to take on the responsibility. You should also be sure to speak with your guardians ahead of time and make certain they understand the responsibility and are willing to take on the task of helping care for your children, if you pass away.

In most states, you’ll need to name your guardian or guardians as part of your will.

Talk to an experienced estate planning attorney with any questions and draft a legal will with the terms of guardianship included, along with a power of attorney and health care proxy. If you need to create a trust for your child(ren), don’t forget to fund it.

Reference: U.S. News and World Report (June 4, 2019) “How to Choose a Guardian for Your Child”

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What’s the Latest with Tom Petty’s Estate?
DEL MAR, CALIFORNIA - SEPTEMBER 17: Tom Petty performs in concert on the third day of KAABOO Del Mar on September 17, 2017 in Del Mar, California. (Photo by Gary Miller/Getty Images)

What’s the Latest with Tom Petty’s Estate?

The late Tom Petty’s wife, Dana Petty, has asked a Los Angeles judge for permission to fund the LLC Tom Petty Legacy with the singer’s assets. However, his two daughters object.

Billboard reports in a recent article, “Tom Petty’s Widow Files New Appeals Against Daughters in Escalating Battle Over Late Rocker’s Trust” that Dana asked the court to deny a previous petition filed by daughter Adria demanding that Dana immediately fund Petty Unlimited. This is an LLC created to receive assets (a.k.a. “artistic property”) from Petty’s trust. Instead, Dana wants to fund and execute an operating agreement for Tom Petty Legacy, a separate LLC that she created by herself.

Adria’s petition accused Dana of withholding Petty’s assets from Petty Unlimited to keep her and sister Annakim from “participat[ing] equally” in the management of those assets, as directed in the trust. Adria also said that under the terms of the trust, Dana was required to fund Petty Unlimited within six months of Petty’s death. However, she failed to meet that deadline.

Dana claims that she’s the “sole successor trustee” of Petty’s trust and she’s “exclusively authorized” to form any entity of her choosing to be the beneficiary of her husband’s assets—provided all three women are given equal participation in its management. She claims that the trust doesn’t specify Petty Unlimited as the only entity that can receive the assets. As such, the LLC has no legal rights to them.

Dana claims there’s been “foul behavior” on Adria’s part, stating that the 44-year-old has “caused enormous damage to many of Tom’s professional relationships” via a series of letters (allegedly sent by Adria’s lawyer Alex Weingarten) that “threaten[ed] everyone whom Tom worked with for decades: his record labels, his music lawyer David Altschul…even Tom’s longtime accountant.” Dana says the threats led the attorney, who was then representing her, to resign. She also claims Adria has been “abusive” and “slander[ous]” towards several others, including his longtime business manager Bernie Gudvi, his estate planning attorney Burton Mitchell and members of his band the Heartbreakers.

Dana accused the daughters of interfering in and, in some cases, delaying the release of several posthumous releases of Petty’s music. She says that as trustee of Petty’s trust, she is sole owner of Petty Unlimited, and that Adria and Annakim (and by extension their lawyers) have been “masquerading” as its rightful representatives. The petition notes that Dana has since signed documents to remove Adria and Annakim as managers of the LLC and “fired” a law firm as its representative.

The petition acknowledged that equal participation in the management of Petty’s assets between the three is required under the terms of the trust, but that Dana has sole power to decide on a governing structure for the entity that’s eventually funded with those assets. Now that negotiations with Adria and Annakim have broken down, Dana is trying to assert her “broad discretion” in deciding that structure without their input.

In response to Dana’s claims, Adria and Annakim’s lawyer Alex Weingarten told Billboard, “Dana and her lawyer are basing their case on smoke and mirrors. Every claim they make is demonstrably false. Adria and Annakim are laser focused on one thing—honoring and protecting their father’s legacy and enforcing the terms of his trust, as written.”

Petty died of an accidental drug overdose in October 2017, at the age of 66.

Reference: Billboard (May 30, 2019) “Tom Petty’s Widow Files New Appeals Against Daughters in Escalating Battle Over Late Rocker’s Trust”

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