Inheriting a House? Navigate Your Options and Responsibilities

July 1, 2024

Inheriting a house can be a life-changing event with emotional and financial implications. Understanding your options and obligations is critical, whether you sell it, keep it, or rent it out. Insights from LendingTree show you how to make the most of your inheritance.

What’s the Legal Process of Inheriting a House?

When inheriting a house, you don’t immediately receive the title in your name. The inheritance process involves probate, where a judge reviews the will and appoints an executor to carry out the deceased’s will. The executor handles responsibilities like insurance, identifying debts or liens and paying utilities. They also distribute belongings and manage property taxes. This ensures that the estate’s assets settle any outstanding debts before you receive ownership.

What Should You Do when Inheriting a Home?

When you’re in line to inherit a home, there are five steps you should take immediately.

Communicate with the Executor: Establish a clear line of communication with the executor. This will help you learn the necessary information and simplify the transfer process.
Coordinate with Co-Heirs: Work with the others if you are one of several heirs. Avoid costly disputes by deciding whether to sell, keep, or rent the property.
Get an Appraisal: An appraisal calculates the property’s value. This informs your decision to keep, sell, or rent the home while informing you of tax liabilities.
Evaluate Debts: Identify any liens or debts tied to the property and compare them against the house’s value. Understand the financial implications and incorporate that into your decision.
Seek Professional Advice: Consult estate planning attorneys, accountants and financial advisors. These professionals can clarify ownership-related problems, such as debt obligations and inheritance taxes.

What Should You Do with the House?

Moving Into an Inherited House

Moving into the inherited house can provide a new residence or vacation home. However, this option can be costly due to mortgages, taxes, repairs and insurance.

Renting Out an Inherited Home

Renting out the property can provide passive income, while keeping it in the family. Buy out other heirs or work with them to share costs and rental income.

Selling Your Newly Inherited Home

Selling the house is a straightforward way to obtain immediate cash. The proceeds can help pay off debts tied to the house, and the remaining proceeds will go to the heirs.

How Can You Finance an Inherited House?

If debts and taxes are associated with the house, that doesn’t mean you need to sell. There are many ways to finance the home and keep your inheritance.

Mortgage Assumption: Take over the existing mortgage if its terms are better than what you’d get with a new loan. The lender must approve the assumption.
New Purchase or Refinance Mortgage: You can obtain a new mortgage or refinance to put the house in your name. This option is particularly useful when the property has a reverse mortgage.
Cash-Out Refinance: Refinance the mortgage with a cash-out option to tap into the home’s equity to cover expenses, like buying out heirs or making repairs.
Investment Property Loan: Mortgage an investment property if you plan to rent the house.

Inheriting a House? Schedule a Consultation Today

Navigating the process of inheriting a house requires legal, financial and practical knowledge. You can get this knowledge by scheduling a consultation with our estate planning attorneys. We’ll listen to you and provide tailored advice about handling your inheritance.

Key Takeaways

Inheriting a House: The probate court oversees the inheritance process, and the executor handles legal and financial responsibilities.
Options: Move in, rent out, or sell the property based on financial goals and agreements with co-heirs.
Financing: Explore mortgage assumptions, new or refinanced mortgages and other financing options.

Reference: LendingTree (Nov. 16, 2021) “Inheriting a House? Here’s What to Expect”

Estate Planning Questions for Couples with a Big Age Gap

June 28, 2024

Even if it was never an issue in the past, when couples with a significant age gap reach their 60s and 70s, the age difference can present challenges. When one partner is ten or more years younger than the other, assets need to last longer, and the impact of poor planning or mistakes can be far more complex. The article in Barron’s “Big Age Gap With Your Spouse? What You Need to Know” explains several vital issues.

Examine healthcare coverage and income needs. Health insurance can become a significant issue, especially if one partner is old enough for Medicare and the other does not yet qualify. How will the couple ensure health insurance if the older partner retires and the younger depends on the older partner for healthcare? The younger partner must buy independent healthcare coverage, which can be a budget-buster.

Be strategic about Social Security. Experts advise having the older spouse delay taking Social Security benefits if they are the higher-income partner. If the older spouse passes, the younger spouse can get the bigger of the two Social Security benefits. Delaying benefits means the benefits will be higher.

Planning for RMDs—Required Minimum Distributions. Roth conversions may be a great option for couples with a significant age gap. Large traditional tax-deferred individual IRAs come with large RMDs. When one spouse dies, the surviving spouse is taxed as a single person, which means they’ll hit high tax brackets sooner. However, if the couple converted their IRAs to Roths, the surviving spouse could withdraw without taxes.

Estate planning becomes trickier with a significant age gap, especially if the spouses have been married before. Provisions in their estate plan need to be made for both the surviving spouse and children from prior marriages. An estate planning attorney should be consulted to discuss how trusts can protect the surviving spouse, so no one is disinherited. Beneficiary accounts also need to be checked for beneficiary designations.

Couples with a significant age gap need to address their own mortality. A younger partner who is financially dependent on an older partner needs to be involved in estate and finance planning, so they know what assets and debts exist. Life has a way of throwing curve balls, so both partners need to be prepared for incapacity and death.

Plans should be reviewed more often than for couples in the same generation. A lot can happen in six months, especially if one or both partners have health issues.

Reference: Barron’s (May 19, 2024) “Big Age Gap With Your Spouse? What You Need to Know.”

What Do You Do If Elderly Family Member Is Being Financially Abused?

June 26, 2024

Financial elder abuse is when a family member, caregiver, or another individual illegally or improperly uses an elderly person’s assets for their own personal gain without the knowledge or understanding of the elderly person. A recent article from The Sun Times News, “Elder Financial Abuse Can Be A Family Affair,” notes the coming “Great Wealth Transfer” of Baby Boomer assets could lead to a dramatic increase in elder financial abuse.

Even minor memory loss can be exploited by scammers and, sadly, family members. With nearly seven million Americans having moderate cognitive issues, the possibility of financial abuse is growing. Boomers live longer than any previous generation, translating into huge healthcare costs in post-retirement years. At the same time, their children and grandchildren face challenges, including student debt and high homebuying costs. The combination of these issues isn’t pretty.

A contributing factor is the increased misinformation about Medicaid, wills, trusts, guardianship and power of attorney. When seniors make their wishes known and formalize them through an estate plan and trusts to protect their assets, the chances of them becoming victims of exploitation can be minimized.

In many cases, isolation leads to vulnerability. One woman allowed her son’s ex-wife to move into her Colorado home to live with her elderly mother. The ex-wife fell victim to scammers herself and convinced the elderly mother to send two checks totaling $70,000 to two scammers, one claiming to be running a children’s mission in Nigeria and another rescuing animals in Malaysia. The elderly woman’s bank didn’t question the large checks, which it should have. The ex-wife also forged checks worth more than $10,000 on the elderly woman’s account. The promised caregiving never happened, and while the woman was arrested and prosecuted, the family will never recover the money as the ex-wife is unemployable—she was a bookkeeper.

The National Center on Elder Abuse suggests only one in 24 cases of elder abuse is reported to authorities. If abuse of any kind is suspected, it should be reported immediately to the police in the jurisdiction where the senior lives. Financial statements, bank statements, credit card bills, canceled checks and evidence must be provided. Even if you don’t have evidence, suspected abuse should be reported.

Families can be torn apart when heirs battle over inheritances. Two means of prevention are creating an estate plan by an experienced estate planning attorney, with trusted family members or professionals to serve as Power of Attorney and executor. The second is to maintain ongoing contact with the senior, if possible, in person and, if not, via phone calls, video calls and visits. The more involved you are with an aging person’s life, the better your chances of uncovering or preventing financial elder abuse.

Reference: The Sun Times News (May 8, 2024) “Elder Financial Abuse Can Be A Family Affair”

Who Gets Access to Your Digital Assets Account When You Die?

June 24, 2024

With so much of our lives now lived online, it’s hard to remember how we lived in a world without email, internet, or mobile phones. However, the question of what happens to our online lives after we die becomes a challenge for loved ones, says a recent article, “One day you’ll leave this earth, but your data will live on in a messy future” from WFIN.COM. Few people 65 and older have a digital estate plan, meaning the next generation must clean up what’s left behind.

Let’s start by defining digital assets and digital legacy. Digital assets are anything in digital format, including photos, videos, emails, social media account content, websites and cryptocurrency. A digital legacy is all the digital assets left behind when someone passes.

A digital legacy may include personal, financial and creative digital property. For instance, if you’re a prolific blogger, you own intellectual property. What do you want to have happen to your blogs after you’ve died? Or, if you have a craft business on Etsy, who will manage it?

Digital assets don’t disappear when you become incapacitated or die. They live on unless someone has been designated as a digital executor and there is a plan to manage the assets. What happens also depends upon the platform’s privacy and legacy policies. In some cases, accounts and their contents are deleted after a certain period of inactivity.

What happens if no digital estate planning takes place?

Online financial assets, including bank accounts and cryptocurrency, have economic value your executor needs to be able to access and manage. If they can’t locate a username and password or are stymied by third-party verification like facial recognition, gaining access to your assets will take a long time.
If you’re among the millions who enjoy creating a family history with genealogy websites, years of work you may have wanted to pass to the next generation may become inaccessible or vanish.
Identity theft and fraud are common occurrences when digital assets are not managed or deleted after the original owner dies.
Some platforms allow users to name a legacy contact who can access their accounts, gather and download content and close accounts. You’ll need to review your social accounts to determine what each platform permits and set up legacy or memory accounts.

A digital executor doesn’t always need passwords and usernames to delete, memorialize, or close your accounts. However, they will still need an inventory of your accounts and a clear directive explaining what you want to happen to your assets after your passing. Password sharing, while common, is not legal. Most states have passed some version of the RUFADAA—Revised Uniform Fiduciary Access to Digital Assets Act. Talk to your estate planning attorney about incorporating digital estate planning into your estate plan.

As a side note, if gathering your account information seems overly burdensome, imagine what would happen if your executor, already busy with so many tasks, needed to become a digital sleuth to determine what assets you have and how to access them.

Reference: WFIN.COM (May 11, 2024) “One day you’ll leave this earth, but your data will live on in a messy future”

Another Lesson in Updating Beneficiary Designations

June 21, 2024

If you’re among the many who have IRAs, 401(k)s and other retirement accounts with beneficiary designations, now is the time to ensure they have been updated to reflect your current wishes. This is the vital lesson sent by a federal court case described in the article “Court Backs 401(k) Beneficiary Designation in Estate Claim” from the National Association of Plan Advisors.

Jeffrey Rolison worked for Proctor & Gamble for many years. When he enrolled in the company’s 401(k) plan, he named his then-girlfriend, whom he lived with, as the sole beneficiary of his 401(k). The couple broke up in 1989—just two years after he had enrolled in the 401(k) plan.

Over the years, the account grew to $754,000. However, Rolison never changed the beneficiary. According to the court decision, The Proctor & Gamble U.S. Business Services Co. et al. v. Estate of Jeffrey Rolison et al., heard in the U.S. District Court for the Middle District of Pennsylvania, P&G notified Rolison many times over the years of his ability to change the beneficiary designation. The option was sent by mail in the earlier years of his enrollment, and as time passed, it became an option he could have taken care of online.

The court said he was given notice and direction but never changed his beneficiary. Estate planning attorneys reading this already know the outcome. However, the estate devoted countless years and resources to battling this issue, with many motions for summary judgment, a denied motion for certification to appeal and many, many motions for reconsideration.

The judge in the case for summary judgment, where the court decides without going to trial, explained the party seeking summary judgment is responsible for informing the court of the reason for its request and demonstrating the absence of a genuine dispute of fact. The court said it failed to do so.

Rolison’s estate claimed that Proctor & Gamble violated its fiduciary duty under ERISA (a federal law governing employee benefits) by not disclosing material information to Rolison. The estate said P&G should have told him who his designated beneficiary was, not just his option to make a change. The argument was that the company only provides “generic beneficiary information” to employees and doesn’t inform them of their “specific beneficiary status.”

Proctor & Gamble argued that the Court had, in previous decisions, determined that the company had fulfilled all disclosure requirements. The estate didn’t disprove that P&G informed Rolison and all employees how to change their beneficiary designations. The judge agreed.

The court said Rolison had been informed of his options over the course of thirteen years. If he didn’t go online to add a designation, the paper beneficiary designation would stand.

Although the relationship had ended two decades earlier, Rolison had such a large account that he didn’t update his beneficiary designation. Was this what he intended? It’s possible, but it stands as a strong example of why beneficiary designations need to be updated: to ensure that assets pass to the right person and to prevent an estate from being depleted by long, costly litigation.

Any time you meet with your estate planning attorney to update your estate plan should be a reminder to update beneficiary designations. However, if you haven’t reviewed these accounts in years, review them immediately.

Reference: National Association of Plan Advisors (May 6, 2024) “Court Backs 401(k) Beneficiary Designation in Estate Claim”

What Happens When Executors Keep Beneficiaries in the Dark?

June 19, 2024

A couple who never had children created a will, leaving their six nieces and nephews equal shares of their estate upon their deaths. When the uncle died, the aunt remarried years later but never changed the will, except for giving her second husband a life tenancy in the family home. A recent article from Market Watch asks if what happened next is right: “My late aunt gave her husband a life tenancy in her home—but her attorney won’t even let us see the will. Is this a bad sign?”

The problems began when the aunt’s attorney told the nieces and nephews that they were responsible for the taxes and property insurance while the life tenant lived in the home. The nieces and nephews had never seen a copy of the will, so they are unsure of their responsibilities as remaindermen. Nothing in the estate needed to go through probate, so the aunt’s will was not available to beneficiaries through the county court.

This case illustrates several important estate planning points. First, an executor of a will (or an administrator of an estate) is required to keep beneficiaries “reasonably informed” of the will’s contents after probate. It seems reasonable for the nieces and nephews to be able to see the will.

In most cases, the person given the life tenancy is responsible for paying taxes and property insurance and for the general upkeep of the residence. Any other arrangement is unusual, so the nieces and nephews are right to want to see the will.

The life tenant has rights, including the ability to rent out the property. However, they can’t do anything to decrease the house’s value. It’s important to know that elderly people may be unable to apply for Medicaid because they live in the house this way.

If it has been months since the person died and there hasn’t been any communication from the executor, a few different scenarios are possible. It may be that the executor doesn’t know they are required to keep beneficiaries informed. However, it’s also possible that the executor is engaging in illegal behavior.

In most states, the executor is responsible for providing beneficiaries with a complete inventory and appraisal of all the estate’s assets. Depending on the state, probating an estate may take more than six months, and creditors have a certain number of months to file a claim.

Suppose the beneficiaries wish to replace the executor. In that case, they can do so by speaking with an estate planning attorney and being prepared to go to court and prove the executor is either self-dealing, incompetent or has a conflict of interest.

However, once the will is probated, it will become part of the public record and must be filed in probate court. Depending on the jurisdiction, the court will give the beneficiaries the right to access the will.

The best option for the nieces and nephews is to consult an estate planning attorney to explore their options. If they live in a different state, a local estate planning attorney can recommend someone in their aunt’s jurisdiction to help.

Reference: Market Watch (April 28, 2024) “My late aunt gave her husband a life tenancy in her home—but her attorney won’t even let us see the will. Is this a bad sign?”

Elvis Presley’s Estate Planning Mistakes: Lessons for Us All

June 17, 2024

Even the King of Rock ‘n’ Roll wasn’t immune to estate planning mistakes. Elvis Presley passed away in 1977 with a net worth of around $5 million. Nevertheless, poor estate planning resulted in significant financial challenges for his daughter, Lisa Marie Presley, who inherited the estate at age 25. Unfortunately, the saga of estate mismanagement continued with Lisa Marie’s untimely death in January 2023. This article examines the lessons we can learn from these oversights.

Why Did Elvis’s Estate Plan Fail?

Over-Reliance on a Will

Elvis relied on a basic will instead of a more comprehensive estate plan, such as a trust. While wills provide instructions for asset distribution, they don’t protect beneficiaries from probate. This led to significant legal costs and delays, reducing the estate’s value. Furthermore, only a fraction of his estate remained after creditors, unscrupulous business partners and the IRS took their share. Kiplinger details how these mistakes haunted his daughter, Lisa Marie Presley.

Excessive Spending

Elvis was generous and free spending. However, his estate planning didn’t account for this. As a result, much of his inheritance went to creditors rather than his daughter. However, creditors weren’t the only ones claiming what Elvis left behind. The most significant loss was to the IRS, which claimed that the estate tax was worth double the value of Elvis’ estate.

Trusting the Wrong People

Elvis trusted Thomas Parker, better known as Colonel Parker, with business management. However, Parker was a Dutch illegal immigrant with a history of mental instability. The Army discharged him following a “psychotic breakdown,” and he had only served as a private. Parker’s business deal entitled him to 50% of Elvis’ profits and enabled him to sell Elvis’ song catalog. He kept most of the profits, depriving the family of any royalties.

Lack of Estate Planning

Between the IRS, creditors and Parker, the woes Elvis left his loved ones have one thing in common: They were avoidable estate planning mistakes. While few people trust their will to Colonel Parker, many leave behind a will that doesn’t protect their loved ones. Advanced estate planning strategies, such as the creation of trusts, are much more reliable than a simple will.

Can You Avoid Similar Estate Planning Mistakes?

A will is better than nothing, but it’s only the start. Develop a comprehensive estate plan that includes a trust and a power of attorney, and follow these steps:

Plan for Estate Taxes: Many ways exist to reduce estate taxes. Consider strategies like gifting assets and establishing trusts.
Maintain Liquidity: Set aside liquid assets to cover immediate family needs and creditor expenses.
Regularly Review and Update Plans: Life changes, and your estate plan should too. Ensure that your estate is set up to provide your loved ones with what you wish for them.
Consult with a Reputable Estate Advisor: Estate law is complex. Consulting with an estate planning professional can help you avoid Elvis’ mistakes.

Take Action to Avoid Estate Planning Mistakes

Don’t let your loved ones face unnecessary financial difficulties. Develop a comprehensive estate plan with the help of our estate planning attorneys.

Key Takeaways

Elvis Presley’s Estate Planning Mistakes: Elvis relied on a basic will and trusted people he shouldn’t. Consequently, his wife Priscilla and his daughter Lisa Marie Presley only received a fraction of his estate. If the King of Rock ‘N Roll needed a thorough estate plan, we all do.
Avoid Estate Planning Pitfalls: A comprehensive plan centered on trusts to protect your loved ones avoids many common mistakes.
Contact a Trustworthy Professional: Elvis’ business partners sold many of his assets for personal benefit. Rely on a reputable estate planning attorney to give your family the best opportunities.

Reference: Kiplinger (May 17, 2023) “Five Estate Planning Lessons We Can Learn From Elvis’ Mistakes”

For Business Owners: Unveiling Opportunities and Pitfalls of Business Trusts

June 17, 2024

Entrepreneurs often seek robust mechanisms to safeguard assets and navigate liability in the intricate landscape of business ownership. Enter the realm of business trusts—a lesser-known yet powerful tool entrepreneurs can leverage to secure their ventures. Based on SmartAsset’s article, “What Is a Business Trust and How Does It Work,” we’ll look into the intricacies of business trusts, uncovering their nuances and exploring their potential advantages and drawbacks.

Decoding Business Trusts: A Primer

At the heart of business trusts lies a fundamental premise: the delegation of authority to manage a beneficiary stake in a business. Functionally akin to individual or family trusts, business trusts serve as legal instruments facilitating asset management on behalf of the grantor.

A business trust holds the rights to an individual’s stake in a business entity. In a sense, the trust, as a legal entity, owns the business. With the potential to shield against taxes and liability, business trusts offer a compelling avenue for entrepreneurs seeking robust asset protection.

Understanding the Mechanics: How Business Trusts Operate

Creating a business trust typically starts with deliberations between involved parties and a trust lawyer. This legal instrument, a declaration of trust, formalizes the terms governing the trust’s operation.

Central to the trust’s dynamics is the fiduciary duty entrusted to the trustee—the individual responsible for managing the trust’s assets in the best interests of beneficiaries. This fiduciary obligation underscores the trustee’s paramount responsibility to act prudently and diligently.

Exploring Business Trust Varieties: A Spectrum of Options

Just as individual trusts come in various forms, business trusts exhibit diversity in structure and function. Here’s a breakdown of the primary categories:

Grantor Trust Characterized by the grantor’s control over trust assets and taxation, this trust type offers a self-contained framework for asset management.
Simple Trust Operating under IRS verification, this trust directly distributes profits to beneficiaries without accessing principal assets.
Complex Trust Offering greater flexibility, this trust type permits partial distribution of profits and contributions to external entities, such as charities.

Pros and Cons of Business Trusts: Weighing the Considerations

While business trusts present enticing benefits—from liability protection to enhanced privacy—they pose certain challenges. Here’s a snapshot of the pros and cons:

Pros:

Liability Protection: Shields beneficiaries from individual liability, akin to LLCs or corporations.
Privacy Enhancement: Offers an additional layer of privacy in asset management.
Flexible Distribution Terms: Facilitates tailored distribution schedules for beneficiaries.

Cons:

Cost and Complexity: Establishing and maintaining a business trust can be expensive and legally intricate.
Legal Compliance Challenges: Navigating legal requirements and compliance hurdles can pose significant obstacles.
Lifetime Limitations: Business trusts are typically constrained by a maximum lifespan of 99 years, limiting multi-generational arrangements.

Steps to Establishing a Business Trust

If you’re considering a business trust, the journey begins with competent legal guidance. Collaborate with a trust lawyer to navigate the intricacies of trust creation and ensure alignment with your business goals and objectives.

While establishing a business trust entails upfront costs and legal complexities, the potential benefits of asset protection and operational flexibility can be substantial. Before proceeding, it’s crucial to weigh the key considerations and assess the suitability of a business trust for your unique circumstances.

Business Trusts Key Takeaways:

Early Consultation is Key: Engage with a trust lawyer early in the process to navigate legal complexities and ensure alignment with your business objectives.
Deliberate Consideration is Essential: Thoroughly assess the pros and cons of a business trust, weighing factors such as cost, complexity, and compliance.
Tailored Solutions Yield Optimal Results: Customize your business trust to align with your unique needs, leveraging its flexibility to achieve optimal asset protection and operational efficiency.

Conclusion

Ready to embark on your journey towards enhanced asset protection and operational flexibility? Schedule a consultation with a seasoned trust lawyer today and explore the transformative potential of business trusts.

Reference: SmartAsset (April 19, 2023) “What Is a Business Trust and How Does It Work”

Three Estate Planning Strategies You Might Not Know – but Should – SPATs, SLATs, and DAPTs

June 17, 2024

In estate planning, where uncertainty seems to be the only certainty, it’s time to adapt and choose flexible strategies so you can walk this changing landscape confidently. This is a different world where individuals don’t just move assets into an irrevocable trust to avoid taxes and sigh with relief. As we age, economic uncertainty and rising costs move the goalposts closer to home. Comprehensive estate plans encompass retirement, advance care planning and Medicaid.

The estate tax exemption, poised to drop significantly in 2026, has estate planning attorneys and their clients considering different approaches to estate planning. Estate planning needs for wealthy individuals and those building a nest egg have evolved from passing on wealth to preserving and accessing wealth retirement through the senior season of life. Referencing Charles Schwab’s article, “Prepare for 2026 Estate Planning With SPATs, SLATs, and DAPTs,” we outline three types of trusts that might be good options in your estate plan.

Trusts, an estate planning staple, have benefits and vulnerabilities if not structured strategically. Adjusting a trust’s provisions to empower trustees with control over distributions protects against creditors or the deceased’s ex-spouse. There are three types of trust you might not be aware of: a Domestic Asset Protection Trust (DAPT), a Special Power of Appointment Trust (SPAT), and a Spousal Lifetime Access Trust (SLAT).

Three Types of Trusts that Add Additional Asset Protection – DAPT, SPAT, and SLAT

Domestic Asset Protection Trust (DAPT)

The Domestic Asset Protection Trust (DAPT) is a self-settled or self-created trust that can name the creator/grantor as beneficiary and an administrative trustee with approval authority. Placing asset distribution decisions in the trustee’s hands provides protection from creditors or litigation.

As with any estate planning option, consider the pros and cons of creating a DAPT. The trust creator or grantor funds the trust but only accesses the assets as the beneficiary, not directly. The administrative trustee controls distributions, while the trust creator is the investment trustee, managing the investments in a DAPT trust.

Special Power of Appointment Trust (SPAT)

Not a self-created trust, the special power of appointment trust’s assets are not vulnerable to creditors or estate expenses. The grantor or person funding the trust is not a trustee or a beneficiary and relies on a trusted individual to distribute funds directly to them later.

Work with an experienced estate planning attorney to discuss the pros and cons of this type of trust. If you don’t need direct access to the funds, a SPAT may align with your asset protection goals.

Spousal Lifetime Access Trust (SLAT)

A Spouse Lifetime Access Trust (SLAT), available in community property states, allows a spouse to establish a trust for the other’s benefit. SLATs are post-marital legal documents that separate community property such as real estate, income, and debt. They can be created by one or both spouses and funded with different assets to remove specific property from one spouse’s estate.

Work with an estate planning attorney if you are interested in a spousal lifetime trust so you don’t run into a reciprocal trust doctrine issue, in which the trusts are too similar and create mutual value, much like the community property they’re trying to avoid.

Customize each trust’s provisions to avoid similarities that make both trusts interrelated or like community property. Each SLAT should differ in trustees, beneficiaries, trust administration rules, gift distributions and withdrawal rights.

Estate Planning Trust Strategies to Know Key Takeaways:

Trust Strategies to Know: Consider a DAPT, SPAT, or SLAT in your estate plan.
Trust Pros and Cons: Each has benefits and considerations before choosing your trust type.
Build Flexibility into Estate Planning: Economic uncertainty and changing needs mean more flexibility in today’s estate planning.

Conclusion

Estate planning today means adding more flexibility in uncertain times. With SPATs, SLATs, and DAPTs, individuals can adapt their estate plans to address goals and economic changes for peace of mind from retirement to senior years.

Reference: Kiplinger (April 12, 2023) “Prepare for 2026 Estate Planning With SPATs, SLATs and DAPTs.”

Why are Retirees Selling Their Forever Homes?

June 17, 2024

With the residential real estate market at an all-time high, it seems like a no-brainer for retirees to put their homes on the market, capture the equity in their homes and downsize to a less expensive home. Before you call a realtor, there are a number of factors to assess, advises an article from NerdWallet, “Selling Your Home Could Boost Your Nest Egg—But Is It Worth It?”

Selling high is great, especially if you own a home in an expensive area and your plans include a smaller home in a less expensive market or even renting. However, can you afford to purchase a replacement home to suit your current and future needs? A rising tide lifts all ships, and prices for all homes, even modest ones, have risen.

If relocation is on your agenda, a thorough analysis of property taxes and basic costs of living should be part of your planning. While the recent settlement of a class action lawsuit against the National Association of Realtors may mean you’ll spend less on selling and buying a new home, property taxes only go in one direction: up. If purchasing a new home means a new mortgage, interest rates have continued to increase, and for the time being, money is not as cheap as it was a few years ago. A mortgage payment on a smaller house could be the same as the mortgage payment on a larger house purchased before interest rates began rising.

Consider the non-financial aspects of selling your current home to move to another city. For some people, moving to a golf community is a great thing. However, when there is no family nearby, the death of a spouse can mean a return to their previous hometown, regardless of the cost.

The cost of maintaining a pre-retirement home in a region where all the children have left the nest can become overwhelming for fixed-income budgets. An older home will need a new roof, landscaping services and the inevitable replacement of major appliances.

Before you make the final decision, after considering the costs of selling your current home, buying a new one, or living in another community, you may also need to change medical providers. Do your homework to be sure you will be able to receive the same quality of care you require in your new community.

Don’t underestimate the impact of climate in your ideal location. Suppose you’re planning to relocate to Florida or Arizona. In that case, you’ll want to visit for an extended period during the worst seasons, when it’s hot and stormy in Florida and over 110 degrees and dry in Arizona. It’s great to visit Maine or the Upper Peninsula of Michigan in the summer. However, winters there are long and cold. Be realistic about what kind of weather you’ll want to live with as you and your spouse age.

If you move to a new home in a different state, remember to update all estate planning documents with a local estate planning attorney. The rules for many documents, including Power of Attorney, Last Will and Testament, Advanced Care Directive, Healthcare Proxy and others are different from state to state, and a valid will in one state may not be valid in your new state.

Reference: NerdWallet (March 21, 2024) “Selling Your Home Could Boost Your Nest Egg—But Is It Worth It?”

Estate Planning Blog

Serving Clients Throughout North Central Missouri

What’s the Legal Process of Inheriting a House?

What Should You Do when Inheriting a Home?

What Should You Do with the House?

Moving Into an Inherited House

Renting Out an Inherited Home

Selling Your Newly Inherited Home

How Can You Finance an Inherited House?

Inheriting a House? Schedule a Consultation Today

Key Takeaways

Why Did Elvis’s Estate Plan Fail?

Over-Reliance on a Will

Excessive Spending

Trusting the Wrong People

Lack of Estate Planning

Can You Avoid Similar Estate Planning Mistakes?

Take Action to Avoid Estate Planning Mistakes

Key Takeaways

Decoding Business Trusts: A Primer

Understanding the Mechanics: How Business Trusts Operate

Exploring Business Trust Varieties: A Spectrum of Options

Pros and Cons of Business Trusts: Weighing the Considerations

Pros:

Cons:

Steps to Establishing a Business Trust

Business Trusts Key Takeaways:

Conclusion

Three Types of Trusts that Add Additional Asset Protection – DAPT, SPAT, and SLAT

Domestic Asset Protection Trust (DAPT)

Special Power of Appointment Trust (SPAT)

Spousal Lifetime Access Trust (SLAT)

Estate Planning Trust Strategies to Know Key Takeaways:

Conclusion

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