Estate Planning Blog

What to Do Before Naming a Family Member or Friend to Be a Trustee

Here’s an all-too-common scenario: a husband and father of adult children had created a living trust to protect assets and eventually direct the family’s wealth to heirs. During his lifetime, the man had served as the trustee. His wife became the trustee when he died, as explained in the article “Before Naming Trustees, Get Their Consent” from Next Avenue.

When the mother died, the trustee role was given to one of the adult children. The child was stunned because no one had ever told him about this responsibility.

Living trusts typically require trustees to work with estate planning attorneys and financial professionals to manage assets, distribute investment income to beneficiaries, oversee taxes, and sometimes, maintain or sell real property. This is not just for wealthy families. Families of modest means benefit from tax and estate planning aspects of trusts. They allow grantors (the person establishing the trust) to leave assets privately and, in some states, avoid probate, which is usually a public proceeding and can take time to complete.

Some heirs may not be happy with the person named to be the successor trustee. Some living trusts include special instructions for certain beneficiaries intended to control spending, if the grantor thinks the heir may be unable to manage their inheritance.

This can be avoided by having candid discussions with all family members about the parents’ future plans. Sometimes, having a family meeting at the estate planning attorney’s office—neutral territory and an expectation of mature behavior—may make the conversation less tumultuous.

The person named to be a successor trustee needs to be considered carefully. Just inserting someone’s name in the trust document without speaking to them first about the possibility of taking on the role and what it entails is a recipe for disaster.

Before the estate planning attorney completes trust documents, grantors need to think about who would do the best job, what relevant skills they have and who would be able to manage the family’s relationships if unpopular decisions need to be made.

If there are two adult children, the better choice isn’t necessarily the older of the two. The one with the greater financial acumen is the better candidate.

Suppose no suitable candidates from the family can be identified or no one is willing to take on the tasks. In that case, grantors may consider their estate planning attorney or a professional trustee from a financial firm. Although some grantors would prefer to have a family member as their successor trustee, this may not always be possible.

Once the candidate has been named and before the documents are completed, a meeting is needed to outline the trustee’s responsibilities. Once the candidate fully understands what they must do and agrees to the role, the grantors might want to hold a family meeting to explain their choice and have an open, hopefully peaceful, discussion.

Reference: Next Avenue (December 22, 2023) “Before Naming Trustees, Get Their Consent”

3 Signs You Definitely Need a Trust (and Not Just a Will)

Estate planning is akin to crafting a roadmap for the future; it’s about guiding your loved ones through the maze of your final wishes with clarity and ease. At the heart of this journey lie two pivotal tools: wills and trusts. While both serve to shepherd your assets posthumously, certain situations demand the finesse of a trust over the simplicity of a will. In this piece, we’ll illuminate the scenarios in which a trust isn’t just a choice, but a necessity.

Understanding Wills vs. Trusts

A will is your voice from beyond, a document that speaks on your behalf after you’re gone. It outlines who gets what, who’s in charge and even who cares for your children. Simple and straightforward, right?

Enter the trust. This legal entity takes hold of your assets, managing and distributing them according to your precise instructions, both during your lifetime and after. Unlike a will, a trust offers a private, probate-free path tailored to complex or unique personal circumstances.

The difference? It’s like comparing a hand-drawn map to a GPS; both guide you to your destination, but one offers a path laden with potential roadblocks and public scrutiny (the will), while the other navigates you through a streamlined, private route (the trust).

You Have a Blended Family

Blended families are like tapestries – intricate, colorful and diverse. However, this beauty can result in complexity when it comes to estate planning. With children, stepchildren and multiple parents involved, a will’s one-size-fits-all approach may unravel the fabric you’ve so carefully woven.

A trust, however, can be the tailor to your tapestry. It allows you to:

1. Specify exact allocations: Deciding who gets what, when and how.
2. Protect your children’s inheritance: Ensuring that your children, not just your spouse’s, benefit from your estate.
3. Avoid unintended consequences: Preventing your assets from unintentionally passing to a new spouse’s children in the event of remarriage.

You Own Property in Multiple States

Owning property in different states is like having multiple anchors in diverse ports. A will, however, could make your loved ones set sail on a stormy probate sea in every state in which you own property. Each state’s probate process can be costly and time-consuming, lengthening the time before your beneficiaries can claim their inheritance.

A trust, on the other hand, unifies these disparate anchors. It allows for:

1. Centralized management: One entity handling all properties, irrespective of location.
2. Smoother transition: Bypassing multiple state probate processes.
3. Cost and time efficiency: Reducing legal fees and administrative delays.

You Value Privacy and Want to Avoid Probate

The probate process is like a stage where your will is the star – open for all to see. This public airing of your estate can be uncomfortable, exposing your assets and beneficiaries to outside eyes.

A trust, conversely, is the private screening of your final act. It shields your estate from the public eye and sidesteps the time-consuming, often costly, probate process. With a trust you’re not just planning; you’re protecting.

Additional Considerations

When it comes to estate planning, one size does not fit all. The decision between a will and a trust should be weighed with:

• Tax implications: Understanding how each option affects your estate tax-wise.
• Personalized solutions: Every estate is unique, and so should be its plan.

In the tapestry of estate planning, trusts emerge as a nuanced, flexible thread, weaving through the complexities of blended families, multi-state properties and privacy concerns. If these signs resonate with your situation, it might be time to consider a trust.

Remember, the best estate plan is one tailored to your unique story. We encourage you to seek professional estate guidance to navigate these waters.

Why a Trust Works for Multi-State Property Owners

If you own real estate when you die, it is most likely your estate will be required to go through probate. This can take months to years and becomes expensive, as explained in the article “Why a trust is so useful for those who own real property in multiple states” from Coeur d’Alene/Post Falls Press. However, here’s the thing to be aware of: if you own property in more than one state, your estate must go through the probate process in every state where you own property.

A few strategies must be considered for snowbirds with homes in northern and southern regions or who own out-of-state rental property.

Some families will add an intended heir to the title (deed) of the real estate while the primary owners are still living. This is rarely recommended, since it can open the door to any number of problems. If the intended heir has a financial crisis, like a lawsuit, divorce, creditor issues, etc., the jointly owned property is an attachable asset.

Another solution people try is the “Pay on Death Deed.” This is a special type of deed where the recipient gets the real property on the death of the owner. This strategy has a few problems. However, the main one is that not all states allow these types of deeds to be used.

An experienced estate planning attorney will know whether or not your state allows the Pay-on-Death-Deed.

The best solution for most people owning property in multiple states is using a living trust.

The living trust provides the same directions as a last will and testament about who should receive what assets from your estate after your death, including real property. It also names a trustee, who manages the assets in the trust and distributes them after your death.

A key reason to use a living trust is the assets owned by the trust are outside of the probate estate. These assets pass to beneficiaries according to the terms of the trust and do not go through the probate process.

Once the living trust is established, the trust may hold title to any real property, regardless of where the property is located. The trustee does not have to deal with the courts in multiple states.

There is a tendency to think trusts are only used by the very wealthy. However, this is not true. Anyone who owns real property and doesn’t want it to go through one or more probate proceedings benefits from using a trust.

An experienced estate planning attorney can establish the trust and guide you through putting assets into the trust.

Reference: Coeur d’Alene/Post Falls Press “Why a trust is so useful for those who own real property in multiple states”

Why You Should Consider a Living Trust for Your Estate Planning

When it comes to estate planning, many people think of a will as the go-to document for ensuring that their assets are distributed according to their wishes after they pass away. However, a living trust can often be a more effective tool for many individuals, offering benefits that a will cannot provide. In this article, we’ll explore why you should consider a living trust to be a cornerstone of your estate planning strategy.

What Is a Living Trust?

A living trust is a legal document that places your assets into a trust for your benefit during your lifetime and then transfers those assets to designated beneficiaries when you die. The person who manages the trust, known as the trustee, can be yourself or another person you trust. A living trust’s flexibility and control make it an attractive option for many.

Advantages of a Living Trust

Avoiding Probate

One of the most significant advantages of a living trust is avoiding the probate process. Probate can be time-consuming, costly and public. With a living trust, your assets can be transferred to your beneficiaries quickly and privately without court intervention.

Control Over Asset Distribution

A living trust lets you specify exactly how and when your assets will be distributed to your beneficiaries. This is particularly beneficial if you have minor children or beneficiaries who may not be financially responsible. You can set up the trust to distribute the assets in increments or upon reaching certain milestones, such as graduating from college.

Flexibility

Living trusts are revocable, meaning you can alter or revoke the trust as your circumstances change. This flexibility allows you to adapt your estate plan as your financial situation evolves or as you acquire or divest assets.

Incapacity Planning

Should you become incapacitated due to illness or injury, a living trust already has a mechanism for managing your affairs. The successor trustee you’ve named can step in to manage your trust assets, ensuring that your financial needs are met without the need for a court-appointed guardian or conservator.

Estate Tax Benefits

For larger estates, a living trust can provide significant tax benefits. While assets in a living trust are still subject to estate taxes, the current exemption limits are quite high ($12.92 million for U.S. residents in 2023 and $13.61 million in 2024). This means that many estates will not be subject to federal estate taxes.

Considerations Before Creating a Living Trust

Cost

Creating a living trust generally involves higher upfront costs than drafting a will. However, when you consider the potential savings in probate costs and the value of the benefits provided, the initial investment can be well worth it.

Complexity

Setting up a living trust can be more complex than drafting a will. It requires transferring ownership of your assets to the trust, which can involve additional paperwork and coordination with financial institutions.

Control

While you maintain control of your assets during your lifetime, you must be comfortable with the idea of the trust entity holding title to your assets. This is a shift in mindset for some. However, it is essential for the trust to function as intended.

Is a Living Trust Right for You?

A living trust is not a one-size-fits-all solution. It’s essential to consider your individual circumstances, the complexity of your estate and your long-term goals. Consulting with an estate planning attorney can help you determine whether a living trust is your best option.

For a more in-depth look at living trusts and their role in estate planning, I recommend reading “Is a Living Trust Really the Best Way to Pass an Inheritance to Your Family?” on The Motley Fool.

Conclusion

A living trust offers numerous benefits, including avoiding probate, controlling asset distribution, offering flexibility, aiding in incapacity planning and potentially offering tax benefits. While there are considerations, such as cost and complexity, the advantages of a living trust often outweigh these concerns. If you’re looking to create a comprehensive estate plan that provides for your loved ones while giving you peace of mind, a living trust should be high on your list of options.

Remember, estate planning is a deeply personal process, and what works for one person may not be the best for another. It’s crucial to consult with a professional to tailor a plan that fits your unique situation. Click here to book a consultation with us today.