ARGON LAW GROUP, LLP
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Estate Planning (EP) includes planning for lifetime disability and management of the client’s personal affairs during the client’s lifetime, and sometimes planning for retirement. EP is a fundamental attribute of capitalism and private ownership of property. As owners of assets, one is entitled to determine their disposition. With EP there is possible avoidance of probate expenses and delays and minimization of taxes. Definition of a Will
A Will is a written instruction directing the disposition of a testator’s asset after his/her death. A Will governs assets that are properly included in the testator’s probate estate. It does not apply to assets that do not pass through probate administration, such as joint tenancy property, trust property, and other assets that pass to designated beneficiaries.
You may need a Will if you want to control over who will inherit your property, earmark a particular piece of jewelry or cash gift for a person or charity, nominate guardians for your minor children, express your funeral/burial wishes, name an executor to collect and manage your assets, pay off debts, and distribute your property, among other things.
Definition of a Trust
A Trust is a legal entity, which is able to own property and other assets. It is one of the oldest and best defined relationships known in the law. In other words, a Trust is a legal document, which creates a legal entity that holds title to property for the benefit of the creator of the trust or other beneficiaries. In the Trust, you name your beneficiaries and the manner of distribution of your property upon your death. A trust funded with your property is like your own family company that continues to live on for the benefit of your heirs after your death. Why Create a Trust?
A Revocable Inter Vivos, also known as a Living Trust or Family Trust is used primarily to avoid probate, reduce estate taxes, preserve privacy, and manage your financial affairs. A Revocable Inter Vivos trust is a trust established while you are living. It is revocable, which means you can make changes whenever you want, as well as reclaim the property transferred into it. It describes how your property should be managed while you are alive, and how it should be distributed upon your death.
What is Put Into a Trust? Real property (your house), financial accounts (such as bank accounts), business interests, and other assets. Why Transfer Title of Properties Into a Trust? A Trust provides for disability, plans for loved ones, protects privacy, is generally effective in every state, and it allows you to transfer the legacy you have built during your life without the interference of the probate court. Creating a Trust and transferring your assets into the Trust will enable your assets to avoid probate*. If you don't put your assets in a Trust, then your children or other heirs will have to incur the time and expense of probate (which is a public process that is often times, time-consuming, costly, and does not give your family any privacy). Of course, for clients who do not mind if their assets go through probate and do not want to establish a Trust, we can prepare a Will-based estate planning package for a reduced price. *Avoiding Probate & Protecting Privacy with a Trust
Probate is a public procedure, which opens up an estate’s distribution and beneficiaries to the public. Generally, when a person dies without a Trust in place, there must be a probate process to determine how to distribute all of the property held solely in the decedent’s name. A Will can help the probate court to determine where the property should go, but it does not avoid the probate process. In fact, one primary purpose of probate is to validate the “last will” if one exists.
When you have correctly set up and used a Revocable Inter Vivos Trust, upon your death there will be no probate process. Why? The owner of the property (the Trust) did not die; only the person in the role of the Grantor (you) and most likely the Trustee (usually you while you are living).
What is Trust Funding?
Having correctly created a Trust is not enough; you have to also fund the Trust with the assets mentioned above. For example, in order for your house to be part of your Trust, you have to prepare a deed, which transfers the house from your name as an individual to your Trust. Thus, the title of your house will be held as follows: “John and Jane, Trustees, [or any successor Trustee], of the John and Jane Family Trust, dated January 1, 2011”. What is a Pour-Over Will? A “durable” POA means that the power granted to the attorney-in-fact/Agent survives the fact that you have become mentally incompetent. However, the POA expires when you die.
If you lose mental capacity without a durable POA in place, the court may appoint a conservator to step in on your behalf and handle your finances/affairs. A conservator is someone authorized by the court to manage your affairs. A conservator may be appointed if you become unable to make sound decisions, feed or dress yourself, handle your own finances or resist undue influence. Conservators may be family members, friends, or the county public guardian. However, unlike an Agent under a durable POA, a conservator will receive court supervision in the handling of your affairs. Conservatorships can be expensive.
What is a Medical Durable Power of Attorney (also called Health Care Directive)? In the Health Care Directive, you name an agent for your health care decisions. You can give this Agent the authority to make decisions for you if you are unable to do so due to disability. These decisions could include whether a doctor should operate on you, whether you want to donate your organs, whether you want artificial life support, etc. It is, therefore, vital for you to have a medical power of attorney in case of disability. Also, if you do not have a durable POA and you become mentally incompetent, it may be necessary for a court to appoint a guardian or conservator for you (this is because a Will does not come into effect until a person’s death).
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