What is the difference between Executor and Trustee?
The Executor is the person (or entity) nominated in a Last Will and Testament to collect the “probate”assets, pay creditors and debts of the estate, and distribute the remaining assets pursuant to the law and the Last Will and Testament. The Will has no legal purpose until you pass away and after the probate court has determined that the Will satisfies the legal requirements. Most states do not require an attorney to assist in the probate process; however, attorneys will be able to assist with a proper and efficient administration while limiting liability to the Executor. The Executor may be an individual (including family members) or a corporate fiduciary (e.g. bank, attorney, CPA, trust company). The Trustee is similar to an Executor in that a person or entity is nominated in a legal document to manage and administer assets. The legal document creating the Trust can be incorporated in a Will (i.e., springing to life at death when the Will is probated) or during life in a separate Trust document. Unlike a Will, the Trust does not have to be evaluated by a Court and avoids probate.
What is an Advance Directive for Healthcare?
The Advance Directive for Healthcare document allows you to designate someone (also known as an agent or health care proxy) to make health care decisions on your behalf following your incapacity. The Advance Directive decisions include the following:
- Making elective surgical decisions
- Advocating for health-care needs
- End of life decisions (i.e., withdrawal of life support, including nourishment and hydration) – also called “Living Will” designations
- Housing and medical facility placement
What is a Financial Power of Attorney?
This document allows you to designate someone (also known as your attorney-in-fact)to make financial decisions regarding your assets and finances following your incapacity. For example, if you are disabled and cannot manage your financial affairs, the agent designated in you Financial Power of Attorney would be able to pay your bills, sell assets, file tax returns, and contract for necessary services.
Do I need a Will?
This question usually follows the creation of a revocable living trust. Living trusts are typically used to avoid probate. Legally, you would not need a Will if you passed away without any probate assets;however, most clients do not completely “fund” the living trust – resulting in assets needing to be probated and distributed via a Will. Certain assets may not have been titled into your Trust prior to the Grantor’s death. Some clients forget to title (“fund”) the property into the Trust or choose not to transfer title. However, by having a “Pour-Over” Will, any probate asset owned at the time of death will be transferred to your Trust for trustee management and distribution, although this property would not avoid probate. To the extent you don’t have a Living Trust or chose to leave some assets outside of the Trust, a Will would be recommended to ensure the probate assets are distributed consistent with your intentions. Minor children are another important reason for having a Will. The Will is the legal document allowing you to designate a guardian to raise your minor children.
What happens if I die without a Will?
Whether a person has a Will or not, assets remaining in your name will have to go through probate. If a person passes away without a Last Will and Testament, the probate assets are distributed according to statute – usually to spouse and kids. Although without a Will assets still pass to your heirs, the division and distribution may be different than intended. For example, most married clients want all assets to pass to the surviving spouse. If there is no Will, the assets are split between the spouse and children.
How often should I review my Estate planning documents?
Your Estate planning documents should not be considered permanent. Changes in the law, family dynamics, and intentions all justify a review and likely modifications to Wills and Powers of Attorney. Generally, estate planning documents should be reviewed every five years or when changes dictate. Common life changes that necessitate a review include:
- Birth, death, marriage, divorce or disability of you or a beneficiary
- Large increase or decrease in the net worth of you or a beneficiary
- Purchase or sale of a business
- Change of residence to another state.
What is elder law planning?
Elder law planning is the legal process of preparing documents and shifting asset holdings for eventual eligibility of government benefits such as Veteran’s Administration (VA) Aid and Attendance and Medicaid. In addition to the government benefit planning, elder lawyers also assist clients with incapacity planning, general asset protection, and asset transfer strategies.
What is asset protection?
Generally, asset protection consists of structures and strategies to insulate a family’s assets from liabilities such as creditors, judgments, liens, law suits, etc. The asset protection strategy will be different for each client. The following are just a sampling of strategies:
- Irrevocable trusts
- Business entities
- Layered holdings (e.g. shell entities)
- Division of ownership
- Property encumbrance and liens
How to plan for a disability?
Most government benefits that assist with medical expenses are dependent on the amount of assets and income. To reduce the level of assets to qualify for government health care benefits (e.g. Medicaid), a person may spend down assets, gift or transfer assets, reduce income sources, implement a special needs trust (“SNT”), and swap assets. Assets held in a Special Needs Trust are not counted toward the asset caps used to determine eligibility. Assets directed to a SNT by someone other than the disabled person (e.g. a parent or grandparent) are not subject to a “pay-back” for the government benefits received. Assets funded to a SNT using the assets of the disabled (e.g. settlement proceeds from an injury claim) are subject to “pay-back” following the death of the disabled beneficiary for what Medicaid paid on his/her behalf.
Should I avoid probate?
Probate is perceived by many to be an expensive and time-consuming legal process. Although there are many situations that may yield a different outcome, the majority of cases will be efficient and without complication. The following scenarios justify avoidance of probate:
- Property owned in multiple states
- Business ownership
- Disproportionate distribution to beneficiaries (including disinheritance)
- Special needs or incapacitated heir
- Second marriage situations (especially when there are children from prior relationships)
- Probate assets that consist of perishable property or assets requiring immediate management
- Lack of liquidity outside of the Estate in which to pay for final expenses
- You have heirs with mental incapacity
- You have minor heirs
- You own assets that require quick action and decisions following your death (e.g. income producing property or business inventory)
- Anonymity is important to you (Trusts are private and Wills are public)
What is estate planning?
Estate planning is the process of getting your affairs in order by implementing documents to ensure your assets are distributed according to your intentions.For some clients, estate planning also includes a designation of guardians for minor children, tax planning, and asset protection.
What does an estate plan include?
The documents included in most estate plans include a Last Will and Testament (disposition of assets at death), Financial Power of Attorney (management of assets during incapacity), Health Care Advance Directive (management of health care decisions during incapacity and includes living will provisions), and a revocable “living” trust (to avoid probate and provide for incapacity planning).
How do you avoid probate?
Assets are probated if not otherwise transferred at death. Examples of transfers at death include beneficiary designations (e.g. life insurance and retirement accounts), payable on death provisions (e.g. designation added to financial accounts to distribute assets of the account to the named beneficiary directly upon you death), joint title with rights of survivorship (e.g. financial accounts or real estate), and assets held in trust.
Can you protect a child’s inheritance from a divorce settlement?
Under most state laws, inheritances are the separate property of your child and not community or marital property.Of course, actions by your child after he/she receives the inheritance can convert separate property into community or marital property. An illustration of this is where a child receives an inheritance and transfers it into a joint bank account with his/her spouse (i.e., commingles the inheritance with marital assets). If a divorce follows, the commingled assets are likely to be included in the divorce settlement of assets. To avoid this outcome, a parent can place the inherited assets in a trust for the benefit of the child – to ensure it is not commingled and remains separate.
What are the benefits of a trust?
The primary motivator of a trust for many clients is that property held in a trust can be protected from the claims of creditors (a "spendthrift trust"), bypass the process of probate, allow for tax avoidance (e.g., AB or credit shelter trusts), and minimize loss resulting from a divorce contest. Additionally, a trust can also be customized to manage your assets if you become ill or incapacitated. Trusts can be revocable or irrevocable, limited duration or perpetual, and testamentary (e.g. created at death) or intervivos (created during life).
When can a Will be contested?
The following facts would justify a challenge to a Last Will and Testament:
- If the testator executed the Will as a result of undue influence
- If the will was not properly executed (i.e., lacked the legal formality requirements)
- If the testator signed the Will without the mental capacity to understand the process and purpose of executing a Will (i.e., "testamentary capacity")
Can an executor or trustee be removed?
An executor or trustee may be removed in the following circumstances:
- When the executor or trustee does not fulfill the terms of the Will or Trust
- When the executor or trustee “self deals” for personal gain at the expense of beneficiaries
- When the executor or trustee acts fraudulently
- When the executor or trustee fails to account to the beneficiaries for the income and expenses of the Estate or Trust