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HOW MUCH MONEY DO YOU NEED FOR A TRUST?

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A question that often comes up in estate planning is “How much money do you need to get a Trust?” The question is a fundamental misunderstanding, but a common one. Although there would not be much point in doing so, you can put as little as a single penny into a Trust.

The question is based on the premise that Trusts are designed for rich people. It’s a false premise. Trusts are designed for anyone who either wants to give something for one person to manage for the benefit of someone else or who wants to have their estate avoid Probate. Imagine that you have a minor niece that you want to leave a thousand dollars to. That’s a lot of money for most children and they can be expected to want to blow it as soon as possible. Instead of giving it to your niece directly, you can put it into a Trust. It can earn interest and be made available to your niece when she comes of age.

Trusts are also a great way for everyone to avoid having their estate pass through Probate. If you put all of your assets into the Trust, those assets will be divided according to the terms of the Trust without court intervention. It does not matter how much you have. If you have something, you can use a Trust.

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Everyone knows that there are more important things in life than money. However, when we feel aggrieved, it’s often hard to remember that, especially after the death of a loved one. This sometimes leads to poorly thought out estate challenges after someone does not receive an expected inheritance.

There is no doubt that it hurts when you do not receive the inheritance you expected and think you deserve. Before deciding to challenge the estate, however, take a few moments to consider the consequences. Your relationship with the people who did receive the inheritance will never be the same. They will have to fight you over what they perceive as their rightful inheritances. In many, if not most cases, the relationship is damaged irreparably. Sometimes, other family members who do not have a stake in the outcome are forced to choose sides and your relationship with them could be damaged as well.

That’s not to say that you necessarily should not challenge an estate, if you did not receive the inheritance you hoped to receive. You just need to consider all of the consequences. By all means, you should get what you deserve, especially if there has been fraud involved in an estate plan, but do know what you are in for before you proceed.

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One of the most important decisions that you will ever make is who you should appoint to make your health care decisions when you are no longer able to do so. The designation is made in a Health Care Proxy document. Most people instinctually think that they should name a spouse or family member. That is often the best person to appoint. However, there are other things to consider.

The person that you appoint needs to be able to effectively communicate with doctors and other medical personnel what your wishes are. That means that he or she must not only be able to express your wishes, he or she must know what they are. Some people are not comfortable talking about important health care decisions long before they need to be made. It can be uncomfortable for family members sometimes, but you need to be able to talk to the person you designate about what you want.

You also need to take care to appoint someone who is available to communicate with doctors and who you anticipate will be available long into the future. Hopefully, you will not need the Health Care Proxy for years to come so it does not make sense to designate someone in it who may not be around when you do need it.

Who you designate is up to you. Talk to your attorney about who the right person is for your situation.

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After you set up a Revocable Living Trust, one of the first things that you do is to transfer your other assets into the Trust. Most people will try to make sure that everything they have when they pass away will transfer through the Trust to the beneficiaries. However, it is not always a good idea to do that. It depends what you are trying to transfer through the Trust.

For example, if you have an IRA, you can name the Trust as a the beneficiary. By doing that, the money in the IRA will be handled according to the terms of the Trust. However, if you name a person as your IRA beneficiary, then that person can keep the IRA open and continue to take advantage of the tax benefits. A Trust cannot do that as an IRA requires the owner to be a person with a life expectancy in order to take advantage of the tax benefits.

Most assets should be transferred into a Revocable Living Trust. Exercise caution, however, and make sure that you are not losing other important benefits with some instruments. Ask you estate planning attorney if you have questions about your Revocable Living Trust and transferring your assets into it.

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There has been a lot of talk recently in the media about the Facebook IPO and how company insiders are avoiding paying taxes on their earnings from it. The tools that they are using are called. Grantor Retained Annuity Trusts (GRATs). They can be an excellent way for wealthy people to transfer assets.

A GRAT has a set term of at least two years, and the granter loses control of the assets for the length of the term. The granter receives an annual payment from the Trust plus a return on investment income at an interest rate fixed by the IRS. When the term of the Trust expires, the Trust assets pass to the Trust beneficiaries. You can name another Trust as the beneficiary or a person. GRATs even allow you to name future children or grandchildren as beneficiaries.

GRATs are not for everyone, as the granter loses control of the Trust assets until the term of the Trust expires. However, for some people, they are a great solution to lower the tax burdens associated with wealth transfer. For example, it is estimated that the Facebook insiders will save approximately $200 million in taxes. If you are ever in a position to receive wealth from a stock offering, talk to an attorney about setting up a GRAT.

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If you are concerned about what will happen to your pets after you pass away, you have several options to provide for their care. All of the options have their benefits and drawbacks, but most people can find one that suits their needs.

The traditional option is to provide for your pets’ care in a Will. You bequeath your pets to someone else the same as you do with your other assets. The drawback is that the person must be willing to take care of your pets and you do not have a say in whether or not that will happen. However, this is the simplest option.

Another option is to create a Pet Trust. This allows you to set aside money for the care and support of your pets. However, it also requires that someone be willing to take care of the pets.

Another option is to leave your pet with a no-kill shelter. Many shelters will agree to take care of your pets for the duration of their natural lives if you make a donation to the shelter of a certain level. However, living in a shelter may not be as pleasurable for your pets as living with another person.

Ask your estate planning attorney about the options available for your pets

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People are often similar and predictable. It is no different when it comes to their estate plans. Most people want the same thing. Almost universally, when a husband and wife in a first marriage devise an estate plan they want the same thing: when the first spouse passes away, everything goes to the surviving spouse. When the second spouse passes away, everything goes to the children. Executing this plan with joint Wills is not always the best option.

Most people do not want to think about it, but there is always a possibility that a surviving spouse will get remarried. It happens all the time. The new spouse is entitled to a share of the surviving spouse’s estate by law. This may or may not leave enough of the property available for the original couple’s children to receive the originally contemplated inheritance.

The initial goal of most couples is laudable. It is an excellent idea to leave your assets to your surviving spouse with the plan that everything will eventually pass on to your children. It is not the idea that is wrong. It is often the execution. Circumstances change and what we expect to happen often doesn’t. Talk to an estate planning attorney about ways that you and your spouse can accomplish the same goals in ways that take changing circumstances into consideration.

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Getting a General Durable Power of Attorney is one of the most important things that you can do as part of your overall estate plan. You should consider the possibility that you might be incapacitated and unable to look after your own interests in the latter years of your life. If you do not plan ahead, then someone else will have to go to court and ask for guardianship over you to protect your interests.

If you think that having a relative asking a court for guardianship is not that big of deal, a recent case illustrates the problem with that approach. Sometimes, your relatives might not agree about all aspects of the guardianship and who should be the guardian. Usually, that argument is left in court, which can be bad enough. In the case of the Fox family, the disagreement resulted in a 63 year old high school counselor punching his 74 year old uncle after a court hearing.

Fortunately, not every family feud over guardianship will end up in criminal charges. However, any family disagreement over the issue is unnecessary and avoidable. All that you need to do is have an attorney prepare a General Durable Power of Attorney so that everyone knows who you want to look after your interests when you are no longer able to do so.

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College is extremely expensive and the cost keeps rising. Parents and grandparents routinely struggle with how they will pay for their children or grandchildren’s college education. If you plan ahead, you can make paying for the college education a part of your larger estate plan. You have many different options.

The traditional way to pay for a college education is by setting up a Trust. This allows you to set up the account long before it will be needed and let the Trust assets earn interest. However, there are other ways to pay for college if you have not planned far in advance. Parents and grandparents can directly pay tuition to the education institution. Money paid directly to an accredited school is not subject to the gift tax. You can then give living expenses to the student directly up to the gift tax limit. Another option is to set up a 529 college savings plan. However, like a Trust, that should be done long before it is needed.

Paying for college is important and most people want to see their children and grandchildren go to college without having to worry about how it will be paid for. Talk to an estate planning attorney about making your loved ones’ college expenses part of your estate plan.