Living Trusts Offer Advantages Over Wills

Posted on Friday, February 3rd, 2012 at 11:50 am and filed under Advance Directives

As mentioned in the accompanying article about wills, provisions in other documents such as insurance policies, retirement accounts, and jointly-held property often conflict with the intent expressed in a will. Another drawback of wills is that they are subject to the probate process and its typical delays, public proceedings, lawyers’ fees and court costs, which will cost your heirs as it reduces their inheritance. Trusts, on the other hand, bypass the probate process and put you 100 percent in control of your assets.

A trust that has gained popularity for its effectiveness, according to the American Bar Association, is the revocable living trust, also known as an inter vivos trust.

The Advantages Of A Living Trust

• Requires no court proceedings, unlike wills. Titles to real estate, securities and other assets are placed in the trust during the owner’s lifetime, and the trust document contains the instructions for managing the assets and how they are to be distributed when you die. Through the trust, a successor trustee distributes the assets according to these instructions, and then dissolves the trust.
• Allows you to change or cancel the terms, change beneficiaries and move assets in and out at any time during your lifetime.
• Reduces exposure to legal challenges. When going through probate, the assets covered in a will are frozen for several months as the court provides the opportunity for anyone to contest the will. The person contesting the will can do so without a lawyer. In the case of a trust, the assets are not frozen and a person who wants to contest it usually must hire a lawyer and file a lawsuit. Without the usual delays of probate, the assets in a trust often are distributed and the trust dissolved before a contesting heir has time to act.
• Does not reduce income taxes, but living trusts can reduce the federal estate tax burden.
• Allows you to authorize a trustee to manage your property for your and your family’s benefit should you become mentally or physically disabled and unable to manage your affairs. This feature, not available with a will, avoids a court-appointed guardianship and helps assure greater control over your assets. The living trust gives you the freedom to designate the person who will take over your affairs if the need were to arise.

 

To help you determine whether a living trust is the right solution for your estate planning needs, consult with your attorney. For more information about estate planning, visit the American Bar Association’s Estate Planning FAQs. (link to: http://www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning.html

Common Errors To Avoid When Writing Your Will

Posted on Thursday, January 19th, 2012 at 2:08 pm and filed under Advance Directives

You cannot take it with you, but with careful planning you can make sure the assets you worked hard for will benefit the ones you love after you are gone. Many of us, however, put off creating a last will and testament, for one reason or another. In fact, 58 percent of American adults have not written a will, according to a 2008 survey conducted by FindLaw.com. 

Of all the problems associated with wills, the failure to write one is probably the greatest. Dying without a will leaves the distribution of your property up to your state’s inheritance laws—which likely differs from your idea of how things should be handled.

Among other common will-related problems to avoid:

• Failing to update your will to reflect changes in your life. It is great you took the important step of writing a will. But if you have neglected to revise it after the birth of a child or marriage to a new spouse, the will may no longer be effective.  You should also have a lawyer review your will when estate and tax laws change.

 

• Not putting a “superlative clause” at the end of your will to indicate that this most recent version of your will supersedes all previous wills you have drafted. Without this clause, earlier versions could be brought forward in a challenge to your last will.

 

• Forgetting or not taking into account other documents you have that could conflict with or supersede the wishes you express in your will. Examples of such documents include life insurance policies in which you designate a beneficiary or a 401(k) retirement account, which automatically goes to the surviving spouse unless the spouse signs a notarized form to waive rights and name another beneficiary. Jointly-held property or accounts also go directly to the surviving owner.

 

• Entering joint property ownership, which can make the provisions of your will ineffective. When you grant a child joint ownership of property, for instance, full ownership passes to the survivor and cannot be passed on to others through the will.

 

• Not telling family members where to find your will and other important documents and assets. Even if you do not want family members to know the details of your will in advance, they need to know where to find it. Record and leave all relevant information in an accessible location.

 

• Choosing an inappropriate executor, such as someone who does not have the time to give to the often long and drawn-out process of estate administration or someone who has a conflict of interest.

• Writing the will in language that is difficult to understand and easy to misinterpret. Write in plain, simple language—not legalese.

 

• Being too specific, listing every item you own and who gets it. Options are giving things that have special meaning to loved ones while you are still alive, or grouping valuable items such as jewelry, collectibles or tools to specific loved ones.

 

• Forgetting to include a “leftovers” clause. Such a clause—more formally referred to as a residuary clause—directs distribution of any part of your estate that is left over after all assets specifically mentioned are distributed.  For instance, funds could be left over when a named beneficiary is deceased. If your will does not have a leftovers clause, your state’s laws will direct how remaining assets will be distributed.

 

This article is not intended to provide legal advice but to discuss the topic of wills generally.  For more information, visit the American Bar Association’s page http://www.americanbar.org/aba.html and/or consult your own attorney.

When Writing a Will…Consult An Attorney

When planning your estate it is best to choose the counsel of a lawyer—rather than do-it-yourself software and kits—to help guide you through the complexities of property and tax laws, wills, trusts and probate.  You are much more likely to meet all of your objectives with the help of a lawyer.

If you are concerned about saving time and money in your estate planning, the American Bar Association (ABA) (see link above) recommends that you organize all pertinent information and documents before meeting with the lawyer. This includes information on assets, liabilities and title arrangements and copies of important documents such as previous wills or trusts, powers-of-attorney, life insurance policies, employment benefits, and prenuptial agreements or divorce decrees.

The ABA advises that since not all states have programs that require or allow attorneys to designate a specialty area of practice, you should carefully look into the level of experience and qualifications a lawyer has in estate planning and seek recommendations from friends or other professional advisors. Membership in certain estate planning organizations often indicates a lawyer’s dedication to keeping up-to-date in the specialty.

Make sure the lawyer addresses legal fees to your satisfaction in an engagement letter before proceeding.

Advance Directives for Healthcare: Removing Uncertainty When You Cannot Speak for Yourself

Posted on Tuesday, January 17th, 2012 at 8:51 am and filed under Advance Directives

It is not something any of us likes to think about, but there could come a time when we face a life-threatening illness or injury that leaves us incapable of communicating our wishes about the medical care we receive. If you are unable to talk in such a situation, your loved ones would be placed in a very difficult, stressful position, not knowing what to do, not knowing what you would want. That is, unless you had taken the time to create and sign advance directives for health care.

Advance directives are legal documents that describe in writing your preferences for life-saving and sustaining medical care. They speak for you when you cannot –for instance, if you are in a coma. Advance directives come in two primary forms and can be prepared by anyone age 18 and over, serving to guide family members and doctors when you cannot make your own health care decisions. You do not have to have a lawyer to complete advance directives, but you do need to sign them in front of required witnesses.

What are the differences in advance directives?

• A living will is a legal document that enables you to declare your wishes to receive or to have withheld life support procedures when permanently unconscious or terminally ill and unable to make informed decisions. Living wills also are referred to, in some states, as a health care declaration or health care directive.

 

• A durable power of attorney (POA) for health care is a legal document in which you designate a trusted individual—your “agent”—to make medical decisions for you when you are unable. Do not confuse this with a financial power of attorney, which authorizes someone to make financial decisions for you when you are incapacitated. The POA can grant broad or specific powers to the agent. In your POA you can specify the treatments you would or would not want to receive.

 

• A do not resuscitate (DNR) order sometimes supplements advance health care directives. Placed in a patient’s medical chart, a DNR is usually used by people who are already critically ill and feel strongly against use of life-prolonging measures.

Access To All States’ Advance Directive Forms

All states have advance directive laws, but they vary. It is important to complete and sign advance directive forms designed for your state.

Caring Connections, a program of the National Hospice and Palliative Care Organization (NHPCO), offers online access to advance directive information and forms from all 50 states. (link to: http://www.caringinfo.org/stateaddownload)

Caring Connections advises:

• Not all states honor other states’ advance directives, so it is a good idea to complete advance directives for all states where you spend a significant amount of time.
• Advance directives remain in effect until you change them.
• Review your advance directives periodically to make sure they still reflect your wishes.