Understanding Living Trusts by Debunking Living Trust Myths

Jan 27, 2014  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Wills and Trusts

If you are like a lot of people in the Seattle, Washington area beginning an estate plan, you have likely heard of revocable living trusts. A revocable living trust is an essential piece of many contemporary estate plans. Like other estate planning tools, living trusts will serve some specific purposes and will allow you and your estate some significant benefits.

There are, unfortunately, some commonly held myths about living trusts that you may have come across. While most of these myths are relatively harmless, it’s a good idea to understand why they’re not true. Having the right information about revocable living trusts will allow you to make much better choices when you go through the estate planning process.

Myth 1. If I create a revocable living trust I don’t have to worry about probate.

A revocable living trust is essential if you want to create an estate plan that focuses on probate avoidance. Yet creating a revocable living trust is not the only necessary step. Your trust will have to be properly funded in order for your estate to avoid probate. Funding a trust means transferring all appropriate assets into the trust’s name. Without a properly funded revocable living trust, the property left out will have to go through probate. Further, failing to transfer the property properly will also mitigate any potential probate avoidance benefits.

Myth 2. If I have a revocable living trust I don’t need a will.

While a living trust will allow you to make inheritance choices outside of your last will and testament, it doesn’t make a will and optional device. Your last will and testament affords you specific benefits and choices that you cannot accomplish through your revocable living trust.

For example, you can name a guardian for any minor children in your will. The guardian will take over parenting responsibilities should you die before the child becomes an adult. You cannot use a revocable living trust to nominate a guardian.

Myth 3. Once I create a revocable living trust I don’t have to worry about it anymore.

Managing a revocable living trust is something that requires regular activity. Like your car, your revocable living needs routine maintenance. To keep it functioning properly and to make sure you are getting the most benefit possible, you need to carefully review your living trust at least every three years.  Further, if you acquire or dispose of trust property, you need to keep accurate records. Having a living trust with poorly kept financial details can be a significant problem, if and when you have to distribute trust property or have someone step in to manage the trust when you are incapacitated.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Understanding the Clauses in Your Will

Jan 26, 2013  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Wills and Trusts

Knowing about the different kinds of clauses that are in your will is an important part of understanding the estate plan that you’re trying to put together. After all, if you don’t know what the will is saying, how can you know for certain what you’re doing with your estate? With that in mind, take a moment to look over some of the various types of clauses contained in a will.

Declaration and Revocation 

These clauses work in tandem of to let the reader now that you have unequivocally made it so that the document they are holding in their hands is, without a shadow of a doubt, what you intended as your last will and testament. For example, “I, William Jones, declare this to be my last will and testament.  All wills and codicils that I have previously prepared are hereby revoked.”

Guardianship 

The clause is where you designate someone to serve as guardian to your children if you are unable to do so yourself, due to death or incapacitation. A guardian is kind of like a replacement parent, so don’t make this decision lightly.

Residuary Gifts 

This clause is used as a catch-all for any of the assets that you do not specifically give to someone elsewhere within the will. It will designate the person or entity to which this residual property will pass.

Signatures, Witnesses and the Self-Proving Affidavit

A self-proving affidavit is a unique statement that the witnesses sign to indicate that the proper procedures were followed, and that you knew what was going on when you signed, and you signed willingly.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

What Happens if I Make a Will and a Beneficiary Dies Before I Do?

Jan 25, 2013  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Inheritance Planning, Wills and Trusts

When you create your will you decide who receives your property after you die. Those you select become known as your beneficiaries and, as long as you do not change your will, they will inherit your property. But what happens if one of your beneficiaries dies before you do? Who inherits the property then?

When the beneficiary dies before a testator—a person who makes a will—the gift the beneficiary would have received is said to have lapsed. All states have created what are known as anti-lapse laws, or anti-lapse statutes, that direct how lapsed property passes in this situation.

However, you do not have to rely upon your state’s anti-lapse laws to address this possibility. You can create your own anti-lapse provision or clause in your will to determine what happens should the beneficiary predecease you. In this situation your anti-lapse clause will take precedence over state law.

For example, let’s say your state has a law that directs that any lapsed gift will pass to the deceased beneficiary’s descendants. This means that if you leave your child an inheritance and the child dies before you do, that inheritance will pass to the grandchildren.

But, you can also create an anti-lapse clause in your will that differs from state law. So, you might say that any lapsed gift will pass according to your residuary clause. Your residuary clause might state, for example, that your residuary property will pass to a charity.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Using Trusts in Your Estate Plan to Help Your Troubled Child

Jan 24, 2013  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Inheritance Planning, Wills and Trusts

As a parent, you will always worry about your children. Fortunately, these concerns will be largely unnecessary since most children learn how to handle the ups and downs of the world from their parents’ love and guidance. However, some concerns are justified because some children, no matter what age, seem to always need parental guidance. And, while you are alive, you can provide the direction and encouragement to steer your child clear of their compulsions, such as gambling, drug abuse or excessive drinking. But, is there something you can do now to make sure your child does not chip away at their future inheritance, or take away from your ability to plan for your own future?

One effective estate planning tool to protect your assets, and your children’s inheritance, is to create a trust. A trust is very flexible, allowing you to set the terms for releasing monies to your children or other heirs, and to change the terms of the trust during your lifetime, if needed. Some establish the trust so that additional money is set aside to one child to take care of anticipated expenses for a more troubled child. Some trusts require that a beneficiary pass a drug or alcohol test before funds are disbursed; others write their trust to have a third party manage the funds for the beneficiary to limit the amount of access a beneficiary has to their trust funds. Although you may not be comfortable treating your children differently, circumstances may dictate that you do so to best provide for the future of your loved ones.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

When You Want to Change the Terms of Your Testamentary Trust: 3 Tips

Jan 24, 2013  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Wills and Trusts

Tip 1: Be clear about the changes you want to make and why.

People often establish a testamentary trust to provide inheritances to those who cannot govern them themselves, such as minor children who cannot directly own property. If you want to change the terms of the trust you need to be sure why you are doing so and if changing the trust terms is the right course. You should speak to an attorney about this because there may be other alternatives you have not considered that could fit your desires better.

Tip 2: Consider the effect the change will have on your other property.

A significant change to the terms of your testamentary trust could impact the other gifts or conditions you included in your will. If, for example, you direct that additional property gets transferred to the trust, that property might affect the inheritances you directed in the will.

Tip 3: Make your changes in writing.

The most common way to update or alter the terms of a testamentary trust is to create a codicil or a new will. A codicil is a document that alters the terms of your existing will, while a new will allows you to completely rewrite it. Both documents must be printed and comply with the laws of your state. These laws are the same laws that applied when you made your original will, and failing to meet them will render the updated document invalid.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

A Few Common Will Clauses and Why You Need Them

Jan 20, 2013  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Wills and Trusts

Drafting a will is not difficult, but there are a lot of small points that you need to address in order for your will to be complete. If you aren’t experienced with creating wills or don’t know a lot about the practical effects that certain clauses have, you may wonder why those clauses are there. Let’s take a look at a couple of the more common will clauses you may encounter and why you need to have them in your last will and testament.

Minor Clause

If you create a will and leave property to children who are under the age of 18, your will should include a minor clause. That’s “minor” in the sense that it relates to the property that a non-adult can inherit. Such a clause will typically provide that the child’s guardian be responsible for managing the property until the minor child reaches adulthood. Without such a clause, the court might have to appoint someone to manage the property.

Residuary Clause

When you make your will you will probably make specific choices about who will receive specific property. For example, you might direct that each of your grandchildren receive $25,000, or your children will inherit your real estate as co-tenants. However, you may acquire more property between the time you draft your will and the time when you die, or you may simply not want to take the time to inventory everything you have and specifically direct how it should pass after you die. This is why it’s common to include a residuary clause. This clause directs that anything you haven’t specifically identified in your will passes to someone else. For example, you might direct that the residuary of your estate should be divided between your grandchildren or go to charity.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

What is Living Trust Administration?

Dec 08, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Wills and Trusts

A living trust, also called an inter vivos trust, forms an essential part of many estate plans. These trusts are renowned for their flexibility and privacy, offering anyone creating an estate plan a wide range of choices in how they want their estate managed. The person who creates a living trust is called a trustor, or sometimes a settlor, and gets to make key decisions about how the trust operates and who manages it. After the settlor dies the process of transferring trust property to new owners is generally known as trust administration. Here is what you should know.

Trustees

When you create a living trust you choose who will act as the trust manager, a person or organization known as a trustee. After you die, it is the trustee’s duty to ensure that the trust property is properly inventoried and distributed in accordance with the terms of your trust.

Probate court

Unlike property that you direct to be distributed through the terms of your last will and testament, trust property does not have to go in front of the probate court before new owners can take control. As long as the property was properly transferred to the trust in your lifetime, the trustee can distribute it without going before the probate court. This is very different than a will, which requires the court first approve the will and supervise the administration process.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Selecting a Guardian – 3 Practical Steps

Dec 08, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Estate Planning, Guardianship, Wills and Trusts

For many people, the realization that you need an estate plan comes when you learn you are pregnant and start thinking about the needs and future of your child. If something should happen to you and your spouse, who would be left to care for your child? The legal answer is: a guardian. However, while a parent can select who would act as guardian should the unthinkable happen, if you don’t make your choice in a legally recognized manner, it will be up to the court to choose for you. Here are several steps you can take to ensuring your choice will be honored.

Step 1: Agree on someone.

It’s best if both parents can come to an agreement about who the guardian will be. Take some time to consider your options and discuss your choice before either of you make any decisions.

Step 2: Discuss it with your choice.

No one has to be a guardian, and if you choose someone who doesn’t want the responsibility, that will only cause problems later on. Always discuss your choice with your guardian selection. It’s also good idea to discuss it with other family members as well so they know what your choices are and can express their own feelings about it.

Step 3: Write your will.

The only way to formally recognize a guardian choice is to create a last will and testament. You can make a will on your own, but it’s always a good idea to contact an estate planning attorney so you can be sure your will is properly created and properly includes your guardian selection.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

FAQ about Trusts

Dec 08, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Wills and Trusts

Because of the flexibility afforded by trusts the estate planning community has embraced them with open arms. But before you go running across a field with arms spread wide, make sure you understand the basics about trusts. The following paragraphs will help to ensure that you do.

What are the names given to the parties to a trust?

Generally, there are three parties to a trust: the settlor, the trustee, and the beneficiary. The settlor is the person that creates the trust and provides the property that is the subject of the trust. The trustee is the person that is tasked with the financial responsibility of maintaining the trust; therefore, they hold legal title to the trust property. The beneficiary holds equitable title to the trust property and is the person for whose benefit the trust was created.

What are the most commonly utilized trusts?

The two most commonly utilized trusts are the testamentary trust and the inter vivos trust. A testamentary trust is a trust that is created in the language of a person’s last will and testament, and only becomes effective upon the death of the person to whom such will belongs. An inter vivos trust, also known as a living trust, is created by the settlor while they’re still living; in other words, the creator of the trust does not need to die for it to become effective.

What is the greatest attribute of a trust?

The most commonly sought attribute of a trust is its ability to shelter certain assets from the reach of taxes imposed at death.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Everything You Generally Need to Know about Choosing an Executor

Dec 07, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Probate, Wills and Trusts

The executor of a Will handles complex tasks such as notifying creditors of the death, paying debts of the estate, and working with the probate attorney. Not to mention handling tedious administrative tasks like collecting the deceased’s mail, canceling credit cards and subscriptions, notifying benefit plan administrators of the death, and inventorying any lock boxes, safes, and other personal property.

With such varied tasks it’s very important to choose the right person as the executor of your Will. Closing your estate may take months to complete, and your executor will be legally obligated to see it through to the end, so be sure you pick someone responsible, organized, and trustworthy.

Common choices for executors are spouses, children, siblings, or close friends; still, there are limitations on who you can choose to be your executor, in that you cannot name a minor child or a convicted felon as your executor. Additionally, your state may have extra limitations, restrictions, or requirements, so be sure you know what those may be.

Finally, you should talk to the person you want to name as your executor to make sure he or she is available – and willing – to undertake the job. If they are, you should provide them with a list of where your records are stored, and how to get any other important items necessary to make it easier for them. Writing a Will and estate planning can be a stressful experience, but having someone competent to handle your estate will help ease the process.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.