But seriously y’all – let’s hope we all “need” to have an estate plan in place. Let us all hope that when that day does come (very far off in the distant future) we have loved ones we want to give our assets to, have assets to give, and aren’t so apathetic that we are happy to let the government decide what to do with our things and where our minor children should live.
If you own a closely-held business, a Revocable Living Trust might be a great tool to consider – as it gives you the ability to transfer your business interests into a trust.
Typically there will be a gap between the date of death and the appointment of an executor to handle your estate during the probate process. This time gap can cause problems with a business running smoothly and in extreme cases can lead to your business dying with you.
As a way around this, business owners can transfer their interest in the business into a Revocable Living Trust. When the owner dies, the successor trustee can continue to run the business in a seamless manner and without delay.
Since the owner will only be transferring the business interest (as opposed to the actual business) into the trust – there won't be any major functional differences when running the business. At the same time, in the event that something happens to the owner, business employees or others who rely on everything running smoothly won’t suffer the consequences of a time delay in the event of the owner's death.
Whether or not to create a Revocable Living Trust will vary from person to person based on their needs and estate planning goals. If this is something you would like to learn more about, feel free to reach out to us so we can discuss it further.
One of the biggest misconceptions about Revocable Living Trusts is that they are only for the wealthy. However, even if you have only accumulated a moderate amount of wealth or assets, having a trust might be a useful tool to consider for your estate plan.
Probate is the court-supervised process of settling an estate after someone dies. It is a time-consuming process and can sometimes end up being costly. Additionally, it is completely public – anyone can see the distributions made and who they are made to.
A Revocable Living Trust, however, allows for greater privacy since any assets that were titled in the name of your trust during your lifetime will generally avoid the probate process and will not become part of the public record. At the same time, a Revocable Living Trust can be altered, revoked, or amended any time during the lifetime of the person who created it – without the consent of the trustee or others – allowing privacy at death and flexibility during life.
While it is important to fund the trust by adding your assets to it, it is also important to have a will that will work in conjunction with the trust. A carefully drafted will can allow for assets that were not in the trust at the time of your death to “pour over” into the trust during the probate process.
Revocable Living Trusts are useful tools, but it’s important to keep in mind that they are not a magic solution to all of your problems. Without further planning, most Revocable Living Trusts cannot help you avoid income taxes, avoid estate taxes, shield assets from your creditors, or help you qualify for Medicaid. While options may be available such as a credit shelter trust to reduce the amount of estate taxes due for some people or a spendthrift trust to prevent a creditor from accessing some assets, these are issues that would need to be carefully addressed on a case-by-case basis.
Whether or not to create a Revocable Living Trust will vary from person to person based on their needs and estate planning goals. If you would like to talk about whether one will be beneficial to you, we recommend talking with an attorney or tax advisor. As always, don't hesitate to contact us if this is something you would like to discuss.
While it is never something we want to consider, planning for incapacity is an important part of making an estate plan. There are many methods and tools available to make sure that your wishes are respected and that the people you trust the most will be the ones making important decisions on your behalf.
Some useful tools to consider include:
- Health Care Power of Attorney: A health care power of attorney becomes effective after a physician determines that you are unable to make or communicate health care decisions yourself. It is a legal document giving authority to the person (or people) of your choosing who you trust to make medical decisions on your behalf.
- Advance Directive / Living Will: A living will is the legal document that you can use to direct whether you want your life prolonged in specific circumstances. It is a great way to be able to direct your health care power of attorney so that they can best champion your wishes in the event that you cannot make them clear at the time.
- Advance Instruction for Mental Health Treatment: An advance instruction for mental health treatment works much like an advance directive or living will, but instead applies when one lacks the capacity to make or communicate mental health treatment decisions. This document gives your appointed agent the power to make decisions regarding mental health treatment – and includes specific directions for your agent to follow regarding the use of medication, shock treatment, and/or admission to a mental health facility.
- Power of Attorney: A durable POA is a great choice for many people as it allows for you to appoint an attorney-in-fact who can basically step in to your shoes and act on your behalf with regard to your financial affairs.
- Revocable Living Trust: While you can be your own trustee of your RLT during your lifetime, you can also appoint a secondary, or successor, trustee to take over in the event of incapacity. Since a trustee only has power over the property held in trust and subject to the trust document itself, the grant of power is generally less broad than a POA, creating an RLT may be an option to consider if you want to put greater restrictions on the actions of your attorney-in-fact.
- Standby Guardianships for Minors: if you have minor children but become incapacitated, having a standby guardian for any minor in place can ensure that the people you trust the most will be able to fill in for you to make decisions on behalf of the child.
We highly recommend that you put a plan in place so your wishes are followed in the event of incapacity, and perform periodic reviews of your documents to make sure nothing needs to be changed or updated.
Titling a Car as Joint Tenants With Right of Survivorship
Your vehicle may be one of your most valuable assets, next to your home, that you own. If you rent, it may be your most valuable asset. If something happens to you, what will your partner or spouse need to do with it? Will they need the cash value of the vehicle to pay for your expenses? If so, it might require that several probate hoops be jumped through in order to sell it. In this situation, wouldn’t it be nice if you could just take the title and death certificate to the DMV? Well, owning a car as joint tenants with right of survivorship would allow just that - and is about to get easier as of January 1, 2017.
First, owning a car with your spouse/partner/family member as joint tenants with right of survivorship (JTWROS) means that, upon the passing of one of the joint tenants, ownership will be consolidated in the surviving tenant. Functionally, for estate planning purposes, this means that when one owner passes away the car is wholly owned by the survivor.
Second, this allows the car to avoid the probate process. Generally, if just you or your partner own the car separately, ownership will not pass until the probate process is completed. This can take a lot of time depending on the size and complexity of the estate.
Third, titling a car (or other vehicle) as JTWROS in NC is totally doable and about to get easier. For sometime now, the DMV has allowed people to to write in the designation “JTWROS” on the certificate of title application. As of January 1, 2017, the form will contain a “preprinted option” for co-owners to choose JTWROS.
Curious how this will impact you and your loved ones? Feel free to reach out to us to discuss it all in more detail.
While it is easy to be dismissive of the idea of creating a pet trust – it’s not something to completely rule out. When it comes to our furry/feathered/hoofed family members – the law doesn’t distinguish between “pets” and “property” – which means that you may need do some extra planning when it comes to the care of your pets if you become unable to care for them or pass away.
The two attorneys at Clayton and Clayton are unfortunately currently experiencing the pitfalls of a lack of appropriate planning first-hand; James’ grandmother is in rehabilitative care, which has meant that our household has temporarily grown with the addition of a tiny Chihuahua named “Prissy.” While she has many adorable and lovable qualities – the sudden arrival of a strange dog has not been the most ideal situation for a family with a toddler, hectic and long work hours, and a busy travel schedule.
What it has done, however, is make us more aware about the importance of having a discussion with our clients about their wishes when it comes to the care of their beloved pets.
While a will is a valid place to establish where you want your pets to go – there are some benefits to using a trust over a will, such as:
• Incapacity: A trust can appoint a guardian for your pet in the event that you are medically incapacitated and cannot care for your animal or communicate your desires about where your pet should go. A will won’t be effective until after you pass away.
• Quick: A trust does not need to go through probate – and will therefore allow the pet to be immediately transferred to the guardian you choose, and allow for funds to immediately go towards the care of the pet. If you disburse funds to cover the costs of pet care through a will, they will not be available until after the will goes through probate – which can take years in some instances – leaving the kind people who took your pet in in a potentially financially stressful situation.
• Reliable: A trust will allow the disbursement of funds to be monitored – the person who takes your pet in can’t drop the pet off at the pound and use the money to take an elaborate vacation or renovate their kitchen.
• Choice: A trust will allow for any remaining funds left after your pet is cared for to go wherever you prefer – a local animal shelter, your family, etc.
If you want to talk about the options that are available for your pets in the event that you cannot care for them, feel free to give us a call or send us an email. We are happy to talk about it with you in more de“tail.”
Procrastinate: “Delay or postpone action; put off doing something.” The definition seems harmless; the simple shuffling of a task to a time that is more appealing. Often, people procrastinate until they are in a better mindset to tackle a task or they avoid the task altogether because it is unpleasant in some way. Estate planning generally falls into the second category. Planning for your own demise is not a task that is undertaken with any great amount of glee. Most people try to avoid confrontations with their own mortality until the eventual becomes imminent– procrastination is the perfect way to avoid dealing with these decisions. “I will do it tomorrow.” However, tomorrow is not guaranteed.
Estate planning is possibly one of the most selfless legal acts a person will perform during their life. For example, the decisions made in a will take effect only after the testator has, as my granddad would have said, had their worst spell. The decisions made with your attorney make life easier for those grieving beneficiaries that remain, not the testator; a clearly written document outlining the disposition of the testator’s property removes the uncertainty felt by most people who's loved one passed without a plan.
I assume if you are reading this blog post you have already realized the importance of planning for end of life needs and you are aware that there are things you need to do to plan for the eventuality of death or incapacity. Don’t procrastinate. We’re all in this together so let’s start talking about it!
We recently met with someone who shared a bit about a difficult experience handling the estate of a loved one who had no estate plan in place.
This conversation reiterated the importance of having a plan in place – even if the estate isn’t so large that it will need a trust or other complex planning. Consider all of the details that your loved ones will face if you haven’t planned – such as accessing your house and caring for your pets, trying to work with doctors to determine who can make health care decisions on your behalf, weighing the heavy decisions about what health care decisions you would even want, trying to guess whether you would want to be buried or cremated, and then working with the court system to try to determine how your assets will be distributed under the laws of intestacy.