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10 Types of Trusts: A Quick Look

Considering the myriad of trusts available, creating an estate plan that works can seem daunting. However, that’s what we, as estate planning attorneys, do every day. We know the laws and will design a plan which addresses your specific situation.

Here’s a look at the basics of ten common trusts to provide a general understanding. There will not be a quiz at the end. All you need to do when we meet is share your goals and insight into your family and financial situation, we’ll design a plan that incorporates the best documents for your situation.

Bypass Trusts. Commonly referred to as Credit Shelter Trust, Family Trust, or B Trust, Bypass Trusts do just that: bypass the surviving spouse’s estate to take advantage of tax exclusions and provide asset protection.
Charitable Lead Trusts. CLTs are split-interest trusts which provide a stream of income to a charity of your choice for years or a lifetime. Whatever’s left goes to you or your loved ones.
Charitable Remainder Trusts. CRTs are split-interest trusts which provide a stream of income to you for years or a lifetime and the remainder goes to the charity of your choice.
Special Needs Trusts. SNTs allow you to benefit someone with special needs without disqualifying them for governmental benefits. Federal laws allow special needs beneficiaries to obtain benefits from a carefully crafted trust without defeating eligibility for government benefits.
Generation-Skipping Trusts. GST Trusts allow you to distribute your assets to your grandchildren, or even to later generations, without paying the generation-skipping tax.
Grantor Retained Annuity Trusts. GRATs are irrevocable trusts which are used to make large financial gifts to family members while limiting estate and gift taxes.
Irrevocable Life Insurance Trusts. ILITs are designed to exclude life insurance proceeds from the deceased’s estate for tax purposes. However, proceeds are still available to provide liquidity to pay taxes, equalize inheritances, fund buy-sell agreements, or provide an inheritance.
Marital Trusts. Marital Trusts are designed to provide asset protection and financial benefits to a surviving spouse. Trust assets are included in his or her estate for tax purposes.
Qualified Terminable Interest Property Trusts. QTIPs initially provide income to a surviving spouse and, upon his or her death, the remaining assets are distributed to other named beneficiaries. These are commonly used in second marriage situations and to maximize estate and generation-skipping tax exemptions and tax planning flexibility.
Testamentary Trusts. Testamentary Trusts are created in a will. These trusts are created upon an individual’s death and are commonly used to provide for a beneficiary. They are commonly used when a beneficiary is too young, has medical or drug issues, or maybe a spendthrift. Trusts also provide asset protection from lawsuits brought against the beneficiary.

There are many types of trusts available. We’ll help you select which trusts, if any, are a good fit for you. Call us today! Call our office at 832.408.0505 or schedule your appointment right now. We’re waiting to hear from you.

Stress Test Your Estate Plan

So you have done the hard work of establishing an estate plan. Good for you! However, you still have serious work to do to ensure that the strategy you have selected will maximize your peace of mind and protect your legacy.

Estate plans should be like living, breathing creations that reflect the changes in your life. Your life can and will change due to new births, children getting older, and other shifts in the family; changes to your investment portfolio, career and business; and changes to your health, where you live, and your core values. Likewise, external events, such as new tax legislation passed in your state or the development of a novel financial instrument, can throw your plan off track or open the door to new opportunities.

Obviously, you should do due diligence without spending inordinate amounts of time noodling over your plan. To that end, ask yourself the following “stress test” questions to assess whether you need to meet with an estate planning attorney to update your approach:

1. When was the last time you updated your will or living trust? Since then, have you had new children or gotten divorced? Have you moved to a new state, opened or sold a business, or just changed your mind about the type of legacy you want to leave behind? Especially if big, tangible life events have occurred, strongly consider updating your documents as soon as possible. Also keep in mind that there may have been changes in the law since your last update that could significantly affect the viability of your plan.

2. Who have you named as executor and trustee? If you had to start your planning over from scratch today, would you still name the same people? If not, why not? Did you choose the best person for the job or was your choice based on less relevant factors? Is the person you chose still available to serve in that role?

3. Do you have adequate insurance? Many people do not have enough insurance for themselves or their businesses. They also fail to name contingent beneficiaries. Get your insurance policies in order, and make sure your designations match your estate plan.

4. How much of your property is jointly owned with someone other than your spouse? Jointly owned property has the potential to be double taxed. Take a look at your real property and seek advice on the proper adjustments to make in order to save on taxes when it’s really necessary to save on taxes.

5. How’s your record keeping? Nothing drives an executor crazy like sloppy record keeping.

6. When was the last time you gave your plan a thorough once-over? Even if nothing “huge” has happened in your life recently, if it’s been over five years since a qualified estate planning attorney has assessed your strategy, schedule a time to meet. Identify any issues, and iron out the kinks one at a time.

After going through the “stress test,” if you have any questions, please feel free to give us a call. Estate planning is an ongoing process, and we want to make sure your wishes withstand the test of time. You can also book an appointment online. We are here to help and love to talk to you.

Four Types of Gifts Under A Will

Many people believe making a will is something that can be done with ease, and although most estate plans do not need to be complicated, most situations will call for something more than just a simple will.

We have set out the legal requirements for making a will in one of our previous blog, which you can read up on here: “Anatomy of a Will”.

“Simple Wills” refer to a document where someone leaves all their assets to their spouse, that’s it, nothing else, nothing fancy. It’s like a “here you go” transaction. If however, this is not what you want, and you would prefer to leave things to specific people or have plans for specific assets, the type of gift will matter. Under the law we have four types of gifts that deserve some extra attention, as each type of gift will fall under a specific class of gift, and will have different legal consequences. So let’s look at each one of them:

1) Specific gifts.

This is when you give a specific property to someone via your will. This type of gift is easy identifiable, and there is no mistake possible to it’s identity.

E.g. That large grandfather clock you inherited from your grand parents, which everyone has seen standing in your hallway. An other example can be the content of a safe deposit box, and although the content might be unknown, the safe deposit box is easily found, as it has a specific location and box number.

2) Demonstrative gifts.

This is a type of gift where we know the source, but not the specific “item” that was left.

E.g. You might have an art or jewelry collection, of which you would like a piece to each of your children or grandchildren. With a demonstrative gift you identify the specific source (your collection), but each item is left to the choice of the individual receiving it.

3) General gifts.

The most common general gift is money.

E.g. You leave someone “x” amount, or a specific value, you don’t care where it come from, as long as they receive it from the items in your estate.

4) Residuary gifts.

This is the last, and least specified gift of the bunch. It’s pretty much anything that is left of your estate after all gifts are accounted for, and all expenses and obligations of the estate have been settled. Residuary gifts are the most generic gifts of the bunch.

If you have more questions, or would like to start your plan, we would love to talk to you! You can book an appointment here, or contact our office. You can also schedule your consultation TODAY by using our online scheduling portal.

James Brown’s “Vague” Estate Plan Forced Family into Years of Litigation

James Brown, the legendary singer, songwriter, record producer, dancer, and bandleader was known to many as the “Godfather of Soul.” Although he intended his estimated $100 million estate to provide for all of his children and grandchildren, his intentions were somewhat vague. This forced his family into years of litigation which ended up in the South Carolina Supreme Court.

Everything Seemed In Order…

Brown signed his last will and testament in front of Strom Thurmond, Jr. in 2000. Along with the will that bequeathed personal assets such as clothing, cars, and jewelry, Brown created a separate, irrevocable trust which bequeathed music rights, business assets, and his South Carolina home.

At first glance, it seems as though everything in Brown’s estate plan was in order. In fact, he was very specific about most of his intentions, including:

Donating the majority of his music empire to an educational charity
Providing for each of his six adult living children (Terry Brown, Larry Brown, Daryl Brown, Yamma Brown Lumar, Deanna Brown Thomas and Venisha Brown)
Creating a family education fund for his grandchildren

However, only days after his death in 2006 from congestive heart failure, chaos erupted.

Heirs Not Happy With Charitable Donation

Apparently, Brown’s substantial charitable donations didn’t sit well with his heirs. Both his children and wife contested the estate.

His children filed a lawsuit against the personal representatives of Brown’s estate alleging impropriety and alleged mismanagement of Brown’s assets. (This was likely a protest of the charitable donation.)
Brown’s wife at the time, Tomi Rae Hynie, and the son they had together, received nothing as Brown never updated his will to reflect the marriage or birth. In her lawsuit, Hynie asked the court to recognize her as Brown’s widow and their son as an heir.

In the end, the South Carolina Supreme Court upheld Brown’s plans to benefit charities and recognized Hynie and their son as an heir.

Should You Anticipate Litigation?

Brown’s estate was substantial and somewhat controversial – and he failed to update or communicate his intentions to his family. His heirs were taken by surprise. And experienced attorney could have avoided much of the family upset. Contact our office today to protect your goals or schedule your personal Estate Planning consultation NOW. We’ll help you decide whether it makes sense to avoid probate in your particular case and, if so, the best way to do so.

Just Like You Need a Medical Checkup, Your Estate Plan Needs a Checkup!

Whether or not you currently have estate planning documents, one important item to add to your calendar is getting an estate plan checkup.

Don’t Have an Estate Plan?

If you don’t already have an estate plan, then getting one in place should be at the top of your to-do list.

Why? Because without an estate plan, you and your property may end up in a court-supervised guardianship if you become incapacitated, and your property and your loved ones may end up in a time-consuming and expensive probate proceedings after you die.

Worse yet, if you don’t take the time to have any estate planning done, then the state where you live at the time of your death will essentially write one for you. It most likely won’t divvy up your property the way you would have and certainly will not protect your heirs the way you would.

A common misconception is that estate planning is only necessary for wealthy people. But this simply isn’t true – anyone with a bank or retirement account, a home, or a family needs to make a plan for what happens if they become incapacitated or when they die. Of course, the complexity of the plan will vary depending on your circumstances, but all estate plans should be put together with the help of an attorney who is experienced with the legal formalities required to create a valid will, trust, health care directive, and power of attorney in your state.

How Old Is Your Estate Plan?

Do you already have an estate plan?

If you do, then please pull your documents out of the drawer, dust them off, and look at the date you signed them.

Were your documents signed in the 80s or 90s, or, worse yet, before 1980? If so, please run, don’t walk, to an estate planning attorney, because your documents are terribly out of date and need to be updated as soon as possible.

Did you sign your documents between 2000 and 2009? Aside from the federal estate tax exemption jumping from $675,000 to $3,500,000 during that time period, state estate taxes disappeared in many states. Because of the significant changes in federal and state estate taxes, documents from this time period may be out of date and need to be tweaked in some shape or form.

Did you sign your documents between 2010 and 2017? Federal estate taxes, gift taxes, and generation-skipping transfer taxes went through major changes during these years, and “portability” of the federal estate tax exemption between married couples was introduced. Unfortunately, while your estate planning documents may only be a few years old, they very likely do not take advantage of the opportunities made available from recent changes in federal tax laws. And, it’s not just tax laws that are changing – modifications to state laws governing wills, trusts, health care directives, and powers of attorney may warrant some revisions to your estate planning documents as well.

And last but not least, regardless of what year you signed your estate planning documents, think about all of the changes in your life since you signed them. Did you get married or divorced, have a child or two or a grandchild or two, or move to a new state? Did you sell your business, retire, have a significant change in assets, or win the lottery? Any major changes in your family or financial situation will certainly have an affect on your estate plan.

Estate Planning Is Not a One Shot Deal

Estate planning is not a static event that you can grudgingly do once and then forget about it. On the contrary, estate planning is a continuing process, because life is a moving target that is full of constant change: Your estate plan needs to change as your life changes.

We are here to help you navigate the changes that have occurred since you had your estate plan prepared and ensure your wishes are still being carried out as you envisioned. For those needing an estate plan, we are here now and in the future to mold your estate plan as you move through the various stages of life.

Call or contact our office today or schedule your personal Estate Planning consultation NOW. We’ll help you decide whether it makes sense to avoid probate in your particular case and, if so, the best way to do so.

Seeing an Estate Planner? Three Key Questions to Ask

Hiring an estate planner is an important decision as you are seeking advice on how to protect your loved ones once you are gone. For this reason, it is critical to hire an attorney with good knowledge of estate planning and how to use the tools available to create the best plan for your particular needs. Be sure to ask questions of the lawyer before deciding whether or not you will hire him or her.

Here are three key questions to ask when looking to hire an estate planner.

How does the attorney’s estate planning process achieve your goals? Just like every family’s needs are different, you should make sure the attorney you hire does not have a one-size-fits all approach when putting together an estate plan for clients. This is because what may work well in one situation may not in another. Be sure that the attorney you hire familiarizes him or herself with your specific situation and custom tailors a plan that will meet your goals and needs.
What are the advantages and disadvantages of the various planning tools for your situation? A knowledgeable estate planning attorney will be able to explain the benefits and risks of the different estate planning tools – such as wills, trusts, pre or post nuptial agreements, and healthcare proxies, among others – available to you under the law. He or she should be able to explain this in terms that you can understand, and explain how these tools work in your specific situation.
How does the attorney take into account other assets and will he or she make sure your plan works will all of them? This question is particularly important if you already have other assets in place such as life insurance, retirement plans, among others. A well crafted estate plan will incorporate other assets so that they help to offset income taxes, equalize inheritances, or leave a legacy. A whole-picture approach to your estate plan is the best way to make sure your family’s needs are met.

Estate planning is a very personal aspect of one’s life and addresses sensitive issues. Making sure you choose the right experienced attorney can make all the difference when your family members needs your estate plan the most. We would be honored to discuss these questions and your needs with you. Give us a call today.

Contact our office today or schedule your personal Estate Planning consultation NOW. We’ll help you decide whether it makes sense to avoid probate in your particular case and, if so, the best way to do so.

Four Common Myths about Estate Planning

1) Myth: My spouse can make all of my healthcare and financial decisions because he/she is my spouse.

Reality: This is not always the case. To make sure your spouse can indeed make important medical decisions on your behalf, you should sign a durable power of attorney and a medical advance directive.

2) Myth: I’ve told my family how I want my affairs handled after I die. They’ll divide everything the way I want it divided.

Reality: Informal discussions about your affairs have no legal enforceability. Even if your immediate family does carry out your wishes, if there is a remarriage or divorce, for instance, your estate could end up in the hands of people you never intended to be beneficiaries. A properly executed will and other estate planning documents are the only way you can ensure your estate ends up where you want it to go.

3) Myth: I signed a will before, so I don’t need to do it again.

Reality: An old will may not reflect your current goals. You or your children may have married or remarried. Your property holdings may have changed. A trust may now be the preferred method to safeguard your legacy because of changes in your circumstances and needs. The only way to know for sure is to have a comprehensive estate plan review.

4) Myth: I am not wealthy enough to need an estate plan.

Almost everyone will benefit from estate planning, which addresses non-wealth aspects of your legacy along with the financial aspects. Estate planning can ensure someone you trust will care for your children and pets after your death, and make sure treasured family heirlooms end up where you want them to go. Estate planning also can help you pass along your values.

Moreover, trusts are not just for the wealthy: In states that practice Medicaid recovery, for instance, your survivors may receive a large bill for Medicaid-funded nursing home care after your death, which can force the sale of assets like the family home. Some states even seize life insurance proceeds. Depending on your situation, a trust can prevent this from happening. The only way to know for sure is to visit with an estate planning attorney to obtain personalized advice for your situation.

Integrating Community Property Trust Into Your Estate Planning

A well-crafted estate plan is comprised of many individual parts, and careful, trust-based estate planning is the best way to ensure the highest possible quality of life for you and your loved ones.

One way couples can make get the most mileage out of their estate plans is through community property trusts. This is a special type of trust that combines a couple’s jointly acquired assets as community property and can save a significant amount of taxes.

Why community property trusts are a great idea

The essential benefit of a CPT is that the basis of community-owned property is stepped up when one member of the couple dies. Not only that — it also steps up the basis for the surviving spouse’s half of the property (rather than only half, which is what happens with “plain” jointly owned property). This means that the capital gains tax will take a much smaller percentage of the surviving spouse’s wealth when the property is sold.

The limits of community property trusts

There are two states in which CPTs can be formed: Alaska and Tennessee. These trusts have to be funded and have ongoing requirements to achieve their tax benefits. So, they are not a panacea and don’t necessarily fit every married couple’s situation.

How CPTs fit in with other estate planning strategies

If your estate plan is robust and ready for all of life’s potential successes and challenges, it likely includes any number of revocable and irrevocable trusts, powers of attorney, long-term care directives, and miscellaneous probate-avoidance precautions.

Community property trusts can only work for the property you fund into them, meaning that you can and should have other strategies in place such as a revocable trust, will, power of attorney, etc. The same property cannot be managed under multiple trusts at the same time, so it is important for us to figure out which of your assets you’d like to set aside for other types of trusts before settling on the details of your CPT.

Community property trusts are not for everyone. However, if we can determine that setting one up is a realistic fit for you and your family, you can expect to save a large sum by avoiding taxes you would otherwise accrue. Give us a call today to see whether this solution might be an effective addition to your other estate planning strategies.

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Don’t Have an Estate Plan?

How Old Is Your Estate Plan?

Estate Planning Is Not a One Shot Deal

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