Retirement accounts are often very misunderstood. Dealing with how to incorporate them in your estate plan can seem very difficult. Here is some basics, but you really need to speak to a professional about your particular circumstances.
You have your Trust and now you are working on funding it. Your attorney (or online service) told you to put all of your accounts in the name of your Trust. Hold on, don't do that with your retirement accounts. Retirement accounts are treated differently when it comes to taxes; they are also exempt for most collection actions. If you change the ownership of your retirement accounts that will trigger a tax and you'll loose that collection exemption. If someone tells you to change the name on your retirement accounts...get a second opinion before you do anything.
If you're married, 9 times out of 10 your should name your spouse as the primary beneficiary. Inheritance of a retirement by a spouse retains the exemption as if they were the original owner of the account. Of course you might be that 1 out of 10...seek professional advice before you make a final decision.
If you are single, see the contingent beneficary section below.
When a non-spouse inherits a retirement account it looses the exemption protections unless you live in a handful of states (Oregon is not one of them). The general best practices it to leave make sure you name each person or organization you want to get part of your retirement account separately - don't name only one person and expect them to share. If you are interested in protecting your retirement accounts from creditors, then there are ways to name a trust to do just that. However, you must name the trust in a specific way and should get the advice of a professional.
If you'd like to learn more about incorporating your retirement accounts into your estate plan, please schedule and complimentary Strategy Session with me.
Most people think of Estate Planning solely as an end of life tool. That is an essential part of Estate Planning, but there are more. I like to think of the end of life portion as the pinnacle of a pyramid. At the base there is getting an understanding of your estate; things and people. As we move up the pyramid there is healthcare, incapacity, and how your life is maintained.
Every client I work with completes an Estate Planning Inventory and Assessment. This includes who you are, who your beneficiaries are, who your decision makers are, what your have (your assets), and your wishes. Completing this Inventory and Assessment gives you a complete picture of the current status of your Estate.
Whether medical, physical, or mental incapacity, an Estate Plan provides for how you and your things are managed when you can't manage them. This includes appointment of healthcare decision makers, financial decision makers, and instructions to those decision makers.
Setting forth the explicit directions on who will get what. Also, how taxes should be paid, the process by which your estate is administered (Private or Public), guardians for minor, etc.
If you'd like to learn more about estate planning, please schedule and complimentary Strategy Session with me.
As parents we all worry in the back of our heads about our children being cared for after we are gone. Hopefully we all get to see our children grow into adulthood and never have to worry about guardians and leaving money to minor children. As the saying goes, "hope for the best, plan for the worst."
In most states a person under the age of 18 cannot directly inherit money & property and be in control of it. Rather, the laws require that a third party be appointed to manage and care for the minor's assets.
This third party can be a custodian or a trustee depending on the type of Estate Plan involved.
In the event you have a Will based Estate Plan, or no Estate Plan at all, the third party will mostly likely be referred to as a custodian. You can name a custodian in your Will. If you have no Will a judge will appoint a custodian. In either case, the custodian must be approved and appointed by a judge.
In the event that you have a Trust based Estate Plan, you can leave your children's inheritance to them in a Trust and select the Trustee for that Trust. Absent some unforeseen turn of events, there is no need for a judge to get involved.
Also, the people you choose as guardians for your children can, and often should, be different than the person you name as Trustee or Custodian. That way your children can have the best of both world after losing everything; the right people raising them and the right people looking after their inheritance.
If you'd like to learn more about leaving money and property to minors, please schedule and complimentary Strategy Session with me.
A couple that I worked with this year was surprised to learn that they need a Will to go along with their Trust based Estate Plan.
This couple came to me with a Will based Estate Plan that they had for years. These was nothing wrong with their plan when it was setup. However, as time passes, circumstances change as to your Estate Planning needs.
After learning about their current circumstances, we all agreed that a Trust based Estate Plan was right for them.
When they came in for their signing cermony, we reviewed their Trust and other documents. The couple was surprised that switching form a Will based to Trust based Estate Plan would require them to still have Will.
REASON #1 - You pass away before your Trust is fully funded.
This can happed if you pass away before you have time to fund your Trust, or if there is a mistake/oversight and an asset is properly funded into your Trust.
In this case, your Pour-Over Will directs that you are leaving your probate assets (those not funded into your Trust) to your Trust. Once the Probate is complete, all of your assets are then handled pursuant to the terms of your Trust.
REASON #2 - Your Trust is invalid for some reason.
It doesn't happen often, but there is always a change that your Trust can be found to be invalid.
It could be an error in executing your Trust, or due to an heir challenging your Trust in Court.
No matter the reason, if your Trust is invalid that you assets will need to go through Probate. In this case, your Pour-Over Will directs your Personal Representative to setup a new Trust with the same goals, heirs and wishes as your invalid Trust. Then all of your assets are left to the new Trust and your assets will go where you wanted them to go in the first place.
As you've heard me say in the past, a goal of having a Trust is to avoid Probate. That means that our goal is to never use your Pour-Over Will.
Despite our goal, we never want to put all of our eggs in one basket and having the Pour-Over Will is an insurance policy for your Estate Plan.
If you have any questions, or want to learn more about Estate Planning, please schedule a complimentary Estate Planning Strategy Session.
Just last week I met with a client with three children. They wanted to leave the home they had built to all three of their children.
This can, and often is a bad idea. When you leave a single piece of real property to more than one person, conflicts can often arises. Most likely they will take ownership as tenants in common...meaning that each of them owns a undivided interest in the whole property.
The conflict comes in determining how the real property will be used. Who gets to live there? Who pays the property taxes? How much is reasonable to pay the owner managing the property.
I often advise my clients to choose one person to inherit the each piece of real property and offset the value of the real property with other assets to other beneficiaries.
If it is a must that the property must stay in the family, there are solutions to set down rules for the use and enjoyment of real property. Those solutions are often expensive. If its important that to you that you leave real property to more than one person, then the expense is well worth it.
If you have any questions about leaving real property to your heirs, or any other estate planning questions, schedule a complimentary estate planning strategy session.