Is A Trust the Right Choice for Me?
QUICK ANSWERS
- An "estate plan" is a plan put in place in the event of your incapacity and for "succession" (passing forward) of your assets and care for beneficiaries.
- Incapacity and succession planning through an estate plan provides for liquidity (the availability of money) and avoidance of the need for orders from the probate court.
- The settlement of an estate plan, including a trust, is recognized by the laws in the Probate Code, which is the area of law that deals with certain aspects of personal welfare and the settlement of estates.
- We offer a complimentary consultation to evaluate your assets, goals and options. Our Organizer, which is of great help in any consultation, is available for download at the bottom of this page. Click here to contact us for a complimentary consultation.
IN DEPTH
When Is the Settlement of a Full Estate Plan the Right Choice?
We at Zinnanti Law Firm, P.C. are conservative in our recommendation for setting an estate plan, including a trust. Were there are simpler methods for succession and incapacity planning, we recommend such.
However, a full estate plan, including a trust, is the right choice in any combination of the following circumstances:
- Where you have minor children and, highly advisable, where you have more than one adult child;
- Where you have a spouse and/or beneficiary with a disability;
- Where there are "blended" families from subsequent marriages;
- Where you have real estate of gross value near or in excess of the limit for probate (presently $750,000), however, subject to additional concerns;
- Where you have business interests that will need to be maintained in the event of your incapacity or death;
- Where you have rental properties or other income generating assets;
- Where you have assets in foreign states (which will include the need to employ either an attorney or title company in such foreign state to cooperate in the settlement of your estate plan);
- Where you have non-cash assets of significant value where direct beneficiary designations cannot be made (such as heirloom or collector's items of significant value);
- Any combination of assets or factors which require a governing plan (including disinheritance of potential heirs and beneficiaries).
Please note that a combined estate of significant value (in excess of $14 million for an individual and in excess of $28 million for a married couple) requires additional and more complex planning to avoid the imposition of federal "estate tax." In this case, both a simple and more complex tax avoidance trust would be settled.
The estate plan and the trust become the "governing document" for the management and succession of your estate. In short, a properly drafted and maintained trust is your best insurance for seamless management and succession of your estate.
Can I Plan for Succession But Avoid Settling a Full Estate Plan with a Trust?
Where estates and families are less complex, you can plan through simpler means. For example, in the case of an individual, or married couple, with a only a primary residence, a retirement account (other than a pension) and bank and/or brokerage accounts, it is possible to plan with the use of a "Transfer on Death Deed" for the residence and direct beneficiary designations on the accounts. This is a good alternative where the individual or couple has only one adult child or beneficiary who is free of any disability. Where there are multiple children, or a disabled child or beneficiary, this is a poor choice because of the possibility for partition of any real estate, disagreements over the handling of accounts and lack of a plan for providing for a disabled child or dependent.
In this case, the planning would include making sure that each account has a designated beneficiary and that the "Transfer on Death Deed" designates the sole child or beneficiary as the success in interest to the property and the accounts.
How Are Retirement Accounts Handled with Regard to a Trust?
As employers phased out pensions, "defined contribution" plans (also called "qualified plans" such as IRAs, 401(k) Plans, 403(b) Plans, and certain annuity and insurance contracts) rose in popularity. Accordingly, these are typically a factor in estate planning. While qualified plans do not "go into" the trust, the trust can act as a "conduit" to pass money from the qualified plan to the beneficiaries of the trust. This is the most appropriate solution where there are minor children whose welfare may be dependent on receipt of funds from your qualified plan.
SIDE NOTE: Due to recent tax law, you should always have a designated beneficiary for your qualified plans. If you do not, contact the plan administrator immediately as the failure to have a designated beneficiary can result in an increased tax consequence by greatly shortening the time for distributions.