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Trusts

Friday, May 20, 2016

Controlling Estate Planning Through Trusts

How can I control my assets after death?

The practice of estate planning is dedicated to preserving an individual’s control over his or her assets after death. A simple will can control which individuals receive what assets, but a more thorough plan has the potential to do much more. Establishing a trust is the most common method used to exercise this kind of control. 

A trust can issue a bequest restricted by a condition; for example, a trust might be established to pay out $10,000.00 to a specific grandchild only once he or she has reached 18 years of age. Multiple payments can be made to the beneficiaries as long as the trust is funded. The trust can stipulate that the grandchild may have to graduate from college to receive the money, or even that he or she must graduate from a specific school with a minimum grade-point average or membership in a particular fraternity or sorority.

A trust can make the condition of payment as specific or as broad as the creator of the trust wishes. It may, for instance, bequeath benefits to a humanitarian organization on condition that the organization continues to provide food and shelter to the homeless. There is no limit to the number of conditions permissible in a trust document. Even when the conditions go against public policy and general norms and mores established by society, as long as the conditions may be met legally, they will be upheld by the court.

In order to create a trust, there must be a capital investment to fund it and a trustee must be named. The trustee is responsible for protecting the assets of the trust, investing them to the best of his or her ability, managing real estate and other long-term assets, interpreting the trust document, communicating regularly with the beneficiaries of the trust and performing all of these actions with a high level of integrity. Trust assets may be used to pay for expenses of managing the trust as well as to provide a stipend for the trustee if so provided for in the trust document.

If a trust document is not well written, it may be the target of a lawsuit seeking to dissolve the trust and disburse the assets held therein. Even if the trust is defended successfully, the costs of this challenge may deplete its coffers and frustrate the very reason for its creation. In order to avoid these possible pitfalls, it is imperative that a trust document be drafted by an attorney with a high degree of experience in estate planning law.


Friday, April 22, 2016

What Will Happen to My Pets When I Die?


A past client recently emailed me an article from the New York Post about a custody battle over a recently deceased person’s dog. The judge in the case ruled that the dog should be considered property, and that what was in the best interest of the dog was not something he was going to consider. As a result, the dog was given to the brother of the man who had died even though other relatives who wanted the dog claimed that the brother had neglected the dog’s care. My client asked me: “What will happen to my pets when I die?” Although there is not a ton of case law in this area, it appears there are three basic scenarios that can play out.

1.


Read more . . .


Tuesday, October 13, 2015

Wills vs. Trusts 101

What is the difference between a will and a trust? Do I need one, either, both or neither?

First of all, there is a wide range of differences among types of trusts, but here we will focus on revocable living trusts. A revocable living trust is basically a separate entity in which assets are deposited and withdrawn during one's lifetime. The person who contributes assets to the trust is called the “settlor.” The person who receives the benefits of the trust is called the “beneficiary.” The person who maintains the trust is known as the “trustee.” When the assets are in the trust, they are titled in the name of the trustee. A key benefit to any type of trust is that the assets bypass the probate process upon the death of the settlor.

One of the most obvious benefits to a trust is that the “settlor” can keep his or her estate plan private. A will is filed in court upon the death of the testator, and thus becomes a public record. A trust, however, is a private document. Therefore, if privacy is necessary, a trust may be the way to go.

Another less obvious benefit to having a trust is that it makes handling an estate with real property in multiple states much easier. Without a trust, if the decedent owns real property in more than one state, a probate proceeding must be opened in both states to handle the disposition of that property upon the decedent’s death. If a trust is the owner of the property, however, it can pass to the beneficiary without the unnecessary expense of duplicative probate proceedings.

If you are married, and have substantial assets, a trust can lower your estate’s tax bill. Also, if you are in a second or subsequent marriage, and you and your spouse have separate beneficiaries, you will find that avoiding the probate process altogether can be significantly easier. For those who are single, trusts can, among other benefits, help avoid a court-supervised guardianship. If you have minor beneficiaries, trusts can help your children avoid the pitfalls of inheriting wealth at a young age.

To explore the differences between these two common types of estate planning, consult the experienced attorneys at the Winters Law Firm, serving clients throughout Northwest Indiana. Call us at 219-307-4373.


Monday, October 12, 2015

Protecting Your Vacation Home with a Cabin Trust

Many people own a family vacation home--a lakeside cabin, a beachfront condo--a place where parents, children and grandchildren can gather for vacations, holidays and a bit of relaxation. It is important that the treasured family vacation home be considered as part of a thorough estate plan. In many cases, the owner wants to ensure that the vacation home remains within the family after his or her death, and not be sold as part of an estate liquidation.

There are generally two ways to do this: Within a revocable living trust, a popular option is to create a separate sub-trust called a "Cabin Trust" that will come into existence upon the death of the original owner(s). The vacation home would then be transferred into this Trust, along with a specific amount of money that will cover the cost of upkeep for the vacation home for a certain period of time. The Trust should also designate who may use the vacation home (usually the children or grandchildren). Usually, when a child dies, his/her right to use the property would pass to his/her children.

The Cabin Trust should also name a Trustee, who would be responsible for the general management of the property and the funds retained for upkeep of the vacation home. The Trust can specify what will happen when the Cabin Trust money runs out, and the circumstances under which the vacation property can be sold. Often the Trust will allow the children the first option to buy the property.

Another method of preserving the family vacation home is the creation of a Limited Liability Partnership to hold the house. The parents can assign shares to their children, and provide for a mechanism to determine how to pay for the vacation home taxes and upkeep. An LLP provides protection from liability, in case someone is injured on the property.

It is always wise to consult with an estate planning attorney about how to best protect and preserve a vacation home for future generations.


Monday, September 7, 2015

When Will I Receive My Inheritance?

If you’ve been named a beneficiary in a loved one’s estate plan, you’ve likely wondered how long it will take to receive your share of the inheritance after his or her passing.  Unfortunately, there’s no hard or and fast rule that allows an estate planning attorney to answer this question. The length of time it takes to distribute assets in an estate can vary widely depending upon the particular situation.

Some of the factors that will be involved in determining how long it takes to fully administer an estate include whether the estate must be probated with the court, whether assets are difficult to value, whether the decedent had an ownership interest in real estate located in a state other than the state they resided in, whether your state has a state estate (or inheritance) tax, whether the estate must file a federal estate tax return, whether there are a number of creditors that must be dealt with, and of course, whether there are any disputes about the will or trust and if there may be disagreements among the beneficiaries about how things are being handled by the executor or trustee.

Before the distribution of assets to beneficiaries, the executor and trustee must also make certain to identify any creditors because they have an obligation to pay any legally enforceable debts of the decedent with those assets. If there must be a court filed probate action there may be certain waiting periods, or creditor periods, prescribed by state law that may delay things as well and which are out of the control of the executor of the estate.

In some cases, the executor or trustee may make a partial distribution to the beneficiaries during the pending administration but still hold back sufficient assets to cover any income or estate taxes and other administrative fees. That way the beneficiaries can get some benefit but the executor is assured there are assets still in his or her control to pay those final taxes and expenses. Then, once those are fully paid, a final distribution can be made. It is not unusual for the entire process to take 9 months to 18 months (sometime more) to fully complete.

If you’ve been named a beneficiary and are dealing with a trustee or executor who is not properly handling the estate and you have yet to receive your inheritance, you should contact a qualified estate planning attorney for knowledgeable legal counsel.


Tuesday, June 23, 2015

Basics of Pre-Planning for Long-Term Care

What are the best strategies to consider in anticipation of needing long-term skilled nursing care?


Based on current data, the average annual cost for a stay in a nursing home in Indiana is a staggering $60,000 per year. For many middle-class Americans, this amount – particularly if both spouses need care – is enough to deplete a sizable nest egg in just a few short years, leaving nothing for future generations. As such, it is vital to consider the advantages of long-term care planning long before the need arises, and an elder law attorney can help you best understand your options. 

One foundational principle to understand from the outset is that Medicare does not cover long-term care past 120 days. In other words, a patient needing skilled nursing care longer than four months will need to self-pay. As explained above, paying $5,000 or more per month for a nursing home residency can quickly deplete one’s entire life savings in just a few short years, leaving many to ponder if an alternative option may be better. 

Medicaid Planning

As opposed to Medicare, the Medicaid program does offer full-time benefits for those needing long-term care in a nursing home. However, the program is need-based, and is only available to those who can show a true financial need for long-term care benefits. 

Generally speaking, a Medicaid applicant may only have a small amount of income and assets – not including the family home if the applicant’s spouse is still in residence. Accordingly, pre-planning for long-term care (i.e., Medicaid eligibility) requires the disposal of assets to reach the maximum threshold. Under Medicaid guidelines, below-market transfers of property will trigger a penalty period if the transfer occurred within five years of the date of application. Likewise, any transfers of property made during this five-year “look back” period will result in a penalty congruent with the value of the transfer – and the amount of months the applicant could have paid for with the funds. 

Use of irrevocable trusts is also a way to protect assets from Medicaid regulation, as any property transferred to trust is considered to be no longer “owned” by the trust creator, and therefore is not counted as an asset for Medicaid purposes. Of course, careful drafting of an irrevocable trust is an essential component to the long-term care planning process, and we encourage you to contact a knowledgeable attorney as soon as possible. 

If you are considering long-term care costs and would like to discuss your options, please contact the Valparaiso and Porter County elder law attorneys at the Winters Law Firm by calling (219)307-4373 today. 

Monday, June 1, 2015

The Importance of Health Care Powers of Attorney

How can I ensure that I stay at home until I die?

One of the most common questions we get from our clients when we are putting together health care power of attorney documents is whether the document will allow their designee to put them into a nursing home against their wishes, because, “I want to live at home until I die.” In typical lawyer fashion, we answer, “It depends.”

Health care power of attorney powers do not kick in automatically, so you need not worry about being “put into the old folks home” the minute you sign the document. The powers you are giving your designee are “springing,” which means they spring into effect only when needed - when you are unable to make decisions for yourself. 

This means you cannot be put into a nursing home if you do not want to be so long as you are able to adequately care for yourself or arrange for someone else to care for you in your home. 

If, at some point in time, you can no longer physically take care of yourself and are mentally unable to make arrangements for someone else to care for you, the health care power of attorney then springs into effect. The person you designated then has full authority to direct your care, which includes the power to put you into a nursing home or other facility.

There are certain things you can do to help you maintain your independence as long as possible. 
• First and foremost, you should think long and hard about who you are granting health care decision-making rights to. The right person for the job is someone who is going to respect your wishes. Do not pick someone you do not trust absolutely because the nursing home decision is just one of many decisions they could be making on your behalf. 
• Talk with the person you have chosen to be your health care decision maker while you are still able to do so! They cannot follow your wishes if they do not know what they are. This can be a difficult conversation to have since nobody likes to think about being too sick or injured to take care of themselves, but it is critical to make time to have it. 
• If carefully drafted, and sufficiently funded, a living trust can protect you from unwanted admission to a nursing home even after you are no longer able to care for yourself or make decisions about your own care. With a trust in place, you can designate a trustee that will arrange and pay for your care out of trust assets in the exact manner you specify. So long as there are sufficient assets in the trust to pay for the care you require, you need not worry that you will be taken out of your home.

The knowledgeable attorneys at the Winters Law Firm have extensive experience with estate planning utilizing wills, trusts and various other tools that can help you carry out your wishes for the future. Call us today at (219)307-4373 to schedule a consultation. We are based in Valparaiso, Indiana, and serve clients throughout Northwest Indiana.


Tuesday, May 19, 2015

Using an A/B or ‘Bypass Trust’ to Avoid Double Estate Taxation

My spouse and I maintain assets approaching the federal estate tax threshold. Should we look into transferring our assets to trust? 


Currently, the federal government may impose an estate tax on transferred assets of $5.43 million per individual, or $10.86 million per couple, with a top taxation rate of 40 percent. For higher net-worth couples, a 40 percent tax rate on their hard-earned wealth is simply unthinkable – and fortunately, there are strategies available to avoid this type of tax burden for both the surviving spouse and the ultimate beneficiaries. 

An experienced estate planning attorney, such as Gerald Winters, can help you best meet your financial goals.  One option  many couples have chosen when dealing with this situation is creating a bypass trust.  These trusts, also known as A/B trusts, will address the death of each spouse individually, obviously beginning with the death of the first spouse. Assuming the trust is properly funded, the death of the first spouse will trigger a division of assets into one of two sub-trusts. Sub-trust A will be held for the benefit of the surviving spouse, and is accessible to him or her as needed for the duration of his or her life. Sub-trust B will hold assets in an amount, which does not exceed the federal or state tax threshold, and will remain in trust for the benefit of named beneficiaries, other than the surviving spouse. This way, when the surviving spouse passes away, the contents of Sub-trust B will bypass his or her gross estate for the benefit of the couple’s children or next-of-kin and escape any valuation for estate tax purposes. 

Executing an A/B or bypass trust has additional benefits aside from estate tax savings. Probably one of the biggest benefits of an A/B trust is the ability to skip the probate process upon the death of the second spouse, which will save a significant amount of time and unnecessary expenses. In addition, managing trust assets through the use of a trustee helps to maintain family privacy – particularly upon the distribution of real estate and other titled assets. 

If you are interested in a bypass Trust, or have any other estate related questions, contact trusted Porter and Valparaiso County estate planning attorney Gerald Winters at the Winters Law Firm by calling at (219)307-4373 today. 


Tuesday, February 17, 2015

Long-Term and Intergenerational Trusts

Can You Create an Asset-Protecting Trust That Lasts … Forever?

Several decades ago, most of us felt that we had fully completed our estate planning if we wrote a will that dictated who would receive which of our assets upon death. As estate-planning laws evolved to offer more options, and public awareness of estate planning options grew, more people opted to streamline inheritance processes via asset-protecting and probate-avoiding trusts. 

More recently, states have competed against each other to win a bigger portion of the national estate planning industry. The result? The growing popularity and legality of trusts that span generations and even, in theory, eternity. 

Trusts that last for eternity are called perpetual trusts, and for individuals who wish to protect the financial security of their family for as long as possible, they make a lot of sense. Consider that, with most perpetual trusts:
• Disbursements are optional, not mandatory, resulting in permanent financial protection;
• Grandchildren, great-grandchildren and even great-great-grandchildren and beyond can receive financial security; and
• The financial dangers of unforeseen events like divorce can be avoided via the asset-protecting features of a perpetual trust.

Though numerous states now offer legal perpetual states, risks remain. For instance, according to Harvard Law School professor, Robert H. Sitkoff, perpetual trusts are unconstitutional and may be ruled illegal in many of the states that now allow them.  Also, states that do not allow perpetual trusts may question the legality of protecting assets by moving them to a perpetual trust established in another state that allows them.

Creditors may eventually succeed in “cracking” perpetual trusts and gaining access to assets in debt disputes. Even trusts that last, for example, 365 years (such as Nevada) may eventually be deemed unconstitutional loopholes, since such extreme lengths of time may be deemed excessive (for perspective, go backward 365 years and you’ll find yourself in the year 1650, 126 years before the founding of the United States).

To navigate the complexities of cross-border asset protection, long-term asset protection and the possibility of future challenges to existing trust options, conduct your estate planning with the help of an experienced attorney. Contact Gerald Winters of Winters Law Firm in Valparaiso, Indiana at (219)307-4373.


Monday, January 12, 2015

Choosing an Executor or Trustee

Should you appoint a loved one or a professional as an executor/trustee?


If you are currently involved in creating an estate plan you might be faced with a will or trust in the near future.  If either of these documents is used in your planning you will have to choose a representative to administer it according to your terms.  Because this person or entity will be responsible for carrying out your wishes, it is important to choose someone whom you trust and who has a demonstrated financial ability. 

Choosing an executor or trustee often gives estate planners a lot of grief as they are usually very concerned with picking the right person.  When making this decision, you do have a couple of options to consider and you also have the ability to create a situation that you feel totally comfortable with.  While traditionally the position of executor or trustee was given to a loved one, this is not always a great idea.  If no one in your life fulfills the requirements, you might be considering a service provider, such as an attorney or accountant, whom you currently work with.  This too can be a problem as this type of arrangement has the potential to result in a conflict of interest.

While it may seem like you have run out of options at this point, you have not.  There are professionals who administer wills and trusts by occupation and who can be hired to administer yours.  While it might be possible to get a rough estimate of how much the service will cost, it is nearly impossible to get a definite number as the professional will not know how much work will be involved with the administration until after you die.  Of course, all fees will be paid out of your estate.

Even using a professional might not be sufficient to alleviate your worry.  In that case, it is recommended that you use a combination of parties.  As many executors and trustees need the assistance of a professional while carrying out their duties anyway, you can make it easier for them by appointing someone up front.  Estate planning is about being prepared and appointing a backup executor or trustee is encouraged.  In this way, you are able to appoint a loved one to act as an administrator and let them know which professional you would like them to work with.

If you are concerned about choosing an executor or trustee, or any other estate planning matter, the Winters Firm can help.  We serve clients in the City of Valparaiso and Porter County, Indiana and can be reached at (219)464-7710.

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