Wills & Trusts

Decisions about one's Last Will and Testament can be daunting. While the process to draft a Will is not necessarily that complex, the ability to face one's own mortality and make final decisions can often be difficult. Adults of all ages should have a Will since tragic, unexpected events can occur at any age, however unlikely.

A Will is an important piece of every estate plan. A Will provides specific instructions about how and to whom a person's estate shall be distributed upon their death. Without a valid Will, state laws known as "intestacy statutes" provide who will receive your assets. The government - and not you - would dictate how your property, your assets, and your other valuables are divided among family members. More importantly, without a proper Will and accompanying estate plan, your loved ones may have to proceed with a costly and time consuming probate process. A Will can help avoid this - especially when drafted in conjunction with simple trusts.

A Will provides certainty as to who is responsible for handling your estate - whatever size it may be. Even if you are not wealthy, a simple appointment of an executor in your Will can save your loved ones substantial money in court costs and designate who you want to be in charge after your death.  They will gather your assets, pay debts, hire any necessary professional for things like tax returns and make certain filings in Court.  Finally, they will have the duty to ensure that the balance of your assets are distributed in accordance with your wishes.   

Another important aspect of a Will is helping to decide who should take care of your minor children in the unlikely event of an untimely death. While a difficult thing to discuss, it is better to decide before a tragedy who would care for your children and how they would be provided for in the future. Through your Will, you can establish a guardian for your minor children and ensure proper management of finances beyond when your children turn 18.

Estate planning goals evolve and change over time, just as your hopes, dreams, and you yourself change over time. Your Will - along with other aspects of your estate plan - can be amended as your personal circumstances, goals, and planning purposes change. We recommend a regular review of your estate plan to ensure compliance with the latest tax laws; your own personal family situation and best practices. Additionally, other life events can change or even possibly invalidate your Will. They include: marriage, re-marriage and divorce. If one of these events occur, you should review your Will with a qualified attorney.

Trusts
Put simply, a trust is a set of instructions for people near to you.  As a legal matter, it is a contract that serves to manage assets by one person  (or entity) – the Trustee - for the benefit of others (the beneficiaries).  A trust creator (the “settlor” or “grantor”) creates the trust, usually contributes assets to the trust, appoints a trustee to manage the trust and its assets, and designates the beneficiaries of the trust.  The Trustee has a legal responsibility to manage the assets of the Trust for the benefit of the beneficiaries.

Depending on how the trust document is set up, the beneficiaries can have some rights to the assets immediately—for example, the beneficiaries can be entitled to any interest or profit earned by the trust each year—and/or the beneficiaries can have rights down the road, as in a trust that grants its assets to the beneficiaries when the beneficiaries reach a certain age.  Trusts can have many uses in estate and legacy planning, since they can provide much more flexibility than a straight grant of property.  Below are some different types of trusts that can be used in estate planning:

Revocable Living Trust:  A Revocable Living Trust (also sometimes referred to as a Revocable Trust, Living Trust or even a ‘Loving Trust’) is established during the trust maker’s life to determine disposition of his/her assets if he or she becomes mentally disabled and upon the trustmaker’s death.  This type of trust is central to most estate plans and is consequently used often in our practice.  During the trust maker’s life, the trust maker (you)  can be both the trustee and beneficiary of the trust, and therefore have complete control over, and derive all benefits from (and, alas, pay all taxes on) the trust assets during his/her (your) life.  The Living Trust identifies specific trustees and beneficiaries to be automatically designated upon the disability or death of the trust maker. 

If properly done, these trusts can leave one’s assets in protected ways for loved ones while also providing a terrific vehicle for leaving  instructions for loved ones.  A fully funded Living Trust can also help avoid costly and time consuming probate proceedings.  Care must be taken not only to fund these trusts (meaning change assets into the name of the trust) but to keep them funded during your lifetime.  We therefore strongly encourage our clients to fund these trusts during their lifetimes and offer to assist them in this process. 

Family and Marital Trusts:  These are often sub-trusts within a Living Trust (or sometimes contained in a Will).  The purpose of these trusts I to maximize the amount of property that may be passed on to loved ones free of state and federal estate tax and to ensure that no estate taxes will be owed until the death of the surviving spouse.  To achieve these tax-saving goals, the Living Trust is divided usually into sub-trusts. First is a Marital Trust (which is usually divided for tax-saving purposes in two sub-trusts) in order to take advantage of the state and federal estate tax exemptions for the sole benefit of the surviving spouse during his or her life.  Second is what is often referred to as the Family (or Credit Shelter) Trust, which can be for the benefit of the spouse, children, and/or any other beneficiaries that the trustmaker wishes.  There are countless variations of this type of trust that we could draft, depending upon a client’s circumstances and estate planning objectives.       

When we do these trusts, we also ask people to consider whether they want remarriage protections.  For example, if Bill & Mary Smith intend to provide their entire estate to each other when the first of them passes, if the survivor were to re-marry – we ask whether they would care if later, that remarriage were to end in divorce and the inheritance were subject to that divorce proceeding ?  If they do, we often suggest certain re-marriage protections in the Family and Marital Trusts.

Irrevocable Trust:  In contrast, an irrevocable trust is a trust that cannot be modified once created.  Therefore, an irrevocable trust is best used when one wishes to make a permanent gift.  Because the trust maker has relinquished control over whatever assets may be put into these trusts, care must be taken in drafting the instructions for the Trustee and for use by the beneficiaries of the assets.  There are many different types of irrevocable trusts, which depending on client objectives, we can use in addition to the Living Trust, to provide clients with a way to further maximize estate tax savings and protect and transfer wealth.   

Irrevocable Life Insurance Trust:  These trusts, commonly referred to as ‘ILIT’s’ are often used when people own large life insurance policies.  Although proceeds of life insurance are not subject to income tax to the beneficiaries - those proceeds may be subject to state and/or federal estate tax unless the insurance policy is owned and maintained according to a properly drafted life insurance trust.  One of the great benefits of these types of trusts is that the life insurance proceeds can be delivered to beneficiaries in protected ways and protected from creditors and predators.

Special Needs Trust:  A special needs trust, also known as a supplemental needs trust, is a trust whose beneficiary is an individual who has a disability, and who may be eligible for governmental assistance in the form of Supplemental Security Income, subsidized housing, Medicaid, etc.  Because these programs are generally needs-based, eligibility to receive benefits is dependent on falling below certain wealth thresholds.  Assets held in a Special Needs Trust for the benefit of a person with a disability (if set up properly) will not be counted towards determining that person’s total assets, so they will not impact eligibility for governmental aid.

There are a variety of other types of trusts available and used, depending on client’s goals and objectives, including tax savings and Medicaid eligibility.