Estate Planning for Beginners Part 6: Funding Your Trust
July 8, 2011
The hard part is done. Your estate plan has been created, all the documents signed and witnessed and notarized. But wait, you’re not quite done yet—especially if your estate plan includes a trust. The task of funding that trust still remains. Without the completion of this crucial step all of your hard work could be for naught.
Funding is the process of putting all of your property into the trust. Your trust is more than just a piece of paper. It works like a protective box, keeping its contents private and safe from probate, and funding is the process of filling that box. Without funding, your trust is just an empty box and doesn’t provide much protection at all.
The first question you may ask is “what should go into the box”? The easy answer is almost everything, except retirement accounts such as IRA’s, 401K’s, and certain tax deferred items such as tax qualified annuities and insurance policies. Start by asking your attorney to create a deed to help you put your home into your trust. For most people, their home is their greatest asset, and the first and most important item to put into the protective box.
The next step is to go to your bank and investment advisor and put your bank accounts and stocks or investments, and any other immediate assets into the name of your trust. To do this you will need your Certification of Trust, which is a short document proving the existence of your trust. Your attorney can provide you with copies of your Certification of Trust.
The third step is to look at all of your tax-deferred assets such as retirement accounts, 401(k) accounts, or life insurance policies. These tax-deferred assets cannot be owned by the trust, but to ensure that the proceeds of these assets are distributed according to your wishes you will need to make your trust either a primary or a contingent beneficiary of the accounts or policies, depending upon your circumstances. If you make the trust your primary beneficiary of these items, then you are arranging to funnel the proceeds of these assets into the protective box when the time comes. But keep in mind that not all tax-deferred assets are created equal—ask your advisor before designating your trust as the beneficiary of these items.
Your last step is to execute a comprehensive transfer document, a simple document stating your desire to put all small or tangible property such as furniture, artwork, antiques, etc., into that protective box, and be considered trust property, rather than subject to probate.
Of course every estate will be different; ask your attorney for a comprehensive list of assets to put into your trust. It is only once you’ve tucked all your assets away under the protection of your trust that you can finally breathe that final sigh of relief.
Estate Planning for Beginners Part 5: Guardians of Minor Children
July 5, 2011
Quite often, an individual or couple’s decision to finally create an estate plan is motivated by a strong need to ensure that their minor children will be protected and provided for. This kind of planning for young children often begins with choosing the person or couple who will care for and raise the children if the parents pass away. But what many parents find is that choosing people who will serve as guardians of their young children is not as easy as they first imagine. In fact, it can be the most difficult and most emotional part of creating an estate plan.
For some families choosing guardians is easy—they simply pick a sibling or parent who is close to their children and who shares a similar parenting philosophy, but for other families the choice is not as clear. The following questions may be helpful ones to keep in mind when considering who may be in the best position to serve as guardian for your young children.
- Is the person someone your child already knows and with whom he or she feels comfortable?
- Does the person live in the same state as you and your child, or will your guardian or child have to relocate?
- Does the person share a similar parenting philosophy with you?
- Is the person married? Does he or she have children already? Are they in a position to welcome another child into their lives?
- Does your potential guardian work or stay home? Would this change if they were to accept guardianship of your child?
- If family is important to you, would your guardian ensure that your child had opportunities to spend time with your extended family?
- Would this person serve as both guardian and trustee until your child came of age, or would you choose two people for these roles—one as guardian and one as trustee?
These are just a few of the many questions you may want to keep in mind when considering a guardian for your child.
In rare circumstances there may be a person you want to explicitly bar from ever gaining custody of your child—an abusive aunt or uncle, or a sibling with a dangerous addiction. In these cases it may be prudent to create an anti-nomination of guardians, a document in which you name the person or couple who should under no circumstances receive guardianship of your children.
We know that these plans concerning the future and care of your children are possibly the most important you will ever make; and we know you’ll want to ensure you make them with the best information and most trusted guidance available. Give these comments thought when you prepare your estate plan.
Estate Planning for Beginners Part 4: Healthcare Documents
July 3, 2011
Thus far our “Estate Planning Basics” series has focused primarily on financial documents, but the documents pertaining to your health care are an equally important part of any estate plan.
The most important healthcare document in your estate plan will be your healthcare directive. Depending on where you live, this document naming a healthcare agent and detailing your wishes for decisions made on your behalf and end of life treatment, may also be called a living will, an advance healthcare directive, healthcare power of attorney, or a personal directive.
Perhaps the most important part of a healthcare directive is the nomination of your healthcare agent. This is the person who will be making decisions (potentially life-and-death decisions) about your medical treatment in the event that you are unable to do so, yourself. The person you choose should be trustworthy, sensitive to the concerns of your other loved ones, and have the strength to ensure that your wishes are followed—even if those wishes are difficult or unpopular.
Like a financial power of attorney, the advance healthcare directive can be very general or very specific in its instructions. In addition to a nomination of agent, most healthcare directives also include (but are not limited to):
- Instructions for life-saving treatment (or your desire for a Do Not Resusicate (“DNR”) order)
- Any existing medical conditions
- Your preferences for alternative medical treatment, if any
- The name of your primary care physician
- Your instructions for the final disposition of your remains
While some people have very specific preferences for medical treatment and end-of-life care, others prefer to leave these decisions in the hands of their loved ones, letting those who care about them make the choices that will bring the most comfort. Whether you choose to leave detailed instructions for care or leave the decision-making to others, your healthcare directive should reflect your choice. We all know the tale of Terry Schiavo, whose lack of a living will resulted in a seven year court battle between her husband and her parents over her end of life care… Don’t let the same thing happen to you or your family.