Your Will

Some clients choose to have only a Will prepared, as opposed to a Will and Trust combination.  Having a will does not avoid the need for a probate, but it does let the Court know whom you want to appoint as your personal representative, whom you want as your beneficiaries, and your other wishes included in the Will.  So, it is helpful.  And, there may be times where a simple Will, without more, makes the most sense — such as with clients who have the bulk of their assets in another country.

Just be aware that your US estate will still need to go through probate, and it is through that lawsuit that the Court will provide all appropriate authorizations and transfers.

Will + Trust Combo

This is the combination H&S tends to recommend in most cases because it generally allows you to avoid your estate going through probate at all.  That said, there can be some extenuating circumstances of which you should be aware.

Third Party Providers – As a general disclaimer, bear in mind that banks, annuity companies, insurance companies, retirement funds, etc. are private third parties that have their own rules.  It would not be possible to anticipate the policies and procedures of every company out there, but we will try to give you some general guidance.

Banks

The most seamless option would be to establish a bank account in the name of your trust.  That way, when you pass away, the successor trustee should be able to simply take over, and nothing else changes.

If you resign as trustee prior to your death, then the process is even simpler still.  Absolutely nothing would need to be done after your passing.   A trust, like a company, does not die.  So, as long as you have an authorized person in place, your passing should have not effect on the Trust’s bank account.

If you find it convenient to have a personal bank account, then your estate (i.e. your Personal Representative) will need to deal with the bank’s rules regarding the beneficiary(s).  Hopefully, it will be a simple matter of presenting a Death Certificate and a copy of the estate documents (i.e. Will and Trust).

Annuities, Retirement Accounts, Insurance, etc.

These types of accounts generally ask you to name a beneficiary(s).  Most often, the beneficiary(s) you name on the account will be the same as in your Trust.  In that case, there may be no reason to do anything.

If, upon your death, the account will simply cash out and be paid to your beneficiary(s) – and assuming that is what you want to happen – then you are probably all set.

Caveat:  It would be wise nonetheless to double-check with your account manager and let him/her know about your new estate documents.

On the other hand, if you have set up an account that will continue after your death – as opposed to being cashed out (i.e. liquidated) – then you probably will want to make some changes while you are still alive.

For example, you may want to change the beneficiary(s) you named previously to the account by substituting in your Trust as the beneficiary.  That way, the benefits will flow to your Trust and be managed or dispersed by your Trustee.

Also, for continuing accounts, there could be other complications, such as determining who will have authority to direct the account manager, make certain decisions, etc.  More than likely, you will want your Trustee to take over this role.  In order to know what needs to be done to make that happen, you will have to talk to your account manager or representative.

The one thing you do not want to do is leave some loose thread that will require a probate to resolve, even though you have gone through the trouble of setting up a Pour-Over Will and Trust.

At HLA, we believe that just about everyone should have a Will and Trust as basic estate planning, so we strive to make that set up very cost-effective.  Obviously, the low, fixed rate  does not include anything beyond drafting your estate documents and presiding over execution.

If you would like some help tying up other loose ends, such as those described herein, we are happy to do so.

~ Jeff Harrington, Esq.

In our firm’s international practice, we work with Europeans and South Americans, whose legal codes essentially disallow (or disregard) the concept of a trust. It is sometimes hard to explain to such clients the advantages of a trust because it just sounds too good to be true.

Q: So, you’re saying I can put my assets into a trust and no creditors will be able to touch them?

A: That’s right. The trust has to be set up in a particular way, but you certainly protect your assets from creditors through the use of a trust.

Q: Can I still control and have access to my assets even though even though they belong to a trust?

A: The simple answer is “yes.” The full answer will be part of the upcoming article on asset protection trusts.

Q: When I die, my estate does not have to go through the probate court if my assets are in a trust?

A: That’s correct. Your beneficiaries do not have to wait for a court order, and your estate will not be depleted by court costs and legal fees.

Q: I don’t want a money grab when I die. With a trust, can I control precisely who gets what, when and how?

A: This is one of the major advantages of a trust. Having a will is certainly better than nothing, but a will certainly cannot give you the kind of control a trust can.

Q: What about in-laws? I want to protect my heirs from their spouses and their spouse’s family.

A: There are some situations, such as with homestead properties, where the use of a trust is the only way to accomplish this goal.  [ Read more about homestead rights and trusts here]

Q: Can I make sure my loved one with special needs is taken care of?

A: Yes. In fact, there is something called a “Special Needs Trust” that is designed specifically for this purpose.

Q: I am concerned about losing my medicaid benefits. Can I use a trust to avoid that?

A: Yes. There is a particular kind of trust commonly used to protect medicaid and other government benefits.

Alright, so you can see there are many advantages to incorporating a trust in your estate planning.  But, what is a trust?

I tell clients they can think of a trust like a company.  That is not a great analogy, but it does at least help to think of the trust as an entity that is separate from you personally.

Your trust may be your alter-ego, but it is not you.  And, that is the key feature that makes the trust so useful.

Since the trust is not you, then the assets that belong to the trust are just like assets that belong to a different person. [ Caveat: The trust must be set up in a specific way for this to work. ]  So, the trust can be used for asset protection.  That is, even though you may personally be subject to collection by a creditor, your trust is not.

More on Asset Protection

More on Asset Protection

The same is true for avoiding probate.  Even though you will die, your trust will not.  In that sense, it is like a company.  The trust will live on, and the trustee will continue to carry out the instructions you leave in the trust agreement.  For that reason, there is no reason to subject your estate to the court system for probate.  Everything that you put in place with your trust simply carries on after your death.

As mentioned, there are some ways in which a trust is not like a company.  In reality, most of those differences come down in favor of the trust.  In other words, in most ways, a trust is actually better than a company.  Here is an article that compares and contrasts the features of a trust to those of an LLC.

Trust vs. LLC

Click Here

The next article in this series describes what it means to “put assets into a trust” and exactly how to do so.

Later articles in this series will explore a few of the most common types of trusts used for estate planning, such as a living trust, as well as common strategies, such as a Pour-Over Will & Trust combination.

Stay tuned.

~ Jeff Harrington, Esq.

 “Your trust may be your alter-ego, but it is not you.”  – J. Harrington

Let’s face it. We all have a tendency to put off thinking about our own demise. It usually takes some kind of prompt to get us to take the time – and pay the money – to have a will drafted. That prompt may come in the form of the birth of child or development of health issues. Those are common reasons people start thinking about their last will and testament, but are they the only reasons?

In reality, every adult should have a will – even if the estate does not have significant assets – and these are the reasons why.

Healthcare Directives

Even if you don’t own much more than the clothes on your back, it would still be worthwhile to put together a simple will with instructions about how you would like your healthcare to be carried out in the event you are unable to make your own decisions.

Would you like your life to be artificially sustained even if you in great pain? What about if you are in a vegetative state? Let’s say you are in a coma, and the doctors do not know whether you will ever recover. They can keep you alive, but doing so will likely bankrupt you and your close family members. What would you want to happen?

These are very difficult and very personal choices. Ideally, you should make these decisions for yourself. A simple will with standard healthcare directives will cover broad categories of circumstances, so your loved ones will have some idea of what your wishes are should the situation ever arise. At the very least, you can name the person you want to make those decisions on your behalf.

The truth is it’s not fair to put your loved ones in the position of having to make such decisions without any guidance from you.

Hopefully, the situation never arises. But, the time and money its takes to cover these contingencies are so minimal there probably is no good reason for any of us not to have healthcare directives in place. And, if you are going to do the heathcare directives, why not just include them in a will?

Control over Distribution

Alright, so I suppose if one really does not have much in the way of assets, then distribution is not a big issue. Then again, it’s not like one’s will is going to expire. Hopefully, there will have some assets in the future, so why not put the estate in order now?

After all, making a will early on may very well lead to clearer, more objective decision-making about who gets what.

In any event, most people do have enough in the way of cash, insurance proceeds, real property, vehicles, etc. to warrant the nominal expense of drafting a will.

Do not be under the impression that the judge or your friends and family will make sure the right people get the right things. They won’t have any control over what happens.

Chapter 732 of the Florida Statutes covers intestate succession. (Dying “intestate” means dying without a will.) Those rules are rigid and, perhaps, just a bit arbitrary. There is no room for fondness or necessity or any of the things you personally might want to be considered. By and large, the judge is not allowed to consider anything outside this set of rules set up specifically for people who die without a will. Nothing else matters.

So, even though everyone knows you were madly in love with your fiancee, she gets nothing. Even if your younger sibling really needs the help more than your older sibling, the split will be the same. And, though you were fully intending to divorce your spouse and cannot stand the thought of giving her/him your company . . . well, you get the idea.

Without a formal will, you completely give up control of your estate. All the judge can do is follow the statutes – even if the result is the exact opposite of what you would want.

 There are many sad stories (and a few humorous ones) about the outcome of intestate succession. Maybe you think “Hey, if I’m dead, I don’t care what happens.” That may be true but, then again, it is not really about you at that point, is it? You are planning today to protect the ones you care about tomorrow.

Costs

While Florida has no estate or inheritance tax – which is a big advantage over some other states – there will still be additional expenses if you die without a will. If nothing else, there will likely be significant additional legal expenses involved in the probate of your estate if you leave nothing behind to guide the court as to your wishes.

Children

Naturally, issues related to guardianship and providing for children from other marriages are very important items addressed in your will. If that situation applies to you, then you probably do not need much convincing. Going forward without a will is gambling with the welfare and happiness of the most loved – and vulnerable – people in your life.

Tax Planning

Most of this article has been aimed at demonstrating that even people who might think they do not need a will probably really do. Much more attention will be given in upcoming articles to key issues and techniques available for those whose estates are large enough to warrant tax and succession planning. Here, it is enough simple to note having a will is the first step towards effective estate planning.

~ Jeff Harrington, Esq.

The post ESTATE PLANNING: Advantages of a Will first appeared on Harrington Legal Alliance.]]> https://Harringtonandsheppard.com/estate-planning-pour-over-will-trust-combo-part-iv/ Sun, 05 Sep 2021 20:35:58 +0000 https://www.harringtonlawassociates.com/?p=1392 The will-trust combo is a standard technique in estate planning because it is an effective, convenient and cost-efficient means to your goals.

The purpose of this article is to highlight the key advantages of a Florida land trust so, whether you are a realtor or a buyer, you can better understand the options and make smarter decisions.

Establishing a Land Trust

Florida Land Trusts are simple to create and are an excellent planning tool for residents and nonresidents alike. In Florida, we actually have a land trust act, which creates a statutory right to utilize this vehicle. Many states do not have such legislation, which can lead to a certain amount of uncertainty.

There is no need for any nervousness with a Florida land trust because the state legislators have clearly given it their blessings, along with concrete guidelines in the form of the Florida land trust act.

Benefits of a Land Trust

Avoid Probate

While Florida has long been a destination of choice for retirees, it is nevertheless one of the worst states when it comes to probate of one’s estate. The process is expensive and time consuming. One of the biggest advantages of a land trust is that you can avoid probate of your real property. With a land trust, you simply designate the beneficiaries in the trust document, and the rest takes care of itself. That is, since the land trust will be the owner of the property, and the land trust never dies, the trust property need never pass through the probate court.

In this regard, the trust document acts kind of like an insurance policy. When you decease, the trust property will be governed by the provisions of the trust document. Specifically, your beneficiaries will receive the trust property in the manner you see fit.

So, just as important as the cost savings is the control you can exercise over the trust property. For example, you get to decide whether you want the land trust to continue to own the property, paying monthly or quarterly rent to the beneficiaries, or liquidate the property and give the sale proceeds to the beneficiaries. Or, you can liquidate a portion of the assets and hold the rest, transfer assets to some beneficiaries but leave other assets in the trust until beneficiaries reach a certain age, etc.

The possibilities are as boundless as your imagination. The point is you get to decide, not a judge.

Managing Trust Property in the Event of Incapacity

Sooner or later we all get old. At some point, you will be unable – or simply unwilling – to manage the Trust Property. No problem. You can name a Successor Trustee in the trust document, who can take over whenever the need arises.

If you are mentally fit but just ready for a break, then all you have to do is resign as trustee. If you are not mentally or physically incapacitated, a well-drafted trust document will have provisions that cause your Sucessor to be appointed without involving the courts.

Again, you are in control of the governance of your estate, not a judge.

Privacy

My firm caters to foreign investors, so this issue comes up often. If you are from Venezuela, China, Argentina, or any other country with a rather authoritarian government, then you are interested in keeping your US holdings private. No problem.

As you may know, Florida companies are not particularly private. In fact, you can easily discover the owners and managers of any company by simply checking the state department’s website at sunbiz.org. That’s not ideal.

However, unlike a corporation or limited liability company there is no public record of trusts. That is, there is no requirement to register the land trust with the State Department, so nothing appears on the website.

Further, title to the property will be in the name of the trust, so there is no transparency there.

If you want complete anonymity, then you will want to name someone else as the trustee – like your lawyer, for example. That way, you do not even sign any paperwork related to trust property.

This is very handy for internationals and anyone who wants to maintain confidentiality.

Avoid Judgments & Liens

If you have judgments hanging over you head that would allow creditors to attach proceeds from sale of real property, then pay attention. If you set up the trust correctly – and, I would not recommend you do this without an attorney—then, legally, the property the trust buys and sells is not yours and your creditors cannot touch it.

There may be some tax implications, which we can discuss in a consultation, but at least you are back in business. You can buy and sell property without worrying about creditors taking all the profit.

Trusts have long been a great vehicle for asset protection, and the land trust is perfectly suited for protection of real property and the capital gains.

Facilitation of Multiple Owners

If you belong to an investment group, it can be cumbersome to involve all the investors in every transaction. You could, of course, nominate a president or chair person to sign on behalf of all investors, but then you have to deal with the politics of choosing the empowered one.

With a trust, it is more comfortable to assign signatory rights to one individual because that comes as a built-in feature of a trust.

The trustee is the one and only person who will sign off on all trust transactions. If you want extra checks and controls, you can create a board of trustees. But, if you are looking for simplicity, then hiring an attorney or a trust company to represent the trust is a very efficient solution.

The same is true for foreign owners who cannot be present for every trust transaction. Having a trustee in the local forum obviates any need for travel, apostilles, etc.

Facilitation of Dispute Resolution or Succession

Like companies, a trust can stipulate to the terms of resolution in case of a dispute between owners or beneficiaries. This can be extremely important since litigation is expensive. So, for example, the trust document can state that disputes must be resolved through binding mediation. You can even name the person you want to act as the mediator.

You make decision right at the start – when everyone is happy – and then there is no need for unnecessary complication or expense should disagreements arise in the future.

Ease of Maintenance

Unlike corporations or limited liability companies, land trusts do not require annual filing fees with the state. So, besides saving the annual fee, you do not have to worry about missing the deadline for renewal, filing amendments, etc.

Additionally, depending upon how you set up the trust, you may not even need to obtain a separate tax I.D. or file a separate tax return.

Ease of Changing Beneficiaries 

I am not saying I recommend this, but some people actually use a land trust in place of a will. One advantage of the land trust is that you can amend the trust document at any time without having to change the deed. There is no requirement to record the trust document, so the amendments are simply done privately, just as you would a will.

Also, from a tax standpoint, be aware that transfers among beneficiaries do not trigger the Florida documentary transfer tax.

Making Gifts 

Land trusts can be an excellent estate planning tool to gift assets out of an estate, minimizing estate tax without sacrificing equity.

Favorable Tax Rate

Unlike a corporation, beneficial owners of a land trust – including foreign nationals – are only taxed at the favorable individual capital gain rate. Depending upon the situation, you may choose for the trust to file its own tax return, which may result in a higher tax rate. Otherwise, you will enjoy the same tax rate as you would individually.

Moreover, if at least beneficiary of the trust is a Florida resident, then the land trust can qualify for the homestead exemption, which provides excellent asset protection and tax benefits. Section 689.071 was recently amended to reflect that the principal residence of a beneficiary held in a Land Trust qualifies for the Homestead Tax Exemption.

Conclusion

I realize a land trust might sound somewhat exotic, but you really should take the time to learn more about it. It is almost certainly the most flexible, useful, and advantage vehicle available to you.

~ Jeff Harrington, Esq.