-Can I avoid probate by making my family joint owners of my property?
Generally, real estate which is held as “joint tenants with right of survivorship” automatically passes to the surviving joint tenant without a probate procedure. Many persons attempt to avoid probate by naming children as joint tenants. Although this practice may avoid probate, it brings with it a host of potential pitfalls. In addition to triggering gift tax consequences, you may subject your home to attack by a child’s creditors, as your child is now a “co-owner” of the asset. Many problems lurk within estate plans founded upon joint ownership. Often a Revocable Living Trust is a better vehicle for probate avoidance. Contact an estate planning attorney before implementing joint ownership strategies.
-The Revocable Living Trust and Estate Taxes
Many people share confusion regarding estate taxes. Some clients seem to believe that the state or federal government will take money from their estate by virtue of a probate proceeding alone. Please understand that probate has nothing to do with taxes. Rather, the expense associated with probate is mainly attorney’s fees.
Under federal law larger estates may be subject to the estate and gift tax. The exclusion level is subject to Congressional oversight and is often the subject of discussion. The unlimited marital deduction affords no real tax liability upon the death of the first spouse die. However, after that first to die we have a single individual with an estate exceeding the exclusion amount which will likely be subject to some estate tax. Consequently, couples who have estates close to or exceeding the exclusion level should properly plan their estate for tax avoidance purposes.
The Revocable Living Trust is a good vehicle to avoid or minimize estate taxes. A properly drafted trust may separate the estate into to two trusts upon the first to die. This strategy will allow a couple to fully utilize each of the individual exemption, allowing double the benefit for surviving spouse. Portability is another benefit a surviving spouse may utilize to minimize the potential of federal estate taxes.
-Will My Estate Planning Trust Protect My Assets From Creditor Claims?
It depends. Generally, for basic estate planning purposes, people execute a revocable living trust. This trust provides the many benefits that I have discussed in prior posts including probate avoidance, privacy, planning for incapacity, and estate tax avoidance. However, a revocable living trust generally will not provide protection from your own creditors.
It is a common misconception that by transferring your assets to a trust you will keep them out of reach of creditors. However, because grantors using revocable trusts have full powers to revoke, amend, and otherwise exercise dominion and control over the assets, creditors may still get to the assets of the trust. Although, a beneficiaries creditors may not get to the assets of the trust if a proper “spendthrift provision” governs the trust.
In order to truly protect assets one must generally enter into an irrevocable arrangement. The downside is that you generally lose control of your assets in an irrevocable trust. However, for some people, the irrevocable trust may make some sense. Some advanced planning techniques may be appropriate to those who have increased liability risks.
-Revocable Living Trust and Privacy
The Revocable Living Trust is privacy. A will that is probated becomes part of the public record. Probate is a court proceeding where a court oversees the administration of an estate. Generally a will would be filed with the court in probate, thus, becoming a public document. A Revocable Living Trust avoids your estate plan becoming a public document by avoiding probate altogether. Consequently, the Revocable Living Trust becomes a good vehicle to keep your estate planning private.
-Check Your Deeds
If you have previously had an estate planning trust prepared, check your deeds to make sure all of your real estate and water rights are titled in the name of your trust. The number one pitfall of the revocable living trust is failing to deed your property to it. Your trust only governs the property it owns.
If you do not have a trust, you should check the status of your deed. For married couples, the vesting language on the deed should include language affording the surviving spouse the right of survivorship. Otherwise, the interest of the deceased spouse will be subject to probate in order to legally convey title. The key language in the deed should be “with right of survivorship.”
-Dealing With Tangible Personal Property
Most states, including Utah and Nevada, provide that personal property may be disposed of by use of a handwritten list left at death. . If the handwritten list is found at your death it is effective to pass items of personal property to specific people by way of probate or specific instruction to a successor trustee. The handwritten list allows people to devise certain items of sentimental value to particular persons even though their estate may be otherwise divided in equal shares. So, if you want your prize hunting rifle to go to your hunting buddy, it is easy to do. The simplicity of the handwritten list is that it can be changed without a complete revision of your will or trust documents.
-Who will care for my minor children if I pass away?
This is one of the major reasons that it is vital for even young couples to have a will. Utah law allows a parent to name a guardian for their minor children by a provision in their will. A person named by will has priority of appointment as the minor child’s guardian. Otherwise, the guardianship of the children could be a matter of litigation between family members as well as the State Department of Child and Family Services. Young families should safeguard their children through a properly drafted will provision.
Another planning tool that can benefit your minor child is a Special Needs Trust. This trust gives the benefit to the special needs child and avoids any spend down provision that may apply for public benefit programs. A Special Needs Trust is a vehicle that can provide the financial peace of mind for you and provide for the care, maintenance and welfare of your child with special needs. Once the designated purpose is fulfilled, the trust assets can then pass to named beneficiaries, including your surviving children and grandchildren.
-The Revocable Living Trust and Guardianship
The number one reason that my clients seek a living trust is for probate avoidance. You can learn more about probate in my previous post on probate. Basically, probate unduly complicates administration of your estate and adds unnecessary expense.
However, there are many other reasons to consider a living trust. First, if you become incapacitated and unable to handle your personal or financial affairs your loved ones would generally need to seek a guardianship from the court to properly provide for your care. In Nevada, a court often requires your assets to be placed in a blocked account so that the court may oversee administration. A trust allows you to name a successor trustee to handle your affairs should you become mentally incapable. This allows YOU to choose your guardian and not some court. A trust generally allows administration without the time and expense of going to court.
-How Do I Handle Affairs When I Live Out of State?
Our attorneys frequently work with clients that live out of state that have the responsibility to close the affairs of parents and grandparents. Our services are tailed to match the needs and budget of our clients. We focus on the most cost effective means to probate the estate, transfer title to real and personal property, and distribute estate assets to rightful heirs.
By retaining counsel located in the county where the deceased passed away, the client retains our experience of knowledge of the local court proceedings, transfer procedures and services. Our firm strives to communicate often and openly with the client to minimize any challenge physical distance may present.
-Cremation and Burial Instructions
Upon a person’s death, loved ones often disagree as to the proper disposition of the remains. I have had more than one panic phone call stating “My brother is having my mother cremated and I don’t want him to.”
It is vital to a proper estate plan to make appropriate arrangements for your remains. I find that a failure to properly plan these issues can lead to family strife and, at times, litigation.
Both Utah and Nevada law give preference to the properly expressed wishes of a decedent. In Utah, burial instructions may be made in a will or separate legal directive (often executed when making advance funeral arrangements), stating the name and address of the decedent, the decedent’s wishes, the decedent’s signature, the signature of two unrelated witnesses, and the date the document was executed. Similarly, in Nevada, a person may execute a will or other directive to establish burial instructions.
If no instructions are left by a decedent, the law generally provides a plan of priority as to who may order the burial or cremation. In Utah, absent a written instruction, the following order of priority applies: (1) Surviving Spouse, (2)majority vote of surviving children over 18, (3)unanimous consent of surviving parents, (4) next of kin, (5) public official charged with disposition of deceased persons. You can see the obvious flaws in this imperfect system. What if the kids do not agree and are evenly divided? What if only one surviving parent consents to cremation? Does it then fall to a next of kin to make the decision?
Nevada law follows a similar system of priority, absent a writing, as follows: (1) The surviving spouse, (2) An adult son or daughter (former law required a joint decision), (3) either parent (former law required parents jointly), (4) Adult brother or sister, (5) a grandparent, (6) a guardian, (7) a person who held the primary domicile with the decedent as a joint tenant (i.e. unmarried partner.) The Nevada system went away from a majority vote of children to “an adult child.” This seems to invite panic among siblings.
This is a situation where the legislators have done the best they can with a difficult situation. Many familial problems can be solved by properly designating your burial instructions in your estate plan and/or making advance arrangements with a funeral home.