TRUSTS AND ESTATE PLANNING
1. What is Estate Planning?
Estate Planning Tools
3. What is a Revocable Trust?
4. Purposes of Revocable Trusts
5. General Nature of Trusts
6. Overview of Revocable Trusts
7. Features of Revocable Trusts
8. Durable Powers of Attorney (vs. Conservatorships)
9. Naming Guardians of Children (vs. Guardianships)
10. Asset Distribution and Timing
Avoiding Probate, Conservatorships and Guardianships
12. Pour-over Will vs. Standard Will
13. Asset Management
& Asset Protection
14. Taxes and Revocable Trusts
15. Disadvantages of Revocable Trusts
17. Special Needs Trusts
18. Trust Pricing
19. Disclaimers of Inheritance
20. Estate Tax
Contact us for your Estate Planning needs.
[Caution: Under EGTRRA’s "sunset" provision, the laws governing federal income, gift, estate,
and generation-skipping taxes will apply beginning in 2011 as if the 2001 Act had never been passed, unless Congress acts
to the contrary.]
1. WHAT IS ESTATE PLANNING?
Estate planning is the process
of arranging assets and personal matters in a manner that helps to meet lifetime financial and personal objectives, and simultaneously
helps provide for survivors' needs and the disposition of property at death. A carefully implemented estate plan can help
• create and conserve assets during life
• protect assets from creditors and judgment
• minimize death taxes and estate settlement costs
• assure that cash is available to pay unavoidable
death taxes and costs
• provide an orderly distribution of assets that meets the estate owner's objectives and intentions
• name health and financial caretakers in case of incapacity
• avoid the costs and confusion of probate
• maximize financial and emotional support for your beneficiaries
• preserve your estate throughout your
• provide for charitable contributions
• ensure peace of mind and family harmony.
2. The Estate Planning tools include:
• trusts and wills
• forms of property
• estate valuation
• marital deduction
• qualified terminable
interest property (QTIP)
• Section 6166
• generation-skipping transfer tax (GSTT)
life insurance trust ($3,500)
• irrevocable trusts ($4,700+)
• bypass trust
GRITs, GRATs, and GRUTs
• family limited partnerships (FLPs)
• Section 2503(c) trust
• qualified domestic trust
• advance medical directives
• income in respect of a decedent
• revocable living trusts, and much more.
• special needs trusts: - see #17
3. WHAT IS A REVOCABLE LIVING TRUST? (Full Trust pricing at bottom)
A Revocable Living Trust, also known as a family living trust, or inter vivos trust, is a trust created during the
grantor's lifetime that the grantor may alter, amend or revoke. While the revocable living trust is revocable during the grantor's
lifetime, it usually becomes irrevocable or terminates at death.
Full Trust Package includes 1 Family Trust, 2 Pour-over Wills, 2 Durable Powers of Attorney for Financial Matters, 2 Health
Care Directives, Notarization and Full "Funding" of the Trust. (Please ask for our Trust Pricing Sheet for
details and limitations.)
Full Trust pricing is at the bottom of this page.
Stand Alone Revocable Trust + Pour Over Will (not a Full Trust package: does not including DPoA or
- $2,000 (includes notarization and Funding)
Amendments to Revocable Trusts:
- 1st subject: $1,250 (+$250 if
- each additional subject: $500
(+$150 if restatement required)
4. Purposes of the Revocable Living
Because of the revocability feature, the revocable living trust does not provide any tax advantages
during the grantor's lifetime or at his death. The main purposes of such trusts are:
• to avoid probate on
any assets transferred into the trust during the grantor's life;
• to receive life insurance proceeds made payable
to the trust at the grantor-insured's death;
• to receive probate assets pouring over into the trust under the deceased
grantor's will at death (assuming the trust did not terminate upon the grantor's death);
• to keep the decedent's
directions for distribution of the assets from being open to public inspection (wills admitted to probate are subject to inspection
by the public);
• to control, through the terms of the trust, the disposition of trust assets much as the grantor's
will would have done if these assets were part of the probate estate.
• to provide management of the assets transferred
to the trust by a trustee other than the grantor, if the grantor becomes incapacitated.
5. Background on
the General Nature of Trusts
A trust is a legal entity created by a grantor. The "trustee" takes
legal title to the property transferred by the grantor to the trust. The "grantor" is an individual who wishes to
have the trust manage property on behalf of the trust beneficiaries. The beneficiaries are said to hold the equitable or beneficial
title to the trust property. That means they are generally entitled to the income and/or principal of the trust.
trustee, as legal titleholder, can exercise most of the usual rights over trust assets. For example, he or she can usually
invest or sell the assets. But trustees cannot act in their own interest; they must act in accordance with the trust terms
and their fiduciary responsibilities to the trust beneficiaries.
The revocable living trust may be contrasted with
both an irrevocable trust—also a trust created during life but which can't be changed—and a testamentary trust—a
trust established by the decedent's will to take effect after death.
The trust agreement should always be in writing,
and should be prepared only by an attorney who specializes in estate planning. Once the grantor's objectives are known, the
attorney will draft a trust that addresses the following key issues:
• Who (if anyone) is to receive the trust
income, and how long do these income payouts (or the accumulation of income) last?
• Who is to receive distributions
of trust principal and at what times?
• When will the trust terminate?
6. Overview of the Revocable
We have observed that the trust is revocable. A written amendment to the trust can be prepared
at any time by the grantor's attorney. There's no tax or other penalty for doing this, since the trust does not provide income
tax or estate tax benefits to the grantor anyway.
Further, a revocable living trust is a private document, whereas a
testamentary trust will become available for public inspection when the will is filed for probate.
Finally, estate assets
will have to travel through probate—with the usual reduction by probate costs—before they get into the testamentary
trust. Any assets placed in the revocable living trust before death will avoid probate (but not estate taxes). And this won't
jeopardize the security of the grantor and his family. If an emergency arises, the grantor can simply revoke the trust and
get back outright ownership of the former trust property.
to Revocable Trusts or other Estate Planning documents:
- 1st subject: $1,250 (+$250 if restatement required)
- each additional subject: $500 (+$150 if restatement
Typical Features of a Revocable Living Trust
Typically, the first part of the trust instrument will direct
how the trust is to be managed during life. The second part will deal with the management and disposition of trust properties
The trust agreement will generally provide that, during the grantor's life:
• the grantor
is to receive all trust income;
• the grantor may add property to the trust or take property from the trust at any
• the grantor can change any of the trust provisions—or cancel the whole arrangement—for any
reason and at any time.
The grantor can name himself or herself as the sole trustee of the trust. However, if the
grantor wants to avoid day-to-day investment responsibility, a bank or some other person can be named trustee.
part of the trust instrument will direct exactly how the trust properties are to be used and disposed of after the grantor's
death. In this sense, the revocable living trust is like a will. It can be changed at any time during life, but the terms
of the trust instrument become unchangeable at the grantor's death.
8. Durable Powers of Attorney (DPoA)
Designate trusted loved ones whom you wish to take responsibilty over your healthcare and financial matters in case
of your incapacity.
Financial DPoA: $1,250
Health Care Directive (HCDPoA): $1,400
Both (single): $2,500
Both per couple:
Domestic Partnerships (Civil Union) ($500)
If, however, you become incapacitated
without Powers of Attorney in place, your loved ones may need to obtain a court ordered Conservatorship to manage your healthcare
and financial matters.
Conservatorship: $7,500 (add $1,500 for
urgent Orders - w/i 30 days)
9. Naming Guardians for Minor Children
Name trusted loved ones
whom you want to take care of your minor children in case of your demise. Guardians need not be the same person as your Trustee.
Generally, your children's guardian is responsible for your childrens' day-to-day needs, while the Trustee manages and distributes
your trust assets for the benefit of your beneficiaries.
If, however, you become incapacitated (or die) without Guardianship
papers in place, your loved ones may need to obtain a court ordered Guardianship to take care of your minor children.
Guardianship: $7,500 (add $1,500 for urgent Orders - w/i
10. Asset Distribution and Timing
Designate each beneficiaries' share of your
estate, and provide instructions to your trustee as to when and how lump sum distributions shall be made to beneficiaries.
For example, while your trustee is instructed to provide for your minor childrens' day-to-day needs using the trust assets,
you further instruct lump sum distributions of each child's share, 1/3 at age 25, 1/3 at age 30, and the remainder at age
35. This strategy can help preserve each child's share of your trust until he or she reaches a more financially responsible
age, and prevent beneficiaries from depleting their inheritance at a less responsible age.
Probate, Conservatorship and Guardianship Costs and Delays
Properties transferred to the revocable living
trust during the life of the grantor are not subject to probate at the death of the grantor. Thus, assets in the trust can
avoid the delays and the costs of settling or probating an estate. Probate costs may be substantial or modest, depending on
Settling the estate of a decedent always ties up the decedent's property—at least to some degree. Typically,
the local probate court will appoint the executor or an administrator who will collect all the properties of the estate, hold
these properties until creditors' claims are satisfied and other formalities are complied with, and then distribute the remaining
properties as directed in the decedent's will or, if there is no valid will, according to state intestacy laws. During this
time, which usually ranges from six months to a year or more, the properties may be poorly invested and income or principal
may not be readily available to the beneficiaries or heirs.
The revocable living trust can be especially important
if the grantor owns real property in states other than the state of his residence. The grantor can avoid multiple probate
proceedings in several states (called ancillary probate) by placing the property in the trust during life.
however, you become incapacitated (or die) without Durable Powers of Attorney or Guardianship papers in place, your loved
ones may need to obtain court Conservatorship or Guardianship Orders to take care of you or your minor children. (see
#8 and #9 above)
12. Pourover Will Receptacle
The revocable living trust
can be a "shell" during the grantor's lifetime. That is, the trust can be dormant, unfunded, or under-funded during
life. If the trust did not terminate at the grantor's death, the trust may receive unfunded assets passing under the "pour-over"
will (after probate), including from life insurance policies. Remember, the trust may now be irrevocable, and the grantor's
comprehensive plan for the disposition of assets will be carried out via the trust terms.
With respect to life insurance
proceeds, the trust can provide more flexibility in the payout to beneficiaries than is possible with the standard settlement
options offered by the insurer. Also, where there are a number of different policies, the proceeds can be consolidated in
the trust and administered under one comprehensive plan of disposition.
Of course, a standard Living Will (Last
Will and Testament) can be established in lieu of a Trust, but the many benefits of a Trust (see #4 above) would be lost.
Standard Living Will: $800
Second Spousal Will: $200
Statutory (simple) Will: $250; $400/couple
Asset Management and Protection
The revocable living trust can be more than a mere shell during the grantor's
lifetime. If the grantor wants to be free of investment responsibilities, or fears future mental incapacity or absence from
the property, assets may be transferred into the trust during life where they will be professionally managed. The grantor
will usually receive an income earned by these assets since he or she is going to be taxed on it anyway.
to popular belief, Revocable Living Trusts do NOT offer any Asset Protection to the Grantor(s) during their lives. However,
limited Asset Protections may be triggered for the surviving spouse and/or beneficiaries.
Asset Protection Planning
(consultation & proposal: $750): Asset Protection strategies
involve "foregoing" some control over ones assets. For example, placing the asset within an irrevocable trust ($4,700+) or other asset protection vehicles.