Today’s parents are all too familiar with the budget-busting cost of funding a child’s college education. It can be challenging enough to put aside sufficient savings for a single child’s education, but for multiple kids, the price tag can make donating a kidney for extra cash seem downright reasonable!
In fact, a survey by The College Board found that the “moderate” cost for all expenses (tuition, fees, books, room and board) for a year of in-state public college averaged $24,610 in 2016-2017. A similarly moderate budget for a private college averaged $49,320.
But don’t freak out just yet! If you’re savvy about estate planning, you can use an education trust fund to save for your child or grandchild’s education expenses and specify exactly how you want those funds used.
You can create an education trust that is payable during your lifetime (living trust) or upon your death (testamentary trust). The disbursements from the trust are designated for a beneficiary's education, and you can specifically designate how and when the funds are to be distributed—meaning the beneficiary can only receive the funds if they’re compliant with your terms.
Education trusts can be used to fund not only a traditional university education, but any type of learning institution, such as trade schools, educational workshops, community colleges, and private academies. Or even alternative education, such as travel, workshops, retreats, business building programs, and the like. You get to decide exactly how broad or how limited the use of the funds can be.
Trusts can be created for multiple beneficiaries, whether through separate trusts for each individual or a single trust that funds all beneficiaries. If a single trust is established for multiple beneficiaries, you can require the assets to be distributed in a number of ways: equally, using a set amount, by percentage, or the decision as to how much each beneficiary receives can be left to the trustee’s discretion.
Education trusts aren’t generally set up as tax-saving vehicles, as would be the case with a traditional 529 Plan (which does provide tax savings, but has much more restrictive use). That said, there could be some tax savings if the income of the trust is taxed at your beneficiary’s tax rate, which could be lower than your personal tax rate on income.
The only part of the trust that will be taxable is income earned by the investments in the trust (interest and dividends). The trust owes yearly income taxes on income above $600; however, if the trust distributes that income, the beneficiary is responsible for paying taxes at their rate.
The trust is only responsible for taxes on income not distributed by year’s end. And that income is taxed at trust tax rates, which could be higher than the beneficiary’s rate—and possibly even higher than your personal tax rate, so make sure you are clear about whether income should be distributed before year’s end for each year the trust earns income.
If the education trust is irrevocable, meaning that the gift cannot be taken back, and the amount contributed is less than the annual gift tax exemption amount ($14,000 in 2017), then no gift-tax return is required. If the gift exceeds that amount, then it would be necessary to file a gift-tax return, reporting the gift and using up part of your lifetime exemption of $5.49 million. A married couple can exempt $10.98 million in their lifetime.
If you’re interested in funding your children’s or grandchildren’s education using an education trust, we can walk you step-by-step through the process.
Perhaps you’ve heard from a well-meaning friend or advisor that you can use an inexpensive Transfer on Death Deed to keep your property out of court without going to the trouble of creating a Living Trust. If so, read this before you rely on a Transfer on Death Deed to ensure that you aren’t creating more trouble for the people you love.
On January 1, 2016, Assembly Bill 139 went into effect, providing California residents with a new way to transfer residential property to their heirs. Specifically, the law creates a Revocable Transfer on Death Deed (TOD Deed), intended to be a simple tool for transferring ownership of real property to beneficiaries upon the property owner’s death.
The law was initially heralded as a welcome alternative to Revocable Living Trusts, which some believe to be costly, time consuming, and complex. A TOD Deed allows named beneficiaries to assume ownership of your residential property without undergoing probate or trust administration.
However, before you rely on a TOD Deed as a cheaper alternative to full-on Revocable Living Trust planning, consider these factors …
First, the TOD Deed only applies to certain types of real property:
1. A single-family home or condominium,
2. A single-family residence on agricultural property of 40 acres or less, or
3. A multi-family residence with no more than four units.
Moreover, a TOD Deed has several other restrictions and requirements.
1. It must be signed and dated before a notary to be valid.
2. It must be recorded within 60 days from the date it’s signed.
3. It does not permit designation of beneficiaries by class (e.g. “my siblings”).
4. It must strictly adhere to the form prescribed by the statute.
Finally, and most importantly BEWARE of these major risks:
The TOD Deed offers no protection from your creditors.
1. If your property is held joint tenancy, your joint tenant becomes the sole owner upon your death and has full control of the property, and your Transfer on Death Deed is inapplicable.
2. Unlike with a Living Trust, a Transfer on Death Deed cannot be used to manage, sell, or borrow against the property during your incapacity. This means that if you become incapacitated, there’s no action your beneficiary can take to get access to using your property as a resource for your care, as your Trustee could, if you had your property in a Revocable Living Trust.
3. If the beneficiary is a minor upon your death, a court-appointed custodian will need to be named to control your property until the child reaches legal age. With a Living Trust, you get to name the person to handle the property until your child reaches legal age, and you can even set up your trust so that when your child does inherit it, he or she can receive it protected from a future divorce or future creditors.
4. Title insurance companies have been reluctant to insure clear title until three years after the grantor’s death when a Transfer on Death deed is used. During this time, the beneficiary will likely be unable to sell or borrow against the property.
5. The property may be subject to Medi-Cal Estate Recovery, if you received Medi-Cal benefits.
Unless extended, the new law will sunset on January 1, 2021, but TOD Deeds executed before that date will remain valid.
Warning: Since its inception, significant flaws have been found within the statute, and some advocates believe it will lead to increased elder abuse. For more on this, read a letter from the Executive Committee of the Trusts & Estates Section of the California Bar, appended as an exhibit to the California Law Revision Commission’s Memorandum # 2017-35.
Given these concerns, we recommend against the use of the TOD Deed and advise those seeking to transfer their real estate in a manner that is best for you, and the people you love to schedule a Vision Meeting with us to choose an option that will best meet your needs.
As the baby boomer generation ages—and downsizes—more and more adult children will be tasked with going through their loved one’s belongings to decide what to do with everything. As more and more people downsize after retirement, china sets, furniture, heirlooms, and other belongings are often left behind and unwanted.
Traditionally, these items have been passed down to the next generation. But today, the next generation has different needs, tastes, and wants. As a result, there is a surplus of “stuff” baby boomers don’t need or have room for, and their adult children don’t want. Maybe that includes you.
This is an all too common problem with a few helpful solutions.
The thought of tossing a lifetime of belongings in the trash is more than many can bear, which explains the advent of the senior move management industry. Today, there are a plethora of professionals who can help your loved one go through each item to decide what should be kept, what should be given away, and what should go to charity or donated.
The cost of this professional service can be up to $5,000 for a large estate, but it eases the burden on the adult children and ensures the loved one’s wishes are listened to and honored.
Bear in mind, as the baby boomer generation ages, charities and nonprofits that typically accept used furniture and other belongings are faced with the burden of too much stuff. The dated styles baby boomers preferred during their prime don’t fit the tastes and needs of today’s generation. The current generation views belongings like furniture and dishes as functional and more disposable, better suited to their urban, fast-paced lives where minimalism and portability are more prized than sentimentality and tradition.
Another way to decrease the time and effort it takes to dispose of all your belongings is to be very clear about what you consider to be heirlooms and valuable items by indicating in your will, or in a separate writing ancillary to your will, exactly what’s important to you and what isn’t.
Most importantly, talk to your children or other heirs to see what they want and don’t want. And to make sure they know what’s important to you, and what isn’t. The more you can communicate about this now with your loved one’s, the better.
You may be surprised to discover that most family fights that break up families aren’t over money at all, but over the personal property of mom and dad that the kids fight over because there was not clear instructions.
As more baby boomers age and non-profits turn away dated donations, the need for thoughtful estate planning is greater than ever. A comprehensive estate plan can ensure your belongings either go to those who will cherish them or to charities that will benefit from them.
If you’re like me, you want to leave an inheritance for your children. It’s likely part of what you are working so hard to do. But, far too often, the way we leave those inheritances actually does more harm than good. Something no parent wants.
Giving outright ownership of our assets to the kids could put everything you’ve worked so hard to leave behind at risk. Why, how and what can you do about it?
Let me share with you the five reasons leaving an outright inheritance to your kids is a mistake and then show you the way to protect your kids’ inheritance for many, many generations.
- Your Child’s Future Divorce
According to current statistics, forty-two percent (42%) of our children will divorce during their lifetime. In most divorces property is divided evenly. So if you have a married child, or a child who will get married in the future, and you leave them an inheritance, and they later divorce, as much as half of their inheritance could go to their ex-spouse. You aren’t working as hard as you are to support your child’s future ex-spouse, right? Good news, there is an alternative!
- Extreme Debt/Bankruptcy
Your child may incur such extreme debt that the only possible relief will come through bankruptcy.
Possible causes of such debt are a business venture gone bad, a health event, such as addiction, mental illness, accident, or disease that results in either a temporary or permanent inability to work in combination with staggering medical bills, or an accident, resulting in judgment, as discussed below.
Bankruptcy does happen to good people and you can ensure that the inheritance you leave behind will never be at risk due to a mistake or health issue.
Unintended neglect that injures someone’s person or property could wipe out an inheritance you leave your children. For example, ACE Financial Services, Inc. in 2012 found these lawsuit judgments:
- $49 million in California for an automobile accident where the family of 21-year-old college student sued drivers of two vehicles involved in the multi-vehicle crash. The plaintiff’s counsel claimed one defendant was sleep-deprived, while the other was on their cell phone. The plaintiff was in a coma for one month and is expected to require lifetime 24-hour care.
- $20 million in Florida for an ATV accident where a teenage male was killed while riding an ATV on the neighbor’s property. The neighbor had invited him to drive the ATV, permitting him to operate it without proper safety equipment and without adult supervision. The teenage male struck a fence and was decapitated.
- $11.9 million in Florida for an internet defamation suit brought by a Florida consultant against a Louisiana woman for posting defamatory statements about the plaintiff on an internet bulletin board. The defendant called the plaintiff a “crook” and a “fraud.”
- $5.9 million in Maryland in a dog-bite case where a 16-month-old child was attacked and killed by a pit bull kept at the home of a family friend.
In the Florida ATV case, the defendants thought they were doing the neighbors’ son an act of kindness by allowing him the “fun” of driving the four-wheeler around the family property. Apparently, they didn’t tell the young man about the barb wire on the property. Their good intended neglect, resulting in the decapitation of their neighbor’s son, was not seen as good by the parents or the court, who ordered the $20 million judgment.
In my own personal life, a friend recently called me because he accidentally left a faucet running at a friends’ house where he was visiting and the resulting flood causes $413,000 in damage that the insurance company is now looking to collect. If he had an inheritance, it would be wiped out by this potential claim.
As we can see, well intended, but neglectful behavior on the part of your children could wipe out any inheritance you leave them.
I have many clients who tell me they do not trust their children to manage money. This could mean that their children are spendthrifts, unwise investors, or easily manipulated out of the money. And, the statistics support this for nearly 20% of inheritors.
According to Prof. Jay L. Zagorsky of Ohio State University, 40% of individuals inheriting less than $100,000 will spend or lose the entire inheritance and 18.7 % of individuals who inherit more than $100,000 will spend or lose the entire inheritance... It’s quite likely that if that inheritance was left in a different way those numbers would greatly improve. I’ll share more with you about that below.
- Lost Work Ethic:
My father once said, “Some people can’t handle prosperity.” He was right. In fact, most people cannot.
For example, Thomas Stanley and William Danko in their book, The Millionaire Next Door, uncovered research showing that children who received an inheritance were worth four-fifths less than others in their same profession who didn’t.
Vic Preisser, of the Institute for Preparing Heirs, says that unprepared children who inherit money are susceptible to excessive spending, identity loss, and guilt over receiving money they didn't earn. Preisser says, "In a year to 18 months, everything falls apart -- marriage, finances -- and if there is a drug problem it becomes worse." Thus leaving an outright inheritance to our kids, may do harm instead of good. But there is an alternative!
As we can see, an outright inheritance is NOT the best answer for your kids.
Most lawyers would tell you that the answer is to leave your kids’ their inheritance in a Trust and they’d be right, but they would likely still distribute that Trust outright to your kids at specific ages or stages.
We’ve got a plan for your family that is far, far better.
An alternative to an outright inheritance to your children (“outright” meaning they both personally own and can personally lose the inheritance) is to gift your assets to your children at the time of your death via a Beneficiary Vault Trust.
A Beneficiary Vault Trust can be drafted to give your children full control of their inheritance (if you choose), but ensure they never own the inheritance. And because the rule of law is you can’t lose what you never owned, you are gifting your children with airtight asset protection, of the kind they couldn’t give themselves at any price.
When you gift an inheritance to your children via a Beneficiary Vault Trust, the trustees of the trust own the property, not your children. Thus, if your children ever get divorced, file bankruptcy, or are ordered to pay damages in a lawsuit, they can’t lose the inheritance, simply because they never owned it.
You can use the Beneficiary Vault Trust as a vehicle for educating your children about investing, giving, and even business by allowing them to become a Co-Trustee of the Trust, with someone you’ve chosen and trust to support their education.
And you can even build in provisions to allow your child to become the Sole Trustee of the Trust or the right to become Sole Trustee at specific intervals, as well, giving them effective full control without the risk of ownership.
There are quite a few nifty additional ways we can structure this trust to meet the needs of your unique family and children.
When you come in for a Family Wealth Planning Session, if you desire to provide the most airtight form of asset protection for your child, and set up a structure that incentivizes them to invest and grow their inheritance rather than squander and waste it, we will discuss all the options with you then.
One of the benefits of a Family Wealth Planning Session is that you will get more financially organized than you ever have been before and understand all of the options for ensuring everything you are working so hard to leave behind to the people you love is handled with the ease, grace and care you desire.
This article is a service of Erik Hartstrom, Personal Family Lawyer,® who develops trusting relationships with families for life. That's why we offer a Family Wealth Planning Session,™ where we can review your family wealth needs and help identify the best strategies for you and your family. You can begin by calling our office today to schedule a time for us to sit down and talk because this planning is so important.
We all hate to think that something could happen to us, but we know it happens to others like us every day. We’ve all seen the news stories of moms and dads who leave their children with a babysitter, get into a terrible accident, and don’t make it home.
The babysitter calls and calls, but there is no one to answer. The police are summoned and the children have to be placed with Child Protective Services. It’s the thing every parent is most afraid of happening.
We’ve seen the stories of children placed in the care of people they barely know, just because they are related by blood, since there was no plan in place that dictated who would take on this incredible responsibility.
And we have seen the fallout from family fights created when mom and dad didn’t make a plan, and the family couldn’t agree on what would happen. Or in the worst case, what happens when there is no family available.
In all cases, it’s left up to a Judge to decide when mom and dad haven’t.
But even if you have a will tucked away somewhere, is that all your children need? Don't make these six mistakes:
1. Named a couple to act as guardians when you don’t really want both people in the couple and you haven’t said what should happen if the couple broke up or one of the partners in the couple died.
2. Only named one possible guardian. What if something happens to your first choice?
3. Have not considered financial resources when deciding who should raise your children. Your guardians do not have to (and often should not) be financial decision makers for your kids.
4. Only have a Will, which means the Court will distribute your money, it’s totally public and doesn’t protect your money from their divorce and lawsuits.
5. Did not exclude anyone who might challenge your guardian decisions or who you know you’d never want to care for your kids.
6. Only named guardians for the long-term and did not make any arrangements for the short term if you were in an accident. What would happen in those immediate hours until your permanent guardians could arrive?
Doctors and hospitals ignore directions from health care agents at their legal peril according to a recent appellate case, Stewart v. Superior Court.
After ignoring the direction from a patient’s health care agent, the hospital and doctors face claims for elder abuse, fraud by concealment, and medical battery. The appellate court held that elders have the right to autonomy in the medical decision-making process and that deprivation of this right can constitute actionable “neglect” under California’s elder abuse laws.
Anthony Carter, a 78-year-old man, named Maxine Stewart as his health care agent. When he was admitted to the hospital, he was advised to get a pacemaker to correct his irregular heartbeat and be placed in hospice care. His health care agent canceled the heart surgery, suspecting that the irregular heartbeat was caused by Anthony’s sleep apnea, and sought a second medical opinion.
The hospital, following the cancellation of the surgery, convened an ethics committee and decided to proceed with the surgery anyway. Sometime shortly after surgery, Anthony went into cardiac arrest, supposedly from complications with the pacemaker and ultimately died. Maxine sought legal help and now the appellate court has allowed her to proceed with her lawsuit against the hospital.
The takeaway for hospitals:
Ignoring directions from a valid health care agent can constitute “neglect” under California’s elder abuse laws, leading to claims of elder abuse, fraud by concealment, and medical battery.
The takeaway for patients:
You can protect yourself by naming a health care agent under a valid Advance Health Care Directive.
Grandparents are increasingly in the picture helping grandchildren with the skyrocketing costs of college. That help can be unintentionally negative if it impacts a child’s eligibility for need-based aid. Here are some strategies to make sure your financial assistance doesn’t end up costing your grandchild:
Using a 529 Account: Who owns it and When Distributions are made
The 529 account is a popular tax savings account lets you put money away for your child's or grandchildren’s educational needs. Under the guidelines of the Free Application for Federal Student Aid (or FAFSA), 529 accounts in a parents or child name will count as assets and may reduce the amount of aid for which the student is eligible. The College Board’s CSS Profile for financial aid has similar guidelines.
The important thing in setting up a 529 account then is who owns the account. Typically, you the grandparent should own the account. Care must be exercised however in how distributions are made from grandparent-owned 529 accounts because distributions from a grandparent to a grandchild are considered “untaxed income” and can reduce aid. If the child is not planning on attending graduate school, distributions can be made in the junior or senior year without penalty under the new “Prior-Prior” rules.
Direct gifts to the student or to the school are simple, but have a catch – they are also considered “unearned income” and can reduce the aid. But with the new “Prior-Prior” rules, gifts in the junior or senior year can be made without impacting aid. For freshman or sophomore years, gifts can be made to the parents which will have a smaller impact on aid than a direct gift to the child.
Find Them a Job
In 2016 a student can shelter $6,300 in income from the federal aid calculation. Besides cash, experience in the workforce has its own benefit. Find out what they're interested in doing, and look for opportunities for internships or starting positions with the people you interact with on a regular basis. Your circle of friends and acquaintances can be of tremendous help for a first-time job-seeker.
Use a Trust
You can create an education trust for your grandchild. This can be money you directly control while you're alive, and give directly to the student or parents (see above), and be set aside after you're gone to support the students further education. Funds set up correctly in a trust for the parents or grandchild won’t negatively impact a child’s eligibility for need-based aid. While it won’t have the tax savings of a 529 account, you’ll have more flexibility on where the funds can be used. Funds in a 529 account, for example, can only be used without penalty for tuition, fees, books, as well as room and board. An education trust can be designed to cover any expenses you deem appropriate – off-campus housing, transportation costs, tutors, travel, and more. And the funds in trust don’t have to stop when the child’s education is done, for example, they could be used to help buy a house or get a new business started.
Source: How Grandparents Can Help Pay for College
When I go car shopping, I have a number of metrics I can use to evaluate the value of what I’m buying – miles per gallon, horsepower, and length of warranty for instance. But what kind of metrics can the average person use to evaluate the value of the trust they have? Pretty binder? The length of the document? Here are some key things to look at when evaluating the effectiveness (value) of your trust.
Customization - Putting Your Voice Into Your Plan
Did your attorney take the time to talk to you about your family? Every family is unique, and your estate plan should reflect your family’s needs and your financial goals. A simple fill in the blank form can’t accomplish this. In contrast to the cookie-cutter, one size fits all approach, trusts are very flexible instruments and can do a whole lot more than simply avoid probate, as I’ve written about here and here.
Implementation - Integrating Your Stuff with Your Plan
How much help and direction did you receive regarding transferring assets into your trust? Trusts avoid probate because the title to your assets has been changed to the trust. Pretty simple right? You’d be surprised how many people miss this step in setting up their own trust or even working with some law firms. And it can be more complicated than it first appears. One example would be getting the trust transfer deed correct so that you don’t trigger a reappraisal. Another example would be knowing when and when not to name a trust as a beneficiary for life insurance or retirement plans.
Long Term Support - Keeping You and Your Plan Up to Date
What kind of support do you receive for your estate plan package? Our support plan includes the following:
Free phone calls to answer your questions
Free weekly email newsletter to keep you informed
Special notices and seminars as law and planning changes
Special family discount
A free checkup meeting every three years
As the founding principle attorney at Estate Plan Pros, an Elk Grove law firm, I’ve made it our mission to empower people through education. Together, our team has over 30 years combined experience in education. For more than a decade, I’ve practiced law in Sacramento focusing on estate planning and family law. Because of my practice focus, I have spent a lot of time in court, and probably have more court experience than most estate planning attorneys. Because of that experience, I know how family disagreements get resolved, and how to avoid problems before they start. I truly believe a well-planned estate can avoid those problems, and that is why I’m so passionate about estate planning.
A living trust is more than a final product, it is a plan for your family’s future peace of mind and financial security.
Have you ever come across a deal that you really wanted to jump on, and for whatever reason, didn’t or felt like you couldn’t at the time? And later, you looked back, and realized that you should have made the leap?
Bill Gates, at age 23, offered a majority share for his fledgling tech company, Microsoft, to Ross Perot, the President of Electronic Data Systems, for between $50 to $60 million. Perot turned him down, thinking the price was too high. Years later he told The Seattle Times, “I consider it one of the biggest business mistakes I’ve ever made.”
Estate planning has a window of opportunity, and after it closes, certain costs come into play.
Cost of Incapacity
One of my clients came to me after their spouse slipped in the shower and hit his head, severely injuring himself. He was unable to anything, and unfortunately, they hadn’t done any prior planning, so he had no Durable Power of Attorney or Advance Health Care Directive in place.
Because of his new situation, major financial decisions needed to be made that required his signature, meaning that my client had to seek a conservatorship.
Another example is a young man who was in a severe auto accident. He was over age 26, so he was off of his parent’s insurance, and happened to be in between jobs, so didn’t have his own coverage either. His concerned father wanted to provide coverage, but needed the legal authority act on his son’s behalf.
A conservatorship is the court process to determine whether a person has the capacity to manage their legal, financial or health care decisions. There are different levels of conservatorships, and the process is designed to protect the person who is going to be under the conservatorship. As you can imagine, that process takes time.
It isn’t unusual for a conservatorship case to cost $3,000 or more.
Cost of Probate
Probate fees in California are based on the gross value of your estate, calculated as follows:
- 4% of the first $100,000 of the gross value of the probate estate.
- 3% of the next $100,000.
- 2% of the next $800,000.
- 1% of the next $9 million.
- .5% of the next $15 million.
That fee is effectively doubled because the executor gets the same amount. There are other fees of course that go along with the attorney fee calculation, court costs, appraiser costs, etc.
Probate is a very lucrative business.
Cost of Litigation
A lack of a plan or a poor plan can lead to the heirs fighting in court. Long hidden tensions can spring to the surface and essentially lead to the heirs spending the next decade or more in and out of court, with the final beneficiaries being the attorneys representing the litigants.
Cost of Guardianship
Let’s say your estate mainly consists of life insurance for your young family. If something were to happen to you and your spouse, who manages the money? You could give it outright to someone you trust. You could set up a UTMA account with a custodian for your child. You could set up a trust and empower the person you trust to manage the money for your child(ren). But if you instead named your minor children directly, the state will take over managing the money for your children (and incidentally helping themselves to the interest). The alternative is to petition for a guardianship, where the court will now supervise the guardians' use of the funds until your child turns age 18 when as a legal adult they are now able to manage the money themselves.
The typical cost to have an attorney set up a guardianship is $2,500 to $3,000. And then there are the annual filings with the court, and the occasional petition to the court for permission to use the money in a particular way.
The Cost of Taxes
For high-net worth individuals, estate taxes are a significant expense, coming in at 40% of the estate or more. Even if your estate isn’t over the $5 million-dollar mark, consider the impact of capital gains, managing basis, and other tax implications of the way you hold your asset, and the way your beneficiary receives their inheritance.
When you create an estate plan with your voice, you can create your vision for the future. You can create a plan that provides asset protection for your children or beneficiaries from creditors, divorcing spouses, and lawsuits. You can provide asset protection for your spouse, and decide what happens if your spouse remarries. You can provide for disabled or young beneficiaries. You can decide what conditions your children have to meet before taking over managing their inheritance. You can do all of these things, and more when you take the plunge and create your estate plan.
Assuming you’ve created a plan that contains your unique goals and wishes for your family, the next step is to ensure that your plan is carried out. The first tip is to not hide your estate plan. It’s easy to hang on to “important” paperwork for years, burying the legal “treasure” (your estate plan, and other helpful information) in a mountain of irrelevant papers. Let’s create an effective map by following these steps:
Fully Fund for Future Feats of Family Fealty
Sorry, just like Jack Sparrow can’t resist Spanish gold, I can’t resist an alliteration.
When you leave assets out of your trust, the plan you carefully crafted with your attorney could go by the wayside. Create your plan, then transfer your assets into it. But beware – assets like life insurance and retirement plans have special rules; don’t transfer those assets into your trust without careful instructions from your attorney.
There are two key things I think every parent should communicate to their family, no matter how private they wish to keep the other details of their estate plan.
The first is, tell people who will be in charge, especially the one who will be in charge. The successor trustee needs to be ready to step in at the right time. If they don’t know that they’re “it” they won’t know to act. And everyone else needs to know who to talk to in order to get things moving.
The second thing is that the person who will be in charge next needs to know where the documents are. And have the ability to get those documents. If you use a bank safety deposit box, make sure their name is on the account for the box. Bank safety deposit boxes often present a problem, because the legal documents granting you the authority to access the bank safety deposit box are locked securely in the safety deposit box. A fire safe box at your home keeps the documents accessible while keeping them safe.
What You Don’t Have to Say
You don’t have to spill the beans on how much money you have or the details of all your assets. How much, and where are details for another day. But they are important details for that other day, as I discuss in the last point.
You don’t necessarily have to go into the details of who is getting what. I do think generally the more you communicate on this point, the more problems you’ll avoid for your beneficiaries down the road. If the conversation is going to be too awkward, work with your attorney to communicate some of the “why” behind what you’re doing, either in the estate plan or in a separate letter. Confused kids cause chaos, and chaos leads to expensive litigation.
Create a Map for Later
Stop and think for a minute. The person you’ve chosen to be the successor trustee has a big job. At some point in the future, they’re going to be all alone, handling your affairs, using the information you’ve left behind. Every year the state spends a lot of your money that sits unclaimed, mostly because the people who would have benefited from it had no idea that money was there. We all have buried treasure; the question is what clues will we leave behind for those who follow.