ESTATE PLANNING

I. General Estate and Gift Tax Law.

For 2023, the estate tax exemption is $12,920.00.  With the correct language in a Trust, that can be doubled for a married couple. Unless the total estate valuation is expected to exceed these amounts, no addition estate tax planning is necessary. 

II. IRAs and Retirement Plans

Ownership of retirement accounts are considered outside your estate plan documents because the funds were accumulated free of income tax. If ownership is transferred to a trust, it then triggers all the income tax. However, to delay ownership to beneficiaries, you may want to name a trust as a contingent beneficiary. Then the Trust can require a delay in distributions until certain later ages, or with installments. Recent I.R.S. regulations do require distributions to a trust or beneficiaries within 10 years, but the Trust itself can then still delay ultimate payments. 

III. Estate Plan Documents

– A Will

— Living Will

— Medical Durable Power of Attorney

— Revocable Trust 

– Financial Powers of Attorney

– Certification of Trust

1. Revocable Trust. You can simply have a Will, but later it will become public and have to go through probate administration. You first should consider a trust. The cost is not much greater than just a Will since the provisions would be similar. The package of all documents may be as low as $1,400.00.   I have seen trust documents over 50 pages with fees of as much as $5,000.00, containing unnecessary and irrelevant provisions, with half-empty pages apparently to justify the ridiculous fees. The most complicated trusts are usually 15-20 pages, yet contain the same, and often more, protections.

The “living trust” is also called a “revocable trust,” or “grantor trust,” you use it to manage all your assets during your lifetime and provide for beneficiaries when you are gone. It is private, does not go through probate and often an attorney is not necessary later.  

It is typically the primary estate planning document. Besides avoiding probate and its delays and costs, it also provides for managing your affairs if one party or both become disabled. Just putting everything in joint names on accounts would protect you if only one of you becomes disabled, but does not solve it for the survivor.  

After the trust is signed, you then transfer ownership of your assets into the name of the trust – real estate, bank accounts, cars, life insurance policies, safe deposit box, and any investment accounts. Again you dot transfer retirement funds, but may make the trust the contingent beneficiary.  

If you become disabled or die, the Trust does not. The successor Trustee you will name takes over, just the same as the vice-president of a company if the president leaves. On the death of the survivor, the Trust still exists and the assets are then distributed to whomever you want, in whatever shares you want, and at whatever intervals you want, without needing an attorney and without probate.   

You are merely “moving your assets from your right pocket to your left pocket.”   You will notice no change in how you manage your daily financial affairs.  

2. The Will

A Will governs assets in your name alone on your death. However, they are still at risk if you both become disabled or should die within 90 days of each other. A court then must appoint someone to take care of your financial affairs.  (A trust avoids that). On your death, the person you name in charge has to hire an attorney for the probate administration, review claims, file accountings through Probate Court to carry out the Will and handle any legal issues that arise. Probate takes a minimum of six months and extra attorneys fees. There is a statutory scale but it works out to a minimum of 3% of the total. So if total assets are only $300,000, this means throwing away about $9,000.00 by just using Wills.

Again, creating a trust eliminates all those issues. You personally “own” nothing on the date of your death and the Will becomes irrelevant. Nothing is filed in court.

As a side matter, even if you use a Trust, we still draft a simple Will to take care of any assets that for some reason do not get transferred into the trust. It is commonly called a “pour-over” Will because all it says is that any assets still in your name will “pour over” into the Trust anyway. Then the terms of the trust take over.  Probate is still required but can be a far simpler and shorter matter.   

3. Medical Power of Attorney.  

This instrument authorizes an agent, typically each other, to make medical decisions on your behalf in the event you are unconscious or unable to do so. In addition, you name a successor or back-up person if the first one is unavailable.

We do not recommend multiple persons like children jointly, but in the alternative since joint authority would make it difficult for medical providers to act.   

4. Living Will. A Living Will expresses your wishes to avoid certain medical procedures if you have an imminent terminal condition, e.g. breathing tubes, feeding tubes, resuscitation. It does not require those actions, only indicates you want no procedure that merely prolongs the dying process.

The first three items above are legal decisions. The Living Will, however, is a personal and not a legal decision.   There is no extra cost and we can easily prepare it for you if you want. 

5. Financial Durable Power of Attorney. This document allows each of you to manage financial matters of the other not governed by the Trust, if you are unavailable or unable to communicate. For example, typically medical insurance companies will not talk to one spouse to handle medical claims for the other; credit card companies will not talk to anyone but the card holder; investment managers and retirement funds will not talk to anyone but the account holder. 

6. Certification of Trust. There are times when an institution such as an investment advisory or title company needs verification that the trust is in full force, who the trustees are and a recitation of authority of the trust separate from the Trust itself. 

7. Summary of  Decisions So your list of decisions to be made is:

a. Any charitable bequests?

b. Any monetary bequests to particular people?

c. Who would be the Trustee, and any successors after you. 

d. Who would be the Personal Representative (formerly “executor”) for the Will, and who would you name as a successor?

d.    At what age would each beneficiary, i.e. child or grandchild,  get his or her share.    You can provide that assets can be maintained in trust until any age you want, or provide that a portion is distributed at one age and another portion at another later date.   

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Use of this Web Site and review of this Article does not create an attorney-client relationship.   The law and its application by the courts is constantly evolving and changing.  As with all memoranda in these archives, the discussion of the law is for general informational purposes, is in general summary form, is not to be taken as a definitive guide, and should not be relied upon to determine all fact situations.    Each set of facts must be examined separately with the current case and statutory law analyzed and applied accordingly.