Wills Vs. Trusts

Revocable Living Trusts The Basic Explanation

First and foremost, this topic is generally misunderstood and is much simpler than folks are led to believe. Really, it is not that complicated – I promise! Below is a basic explanation for general use on what is often referred to as a “Will Substitute” type of revocable living trust.

What ?is ?a Revocable Living? Trust?

According the Black’s Law Dictionary, A Revocable Living Trust is, “[t]he agreement that relates how the property of an individual is to be distributed during their life and after their death.” See Black’s Law Dictionary Free Online Legal Dictionary 2nd Ed. (http://thelawdictionary.org/revocable-living-trust/). A person creates this while alive (hence the word “living”) and can exercise complete control over it while alive. At death, the distribution plan kicks in and the persons or entities that are going to inherit will take according to the plan the trust maker puts in place.

Generally, an individual (or couple in a joint trust) will make a Revocable Living Trust as a substitute for his or her Will. In the typical probate avoidance revocable trust, the Maker of the trust (sometimes called “Grantor” or “Settlor”) will usually be the beneficiary and the Trustee. As the name implies, the beneficiary gets the benefit of the assets placed into the trust. The Trustee is in charge of the trust. The biggest benefit is the Successor Trustee(s) named in the Trust document will be able to efficiently assume control of everything in the Trust and has a fiduciary obligation to honor the trust terms. The Trust will have a name and become the title holder over the Maker’s assets. For a trust to be valid, it must have a Maker, beneficiary and trustee. The other essential element is the trust must have something in it – i.e. it must be “funded” by taking some asset. This is called the “corpus” of the trust.

I hope I have not lost you yet! In summary, a person makes a trust, benefits from it, and is in charge of it while alive. They put their own “stuff” into the trust, such as a house, checking/savings accounts and other personal property. The Trust has a name, such as “My Will Substitute Trust”, and there is proper evidence of transferring the assets into the trust. The house went in by deed transfer and the checking and savings were modified when the Certificate of Trust was shown to the banker at ABC Bank and the request was made to put the accounts into the trust. After that, you live life like a normal person.

Because I am placing my own assets into the trust (this is called a “grantor’s trust”), according to IRS regulations and rules, the assets have not left my control so it is as if I still have them. The IRS will not treat this any different order proscar than if I never made the trust to begin with. Why? Because, like I said, I have control and can revoke the trust entirely. So, while I have a stack of paper that creates the trust, and I have evidence that my assets are in the trust, the IRS will not treat this as independent from me. An individual with a Revocable Living Trust as a Will Substitute is going to file their normal 1040 and other tax documents.

What are the benefits of having a Revocable Living Trust as a Will Substitute?

Avoid Having a Judge Decide

The key benefit is that it will avoid probate over assets that are held in that trust. Nevada may be remarkably efficient in getting an estate through probate, but a Revocable Living Trust could make it so that family members can automatically assume control. The Successor Trustee(s) shows a banker the Certificate of Trust and viola! – magic happens and that trusted individual can start handling the estate. With real property, a notice is filed with the county recorder’s office. Does that sound better than going to a lawyer (and who wants to go to a lawyer – let’s be honest) to find out what Probate is, how long it will take, and likely pay more fees to get through the process? Yes – I thought you might agree.

Avoid an Adult Guardianship

If someone has a properly drafted trust, it can prevent guardianship (or conservatorship in other states). I have seen this first-hand and the notice provisions (called “citation” in the guardianship context) of an adult guardianship, mandatory hearings, together with all the documents that go to the court can be cumbersome. If an accounting is required, it is even more cumbersome; and by that I mean expensive because it takes a lot of legal time and effort. All of that can be avoided with a trust and other related powers of attorney!

Other Key Benefits

I have to mention that doing a trust allows the family to keep the matter out of the court system with means it is generally a bit less public. The terms of the trust may require notice to beneficiaries, but that is quite a bit different than a public document on file with the local district court. Your family maintains complete control in a time of stress and, likely, mourning the loss of a loved one.

There are many other important things to learn about estate plans and trust – and I will go into this later on. However, the assets that are placed into the trust can make life so much easier for the loved ones left behind. If you have been thinking of making one of these Will Substitute trusts, think of us at Surratt Law Practice Estate Planning.

By Attorney Melissa L. Exline, Esq.

ESTATE PLANNING: POST “DOMA” AND THE IMPACT ON SAME SEX COUPLES

Ensuring your assets are there for your same-sex spouse with Estate Planning tools will be much easier, and fairer, given the DOMA decision.  It is clear we are still in a transition period, but, in Nevada, which only mandates filing a federal tax form, there are broader protections for higher wealth same-sex spouses.

For those that may not be as familiar with this issue, there was a recent decision by the U.S. Supreme Court in US v. Windsor that significantly impacts same-sex married couples.  “DOMA” (the Defense of Marriage Act) was impacted by the Windsor decision when the Supreme Court, in a 5–4 decision this summer, found Section 3 of DOMA was unconstitutional, declaring it “a deprivation of the liberty of the person protected by the Fifth Amendment.”  This has special tax and estate planning implications for same-sex married couples.  While Nevada does not allow same-sex marriage, couples that marry in other states now living in Nevada are impacted under federal rules.  Under Windsor, same-sex married couples are treated the same as heterosexual married couples in certain jurisdictions.

Each person can give another person thousands of dollars each year without current tax consequences (for 2013, the tax-free gift limit is $14,000, adjusted each year based on inflation).  The gift recipient does not have to pay tax on the gift. The giver must report the amount given if it exceeds the annual limit. These excess amounts go toward the lifetime total of money each taxpayer may give without facing any gift tax penalty. In addition, an important tax break for married couples, called the marital deduction, permits spouses to transfer as much as they want to each other without having to pay any federal estate or gift tax if the recipient spouse is a U.S. citizen. For 2013, the lifetime buy proscar australia limit is $5.25 million (also adjusted each year for inflation).  This lifetime limit is taken into consideration by Estate Planning professionals when looking at how spouses intend to provide for each other in their final Will or Trust documents.

The annual and lifetime gift limits mean that few people have to worry about the tax implications of gifts.  However, married couples recognized by the Internal Revenue Service get a break. Heterosexual married couples are subject to no limits, annual or lifetime, on gifts or transfers of property of any amount to their spouses.  With the DOMA decision, now same-sex married couples who were legally married in one of the states or jurisdictions that recognize their marriage will be given the same federal estate and gift tax benefits as heterosexual married couples.

The DOMA decision impacts other areas of law that are considered when drafting Estate Plan documents.  To name just a few, same-sex married couples should consider the implications the law change will have on:

  •  The right to be named the sole primary beneficiary on ERISA qualified retirement accounts.
  •  The right to roll over IRAs and other qualified retirement plans, rather than be subject to mandatory withdrawals.
  •  The right to collect spousal benefits under Social Security Benefits.
  •  The right to be treated as a spouse with all military benefits.
  •  The right to COBRA continuation health insurance benefits.
  •  The right to protections for an “innocent spouse” under Medicaid and the impacts with long term nursing home care.
  •  The right to take time from work under the Family Medical Leave Act.

There are many professionals still figuring out where the same-sex spousal rights fit in to various areas of law, but, overturning DOMA vastly expands the estate planning resources available for same-sex couples as they plan for how to ensure the one they love is provided for.

Nevada’s Living Will Lockbox

During the Surratt Law Practice radio show hosted by Kim Surratt with guest Melissa Exline, the attorneys recently talked about the Living Will Lockbox provided as a free service to Nevadans.  You can easily access the information available on the “Living Will Lockbox” by visiting Nevada’s Secretary of State online.  This service provides an accessible location for doctors to obtain documentation on your stated desires in the case of incapacity.  The “living will” also known as an advance directive/declaration to physicians, explains what you want to do for life prolonging measures (feeding tubes/hydration).

In light of the recent tragedies that have forced people from their homes, threats of flood locally, and our not to distant memory of fires that swept through Northern Nevada, it is always a good idea to store your important where to buy proscar forum papers in a safe place.  The “lockbox” is a resource that is easy to use.  Also, please make sure you get a fire rated and water resistant document holder and/or scan and store your most important documents in the “cloud” or in some sort of offsite but accessible location.  Not only that, you need to have the right documents created in the first place!  For those of you out there interested in talking about your estate plan, options, and the other documents besides a Will or Trust that are part of the estate plan which we talked about in depth in the radio program, please call our office, mention the “disaster planning”, and we will give you a free half-hour consultation.  Don’t wait any longer – get your estate plan completed!