Category Archives: Trusts

Who is in Charge of Your Estate?

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Choosing a Personal Representative or Trustee to Manage Your Estate

Choosing the personal representative of your estate or successor trustee in the event of a trust, is one of the most important estate planning decisions you will make. However, all too often people make this decision rather quickly without considering all of the options and potential long-term issues.

Take the case of Sharon. Sharon was a single woman with four grown children.  She finally decided to get her estate plan in order. Due to the nature of her assets she determined that a revocable living trust was the best option for her. She put considerable time into creating her trust, and appointed all four of her children as co-trustees of the trust. Sharon’s four children were also her main beneficiaries and would receive most of the assets of her trust.

According to the terms of Sharon’s trust agreement all of the trustees were required to agree before they could distribute any assets of the trust. Upon Sharon’s death her four children were unable to agree on anything and make any decisions about the trust distribution.  Consequently it took several years to settle her estate and had a traumatic impact on her four children and their relationship with each other.

This situation is actually quite common; parents nominate all of their children as their personal representative(s) or trustee(s) with the best of intentions, but the children cannot agree on any aspects of the distribution. As a result it can take years for an estate to be settled at the expense of family relationships.

How can you avoid this situation?

Choosing the personal representative of your estate, or successor trustee in the event of a trust, is one of the most important estate planning decisions you will make. It requires careful consideration of both your estate assets and family relationships.

What Does a Personal Representative or Trustee Do?

As an initial matter whether you appoint a personal representative or a trustee depends on your specific estate plan and whether you create a will or trust.

Duties of a Personal Representative

A personal representative (also known as an “executor” or “administrator”) is the individual responsible for the administration of your Last Will and Testament through probate. The personal representative is responsible for gathering up the assets of your estate; evaluating claims against the estate; paying the last debts and expenses of the estate; accounting for assets of the estate; paying taxes; and distributing the assets of your estate according to the terms of your will or trust.

Duties of a Trustee

A trustee is the individual you appoint to carry out the terms of your trust agreement and plan of distribution. You would nominate a trustee, or successor trustee, only if you have executed a trust agreement, most likely a revocable living trust. A trustee is required to collect the assets of the trust, pay bills of the trust, account for trust assets, and distribute those assets. Often a trustee is also required to invest and manage assets for the benefit of your beneficiaries over time. Unlike a personal representative, the duties of a trustee can carry on for many years, sometimes even multiple generations.

Who Should  You Choose to Manage Your Estate?

Once you have created a will or trust, then who should you appoint to manage your estate? Again, who to appoint requires careful consideration of the nature and value of your assets, as well as your plan of distribution and the relationships between your family members.  Typically, a married individual will nominate his or her spouse as a personal representative of their will, or a trustee of a trust. However, it can be difficult to determine who to appoint as an alternate personal representative of a will or alternate trustee of a trust.

Appointing Your Children

After appointing a spouse, people often appoint either one or all of their children as alternate personal representative(s) or alternate trustee(s). If you have a fairly simple will or trust, and a relatively small family with a solid, ongoing relationship, then appointing one or all of your children may be a good option. Your children are familiar with your assets and intentions. Accordingly, appointing your children to manage a simple estate can provide a relatively quick and economical solution.

However, as illustrated above children are also often the primary beneficiaries of an estate which can provide for unintended consequences. Even siblings with the best of relationships do not always agree to the management or distribution of an estate.

Appointing a Relative or Friend

Instead, you may decide to appoint a relative or close friend that is not one of your children and not a beneficiary named in your will or trust. Appointing a family member, such as one of your siblings or a close friend, can be beneficial because they are familiar with your family dynamics, your assets and your intentions. Moreover, an individual that is not named in your will or trust does not have a potential conflict of interest between the duty to manage your estate and the desire to receive certain assets from your estate.

While appointing a non-beneficiary family member or friend may help to reduce disputes between your children, there are drawbacks to consider. One common issue is that family members often lack experience managing estate assets, financial investments and methods for ongoing accounting of these assets. In addition, a relative or friend may not be immune to family disputes. One of your children may simple dislike or not agree with the personal representative or trustee, which makes it difficult for that individual to carry out his or her duties.

Appointing a Professional Fiduciary or Institutional Trustee

As an alternative to your children, relatives or close friends you may choose to appoint an institutional trustee such as your bank’s trust department, or professional fiduciary to act as a personal representative. One key advantage to a professional or institutional fiduciary is that they are not subject to the same family pressures and can provide neutral management. A professional fiduciary also has critical professional knowledge in working with wills and trusts, and managing and investing estate assets.

The use of a neutral professional may help to reduce family conflict, although there are other issues to considering when deciding to appoint a professional fiduciary or institutional trustee. The main consideration for most people is simply the cost of administration. A bank or trust company will charge a fee for its services, and usually have minimum fees that make it unaffordable for a simple estate. Another important consideration is that a professional fiduciary is not familiar with your family dynamics and can be a bit impersonal. However, the impersonal aspect may be an advantage when it comes to providing neutral administration, especially with arguing family members.

Qualities of a Personal Representative or Trustee

Ultimately the choice of who to appoint to manage your estate is personal and depends on your particular estate and family dynamics. It is important to consider the factors mentioned above and choose an individual or institution that is responsible, has the ability to follow with large amounts of estate paperwork, an ability to work with all of your beneficiaries, and is willing to seek the advice of professionals such as estate attorneys and CPAs. Discuss your thoughts and concerns with an estate planning attorney and your family members to ensure you have made the right choice for your family and estate.

If you have specific questions about any of the issues discussed in thispost, Contact Kelly O’Brien at Measure, Sampsel, Sullivan & O’Brien, P.C. at (406) 752-6373/ www.measurelaw.com

 

 

Estate Planning in a New Year

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Start 2014 Out Right By Getting Your Estate Plan in Order 

Recently, a friend and client of mine asked me to help her update her will. My friend realized that her will might need a little updating, but she was shocked when she actually retrieved her will from her safe deposit box to see just how much in her life had changed since she executed her will. In my friend’s case she had been divorced and remarried, and instead of having minor children, her children were now grown with children of their own. While my friend was shocked (and a little embarrassed) I reassured her that no time is better than the present to finally update her will.

Organize & Update Your Estate Plan in the New Year

The start of a new year is an excellent time to think about your estate planning. Whether that means a simple review of your existing will or trust to ensure that it still works for your current life situation; or that means finally taking the step to get a will or trust in place, consider the start of a new year a perfect opportunity. Remember estate planning is not only about how your assets are distributed, it also means appointing the individual(s) responsible for carrying out your wishes for your family and health care decisions.

Individuals whom have recently experienced major life changes such as a divorce, or the death of a spouse, are especially susceptible without a plan that reflects their current life situation. In the case of my friend, while she did have a will, it was completely irrelevant to her current situation. Moreover, women without any kind of estate plan in place leave it completely up to state law to dictate matters such as how their assets will be distributed, who will care for their children, or who will manage funds for their children or grandchildren.

If You Don’t Already Have an Estate Plan, Take the Opportunity in the New Year to Finally Get a Plan in Place  

Essentially, estate planning enables you to be in control of what happens to your assets upon your death or incapacity. Estate planning is also the process by which you appoint who you want to be responsible for carrying out your wishes for your assets, family and heath care decisions. At a minimum, your estate plan should include the following elements:

A Will and/or Revocable Living Trust

These are formal documents that describe how and when to divide and distribute your assets upon your death. Whether you need a simple will, or a more complex, revocable living trust, depends on your specific situation. Discuss your situation with an estate planning attorney to determine which makes sense for you and your family.

Durable Power of Attorney for Financial Decisions

A durable power of attorney for finances allows you to appoint another individual to make financial decisions on your behalf in the event that you are unable to make these decisions yourself due to incapacity or disability.

Durable Power of Attorney for Heath Care Decisions

A durable power of attorney for healthcare allows you to appoint another individual to make medical decisions on your behalf including decisions regarding medical consents and life support issues in the event you are unable to make these decisions yourself.

Beneficiary and Payable on Death Designations

If you list an individual as a beneficiary of a financial asset, that individual becomes the legal owner, immediately, upon your death without the need for probate.

 If You Already Have an Estate Plan, Take the Opportunity to Review Your Existing Plan to Ensure it is Still Relevant to Your Life  

As busy individuals today, we all know that life changes fast. Your will may have been drafted during a prior marriage, or when your now grown children were still minors.  After any major life change, such as a divorce, death, or major change in assets, it is important to review your plan and appropriate changes.

When Should You Update Your Estate Plan?

While there are many life circumstances that warrant a change in your estate plan, below is a checklist of some of the life changes that may require an update to your plan:

  •   After a divorce or marriage
  • After the birth or adoption of a new child or grandchild
  • When your children or grandchildren reach the age of 18
  • Death or illness of an individual named as personal representative, trustee, beneficiary or guardian
  •  A change in relationship with an individual, organization or other beneficiary named in will
  • A sale or purchase of a major asset, such as a new home, a  new business, or sale of business or home
  • You move, especially if you move out of state
  • There is a change in the state or federal tax law
  • You experience a significant increase or decrease in the value of your assets, such as receiving an inheritance

Don’t forget to review & update Beneficiary designations

The last thing you want your family to have to deal with is removing a former spouse or other unintended beneficiary after you are gone. Work with your financial planner, or check with your specific financial institution on how to make and update beneficiary changes to reflect changes in your life.

No Time is Better than the Present to Review, Update or Create Your Estate Plan

We all know that it can be difficult to keep up with every little change in life. However, when a major life change occurs, it can sometimes be too overwhelming to think about your estate plan.  Make it a resolution to consider your estate plan in the New Year to ensure that it works for your life.  By taking the time to review your existing estate plan, or to finally execute a will or trust, you take control of what happens to your assets upon your death or incapacity. Review the checklist above and discuss any life changes with estate planning attorney to ensure that your estate plan reflects your current situation and ensures that you and your family are protected and prepared.

 

If you have additional estate planning questions contact Kelly O’Brien, Measure, Sampsel, Sullivan & O’Brien, P.C. at (406) 752-6373(406) 752-6373/ www.measurelaw.com

 

 

 

How to Keep the Vacation Home In the Family

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If you own a vacation home in Montana, you probably have a very special emotional connection to the area, and the memories it creates for you and your family. Since vacation homes have such a unique emotional and familial tie, you likely want to make sure that it stays in the family for generations to come.

However, you also may have worried about what will happen to the family vacation home after you are no longer able to visit. Often questions come up, such as: Who will inherit it? How will I decide who can use it and when? Will my family have to sell it after I am gone? How will my family pay for the taxes and maintenance?

Without proper planning your family’s vacation home can be a great source of disputes, and create financial burdens for your family in the future. Moreover, there are tax and financial implications for transferring your vacation home at different times and though different mechanisms, especially in situations where the home has increased in value.

What Is Your Long-term Vision for Your Vacation Home?

First, it is important to adequately consider your long-term goals for your vacation home. Do you intend to keep in the family for multiple generations? If so, how do you envision the home being shared by your children and grandchildren? How do you plan to pass along your interest in the home? Do you want to pass it during your lifetime, or upon your death?

As an initial matter it is critical that you speak with your CPA or tax planner about the tax implications of transferring real property during your lifetime or upon your death. Everyone has a unique financial and tax situation, and real property transfers are especially susceptible to pitfalls.

If you do not want the vacation home to be sold upon your passing, and want to make sure that the home is kept in the family, without a significant financial burden, consider the creating a separate entity such as a trust or limited liability company (LLC) to own and manage your vacation home. Both trusts and limited liability companies can help to reduce personal and financial risks for your family, plan for financial costs, and reduce conflict. Moreover, trusts and LLCs also have the advantage of preventing unwanted partitions or forced sales.

Create a Trust for Your Vacation Home

There are several different types of trusts you may consider in managing a vacation home, including revocable or irrevocable trusts. Speak with your attorney or tax advisor to determine which makes the most sense in your specific situation.  Regardless of the type of trust, a trust can hold the home for the benefit of your family, as well as direct the distribution of the home to your children or grandchildren. In addition, a trust keeps your vacation home out of probate and less likely to be subject to claims of creditors. Moreover, a trust can provide additional funds to be set aside specifically for taxes or maintenance of the home.

A Trust as a Method to Provide Funds to Maintain the Home for Your Family

Adequate funding helps to alleviate some of the financial constraints for your family and help to ensure that the vacation home will stay in the family for generations to come. Your trust can simply set aside funds to pay taxes upon your death, or a lump sum of money to be paid to your children for the maintenance of the vacation home.  Otherwise, you could decide to keep the trust ongoing to make annual payments of principal or income to provide for such costs as taxes and insurance for the home.

If you managed to save enough to buy a vacation home, but don’t anticipate that you will have a significant sum of money to provide for the maintenance of the home long after you are gone, you may consider making the trust a beneficiary of a life insurance policy. Upon your death, the death benefit of the life insurance policy will be paid to the trust. Then, these funds can be uses to pay for taxes, repairs and maintenance for the property.

Create a Limited Liability Company to Hold and Transfer Interests in Your Vacation Home

A Limited Liability Company (LLC) can be a great tool for transferring interests in your vacation home to family members, as well as establishing guidelines for the use of the home.  In addition, by placing liability on a separate entity rather than an individual, LLCs help to protect your family from personal liabilities, including creditor claims or liability associated with accidents occurring on the home by other users.

Transferring Ownership Through Membership Interests in the LLC

If you establish an LLC for your vacation home, you can transfer partial interests in the home during your lifetime. You can accomplish this simply by gifting membership interests (like shares of stock) in the LLC to each child or grandchild up to the current federal gift-tax exclusion amount every year. This can provide significant tax advantages, and also allow you to maintain a certain amount of control over your vacation home until your death. Again, make sure that you work closely with your financial and tax advisors when gifting interests in your vacation home LLC.

Utilizing an LLC Operating Agreement for the Maintenance and Use of Your Vacation Home

To ensure the success of the LLC for your vacation home, an operating agreement is essential. A well-planned LLC operating agreement will encourage your family members to share in the management and take responsibility for the use and maintenance of the property.

The LLC operating agreement should address the allocation and payment of taxes, maintenance, and other expense associated with owning and improving the vacation home over time, as well as how to decide on maintenance and improvement costs. In addition, the operating agreement should adequately discuss how the property can be used, by when and by whom, and how and when members can transfer or sell their membership interests. Similarly, the operating agreement should set out what to do in the event one member does not pay his or her contribution towards expenses or fails to follow the guidelines for use of the home.

Communicate Your Vision with Your Family & Seek Professional Advice

These are only a couple of techniques to consider when planning for your vacation home. Discuss your goals and considerations with your family members to determine if they are interested in pursuing one of these techniques. Make sure your children want to share in your vacation home and create an overall plan to addresses any potential disputes and financial issues. Once you and your family are all on the same page, then work closely with your CPA, attorney, financial and tax advisors to make sure you have chosen the right technique for keeping the vacation home in the family.

If you have specific questions about any of the techniques discussed in this article, Contact Kelly O’Brien at Measure, Sampsel, Sullivan & O’Brien, P.C. at (406) 752-6373/ www.measurelaw.com to schedule an appointment.

Article previously published in the October/November 2012 Business Issue of 406 Woman Magazine http://406woman.com/

 

 

 

Estate Planning for Blended Families

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Tips & Techniques for the Modern Family

The idea of the “typical” American family has changed significantly over the last several decades from the traditional nuclear family to blended families of countless variations. Now-a-days, a blended family, or a family where one or more spouse has children from a prior marriage is commonplace.

Blended families face unique challenges when it comes to estate planning. Parents of blended families should take extra precautions to adequately consider what would happen to the family upon the death of one spouse and take steps to avoid disinheriting a spouse or children.

Perhaps one of the more famous estate disputes in recent history surrounded the estate of J. Howard Marshall who was married to the much younger Vickie Lynn Marshall, more widely known as Anna Nicole Smith.  Upon Mr. Marshall’s death, his will left almost all of his estate to his son from a previous marriage. However, Ms. Marshall sued, claiming her elderly husband promised to give her more than $300 million and the court battle went on for several years.

This case illustrates one of the more common scenarios in blended families, where one spouse leaves everything to their children from a prior marriage and completely leaves out his or her spouse. This leaves the estate subject to claims from the surviving spouse, as well as other disputes between family members that can have lasting impacts.

Another common problem occurs when the children are disinherited by virtue of joint ownership of property.  This commonly occurs because married couples often decide to hold property such as houses, bank accounts, or cars jointly. However, in a family of a second marriage joint ownership with a spouse can result in unintended consequences. In the case of joint ownership, the surviving spouse obtains sole ownership of the property by operation of law, thereby excluding the predeceasing spouse’s children from ownership of the property.

If you have remarried and have children from a prior marriage, what can you to reduce the chance for disputes between your spouse and children after you are gone?

First, it is essential that you talk to your spouse and children about your wishes, as well as discuss potential issues that may arise with the distribution of your estate. In addition to communication with family members, a blended family should consider the following techniques for reducing conflicts:

Update your Estate Plan & Beneficiary Designations

At a minimum each spouse should have an estate plan containing a will with Powers of Attorney for finances and health care. However, a will only goes so far with a blended family. It is also critical that each spouse updates their estate plan and beneficiary designations to ensure that ex-spouses are disinherited or no longer listed as beneficiaries of assets such as retirement accounts or life insurance policies. Then review your beneficiary designations to make sure that the proper beneficiaries are named, and the beneficiary designations fit within your overall estate plan. Remember, a beneficiary designation trumps a will, so keeping your beneficiary designations updated to reflect your current life situation is essential.

Prenuptial or Other Marital Agreements

Perhaps one of the best methods of preventative maintenance for a blended family is to execute a prenuptial or other marital agreement with your spouse that addresses estate planning issues. By clearly defining which assets you want to remain separate after the marriage and which assets you agree will pass to each of your children you can reduce disputes later, Moreover, marital agreements allow you to maintain more control over the how and when your assets are distributed.

Life Insurance Policies

Life insurance can be a great tool for providing for your children, while also providing for your spouse. By specifically naming children as beneficiaries of a life insurance policy it creates immediate benefit to children upon death, rather than having to potentially wait many years for inheritance. With the life insurance proceeds going to children, the remainder of the estate may pass to the surviving spouse, thereby eliminating or reducing potential inequities.

Create a Trust

Consider a joint revocable living trust or Qualified Terminable Interest Property Trust “QTIP” Trust. A QTIP or other trust can provide income and principal for a surviving spouse’s care during his or her lifetime. However, upon the death of your spouse, the remaining assets in the trust can be distributed to your children according to your wishes.

Life Estates

Another option to consider is to provide your spouse with a life estate in your home.  A life estate allows a surviving spouse to live in the house for his or her lifetime, but allows the remainder interest in the home to pass to your children.

Talk with your Family & Seek Professional Advice if Necessary

These are just some of the techniques to consider when planning an estate with a blended family. It is critical that you and your family discuss these issues together and have an overall plan to addresses any potential disputes or inequity problems. Your particular estate may also have estate tax or other considerations, so I always recommend seeking the professional advice of your attorney, CPA or financial planner.

These types of estate planning issues may not always be easy issues to talk about, especially with a blended family. However, communication and planning now can provide peace of mind that you are sparing your family from conflicts or hurt feelings down the road.

Contact Kelly O’Brien for more information or questions about estate planning at  Measure, Sampsel, Sullivan & O’Brien, P.C. at (406) 752-6373/ www.measurelaw.com

 

 

New Federal Estate Tax Exemptions for 2012

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The IRS recently announced that it will increase its federal estate tax exemption amount for 2012. For an estate of an individual that dies during calendar year 2012, the basic exclusion from estate tax amount will be $5,120,000, up from $5,000,000 in 2011.

The federal estate tax is a tax on property transferred pursuant to a death. Essentially, it is the tax that the family or beneficiaries of a deceased person must pay on that inheritance. Only those estates that exceed this amount must pay estate taxes, and the estate is only taxed on that portion of that exceeds the threshold amount.

For purposes of determining whether or not a federal estate tax return is required, it is important to determine the value of the “gross estate.” The “gross estate,” consists of the fair market value of everything owned on the date of death. The IRS also allows adjustments for taxable gifts and certain deductions including deductions for mortgages, debts and the expenses to administer the estate. Moreover, all property that passes to the surviving spouse or a charitable organization with federal 501(c)(3) exempt status is excluded from the taxable estate. After these adjustments and deductions are accounted for, only those estates with a “gross estate” that exceeds $5,000,000 (or $5,120,000 in 2012) need to file a federal estate tax return and pay estate taxes.

In addition, the IRS permits reductions in value for certain real property in determining the value of the estate. The total decrease in value permitted will decrease in 2012. For Special Use Valuation for qualified real property, the aggregate decrease in the value of the property resulting from the election cannot exceed $1,040,000, in 2012, up from $1,020,000 for 2011.

There are a number of other exemptions and reductions permitted in determining the gross value of the estate for federal estate tax purposes. For a complete list of the increases in tax benefits for 2012 see http://www.irs.gov/newsroom/article/0,,id=248485,00.html, which lists all of the income tax benefit increases, exemptions, standard deductions, and tax brackets for 2012.

Federal estate tax calculations are complicated, so I always recommend working with CPA to determine whether or not an estate tax return is required for a specific estate. However, the best way to ensure that your family avoids paying federal estate tax is to plan ahead with the use of trusts and other estate tax reducing tools. Work with a team including an estate planning attorney, financial planner and accountant to determine how you can plan your estate to reduce taxes and other complications for your family.

For questions or advise on federal estate tax and estate planning contact Kalispell, Montana attorney Kelly O’Brien at (406) 752-6373.

When should you update your will or trust?

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Reviewing & Updating Your Will or Trust

Advice from a Montana Estate Planning Attorney

Wills and Trusts are highly effective tools in distributing assets upon your death and reducing family stress and conflicts. However, Wills and Trust are only effective estate planning tools if they are kept up to date. An outdated Will or Trust and be just as ineffective as nothing at all, or worse.

Instead of thinking of your Will, Trust or other estate planning documents of something you do once, then lock away, I always recommend you keep copies of these documents in a safe, but in a handy place. It is important to review and update these documents on a regular basis. In addition, there are some specific instances where it is especially important to take some time to review, and if necessary, update your estate plan. Some examples of these situations include:

 

  • After the death or incapacity of an individual nominated in your will or trust as a personal representative, trustee or beneficiary
  • After you are married or divorced
  • After birth or adoption of a child
  • After purchasing or selling real estate or other large asset
  • Prior to a major operation or other medical procedure
  • After receiving a large inheritance
  • After moving to another state or purchase assets in another state
  • After any major change in your income or income earning capacity
  • After a minor child reaches the age of majority or completes college
  • Upon the marriage of a child or other beneficiary
  • Anytime you change you change or mind about how your want to distribute your assets and to whom you want to distribute those assets 

There are many other situations where you might need to update your estate plan, but the important thing is to get in the habit of reviewing your estate planning documents when your life changes. If you have questions about how or when to update an estate plan, speak with a local estate planning attorney. Making a change to your estate plan is usually quite simple and reduces complications for your family later. 

 

How to Choose the Right Guardian for Your Minor Children

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Choosing a Guardian for Minor Children- Advice from a Montana Estate Planning Attorney

For many people their largest concern in estate planning is providing for their children. Everyone who has a child under the age of eighteen should consider who would raise their children if there were unable to do so. However, determining who would act as a guardian for minor children is perhaps the most difficult decision in estate planning, and the one with the most potential impact. That is why it is critical to take some extra time to make this decision.

Perhaps the best place to start by making a list of good potential candidates for the role of guardian. Initially this list may include brothers, sisters, aunts, uncles, grandparents or even family friends, basically anyone you can think of that may act as a guardian.

Then consider the factors that are most important to you in deciding on a guardian. Some considerations may include:

-Do they have similar philosophies about child rearing?

-What are their religious beliefs or do they possess the ability to follow your desires for your children’s religious upbringing?

-Do they possess the ability to follow your instructions about education, activities and child rearing, in general?

-What is their age, stamina, and maturity level?

-What is their relationship with your children and do they have a genuine interest in your children’s well being?

-What is their level of stability and integrity?

-Are they physically capable of caring for your children?

-What is their current job situation and do they have time available to care for your children?

-Are they willing and interested in acting as a guardian for your children?

-Do they have children of their own and are their children compatible with your children?

-Do they live in the same geographic area as you?

-What are their social, political and moral values?

-Are they financially responsible?

-Do you children enjoy their company?

-Is their overall lifestyle compatible with yours?

Once you have considered these factors, I recommend prioritizing the factors that are the most important to you and your spouse (or other co-parent as the case may be). Understand that you and your spouse may have conflicting ideas about the most important attributes, however the discussion is important to have within this process. Once you have decided on a few key factors you can compare these to your list of candidates and determine who would best fit based on your priorities.

Open discussion with your family members, including your spouse, children and potential guardians is a key component in this process. While the discussion may be difficult at times, keep in mind that this is one of the most important life decisions you will have to make, so discussion is important.

If you have additional questions about choosing a guardian for your minor children, or if you would like additional assistance from a Montana estate planning attorney in nominating a guardian for your minor children or other estate planning techniques to provide for your children, call me at (406) 752-6373.

 

What is Estate Planning & What Happens Without it?

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What is Estate Planning & Who Needs it?

Advise from a Montana Estate Planning Attorney

Estate Planning is the process of setting out your wishes for the distribution of your assets upon your death, and implementing strategies to ensure that your wishes are carried out to the fullest extent possible. Anyone who wants to control the distribution of their assets, the guardianship of their minor children, provide for charitable causes, or reduce estate taxes needs estate planning can benefit from estate planning.

Estate planning can be utilized to accomplish goals ranging from complex tax planning to simple distributions to children. However, it is best accomplished as a team, where you, your attorney, financial advisors, and your family can work together to create a complete picture of your goals and implement the best strategies to meet those goals.

What happens without a Will or Trust Montana?

Without estate planning, or a Will or Trust, Montana state law controls the distribution of assets upon your death. These laws are known as the laws of intestate succession. Without a valid Will or Trust you do not have control of who receives which assets, nor do you have control over the selection of guardians for minor children, or how those children will receive their inheritance.

For example, if you are married without children, or all of your children are from you and your spouse together, then upon your death your spouse will receive your entire estate. However, if you die leaving a spouse and children who do not belong to your surviving spouse, then surviving spouse is entitled to receive a $100,000 plus ½ of the remaining estate and the child is entitled to receive ½ the remaining estate. It is important to note that intestacy laws change, and unless you want to constantly keep up with current laws, it is a good idea to have a valid Montana Will or Trust.

However, if you have a valid Montana Will or Trust in place, you can decide who receives your assets, how much, and when they receive those assets. This means that you can provide for different distribution amounts to different children. With a valid Will or Trust, you can distribute specific assets to other friends, family members or charities. You may also decide to disinherit a child, limit the amount a child receives from your estate, or place their inheritance in a separate trust to be managed by someone else. Basically, a Will or Trust lets you determine who receives your property and does not leave it up to state law.

Proper estate planning is one of the most valuable gifts you can give your loved ones. It is important to work with an attorney that can take the time to understand your long-term goals and draft a Will or Trust that will address your family’s unique needs. If you have questions about estate planning or would like assistance with a Will or Trust, please call my office to schedule a consultation at 406-752-6373.

How can you avoid Probate? Part IV: Revocable Living Trusts

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Revocable Living Trusts as a Method to Avoid Probate

Advice from a Montana Probate Lawyer

This is the final post in a series of entries regarding methods for avoiding probate in Montana.  For a more general overview of probate avoidance methods, see Part I of this series; for a discussion of beneficiary designations, see Part II of this series; for a discussion of joint tenancy see Part III.  Today’s blog post focuses on revocable living trusts.

A revocable living trust is the most comprehensive and sure way to avoid the probate process. All of the assets are owned by the trust, and not held by an individual therefore a court process is not required to transfer assets upon death. To completely avoid probate with a revocable living trust, the trust must be properly “funded,” which means that all assets must be title in the name of the trust (or held by the trustee of the trust) and not titled in the name(s) of an individual(s).

A revocable living trust is an estate planning mechanism where an individual (called “trustor,” “grantor,” or “settler”) puts property into the trust, to be managed and controlled by the trustee. Usually the trustee is the same person(s) as the trustor(s) while that individual or individuals are alive. The trust is considered a separate entity and technically “owns” the trust assets, and since the owner of the assets never technically dies, probate is avoided.

A revocable living trust has several advantages over other estate planning mechanisms. A trust allows for greater planning options over time. If a revocable living trust is properly funded, then it is possible for your family to avoid the need for probate. A trust may also avoid the need for a conservatorship in the event of incapacity and greatly reduce or eliminate estate taxes for large estates.

Manage Distribution of Assets Over Time

A trust allows you to control the distribution of your assets over time. If you have a revocable living trust, you basically provide your trustee with a set of “instructions,” for how you want your assets to be managed or distributed upon your death. Typically, the trustee invests the property on behalf of the trust and then the trustee will pay beneficiaries interest and distributions according to your instructions. For example, you could provide for a distribution to each child upon graduation of college or upon reaching a specific age. Then, upon the expiration of the trust, the trustee distributes remaining property to the beneficiaries.

Privacy Protection

Trusts provide for more privacy in estate planning than wills. If you had a will it needs to be filed in your county of residence upon your death. The, your personal representative would have to provide notices to all heirs, beneficiaries and creditors, along with a public posting in a local newspaper.

However, if you were to pass away with a trust in place, probate is usually avoided so no documents need to be filed with a court. Your trustee basically follows your instructions and your estate is all handled in a private manner.

Estate Tax Advantages

Simply having a trust does not mean that your family will not have to pay taxes upon your death. However, there can be some estate tax advantages to having a revocable living trust, especially if you are married or want to give a portion of your estate to a charity.

I will not discuss tax planning in any detail in this post, but it is important to note that the federal estate tax limit for 2011 is currently set at $5,000,000. Only individuals that have estates exceeding this amount need to worry about estate tax planning, but the estate tax rate is generally very high and reducing the total value of your estate is greatly beneficial. If you or your family falls into this category I highly recommend working with an estate planning attorney, CPA and financial advisor on strategies for reducing federal estate taxes.

Incapacity Planning

A carefully drafted trust can also account for the management of your assets in the event of incapacity, and eliminate the need for a court ordered guardianship or conservatorship. You can specify in your trust how to determine whether or not you are physically or mentally incapacitated to the point where you are no longer able to manage your own affairs.  Then you can direct through your trust who should take care of you and nominate a disability trustee to manage your financial affairs in the event of your incapacity. You can also set limits on the types of assets your disability trustee can manage and the amount of funds they can distribute.  Not only could you eliminate the need for a court process to nominate a guardian or conservator, but you can direct the details of this relationship before incapacity.

Considerations

Revocable living trusts are great estate planning tools, but they do not make sense for everyone. Trusts take more work to administer and are more expensive to set up than a regular will, but they can be very effective in avoiding probate. However, if you are concerned about any of the issues I discussed above, or if you simply have more questions about the advantages and disadvantages of trusts, call me to speak with a Montana estate planning attorney at 406-752-6373.

How can you avoid Probate? Methods for Avoiding Probate in Montana

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How can you avoid Probate? Methods for Avoiding Probate, Advice from a Montana Probate Lawyer, Part I:

While the probate process in Montana is not as daunting as it might sound, people often ask me or how to avoid the probate process all together. While my answer really depends on the specific situation there are many ways to transfer property upon your death in Montana, while avoiding probate.

Today’s entry will provide a brief overview of some of the methods to avoid the probate process. However, over the next few weeks I will be posting a series of entries which will explain the advantages and disadvantages of the specific method you can use to avoid probate in more detail.

The most common methods for reduce or eliminate the need for probate include:

  • Beneficiary Designations or Transfer-on-Death (T.O.D), Payable-on-Death (P.O.D) Designations

Designating a beneficiary or a Transfer-on-Death (T.O.D), Payable-on-Death (P.O.D) designation for your financial assets is can be a helpful tool in avoiding probate. These designations are used for your financial accounts such as bank accounts, money markets, annuities, brokerage accounts, life insurance and retirement accounts. Most financial institutions have an easy form where you can specify who will receive ownership of the account upon your death. Then, upon your death the person you designated as your beneficiary (or T.O.D. or P.O.D) would be the outright owner of that account. These assets are not considered part of your probate “estate,” and therefore these assets will not have to go through the probate process.

  • Joint ownership

Another method commonly used to avoid probate in Montana is joint ownership with the rights of survivorship. If you own something jointly with the rights of survivorship it means that upon the death of the first co-owner, title to the entire property or assets automatically transfers or “vests” in the surviving co-owner.

  • Trusts

The one method for avoiding probate for all of your assets, while maintaining full control of these assets is a revocable living trust. A trust is basically a legal agreement where a “grantor” transfers title to property to another person, the “trustee,” to mange it for the benefit of a third party, known as a “beneficiary.” The property is placed in trust while the grantor is alive and upon the grantors death, the beneficiary will receive the trust assets, managed by the trustee according to the instructions set out by the grantor of the trust.

While this sounds like there are a lot of people involved, if you set up a trust during your lifetime, most likely you are the grantor, trustee and the main beneficiary at the same time. You would retain control of all of your assets as you had before, but upon your death your trust remains “alive” therefore no probate is required.

It is important to remember that there are advantages and disadvantages of using each of these tools depending on your specific situation. As a Montana probate and estate planning attorney, I always recommend that you have a valid Montana will or trust and that you discuss your specific situation with an attorney.