Two people looking at sunset

When you think about estate planning, life insurance doesn’t come to mind first. Your house, collectibles, and 401k? Sure. Yet, life insurance is present in almost every quality estate plan and can serve as a source of support, coverage, and liquidity to pay death taxes, expenses, fund business buy-sell agreements and sometimes to fund retirement plans. A life insurance policy, when used correctly, can be used to protect your estate and ensure your lasting legacy. Yet, for even the savviest of people who have a plan in place for the future, how life insurance fits into the estate planning puzzle can prove complicated.

puzzle pieces all mixed up

Enter Christa Payne, a Financial Representative for Country Financial in North Liberty, who was generous enough to share her expertise on the subject. Christa has been with Country Financial for over seven years and you can tell she’s passionate about what she does. She finds joy in being a part of planning for the future for all her clients.

Christa Payne
Gordon Fischer Law Firm (GFLF): In general, what role does a life insurance policy play within an estate plan?

Christa Payne: Generally, life insurance is a great vehicle to provide estate liquidity (in order to pay taxes, debts, administrative expenses, family allowance for surviving spouses and dependents). It can also provide debt relief or continuation plans (buy-sell for businesses, etc.), provide income replacement, and wealth accumulation…proceeds are paid to beneficiaries income tax free!

Two parents with two children

GFLF: Can life insurance affect the amount of taxable assets of the estate?

CP: Yes, if you are the owner of the policy, it gets added into estate calculation (up to $5.49 million as of 2017). However, if you give up rights to the policy for longer than three years, it doesn’t have to be included. There are steps you can take to make sure that the death benefit or the replacement value don’t get included in the estate calculation.

GFLF: What are the options for charitable giving with/through a life insurance policy? Can you “give” or transfer your policy to a charity?

CP: Premiums can be deductible, but owner and beneficiary both have to be the charity. Yes, you can transfer your policy to a charity or purchase a new one. Life insurance can be a great way to turn a smaller cash donation into a larger donation!Boy on bike and girl chasing after him with American Flag

GFLF: What are some errors you’ve heard of/seen in regards to life insurance and estate planning? What should people know to avoid these pitfalls?

CP: There are many errors that can be made, including: listing the wrong beneficiary (or failing to update as things change—beneficiaries trump a will!) and having an inadequate amount of coverage in force are two major ones. People should always meet with a competent financial professional and attorney to discuss their life insurance and estate plan. It’s vital to complete annual reviews of the policy, as simple as that seems, things change, and it’s easy to forget. It’s always great to be reminded what policy you have, how it works, and what will happen in the event of a death.

GFLF: What’s the difference for life insurance between revocable and irrevocable trusts? Is one category recommendable over another?

CP: In a revocable trust, there is no gift tax on funding the policy and it avoids probate. The death benefit, however, is included in grantor’s gross estate. In an irrevocable trust, it avoids probate, has asset protection against creditors, and is excluded from gross estate. One is not necessarily better than the other, it depends on the specific needs of each individual client at the time the trust is established.

Family standing around fire pit

Let’s Talk About Your Life Insurance

Take it from Christa, life insurance as a part of your estate plan is important. If you have questions on her advice or think you need a new/updated policy, don’t hesitate to give her a call at 319-626-3516 or shoot her an email. (A resource like this research can also be useful in comparing insurance plans.)

Of course, you also need an estate plan before life insurance an be a part of it)!  Contact me to get started or fill out my obligation-free estate plan questionnaire. I believe our guide comparing the best life insurance policies would be a useful resource for your readers, especially since this is the time of year that many have to re-evaluate their policies:

GoFisch is ever-evolving and I tried out a new look on this month’s newsletter. Give GoFisch a read, subscribe, and share it with your friends & colleagues to stay in-the-know with all things Gordon Fischer Law Firm. (If you missed last month’s edition of GoFisch, you can read it here.)

Two men having a conversation near the ocean

Several weeks ago, I held a survey about estate planning, through my GoFisch newsletter, blog, and social media platforms. I received over a hundred responses! Considering the sensitive and, indeed difficult subject matter, I thought this was a very significant number.

Action Time

You spoke loud and clear, and I heard you.

Child yelling into microphone

You don’t understand what an estate plan is. You’re not sure why you need an estate plan. You don’t know the process of putting together an estate plan. That’s understandable! Estate planning isn’t something most people deal with every day.

So, I wrote a series of short, but relatively thorough blog posts on each of these subjects, in plain English, free from legalese.

I explain what an estate plan is and outlined the six “must-have” documents everyone needs. I also detailed what a trust is, and about its benefits, here.

I wrote on the consequences of dying without an estate plan.

I also set forth my simple five-step process to get to a complete estate plan here.

But, that wasn’t enough, not nearly enough, by my own standards. Plus, actions always speak louder than words.

Cost Concerns Resolved

One of the most common concerns survey respondents cited was cost. There was tremendous confusion about how much an estate plan could/should cost. Some worried about the price being unaffordable for middle class Iowa folks. Worse, some respondents were genuinely fearful they would be told one price, and then pressured to a more expensive “package.” Or, that there would be a bunch of hidden fees and costs. Then there was the fear that you wouldn’t even know how much the estate plan would cost, until it was all over, and you got a bill (and by then, presumably, it would be too late to do anything about it if you thought the bill high or otherwise unfair). This approach, or the other with hidden fees, simply won’t fly with me; it’s advantageous for me to be transparent with my fee structure.

Estate Plan Sale

Again, actions always speak louder than words. You said you were concerned with cost, so I’m holding an estate plan sale.

estate plan sale image

For a limited time only (June 15 to July 15, 2017), you can receive a standard estate plan (which consists of the six “must-have” estate planning documents) for only $500. You will be billed only at the conclusion of this process, when you are executing the documents. So, obviously, you won’t pay anything until you are completely satisfied with both the plan and your understanding of the plan.

What if you need, or want, something more than the standard estate plan? Like, say, a revocable living trust? A standard estate plan, including a revocable living trust, will only cost you $1,000.

Let’s Talk…and Talk & Talk

I should note that either package comes with as many consultations (meetings, emails, and phone calls) with me as you reasonably feel we need to finish your estate plan. Again, you’re not sitting down to execute the documents, and so you’re not being billed (let alone paying anything!), until you are completely satisfied with both the process and the results of the process.

Now! Right Now!

Again, the special deal of $500 for a standard estate plan, and $1,000 for a standard estate plan plus a revocable living trust, will last only a limited time, June 15 to July 15, 2017. So, ACT NOW and do not wait!

Gordon Fischer discussing an Estate Plan with a Client

Contact Me

You can reach me most easily by email at gordon@gordonfischerlawfirm.com or call my cell, 515-371-6077. Don’t delay, write or call today.

A great place to begin thinking about estate planning is with my free, no-obligation Estate Planning Questionnaire.

Disclaimers
The Estate Plan Sale merely relates to pricing and in no way creates an attorney-client relationship, nor any other kind of professional relationship.
The Estate Plan Sale merely relates to pricing and does not create a contract or agreement of any kind.
GFLF, P.C. retains full and total discretion as to who it chooses to serve as clients and why. GFLF, P.C. retains the right to refuse service to anyone it chooses.
The Estate Plan Sale may not apply to individuals or families with a net worth of more than $1 million dollars. (You still need an estate plan, very much so, but it necessarily needs to be much more “complex.”).

Estate planning is not just for your grandma, rich people, or families with kids. Call it adulting or simply being prepared, creating a quality estate plan is an essential part of your financial health. Here are five valid reasons for single, twenty-somethings to make an estate plan ASAP.

  1. The future of your digital assets (e.g., bank or credit union account information, social media accounts, and more) are in limbo. So much of our lives are lived online that it’s just as important to have your online presence accounted for as your personal, physical property.

digital assets on computer

  1. Your debt still needs to be handled. Unless it’s student loans, your debt just doesn’t go away if you pass away, and someone in your family may well be responsible for paying it off.
  2. Without an estate, your assets will be liquefied to pay off debt, and then reassigned to whomever a probate court deems to be the best recipient. This also means that without an estate plan you cannot donate your assets to the charities you care most about.

Butterfly in two hands

4. Do you really want to leave all of the burial decisions and house cleaning to your distraught loved ones?

5. Who’s going to parent your fur baby (dog, cat, bunny, chinchilla, you name it) if something happens to you? You’ll want your pet to go to a loving home and an estate plan (with a pet trust) is a great (only?) way to set the standard for continued care and ownership.

cat curled up in basket

These are just a few of the many considerations that are, yes, tough to think about, but so important.

Have questions? Need more information?

A great place to get started is with my Estate Plan Questionnaire. Also, I’m always here to offer guidance, explain important terms, and answer questions. Feel free to reach out at any time.

estate plan sale

WHAT IS AN ESTATE PLAN SALE?

For a limited time only (June 15 to July 15, 2017), you can receive a standard estate plan (which consists of six “must-have” estate planning documents) for only $500 (five hundred dollars). You will be billed only at the conclusion of this process, when you are executing the documents. So, obviously, you won’t pay anything until you are completely satisfied with both the plan and your understanding of the plan.

man working at desk on computer

What if you need or want, something more than the standard estate plan? Like, say, a revocable living trust? A standard estate plan, including a revocable living trust, will only cost you $1,000 (one thousand dollars). A revocable living trust accrues several benefits, including avoiding probate; saving costs, taxes, and fees; getting bequests to beneficiaries more quickly; and privacy.

I should note that either package comes with as many consultations (meetings, emails, and phone calls) with me as you reasonably feel we need to finish your estate plan. Again, you’re not sitting down to execute the documents, and so you’re not being billed (let alone paying anything!), until you are completely satisfied with both the process and the results of the process.

Gordon Fisch Estate Plan

WHY?

Why have an estate plan sale? Several reasons, actually.

To begin, the mission of my law firm is to promote and maximize charitable giving in Iowa. Straight up, the more estate planning Iowans do, the more charitable giving will occur.

Sure, not everyone who constructs an estate plan uses it to give to charities, but many do. Again – it’s simply a numbers game; the more estate planning, the more money flowing to worthwhile causes.

Also, 60% of Americans don’t have a will/estate planning. I want to help combat that statistic in Iowa. We can do better. Working together, we will do better.

Grandpa face

Finally, everyone deserve access to a secure future and a legacy. For these reasons, I’m offering very special rates.

HOW?

How much money are you saving? Quite a bit actually!

Speaking very generally, an estate plan from my Firm usually costs a single person about $700, and a family about $850. So, under this Estate Plan Sale, that’s a saving of about $200 for singletons to $350 for your family!

Family: mom, son, and dad

Also, speaking very generally, an estate plan including a revocable living trust, from my Firm, usually costs a single person about $1,300, and a family about $2,200. So, under this Estate Plan Sale, that’s a saving of about $300 for singletons and a whopping savings of $1,200 for your family!

WHERE?

Any Iowan is eligible. I am licensed to practice law in Iowa, and I have clients all over the state. In our modern age of emails, scanning, and cell phones, mere physical distance is not an issue.

I have clients from Burlington and Carroll to Sioux City and Urbandale. If you want to work with me, I want to work with you, and we can easily find ways to do so.

HOW?

I write about my process at length, but it’s just five steps! Seriously, it’s not that painful, it truly isn’t. My clients report back to me that they have such relief and peace of mind when it’s completed.

Peace signs at the golden gate bridge

WHEN?

NOW! RIGHT NOW!

Again, the special deal of $500 for a standard estate plan, and $1,000 for a standard estate plan plus a revocable living trust, will last only a limited time, June 15 to July 15, 2017. I’m already backlogged, so ACT NOW. Do not wait!

We all know, of all the seasons, summer goes by the fastest. Time can run out on you; don’t let that happen.

You can reach me most easily by email at gordon@gordonfischerlawfirm.com or call my cell, 515-371-6077. Don’t delay—write or call today.

A great place to start in on the process is with my Estate Planning Questionnaire.

mom and son on street

DISCLAIMERS

The Estate Plan Sale merely relates to pricing and in no way creates an attorney-client relationship, nor any other kind of professional relationship. The Estate Plan Sale merely relates to pricing and does not create a contract or agreement of any kind.
GFLF, P.C. retains full and total discretion as to who it chooses to serve as clients and why. GFLF, P.C. retains the right to refuse service to anyone it chooses.
The Estate Plan Sale may not apply to individuals or families with a net worth of more than $1 million dollars. (You still need an estate plan, very much so, but it necessarily needs to be much more “complex.”).
Gordon Fischer Estate Planning Simple

You know you need an estate plan, but you still don’t understand really what you need or where to start. What to do? I’m here to help and it’s one of my personal missions to break down estate planning so it’s as easy and accessible as possible.

Here are three blog posts, all relatively short and simple, that should help.

First, I provide the very basics of estate planning which features the six “must have” estate planning documents everyone needs.

For many, the six “must have” estate planning documents is enough. Some Iowans will also want or need a trust.

Second, here are the basics of what you need to know about trusts.

https://www.gordonfischerlawfirm.com/legal-word-of-the-day-trusts/

Trusts can be needed and utilized for a number of reason. Perhaps someone’s assets are too large, too numerous, and/or too complicated and a trust is needed. Perhaps the person simply has a desire to avoid probate. Trusts can also provide a measure of privacy that, say, wills, do not.

Third, you may ask, how does someone go about actually getting these documents? What’s the process of putting together an estate plan? Well, probably every lawyer has a different estate planning process. I of course prefer mine – I think it’s very client-focused and client-friendly, and allows plenty of give and take between me and you. We’ll have an ongoing dialogue between us to ensure the best plan for you. Really, it only takes five steps to have a full and complete estate plan.

Let’s Talk.

After reading these posts you may still have questions or will want to discuss your personal estate situations. I would love to schedule a time to meet or discuss over the phone. Shoot me an email or give me a call and we’ll start the conversation on what YOU need to leave a lasting legacy and secure future for your loved ones.

If you’re feeling good and want to get started on your estate plan, the best place to begin is with my free, no-obligation Estate Plan Questionnaire.

old and young hand touching a rose

If you have a living trust (sometimes referred to as an inter vivos trust) in your estate plan, you need to know how to administer it. That sounds like common sense, but there are some unique elements to consider that otherwise you probably wouldn’t think about. The following definitions and directions should help you with that process.

In the following descriptions I also include details of what role I play as a lawyer in assisting the process of funding and administering my clients’ living trusts.

(If you’re considering whether or not you need a living trust, this blog post helps break down the basics. Of course, don’t hesitate to contact me to discuss your individual situation.)

Tax Identification Number

As long as you are the trustee of the trust, the trust’s tax identification number is your social security number. No separate tax return will need to be filed for the trust for as long as you are the trustee.

Initial Funding of Trust

One of the primary reasons to use a trust is to give your trustees and beneficiaries the ability to avoid probate proceedings at your death. This only works if all your assets are owned by the trust. Accordingly, I suggest you transfer your assets to the trust as soon as you have signed your estate planning documents. The transfer can be easy or difficult, depending on the nature and extent of your assets. The following is a brief description of the process you should complete. I am available to assist you in the process if you wish. Your assets and accounts should be held as follows: (Your name), Trustee of the (Your name) Living Trust.  

Bank Accounts

You should make an appointment with each of your bankers to transfer ownership of your bank account to the trust. When you go, take an updated list of your accounts with the bank or have the banker print one for you. Also take a copy of your trust agreement. If you open new accounts or certificates, please make sure that those new accounts are held in the name of the trust.

piggy bank with gold coins

Option: If your bank requires you to establish a new bank account for your trust and you do not desire to replace your current account for various reasons, you can establish a “Payable on Death” (POD) designation on your bank account to provide that upon your death the account is paid to the Trustee of the ________ Living Trust. This should be handled by your bank.

Brokerage Accounts

The procedure for changing brokerage accounts should be the same as the procedure for transferring your bank accounts.

Stocks and Bonds Held in Certificate Form

If you own stocks and bonds in certificate form, you will need to obtain directions from the transfer agent for each individual stock or bond owned. An alternative would be to have your broker, if you have one, assist you with the transfer. I am often asked to assist my clients in the transfer of these types of assets; please let me know if I can assist you.

Savings Bonds

Savings bonds can be transferred to your trust; you should take your bonds to the bank to be reregistered. Current regulations do not require title to be changed if the total amount of the U.S. Savings Bonds are less than $100,000.

Closely Held Business Interests

If I am the attorney for the business, I can assist you in transferring ownership from the business to the trust. If I am not, you should contact the attorney for the business or whoever is in charge of the ownership record books. If they are not familiar with the use of living trusts or are hesitant to change ownership, please contact me.

Real Estate

modern condos

As part of my service in preparing trusts, I prepare and record deeds transferring your Iowa real estate to your trust. For out-of-state property, you should contact an attorney in the state to complete the transaction. I can refer you to an out-of-state attorney if you do not know of one to assist you. It is particularly important to change ownership of out-of-state real estate. If you don’t, separate probate proceedings may be requited. You should also contact your liability insurance agent and ask them to add your trust as an additional insured on your household and liability policies.

Tangible Personal Property

Unless your household goods and personal effects are quite valuable, I would generally not prepare a bill of sale transferring those goods to your trust. Your will contains provisions regarding the distribution of personal property, and you can also write a list of memorandum specifically providing for the distribution of those goods. You do not need to retitle your automobiles, as your family will be able to sign an affidavit concerning the ownership of the automobile after your death.

Assets with Beneficiary Designations

Your trust will not control the disposition of assets you own with beneficiary designations, such as life insurance policies, annuities, IRAs, and other retirement plans. The beneficiary designation form controls the disposition of those assets. You should avoid listing your estate as the beneficiary of any of these types of assets unless we  have specifically advised you to do so. You may list your trust, individuals or charities as the beneficiary or beneficiaries. If you list beneficiaries other than your trust, please remember that on your death the beneficiary will receive those assets in addition to his or her share of the trust assets.

Changing Trust Provisions

You can amend or revoke your trust at any time. Simply call me and I will prepare the appropriate paperwork.

When you are no Longer the Trustee

two people discussing living trust

If you become unable to manage your financial affairs, or if you simply want to have the successor trustee act on your behalf, the successor trustee will need to obtain a separate tax identification number from the IRS and a short form information tax return will need to be filed each year.

Administration of Trust upon your Death

Upon your death, the successor trustee will administer and distribute the trust assets in accordance with the provisions of your trust. If you ever have any questions about the administration of the trust, please contact me.

 Questions?

You probably still have some questions on living trusts…which is why I’m here! Don’t hesitate to contact me by phone (515-371-6077) or email (gordon@gordonfischerlawfirm.com). I offer a free one-hour consultation at which point we can discuss your personal situation, see if a trust is right for you, and set up the steps to take for success.

How many times during the day, without even thinking about it, do you use a digital account? Twenty? Fifty? More? Think about it, within the space of just a few minutes you’ll login to your work email, post to your Facebook account, upload files to Dropbox, and check your credit card statement from your banking app. There’s no doubt digital accounts are a regular part of the hum of daily life. A huge amount of your personal and financial information is not only held online, it’s held entirely online, and nowhere else.

Fingernails on a Macbook

Just as dying without a will can cause grave stress and even anguish to your loved ones, dying without passing along information and instructions on your digital accounts can cause major headaches. Considering that you may well have dozens or even a hundred different digital accounts, this represents a huge challenge to your executor.

Defined broadly as any multimedia, website login, online account, hardware, and/or software — your digital assets can quickly accumulate and represent a vast amount of information, both personal and professional. (Digital assets encompasses tools for both personal or professional use).

Anything from your Facebook business page to your Paypal account is counted as a digital asset. When you pass away, these accounts will (presumably) need to be accessed by your executor. Which is weird, when you think about it, considering all the time we spend on anti-virus software, reporting spam, and avoiding hacks of our online selves. These accounts will need to be used totaling up all your assets and finalizing your affairs. Your online bank or credit union records will be used for the former. Shutting down your social media profiles will be part of the latter. In any case, an executor needs access.

The law and the online world have had a rocky relationship thus far. There are so many competing principles, including privacy, ownership interests, ability of companies to freely contract with customers, and a probate code that in many ways is more attuned to the 1800s than the 2000s. These clashing concepts means we only now are beginning to codify solutions to the online world issues and problems.

For example, how should the law handle terms-of-service agreements, after one party to the agreement has died? You remember that little box you check every time you update your computer or get a new account. All that small print includes terms-of-service agreements to which you agreed. These agreements, in addition to state and federal privacy laws, forbid unauthorized access to digital accounts.

social media on iphone

Enter the 2015 Revised Uniform Fiduciary Access to Digital Assets Act. (Try saying that five times fast!) This statute’s title is legal speak for, “Here’s what you do with someone’s digital accounts like email and social profiles and financial institution accounts after they die.” It provides (relatively clear) rules so an executor can effectively manage a decedent’s digital accounts without violating any laws (like the terms-of-service agreements).

Iowa is one of the majority of states which enacted the Digital Assets Act, but only recently. Governor Branstad signed Senate File 333, the Iowa Uniform Fiduciary Access to Digital Assets Act, on April 20, 2017.

The Digital Assets Act gives you the power to plan for the management and disposition of your digital assets in similar ways to your planning for disposition of tangible property. In case of conflicting instructions, the Digital Assets Act provides a three-tiered system of priorities:

Tier One

Just like a beneficiary on an account trumps what’s written in a will, if a service provider like Google offers a mechanism for the account holder to outline their wishes post-mortem, then that tool is used as the primary instruction. Note that other tools, like Twitter, have a specific policy involving steps like submission of a death certificate by an authorized representative. But, if a digital service offers you the option to set what happens upon your passing—who should be notified or has access to the account—use it.

social media buttons

Tier Two

If an online account doesn’t offer any sort of contingency plan, then put directions for digital assets in your will, and in your powers of attorney, and in trust agreements, if applicable. If nothing’s specified with the service provider, then directions in an estate plan are the next, best clear intention. Don’t rely on general definitions of the executor’s powers, or what “assets” mean, to wrongly assume these cover your digital assets. A written statement(s) ideally gives your executor equal access to what you had during life. Considering you could have dozens or even hundreds of online accounts, include an overarching, general statement that includes any account owned by the decedent. Consider using specific instructions for intentions on particular accounts.

You should include these instructions in your estate planning documents even if you’ve designated an account executor with the service provider . . .  it doubles down on your wishes.

Tier Three

If digital assets aren’t accounted for by a service provider tool or in an estate plan, then the determination of how the assets may be dealt with falls to the dreaded service agreement. Such agreements typically prohibit anyone accessing the account aside from the owner.

finance on phone with laptop in background

Easy Steps to Take

Beyond knowing these three tiers of the Digital Assets Act, there are a few (relatively) easy steps you can take to ensure your digital assets are both accessible and accounted for:

  1. Consider a password manager like LastPass. With this tool there’s one password to login and then the executor could see all the sites you use regularly. In a way it’s like a net worth statement of investments . . . but for accounts.

 

  1. In addition to a password manager, write down an inventory of your accounts and log-in information; keep it secure and updated. Of course, don’t put this login info in your estate plan documents. Give clear instructions to your trusted family member or friend as to where to find this document.

 

  1. You’ll want to consider what you want your executor to be able to access. Do you want them to be able to read all your private emails and Google+ Hangout chats? If not, you may specify limited access.

 

  1. This goes without saying, but think long and hard about precisely who you want to have access to your online accounts. Someone may be qualified to be your Financial Power of Attorney agent, but entirely unqualified to handle your digital accounts. You’ll need to consider both trustworthiness and tech savvy and tech aptitude in your decision.

double computer screen

Don’t Just Tweet About It, Talk About It

If you don’t have an estate plan yet, the best place is to start with my Estate Plan Questionnaire. It’s free and provided at no obligation.

If it’s time to update your estate plan to include digital assets, I would love to discuss your situation. Reach out at any time by email, gordon@gordonfischerlawfirm.com, or cell phone, 515-371-6077.

Calling All Parents

In your role as a responsible parent you most definitely need an estate plan. One of the most critically important features of an estate plan is establishing guardianships for any minors (i.e., children under the age of 18) in your care. The ability to establish guardianships through your will is one of the (major) reasons I give for stating that estate planning is just as important for young people – arguably even more important – than it is for older folks.

couple with child at beach

What if a child’s caregiver is in an accident resulting in disability or even death? It’s tragic and uncomfortable to think about. If the child/children are younger than 18, the question will immediately be, “Who cares for them now?” And I say, immediately, because children can’t wait hours (let alone days, weeks, or months) for the adults around them to sort out an answer—kids need help, care, and support ASAP.

Establishing Guardianship Can Best Be Accomplished Through Will

A guardianship for a minor child can best be established through a Will. For example, your Will could state something like this:

Nomination of Guardians. If I die leaving minor children, it is my wish that such minor children be cared for by my sister, AMY SMITH, and brother-in-law, GARY SMITH, as co-guardians, both of whom may also make a determination of appropriate custody, provided both are still living and are still married to each other. If AMY SMITH or GARY SMITH do not survive me, it is my wish that my brother-in-law, DARREN JONES, and his wife, LAUREN JONES, act as guardians, and both of whom may also make a determination of appropriate custody.

Be sure to discuss your guardianship choices with your family members to be sure they’re “in-the-know” and on board with the potential responsibility of caring for your young ones.

Without Nomination of Guardians, Iowa Court Must “Guess”

Unless guardianship has been established, as in the clause directly above, an Iowa Court must choose guardians. Unfortunately, with no clear choice as to what the former caregivers would have preferred, the Court must basically make its own and best determination as to who the parents would have preferred and what would be in the best interest of the children. The Court may or may not, choose who the former caregivers would have named.

child celebrating fourth of july

Spiraling into Conflict

In an extremely stressful situation such as in the case of major disability/death of a caregiver, there may be several family members all sincere in the same strongly held belief that the children would be best taken care of by them. From there, events can quickly spiral into conflict, even a full-blown Court battle. The people who suffer most during this conflict are, of course, the minor children themselves, as they are thrown into an even worse situation.

Oral “Promises” Not Sufficient

OK, you say. But, our neighbors and us, we have a special deal. We’ve talked and agreed, if something happens to us, they’ll be the guardians. If something happens to them, we’ll be the guardians. Isn’t that good enough?

In a word, no. No way. This sort of oral agreement is not enforceable in Probate Court (or any other Court). (Here’s an example of how such agreements fail to hold up using examples from the podcast, S-Town.) The Court might consider this as one piece of evidence among the many other pieces of evidence—assuming this oral agreement can even get admitted into evidence—including in-person testimony by would-be guardians, in order to reach a guardianship decision.

Not to Decide Is to Decide

I’ve known couples haven’t been able to agree who will take care of their children in the event of them both passing. Since they can’t reach an agreement, they bypass the conversation entirely, and leave their children without a legal guardian. Which is, of course, the worst possible decision of all!

A good estate planning attorney can help with this discussion. (Let’s set a time to have this discussion.) A compromise must be reached, to ensure a good plan for the kids.

Testamentary Trust for Children

girl blowing bubbles

Further, it’s not just guardians you can plan for in your will, you can also plan material support for your children. Through a will, you can set up what is known as a testamentary trust for your children. This trust will ensure your minor children will be provided and cared for in the event you are gone.

A trustee named by you to oversee the trust, can distribute funds from the estate (with oversight by the estate attorney and the Court), for the following childcare categories:

  • Health
  • Education
  • Maintenance
  • Support

Lawyers often refer to this in shorthand as “HEMS.”

Who Wants to be an 18-Year-Old Millionaire?

When you pass, even at a young age, all your assets (house, vehicles, life insurance, retirement benefit plan) could add up to quite a tidy sum. Without a testamentary trust, a child would simply inherit everything at once, when he/she reaches the age of majority (i.e., on their 18th birthday). No matter how smart and responsible an 18-year-old is, they are still only 18. Most of my clients feel strongly that inheriting that much money, that quickly, would not be good for anyone. (Case in point, this guy learned his lesson from blowing through a trust fund in just a couple years.)

teen in france walking in grass

Instead, in a quality estate plan, a testamentary trust will provide assets to the child/children as they reach different age checkpoints as chosen by the caregivers. For example, the caregivers may decide the children should receive one-third of the estate at age 21, one-third of the estate at age 30, and one-third of the estate at age 40. Or, again, whatever ages and percentages the caregivers think best and most appropriate.

Contact Me for a (Genuine and) Free Consultation

I know this can be a lot to think about. So, don’t hesitate to reach out at any time with any questions, concerns, or considerations. You can also get started on the creation of an estate plan by filling out my Estate Plan Questionnaire.

number four on wood

We dove into the definition of the term “trust” in this blog post. But, that’s just the tip of the iceberg when it comes to learning about the important agreement that’s often used for purposes including estate tax liability reduction, estate property protection, and probate avoidance. There are four standard ways of classifying trusts.

Trust Classifications

The word "TRUST" written in vintage wooden letterpress type

Trusts may be classified by their purpose, duration, creation method, or by the nature of the trust property. One common way to describe trusts is by their relationship to the life of their creator. Those created while the grantor is alive are referred to as inter vivos trusts or living trusts. Trusts created after the grantor has died are called testamentary trusts. Another helpful classification of trusts is comparing those which are revocable to trusts which are irrevocable.

Inter Vivos Trust

An inter vivos trust, also known as a living trust, may be either revocable or irrevocable. In a revocable trust, the grantor can retain control of the property, if the grantor so wishes, and the terms of the trust may be changed, or even cancelled. An irrevocable living trust, on the other hand, may not be changed or terminated after it is executed.

Testamentary Trust

A testamentary trust is most often a component of a will. The testamentary trust is created when the trustor passes away. The designated trustee then steps in and distributes or manages the assets of the trust according to the deceased’s wishes.

Revocable Trust

professional talking to couple about trust

A revocable trust allows assets to pass outside of probate, yet allows you to retain control of the assets during your (the grantor’s) lifetime. It is flexible in that it can be dissolved at any time, should your circumstances or intentions change.

A revocable trust typically becomes irrevocable upon the death of the grantor. You can name yourself trustee, or co-trustee, and retain ownership and control over the trust, its terms, and assets during your lifetime. You may also make provisions for a successor trustee to manage them in the event of your death or incapacity.

Although a revocable trust allows you to avoid probate, it’s subject to estate taxes. It also means that during your lifetime, it is treated like any other asset you own.

Irrevocable Trust

An irrevocable trust typically transfers your assets out of your (the grantor’s) estate and potentially out of the reach of estate taxes and probate, but cannot be altered by the grantor after it has been executed. Therefore, once you establish the trust, you will lose control over the assets and you cannot change any terms or decide to dissolve the trust. An irrevocable trust is preferred over a revocable trust if your primary goal is to reduce the amount subject to estate taxes by effectively removing the trust assets from your estate. Also, since the assets have been transferred to the trust, you are relieved of tax liability on the income generated by the trust assets (although distributions to others may have income tax consequences). Trust assets in an irrevocable trust may also be protected in the event of a legal judgment against you

Let’s Get Started

You probably still have some questions on trusts…which is why I’m here! Don’t hesitate to contact me. I offer a free one-hour consultation at which point we can discuss your personal situation, see if a trust is right for you, and set up the steps to take for success.