Gordon Fischer at desk with client

I’ve previously written about the six “must have” documents of everyone’s estate plan. These documents include some key people that are essential. But, the terms for some of these roles can be confusing. Let’s review the main ones today.

Who/What is a Beneficiary?

Let’s talk first about beneficiaries. This is a basic term you’ve probably heard before or seen while filling out documents. Your beneficiary is the person to whom you leave your belongings, assets, money, land, etc. Of course you can leave your stuff to more than one person, in which case there would be multiple beneficiaries. With multiple beneficiaries, you’ll have to clearly designate who gets what. This can be done in a number of ways; for example, percentages of total value of the estate, or it can be done with specifics.

An example of percentages:  “I want Beth to inherit 20% of my estate.”

An example of a specific bequest:  “I want my son John to inherit the country house and I want my daughter Suzie Q to inherit the lake house.”

You don’t have to be related to your beneficiaries, and you’re under no obligation to leave anything to family members whom you wish not to receive your assets (no matter how hard that may be or how guilty you might feel). You could elect to leave part or your entire estate to charities. It truly is your choice as to who should benefit under your estate plan.

There’s a lot more to say about beneficiaries, but for now, just remember to make sure all documents are up-to-date. Keeping your estate plan up-to-date ensures you avoid nightmares like your ex-husband from years ago cashing in on your retirement funds.

How about an Executor?

Let’s talk about the executor of the will. An executor is the person who is in charge of your estate plan. They make sure the will is carried out as it is written. It’s not an awful job, but it is an awful lot of responsibility. Most folks, having never had to deal with the execution of a will, might not know how arduous it can actually be. Additionally, your executor might be close to you and grieving your passing while trying to make sure everything is taken care of properly. It can be stressful, to say the least.

When picking an executor, you want to make sure it’s someone you trust. Obvious, right? But, it’s so much more than that. We all have people in our lives we love and trust on a personal level, but we know they’re not responsible with things like finances and details. Those people would not a good executor choice, generally speaking. Look for someone in your life who is detail-oriented and can handle the part-time job of dispensing an estate.

If there’s no such person in your life, or even if there is and you simply don’t want to burden them with the task, there’s another great option: corporate executors or trustees–which can be found at a bank or a credit union. The corporate executor offers the bonus of being completely neutral in all things, which can be helpful if you have sticky family dynamics that might make life difficult for the executor. The corporate executor does come at a cost, which is usually based on the size of the estate. I tend to think you get what you pay for, and this could be an excellent option to consider.

If you do go with an executor you know personally, you’ll want to sit down and talk with them about it. You want them to know that you’ve assigned them the task and why you chose them specifically. And, if you’re choosing one child out of many, you’ll want everyone to be on the same page so there’s no unexpected turbulence after you’re gone.

How about Legal Guardians?

Legal guardians are the folks who will take care of your minor children should something happen to you before they reach the age of 18. Like your executor, this job requires a lot of trust in the person you choose.

Clearly, this is not a job that ends after the estate is closed. Who you decide to choose should be a matter of closeness of relationship (as in bond, not necessarily family ties), mutual values, and ability to handle the responsibility. Have an in-depth conversation with the person or people you choose. You want to confirm that you’re comfortable with their parenting style, make sure they feel they’re up to the job, and let them know why you chose them.

Important Trait in Common: Trust

What’s the key theme in all of these roles from beneficiaries to executors to legal guardians? Trust. The level of trust you have in the people who are involved in and benefit from your estate plan should be strong to be successful. If you ever have any questions about selecting the key players in your estate plan, don’t hesitate to reach out.

Your Estate Plan Should be Unique to You

There it is in a nutshell. Those are the basics of the key people in your estate plan.

Whether your estate plan is simple or complicated, it does require some thought and time, but it’s worth the investment. A proper estate plan can save you and your estate costs, taxes, and fees; help your family and friends; and provide you peace of mind.

Perhaps most importantly, through proper estate planning, you can help your favorite charities in ways large and small.

No Day Like Today

Why not start right now with my Estate Planning Questionnaire? It’s provided to you free, without any obligation.

Do you have an estate plan? Why or why not? I’d love to hear from you. You can reach me any time at gordon@gordonfischerlawfirm.com or by phone at 515-371-6077.

Pets are a huge part of many families. They are there to snuggle you, greet you every day when you come home, and share so many of life’s best memories with you.

For most people, planning what happens to your loved ones, including pets, is a big contributor to sound peace of mind. In the past, probate and trust laws did not allow pet owners to provide for the care of their pets after death, however, in 1990, the National Conference of Commissioners on Uniform State Laws enacted the first pet trust statute in the Uniform Probate Code. Fortunately, the State of Iowa is one of the majority of states that have adopted a law on animal trusts, most often referred to as “pet trusts.” It reads as follows:

633A.2105 Honorary trusts — trusts for pets.

  1. A trust for a lawful noncharitable purpose for which there is no definite or definitely ascertainable beneficiary is valid but may be performed by the trustee for only twenty-one years, whether or not the terms of the trust contemplate a longer duration.
  2. A trust for the care of an animal living at the settlor’s death is valid. The trust terminates when no living animal is covered by its terms.
  3. A portion of the property of a trust authorized by this section shall not be converted to any use other than its intended use unless the terms of the trust so provide or the court determines that the value of the trust property substantially exceeds the amount required.
  4. The intended use of a trust authorized by this section may be enforced by a person designated for that purpose in the terms of the trust or, if none, by a person appointed by the court

Pet trusts include the following elements:

  • Selecting a caregiver to attend to the daily needs of your pet.
  • It is recommended to name a second caregiver, in case the first can’t adequately care for the pet or decides not to do so.
  • You can include instructions for day-to-day needs as well as overall healthcare. You can be as general or as specific as you’d like.
  • You can set aside monetary distributions, on the condition that it is used for your pet’s needs.
  • The monetary distributions may include a reward/stipend for fulfilling the caregiver role.

Let’s talk about your furry friends and how we can ensure they are provided for in case something happens to you. Give me a call at 515-371-6077 or shoot me an email at gordon@gordonfischerlawfirm.com.

GoFisch blog

Mark Twain famously said, “A classic is something everybody wants to have read, but no one wants to read.” Life insurance is a little like that. Everyone needs it, but we don’t like to talk about it much.

Life Insurance as Key Estate Planning Tool

Life insurance is an amazing estate planning tool. I cannot stress enough the importance of life insurance. I, of course, don’t sell it, so I have no economic stake here. It’s just that life insurance is generally reasonably and affordably priced, yet still so helpful with so many financial goals. Replacing a breadwinner’s earnings is one of the most commons ways it is utilized. But, it can also provide liquid assets for a small business when a key partner dies. Life insurance can also cover costs that you might forget about, like funeral costs or unpaid taxes. While there are many advantages to life insurance, and you most definitely need it, life insurance can also create estate planning issues.

Three Estate Planning Issues Life Insurance May Create

The major issue created by life insurance is that of the “sudden windfall” to your beneficiary. Do you really want, say, your 19-year-old to inherit several hundred thousand dollars at once? Even oldsters with experience managing finances may find a huge influx of cash to be overwhelming.

Another issue to consider: does your beneficiary receive government benefits? If so, proceeds from your life insurance policy might make your beneficiary ineligible for further benefits. By the way, don’t think that those receiving government aid are all elderly. Quite the opposite! A vast majority of Medicaid recipients are under age 44. Regardless of age, any beneficiary on Medicaid, or similar government aid program, is at risk of losing benefits without careful estate planning.

Finally, for high-net-worth (HNW) individuals and families, there is the issue of the federal estate tax. Everything owned in your name at death is included in your estate for estate tax purposes. Yes, that includes the death benefit proceeds of your life insurance policy. Considering that many policies carry quite hefty death benefits (several hundred thousand dollars, or more, not being unusual), this is definitely something for those with HNW to carefully consider.

In Trusts we Trust

I’ve explained trusts generally before. A quick primer: in simplest terms, a trust is a legal agreement between three parties: grantor, trustee, and beneficiary. This allows a third party (the trustee) to hold assets for a beneficiary (or beneficiaries).

There are a nearly infinite variety of trusts. One type of trust is an irrevocable life insurance trust or ILIT.

So, what IS an Irrevocable Life Insurance Trust?

Think of an ILIT as an “imaginary container,” which owns your life insurance policy for you. This provides several benefits. An ILIT removes the life insurance from your estate, i.e., lowers estate tax liability. Like other trusts, an ILIT allows you to decide how, when, and even why your named beneficiary receives life insurance proceeds.

Wait, what was that about the three parties?

The grantor is you, the purchaser of life insurance.

The trustee can be anyone you, as grantor, chooses — an individual(s) or a qualified corporate trustee (like the trust department at your bank). But, note a major difference between an ILIT and other kinds of trusts – with a large number of other trusts, you can name yourself as trustee. With an ILIT, you wouldn’t want to do so, because the IRS may then determine that life insurance really hasn’t left your estate.

Who can be a beneficiary of an ILIT?

Most often, spouses, children, and/or grandchildren are the named beneficiaries of an ILIT. But really, it can be any individual(s) you, as grantor, choose.

Your beneficiary and your life insurance proceeds

The conditions under which a beneficiary receives distributions from an ILIT is up to you. You can, for example, specify that your beneficiary receives monthly or annual distributions. You can decide the amounts. You may even dictate that your beneficiary receives distributions when s/he reaches milestones which you choose. For example, you can provide for a large(r) distribution when a beneficiary reaches a certain age, graduates from college or post-graduate program, buys a first home, marries, or has a child. Or, really, just about any other condition or event that you decide is appropriate.

You also have the option to build in flexibility, so that your trustee has the discretion to provide distributions when your beneficiary needs it for a special purpose, like pursuing higher education, starting a business, making an investment, and so on.

And, of course, if your beneficiary is receiving government benefits, an ILIT can account for that, as well.

Good gosh, is there anything an ILIT CAN’T DO?

Once again, an ILIT is irrevocable. While an ILIT provides a great deal of flexibility, there’s one action for certain you can’t take — you cannot transfer a policy owned by an ILIT into your own name. So, if you think that someday you may need to access the policy’s cash value for your own purposes, you probably shouldn’t set up an ILIT.

Options for “ending” an ILIT

Now, I suppose, there’s nothing requiring you to continue making insurance payments into your ILIT. Depending on the kind of policy you have, your policy may lapse as soon as you miss your premium payment. Or, if your policy has cash value, these funds may be used to pay premiums until all the accumulated cash is exhausted. So, that’s an option for “ending” an ILIT.

I bet you have some questions. Let’s talk!

An ILIT can provide you, your loved ones, and your estate with significant benefits. To learn more, contact me at my email, gordon@gordonfischerlawfirm.com, for a free consultation, without obligation. You can also give me a call at 515-371-6077.


*Yes, you’re right – ILIT is really not a word, but an acronym. You caught me. It’s just that Legal Word of the Day sounds more exciting than Legal Acronym of the Day. Also, congratulations to you for being the kind of person who reads footnotes.

**In 2019 an individual must have an estate of more than about $11.18 million, and a married couple an estate of more than $22.8 million, before they need to worry about federal estate taxes.

april fool's day balloons

Hopefully, you didn’t get pranked too bad today or misled by a jokester on social media today. But, if you did, happy April Fool’s Day! We all love a good practical joke now and then, but the subject of estate planning is definitely not one to laugh at. If you already have an estate plan in place, that’s fantastic, but don’t let an old or inadequate estate plan make a fool out of your life, property, and legacy.

Review Your Estate Plan

Let this lighthearted April Fool’s day actually serve as a reminder to review your current documents and determine if you need to consider updated language, additional provisions, or a different strategy (like “upgrading” from a basic will to a trust). When revisiting your estate plan consider these common mistakes I see when reviewing folks’ less-than-optimal documents.

Living Trusts Missing Retirement Plan Lingo

Many people have a valid portion of the estate assets investing in retirements plans like IRAs and 401(k)s. The mistake comes when people designate their revocable living trust as the beneficiary of these plans, but the trust hasn’t been written or updated to grant the trustee the power to manage the accounts placed in the trust. Without vesting this power in the successor trustee (presuming the testator was the initial trustee and then passed away), the trustee can lack the ability to properly deal with the plan assets and unfavorable income tax consequences can occur.

Uncertain if your revocable living trust properly contains the requisite retirement plan lingo? Simply check with an experienced estate planning attorney and invest in amending.

Outdated Living Wills

Also known as an “advanced medical directive,” your living will should contain the appropriate Health Insurance Portability and Accountability Act of 1996 (more commonly referred to as HIPAA) language. (HIPAA involves privacy and who can and cannot have access to your medical records.) If your living will was drafted pre-2001 (before Congress passed new rules governing the Act) it likely doesn’t contain the essential references to HIPPA. I’ve even seen some living wills written well after 2001 that didn’t have the proper provision. It may sound silly, but without this “magic” wording, your designated health care representative won’t have access to your medical records. Without this access, they may not be able to fulfill their duty in making the most informed decisions regarding your health care as possible. This mistake can be especially important if you’ve designated someone other than a close relative (such as a spouse or adult child) as your agent.

Underfunded Living Trusts

Another mistake I’ve seen is living revocable trusts that are not fully funded. Undoubtedly, without the guidance of a quality estate planner, the funding process can feel overwhelming. When people procrastinate or run into roadblocks when placing assets into their trust they can get frustrated and fail to complete the process. This is a misstep with negative consequences because without funding the trust, it’s best thought of as an empty container waiting for a testator’s assets to fill it up. Without it, if the person with the underfunded trust passes away, the estate will still need to pass through the sluggish and costly probate process. And, quite frankly, the investment in the trust will have been for little benefit or advantage.

Let your estate planner help you through this process. Also, consider if you have any new major assets that need to be assigned to the trust.

All jokes aside, every Iowan deserves a high quality and functional estate plan that meets their goals. Don’t be a fool and let more time go by before reviewing your plan! Please contact me with any questions; I offer a free one-hour consult.

Businessman taking notes and planning in a meeting

Q: How many elephants will fit into a Minivan?

A: Four: Two in the front, two in the back.

Q: How many giraffes will fit into a Minivan?

A: None. It’s full of elephants.

Jokes aside, you can fit just about any asset into a trust. Here is a “short” list of assets actually placed into trusts:

  1. Airplanes
  2. Antique automobiles
  3. Antiques
  4. Artwork
  5. Assets held by C Corporation
  6. Assets held by S Corporation
  7. Autographed books
  8. Barn doors
  9. Beach house
  10. Beanie Babies
  11. Boats
  12. Bonds
  13. Books
  14. Bookstore
  15. Boxes
  16. Boxing gloves
  17. Broadway musical
  18. C Corporation stock
  19. Cheese shoppe
  20. Chocolate store specializing in “I love chocolate” t-shirts
  21. Chocolate store specializing in baking chocolate
  22. Chocolate store specializing in bars of chocolate
  23. Chocolate store specializing in candy-coated chocolate
  24. Chocolate store specializing in chocolate and almonds
  25. Chocolate store specializing in chocolate mixed with peanut butter
  26. Chocolate store specializing in couverture chocolate
  27. Chocolate store specializing in dark chocolate
  28. Chocolate store specializing in milk chocolate
  29. Chocolate store specializing in organic chocolate
  30. Chocolate store specializing in hot chocolate
  31. Chocolate store specializing in liqueurs chocolate
  32. Chocolate store specializing in semi dark chocolate
  33. Chocolate store specializing in sweet chocolate
  34. Chocolate store specializing in white chocolate
  35. Chocolate store* (You’re now probably quizzically asking, “Should I send Gordong chocolate?”)
  36. Coin collections
  37. Comic books collection
  38. Commercial and residential real estate
  39. Condominiums
  40. Credit card rebates
  41. Cupcakery
  42. Depression-era glass
  43. Dolls
  44. Enamelware
  45. Equestrian ribbons
  46. Farmland
  47. Ghosts
  48. Gold bullion
  49. Grain
  50. Guitars
  51. Hedge fund carried interest
  52. Historic papers
  53. Installment notes
  54. Intellectual property
  55. Law firm
  56. Life insurance
  57. Limited liability partnerships
  58. Livestock
  59. Marbles
  60. Mineral rights
  61. Monica (my wife)
  62. Moonstone
  63. Music store
  64. Mutual funds
  65. NHL team
  66. Oil and gas interests
  67. Olives
  68. Operating partnership units
  69. Paint-by-number landscapes
  70. Painted planks
  71. Paintings
  72. Patents
  73. Photographs
  74. Pickles
  75. Pooled income funds
  76. Racehorses
  77. Real estate
  78. Restaurant
  79. Restricted stock (144 and 145)
  80. Retained life estate
  81. Retirement benefits
  82. Royalties
  83. S Corporation stock
  84. Sculpture
  85. Sculpture garden
  86. Sea urchins
  87. Seat on New York Mercantile Stock Exchange
  88. Seats at events
  89. Snow globes
  90. Soda pop bottles
  91. Spirits of the damned
  92. Stamp Collection
  93. Stocks
  94. Tangible personal property
  95. Taxidermy
  96. Teddy bears
  97. Timber deeds
  98. Vacation home
  99. Vehicles
  100. Violin
  101. Wines

*Yes, this is a cry for help. I love sweets, especially chocolate, way too much.

Why put assets in trust?

There can be many reasons to use a trust, and specific benefits can accrue from specific trusts. In general, there are four great reasons to initiate a trust.

1. Save money

Using a trust, you avoid probate, which can save you lots of money. Probate will generally take two percent-plus of your estate, and even “just” two percent of your entire estate can add up to a lot of money. Avoiding probate also helps you avoid fees, costs, and taxes.

2. Save time

timer with sand in it

Using a trust, you avoid probate, which can save you lots of time. Going through probate, even here in Iowa, can take several months, to a year, or even more. Your heirs and beneficiaries may not receive their inheritances until the end of this probate process. Again, with trusts, you bypass probate. With trusts, your beneficiaries can get their inheritances in mere days, or weeks, rather than several months.

3. Flexibility of distributions

Don’t want your 18-year-old to inherit half-a-million dollars in one fell swoop? I agree it’s not a good idea. Trusts offer flexibility for the payout of inheritances. You set the ground rules of when and how distributions are made. For example, you might decide your children can receive distributions at certain ages. (For example, one-third at age 25, one-third at age 30, and the remaining at age 40). Or, you might decide your children can receive distributions at the attainment of certain milestones, such as marriage, the birth of a child, buying a first home, or receiving a certain degree

4. Privacy

Probate proceedings are public. Your will, once you pass and it is filed in court, is a public record. Some desire privacy about financial matters (say, about their family business) even after death.

Also, privacy can prevent hurt feelings among family members. For example, do you really want your Cousin Joe to know he received significantly less than all the other cousins?

What are the drawbacks to a trust?

It’s more expensive to set up a trust than basic estate plan documents, although I would say those costs are greatly outweighed by the money you’ll save your estate in the end. It’s also a bit of an administrative hassle, as your assets (such as car, house, stock funds, etc.) have to be retitled in the name of the trust. Again, though, I believe this inconvenience is much outweighed by the smooth operation of a trust at death.

Let’s talk about trusts!

Have an asset that didn’t make the list of 101 items? It can probably still go in a trust (even if it isn’t chocolate related!). Sometimes it’s hard to know if a trust may be right for your personal situation. It certainly doesn’t hurt to take me up on my offer for a free one-hour consultation. Give me a call at 515-371-6077 or shoot me an email at gordon@gordonfischerlawfirm.com.

Someone pointing into the sunset

Estate planning allows people to elect tools and strategies that makes life for their loved ones as uncomplicated as possible following death. Almost everyone I work with wants to ensure their family members are set up for success.

Dad holding daughter

One such estate planning tool to accomplish this is the handy dandy trust. There are almost limitless different types of trusts; trusts may be classified by their purpose, duration, creation method, or by the nature of the trust property. For instance, there is the fairly common “animal care” or “pet” trust. You can also place almost any asset imaginable in a trust.

For some parents looking to help a son or daughter (minor or adult) with special needs, a trust can be a powerful avenue to continuing to support the loved one. (In this trust situation the child would be the beneficiary of the trust, the parents would be the settlor, and a trustee would be assigned.) Why? In general, the idea is that a special needs trust can use estate assets to enrich and enhance the child’s life while maintaining the individual’s viability for enrollment in public benefits programs. Examples of assistance programs can include Supplemental Security Income (SSI), Medicaid, subsidized housing, and vocational rehabilitation, among others.

Specifics of Special Needs Trust

Smart estate planning for special needs ensures that the parts of the estate which pass on to the individual with special needs are NOT considered an “available asset” by the associated agencies that disperse essential benefits. Many people make the mistake of leaving assets to a loved one with a disability through a will. This is problematic because acquiring assets, such as a significant lump sum of money, can disqualify your loved one from certain government assistance programs. By setting up a special needs trust, instead of solely using a will, you can avoid these issues. How? Because the trustee has total control over the management of the funds, and the beneficiary does not, government program administrators, like the ones from SSI and Medicaid, don’t “count” the trust assets when considering eligibility.

Beyond protecting the beneficiary’s eligibility for public benefits a special needs trust can also:

  • offer assured lifelong money management for the child; and/or
  • establish a pool of available funds in the future event that public benefits should be restricted or revoked.

Careful Drafting Required

It’s important to remember that details of each special needs trust will vary depending on factors like the beneficiary’s age, competency, and familial situation. Also, because of the complexities involved, special needs trusts require extremely careful drafting. So, If you’re even considering establishing a special needs trust as a part of your estate plan, it’s definitely necessary to speak with an experienced estate planning professional to make sure all of the nuances of the trust are executed properly.

Don’t hesitate to contact me with questions via email (gordon@gordonfischerlawfirm.com) or on my cell phone at 515-371-6077.

number four on wood

We dove into the definition of the term “trust,” 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

handshake over table

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 canceled. 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

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.

cute puppy

In the lead up to Valentine’s Day, I’m exploring here on the blog how love can translate to estate planning. Thus far we’ve covered the best V-Day gift to give your spouse, advice on where to store your estate plan (and it’s not a chocolate heart box!), and how an affinity for football makes understanding estate planning easy. Romance and gift guides aside, this #PlanningForLove series would be incomplete without featuring the love for your pet.

Let’s be for real for a minute. The relationships we have with our pet(s), be they a dog, cat, amphibian, pocket piglet, parrot, or pony are some of the most comforting and consistent. Who else will lick your face, eat snacks out of your hand, demand belly rubs, or get the most Instagram likes? Our pets are a part of our family and it only makes sense to include them in estate planning documents and decisions concerned with the continued care for our loved ones.

cat with flowers

The best way to include your furry and feathered friends in your estate plan is with an animal care trust (sometimes known as a pet trust). This is a special kind of trust different from a living revocable trust or an inter vivos trust. An animal care trust specifically provides for the care of your pet in the event that something were to happen to you. In the trust you’ll likely want include the following information:

  • Sufficiently identify your pets and include a provision that describes your pets as a class through phrasing such as  “the pet(s) owned by me at the time of my death or disability.”
  • Describe your pet’s standard of living, care, and include any regular and special instructions. You can get as specific or general as you want at this point. For example, if your bird only likes a particular brand/type of food, or your dog thrives when she plays catch once a day, this can be specified in a trust agreement. If you want your pet to visit the veterinarian for check-ups three times a year, this can also be written in.
  • Determine the amount of funding that’s needed to adequately cover the expenses for your pet’s care. Generally, this figure can’t exceed what may reasonably be required given your pet’s standard of living.
  • Designate a trustee, caregiver, and remainder beneficiary. Also, designate successor trustees and caregivers if for some reason either becomes unable or unwilling to fulfill their role. The remainder beneficiary is who receives the trust assets if trust funding outlives the beneficiary (your pet).
  • Specify how the funding should be distributed to the caregiver from the trust.
  • Provide instructions and wishes for the final disposition of your pet (for example, via burial or cremation).

Check out and feel free to share this infographic with your fellow pet parents. (Click here to see the pdf version.)

gordon fischer law firm animal care trust

Valentine’s Day is coming up, so let’s discuss how to show your continued love for your pets, even if something unexpected were to happen to you. Contact me via email or phone (515-371-6077).

love in lights

Valentine’s Day is coming up quick and while I think the commercialized messages of “this is love” can get a little cheesy, I’m a full supporter of a day that celebrates love. Be it love for your spouse, a celebration of the fact that you are awesome, or showing even more adoration for your furry best friend, the world could always use a little more love. In this important addition to the #PlanningForLove series, let’s talk about ways you can show love to your children through your estate plan.

I’ve discussed the importance of guardianship quite a bit on this blog. It’s important that anyone with minor children establish guardianship so that if something were to happen to you as a legal guardian that your minor children (under age 18) would be immediately placed in the care of someone you know, trust, and most importantly, choose. Just as establishing guardianship is a powerful gift that your children will hopefully never have to actually know about or experience, a testamentary trust can also continue to provide and support your children if something were to happen to you.

There is an almost endless number of different kind of trusts and you can put just about any asset in a trust. Testamentary trusts are one of the most common kinds of trusts I establish for my clients. You may recognize the first word of the type of trust from “last will and testament.” Indeed, a testamentary trust is a trust written into your will and provides for the distribution of a portion or all of your estate.

Sounds simple enough, but you’re thinking, “What does this have to do with my kids?”

Different from an inter vivos trust, which is established during the settlor‘s lifetime, the testamentary trust kicks in at the completion of the probate process after the death of the person who has created it for the benefit of their beneficiaries.

Typically testamentary trusts are created for minor children or others (such as a relative with some kinds of disabilities) who may inherit a large amount of money if you (the testator) were to pass away. The general thinking is that you may not want a minor child, or even a young adult, to have uninhibited access to their inheritance until a certain age (and presumed level of maturity) is reached. (I can imagine what I would have done with an inheritance at, say, age 18 and it surely wouldn’t have been the smartest use of money!) The testamentary trust then terminates at whatever age you choose, at which point your beneficiaries receive their inheritances outright and can use the funds in any way they choose.

child with red heart

The testator can choose the distribution to be distributed in percentages such as 25% at age 18, 25% at age 22, and the remaining 50% at age 25. Or, the trust funds may be distributed in full at a single age. (All at age 25 is the default if the testator doesn’t choose otherwise.) Distributions can also be made immediately upon your passing if all beneficiaries are legal adults (age 18 or older). The testamentary trust could also be set-up for disbursements around milestones, such as a percentage or full disbursement when the beneficiary graduates from an accredited two- or four-year college institution.

Testamentary Trustee

With a testamentary trust, you also need to designate a trustee. The trustee is responsible for managing the trust property according to the rules outlined in the trust document and must do so in the best interests of the beneficiary (for example, a minor child). Generally, I advise the appointed guardian also be the trustee of a child’s testamentary trust.

Testamentary Trust Options

In my Estate Plan Questionnaire, I offer clients three main options for testamentary trust organization. (Note that there can be more than one testamentary trust created in one will.)

  • Option 1: Separate trust fund for each beneficiary. Each beneficiary’s inheritance to be held by the trustee in a separate fund. Whatever is left in each beneficiary’s trust fund, if anything, will be distributed to that beneficiary when they attain the age(s) indicated in the following section. This option ensures that all of your beneficiaries are treated equally, regardless of needs.
  • Option 2: Single trust fund for multiple beneficiaries. The entire inheritance will be held by the trustee in a single trust fund for the benefit of multiple beneficiaries (such as multiple children). The trustee may make unequal distributions during the term of the trust if a beneficiary needs additional assistance. Whatever is left in the trust, if anything, will be distributed equally when your youngest beneficiary attains the age(s) indicated in the following section. This option will allow the trustee to accommodate a particular beneficiary’s needs by distributing more of the inheritance to that beneficiary during the term of the trust. (Recommended with younger beneficiaries.)
  • Option 3: No delayed distribution. Beneficiary’s inheritance may be made directly to the beneficiary or a court-appointed conservator if the beneficiary is a minor/incapacitated. Funds will be distributed directly to the beneficiary at the age of 18.

Mom and daughter hugging

The important takeaway from all of this is that a testamentary trust can be entirely personalized to fit your wishes. For example, most folks want the testamentary trust written in such a way that their beneficiaries may have access to funds to pay for higher education costs like tuition, room and board, books, and fees, on top of the necessary funds needed for an adequate standard of care, protection, support, and maintenance of the beneficiary.

Estate Plan Revisions & Updates

If you already have an estate plan review it. Estate plans never expire, but major life events or a change in estate planning goals can necessitate changes. For example, if your family welcomed a new baby or adopted a child then it’s definitely time to update your estate plan to include them! Maybe something changes in the future with one of your beneficiaries and you want to change distribution percentages or ages? Simply contact your estate planning attorney and let them know your wishes.

A Lasting Love

hearts on a string

The love for your children knows no bounds and without a doubt, you want to make certain you can still provide for them if something unexpected were to happen to you. There’s no day like today (or Valentine’s Day!) to get your ducks in a row just in case. The best place to begin is with my Estate Plan Questionnaire or by contacting me.

In my ongoing efforts to break down the legalese barriers that tend to separate lawyers from the real world, and have increased quality communication, here’s another Fun with Legal Words post. Today’s word is “trust.”

In this context, and in the simplest terms, a trust is a legal agreement between three parties: settlor, trustee, and beneficiary. Let’s look at each of these three parties, and then delve more into how a trust works.

Settlor

All trusts have a settlor, sometimes called the “donor” or “trustor.” The settlor creates the trust, and also has legal authority to transfer property to the trust. 

Trustee

The trustee can be any person or entity that can take title to property on behalf of a beneficiary. The trustee is responsible for managing the property according to the rules outlined in the trust document and must do so in the best interests of the beneficiary.

Beneficiary

The beneficiary is the person or entity benefiting from the trust. The beneficiary can be one person/entity or multiple parties (true also of settlor and trustee). Multiple trust beneficiaries do not have to have the same interests in the trust property. Also, trust beneficiaries do not have to even exist at the time the trust is created (such as a future grandchild, or charitable foundation that hasn’t been set up yet).

Trust Property

A trust can be either funded or unfunded. By funded, we mean that trust property has been placed “inside” the trust. This property is sometimes called the “principal” or the “corpus.” A trust is unfunded until property are transferred into your name as trustee of the trust.

Any Asset

Any asset can be held by a trust. Trust property can be real estate, intangible property, business interests, and personal property. Some common examples of trust property include farms, buildings, vacation homes, money, stocks, bonds, collections, personal possessions, and vehicles.

“Imaginary Container”

We speak of putting assets “in” a trust, but assets don’t actually change location. Think of a trust as an “imaginary container.” It’s not a geographical place that protects something (such as a garage protects your car), but a form of ownership that holds it for your benefit. For instance, on your car title the owner blank would read “The John Smith Trust.” It’s common to put real estate (farms, homes, vacation condos) and entire accounts (savings, checking, credit union, and brokerage accounts) into a trust.

After the trust is funded, the trust property will still be in the same place before the trust was created—your land where it always was, your car in the garage, your money in the bank, your stamp collection in the study… The only difference is the property will have a different owner: “The Jane Jones Trust,” not Jane Jones.

imaginary container

Transfer of Ownership

Putting property in a trust transfers it from personal ownership to the trustee, who holds the property for the beneficiary. The trustee has legal title to the trust property. For most purposes, the law treats trust property as if it were now owned by the trustee and trusts have separate taxpayer identification numbers.

But, trustees are not the full owners of trust property. Trustees have a legal duty to use trust property as provided in the trust agreement and permitted by law. The beneficiaries retain what is known as equitable title: the right to benefit from trust property as specified in the trust.

Assets to Beneficiary

The settlor provides terms in a trust agreement as to how the fund’s assets are to be distributed to a beneficiary. The settlor can provide for the distribution of funds in any way that is not against the law or against public policy.

Types of Trusts Almost Limitless

The types of trusts are almost limitless. Trusts may be classified by their purpose, duration, creation method, or by the nature of the trust property.

Benefits of Trusts

The potential benefits of trusts are immense. The benefits include avoiding probate (and other costs savings), privacy, and helping with every family’s unique needs. 

Avoid Probate

A major benefit of trusts is avoiding probate. This is because, upon death, the trust dictates how trust property will pass. Avoiding probate saves your loved ones both time and money as the probate process is time-consuming, taking anywhere from several months to a year to complete. Sometimes, depending on the size of the estate, it can take even longer. Probate can also be expensive. Attorney’s fees alone can amount to two percent of the total estate, or even more in extraordinary cases. For some, two percent of their assets can be a very high number. Often, the cost of creating a trust is considerably less expensive than the cost of probate would have been.

Privacy

When a will is filed with an Iowa court upon death, the will becomes a public record. Trusts, on the other hand, remain private documents. Many folks, especially in small towns, have a strong desire to keep business affairs private.

Second Marriages and Blended Families

dad swinging children on beach

Trusts are also helpful in situations involving second marriages or blended families. When married couples have children from previous relationships, the surviving spouse has the ability to disinherit stepchildren. A trust can remedy this situation by providing lifetime benefits to the surviving spouse but, after his or her death, leaving assets to children and stepchildren.

Special Needs Trusts

Families with members who have special care needs must take a careful estate planning approach. For example, when a person receives government assistance due to a disability, a gift or inheritance might result in denial of benefits. However, assets can be left in certain types of trusts (for example, a special needs trust), to provide for supplemental needs while still allowing persons with disabilities to continue to receive benefits.

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.