Posts

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 sitting at table

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 for your success.

A trust is a very useful legal arrangement which may save you, your heirs, and beneficiaries a great deal of money, time, and trouble, as well as help to keep important matters private. 

A trust is what one might consider an “extra” document to a basic estate plan (but an “extra” that can be super helpful, for the reasons discussed below). Over the last several blog posts, I discussed the six basic documents that should be part of most everyone’s estate plan:

  1. Estate planning questionnaire
  2. Will
  3. Power of attorney for health care
  4. Power of attorney for financial matters
  5. Disposition of personal property
  6. Disposition of final remains

At the outset of this seven-part series of blog posts about estate planning, I explained the basics of a will. Then, I covered health care power of attorney, and also financial power of attorney. Most recently, I blogged about disposition of final remains.

When should you consider setting up a trust? You might consider a trust if you have:

  1. A blended family;
  2. More than $1 million in total assets;
  3. Unusual assets (such as one or more antique automobiles);
  4. Complex assets (for example, more than one piece of real estate, like a home and a vacation cabin); and/or
  5. Ownership of part or all of a business.

In such cases, as well as others (talk to your estate planning lawyer!), a trust may be helpful. 

WHAT IS A TRUST? HOW DOES IT WORK?

A trust will ensure that your wishes are followed and your assets appropriately handled after your death. A trust is simply a legal agreement among three parties—settlortrustee, and beneficiary—that provides instructions on how and when to pass assets to the trust’s beneficiaries. Let’s look at the role of each of these three parties, then delve more deeply into how trusts work. 

SETTLOR

A settlor—sometimes called the “donor, “grantor,” or “trustor”—is the person who creates the trust and has the legal authority to transfer assets into it.  

TRUSTEE

The trustee is the person who agrees to accept, manage, and protect the assets delivered by the settlor. The trustee has a fiduciary duty to administer the assets according to the trust’s instructions, and distribute the trust income and principal according to the rules outlined in the trust document. Distribution is done in the best interests of the beneficiary.

A trustee can be one, two, or more people. A trustee can also be what is known as a “corporate trustee,” such as a financial institution (like a bank) or a law firm that performs trustee duties and charges fees for their services. There are no formal requirements for being a trustee, and nonprofessionals frequently serve as a trustee for family members and friends.

BENEFICIARY

The beneficiary is the person or entity benefiting from the trust. The beneficiary can be one person or entity or multiple parties. Trust beneficiaries don’t even have to exist at the time the trust is created (such as in the case of a future grandchild or a charitable foundation that has not yet been established).

TRUST PROPERTY

A trust can be either funded or unfunded. “Funded” means that the settlor’s assets—sometimes called the “principal” or the “corpus”—have been placed into the trust. A trust is “unfunded” until the assets are in it. Please note that failing to fund a trust is a common estate planning mistake!  

TRUST ASSETS

Trusts can hold just about any kind of asset: real estateintangible property, business interests, and personal property. Common trust properties include farms, buildings, vacation homes, stocks, bonds, savings and checking accounts, collections, personal possessions, and vehicles.

“IMAGINARY CONTAINER”

Think of a trust as an “imaginary container” that holds and protects your assets. After the trust is funded, the trust property will remain in the same place as before the trust was created—your land will remain where it always was, your artwork on the wall, your money in the bank, your comic book collection in the den. The only difference is the asset will have a different owner: “The Jane Jones Trust,” rather than Jane Jones.

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 what is called “legal title” to the trust property and, in most instances, the law treats trust property as if it were now owned by the trustee. Each trust has its own taxpayer identification number, just like an individual.

Do not be mistaken, trustees are not the full owners of trust property. Trustees have a legal duty to use trust property as directed in the trust agreement and as allowed by law. However, 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 directing how the fund’s assets are to be distributed to a beneficiary. The settlor can provide for the distribution of funds in any way, so long as it is not against the law or against public policy. The near-limitless flexibility of trusts is a primary advantage for setting one up.

TYPES OF TRUSTS

A joke among estate planners says that the only limit to trusts is the imagination of lawyers. It’s true, though, that the number and kind of trusts are virtually unlimited.

Let’s start by taking a look at the four primary categories of trusts:

INTER VIVOS AND TESTAMENTARY TRUSTS

Trusts that are set up during the settlor’s lifetime are called “inter vivos” trusts.

Those that arise upon the death of the settlor, generally by operation of a will, are called “testamentary” trusts. There are advantages and disadvantages to both types of trusts, and how one decides depends upon the goals and purposes of the settlor.

REVOCABLE AND IRREVOCABLE TRUSTS

Inter vivos and testamentary trusts can be broken down into two more categories: revocable trusts and irrevocable trusts. A revocable trust, just as you might infer from the name, can be changed at any time during the settlor’s lifetime. The settlor can alter parts of the trust or even revoke the entire document.

IRREVOCABLE TRUST

An irrevocable trust, again, is as it sounds – it’s a type of trust that can’t be changed by the settlor after the agreement has been signed and the trust has been formed and funded. The terms of an irrevocable trust can’t be modified, amended, or terminated without the permission of the settlor’s beneficiary or beneficiaries.

A revocable living trust becomes irrevocable when the settlor dies because he or she is no longer available to make changes to it. A revocable trust can be designed to break into separate irrevocable trusts at the time of the grantor’s death for the benefit of children or other beneficiaries.

You might wonder, “Why make a trust irrevocable? Wouldn’t you want to maintain the ability to change your mind about the trust or its terms?”

Not necessarily.

Irrevocable trusts, such as irrevocable life insurance trusts, are commonly used to remove assets from a person’s estate and thus avoids the assets being taxed. Transferring assets into an irrevocable trust gives those assets to the trustee and the trust beneficiaries forever. If a person no longer owns the assets, they don’t comprise or contribute to the value of his or her estate, therefore they are not subject to, say, estate taxes upon death.

REVOCABLE LIVING TRUSTS

There is no “one size fits all” trust—different kinds of trusts offer different benefits (and drawbacks) depending on a person’s circumstances. Age, number of children, health, and relative wealth are just a few of the factors to be considered.

The most common trust my clients use is a revocable living trust (sometimes referred to by its abbreviation, “RLT”).

A revocable living trust is created while you’re alive and can be revoked or amended by you. An RLT has huge advantages:

  1. MONEY-SAVING

Establishing a revocable living trust helps avoid costly probate—the legal process required to determine that a will is valid. Probate generally eats up about two percent (2%) of an estate, which can add up to a chunk of change you’d probably rather see go to your beneficiaries.

Avoiding probate also means avoiding other fees, such as court costs, that go along with it.

  1. TIME-SAVING

A revocable living trust not only eliminates the costs of probate, but the time-consuming process of probate as well. Here in Iowa, probate can take several months to a year, or sometimes even longer, perhaps leaving beneficiaries without their inheritances until th end of the probate process. The transfer of assets through a trust is much faster.

  1. FLEXIBILITY

Don’t want your sixteen-year-old niece to inherit a half-million dollars in one big lump sum? I agree, it’s probably not a good idea.

A revocable living trust offers flexibility for the payout of an inheritance because you set the ground rules for when and how distributions are made. For example, you might decide your beneficiaries can receive certain distributions at specific ages (21, 25, 30, etc.), or for reaching certain milestones, such as marriage, the birth of a child, or graduation from college.

DRAWBACKS

Despite the significant advantages of establishing a revocable living trust, there are drawbacks people should be aware of. For starters, trusts are more expensive to prepare than basic estate plan documents such as a Will.  However, the costs associated with sitting down with a lawyer and carefully creating a trust is, in my opinion, greatly outweighed by the money your estate will save in the end.

Creating a trust can also be an administrative bother because assets (farm land,  business, stock funds, etc.) must be retitled in the name of the trust. All things considered, this is a small inconvenience that is greatly outweighed by the smooth operation of a trust when you pass away.

YOU CAN TRUST ME TO TALK ABOUT THE BEST TRUST(S) FOR YOU

Interested in learning more about trusts or questioning if you need one? Feel free to reach out at any time by email, gordon@gordonfischerlawfirm.com, or on my cell, 515-371-6077. 

If you want to simply get started on an estate plan (everyone needs at least the basic documents in place!) check out my estate plan questionnaire, provided to you free, without any obligation.

*OK, not everything. But many things, let’s say, an excellent start.

 

Estate planning.

Not exactly material for scintillating conversation. In fact, I’d bet most of us like to avoid this topic because it can be confusing, and it requires lots of decision-making. And, well, yes, it forces one to think about one’s own mortality. Estate planning, after all, is a roadmap about what you want to happen after you move on from this life. While it may not be a fun topic, it is indeed a necessary one.

ESTATE PLAN: YOU ALMOST SURELY NEED ONE

Almost everyone needs some kind of estate plan. If you’re young, healthy, unmarried, have no children, and have no significant or unusual assets . . . perhaps you could talk me into the idea that you don’t entirely need an estate plan. Even in such (rare) cases, I strongly recommend making sure your beneficiary designations are completed and up to date (for example, on your bank/credit union savings accounts and retirement benefit plan). But, if you are married, and/or have kids, and/or have significant or unusual assets, and/or own part or all of a business, you most definitely need an estate plan!

WHAT IS AN ESTATE PLAN, ANYWAY?

What do we talk about when we talk about estate planning? There are six documents that should be part of most everyone’s estate plan and you should keep each updated and current. Also, don’t forget about assets with your beneficiary designations. For most Iowans, that’s good – six documents, keeping them current, and also remembering about those assets with beneficiary designations.

Sure, estate planning is complicated, but not that complicated. I’ll show you.

SIX “MUST HAVE” DOCUMENTS OF YOUR ESTATE PLAN

There are six documents that should be part of most everyone’s estate plan:

  1. Estate planning questionnaire
  2. Will
  3. Power of attorney for health care
  4. Power of attorney for financial matters
  5. Disposition of personal property
  6. Disposition of final remains

We’ll go through each document briefly, so you have a sense of what each entails.

ESTATE PLAN QUESTIONNAIRE

Estate planning involves facing heavy questions and, depending on the amount of assets and beneficiaries you have, may take quite a bit of time and thought. I recommend clients (and even those who aren’t my clients) complete an estate plan questionnaire.

An estate plan questionnaire is an easy way to get all of your information in one place, and it should help you understand and prioritize estate planning goals. (I must also admit a questionnaire makes it easier for your attorney to build your estate plan!)

As with any project, it helps “to begin with the end in mind.” A questionnaire can help get you there.

LAST WILL AND TESTAMENT

Now let’s get to the will. The will is the bedrock document of every estate plan, and it’s a little more complicated than other documents.

With your will, you’ll be answering three major questions:

  1. Who do you want to have your stuff? A will provides for orderly distribution of your property at death according to your wishes. Your property includes both tangible and intangible things. (An example of tangible items would be your coin collection. An example of an intangible asset would be stocks.)
  1. Who do you want to be in charge of carrying out your wishes as expressed in the will? The “executor” is the person who will be responsible for making sure the will is carried out as written.
  1. Who do you want to take care of your kids? If you have minor children (i.e., kids under age 18), you’ll want to designate a legal guardian(s) who will take care of your children until they are adults.

POWER OF ATTORNEY FOR HEALTH CARE

A power of attorney for health care designates someone to handle your health care decisions for you if you become unable to make those decisions for yourself. This essentially gives another person the power to make decisions on your behalf. For example, if you don’t want to be kept alive with machines, you can clearly outline that in your power of attorney for health care. But keep in mind that power of attorney for health care isn’t just about end-of-life decisions – it can cover any medical situation.

POWER OF ATTORNEY FOR FINANCIAL MATTERS

The power of attorney for financial matters is similar, only your designated agent has the power to make decisions and act on your behalf when it comes to your finances. This gives them the authority to pay bills, settle debts, sell property, or anything else that needs to be done if you become incapacitated and unable to do this yourself.

It might be obvious by now, but I’ll say it just in case: choosing an agent for a power of attorney requires that you think long and hard about who would be best suited for the job and who you trust.

DISPOSITION OF PERSONAL PROPERTY

Now, let’s get to the disposition of the personal property. This is where you get specific about items you want particular people to have. If you’re leaving everything to one or two people, then you may not need to fill this out. But, if you know you want your niece Suzie to have a specific piece of jewelry, and your nephew Karl to have that antique bookshelf he loved, then you’d say so in this document.

DISPOSITION OF FINAL REMAINS

We come to the disposition of final remains. This document is where you get to tell your loved ones exactly how you want your body to be treated after you pass away. If you want a marching band and fireworks shooting your ashes into the sky (that’s a thing, by the way), then this is where you make it known. It can be as general as simply saying “I want to be cremated,” or it can be specific and include details of plots you’ve already purchased or arrangements you’ve already made.

KEEP UPDATED AND CURRENT

OK, so you’ve gone to an estate planning lawyer, and these six “must have” estate planning documents have been drafted and signed. What else? You need to keep these documents updated and current.

If you undergo a major life event, you may well want to revisit with your estate planning lawyer, to see if this life event requires changing your estate planning documents.

What do I mean by a major life event? Some common such events would include:

  • The birth or adoption of a child or grandchild
  • Marriage or divorce
  • Illness or disability of you, your spouse, or other family member
  • Purchasing a home or other large asset
  • Moving to another state
  • Large increases or decreases in the value of assets, such as investments
  • If you or your spouse receives a large inheritance or gift
  • If any family member, or other heir, passes away

This is just a short list of life events that should cause you to re consider your estate plan. There are many others.

DON’T FORGET ABOUT YOUR BENEFICIARY DESIGNATIONS

There are six “must have” estate planning documents, plus you need to keep them current. Also, don’t forget about your beneficiary designations. For example, savings and checking accounts, life insurance, annuities, 401(k)s, pensions, and IRAs are all transferred via beneficiary designations. These beneficiary designations actually trump your will.

Regarding assets with beneficiary designations, you must make sure that designations are correctly filled out and supplied to the appropriate institution.

WHAT OTHER DOCUMENTS MIGHT YOU NEED BESIDES THESE SIX “MUST HAVE” ESTATE PLANNING DOCUMENTS? 

For many Iowans, what I’ve outlined above is enough. There may be folks who have, say, more than $1 million in assets, or who have complex assets (for example, more than one piece of real estate), or own part or all of a robust business, or otherwise have unusual situations. In such cases, a trust may be helpful. But that will be more “advanced” estate planning. What I’ve described above is an excellent start.

There it is in a nutshell. This is what goes into an estate plan.

Whether it’s complicated or simple, it does require some thought and time. But it’s worth the investment – a proper estate plan can save you and your estate costs 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. Really, without estate planning, it’s not possible, at your death, to help nonprofits you care about. With an estate plan, you can be a real-life charitable superhero!

BEGIN TODAY

Why not start right now on your own plan for the future with my free estate plan questionnaire? It’s provided to you free, without any obligation. I would love to discuss your estate plan with you; reach out at any time by email, gordon@gordonfischerlawfirm.com, or cell phone, 515-371-6077.

*OK, not everything. But many things, let’s say, an excellent start.

four faces covered by health masks

Consequences from COVID-19 including skyrocketing unemployment, mental health concerns, and general basic supply scarcity has meant an increased demand for services from nonprofits in a multitude of sectors. I’ve seen a number of successful efforts to help out local businesses, such as restaurants and shops, that are hurting from lack of foot traffic. These campaigns have focused on alternative revenue streams such as delivery deals and gift cards. The same concept can and should go be applied to your favorite nonprofit organizations as well.

Here are three ways you can help nonprofits while continuing to practice safe social distancing.

Donate cash under the CARES Act

The federal “Coronavirus Aid, Relief, and Economic Security” (CARES) Act was recently passed and among other policy goals, aims to incentivize charitable giving. The CARES Act creates a new federal income tax charitable deduction for total charitable contributions of up to $300. The incentive applies to cash contributions made in 2020 and can be claimed on tax forms next year. This deduction is an “above-the-line” deduction. This means it’s a deduction that applies to all taxpayers, regardless if they elect to itemize.

For those taxpayers who do itemize, the law lifts the existing cap on annual contributions from 60 to 100 percent of adjusted gross income. For corporations, the law raises the annual contributions limit from 10 to 25 percent. Likewise, the cap on corporate food donations has increased from 15 to 25 percent.

Protect yourself from coronavirus

Photo by Obi Onyeador on Unsplash

Gift retirement benefit plans

If you have a retirement benefit plan, like an IRA or 401(k), you may gift the entire plan, or just a percentage, to your favorite charity or charities upon your death. Retirement plans can be an ideal asset donation to a nonprofit organization because of the tax burden the plans may carry if paid to non-charitable beneficiaries, such as family members.

This can be accomplished by fully completing a beneficiary designation form from the account holder and name the intended nonprofit organization(s) as a beneficiary of your qualified plan. The funds you designate to charitable organizations will be distributed directly to the organizations tax-free and will pass outside of your estate, Individuals who elect this type of charitable giving can continue to make withdrawals from retirement plans during their lifetime.

Write in bequests to your estate plan

Execute an estate plan, or update an existing one, to include bequests (gifts) to the nonprofit organizations you care about. There are multiple different types of bequests which means testators have flexibility with the structure of their estate plans. An experienced estate planner will be able to advise you on all of your options, but here is a brief overview.

Pecuniary bequest

A gift of a fixed or stated sum of money designated in a donor’s will or trust.

Demonstrative bequest

A gift that comes from an explicit source such as a particular bank account.

Percentage bequest

A percentage bequest devises a set percentage—for example 5 percent of the value of the estate. A percentage bequest may be the best format for charitable bequest since it lets the charity benefit from any estate growth during the donor’s lifetime.

Specific bequest

A gift of a designated or specific item (like real estate, a vehicle, or artwork) in the will or trust. The item will very likely be sold by the nonprofit and the proceeds would benefit that nonprofit.

Residuary bequest

A gift of all or a portion of the remainder of the donor’s assets after all other bequests have been made as well as debts and taxes paid.

Contingent bequest

A gift made on the condition of a certain event that might or might not happen. A contingent bequest is specific and fails if the condition is not made. An example of a charitable contingent bequest might be if a certain person predeceases you,

This is just a small list, as there are many ways to efficiently and effectively make charitable donations in a tax-wise manner that benefits both parties involved. Because each individual’s financial situation is unique it’s highly recommended to consult with the appropriate professional advisors.

I’d be happy to discuss any questions, concerns, or ideas you may have. Contact me via email at gordon@gordonfischerlawfirm.com or by phone at 515-371-6077.

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.

woman in front of painting

If you’re growing an art collection it brings up an interesting situation: how do you incorporate your prized pieces into your estate plan? Sure, you likely don’t have an authentic da Vinci, Renoir, or Klimt just hanging in your living room, but maybe you have a couple of pieces you inherited or a burgeoning modern art collection.

Value of a Passion

For most collectors the art isn’t about monetary value, but more so about a passion for a certain period, artist, or medium. Collecting is often an act of genuine appreciation for the fine arts. Considering both the intrinsic and market value of your art collection it’s ESSENTIAL you include it as a part of your estate plan. The collection is, after all, a part of your total estate’s value and they way it’s handled in your estate plan could impact the value of your gross estate in regards to the federal estate tax. When it comes to the estate planning goal of avoiding such taxes and fees the appraised value of your art is paramount to consider. Naturally, you want your collection to be well-treated following your passing, as well as retain its value.

Let’s go through some important steps and elements to consider.

Assemble Documentation

The value of the collection will be important to the estate plan. If you haven’t done so already, you must correctly catalog, photograph, insure, and appraise the collection. You should also gather all documentation such as appraisals and bills of sale that will need to accompany the artwork as it changes hands upon your estate plan’s execution.

Weigh Your Options

With an art collection, there are three main options for disposition within your estate plan (or to be executed during your life).

Donate

Donating your art to a charitable organization or a museum is an excellent way to practice smart charitable giving. It can also be one of the more simple options. Donate through your estate plan following your death and the estate will receive a tax deduction based on the current valuation. Give while you’re living and you can take an income tax deduction, also based on the value of the piece or collection at the time of the donation.

With this option, you and the recipient organization should agree to signed terms and conditions BEFORE the artwork delivery. Details can include specifics as to where and how the art is to be displayed if you want your name on the signage next to the painting and similar details.

Bequest Artwork to your Loved Ones

Another common option is to keep the art within the family by passing along the art along to your estate’s heirs. Yes, you could gift each individual piece to each family member, but if you want to keep the collection intact you could transfer the collection to a trust you create while living that can be updated and changed during your lifetime. A trust is a solid estate planning tool that allows your named trust beneficiaries to avoid estate tax and probate complications and fees. In the formation of your trust, you can also define the terms for the care and condition of the artwork.

You could instead bequest the collection to an entity like an LLC you create. In this case, your heirs would own interest in the LLC instead of each owning a piece of art. In your estate plan and in the development of the entity you can appoint a manager (or multiple managers) who make sales or purchasing decisions for the collection.

Sell

It goes without saying that art is expensive—to buy and to sell. There are benefits (and detriments) to this option during life and after death, but waiting to sell until after death means the art’s value will be included in the estate. As such the capital gains tax could be lessened or entirely eliminated because the tax basis for the art collection is increased to fair market value at the time of death, instead of what you paid for the art/collection. If you instead would like to sell while alive you can likely expect to pay a capital gains tax on top of a sales commission fee and sales tax (among other potential fees).

Give, gift, sell—whatever option you choose, select a plan that allows you to feel at peace with where and to whom your collection is headed.

Enlist an Expert

Regardless of what option you want to pursue in the disposition of your art work, you need to work with an experienced estate planner who can help navigate the complexity of your estate. It’s your estate planning lawyer who can help you establish a framework for passing along your artwork to your chosen beneficiaries.

Discuss With Your Family

Depending on your family dynamic, discussing your estate plan with your loved ones can be difficult. It can bring up emotion and hard topics like mortality, however, to avoid litigation, mitigate in-fighting, and help determine what’s the best course of action forward for your property it’s necessary. When it comes to your art collection, your heirs may not feel the same way about the artwork that you do and knowing these opinions is critical in the decision of what to do with the collection.

When having the conversation, cultivate an environment in which your family can discuss openly and freely without judgment. You want their honest opinions as a part of your decision in what to do with your collection in the event of your passing.

art graffiti


Just as the art itself can be exceedingly complex, so can incorporating said art into an estate plan. You probably have questions; don’t hesitate to reach out at any time via email or phone (515-371-6077). I offer a free one-hour consultation and would love to help you protect your artistic assets through quality, individualized estate planning.

hammers and tools hanging in garage

Three Parties

I’ve previously written about the three parties necessary for every trust: (1) the settlor (sometimes called the donor or grantor); (2) the trustee; and (3) the beneficiary.

Two Other Elements

Besides three parties, at least two other elements are necessary for a valid trust.

  1. The trust instrument is the document that sets forth the terms of the trust.
  2. The other necessary element is property. After all, the trustee must be holding something for the benefit of the beneficiary.

Property of the Trust

When laypersons use the word “property,” I believe they usually mean real estate. But, lawyers use the term “property” much, much more broadly, to mean literally any transferable interest. Sometimes trust property is also referred to as the res or corpus or assets of the trust. (Bonus words!)

Any property can be held in trust. Seriously, check out this list of 101 assets that would fit in a trust. You could likely think of literally hundreds more types or categories of property to place in your own individual trust.

Pour Over Trust

How about an unfunded trust that will receive property at some point in the future? Can you even do that?

Yes, that can certainly be done. This is usually called a pour-over trust. (More bonus words!) The pour-over trust deserves its own blog post. Briefly, a pour-over trust is usually set up by language in a will. A will may validly devise property to a trust, established during the testator’s lifetime, and then funded at her death.

Example

Let’s take a very simple example. Kate has a lawyer write her will, including language that at her death all her Monster Truck memorabilia be placed in a trust for the benefit of her nieces and nephews. Only at Kate’s death will the property be transferred into the trust, not before.

Monster Truck

Take-Aways

The important points are that property is necessary, at some point, to make a trust valid, and that literally any transferable interest in property – anything! – can be held in a trust.

Let’s Talk Trusts

It can be difficult to determine on your own 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.

footballs on wall

Turn on ESPN, put on your jersey, and stock with fridge with a cold beverage…the College Football Playoff National Championship is this Monday, January 13, 2020. (The game kicks off at 8 p.m.) While reading up on the stats and predictions for a tiger showdown between the LSU Tigers and Clemson Tigers in New Orleans’ Mercedes-Benz Superdome, I couldn’t help but make a connection with estate planning. Goalposts to estate planning goals may seem like a stretch, but hear me out.

 

Football is a complex game—the field is full of moving parts and competing strategies; it’s a game of inches where just a few missteps or right moves can make a huge difference. Estate planning works the same way. Here are just five of the surprising similarities between estate planning and the game of football:

1. Your Clock Will Indeed Run Out

Just like every football season eventually comes to an end, your (hopefully long and healthy) season will also come to a close. When it does, you need a special kind of playbook for the rest of your team…AKA an estate plan. In this analogy, an experienced lawyer is a great coach who is going to help you put plans in place for when the game changes unexpectedly or the stadium lights turn off for the last time. And, just like so much can change over the course of a season, a lot will happen over the course of your lifetime. That’s where annual reviews and revisions after significant events fit in.

While it is often difficult for people to ponder their unavoidable exit off their own fictitious field, preparation for what happens after your season is over can be one of the most comforting aspects of financial and legal planning.

2. The Main Players

Let’s take this analogy a bit further and put some estate planning terms into football speak.

Estate – An estate is a whole playbook, containing the following documents: your will; health care power of attorney; financial power of attorney; disposition of personal property; and final disposition of remains. (Click on the link preview below to delve deeper.)

Will – A will deals primarily with the distribution of assets and care for minor children. You need to make certain the will is well-drafted, solid, and can stand up in court. Keep in mind though, important assets such as life insurance policy payouts, retirement assets, and investment accounts may well contain beneficiary designations that trump your will.

Trust – You have lots of different options with this player. A trust can dictate how your assets will be dispersed, the timeline and manner in which they are dispersed, and who’s overseeing the process.

3. You Must Make Mid-Season Starting Lineup Adjustments

Just as a coach may switch up who’s starting partway through the season, you may need to make adjustments to your estate plan as things inevitably change over the course of your life. Big events like marriage, birth of a child/grandchild, moving to a different state, a large change in financial status, divorce, and other significant changes are a good reason to review your “playbook.”

4. No ‘I’ in Team

Your loved ones and close friends are all a part of your team; part of being a strong team player is including them on the plays you’re making. Discuss important aspects of your estate plan with the people it involves to avoid any confusion or conflict when it comes times for them to carry out your wishes. For instance, if you have minor children (under age 18) you’re going to want to establish legal guardianship if the worst happens and you’re no longer around to care for them. You’ll want to discuss with your chosen guardians ahead of time to make sure they’re willing and available to carry out the responsibility.

5. Final Score

football on field

 

There are probably at least a few more good football analogies I could tie into the conversation of why you need an estate plan, but the most important takeaway is that you never know when the game is going to change. So, you need to have your “playbook” written out ASAP. The best place to start is with my free, no-obligation Estate Plan Questionnaire. You can also shoot me an email or give me a call at 515-371-6077 to discuss your situation (or football).

Checklist with coffee and croissant

It’s National Estate Planning Awareness Week! In an effort to break down the barriers, myths, and excuses surrounding estate planning, I’ve created this handy dandy ultimate estate planning checklist. It runs down just about everything you need in terms of a comprehensive, quality estate plan including the six major documents, reviewing beneficiary designations, considering if a trust is applicable to you, and discussing your estate plan with your loved ones.

Estate Planning Checklist GFLF

 

I would love to help you check these items off your list. If you want to get started, download my Estate Plan Questionnaire. Or, you can contact me to discuss your individual situation and what estate planning provisions make the most sense for you!