Tag: Revocable Living Trust

We receive more calls these days from clients who have parents, spouses or other loved ones dealing with temporary and permanent incapacity.  In cases where the individual does not have an updated estate plan, these can be challenging.  There are court-supervised processes that enable appointed individuals to act on behalf of incapacitated persons. The problems with these proceedings are many.  First, the initial part, determining incapacity, can be trying as it is a public process designed to protect the individual who may be incapacitated.  Normally multiple attorneys are involved to represent all the parties and interests in the case. 

In addition, even after a guardian is appointed, the court stays involved in supervision and this often requires participation of lawyers and other professionals, thus entailing ongoing costs.  Not a pretty picture, but it does allow the person’s assets and affairs to be dealt with by a competent individual.

A much brighter picture is available to those who engage in at least some basic planning.  The key documents for solid outcomes, which are common in many of the plans we produce every month, are:  Revocable Living Trusts, Financial Powers of Attorney and Health Care Powers of Attorney.  The latter two, the powers of attorney, allow a person (the principal) to appoint another (the agent) to bind them legally.  In both cases, you have a good deal of flexibility in customizing the authorization you give the agent.  For example, there may be certain cases or times when you want the agent to act or you may want to limit their ability to authorize certain types of treatment for you.

While not necessarily required to deal with incapacities, a Revocable Living Trust can give your chosen successor the ability to deal with your assets in a fairly seamless manner.  This is true because the Trust can become the owner of the asset at any point after the plan is executed and this means that even after the incapacity, the same owner is still speaking for the asset.  In other words, the Trust owns the asset before and after the incapacity.  Things are different after the incapacity only in the sense that the person who controls the trust (the Trustee) has changed according to the terms of the document.  Normally, such terms will set out a private procedure to determine incapacity (e.g., an exam by the family physician of the person who established the trust.)  The fact that asset ownership stays in the same hands throughout the incapacity can facilitate smooth administration for the persons involved.

If you are interested in learning more about any of these documents or are dealing with issues such as the ones referenced here, please give us a call at (704) 552-5160 or send us an email.

*Intended as general guidance only and not as legal advice.

Many of our clients who come in to prepare or update their Will ultimately decide to include a Revocable Living Trust (RLT) in their estate plan after learning about the benefits it can provide. These benefits include privacy, avoiding or reducing probate fees and delays, and aiding in the management of their assets during periods of incapacity.

If you decide to implement an RLT, you’ll want to fund it by moving assets to it after it’s in place. For an RLT, which is the type of trust that operates as kind of a “Super Will,” you should be adding other assets within the days and weeks after you establish it. This is true because assets titled in your trust name are going to have some real advantages over assets titled in your individual name. For one, if you become incapacitated, your successor or backup trustee will be in a great position to go ahead and take action for that asset. In addition, unlike assets such as stocks, bonds or mutual funds that are titled in your name, assets titled to your trust do not have to go through probate. Avoiding this court process can save time, money and protect your family’s privacy.

RLTs are easy to handle for income tax reporting purposes. The Employer Identification Number (EIN) associated with the trust account will remain your social security number, at least so long as you are the sole trustee of your trust, which is usually the case during your lifetime.

So what’s involved with moving assets to your trust? In general, you simply need to change the name of the asset owner to your RLT. Most often this is accomplished with the assistance of your bank or other financial institution. Some assets, like closely-held business interests, for example, will have ownership agreements that need to be consulted before any title changes are made.

Here are some other general recommendations regarding assets to title and not to title to your new revocable trust:

Assets you should re-title to your new RLT:

• Savings accounts
• Money Market accounts
• Mutual funds
  • Certificates of Deposit (consider delaying the transfer to maturity if the institution considers the transfer a technical termination that could reset your interest rate)
• Publicly-traded stocks
• Bonds

Assets you should not re-title to your new RLT because they are instead handled by beneficiary designation updates:

• Any retirement account (IRA, 401(k), 403(b), etc.)
• Any annuity
• Any life insurance policy
  

Assets you should contact competent legal counsel before transferring to your new RLT:

• Stock in a closely-held corporation
• LLC ownership interests however denominated (e.g., Units, Shares, etc.)
• Any other assets not listed in “should re-title” above

In summary, titling assets to your new Revocable Living Trust will help you get the full benefits of this valuable and versatile tool. What’s more, in most cases you’ll find the process relatively quick and painless. If you have any questions regarding the benefits of a Revocable Living Trust and whether this technique may be right for your situation, please contact us to speak with one of our attorneys.

*Intended as general guidance only and not as legal advice.