Many Services a Special Needs Trust can Fund

February 17, 2025

A special needs trust (SNT) is a financial tool designed to provide for individuals with disabilities without affecting their eligibility for government benefits such as Supplemental Security Income (SSI) and Medicaid. These programs have strict asset and income limits, meaning direct financial gifts or inheritances can disqualify beneficiaries from receiving essential support. However, there are many services an special needs trust can fund. By placing funds in an SNT, families can ensure that their loved one’s financial security while maintaining access to necessary benefits.

Allowable Expenses for a Special Needs Trust

Trust distributions must follow specific rules to avoid impacting eligibility. Understanding what an SNT can and cannot pay for helps trustees manage funds appropriately and ensure that they enhance the beneficiary’s quality of life. As such, planning should use special needs trust funds to supplement government benefits, not replace them.

How to Support Housing and Living Arrangements

While an SNT can pay for housing costs such as rent or mortgage payments, doing so may reduce SSI benefits because the Social Security Administration considers it “in-kind support.”

You can avoid reducing cash benefits by paying for housing-related expenses instead. These include accessibility modifications, utilities, taxes and insurance.

Paying for Medical and Health-Related Expenses

Medicaid covers many healthcare services. However, an SNT can pay for additional medical care not covered by government programs. Some of these gaps in Medicaid that an SNT can cover include:

Out-of-pocket medical costs and copayments
Specialized therapies (occupational, speech, physical)
Dental and vision care
Alternative treatments (acupuncture, chiropractic care)
Medical devices and equipment (hearing aids, prosthetics)

Funding Personal Care and Support Services

An SNT is broadly clear to fund personal assistance that improves daily living for the beneficiary. Among the many services an special needs trust can fund, are in-home caregivers and companions, respite care, meal delivery and transportation services.

Recreation, Travel, and Social Activities

Quality of life extends beyond necessities. A special needs trust can pay for activities that promote personal enjoyment and social engagement, including:

Vacations, travel expenses and accommodations
Membership fees for gyms or clubs
Hobbies such as art, music, or sports lessons
Concert, theater and event tickets

Education and Vocational Training

Many individuals with disabilities benefit from continued education and skill development. SNT funds can cover

Tuition for private schools or specialized education programs
Job training and certification courses
Tutoring and life skills coaching
Assistive technology for learning

Transportation and Vehicle Expenses

Reliable transportation is essential for independence. SNT funds can be used to:

Purchase or modify a vehicle for accessibility
Cover gas, insurance and maintenance costs
Pay for rideshare services, taxis, or public transportation passes

Assistive Technology and Communication Devices

Technology plays a significant role in supporting individuals with disabilities. SNTs can fund:

Computers, tablets and adaptive software
Wheelchairs and mobility aids
Smart home devices for accessibility (voice-activated systems)
Cell phones and internet services

What a Special Needs Trust Cannot Pay

Some expenses can jeopardize government benefits if paid directly from an SNT, including:

Cash gifts to the beneficiary: Direct cash withdrawals may be counted as income and reduce benefits.
Groceries and food expenses: SNTs can only cover these costs in specific circumstances.
Direct rent or mortgage payments (reduces SSI benefits if improperly structured)
Basic medical care covered by Medicaid

Trustees should work with a special needs planning attorney to avoid penalties and ensure that funds are managed appropriately.

Structuring SNT Distributions Properly

Because direct payments to the beneficiary can affect government benefits, funds from an SNT should be paid directly to service providers, vendors, or businesses instead of being given in cash to the individual. For example, rather than providing the beneficiary money for a new wheelchair, the trustee should pay the wheelchair provider directly.

Why Proper Management of an SNT Matters

Managing an SNT incorrectly can lead to Medicaid disqualification, SSI benefit reductions, or unnecessary taxation. To ensure compliance, trustees should:

Keep detailed records of all trust transactions.
Consult an estate planning attorney before making large purchases.
Work with a financial advisor to maximize the trust’s longevity.

Protecting a Loved One’s Financial Future

A special needs trust is one of the most effective ways to provide long-term financial security for individuals with disabilities. There are many services an special needs trust can fund. By ensuring that funds are appropriately used and distributed wisely, families can enhance their loved one’s quality of life while safeguarding their eligibility for critical government benefits. If you would like to learn more about special needs planning, please visit our previous posts.

Reference: Special Needs Answers (Oct. 30th, 2024) “What Can My Special Needs Trust Pay for Without Affecting My Disability Benefits?”

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Understanding Gift Tax Rules can help Tax-Efficient Giving

February 12, 2025

Many people give financial gifts to family members, friends, or charities, whether for milestone events, education, or estate planning purposes. While gifting is a generous act, certain gifts may trigger tax obligations. Understanding federal gift tax rules, annual exclusions and lifetime exemptions can help individuals structure their giving in the most tax-efficient manner.

What Is the Gift Tax?

The gift tax is a federal tax imposed on transfers of money or property made without receiving something of equal value in return. The person making the gift, not the recipient, is responsible for paying any applicable gift tax. However, most gifts fall within exemption limits, meaning few individuals owe taxes on their generosity.

How the Gift Tax Exclusion Works

As of 2025, individuals can give up to $19,000 per recipient per year without triggering gift tax reporting requirements. Married couples can combine their exclusions, allowing them to gift $38,000 per recipient tax-free.

For example, if a parent gives their child $19,000 in 2025, the gift is below the annual exclusion and does not need to be reported to the Internal Revenue Service (IRS). However, if the gift is $26,000, the excess $7,000 must be reported, though it may not necessarily result in tax owed.

Lifetime Gift Tax Exemption

In addition to the annual exclusion, individuals have a lifetime gift tax exemption, which allows them to give away a set amount over their lifetime without incurring taxes. In 2025, this exemption is $13.99 million per person (or $27.98 million for married couples).

If a gift exceeds the annual exclusion, the excess amount is deducted from the lifetime exemption. Only gifts that surpass this exemption trigger actual gift tax liability. Most people will never reach this limit, meaning they can give substantial amounts tax-free.

What Types of Gifts are Tax-Exempt?

Certain types of financial gifts are automatically exempt from gift tax rules, including:

Payments for Medical Expenses: Direct payments to medical providers for someone else’s healthcare are not considered taxable gifts.
Educational Tuition Payments: Direct tuition payments to a school or university (not including room and board) are exempt from gift tax.
Gifts to Spouses: Unlimited tax-free transfers can be made to a U.S. citizen spouse. Gifts to a non-citizen spouse have a lower annual exclusion limit ($190,000 in 2025).
Charitable Contributions: Donations to IRS-recognized charities are tax-deductible and do not count toward the gift tax exemption.

Reporting Large Gifts to the IRS

If a financial gift exceeds the annual exclusion, the giver must file IRS Form 709: U.S. Gift (and Generation-Skipping Transfer) Tax Return. Filing does not necessarily mean taxes are owed—it simply records the amount deducted from the lifetime exemption.

For example, if an individual gifts $30,000 to a child in 2025, the excess $11,000 is reported on Form 709. However, it is deducted from their $13.99 million lifetime exemption, leaving them with $13.979 million remaining. Taxes are only due if lifetime gifts surpass the exemption limit.

Tax Planning Strategies for Gifting

To maximize the benefits of financial gifts while minimizing tax exposure, consider these strategies:

Spread gifts over multiple years to take advantage of the annual exclusion each year.
Leverage direct tuition or medical payments to help loved ones without using up gift tax exclusions.
Utilize trusts for structured wealth transfers, such as irrevocable trusts for minor children or special needs beneficiaries.
Coordinate with an estate plan to gradually minimize estate tax liability by gifting assets.

The Role of an Estate Lawyer in Gifting Strategies

An estate planning attorney can help structure financial gifts to align with long-term wealth transfer goals while minimizing potential tax liabilities. Whether incorporating gifting into an estate plan or establishing trusts for heirs, professional guidance ensures compliance with IRS regulations.

Financial gifting allows individuals to share wealth, support loved ones and reduce potential estate taxes. By understanding gift tax rules and planning strategically, you can help structure tax-efficient giving that benefit both the giver and the recipient. If you would like to learn more about the gift tax, please visit our previous posts.

Reference: Kiplinger (Jan. 14th, 2025) “What is the Gift Tax Exclusion for 2024 and 2025?”

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A No-Contest Clause can Protect your Planning

February 10, 2025

While the number of wills being contested may sound small, this number doesn’t include the many wills not contested because of strategies used to discourage litigation. If your family includes people likely to battle over your estate plan, you’ll want to know about how a no-contest clause can protect your planning. A recent article from Think Advisor, “How to ‘Bulletproof’ a Will With a No-Contest Clause,” explains how to protect your wishes.

Tens of thousands of wills are impacted by contested wills yearly, and even the closest families can find themselves fighting over inheritances. One way to prevent this is with no-contest clauses, also known as the in-terrorem clauses, placed in wills and trusts to discourage heirs from voiding their claims to any part of the overall estate if they challenge the will in court proceedings.

Estate battle reasons vary, from sibling rivalry to intergenerational power struggles. The outcome of using a no-contest clause depends on state statutes, evolving case law and how much the warring parties can or want to invest in estate litigation.

Encouraging discussion between all stakeholders in advance of the passing of the parent or grandparent can give time for everyone to work through any disagreements before courts become involved. However, even with the best of intentions, clear communication doesn’t always resolve the issues.

Almost every jurisdiction has addressed whether or not no-contest clauses can be enforced, either by law or by case law. Vermont doesn’t have any laws about enforcement, and Indiana and Florida do not allow the use of no-contest clauses.

A no-contest clause is relatively simple. However, there are limitations to be aware of. No-contest clauses work only for named beneficiaries who have a claim in the will, and they must be given a sufficient interest under the will or trust for the no-contest clause to be useful. Someone who has been cut out of a will entirely has nothing to lose by taking family members to court for their perceived deserved inheritance, while someone who stands to inherit something, albeit a smaller amount than they would have wished, could lose everything if the no-contest clause is enforced.

Many estate litigation matters involve individuals who receive significant interests. However, feel they that did not receive what they see as unequal or non-controlling interests. In these cases, the enforcement may be relatively straightforward.

Challengers who file actions because they believe someone unduly influenced the testator can be problematic. Few people understand how undue influence works in a legal setting. Undue influence can be found when a person makes bad or unfair choices because of an alleged wrongdoer’s behavior towards them, causing the victim to placate the person. However, proving undue influence is not easy.

There are strategies to overcome no-contest clauses, so estate plans must be prepared with these in mind. In some instances, estate administration is challenged, including actions over improper investments, or raising interpretations of ambiguities.

An estate planning attorney with experience will show you how a no-contest clause can protect your planning and create an estate plan to stand up to challenges from dissatisfied family members or others who feel they have been treated unfairly. If you would like to learn more about no-contest clauses, please visit our previous posts.

Reference: Think Advisor (Jan. 16, 2025) “How to ‘Bulletproof’ a Will With a No-Contest Clause”

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Understanding the Difference Between a Living Will and Last Will and Testament

February 4, 2025

Estate planning serves to make your wishes known, plan for the future and enjoy peace of mind knowing that you have protected yourself and your family. Young adults, unmarried people and parents juggling family and work also need an estate plan, according to a recent article from Success, “What to Consider When Making a Will—and the Difference Between a Will and a Living Will.” Understanding the difference between a Living Will and a Last Will and Testament is critical to successful estate planning.

A Last Will and Testament and a Living Will are essential parts of every estate plan. However, their similar names can lead to confusion. They serve two very different purposes.

A Will provides directions to be followed when administering your wishes. The will names an executor who manages the estate and distributes assets in the probate estate. A guardian for minor children is also part of a will. This is why it’s so important for parents with young children to have an estate plan, including a will. If there is no will, a court will decide who will raise the children if both parents die.

Young adults, who generally believe they are immortal, often engage in high-risk activities and travel to exotic places. They should have a will and, equally importantly, a living will. This document is used to express preferences for medical care if one is seriously ill or injured and cannot communicate their wishes.

Similarly, young adults should also have an Advance Directive or a Medical Power of Attorney so someone they choose can make decisions if they are incapacitated, whether by illness or injury.

A Power of Attorney is needed to allow someone else to handle financial and legal matters in case of incapacity. Taken together, the will, living will and advance directive allow someone else to take over for you while you are living or after you have died.

Digital assets need to be addressed for anyone with an online life—which means almost everyone, especially younger people. Access to bank accounts, utility companies, photos stored online, social media accounts and digital property is a part of contemporary life. Settling an estate without this information will be difficult, if not downright impossible.

Estate plans need to be reviewed every three to five years and when significant life events occur, like marriage, divorce, the birth of a child, or a big change in financial circumstances. An experienced estate planning attorney will ensure you have a full understanding of the difference between a Living Will and a Last Will and Testament. They can guide you through this process, making it far easier than expected. If you would like to learn more about a Living Will, please visit our previous posts.

Reference: Success (Dec. 23, 2024) “What to Consider When Making a Will—and the Difference Between a Will and a Living Will”

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Leaving Inheritance to a Child with Addiction requires thoughtful Planning

January 30, 2025

Leaving an inheritance to a child with addiction requires thoughtful planning to balance their needs with potential risks. Addiction can compromise a person’s ability to manage finances responsibly, increasing the likelihood of misused funds or exacerbating harmful behaviors. By implementing tailored estate planning strategies, parents can protect their children, while ensuring their legacy is used constructively.

Challenges of Leaving a Lump Sum Inheritance

Directly transferring a lump sum inheritance to a child with addiction poses significant risks. The sudden availability of large amounts of money can intensify addictive behaviors, leading to financial instability, strained family relationships and even legal troubles.

In addition, addiction often results in a lack of financial literacy or accountability, making it difficult for the individual to manage their inheritance responsibly. Parents must consider these challenges when planning their estate to ensure that the inheritance is a source of support rather than harm.

Estate Planning Strategies to Protect a Child with Addiction

A trust is one of the most effective tools for managing an inheritance for a child with addiction. Parents can appoint a trustee to oversee distributions and ensure that the funds are used responsibly by creating a discretionary trust.

The trustee, often a professional or trusted family member, can manage payments for essential needs like housing, education, or treatment. This arrangement provides financial stability, while minimizing the risk of misuse.

Include Incentives

Incentive trusts encourage positive behaviors by linking distributions to specific milestones or achievements. For example, a trust might provide additional funds if the beneficiary completes a rehabilitation program, maintains stable employment, or avoids legal troubles.

By structuring the trust this way, parents can promote recovery and self-sufficiency, while ensuring the inheritance aligns with their child’s best interests.

Use Spendthrift Provisions

Spendthrift provisions limit the beneficiary’s access to the trust’s funds, protecting the assets from creditors, lawsuits, or impulsive spending. This legal safeguard is particularly valuable for individuals with addiction, as it prevents external pressures or poor decision-making from depleting the inheritance.

Consider Lifetime Gifting

For parents who prefer to provide financial support during their lifetime, lifetime gifting allows them to contribute smaller, manageable amounts. This approach enables them to monitor how their child uses the funds and adjust future support based on their child’s progress and needs.

Collaborate with Addiction Professionals

Involving addiction specialists or financial therapists in the planning process can help parents design an inheritance strategy tailored to their child’s specific challenges. These professionals can offer guidance on treatment resources, behavioral incentives and effective trust structures.

Communicating the Plan

Open communication about the estate plan can help manage family expectations and reduce potential conflicts. While discussing addiction and inheritance may be difficult, transparency fosters understanding and ensures that other family members are aware of the reasoning behind specific decisions.

Parents should also document their intentions clearly in the estate plan to prevent disputes among heirs. Including a letter of intent can provide additional context and convey the love and support behind the decisions.

The Role of Professional Guidance

Leaving an inheritance to a child with addiction requires thoughtful planning. Working with an estate planning attorney is essential to navigating these complexities. Attorneys can help draft trusts, incorporate spendthrift provisions and ensure that the plan complies with legal requirements. Their expertise ensures that the inheritance strategy aligns with the family’s goals, while protecting the child’s long-term well-being. If you would like to learn more about inheritance planning, please visit our previous posts.

Reference: The Guardian (June 19, 2010) “Experience: I blew my million dollar inheritance”

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Strategies to Resolve Disputes Between Beneficiaries

January 27, 2025

Disputes between trust beneficiaries are common, often arising from misunderstandings, perceived inequalities, or conflicting interpretations of the trust’s terms. These disputes can escalate without timely resolution, leading to costly legal battles and damaged relationships. Employing proactive strategies can help resolve disputes between beneficiaries, while safeguarding the trust’s purpose.

Common Causes of Beneficiary Disputes

Many disputes stem from beneficiaries’ lack of understanding of the trust’s terms. Complex legal language or vague provisions can lead to confusion and differing interpretations. For example, disagreements may arise over distribution schedules, asset valuations, or trustee authority.

Perceived Inequity

Beneficiaries may feel that the trust favors certain individuals, particularly if unequal distributions are involved. These perceptions can lead to resentment and claims of unfair treatment, even if the terms align with the grantor’s wishes.

Trustee Mismanagement

Trustees have a fiduciary duty to act in the best interests of the beneficiaries. However, allegations of mismanagement or conflicts of interest can trigger disputes. Common issues include failure to provide timely accountings, excessive fees, or favoritism.

External Influences

Family dynamics, personal grievances, or outside pressures can exacerbate disputes. For example, disagreements unrelated to the trust—such as unresolved sibling rivalries—may influence beneficiaries’ perceptions and behaviors.

Strategies for Resolving Beneficiary Disputes

The first step in resolving disputes is ensuring that all beneficiaries understand the trust’s provisions. Trustees or estate planning attorneys can provide detailed explanations, highlighting the grantor’s intent and addressing specific concerns. Providing beneficiaries with a clear accounting of the trust’s assets and distribution plan can also alleviate misunderstandings.

Facilitate Open Communication

Encouraging open and respectful dialogue among beneficiaries can prevent conflicts from escalating. Regular meetings or discussions, mediated if necessary, allow beneficiaries to voice their concerns and reach a consensus. A neutral party, such as a mediator or financial advisor, can help facilitate these conversations and maintain focus on the trust’s purpose.

Consider Mediation

Mediation offers a cost-effective and non-adversarial alternative to litigation. A professional mediator works with beneficiaries and trustees to identify the root causes of disputes and negotiate mutually agreeable solutions. This approach preserves relationships, while addressing concerns about the trust’s administration.

Appoint a Neutral Trustee

If disputes involve allegations of trustee bias or mismanagement, appointing a neutral third-party trustee can restore confidence in the trust’s administration. Professional fiduciaries or corporate trustees bring objectivity and expertise, reducing the potential for future conflicts.

Utilize No-Contest Clauses

Grantors can include no-contest clauses in the trust to discourage frivolous disputes. These clauses state that beneficiaries who challenge the trust’s terms risk forfeiting their inheritance. While not enforceable in all jurisdictions, no-contest clauses can deter unnecessary litigation and encourage beneficiaries to seek resolution through other means.

Seek Legal Counsel

In cases where disputes cannot be resolved informally, consulting an estate planning attorney is essential. Attorneys can provide guidance on trust interpretation, compliance with fiduciary duties, and options for resolving conflicts. In some instances, formal legal action may be necessary to protect the trust’s assets or enforce its terms.

Preventing Future Disputes

Preventing disputes begins with proactive estate planning. Clear and specific trust provisions, regular updates and open communication with potential beneficiaries can reduce misunderstandings. Working with an experienced estate planning attorney ensures that the trust reflects the grantor’s intentions, while addressing potential areas of conflict.

Building a Path to Resolution

While trust disputes can be emotionally and financially draining, constructive conflict resolution strategies help protect the grantor’s legacy and maintain family harmony. Trustees and beneficiaries can navigate disputes effectively and uphold the trust’s purpose by fostering transparency, open communication and professional guidance. If you would like to learn more about beneficiaries and trusts, please visit our previous posts.

Reference: The Washington Post (Nov. 16, 2024) “Asking Eric: Siblings disagree over inheritance split”

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A Trust Only Works if it is Properly Funded

January 9, 2025

A revocable trust is a powerful estate planning tool that helps individuals manage their assets during their lifetime and distribute them efficiently after their death. However, a trust only works if it is properly funded. The American College of Trust and Estate Counsel explains that many individuals make the mistake of setting up a trust but fail to transfer assets into it. This leaves their estates vulnerable to probate, taxes and disputes. To fully benefit from your trust, you must ensure that it is appropriately funded with all intended assets.

What It Mean to Fund a Trust

Funding a trust involves transferring ownership of assets from your name into the trust’s name. This step gives the trust legal control over the assets, allowing them to be managed and distributed according to the terms of the trust. Without this transfer, your assets may remain subject to probate, and your trust could become an ineffective document.

Key asset types that can and should be transferred into a trust include:

Real estate properties
Bank and investment accounts
Tangible personal property, such as valuable jewelry, artwork, or collectibles
Business interests and intellectual property
Life insurance policies (with the trust named as the beneficiary)

By funding your trust, you ensure that these assets are managed seamlessly during your lifetime and distributed efficiently upon your death.

Why Trust Funding is Essential

Failing to fund a trust undermines its primary purpose. If assets remain outside of the trust, they may become subject to probate—the often lengthy and costly legal process of settling an estate. This can delay the distribution of assets to your heirs and increase the likelihood of disputes among family members.

A funded trust also provides benefits that unfunded trusts cannot, including:

Privacy: Unlike wills, which become public records through probate, trusts keep the details of your estate private.
Control: Funding the trust ensures assets are distributed according to your wishes without interference from courts or state laws.
Continuity: In the event of incapacity, the trust enables a successor trustee to manage your assets without court intervention.

How to Fund a Trust

Properly funding a trust requires transferring ownership of assets into the trust and ensuring that documentation is updated to reflect the change. Each asset type requires specific steps:

Real Estate

To transfer real estate, you must execute a deed transferring ownership to the trust. This often involves recording the new deed with the local land records office. Consult an estate lawyer to ensure that the transfer complies with state laws and doesn’t inadvertently trigger taxes or other issues.

Bank and Investment Accounts

Banks and financial institutions typically require documentation to retitle accounts in the name of the trust. This might involve filling out specific forms or providing a copy of the trust agreement. Failing to update account ownership could result in these assets being excluded from the trust’s control.

Tangible Personal Property

A written assignment can transfer tangible personal property to the trust, such as art, heirlooms and jewelry. The assignment lists the items being transferred and formally declares their inclusion in the trust.

Life Insurance and Retirement Accounts

While retirement accounts, like IRAs and 401(k)s, are not typically retitled to a trust for tax reasons, you can name the trust as a beneficiary. For life insurance policies, updating the beneficiary designation to the trust ensures that proceeds are directed according to the trust’s terms.

Business Interests

If you own a business, transferring shares or interests into the trust allows the trustee to manage them as needed. This requires amending operating agreements, stock certificates, or partnership documents to reflect the transfer.

Common Pitfalls to Avoid

Even with good intentions, individuals often make mistakes when funding their trusts. Common errors include:

Leaving assets out of the trust: Forgetting to transfer all intended assets undermines the trust’s effectiveness.
Failing to update beneficiary designations: Beneficiary forms conflicting with trust terms can create legal disputes.
Not reviewing the trust regularly: As assets change over time, it’s essential to revisit and update the trust to include new acquisitions.

An estate lawyer can guide you through the process and help ensure that all assets are correctly transferred and documented. Remember, a trust only works if it is properly funded. It is a living document that requires ongoing attention. Regularly reviewing and updating the trust ensures it remains aligned with your goals and includes all current assets. Properly funding your trust provides security for your loved ones, avoids unnecessary legal complications and ensures that your legacy is preserved. If you would like to learn more about funding a trust, please visit our previous posts.

References: American College of Trust and Estate Counsel (ACTEC) (Aug. 31, 2023) “Funding Your Revocable Trust and Other Critical Steps” and American College of Trust and Estate Counsel (ACTEC) (Sep 21, 2023) “Tangible Personal Property in Estate Planning”

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The Estate of The Union Season 3|Episode 11 is out now!

January 7, 2025

The Estate of The Union Season 3|Episode 11 is out now! We all make mistakes, and usually they aren’t fatal. Unfortunately, when someone dies, a mistake made in an estate plan can be!

In this edition of The Estate of the Union, Phillip Arendall and Brad Wiewel dissect mistakes that Phillip has seen people make in the probate process. Phillip is the Associate Director of our After Life Care Division and he brings his great insight (and sense of humor) to help analyze the foibles and pitfalls he has observed in that role. We hope you enjoy listening to these cautionary tales.

In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insights into the confusing world of estate planning, making an often daunting subject easier to understand. It is Estate Planning Made Simple! The Estate of The Union Season 3|Episode 11 is out now! The episode can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. If you would prefer to watch the video version, please visit our YouTube page. Please click on the links to listen to or watch the new installment of The Estate of The Union podcast. We hope you enjoy it.

Texas Trust Law focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization. We provide estate planning services, asset protection planning, business planning, and retirement exit strategies.

Managing a Vehicle Title Transfer after a Loved One’s Passing

December 11, 2024

Managing a vehicle title transfer after a loved one’s passing can feel overwhelming, especially during an already difficult time. The process varies depending on the estate’s status, the deceased’s will and the state’s specific regulations. However, you can avoid future complications by properly transferring the title.

Determine How the Vehicle was Titled

The first step in transferring a vehicle title is to understand how the title was set up. Some vehicles are jointly titled, meaning another individual may automatically inherit ownership without probate. The car might also be titled solely in the deceased’s name, which likely requires probate to transfer ownership.

Jointly titled vehicles are often more straightforward to transfer, especially if designated as “Joint Tenancy with Right of Survivorship” (JTWROS). In this case, vehicle ownership passes directly to the surviving joint owner. However, the process will require additional legal steps if no joint owner is listed, or the title doesn’t specify JTWROS.

Review the Will or Estate Plan

If the deceased left a will, it’s essential to determine who they designated to inherit the vehicle. The named executor or administrator of the estate is responsible for managing the title transfer, ensuring that the legal ownership matches the deceased’s wishes.

In cases where there is no will, known as intestacy, the state’s intestate succession laws dictate how assets, including vehicles, are distributed. This often means the vehicle may go to a close family member, like a spouse or child. However, the rules vary by state. Consulting the estate plan or legal professional can help clarify any uncertainties regarding rightful ownership.

Complete Probate If Required

The title transfer may require probate if the vehicle was solely titled and there is no joint owner. Probate is the legal process by which a deceased person’s assets are distributed according to their will or state law if no will exists. To initiate probate, the executor typically files the will with the local probate court, which then authorizes the distribution of assets, including the vehicle.

The probate process can take weeks to months, depending on the estate’s complexity and any potential disputes. During this time, the executor must gather all necessary documents to satisfy the state’s probate requirements, including proof of the deceased’s identity, a death certificate and other relevant paperwork.

Gather Necessary Documentation

Once you confirm whether probate is needed, the next step is to gather essential documentation to transfer the title. Generally, you’ll need:

A certified copy of the death certificate
The original vehicle title (if available)
Documentation proving estate executorship (if applicable)
Valid photo ID for the new owner
Title transfer application (available from the DMV or Secretary of State’s office in many areas)

Some states may require additional documentation or affidavits. Contacting your local Department of Motor Vehicles (DMV) or visiting their website can clarify the specifics for your state.

Submit Title Transfer Documents to the DMV

With the required documents, the next step is to visit your local DMV or title agency to submit the paperwork. If probate was necessary, bring documentation verifying that the estate has cleared probate, along with the other materials. The DMV will process the title transfer, though the timeline can vary by state and county.

In some cases, fees apply for the title transfer process. States may also impose specific requirements for emissions or safety inspections before the transfer. Consulting your DMV in advance can help you avoid potential delays and understand any associated costs.

Consider Tax Implications

Transferring a vehicle title after a loved one’s passing may also involve tax considerations. For example, some states have inheritance taxes that could apply, while others may require registration fees for the new owner. It’s wise to consult with a tax professional or attorney to clarify potential financial implications and ensure that the transfer complies with tax laws.

Managing a vehicle title transfer after a loved one’s passing can be challenging, especially with differing state rules. If you would like to learn more about transferring ownership of a vehicle or property after death, please visit our previous posts.

Reference: Capital One (2024) How to Transfer a Car Title When the Owner is Deceased

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Pour-Over Will is a Safety Net for Assets not in a Revocable Trust

December 2, 2024

Estate planning can sometimes feel daunting, especially when it comes to ensuring that your assets go to the right people without hassle. The pour-over will, especially when paired with a revocable trust, can provide peace of mind. A pour-over will is like a safety net for assets that are not in a revocable trust.

This type of will allows any remaining assets you hadn’t transferred to your trust during your lifetime to “pour over” into the trust when you pass away. This ensures that everything is gathered into one place—the trust you created—so it can be distributed according to your wishes.

Even though pour-over will still need to go through probate, they streamline the process by consolidating everything into your trust, making it easier for the appointed trustee to handle everything in one place. According to Investopedia, pour-over wills cover any assets left outside the trust at death.

A revocable or living trust is a legal arrangement you create while alive. It allows you to transfer your assets into the trust’s ownership, and you can continue to control these assets, making adjustments or even dissolving the trust if you choose. This type of trust is often used to help avoid the probate process for assets placed within it.

When you set up a pour-over will alongside a revocable trust, the will is a backup for any assets that might not make it into the trust before you pass away. Let’s say, for instance, you acquire a new property but forget to transfer it to your trust. A pour-over will ensure that property eventually lands in your trust, keeping your wishes intact.

While the assets already placed in a revocable trust bypass probate, any assets that transfer via a pour-over will still go through this legal process. However, since the pour-over will usually contain fewer assets or smaller items, the probate process can be more straightforward and less expensive than it might be for a standard will covering all your assets. Probate rules vary by state, but having a pour-over will simplify things since it consolidates your assets into your trust, making it easier to administer your estate.

Not everyone needs a pour-over will. However, it’s a valuable tool in certain circumstances. Here are some situations where this combination might make sense:

You Have a Complex or Changing Asset Portfolio: If you often acquire new assets , it can be easy to overlook transferring something to your trust. A pour-over will capture anything not moved to the trust, ensuring that nothing gets left behind in the probate process.
You Want Flexibility and Control During Your Lifetime: A revocable trust allows you to control your assets and adjust as your needs change. Pairing this with a pour-over will ensure that any missed items are still distributed according to your intentions.
You’re Concerned About Privacy for Your Beneficiaries: Probate records are typically public, so any details in a standard will might be open to view. However, funneling your assets into a trust through a pour-over will add privacy.

A pour-over will pair with a revocable trust can offer several benefits:

Simplicity: Consolidating everything into a single trust makes it easier for your beneficiaries and trustee to manage your estate.
Reduced Legal Complications: This setup can help avoid disputes over assets, since everything is eventually directed to the trust where your wishes are clear.
Peace of Mind: Knowing that your assets will end up in the right hands, even if you forget to transfer something to your trust, can provide significant reassurance.

While a pour-over will is like a safety net for assets that are not in a revocable trust, be aware of a few drawbacks. Assets undergoing a pour-over must still undergo probate, meaning they aren’t entirely shielded from court proceedings. However, this may be a minor inconvenience if the peace of mind it provides outweighs the potential cost of probate.

A pour-over will also slow down the distribution of assets since probate can take time. This is worth considering for families or beneficiaries needing a quicker transition.

Setting up a pour-over will and revocable trust usually involves some paperwork and the help of an estate planning attorney. An attorney can guide you through drafting both documents, ensuring that your assets are accounted for and that any remaining assets will flow smoothly into your trust upon your passing.

Are you thinking about a pour-over will and revocable trust? It’s never too early to start planning. If you would like to learn more about trusts, please visit our previous posts.

Reference: Investopedia (April 1, 2024) “Pour-Over Will Definition and How It Works With a Trust”

Photo by Lukas

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