Estate Planning Can Bridge the Gap Between Generational Wealth

March 19, 2025

Building wealth is only half the battle—ensuring that it lasts for future generations requires careful estate planning and strategic wealth management. Many families fail to implement a structured plan, leading to lost assets, unnecessary taxes and family disputes. Without the proper legal and financial strategies, even substantial inheritances can be squandered within a generation. Estate planning can bridge the gap between generational wealth; ensuring that wealth is protected, distributed according to the family’s wishes, and sustained for years to come.

Why Generational Wealth Often Fails to Last

Studies show that 70% of wealthy families lose their wealth by the second generation and 90% by the third. The primary causes include:

Lack of financial literacy – Heirs often receive wealth without a plan for responsible management.
Estate tax burdens – Without proper planning, substantial portions of an estate may be lost to federal and state taxes.
Legal disputes – Poorly structured wills and trusts often lead to costly inheritance battles.
Failure to adapt to changing financial laws – Inheritance laws, tax regulations and trust structures evolve over time.

Estate planning provides legal structures and safeguards to prevent these issues and ensure that family wealth remains intact.

How Estate Planning Protects Generational Wealth

Structuring Trusts for Long-Term Asset Protection:

Trusts are among the most effective tools for protecting wealth and ensuring that assets are passed down responsibly. Unlike a will, which simply distributes assets, trusts provide ongoing management and protection.

Common trust structures include:

Revocable Living Trusts – Allow individuals to control assets during their lifetime, while avoiding probate upon death.
Irrevocable Trusts – Provide stronger asset protection and tax advantages by permanently removing assets from the grantor’s estate.
Generation-Skipping Trusts (GSTs) – Allow assets to bypass one generation, reducing estate tax liability for grandchildren.

Trusts also allow customized inheritance distribution, such as delayed payouts, financial milestones, or incentives for responsible wealth management.

Minimizing Estate Taxes and Legal Fees:

High-net-worth individuals face significant estate tax challenges if wealth is not structured correctly. An estate planning attorney helps reduce tax exposure through:

Gifting strategies – Annual tax-free gifts to heirs reduce taxable estate size.
Charitable giving – Donating assets through charitable remainder trusts or donor-advised funds offers tax deductions while benefiting causes.
Family Limited Partnerships (FLPs) – These allow wealth to be transferred gradually, minimizing tax burdens.

Without tax planning, heirs may be forced to sell assets or businesses to cover tax liabilities.

Preventing Family Disputes Over Inheritance:

Even well-meaning families can experience conflict over wealth distribution. An estate planning attorney helps prevent disputes by:

Creating straightforward wills and trust agreements that specify asset distribution.
Including business succession plans to ensure seamless leadership transitions in family businesses.
Establishing conflict resolution mechanisms like mediation clauses to settle disputes outside of court.

A structured estate plan ensures that inheritance disagreements do not escalate into costly legal battles.

Teaching Financial Responsibility to Heirs:

Wealth transfer is more effective when heirs understand how to manage their inheritance. Estate planning attorneys work with families to:

Educate younger generations on financial management and investment strategies.
Introduce heirs to financial advisors who can help them navigate wealth preservation.
Incorporate inheritance incentives that promote responsible spending and investment.

Without financial education, even a well-structured estate plan can fail to maintain generational wealth.

Estate Planning for Business Owners

Family businesses require careful succession planning to ensure stability after the founder’s passing. An estate planning attorney helps:

Identify and prepare successors for leadership transitions.
Establish buy-sell agreements to ensure smooth ownership transfers.
Structure ownership in trusts or LLCs to provide financial protection.

Companies often struggle to survive past the first generation without a business succession plan.

Secure Your Family’s Financial Legacy

Estate planning can bridge the gap between generational wealth. It will give you the confidence that your assets are preserved, managed wisely and passed down without unnecessary financial losses. if you would like to learn more about managing generational wealth, please visit our previous posts.

References: J.P. Morgan (Nov. 18, 2024) “We Need to Talk: Communicating Your Estate Plan With Your Family” and Business Insider (Feb. 9, 2025) “Inside the Retreat for Billionaire Heirs Trying to Give Away Their Money”

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What Kind of Trust Helps a Family with Young Children?

March 11, 2025

Trusts are not just for wealthy people. They are used when a family has young children and wishes to ensure that there is a plan in place to care for the children in case the parents die or become incapacitated. A recent article from Business Insider, “I asked an estate planning attorney the best way to establish a trust for my 2-year-old daughter,” explains what parents can do to protect their youngest loved ones. What kind of trust helps a family with young children?

There are a few different trusts to consider, depending on your situation:

Revocable Living Trust. The revocable trust is the most flexible. It is a separate legal entity with language directing how assets will be used for different scenarios. For instance, if someone dies or becomes disabled and their beneficiaries are all children, the trustee will manage and allocate necessary financial resources to support the children. Many estate planning attorneys consider a trust even more important than a will, since it doesn’t require the estate to be settled before trustees can access the assets.

An IRA Trust. You may want to consider creating an IRA trust if you own an IRA. This allows a minor child to be the beneficiary of the retirement account. On the death of the IRA owner, assets go into the trust, which has a trustee who manages the asset until the person comes of age or whenever the original owner wants them to receive the money.

When a regular IRA account is left to a minor, the family must petition the court to obtain a court-appointed guardian to manage the account until the minor is of legal age. With an IRA trust, you’ve clarified who the trustee should be and when the child will receive the money. If the money is not needed and can remain in the trust, it is a protected asset for their future.

A Trust for Minors. This allows you to leave assets to a child until they reach a certain age, which you articulate in the trust. You can leave all or a portion of the money to the beneficiary to be distributed when you feel they can manage it. You decide when to release the funds, who the trustee should be, the rules for how the money is to be spent and when the minor may receive income.

An Education Trust. In addition to creating a 529 College Account for a minor child, it’s a good idea to create an Education Trust to be sure the funds will be used for education. You can assign a certain amount for education and state the age you’d like the beneficiary to receive any leftover funds.

An estate planning attorney can help identify what kind of trust helps a family like yours with young children. It will give you the peace of mind knowing that you created a plan for your children or grandchildren to ensure that they have the funds they need in case of tragedy, and place guardrails on the money so it’s protected. If you would like to learn more about estate planning for young children, please visit our previous posts.

Reference: Business Insider (Jan. 31, 2025) “I asked an estate planning attorney the best way to establish a trust for my 2-year-old daughter”

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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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Self-Employed must take a Proactive Approach to Estate Planning

January 16, 2025

Freelancers and the self-employed must take a proactive approach to estate planning. These types of jobs operate without the safety nets provided by traditional employment. This independence brings freedom. However, it also adds complexity to financial and estate planning. From managing irregular income to protecting business assets, creating an estate plan ensures that your hard work is preserved and distributed according to your wishes.

Unlike salaried employees, freelancers often lack access to employer-sponsored benefits, such as life insurance, retirement plans, or disability coverage. Their business assets and personal finances are frequently intertwined, making careful planning essential to avoid unnecessary complications for heirs.

A well-crafted estate plan for freelancers addresses:

Transfer of business assets or intellectual property.
Continuity of income for dependents.
Minimization of taxes and legal hurdles.

Freelancers and the self-employed must create a plan that considers their unique financial circumstances and provides long-term security for loved ones.

Freelancers often rely on their business as their primary source of income. Without a plan, the value of that business could be lost upon their death. Key steps include:

Appointing a Successor: Identify someone to take over the business or handle its sale.
Creating a Buy-Sell Agreement: Outline how ownership interests will be transferred for partnerships or joint ventures.
Documenting Procedures: Maintain clear records and instructions to help successors understand ongoing operations or intellectual property management.

Freelancers often experience fluctuations in income, which can complicate traditional estate planning strategies. To account for this:

Establish a rainy-day fund to provide a financial buffer for your estate.
Work with an estate planning attorney to identify flexible asset protection strategies.
Consider annuities or investments that provide steady income streams for beneficiaries.

Unlike traditional employees, freelancers must set up their own retirement savings plans. Options include:

SEP IRAs or Solo 401(k)s: Tax-advantaged accounts tailored for self-employed individuals.
Roth IRAs: Flexible savings accounts that grow tax-free, offering greater liquidity for heirs.

Ensuring that retirement savings are properly designated to beneficiaries avoids complications later.

The self-employed often own valuable digital assets like intellectual property, domain names, or online portfolios. These assets must be included in your estate plan to ensure seamless transfer. Create an inventory of:

Login credentials for key accounts.
Ownership documentation for websites or digital products.
Instructions for transferring or licensing intellectual property.

Many self-employed generate income from intellectual property, such as writing, artwork, or designs. An estate plan should specify how copyrights, patents, or trademarks are managed after death. This may include:

Assigning ownership to heirs or beneficiaries.
Creating trusts to manage royalty payments.
Licensing or selling rights to preserve income streams.

The first step to creating an estate plan is drafting a will that distributes assets, business interests and personal property according to your wishes. Without one, state laws determine asset distribution, which can result in unintended consequences. However, there’s much more to an estate plan than just making a will.

Establish Powers of Attorney

Freelancers should designate a trusted person to handle financial and healthcare decisions, if they become incapacitated. Powers of attorney ensure continuity in managing personal and business affairs during emergencies.

Consider a Living Trust

A living trust can help freelancers avoid probate and ensure that assets are distributed efficiently. Trusts are beneficial for managing complex assets, like intellectual property or business income.

Secure Life Insurance

Life insurance provides a safety net for freelancers with dependents by replacing lost income and covering future expenses. Policies should be aligned with your estate plan to ensure that benefits are directed appropriately.

Reach Out to an Estate Planning Attorney

Freelancers should consult estate planning attorneys and financial/tax advisors to create a plan that addresses their unique circumstances. Regular reviews ensure that the plan evolves alongside income, assets, or family structure changes.

Freelancers and the self-employed must take a proactive approach to estate planning. You can ensure your hard-earned legacy benefits your loved ones by addressing business continuity, income fluctuations and digital assets. An estate plan tailored to your needs secures your financial future and provides peace of mind, knowing that your assets and values will be protected. If you would like to learn more about planning for the self-employed, please visit our previous posts.

Reference: American College of Trust and Estate Counsel (ACTEC) (Oct. 19, 2023) “Estate Planning for Freelancers and the Gig Economy”

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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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There are Important Steps involved in Changing a Trustee

December 30, 2024

A revocable living trust is a flexible estate planning tool that allows you to maintain control over your assets, while simplifying their distribution after your passing. However, circumstances may arise where the trustee you initially appointed is no longer the best fit to manage the trust. Whether due to personal reasons, incapacity, or a breach of fiduciary duty, replacing a trustee may be necessary to ensure that your trust operates effectively. There are important steps involved in changing a trustee. This article explains the process for changing a trustee.

What Is a Revocable Living Trust?

A revocable living trust is a legal arrangement that holds assets during your lifetime and distributes them according to your wishes after death. As the grantor (creator of the trust), you typically serve as the initial trustee, retaining complete control over the assets. This type of trust is highly adaptable, allowing changes to trustees, beneficiaries, or terms as circumstances evolve.

Understanding the Role of a Trustee

The trustee is responsible for managing the trust’s assets, ensuring that they are handled by the grantor’s wishes and for the benefit of the beneficiaries. Duties may include:

Managing investments and property held in the trust.
Filing taxes on behalf of the trust.
Communicating with beneficiaries about distributions and other trust-related matters.
Adhering to the trust’s terms with the utmost integrity and professionalism.

Selecting the right trustee is critical. They must act in a fiduciary capacity, meaning they are legally bound to prioritize the interests of the beneficiaries over their own.

Common Reasons for Changing a Trustee

Circumstances that may warrant changing the trustee include:

Incapacity or Death: If a trustee becomes incapacitated or passes away, they must be replaced immediately to ensure smooth trust management.
Personal Request: A trustee may request removal due to lack of time, energy, or desire to continue their responsibilities.
Breach of Fiduciary Duty: If a trustee mismanages funds, uses trust assets for personal gain, or neglects their duties, they can be removed for violating their fiduciary obligations.
Relationship Changes: Personal or professional conflicts may make it necessary to appoint a new trustee better aligned with the grantor’s goals and beneficiaries’ needs.

Steps to Change the Trustee of a Revocable Living Trust

1. Review the Trust Agreement

The trust document should outline removing and appointing a new trustee. This language often specifies who can make changes, such as the grantor, a co-trustee, or the beneficiaries.

2. Amend the Trust

If you are the grantor and retain the right to amend the trust, you can modify the trustee designation directly. This involves drafting a trust amendment, naming the new trustee and outlining any terms related to the transition.

3. Notify the Current Trustee

Once the decision is made, notify the current trustee in writing. This ensures transparency and provides an official record of the change.

4. Consult an Estate Planning Attorney

An estate planning attorney can ensure that the amendment is legally sound and complies with state laws. They can also help navigate situations where court intervention is required.

When Court Intervention Is Necessary

In some cases, trustee removal requires filing a petition in probate court, particularly if the trustee refuses to step down or misconduct allegations arise.

The process typically involves:

Gathering Evidence: Collecting documentation, such as financial records or communication, to substantiate claims of mismanagement or negligence.
Filing a Petition: Submitting a formal request to the court outlining the reasons for the trustee’s removal.
Attending a Hearing: Presenting evidence and arguments to the court will decide whether to remove the trustee and appoint a replacement.

Court proceedings can be time-consuming and costly. An experienced estate planning attorney can guide you through this process and advocate for your interests.

Preventing Trustee Issues

While trustee changes can be necessary, they are often avoidable with careful planning:

Choose the Right Trustee: Select someone trustworthy, organized and financially responsible. Consider naming a corporate trustee or professional fiduciary, if no suitable individual is available.
Include Clear Terms: Clearly define the trustee’s duties and the process for removal within the trust document.
Communicate Expectations: Discuss the role with your trustee beforehand to ensure that they understand and accept their responsibilities.

The Role of an Estate Planning Attorney

There are important steps involved in changing a trustee. Changing a trustee is a significant decision that can have long-term implications for your estate plan. An experienced estate planning attorney can help you navigate the legal and procedural complexities, ensuring that your trust functions smoothly and aligns with your goals. If you would like to learn more about the role of the trustee, please visit our previous posts.

Reference: Smart Asset (Aug. 3, 2023) “How to Change the Trustee on a Revocable Trust”

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Successor Trustee is an Important Element of a Revocable Trust

August 12, 2024

Creating a revocable trust can be a smart way to manage how your assets are distributed after you pass away. One important element of a revocable trust is the successor trustee. SmartAsset makes the case that you should name one if you have any revocable trusts. This can help carry out your wishes when you’re indisposed or deceased.

When you set up a revocable trust, you serve as both the creator (settlor) and the trustee. This means you can move assets in and out of the trust, change its terms and even dissolve it. The trust is “revocable” because you can change it while alive.

A successor trustee is the person you name to manage your trust when you can no longer do so, typically upon your death. The successor trustee enforces the terms of the trust and distributes assets according to your wishes.

A successor trustee can manage your trust without probate court intervention. Once you, as the primary trustee, pass away, the successor trustee can immediately manage your trust and avoid any delay in execution.

The duties of a successor trustee begin once you can no longer serve as the trustee, typically upon your death. Their responsibilities include:

Managing Trust Assets: The successor trustee must responsibly manage and invest the trust assets.
Appraising and Distributing Assets: They must appraise the value of the trust’s assets, pay any taxes or debts and distribute the remaining assets to the beneficiaries according to the trust’s terms.
Handling Administrative Tasks: If the trust includes life insurance policies, the successor trustee must collect these. They also set aside funds for any expenses related to the trust’s administration.

An executor is responsible for managing your estate through the probate process after you die. This includes locating and collecting assets, paying debts and taxes and distributing the remaining assets as directed by your will. This role ends once the probate process is complete.

A successor trustee manages your trust according to its terms and does not need court approval for their actions. Their responsibilities can last much longer, especially if the trust specifies conditions for distributing assets over time.

In the case of irrevocable trusts, you cannot serve as your own trustee. You instead appoint someone else to manage the trust. If this original trustee can no longer serve, a successor trustee takes over. The duties and powers of a successor trustee in an irrevocable trust are the same as those of the original trustee.

Selecting the right person to serve as your successor trustee is vital. This person should be trustworthy, competent and preferably younger to ensure that they can manage the trust for many years, if needed. This role can be demanding, so choosing someone to handle the responsibilities is important.

Appointing a successor trustee is an important element of a revocable trust. It prevents any delay in your trust going into effect. If you’re considering setting up a revocable trust or need help to appoint a successor trustee, an experienced estate planning attorney can help. If you would like to learn more about the role of the trustee, please visit our previous posts.

Reference: SmartAsset (May 30, 2023) “Successor Trustee: Duties, Powers and More”

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RLT can Help with Planning for Incapacity

November 14, 2023

Planning for potential disability and mental incapacity is part of a comprehensive estate plan. Women, in particular, are at a higher risk of becoming disabled, with 44% of women 65 and older having a disability. Most people understand the value of an estate plan. Nevertheless, few know how to that a Revocable Living Trust, or RLT, can help with planning for incapacity, as explained in the article “Incapacity Planning: The Hidden Power Of A Revocable Trust” from Financial Advisor.

Revocable Living Trusts are highly effective tools to protect assets against failing capacity. Although everyone should have both, they can be more powerful and efficient than a financial Power of Attorney. An RLT offers the freedom and flexibility to manage your assets while you can and provides a safety net if you lose capacity by naming a co-trustee who can immediately and easily step in and manage the assets.

Cognitive decline manifests in various ways. Incapacity is not always readily determined, so the trust must include a strong provision detailing when the co-trustee is empowered to take over. It’s common to require a medical professional to determine incapacity. However, what happens if a person suffering cognitive decline resists seeing a doctor, especially if they feel their autonomy is at risk?

Do you need an RLT if you already have a financial Power of Attorney? Yes, for several reasons.

You can express your intentions regarding the management and use of trust assets through the trust. A POA typically authorizes the agent to act on your behalf without specific direction or guidance. A POA authorizes someone to act on your behalf with financial transactions, such as selling a home, representing you and signing documents. The co-trustee is the only one with access to assets owned by the trust, while the POA can manage assets outside of the trust. Having both the POA and RLT is the best option.

Trustees are often viewed as more credible than a POA because RLTs are created with attorney involvement. POAs are often involved in lawsuits for fraud and elder abuse.

Suppose there is an instance of fraud or identity theft. In that case, RLTs provide another layer of protection, since the trust has its own taxpayer ID independent of your taxpayer ID and Social Security number.

Your co-trustee can be the same person as your POA.

Adding a trusted family member as a joint owner to accounts and property provides some protection without the expense of creating a trust. However, it does not create a fiduciary obligation, enforceable by law, for the joint owner to act in the original owner’s best interest. Only POAs or trustees are bound by this requirement.

Once a POA is in place, it is wise to share it with all institutions holding accounts. Most of them require a review and approval process before accepting a POA. Don’t wait until it’s needed, when it will be too late because of incapacity, to have a new one created.

If you know that planning for incapacity is in your family’s future, consider how an RLT can help. Talk with your estate planning attorney about planning to create an RLT and POA to ensure that your assets will be protected in case of incapacity. If you would like to learn more about incapacity planning, please visit our previous posts.

Reference: Financial Advisor (Oct. 18, 2023) “Incapacity Planning: The Hidden Power Of A Revocable Trust”

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Which Trust, Revocable or Irrevocable?

September 27, 2023

Kiplinger’s recent article entitled, “What to Consider When Deciding Between a Revocable and Irrevocable Trust,” explains that, as a legal entity, a trust can own assets such as real estate, brokerage accounts, life insurance, cars, bank accounts and personal belongings, like jewelry. Yet, which trust should you consider, revocable or irrevocable?

You transfer over the title and ownership of these assets to the trust. The instructions state what should happen to that property after you die, including who should receive it and when.

A revocable trust keeps your options open. As the grantor, you can change or revoke the trust anytime. This includes naming a different trustee or beneficiary. This gives you leverage over the inheritance. If your beneficiary doesn’t listen to you, you can still change the terms of the trust. You can also even take your assets back from a revocable trust. There are typically no tax consequences for doing so because only after-tax assets can be placed in a trust while you’re alive.

If a revocable trust seems much like owning the assets yourself, that’s because there’s really little difference in the eyes of the law. Assets in your revocable trust still count as part of your estate and aren’t sheltered from either estate taxes or creditors. However, it’s a smoother financial transition if something happens to you. If you die or can no longer manage your financial affairs, your successor trustee takes over and manages the trust assets according to your directions in the trust documents.

The second reason to have a revocable trust is that the trust assets bypass probate after you die. During probate, a state court validates your will and distributes your assets according to your written instructions. If you don’t have a will, your property is distributed according to state probate law. If you own homes in multiple states, your heirs must go through probate in each one. However, if that real estate is in a revocable trust, your heirs could address everything in your state of residence and receive their inheritance more quickly.

The contents of your revocable trust also remain private and out of bounds, whereas estates that go through probate are a matter of public record that anyone can access.

An irrevocable trust is harder to modify, and even revocable trusts eventually become irrevocable when the grantor can no longer manage their own financial affairs or dies. To change an irrevocable trust while you’re alive, the bar is high but not impossible to overcome. However, assets in an irrevocable trust generally don’t get a step up in basis. Instead, the grantor’s taxable gains are passed on to heirs when the assets are sold. Revocable trusts, like assets held outside a trust, do get a step up in basis so that any gains are based on the asset’s value when the grantor dies.

It is a wise idea to work with an estate planning attorney who will help you consider which trust you should use, a revocable or irrevocable kind. If you would to read more about trusts, please visit our previous posts.

Reference: Kiplinger (July 14, 2021) “What to Consider When Deciding Between a Revocable and Irrevocable Trust”

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The Estate of The Union Season 4|Episode 1

The Estate of The Union Season 2|Episode 9 is out now!

August 29, 2023

The Estate of The Union Season 2|Episode 9 is out now!

All good musicians eventually have a Greatest Hits album. We’ve got one too!

We send our blog out most business days and we track which blog entries are the most popular. The posts we did on the new tax rules regarding “Grantor Trusts” and our article on “How to Leave Assets to Minors” were the BIG Winners. Given how popular each of the posts were, we have dedicated an entire episode of our podcast to them.

In this edition of The Estate of the Union, Brad Wiewel expands on both of these topics in a way that makes them a bit easier to understand and perhaps implement.

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 2|Episode 9 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 below 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.

Category: Revocable Living Trust

Estate Planning Can Bridge the Gap Between Generational Wealth

What Kind of Trust Helps a Family with Young Children?

Leaving Inheritance to a Child with Addiction requires thoughtful Planning

Self-Employed must take a Proactive Approach to Estate Planning

A Trust Only Works if it is Properly Funded

There are Important Steps involved in Changing a Trustee

Successor Trustee is an Important Element of a Revocable Trust

Reference: SmartAsset (May 30, 2023) “Successor Trustee: Duties, Powers and More”

RLT can Help with Planning for Incapacity

Which Trust, Revocable or Irrevocable?

The Estate of The Union Season 2|Episode 9 is out now!

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