Question 1

What is estate planning?

Accepted Answer

Estate planning is the process of making legal arrangements for the management and distribution of your assets and property after your passing. It involves creating a plan to ensure your wishes are carried out, minimize taxes, and protect your loved ones.

Question 2

I don't have a very large estate, so it seems to me that having a trust is overkill and would be more expensive. Why can't I just use a simple will?

Accepted Answer

You can. However, there are many benefits to having trust. Generally speaking, your estate will have incurred more expenses by using a will and going through the probate process rather than using a revocable living trust. There are fees and costs associated with the probate process, including filing fees, an inventory fee, and, often, legal fees. On the non-monetary side, going through probate will mean that your heirs and beneficiaries will be forced to adhere to the timetable set by the probate court. A trust also allows you to disburse assets in ways that a will cannot and generally provides you with a greater level of control over your estate.

Question 3

I hold everything jointly with my spouse; therefore, I thought I would simply put my children's names on our property so we can avoid probate that way. Is there any problem with this?

Accepted Answer

Jointly held property between spouses is very common and does not generally lead to any estate planning issues. However, it is important to understand that the use of joint tenancy between a husband and wife will avoid the time and cost of a probate at the first death, but probate at the second death will most likely still be required. Unlike jointly owning a property with a spouse, jointly owning a property with a child or another individual can potentially lead to some very serious problems. This type of "estate planning" often results in family feuds, severe tax consequences, and your ultimate intention not being met. By adding children as joint owners to the property, you may inadvertently lose some, or all, control over the joint property; you may inadvertently include the dower rights of in-laws; and you may be inadvertently subjecting the jointly held property to the creditors of your children.

Question 4

Why does a trust avoid probate?

Accepted Answer

The key to avoiding probate with a revocable living trust is the retitling of assets. Assets titled in the name of the trust avoid probate. If, at the time of the person's death, the asset is owned by the trust and is not in the decedent's individual name, that asset is generally not subject to administration by the probate court. This is why it is imperative that after a trust has been established, all assets be diligently transferred from the individual's name to the trust. Without this "trust funding," the individual's assets will still be subject to probate court administration even though a trust was created and executed.

Question 5

Would using a trust during my lifetime restrict me in what I can do with my own property?

Accepted Answer

Not at all. A revocable living trust is a document created while you are living but does not prevent you from continuing to use your property as you wish during your lifetime. It can also be revoked or amended at any time.

Question 6

I do not believe that our family needs a trust since we have a small child, and our estate is well under the applicable exclusion amount for estate taxes. Is this correct?

Accepted Answer

Even though your estate may be considered modest, as parents, you should understand what would occur if you both died prematurely. Would you want your child to be able to receive his or her entire inheritance at age 18? If you leave assets to your minor child and both parents die before he or she reaches age 18, the court will appoint a conservator to administer the funds. However, when the child turns 18, he or she will receive a lump-sum inheritance. Further, it is important to understand that you do not need to be extremely wealthy to enjoy the benefits of a revocable living trust. Trusts are, first and foremost, probate avoidance tools.

Question 7

If I establish trust, don't I still need to appoint an executor of my estate?

Accepted Answer

If you establish a revocable living trust, you will appoint a successor trustee to administer your estate after your death. A successor trustee essentially performs the same function as an executor of an estate. A significant difference is that the successor trustee will typically not have to undergo any court proceedings to accomplish your goals.

Question 8

If I am going to establish trust, why do I have to have a will?

Accepted Answer

There are still very good reasons to have what is called a pour-over will. If you have a minor child, the Last Will and Testament is the document used to nominate a guardian. There will need to be a court proceeding in order to appoint a guardian, and it is appropriate that they will be used to make that nomination. Further, the pour-over will instruct that, after any taxes and expenses are paid, the remaining assets "pour over" to the trust and be handled according to your trust instructions. It is a safety net to ensure that any assets not properly funded in the name of the trust — and therefore subject to probate — are deposited into your trust and administered according to your written wishes.

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