The subjects of wills and probate are very detailed. There could be pages and pages about each of them, and the majority of it would be complicated legal jargon that almost no one understands. In this article, we’ll simplify answers to the most commonly-asked questions about wills and probate.
What is a Will?
A will (also known as a last will and testament) is a legal document. A person writes a will when they want to express their last wishes as to how they want their property to be distributed after they die. The will also will name someone to manage their estate until it is wound up (i.e. until the final distribution is made).
The person who writes the will is called a testator. The person who manages the estate after the testator dies is called an executor. The people the testator leaves assets to in the will are known as beneficiaries.
What is Probate?
Just because someone has written a last will and testament does not mean that the document will automatically go into effect without a court stepping in. Probate is not a legal document—it is a judicial process. During the probate process, the last will and testament is proven valid. There must be no undue influence (people manipulating the testator), all the assets must be present and accounted for, and the will must be properly executed. If the will checks out, it will be accepted by the court as a valid public document.
Is there a Minimum Asset Requirement?
There is no minimum asset requirement for writing a will. Whether you have $1 or $1 million, you can still write a will. Many people (especially young people) think that because they do not have many assets or are a renter, they do not need a will. However, even people just starting out have at least some assets to their name and should write a will.
What Happens if I Don’t Have a Will?
If you don’t have a will, things get messy. People who die without a will are said to die intestate. In that case, the laws of your state govern how your assets are distributed. Generally, creditors are paid off first from your assets. Assets can include bank accounts, real estate, securities, stocks, houses, and possessions you own. After creditors are paid and your debts cleared, the court will organize the distribution of your assets itself.
As you can see, this is not an individualized process. A court’s goal is to clear your debts and wind up your estate quickly and efficiently. This means that your family will likely not get the assets you would want them to receive after you died. It also means your family will be tangled up in court for a long time.
Living Will vs. Last Will
A living will, also known as a healthcare directive, applies when you are still alive. It spells out your healthcare decisions in the event that you are too sick to tell a doctor what you want. For example, if you do not want to be resuscitated if your heart stops, this is something you would specify in a living will.
Should I Write My Will Myself?
Tempting though it may be to go on LegalZoom and write your will yourself, that is not a good idea. Though wills are overly complex, there are finicky details that are easy to miss if you do not have legal training. Missing one tiny detail can lead to a costly mistake that burdens your family after you’re gone. It is best to seek out an attorney for help.
Hopefully, this has helped you gain at least a basic knowledge of the will process and probate process. If you have more questions or want to write a will, you should contact an estate planning attorney.
When it comes to retirement, you want to feel secure. You’ve put in a good few decades of work, and you want to be able to ensure that you’re able to live out the rest of your life comfortable. Estate planning can help you do so. There are several things to consider when you are working retirement into your estate plan. This article will cover the basics when it comes to planning for retirement, but you’ll want to contact an estate planning attorney for more detailed information on your particular situation.
The Relation Between the Two
Technically, a retirement plan should include a good estate plan (as opposed to the other way around). The period during which you are retired is likely to be the one where your estate plan comes into effect. When it comes to retirement, you can plan out your finances through a few tools. The IRA, Roth IRA, and 401(K) are three of the most common—and the most often-conflated.
What is an IRA?
“IRA” stands for “Individual Retirement Account.” The IRA lets you save money for your retirement in a way that is tax advantaged. The IRS wants to encourage responsible money-saving for retirement, and tax-advantaged plans are one way of incentivizing that. A traditional IRA is pretty straightforward. You make contributions to your IRA with money that the IRS will allow you to deduct on your tax return. The earnings on the money in your IRA are then tax-deferred until you withdraw them in retirement. Then, once withdrawn, they are taxed.
What is a Roth IRA?
The Roth IRA differs from a traditional IRA in the taxation. With a traditional IRA, the tax payments are deferred until you withdraw your funds. However, the Roth IRA switches that. You are taxed on the contributions you make into your Roth IRA. Then, when you make withdrawals, those withdrawals are not taxed.
You might want to choose a Roth IRA if you think your taxes will be higher when you are retired than they are now, while you are working (and not spending your IRA). However, there are income limits. You might be barred from opening a Roth IRA if you make too much income. You can only put in $5,500 a year if you’re under 50. People over 50 are capped at $6,500 per year. There is no minimum requirement for either age bracket.
What is a 401(k)?
The 401(k) is another retirement plan that you’re likely to hear a lot of. The 401(k) is qualified, and it allows employees to save and invest their earnings into a retirement plan. Employers sponsor this 401(k). Only employers can sponsor their employees, which makes the plan different from an IRA/Roth IRA, where people sponsor themselves.
The 401(k) is given that name because it is the section of the tax code that sets the plan up. The payments are tax-deferred, and employees contribute untaxed portions of their wages into the plan. When they make a withdrawal, the withdrawals are subject to taxation.
Listing Financial Information
When you’re considering these retirement plans, it’s important to think of the big picture with estate planning. You should make a comprehensive, detailed list of all of your financial tools and beneficiaries when you are creating your estate plan. This not only makes it easier for you to be organized, it helps your family get a clear picture of your finances after you pass on.
Again, these are just the basic definitions of tools for retirement. Consulting with an estate planning attorney will allow you to get a better handle on your estate plan and how the two relate.
Valentine’s Day is the season of cards, flowers, roses, and chocolate. This romantic holiday has been around for centuries, ever since 496 A.D. Back then, the Romans hosted the holiday, which they called Lupercalia. Lupercalia was celebrated as the beginning of springtime, but, over the years, it has been changed both in name and in purpose.
Valentine’s Day is all about showing love. While cards and chocolate are nice gifts, they are somewhat fleeting. If you want a gift that will last, consider how you can use estate planning to achieve that goal.
Your Spouse (Or Spouse-to-Be)
If you are married, about to be married, or are in a civil union, estate planning is important to ensure that your spouse has some protection in the event that you die or fall ill. Even if you and your partner are not married, failure to plan will cause you to have issues with inheritance and end-of-life medical care.
A typical estate planning tool that can provide for a spouse/long-term partner after your death is a revocable trust. A revocable trust arrangement can take many forms, but the most common is the continual income trust. This legal document is devised by the grantee (you) for the grantor’s (your spouse’s) remaining life. Your estate will pay out a distribution to your spouse after you die for the rest of their life. Other grantors can include your children, grandchildren, or other relatives.
An example of this is Frances Bean Cobain, the daughter of Nirvana frontman Kurt Cobain. After her father’s tragic death, Frances Bean Cobain revealed that Cobain left a huge chunk of his estate. She gets over $100,000 per month from his estate to this day.
Another important aspect of this type of planning for spouses/partners is end-of-life medical care. If you make your spouse your power of attorney, that will allow him or her to have a say in your financial and medical decisions when you are unable to make them for yourself. Assumedly, you trust your spouse and find them responsible. Giving the person closest to you control over such important, personal decisions is an important aspect of an estate plan. This works both ways.
If something were to happen to you and your spouse, who would you want to take care of your children? Part of your estate plan should involve your kids. This includes not only estate distributions, such as in the case of Kurt Cobain’s daughter, but also guardianship. Guardianship refers to the person who will take care of your kids until they reach the age of majority (18).
Discuss these plans with your proposed guardian to make sure they are on board and consider themselves fit to assume the role of guardian, should anything happen. Most common choices include grandparents and aunts and uncles.
This one applies to those of us who have aging parents. If your parents or grandparents have not put together an estate plan, it is important that they do so. For example, if you know your elderly relatives have very specific medical wishes (such as a DNR), they should include those in an estate plan. That way, the hospital and end-of-life caregivers will honor these wishes even when your elderly relatives cannot communicate them.
Other Loved Ones
Estate plans can include anyone. If you have assets that you want to leave to specific relatives, that is something that estate planning can handle. If you don’t make these arrangements before death, your chosen relatives might not get what you want them to. Instead, your assets will be divvied up and sold off by probate court.
As you can see, there is more than one way to show your loved ones how much you care about them. Estate planning provides a useful way to give a gift that will last long after you’re gone.
I think we can all agree that one of the highlights of paying taxes (since we all have to pay them) is seeing how much we can avoid having to pay. In this article, we’ll talk about how to make the most of exemptions for which you might qualify. Don’t forget—tax day is April 15th, and you should start working on your taxes now to avoid possible penalties for lateness or inaccuracy.
What is a Tax Exemption?
Getting the vocabulary correct is essential to accurate taxes. A tax exemption is the removal of a liability to pay. A tax exemption reduces or removes a compulsory payment that you (or your estate) would have to pay. Tax-exempt status, as it’s known, can provide complete or partial relief from taxes. An example of an entity with tax-exempt status is a church.
What is a Tax Deduction?
A tax deduction is a little different. This income is the result of expenses you incur, usually for a business. A tax deduction reduces your income, and they are a form of tax incentive. Exemptions and credits are the other two tax incentives available.
What is a Tax Credit?
Thirdly, a tax credit is a tax incentive that allows taxpayers to reduce the payment they owe to the IRS. They subtract the amount of the credit accrued from the total payment owed to the IRS. This credit can be granted as a form of state support or as a recognition of taxes that you have already paid.
Each of these incentives is unique in their own way, but the bottom line is the same. These incentives allow you to pay less money to the government, if you know how to take advantage of them.
Standard v. Itemized Deductions
With standard and itemized deductions, you pick one or the other. A standard deduction is a flat dollar amount that you can subtract from your income before the income tax is levied. The standard deduction changes based on your filing status (Married, Single, etc.). For example, in 2019, people who were filing as Head of Household over the age of 65 in 2019 could take a standard deduction of $1,650.
Itemized deductions, by contrast, require their own form. These are eligible expenses that you can claim on your tax form. These expenses are deducted from your final, taxable income. They decrease your taxable income, and you can claim itemized deductions if you are not taking the standard deduction. Making the decision as to which to take—itemized or standard—is easy. Pick the one that saves you the most money. If your standard deduction would be (for example) $2,000 and your itemized deduction $1,850, take the standard deduction.
Most Overlooked Itemized Deductions
Should you choose itemized deductions, make sure that you aren’t overlooking some common ones. The most commonly-itemized deductions include charitable payments, medical expenses, dental expenses, home mortgage points, work-related education expenses, state/local income tax, sales/property tax, personal casualty losses, business use of your home, and more. All of these have their own caps and requirements to take them.
Note that several deductions will be unavailable through 2025. The IRS took them off the list in 2018, and they will remain that way for five more years. Items like home equity lines of credit, loans, alimony, moving expenses, certain types of casualty losses, and other miscellaneous deductions are not available.
Who are your picks for the Oscars? Perhaps you have your bet on the dramatic, eerie Joker or the gritty war movie 1917, directed by Sam Mendes. Regardless of whoever wins, it’s safe to say that this preceding year has been a great one for filmmakers and moviegoers alike. However, while we all love to see drama onscreen, having drama in your life off-screen is far less entertaining.
But, alas, people go through events that shake up their lives, and, sometimes, drama cannot be avoided. In this article, we will talk about how your estate plan should adopt to some of the biggest dramatic changes that you might (but hopefully will not) go through at some point.
Once a divorce is finalized, a spouse will be stricken from your will and estate plan automatically in most states. However, people don’t always get divorced when they decide they want to. If you and your spouse are estranged but still married, he or she could still take under your estate if you die. Another example is if you and your spouse are still in one another’s medical plans as POAs, that might still be valid.
The wisdom of having an estranged family member as your power of attorney is debatable. You want your POA to have your best interests at heart—something that is not always the case even in the most amicable of divorces. Bottom line: change your estate plan to reflect changes between you and your spouse, even before the divorce papers are finalized.
Other Peoples’ Divorces
Divorce is hard outside of the nuclear family. You might have loved your child’s spouse but, now that they are divorcing, it would be in the family’s best interest to exclude your child’s spouse from your will. Make sure that you keep drama to a minimum by including people who are actually part of your family in your will. If this is a change you feel you need to make in your estate plan, do it sooner, rather than later.
A Death in The Family
A death in the family works the same way. While the deceased family member will not take your asset if they die, the person who does get the asset might not be your second choice. If you intended to leave money or property to a family member who dies, make sure your estate plan reflects that change. Pick where you want the money or property to go in the absence of your original choice. This way, you can keep your estate plan concurrent with your wishes.
Estrangement is, sadly, common in families. Every family has its ups and downs, and statistics show that 10% of American mothers are estranged from at least one of their adult children. That same study found that 40% of people have been estranged from a family member at one time or another.
Whether that estrangement is permanent or temporary is something that only you can answer. However, make sure that your estate plan reflects estrangement. Include or exclude people, depending on what works best for your family dynamics. You can always make changes later on—they key is keeping the plan current.
Another interesting statistic is one regarding illness in families. Six out of ten Americans say that they have a family member who is chronically ill. Sickness is something with which we are all, unfortunately, familiar. Therefore, considerations for end-of-life care (such as a medical directive or power of attorney) are an important part of estate planning. You want medical professionals to act in a way that reflects your wishes, and you also want your power of attorney to do the same.
Needless to say, this article is somewhat of a bummer. While, hopefully, you never have to experience these events, it’s important to be prepared just in case. Keeping the drama to a minimum will allow you to deal with them and move forward. By being proactive in your estate plan, you can prevent a bad situation from getting even worse.
Well, it’s here again. Tax season is inevitable, as the old saying goes, and this article will give a brief primer on the top ten things you should know about tax season, including why filing is important, how life changes can affect your taxes, and, of course, penalties you can incur if you run afoul of the IRS.
Top Ten Tax Things to Know
Coming in at number ten (though it could fall anywhere on this list) is e-filing. E-filing is a good way to save money, as opposed to doing your taxes on paper and mailing them in via snail mail. You can use tax software (like that at H&R Block, for example) to help you save time, trees, and, most importantly, money.
9. Always Look for Exemptions
Being married and having kids are two major examples of exemptions. Chances are, even if you don’t fit into either category, you might fall into an exemption that will save you money. For example, if you fall into a lower tax bracket, you might be eligible to save on your taxes. Taking your time to find out whether you can save is a wise idea.
8. Three Words: Adjusted Gross Income
That’s what really matters. Your AGI (Adjusted Gross Income) is the number you get after the government subtracts expenses, like IRA contributions or education tuition. AGI determines credits and deductions we can take. After deducting those, we get our taxable income. The word “AGI” is all over your tax forms because it is really important at the end.
7. Credits = Money Saved
Exemptions and credits are not the same thing, even though they’re both good. An exemption reduces your taxable income. Credits actually reduce how much taxes you owe. Credits are simple to understand: a credit is money you don’t have to hand over to the government.
6. Standard Deduction
Standard and itemized deductions are always somewhat of a source of confusion for people. Here are brief definitions for both. First, a standard deduction is worth somewhere between $5,800 and $11,600. If you have simple taxes, you don’t have to go through a huge process to get deductions. A standard deduction is just a reduction off your taxable income. It’s a flat number. You take it, and you pay less.
5. Itemized Deduction
…Which then brings us to itemized deductions. For itemized deductions, you will need to list out each deduction you can take. If your itemized deductions together equal more than your standard deduction, this is the deduction you take. Examples of itemized deductions include charitable donations, mortgage interest payments, and medical expenses.
4. Why Filing Is Important (AKA Don’t Procrastinate)
Filing is important because there’s no way around it if you make over a certain amount. Because figuring out what exemptions you qualify for and what deductions to take might take some time and digging, you should get started ASAP, not on April 15th or the day before.
3. Ok, So You Procrastinated
However, someone is always going to procrastinate for whatever reason, and the IRS knows that. You can file for an extension if you need more time. This is not a good idea if you’re putting it off because you don’t have the cash to pay it. If finances are the issue, you can use a credit card (if your bill is low) or go on a payment plan.
If you don’t pay your taxes, bad stuff can happen. The IRS will send you some scary letters and charge you fees for not paying. In very extreme cases (the big-name, Al Capone tax evasion cases), you can even do prison time. If you’re having trouble paying, you can talk to the IRS about a payment plan. They will take it easy on you if you do that, but not if you simply don’t pay.
1. Don’t Mess Up Your Filing Status
If you get one thing right out of this entire process, it needs to be your filing status. This is the question on the tax form that asks you if you’re single, married, etc. This status will affect how much you pay, and getting it wrong will be a huge hassle.
Do you have big plans in 2020? If you’re planning to get engaged or married in 2020, first off: congrats! Secondly, you want to make sure that your estate plans are in order before you move forward. Ensuring that your estate plan reflects the new addition of a spouse can save you quite a lot of headaches later on. Don’t worry—making an appointment with an estate planner won’t take too long, and it won’t be (too much of) a buzzkill on the upcoming nuptials. Here are some things to think about before you tie the knot.
Ah, the dreaded prenuptial agreement, AKA “a prenup.” A prenup provides asset protection, not just in the case of divorce but also in the case of death (which might be a more appealing way to sway your significant other into signing one). A prenuptial agreement addresses what happens with alimony and assets if either of these things occur. It also can address how you want your kids from another marriage to be treated in terms of asset protection. Additionally, a prenup can handle how debts are divided between spouses if there is a divorce or death. A prenuptial agreement is, of course, signed before you get married, unlike a postnuptial agreement.
A postnuptial agreement, as the name suggests, is signed after you get married, as opposed to being signed in contemplation of the marriage. A postnuptial agreement has effectively the same protections as a prenup; the timing is just different. In almost all states, this agreement must be in writing. In some states, it must be notarized. A postnup outlines the obligations and responsibilities of each partner in the event of death or divorce.
This makes the list because, if you’re in a time crunch and will be married before you can set up a time to make a prenup, a postnuptial agreement is a viable option so that you’re not left in the lurch.
Power of Attorney
A common misconception is that a spouse automatically becomes your power of attorney once you two are married. This is not true; you have to designate your spouse as your POA. A power of attorney is someone who has the ability to make decisions on your behalf in the event that you are unable to do so yourself. Obviously, this must be someone you can trust to behave rationally and uphold what they know to be your wishes for healthcare and finances. Hopefully, you feel that way about your spouses. Another common power of attorney choice is your children.
While a will isn’t the perfect way to protect your assets, it is better than nothing. If you are not married and you die intestate (without a will), your spouse-to-be will not inherit anything from you. They will receive nothing from your estate. Setting up a will or, even better, a trust, can ensure that you don’t leave your spouse hanging if you die before you are married.
Trusts are flexible, useful estate planning tools. If they are done correctly, you can avoid probate and its expenses, and you can keep your estate’s affairs private. A trust is a legal document that creates a fiduciary relationship between you, your trustee, and, later, your beneficiary. It is a way to transfer assets without going through probate. You can use a trust to transfer assets to your spouse, or you can even create one with specific provisions that ensure your kids will get a share of your estate. Trusts are very wide-ranging and can do a lot for asset protection.
Okay, so maybe this isn’t the most fun thing to do before you get married. But, these types of documents are essential to financial health. Take a break from cakes, tuxes, and dresses and get your estate plan with your new beau squared away.
According to divorce lawyers, January is “Divorce Month.” There are plenty of reasons for why January ends up being the busiest month in which to file divorce. Usually, families want to stick it out through the holidays before making a big chance. Who knows, maybe someone’s New Year’s Resolution is to get divorced.
Whatever the reason, there are some things you need to know when you’re in the process of getting divorced. And no, we won’t put you through the, “Are you sure you want to get divorced?” question. Here are five things to know about getting a divorce.
1. Get Your Financial Documents Together
Divorce relies heavily on documentation for the purposes of things such as alimony, marital property, and child support. Financial records, phone records in some cases, mortgages, and receipts for sale are all things you might have to show to a court to prove financial status or lack thereof. Start digging around for that stuff now, whether you have copies online or in boxes somewhere. It’s always wise to make copies of physical documents, just in case.
2. Update Your Estate Plan
You probably don’t want your spouse as your power of attorney, especially if you are dumping them, or vice versa. Update your estate plan to make sure that they are stricken from the plan where you want them to be. While in some states, divorce automatically invalidates some provisions, the pre-divorce limbo period doesn’t invalidate anything.
3. Ask an Attorney about Joint Bank Accounts/Credit Cards
Joint bank accounts and joint credit cards are tricky. They might have seemed like a good idea at the time, but now they’re a mess because the finances are all tangled up. Talk to an attorney about getting the finances separated and handling the joint bank accounts. You might need to call in an accountant, but the first step is talking to an attorney.
4. Custody Issues
A lot goes into custody. The prevailing standard in most states is the best interests of the child or children, and that “best interests test” depends on a whole penumbra of factors. You will likely need to sit down and work out your work schedule, financial stability, and housing situation when you’re discussing custody. The court will look to the best interests test when determining custody. It is best to keep custody battles between you and your spouse and avoid dragging kids into back-and-forth between the two of you.
5. Know When You Are/Aren’t Single
This one’s about adultery. If you’re still legally married, it is unwise to move in with or start a relationship with someone else, as your spouse could claim that as adultery. Even if you’re living separately, some jurisdictions will look on that as adultery. Adultery doesn’t affect the division of marital property, but it can affect other considerations of the process. Save relationships and dating for when this process is over. You’ll likely be far less stressed out and better able to focus on a new relationship when the divorce is settled, at any rate.
According to the CDC, the US divorce rate is 3.2 per 1,000 people. While this is a decrease, the decrease is caused by people not getting married, as opposed to just being better at getting married. All this to say: divorce is common. Don’t be afraid to ask for help or advice, as you are not alone through this process, though it might seem like that at times. Help is out there, and the first step is to talk to an attorney.
So, here’s the thing about New Year’s resolutions: they don’t always work out. Whether it’s a new diet, exercise plan, or attempt to become more organized, it’s not always easy to get a huge list of resolutions straightened out. Let us present to you a new idea: just one resolution. You can make the resolution to get your finances in order. This broad scope is not only going to be a huge accomplishment; it also will have a lot of long-term benefits.
The Problem with the Big List
A New Year’s resolution list can operate somewhat like a “To-Do” list, though it’s couched in more goal-achieving language. If you’ve always disliked to-do lists, fear not: Harvard Business Review is on your side. Harvard Business Review did a study on the effectiveness of to-do lists and found that they “don’t work.” Your brain can really only handle seven options before it mentally checks out. When it does check out, you end up ticking off the easy things on the list for a quick dopamine rush, avoiding the bigger projects.
An alternative to this is a different way to set goals: scheduling their completion at a certain time. So, if you choose to get your finances in order, you can schedule appointments with an estate planning attorney or sign up for money-management classes. This way, you avoid the to-do list rut and actually set yourself on a path to success.
What “Finances” to Get in Order
“Get your finances in order” can mean a lot of things. Whether you’re trying to cut spending or pay off bills, financial health involves a lot of different, occasionally unpleasant things. We’d all rather buy a fun gift for ourselves than pay off an overdue bill. However, financial healthiness is a goal that will involve some hard work.
One part of achieving financial health is asset protection, and this doesn’t have to be painful at all. Setting up an estate plan will allow you to decide where you want your assets to go after you die. It also allows you to set up end-of-life and sick care for yourself in the event that you become unwell. Another type of asset protection can involve setting up a trust for loved ones, thereby providing for their financial health too. That’s the beauty of this goal—it helps protect other people as well.
Figure Out What the Issue Is
When it comes to achieving financial health, we usually have to figure out first what the problem is. Luckily, most of us probably have some sense of where the financial health issue is. If you don’t, go look at your bank account. That will tell you what you’ve been spending money on, whether it’s Amazon purchases or other needless spending. This will help you recognize where you need improvement. You can always talk to a financial advisor about getting yourself in check. Remember, this goal is more of a long-term one.
Long- vs. Short-Term Thinking
Just like the common goals of losing weight or eating healthy, achieving financial wellness is one of those goals that isn’t going to have immediate, drastic results right away. Often, you can simply chip away at problems until they become manageable. But that is a good start, in and of itself. Estate planning, especially, is a financial tool that will pay off in the long-term.
Hopefully, we’ve convinced you to give our way a try. Instead of big, exhaustive New Year’s list, which can seem daunting at worst and a throwaway item at best, try just one New Year’s resolution that will have long-term impacts: improving your finances.
As a grandparent (or a loved one of a grandparent), you know how much you love your grandkids. You want to be able to provide for them, at least in part, whether that involves time, attention, or even money. If you want to protect your assets and help your grandchildren out later, you can do so through the establishment of a trust. In this article, we’ll talk about the benefits of establishing a trust for your grandkids. This is by no means an exhaustive look—it’s more of an overview—but it’ll get the basics down.
What is a Trust?
Essentially, a trust is a legal construct. It is a three-party relationship between you, your grandchildren, and a trustee. You transfer nominal title of the property to a trustee, who then transfers actual title of the property to your grandchildren at an agreed-upon time period. Sometimes, grandparents will choose certain milestones to release property or money to their grandchildren (eighteenth birthday, college graduation, etc.). Or, they’ll set aside money to be transferred when the grandchild is attempting to meet a specific goal, like buying a home or starting their own business.
How Do I Set One Up?
Trusts aren’t too difficult to set up. An attorney will need to work with you to set one up, and you also might have to involve your bank to discuss investment options or other financial planning considerations. What is for sure is that you’ll need an attorney. An attorney will help you decide how you want to structure your trust. For example, if you set up a gift trust, you will not be able to revoke it and reclaim your money. If that doesn’t sound appealing to you, there are other types of trusts you can create. However, the bottom line is that you will need a lawyer.
Types of Trusts
If you’re leaving money or assets to just a few grandchildren, you may consider setting up an individual trust for each grandchild. Grandparents usually put equal amounts of money into every grandchild’s trust. Again, this is dependent on what works best for your family size. A family pot type of trust is another option.
The family trust fund is another option. If you have a lot of people in your family (and thus a lot of beneficiaries), you might start a large fund and have your trustee distribute assets at certain times or upon certain occasions. This pot of money, so to speak, is a single trust for all your grandchildren and their descendants. Note that these trusts require the trustee to have a lot of discretion, so make sure you are okay with that.
What Do These Include?
Don’t worry—these trusts are not a free for all. You can set up your trust with instructions and rules that govern the disbursement of the money. For example, you might set up a milestone distribution program as discussed above, or you could set aside money to pay for college tuition. Involve your trustee in these discussions.
Protecting the Trust
Last, but certainly not least, is the idea of protecting your trust. Grandchildren don’t always behave according to plan. There might be substance abuse issues or similar problems that would caution a reasonable person to hold back on fund distribution. Again, this is where discretion to the trustee comes in handy. You can leave instructions with him or her to hold back on disbursing funds in the event of an issue with the proposed beneficiary.
An estate planning attorney will help you work out the nitty-gritty. You will need to talk to your family and work with them to decide how you want to structure your trust and what specifications you need to think about. It goes without saying, but every family is different. Your family has its own set of challenges, and structuring a trust with those in mind will be a great long-term benefit.