Several critical estate planning documents give another person—known as an agent or personal representative—the legal right to act on another person’s behalf. They include wills, trusts, powers of attorney and advance health care directives, as described in a recent article titled “The nomination of trustees, executors and agents” from Lake County Record-Bee.

Your will is only activated after you die. The will and executor then have to be approved by the court. Many people think being named as an executor confers instant authority, but this is not true. Only when the will has been deemed valid by the court, does the executor have the power to act on behalf of the decedent.

The best person to serve as an executor is usually a person with good organizational skills, honesty, competency, and a person willing to do the right thing and administer the estate according to law and the will.  A bad person is usually one who would act selfishly or has poor organizational skills or is a procrastinator.

After death in the probate proceeding, the court is petitioned for a court order appointing the executor and then letters testamentary are signed by the appointed executor. An executor then becomes active as an officer of the court with a fiduciary duty to act as personal representative of the decedent’s estate for the estate probate while it is being administered under Louisiana probate law.

If the named person declines to serve, the will should have a secondary person named as executor, who can then request the appointment be validated by the court. Others can petition the court to be appointed. However, it is best to name two people of your choice in your will.

If the decedent dies without a will, the person who represents the estate in the probate proceeding is call the “administrator”.  Under Louisiana law, the court is required to take into consideration an order of preference for the administrator.  The surviving spouse is generally preferred, next the children, then more distant relations such as siblings, then neices and nephews.  For any of them, the administrator has be duly qualified to serve as the administrator.

A trust is a separate legal entity with a trustee who is in charge of the trust and its assets. If a revocable will is created, the trustee is usually the same person who has the trust created, also known as the settlor (or grantor). For certain types of irrevocable trusts, but not all, the trustee is often someone other than the settlor (or grantor).  Keep in mind that it is a common misconception that the establishment of an irrevocable trust means that you would have to relinquish authority over the “stuff”, the assets in the trust.  For both, the appointment as trustee (or successor trustee) does not become official until the appointment is accepted, usually through signing a document or by the trustee taking action on behalf of the trust.

Just as an executor might not accept their role, a trustee can decide not to accept the nomination. However, once they do, they have a fiduciary duty to put the well-being of the trust first and manage it properly. You can’t accept the role and then walk away without serious consequences.

Powers of attorney are used while a person is living. The power of attorney’s effective date depends upon what kind of POA it is. A durable power of attorney is effective the moment it is signed. A springing POA sets forth terms upon which the POA becomes active, usually incapacity. The challenge with a Springing POA is that approval by the court may be required, usually with proof from a treating physician concerning the person’s condition.

Similarly, the health care power of attorney appoints a person who acts on behalf of another as their agent for health issues. They can decline the position. However, once they agree to take on the position, they are responsible for their actions.

If the POAs decline to serve and there is no secondary person named, or if all named POAs decline to serve, the family will need to apply for an interdiction (also called a “conservatorship” or “guardianship” in other states). This is a lengthy and expensive process requiring a thorough investigation of the situation and the person who needs representation. It can be contested if the person does not want to give up their independence, or by family members who feel it is not needed.  The person chosen by the court under Louisiana law is called the “curator”.  The court must also appoint an “undercurator” whose job it is to keep and eye on the curator.

These are commonly used terms in estate planning. However, they are not always understood clearly. Your estate planning attorney will be able to address specific responsibilities and requirements, since every state has laws and appointments vary by state.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “Who Is the Best Person for Executor?” read also these additional articles: What’s the Most Important Step in Farm Succession? and Is ABLE Account the Same as Special Needs Trust? and Pay Attention to Income Tax when Creating Estate Plans and How Changes to Portability of the Estate Tax Exemption May Impact You

Reference: Lake Country Record-Bee (July 30, 2022) “The nomination of trustees, executors and agents”

Not everyone wants to leave everything to their heirs without restrictions. Some want to protect money inherited from their own parents for their children or want to keep an irresponsible child from squandering an inheritance. For people who want more control over their assets, a testamentary trust might be useful, according to the recent article “What Is a Testamentary Trust and How Do I Create One? from U.S. News & World Report. A testamentary trust can also be used to leave assets to minor children, who may not legally inherit wealth directly.

However, your estate planning attorney may have some other, better tools for you.

A testamentary trust is a trust created to hold assets created in a last will and testament. It does not become active until after a person dies and the will has been validated by probate court. Once this has happened, the trust is activated and the decedent’s assets are placed into the trust. At this point, the trustee is in charge of the trust’s management and asset distribution.

A testamentary trust is different from a living trust. The living trust, also known as an inter vivos trust, is created while the settlor (the person making the trust) is still living. When the person dies, the trust doesn’t go through probate and assets are distributed according to the directions in the trust.

Both testamentary and living are used in estate planning. However, the living trust may have far more flexibility and be easier to manage for a very simple reason: testamentary trusts are part of the probate process, administered through probate for as long as they are in effect.

There are advantages and disadvantages to both kinds of trusts. The testamentary trust is often used to manage assets for minor children. It’s also a good tool if you’re worried about an adult child getting divorced and keeping the family money in the family. The long-term court oversight is more protective, which may be desirable, but it can also be more expensive.

The best reason for a testamentary estate? When someone involved in the person’s estate loves to get tangled up in litigation. Having to deal with probate court in addition to civil court might make a litigious family member a little less likely to bring a lawsuit.

Your will must contain specific directions for what assets go into the testamentary trust. Assets with beneficiary designations, such as life insurance policies and retirement accounts, don’t go into any trusts, unless a trust is designated as the beneficiary of the policy or account. They are instead distributed directly to beneficiaries outside of the probate estate.

Changing or annulling a testamentary trust is relatively easy while you are living—simply update your will to reflect your new wishes.  However, once you have passed, the testamentary trust becomes irrevocable and may not be changed.

Which is best for your situation? Your estate planning attorney will evaluate these and other estate planning tools to find the best solutions to protect you and your family.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “Are Testamentary Trusts a Good Idea?” read also these additional articles: IRS Extends Time to File Portability Exemption Relief to Five Years and Can I Use a Special Needs Trust? and How to Plan in a Time of Uncertainty and Can You Leave an IRA to a Beneficiary?

Reference: U.S. News & World Report (July 14, 2022) “What Is a Testamentary Trust and How Do I Create One?

There are numerous benefits for beneficiaries of marital trusts, including asset allocation and tax benefits. An estate planning attorney will be able to determine if they’re the right fit for you, according to a recent article titled “Guide to Marital Trusts” from Forbes.

A marital trust is an irrevocable trust used to transfer a deceased spouse’s assets to the surviving spouse without creating any tax liabilities. Placing the assets in the irrevocable trust also protects assets from creditors and future spouses.

Three parties are involved in creating, managing and distributing a marital trust:

• Settlor: the person establishing the trust.
• Trustee: the person managing the trust and the assets it contains.
• Beneficiary: the person or persons to receive assets in the trust as per directions of the trust.

For a marital trust, the term “principal” is used to refer to assets placed in the trust when it’s established. These may be investment accounts used to generate income for the beneficiary. Real property, retirement accounts and investment accounts may also be placed inside the trust.

A marital trust doubles a couple’s estate tax exemption limit. Estate tax is the federal tax paid on someone’s estate after they die. The federal estate tax exemption is high now, but it won’t always be this high. Therefore, planning for coming years should be done now.

In 2022, the estate tax exemption is $12.06 million. Using an exemption trust would increase the exemption to $24.12 million, potentially shielding $24 million of a couple’s net worth.

Let’s say a settlor passes $5 million to a surviving spouse through an exemption trust. The surviving spouse will be able to pass an additional $19 million to the couple’s children through the same trust, tax free, because of the marital trust. However, this tax move must be made now before the per spouse exemption drops to roughly $6 million automatically on January 1, 2026.

A marital trust also can provide income to the surviving spouse, tax free. The grantor may set a limit on how much can be withdrawn from the trust, something the couple and their estate planning attorney should discuss when the trust is created. When the surviving spouse passes, the trust is passed on to whomever the first spouse’s will says should get the trust—only a surviving spouse may be the beneficiary of a marital trust.

Why should anyone consider a marital trust? This is a way to ensure individuals outside of the immediate family don’t have access to the family’s wealth.

There are other spousal trusts, including Qualified Terminable Interest Property Trusts (QTIP), bypass trusts and Spousal Lifetime Access Trusts (SLAT). The latter may be a very tax-savvy move right now because it uses your full, current estate tax exemption without “claw-back” when the exemption amount is reduced. Ask you estate planning attorney about this. He or she will help you determine which one is best suited to you and your spouse.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “What Is the Purpose of a Marital Deduction Trust?” read also these additional articles: Did Former NFL Tackle and Fox Sports Commentator Tony Siragusa have an Estate Plan? and What are Seniors Doing to Afford Health Care? and Do You Lose Benefits If You Retire Early? and Can Estate Planning Reduce Taxes?

Reference: Forbes (July 10, 2022) “Guide to Marital Trusts”

Business owner’s heads are frequently filled with a steady stream of questions concerning day-to-day activities. Long-range planning questions about how to expand the business, set business priorities, identify vulnerabilities, etc., are lost in the flood of events requiring immediate action. However, business owners need to keep both details and the big picture in mind, according to a recent article “5 Ways Business Owners Can Use Trusts to Benefit Their Company” from Entrepreneur.

Three key questions for any business owner are: how can I minimize taxes, protect assets and what kind of legacy do I want to leave with my business? All three questions can be answered with two words: estate planning. Within estate planning, trusts are a well-known tool to tackle and solve these three issues.

A trust is a legal entity created when one party (the settlor) gives another party (trustee) the right to hold title to property or assets for the benefit of a third party (beneficiaries). Trusts are used to provide protection for assets for individuals and businesses. For business owners, trusts protect beneficiaries and thwart potential creditors (including previous spouses) from gaining direct access to assets held within the trust.

If set up properly, all future growth of assets transferred to an irrevocable trust occurs outside of the estate. It will apply to your lifetime exemption, but all future growth occurs estate tax free. Let’s say a business owner transfers a business worth $3 million into an irrevocable trust and years later, the company is sold for $17 million. The increased value is not subject to estate taxes, saving family members a significant amount of money.  But the potential loss of the “step up” in income tax basis should always be considered in estate tax planning.

It should be noted these types of trusts needs to be created with an experienced tax and estate planning attorney to achieve the desired goals.

Assets in a trust maintain privacy. For companies and individuals who live in the public eye, placing assets in trust means only the settlor and trustee need to know about the assets. A person who lives in a small city and owns a few restaurants may not want their personal financial matters to become known when they die. Wills become public documents when the estate is probated; trusts remain private.

Litigation arising from sales of small businesses are among the most common legal actions filed against business owners. By removing assets from ownership, the business owner receives another layer of protection. You can’t be sued for assets you don’t own.

Trusts are used in succession planning and should be created to align with business legacy objectives, whether the plan is to sell the company to outsiders, key employees or keep it in the family. Succession plans must be properly documented. This is done with the estate planning attorney, CPA and financial advisor working in tandem. A succession plan should also address the goals for the business owner’s life after the business is sold or transferred. Do they want to remain on the board of directors, do they require income from the business to maintain their costs of living?

Minimizing taxes. Preparing for a liquidity event is an excellent reason to consider creating a trust. Depending upon its structure and the laws of the estate, a business owned by a trust may minimize or avoid state income taxes on a substantial portion of the estate income tax.  With an a non-grantor irrevocable trust, however, the compressed income tax brackets should be taken into account in your income tax planning.

A succession plan, like an estate plan, needs to be created long before it is needed. Ideally, to answer the question “What are the Advantages of a Business Trust?”, a succession plan should be created as soon as possible after a business is established (or even before) and revised as time goes on. When the company attains certain milestones, the plan should be updated.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “What are the Advantages of a Business Trust?” read also these additional articles: What Is the Best Asset Protection? and What Happens If My Partner Dies and We’re Not Married? and What Does a Blended Family Need to Know about Finances? and Shocking! 8 Things That Can Spark a Will Contest

Reference: Entrepreneur (June 17, 2022) “5 Ways Business Owners Can Use Trusts to Benefit Their Company”

Remember, if you fail to retitle your home into the name of the trust, you basically paid a lot of money for a piece of paper. Your trust is empty, and if it hasn’t been transferred, it’s not covered, says Yahoo Life’s recent article entitled “Why You Should Put Your House in a Living Trust.”

Let’s look at a few of the errors people make when dealing with trusts:

1. Failing to notify tenants of the change in ownership. If you’re retitling a two- (or more-) family home into the trust, and that property has rent-paying tenants, inform them about this change in landlord for rent payment purposes. You will also have to set up a bank account in the name of the trust for rent deposits.
2. Not notifying the insurance company of ownership change. Tell your home insurance company about changing the property owner from an individual(s) to that of a trust. If you don’t, the insurance company could deny your claim because the actual property owner—your trust—wasn’t insured.
3. Failing to transfer all of your property to your trust.  If you don’t transfer your property to your turst during your life, the property that you fail to transfer to the trust will generally have to go through probate.  Whoever you choose as your estate planning attorney should also make sure that all efforts are made to transfer your poperty to the trust.
4. Failing to name your insurance policy the beneficiary of your trust.  Sometimes the main inheritance of your heirs can be the life insurance policy on your life.  If they receive the policy proceeds outright through the beneficiary designation, that may be fine, but in some cases it is not.  For example, if your trust is meant to protect assets after your death (as an example, see “Protecting benefits for special needs individuals” below), then the proceeds of your policy will not be protected.  In the case of an irrevocable living trust, failing to name your irrevocable trust as the beneficiary may result in your assets being available for your spouse, resulting in a Medicaid spend down.

Here are a few benefits you may not have considered:

1. Probate avoidance.  Because a trust is a contract, it generally won’t go through the probate process—part of which includes notifying your relatives after your death. When the decedent’s assets are in trust, they won’t be probated. Although probate avoidance should not necessarily be the most important goal in a person’s estate planning, it can be a great goal because it probate avoidance can reduce costs and make things less complicated for your heirs.
2. A trust may be a simpler way to title assets in your new name. If you have informally changed your given name (i.e., not legally), a trust can be an easier way to retitle your assets.
3. Protecting benefits for special needs individuals. If you have a family member with special needs or who is receiving government services/benefits, such as SSI or disability, leaving your home to him or her outright can cause issues with continuing these services and funds. You can protect and preserve those benefits and still leave an inheritance by placing your home into a trust whcih will continue as a Special Needs Trust for your family member for the family member’s life.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “What Common Mistakes are Made with Living Trusts?” read also these additional articles: How Do I Maximize My IRA? and Can My Pet Help Me in Old Age? and Can New Program Help Dementia Patients? and RMD Formula Changes for First Time in 20 Years

Reference: Yahoo Life (Jan. 10, 2022) “Why You Should Put Your House in a Living Trust”

If you want to pass money to future generations without having it subject to gift and estate taxes, then a dynasty trust may be right for you. A dynasty trust allows trust assets to be used for the benefit of multiple generations while keeping the assets out of the grantor’s and the beneficiaries’ taxable estates.  This was address in the article by nolo.com called “Dynasty Trusts: Tying Up the Family Fortune Forever”

The main benefit of a dynasty trust is the avoidance of estate and gift taxes over many generations. In 2022, the federal estate tax exemption is $12.06 million ($24.12 million for couples). Estates valued at more than the exemption amount will pay federal estate taxes, at a rate of between 18 percent and 40 percent. The lifetime gift tax exclusion – the amount you can give away without incurring a tax – is also $12.06 million in 2022. Note that you can give any number of people up to $16,000 each per year (in 2022) without the gifts counting against the lifetime limit. In addition, the generation skipping transfer (GST) tax affects assets passed to grandchildren. The tax is imposed even when property is left in trust for a grandchild. The GST exemption is the same as the estate and gift tax exemptions. If you transfer more than the GST exemption, the tax rate is 40 percent.

Assets transferred to a dynasty trust are subject to estate, gift ,and GST taxes only when initially transferred and only if they exceed federal exemption thresholds. While estate and gift tax exemptions are currently very high, in 2026 the exemption is set to drop to the previous exemption amount of $5.49 million (adjusted for inflation).

Another benefit of a dynasty trust is that the assets in the trust are protected from the beneficiaries’ creditors or in the event a beneficiary divorces. If the trust is properly structured, creditors cannot go after trust assets to pay the beneficiaries’ debts.

How a dynasty trust works
A dynasty trust is an irrevocable trust, which means once it is created it cannot be changed. Funds transferred into the trust will be taxed if they exceed the lifetime gift tax exclusion. However, once funds are transferred to the trust, beneficiaries of the trust can pass assets to the next generation without those assets being subject to estate, GST, or gift taxes. In addition, the assets placed in the trust are removed from your estate and can grow outside of it.

The trustee of the trust can be a beneficiary, but because the trust is designed to last for generations, it may make sense to have a professional fiduciary, such as a bank or other financial institution, serve as trustee. The trustee manages and distributes the assets in the way you set forth in the trust agreement. Usually, the trust provides for the beneficiaries’ support during their lifetimes. For example, it could direct the trustee to pay out income regularly, make periodic principal distributions, or make distributions contingent on the beneficiary’s need.

The length of time the dynasty trust can continue to exist depends on state law. Some states allow trusts to run for hundreds of years or indefinitely, while others place limits on how long the trust can operate.  If you live in Louisiana, to establish a dynasty trust beyond the live of the children or grandchildren living now, you may have to adopt a trust under the laws of another state; a state that allows this kind of trust, and the Trustee should be located in that state.

The downside of dynasty trusts is that they are inflexible. Once the trust is created, you lose access to the assets. Because dynasty trusts last for generations, they require guesswork about what will be best for your descendants.

Dynasty trusts are complicated instruments that must be designed correctly in order to provide benefits. Contact your attorney to determine if a dynasty trust is right for you.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “Dynasty Trusts: A Tax-Efficient Way to Pass Wealth Down Through the Generations” read also these additional articles: What Does An Executor Do? and How to Deal with an Estranged Child in Your Estate Plan and Should a Reverse Mortgage Be Used for Long-Term Care? and Did Actor Ray Liotta Have an Estate Plan?

It’s common to focus on the big assets when creating an estate plan, like the family home, investment accounts and life insurance, but personal property also needs to be addressed, especially if the items are of great value or if ownership is complicated. This is especially the case regarding firearms, discussed in a recent article, “In the Crosshairs: Guns in Estate Planning” from The National Law Review.

Your executor, personal representative or successor trustee is the person who takes on the fiduciary role of administering your estate, according to the directions in your last will and testament. What seems like a relatively simple transfer of your favorite shotgun to a family member could lead to serious legal problems, if the family member is a “prohibited person.”

The Gun Control Act of 1968 made it unlawful for certain people to ship, transport, receive or possess firearms or ammunition. This group includes persons with mental illness, felons, dishonorable discharges or domestic violence convictions. Unless your executor knows the family member and can confirm they do not belong to any of these categories, the transfer and receipt of the firearm could constitute criminal behavior.

Geography could be an issue as well. A federal firearms license holder must be used to transfer the firearm, if the recipient lives in a different state. Since guns laws vary widely throughout the US, transfers are not straightforward. Something perfectly legal in one state may be a felony in another.

Laws about guns and related devices change also. After a mass shooting event in Las Vegas in 2017, the bump stock, a device used to allow more shots to be fired from an assault weapon was made illegal and owners were advised to surrender or destroy any bump stocks in their possession. If the fiduciary doesn’t know anything about firearms, they may unwittingly commit a felony.

The risks of transferring firearms can be addressed with informed planning. Gun trusts are used to protect and plan, especially for unique items like registered machine guns, suppressors, short barrel rifles and short barrel shotguns.

In recent years, the gun trust use has expanded to collectible firearms to preserve their use for future generations. Collectable firearms often are as expensive as collectible cars, so care must be taken to properly preserve and transfer them.

If firearms are in your home and you wish to pass them along to another family member, the best way to do this is with the help of an experienced estate planning attorney who can create a gun trust and help determine if the intended heir is permitted to inherit a gun.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “Can My Gun Collection Be Part of Estate Plan?” read also these additional articles: How Do I Pick a Life Insurance Beneficiary? and How Do Estate Plans and Trusts Work? and What Should I Know About Buying Funeral Services? and Medicaid’s “Snapshot” Date and Its Crucial Impact on a Couple’s Financial Picture

Reference: The National Law Review (May 10, 2022) “In the Crosshairs: Guns in Estate Planning”

A typical estate at death will include a personal residence. It’s common for a large estate to also include a vacation home, or family retreat. Leaving real property in trust is common.

Estate plans that include a revocable trust will fund the trust by a pour-over, says Kiplinger’s recent article entitled “Should You Own Your Home in Your Trust?”

A settlor (the person establishing a trust) often will title their home to the revocable trust, which becomes irrevocable at death.

Another option is a Qualified Personal Residence Trust, which is irrevocable, to gift a valuable home to a trust for the settlor’s children. With a QPRT, the house is passed over a term of years while the original owner continues to live there, so the gift passes with little or no gift or estate tax.

Some trusts arising from a decedent’s estate will hold the home belonging to the settlor without any instructions for its disposal or retention. Outside of very large trusts, a requirement to actually purchase homes for beneficiaries in the trust is far less common.

It is more common in a large trust to have terms that let the trustee buy a home for a beneficiary outside the trust or keep the settlor’s home in the trust for a beneficiary’s use, including purchasing a replacement home when requested.

The trustee will hopefully propose a plan that will satisfy the beneficiary without undue risk to the trust estate or exceeding the trustee’s powers. The most relevant considerations for homeownership in a trust are:

• The competing needs of other trust beneficiaries
• The purchase price and costs of maintaining the home
• The size of the trust as compared to those costs
• Other sources of income and resources available to the beneficiary; and
• The interests of the remaindermen (beneficiaries who will take from the trust when the current beneficiaries’ interests terminate).

The terms of the trust may require the trustee to ignore some of these considerations.

Each situation requires a number of decisions that could expose the trustee to a charge that it has acted imprudently.

Those who want to create a trust should work with an experienced estate planning attorney to avoid any issues.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “Is Putting a Home in Trust a Good Estate Planning Move?” read also these additional articles: Senior Second Marriages and Estate Planning and Why Have a Joint Revocable Trust? and Does ‘Gray Divorce’ Fit into Estate Planning? and What Do I Need to Do Right after Spouse Dies?

Reference: Kiplinger (Feb. 8, 2022) “Should You Own Your Home in Your Trust?”

If you’re married, you are eligible to use a joint trust instead of having individual trusts. This recent article, “Joint Revocable Trust: Estate Planning” from aol.com, looks at the pros and cons to see if it makes sense for your estate plan.

A trust is a legal entity where a settlor (called a “grantor” in many other states), the person creating the trust, gives a trustee control over assets in the trust, usually to distribute them when the settlor has died. The person receiving the trust is the beneficiary. They have no control over the assets until they are distributed. In the case of a revocable living trust, the settlor, the trustee and the beneficiary are all the same person.

A revocable trust, also known as a revocable living trust, can be changed many times, or even dissolved whenever the grantor wants. However, when the settlor dies or becomes incapacitated, the trust becomes irrevocable, meaning it cannot easily be changed. It also becomes inaccessible to creditors of the remainder beneficiary, but only if the trust is drafted properly.

Why would you need a “joint” revocable trust? As its name implies, a joint trust has multiple co-trustees. This is a commonly used trust for spouses, especially when the wish is for the surviving spouse to receive 100% of the couple’s assets when the first spouse dies. The joint trust is revocable while both spouses are living and, depending on the trust terms, may continue to be revocable after the first spouse dies.  Alternatively, it can become irrevocable on the death of the first spouse to die.  In this way, a joint revocable trust can, in effect, operate like a “joint will”.  Joint wills are not allowed by law, but you can do with a joint revocable trust what you could do with a “joint will.”

Why would a couple need a “joint will”?  In this case, a joint revocable trust?  Often my clients want to make sure that at least part of their assets are there for their children.  This is most often the case with blended families.  If there is a blended family, and if the first spouse to die gives everything to the surviving spouse in a last will and testament, the surviving spouse can give everything to his or her children when the surviving spouse dies.  This could disinherit the children of the first spouse to die.

This unfortunate situation can be avoided with a joint revocable trust.

When one spouse dies, the surviving spouse becomes the sole trustee. On the death of the second spouse, the trust becomes an irrevocable trust (if it did not become an irrevocable trust on the death of the first spouse to die). This is when an appointed successor trustee takes control of the trust, including distributing assets to beneficiaries as directed in the trust documents.

To decide whether you and your spouse need a joint revocable trust, you’ll want to discuss the pros and cons with an estate planning attorney.

The joint trust is practical and easy to fund and maintain. You and your spouse can both transfer assets into the same trust and you both own it. Assets in the joint trust don’t go through probate, which can get assets distributed faster and easier. The assets in the joint trust and the terms of the trust remain private, since the trust documents don’t become part of the public record. Your will would go through probate. Finally, a joint trust does not need to file a separate tax return, as long as one spouse is still living.

In a small number of states, there are state estate taxes with thresholds far lower than the current federal estate tax exemption of $12.06 million per individual. Your estate planning attorney will know what taxes will be due in your state of residence.

A joint trust may offer less protection from creditors than separate trusts, if one of the spouses has financial issues. If spouses combine their assets in a joint revocable trust, assets in both trusts would be vulnerable to creditors.

Your estate planning attorney will be able to look at your entire estate and see what tools will serve you best.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “Why Have a Joint Revocable Trust?” read also these additional articles: Does ‘Gray Divorce’ Fit into Estate Planning? and What Do I Need to Do Right after Spouse Dies? and Can a Family Limited Liability Company Reduce Estate Taxes? and Should I have a Pour-Over Will?

Reference: aol.com (May 2, 2022) “Joint Revocable Trust: Estate Planning”

A pour-over will is a type of will that’s created in conjunction with a trust. It can help facilitate the transfer of assets, if a trust’s settlor (the person establishing the trust) has failed to transfer all intended assets into the trust. A pour-over will can be an important part of a person’s estate planning checklist. Bankrate’s recent article entitled “Do you need a pour-over will in your estate plan?” gives us more information.

You may ask, “If I have a trust in part to avoid probate, why would I need a will?”  That is a good question, especially since a will is meant to be probated.  Occassionally (believe it or not), some clients forget that they have a trust.  For example, one client of mine whose mother created a trust in California with her then husband, sold her house after her husband’s death to move to Louisiana to be with her daughter here.  When the mother purchased a replacement home in Louisiana, she failed to title the new home in the name of the trust (created in California).  Because of this, her estate had to go through probate.  All that had to be probated was the house becaue her bank accounts remained in the trust.

Luckily, her California attorney did things correctly.  That attorney created a “pour-over will” which bequeathed all property outside of the trust to the trust.  This is because the trust contained the inheritance provisions of both spouses (both spouses had children from prior marriages).  Without the pour-over will, no doubt the succession would have been tied up in litigation for years.

The bottom line is that this type of will has a provision that directs the will to “pour-over” any residual assets left in the person’s estate into a living trust that is overseen by a trustee upon the grantor’s death.

A big benefit of this type of arrangement is that it’s a backstop, in case there were assets the settlor didn’t specifically fund into the trust before their death. This allows these assets to avoid the intestate rules (when someone passes away without a valid will), even though they were not specifically part of the living trust.

A person might designate certain assets to be titled in the name of a living trust they’ve established to facilitate passing these assets to the trust’s designated beneficiaries upon the settlor’s death. The trust avoids probate on these assets. However, any assets, such as an IRA or a life insurance policy, that passes on to heirs via a beneficiary designation wouldn’t be eligible for inclusion in this type of trust.

A pour-over will allows the settlor to state that any assets that had not previously been included in the trust should be added to the trust upon their death. Therefore, assets that may have been acquired after the trust was established are eligible for the same treatment as the assets that had already been funded to the trust.

It’s also simple and eliminates the need to decide which heir receives certain assets because everything eventually becomes part of the trust. These assets are, therefore, distributed via the terms of the trust.

It also helps avoid a lengthy probate case due to a significant asset that wasn’t included in the trust or elsewhere.

However, this type of will doesn’t eliminate the probate process. The will still needs to go through probate, assuming there are assets outside of the trust.  There may also be possible legal challenges, which can be costly to litigate and take time to resolve.  If there are no assets outside of the trust, the pour-over will is usually not even used.  In other words, a pour-over will is a n important component to a trust-based estate plan.

Ask an estate planning attorney about a pour-over will as a part of your estate plan.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “Should I have a Pour-Over Will?” read also these additional articles: How Do I Find a Great Elder Law Attorney? and What Is Cause of Death in Half of Seniors? and Which Supplements Don’t Go Well with Meds? and Tips on Finding the Right In-Home Aide

Reference: Bankrate (April 20, 2022) “Do you need a pour-over will in your estate plan?”