Pillar II
Estate Planning
Preserving your legacy
For FUture generations
If something bad happened, such as Covid-19 or a car accident causing you to become incapacitated, do you have the necessary documents in place to appoint someone you handpicked to manage your day-to-day affairs?
Do you have those documents in place with your financial institutions, so the person you chose can access your money to help manage your day-to-day affairs?
If you answered “no” to either or both questions, you and your family could benefit from estate planning documents.
There are differences between a will and a trust
A Will:
-
May need to be updated every 3-5 years
-
Contains no provisions for incapacitation
-
Is public knowledge
-
Can be easily obtained by anyone after you pass away from the county clerk upon paying a small fee
-
100% of the time results in probate
-
Can be contested in court and is easy to litigate against
-
Could take up to 36 months to probate
A REvocable
Living Trust:
-
Contains durable powers of attorney documents and a pour-over will, which don’t require regular updating
-
Contains provisions for incapacitation, so that someone you handpick can manage your day-to-day affairs or settle your estate; it bypasses the need for court involvement through a guardianship and conservatorship hearing
-
Bypasses the probate process
-
Is 100% private
-
For individuals to gain access to your private documents, they would need to litigate against every single person listed in the trust – including you, your beneficiaries, successor trustee, etc.
-
Provides tax advantages
-
Can be settled in as few as 60 days, taking less time than a traditional will
-
Doesn’t have to go through probate in multiple states
-
Minimizes emotional stress for the family
Protect your legacy
The Benefits of
an Estate Plan
*Attorney-designed, state-specific plans
Most people have either had an experience with probate or haven’t. If you have, you know it’s a long, drawn out process which is expensive and can get ugly. We teach our clients how to avoid probate entirely to keep what they’ve worked so hard for in their families.
#1:Eliminates the need for your estate to go through probate
Most people have either had an experience with probate or haven’t. If you have, you know it’s a long, drawn out process which is expensive and can get ugly. We teach our clients how to avoid probate entirely to keep what they’ve worked so hard for in their families.
What is probate?
- Probate is the Latin word for “to prove.” It is a function of having only a standalone will and results in a series of court hearings where the state will settle and probate your assets prior to them being transferred to loved one(s).
- The process of probate can take up to 36 months and could cost as much as 12-18% of the estate. The majority of costs are a result of court and attorney fees. Furthermore, probate has to occur in every state in which land is owned.
- With probate, your will becomes public knowledge. At that point, anyone can visit the county clerk’s office and for a small fee, receive a copy of the will and challenge it in court. Shouldn’t the process be more robust?
We think so, which is why we teach our clients how to avoid probate entirely by setting up a revocable living trust.
How does an estate plan ensure my family avoids probate? (1)
- Unlike a will, an estate plan is a private document. Clients who execute these legal documents have them witnessed and notarized. As a result, they are very difficult to litigate against because someone who seeks to contest the documents would have to sue everyone listed in the document, including the successor trustee, trustee and beneficiaries. The process can be very taxing and difficult so the frivolous lawsuit nonsense goes away.
- At Foundational Wealth Partners, we teach our clients how to retitle the name of their assets, taking them out of their personal names and into the name of the family trust they create. As a result, there is nothing in your personal name for the state to probate.
- A revocable living trust is NOT a person. It is an entity and you control that entity. Because it’s not a living person, there is no need for court involvement.
Case Study
It is not uncommon for the probate process to last years. For example, one of our clients has been going through probate for 3 ½ years, which has cost the family over $365,000 due to court involvement and the attorneys “hitting the tennis ball” back-and-forth, so to speak.
The nonsense is a result of the deceased not taking into account asset distribution to children from previous marriages. Because those offspring were not named directly, they were effectively “cut out” of the will. The deceased didn’t mean to cut them out of the asset pool, but it happened.
Isn’t that silly?
With a living trust, you can call out those beneficiaries with specific names, determine a percentage of assets that should be left to them and guarantee that, after passing, your wishes are fulfilled through the documents you took the time to prepare.
#2: Prevents court control from assets at incapacitation and death
Because your hand-picked successor trustee can step in as soon as something happens, there is no need for court involvement. Plans are all outlined on paper, which means everyone already understands what’s going to go on with your assets and who is going to care for you when you cannot.
#3: Eliminates the need to go through guardianship and conservatorship hearings
Your successor trustee can immediately step in and provide for your loved ones and children. As a result, there is no need for time-consuming and expensive guardianship and conservatorship hearings. The aspect of guardianship and conservatorship can be separate from the successor trustee you name, but the trustee will work with those individuals to make sure your minor children are taken care of.
#4: Takes less time to settle your estate (2)
It can take up to 36 months to settle an estate through probate. In comparison, an estate plan can generally be settled in as few as 60 days, allowing distribution of assets to occur within a matter of weeks – not years – for loved ones.
#5: Eliminates the need to go through probate in multiple states
If you own land in more than one state, your estate will have to be settled and go through probate in multiple states. On the other hand, if those assets are titled into the name of your trust, the hassle of going through probate in multiple states is eliminated. Most people don’t understand just how powerful that ability is.
#6: Saves Money
In the state of Texas, probate is lasting upwards of 36 months and costing families 12-18% of the asset pool. That’s a lot of money and time wasted, which is completely avoidable.
On the other hand, if you pre-probate your estate, at most your family might pay out 1-2% of the asset pool to offset any costs they incur to settle the estate. While it’s not very common, the expense can occur.
#7: Provides maximum privacy
Once the probate process is started, your estate becomes public knowledge and can be challenged. In most states, someone can pay a small fee at the county clerk’s office and obtain a copy of your will to contest in court. With a revocable living trust, your affairs are 100% private unless the challenger sues every single person, including the successor trustee and beneficiaries, listed in the trust, which is unfeasible for most individuals due to the time and expense involved.
#8: Minimizes emotional stress for the family
When people have to go through the probate process after someone has died, they don’t have time to mourn. The probate process is in their face every day and family members can become impatient, causing a tug-of-war.
On the other hand, when an estate is pre-probated, which is done by executing estate planning documents, all of your wishes are clearly outlined and there is no back-and-forth. This clarity allows family members vital time they need to grieve and mourn rather than concerning themselves with in-family battles and attorney fees.
#9: More control over how your loved ones inherit and when
With an estate plan, assets can be distributed right away or stay in the trust until a time you determine. You can also add requirements, for example, such as after beneficiaries graduate college, pass a drug exam, or they may receive inheritance on a delayed basis, which can be based on age.
With a probatable case, lump sums can be distributed and dumped into the laps of loved ones who have addictions or young family members who may not spend their inheritance in the wisest of ways. For this reason, provisions included in your estate plan are very powerful.
#10: Minimizes emotional stress for the family
Capital gains taxes can make or break a family after a loved one passes away. Due to what’s called a stepped-up basis, your heirs can inherit a large asset, such as a house or ranch. and pay taxes on it based upon the price you purchased it at, not the value it’s worth the day they receive ownership of it.
Ready to get started?
Legacy protection is a phone call away!
What are the roles in an estate plan? (3)
Trustor/Grantor/Creator/Settlor
These are all the same but different titles for the person(s) setting up the trust
Trustee
These are all the same but different titles for the person(s) setting up the trust
Successor Trustee
This is the individual you handpick to manage your day-to-day affairs in the event of incapacitation
What are the duties of a successor trustee?
While you are incapacitated, this individual will collect money due, pay bills on a monthly basis, maintain the vehicles, maintain insurance, etc. Essentially, their role is to keep your life running smoothly until you are well enough to manage your own affairs.
When you pass away, your successor trustee will do all of these tasks a final time in addition to filing taxes and distributing assets to beneficiaries.
The successor trustee is without a doubt one of the most important choices and individuals you can appoint during your lifetime.
FAQ
Frequently Asked Questions
Do I lose control by taking assets out of my own name?
Absolutely not, you maintain 100% control. The trust is tied to your social security number but the assets are not titled in your personal name.
Do I have to “own” the home before I transfer the deed into a trust?
No, when people buy a home, they will receive a closing folder from the lender and the real estate agent. In that folder, there is a copy of all the documents you signed as well as a copy of the warranty deed.
The warranty deed is copied and transferred to our team through encrypted email and once our team receives that information, it will be reconstructed to title the warranty deed into the name of the trust.
On the surface, the process is simple. Of course, due to government delays, there is no guarantee on how quick or slow the process of retitling assets can be.
What happens if I don’t “fund” my trust, failing to provide titles and deeds to be retitled into the name of the trust?
The simple answer is that the trust can’t do its job. In fact, it’s safe to say it’s not worth the paper it is printed on because the assets need to be retitled into the name of the trust for your family to avoid probate and to keep it secure as an asset while you are alive.
“I own nothing but I control everything.”
– John D. Rockefeller
Does a beneficiary have to be an individual in my family
No, it can be anyone or an organization. For example, you can choose to leave your assets to loved ones or a church. Provided with your wishes, our team can build your trust to allocate a percentage of assets to a particular organization. What we will require is a Letter of Understanding from the trustee/trustor, explaining what will be done with the money and why. The reason why we request a Letter of Understanding is to provide as much detail as possible to the family.
Who gets to decide if I’m incapacitated?
A medical doctor will make that determination. You can outline in your trust who that physician is and we always recommend having an alternate resource to provide a second opinion.
- Avoiding probate
- Learning about capital gains tax and death tax
- Preparing for the possible event of incapacitation
- Guaranteeing you have 100% control of your end-of-life wishes
- Ensuring your loved ones with special needs are provided for and don’t lose their government benefits
- Guaranteeing distribution to your loved ones is per your wishes
- and more
The benefits are best explained in a one-on-one meeting, so get in touch today!
How can I be sure my successor trustee will perform outlined duties and distribute assets accordingly?
You can rest easy knowing your trustee will fulfill those duties because the estate plan is a notarized, legal document. The person you name needs to be responsible and have a good moral compass. If not, that person cannot fulfill those duties and will become open to litigation.
If I get divorced, what happens?
It is highly recommended that you and your ex-spouse create new trusts, so the distribution of assets can be clarified, eliminating any nonsense down the road. The last stumbling block anyone wants is an old trust, complicating a new marriage or life changes.
What are some possible exceptions I should know about?
We recommend you update the beneficiaries on tax deferred savings plans, KEOGH, IRAs, etc. to the name of your family trust. Sometimes, this process can include filling out internal pay upon death documents. If the financial institution to which you are submitting copies of the certificate and the revocable living trust do not accept those papers, we need to understand why not and what changes are required. Then, our team will make the appropriate changes and work with you to re-submit those vital documents.
How do I “fund” my trust?
You don’t need to open a bank account and deposit money to fund your trust. Instead, you need to work with our team to retitle your assets into the name of the trust. If you don’t, the trust isn’t worth the paper on which it’s printed.
Do I need to revisit my trust on an annual basis to update designations?
Yes, we highly recommend ensuring that your beneficiaries and successor trustee designations still make sense, so you maintain 100% control over your affairs and how they are managed at incapacitation and/or death.
How do I know these documents are correct?
Firstly, we’ll build your attorney-qualified documents according to the requirements of the state in which you live. Secondly, when we work with you to register those documents with the recorder’s office, we’ll know right away if something needs to be amended.
If I move states, does the trust follow me?
Yes, but of course, there will be some additional clarifications needed. Your estate plan won’t need to be rebuilt, but we will want to review all documents and update them, according to the requirements of the new state in which you live.
If I retitle assets into a trust and pass away, will my family have to finish paying for those assets?
Yes, the function of a trust is to avoid probate. But, your family will still be responsible for the debts you have accumulated. For this reason, we provide additional financial planning services to help individuals and families prepare for long-term expenses, eliminate debt and plan for retirements with which they feel satisfied.
Are you attorneys?
FWP offers specific client attorney designs. If your plan requires additional details outside of the client attorney design, please seek the advice either in our group or in a local attorney.
Learn how to Reclaim
Flexibility & Control
Revocable Living Trust
Protect your assets from litigation, guarantee your family avoids probate, and put your family in a more favorable Capital Gains tax environment.
Medical Directives
Don’t wait until it’s too late. If you have a preference on how you are treated in the event of injury, terminal illness, or dementia, it’s important to document your wishes in legally binding paperwork.
Health & Financial POA
Without these vital Power of Attorney documents, your loved ones cannot make informed decisions on your behalf or access the funds necessary to manage your day-to-day affairs while you are incapacitated.
Disclaimer: FWP offers state-specific attorney-designed plans. If your plan requires additional details outside of the client attorney design, please seek the advice either in our group or in a local attorney.
Resources:
(1)
The Law Offices of Mark S. Knutson. “Do Trusts Go through Probate?” The Law Offices of Mark S. Knutson, S.C., 6 Dec. 2022, www.knutsonlawfirm.com/blog/2022/december/do-trusts-go-through-probate-2/.
(2)
“Make Sure Your Estate Plan Includes a Mousetrap – Alexandria Estate Planning Attorney: Virginia Law Firm: Speedwell Law.” Alexandria Estate Planning Attorney | Virginia Law Firm | Speedwell Law, 12 July 2018, speedwelllaw.com/2016/01/26/make-sure-your-estate-plan-includes-a-mousetrap/#:~:text=Estate%20planners%20generally%20advise%20their,the%20process%20and%20sometimes%20more.
(3)
“Key Roles Involved in an Estate Plan: Fiduciary: Executor: Trustee.” The American College of Trust and Estate Counsel, www.actec.org/estate-planning/key-roles-in-estate-plan/#:~:text=What%20is%20a%20fiduciary%2C%20agent,trusted%20family%20member%20or%20friend. Accessed 24 June 2023.