WILL YOUR FAMILY BE ABLE TO FIND YOUR ORIGINAL WILL WHEN IT IS NEEDED?

While it’s not unusual for an original last will and testament to be misplaced, it is when your daughter happens to be the Register of Wills for Baltimore City.

What is a Register of Wills?

In Maryland, the Register of Wills is an elected official in each county and the City of Baltimore who is responsible for overseeing the administration of the estates of deceased persons during the probate process.  As an added benefit, each Maryland Register of Wills provides safekeeping for the last will and testaments of living persons.

Why is it Important to Locate an Original Last Will? 

Belinda Conaway became the Register of Wills for Baltimore City in December 2014 after her stepmother, Mary W. Conaway, held the office from 1982 through 2012.  After Belinda’s father, Frank M. Conaway, Sr., died in February 2015, court records indicate that the family was unable to locate his original last will and testament but did find a copy of a will he signed in 1999.  The 1999 will left Mr. Conaway’s estate equally to his children, Belinda and Frank M. Conaway, Jr.  In March 2015, Belinda filed a petition requesting that the copy of the will be admitted to probate.  She stated in her petition, "This copy was found among the personal papers and I have not been able to locate the original."

Ironic, isn’t it?  Fortunately in this case, Mr. Conaway’s children agreed that the 1999 will was in fact their father’s last will and the probate judge admitted the copy to probate.  But this may not be the case in your situation.  Sometimes after an original will goes missing and a copy is found, family members will disagree about whether it is in fact the deceased person’s last will.  If this is the case, then the copy may be overlooked in favor of an older original will that has been located or state laws that dictate who inherits when there is no will (known as “intestacy laws”).

This is why it is so important for your loved ones to be able to find your most-recent original last will – because without it, the laws of your state may presume that you intended to destroy your will and a copy of it will be viewed as worthless.

Who Knows Where to Find Your Original Will?

Do you know where your original will is located?  Do your loved ones know where your original will is located?  While your family members certainly don’t need to know what your will says, they do need to know where your original will is being stored.

On the other hand, if you’re uncomfortable letting family members know where to find your original will, then let someone you trust – such as your attorney, accountant, or financial advisor – know where to find your original will.  Otherwise, your family may end up in front of a probate judge and your true final wishes may be overlooked.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Four Steps to Stop Mail Addressed to a Deceased Person

One of the first things you should do as a newly appointed executor of a deceased person’s probate estate or successor trustee of a deceased trustmaker’s trust is ask the post office to forward the deceased person’s mail to your address.  Unfortunately, along with important pieces of mail – statements, bills, and refunds – many not-so-important pieces – catalogs, solicitations, and plain old junk mail – will end up in your mailbox. 

On the other hand, you may have purchased a home from a deceased person’s estate or trust and have received some of their mail at your new address.  

What can you do to stop the post office from delivering mail addressed to a deceased person?  Follow these four steps:

1. If you are the executor of an estate that has been through probate court and the estate is officially closed, hand-deliver or send a copy of the probate order closing the estate and dismissing you as the executor to the deceased person's local post office, and request that all mail service is stopped immediately.  If you don’t take this step and find that some mail continues to trickle through two or more years after the death, this is because the U.S. post office only honors forwarding orders for one year.  The only way to completely stop delivery is to request that all mail service be discontinued.

2. To stop mail received as the result of commercial marketing lists (in other words, junk mail), log on to the Deceased Do Not Contact Registration page (https://www.ims-dm.com/cgi/ddnc.php) of the DMAchoice.org website and enter the deceased person’s information.  According to the website, “DMAchoice™ is an online tool developed by the Direct Marketing Association to help you manage your mail. This site is part of a larger program designed to respond to consumers' concerns over the amount of mail they receive, and it is the evolution of the DMA's Mail Preference Service created in 1971.”  After registering the deceased person on the website, the organization claims that the amount of mail received as the result of commercial marketing lists should decrease within three months.

3. For magazines and other subscriptions and mail that are technically not "junk" mail (for example, solicitations from charities to which the deceased person made donations while they were living), contact the organization directly to inform them of the death.  Note that most publishers will issue a refund for any unused subscription.

4. If you shared the mailing address with the deceased person or if you are the new owner of the deceased person’s home, write “Deceased, Return to Sender” on any mail addressed to the deceased person and leave it in your mailbox for pick up.

Remember it is a federal offense to open and read someone else’s mail; so if you’re not a legal representative of the deceased person, don’t open their mail!

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Caution: Writing Your Own Deed to Avoid Probate Can Lead to Unintended Consequences

One common way to avoid probate of real estate after the owner dies is to hold the title to the property in joint names with rights of survivorship with children or other beneficiaries.  This is accomplished by adding the names of the children and certain legal terms to a new deed for the property and then recording it in the applicable public land records. 

Many people believe that they do not need to pay an attorney to help them prepare and record the new deed.  Instead, they think that a deed form can simply be downloaded from the internet or obtained from a book that can then be easily filled out and recorded.  But deeds are in fact legal documents that must comply with state law in order to be valid.  In addition, in most states, property will not pass to the other owners listed in a deed without probate unless certain specific legal terms are used in the deed.

How is a Defective Deed or an Invalid Deed Corrected? 

If the problems with a defective deed or an invalid deed are discovered before the owner dies, then the problems can be addressed by preparing and recording a “corrective deed” in the applicable public land records.  This should only be done with the assistance of an attorney.

Unfortunately, many times the problems with a defective deed or an invalid deed are not discovered until after the owner dies.  If this is the case, then the problems cannot be fixed with a corrective deed since the deceased owner is unable to sign the corrective deed.  Instead, the property will most likely need to be probated in order to fix the problems with the title.  Aside from probate taking time and costing money for legal fees and court expenses, until the problems with the title are sorted out in probate court, heirs will not be able to sell the property.  Or, worse yet, the property may be inherited by someone the owner had intended to disinherit when they prepared and recorded their own deed.

What Should You Do?

If you want to add your children or other beneficiaries to your deed in order to avoid probate, and you think you can save a few bucks by using a form you find on the internet or in a book, think again.  Deeds are legal documents that have very specific requirements and are governed by different laws in each state (in other words, a deed that is valid in New York may not necessarily be valid in Florida). 

If you want your home or other real estate to pass to your children or other beneficiaries without probate, then seek the advice of an attorney who is familiar with the probate and real estate laws of the state where your property is located. This will insure that the deed will be valid and your property will in fact avoid probate and pass to your intended heirs.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Death Tax Repeal Act Introduced in House and Senate

Identical bills have been introduced in the U.S. House and Senate that would permanently repeal the federal estate tax and generation-skipping transfer (“GST”) tax.

Overview of Current Federal Estate, Gift, and GST Tax Laws

Under current law, the exemptions from federal estate taxes, lifetime gift taxes, and GST taxes are indexed for inflation on annual basis.  In 2015, the exemption from each tax is $5,430,000.  In addition, the top tax rate for each type of tax has been holding steady at 40 percent since 2013 and will remain at this rate in future years (barring any legislative changes).

Summary of Death Tax Repeal Act of 2015

On February 26, 2015, Rep. Kevin Brady (R – TX) introduced a bill “To amend the Internal Revenue Code of 1986 to repeal the estate and generation-skipping transfer taxes, and for other purposes,” to be known as the “Death Tax Repeal Act of 2015” (H.R. 1105). 

This bill currently has 135 Co-Sponsors (134 Republicans and one Democrat – Rep. Sanford D. Bishop, Jr. (GA)) and provides for the following:

1. Repeals the federal estate tax and the GST tax for estates of decedents dying, and generation-skipping transfers made, after the date of enactment;

2. Includes special rules for assets held in a qualified domestic trust before the date of enactment;

3. Retains the federal gift tax with a top rate of 35 percent;

4. Retains the current law regarding the lifetime gift tax exemption;

5. Retains the gift tax annual exclusion ($10,000 as adjusted for inflation at a minimum of $1,000 increments; the exclusion is $14,000 for 2015);

6. Provides that transfers in trust will be treated as taxable gifts, unless the trust is treated as a grantor trust; and

7. Retains the carryover basis rules for lifetime gifts and stepped-up basis for property transferred after death.

On March 25, 2015, Sen. John Thune (R – SD) introduced an identical bill in the Senate (S.860) (the Senate bill was introduced with 26 Co-Sponsors, all Republicans).  On that same date, the House Ways and Means Committee (the chief tax-writing committee of the House) voted to favorably report the bill (as amended) by a roll call vote along party lines of 22 yeas to 10 nays.

What is the Future of the Death Tax Repeal Act of 2015?

Is it possible that with a Republican-controlled House and a Republican-controlled Senate, the Death Tax Repeal Act will become law in 2015?  Not likely.  President Obama has already expressed his disapproval of the proposal and would most assuredly veto the bill if it ever came across his desk for signature.  Nonetheless, our firm will continue to monitor both state and federal bills that will affect your estate plan and your estate tax bill. You should be aware of these proposed changes because legislative changes can have a significant impact on your estate plan.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Three Liability Planning Tips for Physicians Anyone Can Use

Whether you are a physician or not, you probably know that the practice of medicine is a profession fraught with liability.  It’s not just medical malpractice claims either – employment related issues, careless business partners and employees, contractual obligations, and personal liabilities add to the risk assumed by a physician in private practice.  Unfortunately, in our litigious society, these liability risks are not unique to physicians.  Business owners, board members, real estate investors, and retirees need to protect themselves from a variety of liabilities too.

Below are three liability planning tips anyone – physicians and non-physicians alike – can use to protect their hard earned money.

Tip #1 – Insurance is the First Line of Defense Against Liability:

Liability insurance is the first line of defense against a claim.  Liability insurance provides a source of funds to pay legal fees as well as settlements or judgments. Types of insurance you should have in place include (as applicable):

1. Homeowner’s insurance

2. Property and casualty insurance

3. Excess liability insurance (also known as “umbrella” insurance)

4. Automobile and other vehicle (motorcycle, boat, airplane) insurance

5. General business insurance

6. Professional liability insurance

7. Directors and officers insurance

Tip #2 – State Exemptions Protect a Variety of Personal Assets From Lawsuits:

Each state has a set of laws and/or constitutional provisions that partially or completely exempt certain types of assets owned by residents from the claims of creditors.  While these laws vary widely from state to state, in general you may be able to protect the following types of assets from a judgment entered against you under applicable state law: 

1. Primary residence (referred to as “homestead” protection in some states)

2. Qualified retirement plans (401Ks, profit sharing plans, money purchase plans, IRAs)

3. Life insurance (cash value)

4. Annuities

5. Property co-owned with a spouse as “tenants by the entirety” (only available to married couples; and may only apply to real estate, not personal property, in some states)

6. Wages

7. Prepaid college plans

8. Section 529 plans

9. Disability insurance payments

10. Social Security benefits

Tip #3 – Business Entities Protect Business and Personal Assets From Lawsuits:

Business entities include partnerships, limited liability companies, and corporations.  Business owners need to mitigate the risks and liabilities associated with owning a business, and real estate investors need to mitigate the risks and liabilities associated with owning real estate, through the use of one or more entities.  The right structure for your enterprise should take into consideration asset protection, income taxes, estate planning, retirement funding, and business succession goals.

Business entities can also be an effective tool for protecting your personal assets from lawsuits.  In many states, assets held within a limited partnership or a limited liability company are protected from the personal creditors of an owner.  In many cases, the personal creditors of an owner cannot step into the owner’s shoes and take over the business.  Instead, the creditor is limited to a “charging order” which only gives the creditor the rights of an assignee.  In general this limits the creditor to receiving distributions from the entity if and when they are made.

Final Advice for Protecting Your Assets:

Liability insurance, exemption planning, and business entities should be used together to create a multi-layered liability protection plan.  Our firm is experienced with helping physicians, business owners, board members, real estate investors, and retirees create and—just as important—maintain a comprehensive liability protection plan. If you have a Revocable Living Trust and it has been a few years since it has been reviewed, then we can help you determine if a Revocable Living Trust is still the right choice for your estate plan. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Is a Revocable Living Trust Right for You?

Revocable Living Trusts have become the basic building block of estate plans for people of all ages, personal backgrounds, and financial situations. But for some, a Revocable Living Trust may not be necessary to achieve their estate planning goals or may even be detrimental to achieving those goals.

What Are the Advantages of a Revocable Living Trust Over a Will?

Revocable Living Trusts have become popular because when compared with a Last Will and Testament, a Revocable Living Trust offers the following advantages:

1. A Revocable Living Trust protects your privacy by keeping your final wishes a private family matter, since only your beneficiaries and Trustees are entitled to read the trust agreement after your death.  On the other hand, a Last Will and Testament that is filed with the probate court becomes a public court record which is available for the whole world to read.

2. A Revocable Living Trust provides instructions for your care and the management of your property if you become mentally incapacitated.  Since a Last Will and Testament only goes into effect after you die, it cannot be used for incapacity planning.

3. If you fund all of your assets into a Revocable Living Trust prior to your death, then those assets will avoid probate.  On the other hand, property that passes under the terms of a Last Will and Testament usually has to be probated. A probate could add thousands of dollars of costs at your death.

Why Shouldn’t You Use a Revocable Living Trust?

Although Revocable Living Trusts offer privacy protection, incapacity planning, and probate avoidance, they are not for everyone. 

For example, if your main concern is avoiding probate of your assets after you die, then you may be able to accomplish this goal without the use a Revocable Living Trust by using joint ownership, life estates, and payable on death or transfer on death accounts and deeds.  However, those strategies aren’t a perfect fit for everyone.

In addition, if you are concerned about protecting your assets in case you need nursing home care, then an Irrevocable Living Trust, instead of a Revocable Living Trust, may be the best option for preserving your estate for the benefit of your family. The rules governing Irrevocable Living Trusts can be very complex, and you should only create an Irrevocable Living Trust after a thorough discussion with a qualified trust attorney.

Do You Still Need a Revocable Living Trust?

While some estate planning attorneys advise their clients against using a Revocable Living Trust under any circumstance, others advise their clients to use one under every circumstance.  Either approach fails to take into consideration the fact that Revocable Living Trusts are definitely not “one size fits all.”  Instead, your family and financial situations must be carefully evaluated on an individual basis and the advantages and disadvantages of using a Revocable Living Trust must be weighed against your personal concerns and estate planning goals.  In addition, these factors must be re-evaluated every few years since your family and financial situations, concerns, and goals will change over time. 

If you have a Revocable Living Trust and it has been a few years since it has been reviewed, then we can help you determine if a Revocable Living Trust is still the right choice for your estate plan. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller. 

Is a Payable on Death Account Right for You and Your Family?

Payable on death accounts, or “POD accounts” for short, have become popular for avoiding probate in the last decade or so.  These accounts include life insurance policies, certain retirement accounts, and cash accounts with designated beneficiaries. While the idea of these accounts is to avoid probate and simplify distributions, POD accounts can have unintended negative results, which are contrary to the account owner’s wishes.

What is a POD Account?

A POD account is a type of bank account authorized by state law which allows the account owner to designate one or more beneficiaries to receive the funds left in the account when the owner dies.

A POD account allows the owner to do what he or she pleases with the funds held in the account during the owner’s lifetime, including spending it all and changing the beneficiaries of the account.  After the owner dies, if anything is left in the POD account, the beneficiaries chosen by the owner will be able to withdraw the remaining funds without the need for probating the account by presenting an original death certificate of the owner.

What Can Go Wrong With a POD Account?

POD accounts sound great, don’t they?  In general, POD accounts are easy to set up and make sense for many people.  A handful of states now even recognize POD deeds for real estate and POD designations for automobiles.   

Nonetheless, POD accounts may lead those who create them to believe that they have an “estate plan” and no additional steps will need to be taken.  This may or may not be true.  Below are a few examples of what can, and often does, go wrong with POD accounts:

1. POD accounts such as life insurance policies provide death proceeds to the designated beneficiaries. These proceeds are automatically transferred to the named parties by operation of law at the passing of the account owner. Many times, the owner’s intention is to provide liquidity for the settlement of the estate and final expenses. However, if there are three named beneficiaries, each person receives a check for their portion of the proceeds. At this point, each person can do whatever he or she likes with the proceeds. If someone chooses not to contribute a portion of the funds for estate settlement purposes, they have no obligation to do so. In such a situation, using a more advanced estate planning tool, such as an irrevocable life insurance trust may be the proper solution.

2. POD accounts can be set up as joint accounts that become payable on death after all of the owners die.  This means that if a husband and wife in a second marriage set up a POD account that will go to their six children from their first marriages after both die and the husband dies first, then the wife can simply change the POD beneficiaries to her own three children and disinherit the husband’s three children.

3. What about a situation with the same facts as above, except that the spouse remarries for a third time?  He or she could change the beneficiary of the POD account to her new husband, thereby disinheriting her children and her deceased husband’s children.

4. If there is only one POD account owner and he or she becomes mentally incapacitated, then a valid power of attorney or court-supervised guardianship or conservatorship might be needed to access the POD account to help pay for care for a sick loved one.

5. If a POD beneficiary is a minor under the age of 18 or 21 (this depends on state law), then a court-supervised guardianship or conservatorship may need to be established to manage the minor’s inheritance.

6. If all of the named POD beneficiaries predecease the account owner, then the account may have to be probated.

These are just a few examples of why POD accounts should not be a primary asset transfer mechanism in your estate plan. You need to have a will, a revocable living trust, a power of attorney, and a health care directive in place to insure that you and your property are protected in case you become mentally incapacitated and to make sure that your property goes where you want it to go after you die.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller. 

When is an Estate Subject to State Death Taxes?

In the United States, certain states collect a death tax based on the value of the deceased person’s estate and who inherits it. Such states are known as having a decoupled estate tax—meaning that the state has an estate tax separate or in addition to the federal estate tax. While California does not have a decoupled estate tax, it does have a higher income tax than many states. As such, it is critical to discuss your estate and tax planning needs with a qualified legal professional.

Which States Collect a State Death Tax?

As of January 1, 2015, the following states collect a death tax:  Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Tennessee (but it will be repealed in 2016), Vermont, and Washington.

Each of these states has its own laws governing the amount of assets that are exempt from the death tax, what deductions can be taken, and the applicable death tax rate.  But regardless of these factors, for an estate to be potentially subject to a state death tax, the deceased person must have either lived in the state at the time of death or owned real estate or tangible personal property located in the state.

State Death Tax Examples:

Some examples should help to illustrate when an estate may be potentially subject to a state death tax:

1. Deceased Person was a New York resident.  If you inherit your uncle’s estate and he lived in New York at the time of his death, will the estate potentially be subject to a state death tax?  The answer is yes, because your uncle lived in New York at the time of his death and New York collects a state death tax.  However, whether or not the estate will owe any New York death taxes will depend on the value of your uncle’s estate and what deductions can be taken.

2. Deceased Person was a Florida resident.  On the other hand, if your uncle lived in Florida at the time of his death and did not own any property located in New York, then his estate would not be subject to New York death taxes, nor would his estate owe any Florida death taxes since Florida does not collect a state death tax.

3. Inheritor is a New York Resident.  What if you inherit your uncle’s estate and he lived in Florida at the time of his death and he did not own any property located outside of Florida, and you live in New York, will your uncle’s estate be subject to the New York death tax?  The answer is no, because your uncle was a Florida resident who did not own property located in New York, and Florida does not collect a state death tax.  But what if your uncle, who was a Florida resident at the time of his death, owned a second home located in New York?  In this case your uncle’s estate will potentially be subject to New York death taxes even though he was a Florida resident at the time of his death because he owned a house that is physically located in New York which is a state that collects a state death tax.

As the above examples show, state death taxes are tricky and can apply even in unexpected situations.  If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Does Your Estate Plan Protect Your Adult Beneficiaries?

If you think you only need to create discretionary lifetime trusts for young beneficiaries, problem beneficiaries, or financially inexperienced beneficiaries, then think again.  In this day and age of frivolous lawsuits and high divorce rates, discretionary lifetime trusts should be considered for all of your beneficiaries, minors and adults alike.

What is a Discretionary Lifetime Trust?

A discretionary lifetime trust is a type of irrevocable trust that you can create while you are alive. Such a discretionary trust allows you to gift your assets into the trust for the benefit of your beneficiaries. Alternatively, a discretionary trust can come into existence upon your death. Here, your assets will be transferred into the trust for the benefit of your beneficiaries at the time that you pass away. 

The trust is discretionary because you dictate the limited circumstances when the trustee can reach in and take trust assets out for the use and benefit of the beneficiaries. For example, you can permit the trustee to use trust funds to pay for education expenses, health care costs, a wedding, buying a home, or starting a business.  If the trust is funded with sufficient assets that are invested prudently and you choose the right trustee to carry out your wishes, the trust funds could last for the beneficiary’s entire lifetime. 

How Does a Discretionary Lifetime Trust Protect an Inheritance?

With a discretionary lifetime trust each of your beneficiaries will have a fighting chance against lawsuits and divorcing spouses because their inheritance will be segregated inside of their trust and away from their own personal assets.  By creating this type of “box” around the inherited property, it shows the world that the inheritance is not the beneficiary’s property to do with as they please.  Instead, only the trustee can reach inside the box and, based on your specific instructions, pull funds out for the benefit of the beneficiary.  Creditors, predators, and divorcing spouses are generally blocked from reaching inside the box and taking property out. 

When the beneficiary dies, what is left inside their box will pass to the heirs you choose. You could decide, for example, to have the assets pass to your grandchildren inside their own separate boxes and on down the line, thereby creating a cascading series of discretionary lifetime trusts that will protect the inherited property and keep it in your family for decades to come.

What Should You Do?

Does all of this sound too good to be true?  It’s not.  Our firm is available to discuss how you can incorporate discretionary lifetime trusts into your estate plan. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

How to Easily Integrate Asset Protection Trusts into Your Estate Plan

Asset protection has become a common goal of estate planning.  Asset protection trusts come in many different forms and can be used to protect property for your use and benefit as well as for the use and benefit of your family.

What is An Asset Protection Trust?

An asset protection trust is a special type of irrevocable trust in which the trust funds are held and invested by the Trustee and are only distributed on a discretionary basis.  The purpose of an asset protection trust is to keep the trust funds safe and secure for the benefit of the beneficiaries instead of having the funds be an available resource to pay a beneficiary’s debts. 

Asset Protection Trusts Equal Inheritance Protection:

Leaving an inheritance outright to your child or grandchild without any strings attached is risky in this day and age of high divorce rates, lawsuits, and bankruptcies.  Aside from this, your beneficiaries may not have developed the financial skills necessary to manage their inheritance over the long run.  There is also the very real risk that an outright inheritance left to your spouse will end up in the hands of a new spouse instead of in the hands of your children or grandchildren.  Finally, a beneficiary may be born with a disability or develop one later in life that will end up rapidly depleting their inheritance to pay for medical and other bills.

There are a number of different types of asset protection trusts that you can establish to insure your hard earned money is used only for the benefit of your family:

1. Trusts for minor beneficiaries – Minor beneficiaries cannot legally accept an inheritance, so a discretionary trust for a minor is a necessity.

2. Trusts for adult beneficiaries – Adult beneficiaries who are not good with managing money, are in a lawsuit-prone profession, have an overreaching spouse, or have an addiction problem will benefit from a lifetime discretionary trust. 

3. Trusts for surviving spouses – If you are worried that your spouse will not be able to manage their inheritance, will remarry, or will need nursing home care, you can require your spouse’s inheritance to be held in a lifetime discretionary trust.

4. Trusts for disabled beneficiaries – Disabled beneficiaries who receive an inheritance outright run the risk of losing government benefits and will need to spend down the funds to requalify, but an inheritance left to a special needs trust can be used to supplement, not replace, government assistance.

Drafting an Asset Protection Trust Your Way:

Asset protection trusts designed for inheritance protection can be as rigid or as flexible as you choose.  For example, a beneficiary can be added as a co-trustee at a certain age or after the beneficiary reaches a specific goal such as graduating from college.  Another option is to name a corporate trustee, such a bank or trust company, but give the beneficiary the right to remove and replace the corporate trustee with another one. 

You can also make trust distributions as limited or as broad as you choose.  For example, you can state that the funds can only be used to pay medical bills or for education, or the Trustee can be given broad discretion to make distributions in the best interests of the beneficiary.  You may also want to require the Trustee to take into consideration the beneficiary’s income and other assets before making distributions.  Alternatively, the Trustee can be given the authority to deplete the trust for one of the beneficiaries to the detriment of the remainder beneficiaries.  If there are multiple beneficiaries, such as a trust for the benefit of your spouse and your children, the Trustee can be directed to give preferential treatment to one or more beneficiaries over the others.

The Bottom Line on Asset Protection Trusts:

Asset protection trusts offer a great deal of planning opportunities for people of even modest means.  We are available to answer your questions about asset protection trusts and help you integrate this type of planning into your estate plan.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.