Posts in: August

Estate Planning Nuts and Bolts: What Your Lawyer Should Tell You

August 24, 2015 Estate Planning, Law, Retirement Planning, Uncategorized Comments Off on Estate Planning Nuts and Bolts: What Your Lawyer Should Tell You

In today’s society, almost everyone needs a car, but not everyone needs an SUV.  Similarly, almost everyone should have an estate plan, but not everyone needs a complicated and expensive estate plan.  It’s important to get an estate plan that fits your situation.  You might not need an estate plan with all of the bells and whistles, but that doesn’t mean you don’t need an estate plan.  The peace of mind that comes with having even just a simple and basic estate plan is worth it.

What is an Estate Plan?

An estate plan is a set of documents that help you make important decisions about your death while you are alive.  An estate plan provides you with control, flexibility, and peace of mind.  An estate plan might be simply having a Will where you outline who gets what and who would care for you minor children. It might also include power of attorney documents to plan for incapacity.  Or it might also include a trust.  There is no one-size-fits-all.

Do I Need a Will?

A Will is the basic building block of an estate plan.  The purpose of having a Will is so you can decide who will manage your affairs upon your death, where your property should go, and who should be the guardian of your minor children, if you have any.  Unless you have a Will, these are decisions that will be made by the Court and it can lead to family members with differing opinions and expectations. Even well intentioned and loving families can end up torn apart by differences regarding a deceased family member’s estate.

Do I Need a Trust?

The reality is that there many types of trusts.  The type of trust that is typically included in an estate plan for most people is called a revocable living trust.  This is a fairly straight-forward and relatively inexpensive trust.  A revocable living trust is an efficient way to manage your assets during your lifetime and an effective way to transfer your assets to your loved ones upon your death.  It is typically just one document among other documents in your estate plan.  It works in coordination with your Will and your power of attorney documents.  However, the question is often asked, does an estate plan require having a trust?  The answer is no, a trust is not required, but generally, most people should probably have a trust included in their estate plan alongside their Will.    If you don’t have a trust to transfer your assets to your loved ones upon your death, some or all of your assets may have to go through probate before it can be passed to your loved ones, even if you have a Will.  Probate is a topic that deserves its own blog article, but in summary, it is the court-regulated process of transferring the assets of a deceased person.  As a general rule, probate is not the best option for transferring assets to your loved ones. In addition to avoiding probate, a trust gives you significant control of your assets even after you pass away. You may want to give your assets out over time for education expenses, purchasing a home, or starting a business. Or you may want it to distribute in thirds every five years so that your heirs can enjoy the money over time. This is especially important for younger adults who could be heirs. You may want conditions on your assets being passed to beneficiaries (e.g. no distributions to a beneficiary who has a drug or alcohol addiction, or credit problems, etc.).  A revocable living trust is generally an essential tool to avoid probate and to have greater control and protection of your assets, and is a great document to include in your estate plan.

What are the Benefits of Having a Revocable Living Trust?

A revocable living trust offers many benefits, including an efficient and flexible manner in which to pass your property to your loved ones when you die without having to involve the probate court.  This is probably the biggest benefit to having a revocable living trust.   But it also provides benefits during your lifetime, including the ability to maintain control of the property that your trust owns and be able to use and enjoy that property as though it were owned in your personal name, even if you become disabled or incapacitated.  This feature of the revocable living trust explains why during your lifetime, it is not necessary to obtain a tax ID for your revocable living trust nor is a tax return required for your revocable living trust.  For all intents and purposes, the property that is owned by your revocable living trust is treated as though it is owned by you.  However, a standard revocable living trust has its limitations.  For example, it does not provide any tax advantages.  Also, it does not provide creditor protection to you, although it does provide protection from creditors of beneficiaries upon your death.  In sum, the revocable living trust is a basic building block of a solid estate plan with many benefits and features.

There are other types of trusts used for estates over $5M in assets and for situations involving special circumstances (e.g. special needs children) but the most commonly used trust is simply a revocable living trust and it is an affordable and effective way to plan for your estate.

Kevin Kennedy is an associate attorney at the Phoenix, Arizona office of Kyler Kohler Ostermiller, and Sorensen, LLP (“KKOS Lawyers”). Kevin’s practice areas include real estate, self directed IRA law, business entity formation, and estate planning. Kevin is a zealous advocate for his clients and has a passion for finding solutions to their problems.  You can reach him at 888-801-0010 or