Planning Ahead: What’s the Purpose of a trust?
By Angela Gaddis Moore, Esquire
Over the next few issues of SoLo Parenting Magazine, we will cover one of each of the four basic types of estate planning documents to include Wills, Trusts, Powers of Attorney and Advance Medical Directives. Last month we looked at the necessity of a Will.
THIS MONTH’S FOCUS IS ON TRUSTS
A trust is a means of long-term planning for your assets during life and death. Trusts allow more flexibility in the distribution of your financial legacy. They can be revocable or irrevocable. And, trusts contain specific instructions on how to manage and distribute your assets in the event of disability or death. Similar to a will, a trust allows you to be in the driver’s seat of what you desire to happen with your estate.
SO, WHAT ARE SOME ADVANTAGES TO HAVING A TRUST?
Funding a trust requires changing the title of your assets from your name to the name of your trust, i.e. SARA BROWN DECLARATION OF TRUST. As Trustee you will keep control over everything contained in the trust. Funding sources include real estate, checking and savings accounts, certificates of deposits, life insurance, stocks and bonds, mutual funds, furniture, art and jewelry just to name a few.
Planning Ahead: The Process of Drafting and Executing a Will
Estate planning can seem to be an overwhelming process and one that only the wealthy can afford. However, with some basic instructions and tools you will be on your way to investing in peace of mind and protection for yourself and loved ones at an affordable cost.
Over the next few issues of SoLo Parenting Magazine, we will cover one of each of the four basic types of estate planning documents:
1. Will – a will is a final declaration at death of what your wishes are for the distribution of assets you have accumulated during your lifetime. Your “estate” or assets are what your will disposes of. “Testate” means to die with a valid will. “Intestate” means to die without a valid will.
2. Trust – a means of long-term planning for your assets during life and death. Trusts allow more flexibility in the distribution of your financial legacy. Trusts can be revocable or irrevocable.
3. Power of Attorney – a document which gives another person authority to make decisions regarding your assets if you are unavailable, i.e. extended travel, incapacity, disability. Powers of attorney allow funds to still be accessed without court intervention and additional costs.
4. Advance Medical Directive – also known as a Living Will, gives authorization to another person to make health care decisions for you in the event you are not competent to do so.
Creating a will puts YOU in charge of YOUR assets, not the Court. People who die intestate (without a will) are subject to the governing state laws on distribution of their property. For instance, if you died intestate in Virginia and were married with 2 children, your spouse, if living, would automatically be the surviving heir and receive 100% of your estate. If you are unmarried and have no children, your estate would go to your parents, if living, then siblings, then nieces, nephews, etc. But, in our complex world of non-traditional family relationships, it is not often easy, nor desirable to leave the decision making up to the state’s default plan or court determination.
When you create a will you have the power to select who receives your assets, when and how they are distributed, and who will administer the distribution. You also choose who will be the guardian and/or trustee for your child/ren. These choices assist in minimizing costs to your family and depletion of your assets.
So, what is the first step to drafting a will? Organization. The Greek philosopher Plato said “the beginning is the most important part of the work.” Taking the time to get organized will go a long way in getting you the peace and success of a plan that meets the needs of your particular family. It also allows drafting of the document to progress more efficiently saving you time and attorney’s fees.
Organization Step 1:
Consider your assets and write them down. Most people think they don’t have much of value, but when you take stock of what you own, the list grows quickly.
*Tangible personal property includes furnishings in your personal residence, automobiles, clothing, jewelry, art, electronics, collections and other items. Go room by room and catalog your belongings.
TIP: Take pictures of your valuables in each room to staple to your list. In the event of catastrophe or theft/loss you will have what you need for insurance purposes.
*Real estate you own – family residences, investment properties, timeshares, businesses, land, joint ownership
*Bank accounts – include how they are titled (i.e. joint or not). Are they POD (pay on death) or TOD (transfer on death) accounts with a designated beneficiary? Be sure to include all checking, savings, cds, IRAs, 401K accounts
*Investments and securities – stocks, bonds, mutual funds
*Life insurance policies and employee benefits to include pension, medical insurance, disability, average annual salary, survivor annuity.
Organization Step 2:
Just as important as knowing your assets, know your liabilities. Note your mortgage(s) bank notes (cars, education), other loans, store and credit cards.
Organization Step 3:
Finally, consider your family structure. Who do you need to care for, how will you provide for them and for how long? Are you concerned with ailing or elderly parents, young or disabled children, siblings or extended relatives to care for? A trust provision can be included in a will to cover support, maintenance, education and care of loved ones who may not be able to care for themselves.
Now, choose trusted individuals you would want to carry out your estate plan (Executor); care for your children (Guardian); and preserve your financial assets for distribution (Trustee). Talk to the individuals and let them know you would like to name them as part of your estate plan.
You are now ready to have your will prepared. By taking these steps before approaching an attorney, you will save money in attorneys’ fees and execute a will with your specific intentions for your loved ones
Disclosure: The information enclosed is not intended to be legal advice. Each person’s situation is unique and therefore requires individual legal advice from an attorney. If you have questions about estate planning call Moore & Associates, P.C.at (703) 750-1848 for advice.
Content copyright 2017. SoLo Parenting Magazine. All rights reserved
Angela Gaddis Moore, Esquire has received her undergraduate degree from Cornell University in 1993, and earned her law degree from George Mason University School of Law in 1996. In 2000, Angela partnered with Erroll Moore, Esq. forming Moore & Moore, P.C., and subsequently Moore & Associates, P.C. Currently, her practice primarily focuses on estate planning and family law.
Please contact Moore & Associates, P.C. at (703)750 – 1848 or email firstname.lastname@example.org.