Oconee Estate Planning Blog

Serving Oconee County Georgia and the Surrounding Area

What Not to Do when Creating an Estate Plan

Having a good estate plan is critical to ensure that your family is well taken care of after you are gone. Working with an experienced estate planning attorney remains the best way to be sure that your assets are distributed as you want and in the most tax-efficient way possible. A recent article titled “Estate Planning mistakes to avoid” from Urology Times looks at the fine points.

An out-of-date estate plan. Life is all about change. Your estate plan needs to reflect those changes. Just as you prepare taxes every year, your estate plan should be reviewed every year. Here are trigger events that should also spur a review:

  • Parents die and can no longer be beneficiaries or guardians of minor children.
  • Children marry or divorce or have children of their own.
  • Your own remarriage or divorce.
  • A significant change in your asset levels, good or bad.
  • Buying or selling real estate or other large transactions.

Neglecting to update an estate plan correctly. Scratching out a provision in a will and initialing it does not make the change valid. This never works, no matter what your know-it-all brother-in-law says. If you want to make a change, visit an estate planning attorney.

Relying on joint tenancy to avoid probate. When you bought your home, someone probably advised you to title the home using joint tenancy to avoid probate. That only works when the first spouse dies. When the surviving spouse dies, they own the home entirely. The home goes through probate.

Failing to coordinate your will and trusts. All your wills and trusts and any other estate planning documents need to be reviewed to be sure they work together. If you create a trust and transfer assets to it, but your will states that the asset now held in the trust should be gifted to a nephew, then you’ve opened the door to delays, family dissent and possibly litigation.

Not titling assets correctly. How assets are titled reflects their ownership. If your home, bank accounts, investment accounts, retirement accounts, vehicles and other properties are titled properly, you’ve done your homework. Next, check on beneficiary designations for any asset. Beneficiary designations allow assets to pass directly to the beneficiary. Review these designations annually. If your will says one thing and the beneficiary designation says another, the beneficiary designation wins.

Not naming successor or contingent beneficiaries. If you’ve named a beneficiary on an account—such as your life insurance—and the beneficiary dies, the proceeds could go to your estate and become taxable. Naming an alternate and successor for all the key roles in your estate plan, including beneficiaries, trustees and guardians, offers another layer of certainty to your estate plan.

Neglecting to address health care directives. It may be easier to decide who gets the family vacation home than who will decide to keep you on or take you off life-support systems. However, this is necessary to protect your wishes and prevent family disasters. Health care proxy, advance care directive and end-of-life planning documents tell your loved ones what your wishes are. Without them, the family may be left guessing what to do.

Forgetting to update Power of Attorney. Review this critical document to be sure of two things: the person you named to manage your affairs is still the person you want, and the documents are relatively recent. Some financial institutions balk at older POA forms, and others will outright refuse to accept them. Some states, like New York, have changed POA rules to make it harder for POAs to be denied, but in other states there still can be problems, if the POA is old.

Reference: Urology Times (July 29, 2021) “Estate Planning mistakes to avoid”

Suggested Key Words: Estate Planning Attorney, Assets, Power of Attorney, Joint Tenancy, Health Care Directives, Beneficiaries, Will, Trusts, Successor, Surviving Spouse, Probate, POA

When to Use a QTIP Trust

Using trusts in an estate plan protects assets and financial legacies, explains Yahoo! Finance in a recent article titled “How Does a QTIP Trust Work? Married couples often use a QTIP trust to allow the grantor, the person creating the trust, to set aside assets for their spouse and establishing some control over the assets after the grantor has passed.

If you are concerned about what might happen to your spouse after you have died, a QTIP can provide some reassurance.

What is a Qualified Terminable Interest Property Trust? A QTIP lets one spouse provide income for another and can be used to pass assets to other beneficiaries, including children. The QTIP has some similarities to a marital trust, which is also used to hold assets belonging to a spouse. However, the marital trust is not as restrictive as a QTIP. When the grantor of the QTIP dies, their assets are transferred into the trust, which then provides income for the surviving spouse.

How does a QTIP Trust Work? QTIPs are types of irrevocable trusts. Once assets are transferred to the trust, in most cases, the transfer can’t be reversed. This is especially useful for second marriages, where there are children from a prior marriage. The QTIP allows the grantor the ability to provide for their second spouse and protect children from the previous marriage.

Assets can be transferred to the QTIP when it is created, or they can be transferred at the time of death. Usually this is done through the creation of a separate will.

You’ll need to name a trustee for the QTIP, who will manage the trust and oversee distributions. You should also name a successor trustee, in case the original trustee cannot serve.

The spouse of a grantor is considered a lifetime beneficiary, as they may draw on the trust income as long as they are living. When the surviving spouse passes, the people who receive the assets left in the trust, or “remainder,” are known as “remainder beneficiaries.” They may be children from a prior marriage, or anyone else named by the grantor.

The surviving spouse benefits from the QTIP because it provides an income stream. Assets held in a QTIP may be investment properties and taxable investment accounts. The estate benefits from the QTIP because assets qualify for the marital deduction and are excluded from the estate at the grantor’s death. When the surviving spouse dies, the QTIP trust is dissolved, and assets are passed to remainder beneficiaries. At this point, assets in the trust are included in the surviving spouse’s estate for estate tax purposes.

A QTIP, and the separate will for it, should be established with an estate planning attorney to ensure it works with the rest of your estate plan. This is especially important when there are children from second marriages in the family.

Reference: Yahoo! Finance (July 30, 2021) “How Does a QTIP Trust Work?

Suggested Key Terms: Qualified Terminable Interest Property Trust, QTIP, Beneficiaries, Marital, Surviving Spouse, Grantor, Remainder, Assets, Estate Planning Attorney, Second Marriages

How to Keep the Vacation Home in the Family

There are several ways to protect a vacation home so it remains in the family and is not overly burdensome to any one member or couple in the family, according to the article “Estate planning for vacation property” from Pauls Valley Daily Democrat.

To begin, families have the option of creating a legal entity to own the asset. This can be a Family LLC, a partnership or a trust. The best choice depends upon each family’s unique situation. For an LLC, there needs to be an operating agreement, which details management and administration, conflict resolution, property maintenance and financial matters. The agreement needs to include:

Named management—ideally, two or three people who are directly responsible for managing the LLC. This typically includes the parents or grandparents who set up the LLC or Trust. However, it should also include representatives from different branches in the family.

Property and ownership rules must be clarified and documented. The property’s use and rules for transferring property are a key part of the agreement. Does a buy-sell agreement work to give owners the right to opt out of owning the property? What would that look like: how can the family member sell, who can she sell to and how is the value established? Should there be a first-right-of refusal put into place? In these situations, a transfer to anyone who is not a blood descendent may require a vote with a unanimous tally.

There are families where transferring ownership is only permitted to lineal descendants and not to the families of spouses who marry into the family.

Finances need to be spelled out as well. A special endowment can be included as part of the LLC or as a separate trust, so that money or investments are set aside to pay taxes, upkeep, insurance and future capital requirements. Anyone who has ever owned a house knows there are always capital requirements, from replacing an ancient heating system to fixing a roof after decades of a heavy snow load.

If the endowment is not enough to cover costs, create an agreement for annual contribut6ions by family members. Each family will need to determine who should contribute what. Some set this by earnings, others by how much the property is used. What happens if someone fails to pay their share?

Managing use of the property when there is a legal entity in place is more than a casual “Who calls Mom and Dad first.” The parents who establish the LLC or Trust may reserve lifetime use for themselves. The managers should establish rules for scheduling.

For parents or grandparents who create an LLC or Trust, be sure it works with your estate plan. If they intend to keep the property in the family and wish to leave a bequest for its maintenance, for instance, the estate planning attorney will be able to incorporate that into the LLC or Trust.

Reference: Pauls Valley Democrat (July 29, 2021) “Estate planning for vacation property”

Suggested Key Terms: Family LLC, Partnership, Trust, Vacation Home, Generations, Transferring Property, Buy-Sell Agreement, Inheritance, Lineal Descendants, Endowment

What You Need to Know about Probate

We often read about celebrities who die without an estate and how everything they own must go through probate. The article titled “What to know about probate” from wmur.com explains what that means, and what you need to understand about wills, probate and estate planning.

Probate is a process used to prove that a person’s will is valid and to supervise how their estate is handled. It involves a court that focuses on this area. Much about the process depends upon the state in which it’s taking place, since these laws vary from state to state.

When someone dies without a will, they have failed to provide instructions for the distribution of their property. Their assets will still be distributed, but the laws of the state will determine what happens next. The state follows intestacy laws, which outline pre-set patterns of distributing property. In one state, property will go to the spouse and children. In others, the spouse may get everything.

Other decisions are made for your family when there is no will. If you have not named an executor, the court will appoint someone to oversee your estate. The court will also appoint a person to raise your children, if no guardian has been named for minor children. A family member may be chosen, but it may not be the family member you wanted to raise your kids, or it may be a stranger in a foster home.

Another reason to have a will is that probate can take a few months, or, depending on where you live, a few years, to complete. If there is litigation, and not having a will makes that more likely, it would take longer and will undoubtedly cost more. While this is going on, assets may lose value and heirs may suffer from not having access to assets.

Probate is also costly. There are legal notices to be published, court fees, executor fees and bond premiums, appraisal fees and attorney expenses.

Having an estate plan also means tax planning. While the federal estate tax as of this writing is $11.7 million per individual, it will not be that high forever. If the proposals to lower the federal estate tax to $3.5 million per person come to pass, will your estate escape estate taxes? What about your state’s estate or inheritance taxes?

Probate is also a very public process. Once a will is admitted as valid by the court, it becomes a public document. Anyone and everyone can view it and learn about your net worth and who got what.

With all these drawbacks, are there good reasons to allow your estate to go through probate? In some cases, yes. If multiple wills have been found, probate will be needed to establish which will is the correct one. If the will is confusing or complex, probate could provide the clarity needed to settle the estate. If beneficiaries are litigious, probate may be the voice of authority to quell some (but not all) disputes. And if the estate has no money and a lot of debt, it may be the probate court that sorts out the situation.

Every estate is different. Therefore, it is important to speak with an estate planning attorney to have a will, power of attorney and any health care directives created and properly executed. Every few years, these documents should be reviewed and revised to keep up with changes in the law and in your personal life.

Reference: wmur.com (July 29, 2021) “What to know about probate”

Suggested Key Terms: Probate, Estate Planning Attorney, Will, Guardian, Foster Home, Heir, Beneficiaries, Litigation, Minor Children, Court, Intestacy Laws

How Does a Breakthrough COVID Infection Feel?

As the contagious delta variant continues to thrive, more vaccinated Americans are developing “breakthrough infections.” These occur two weeks or more after completion of their vaccine regimen. No one knows exactly how often this is happening, because many breakthrough cases are completely asymptomatic and because the Centers for Disease Control and Prevention (CDC) has stopped tracking them, unless they lead to hospitalization or death.

AARP’s article entitled “This Is What a Breakthrough COVID Infection Feels Like” says that what’s likely different is the severity of symptoms. While a very bad headache, a very bad sore throat, or very bad gastrointestinal issues might be evidenced in the person who’s unvaccinated, those same symptoms would be less intense in a person who is vaccinated.

In fact, the overwhelming majority of serious cases around the U.S. are happening in unvaccinated people, with less than 1% of fully vaccinated people hospitalized with or have died from COVID-19. Older adults are roughly three-quarters of the small percentage of serious cases.

If you are suffering from cold-like symptoms that might signal COVID-19, the CDC recommends you get tested — even if you’ve been vaccinated. (The CDC also now recommends you get tested if you’re vaccinated but have had known exposure to someone with suspected or confirmed COVID-19.)

While the official list of COVID-19 symptoms is long, the Zoe COVID Symptom Study — an app-based study that’s been collecting data from millions of global contributors — recently released a list of the top five symptoms users have experienced and organized them based on vaccination status. They say that headache was the most common symptom, for both vaccinated and unvaccinated people. Sore throat also made the list, as well as a runny nose. However, fever was first only among those who were unvaccinated. Sneezing made the list only for those who were fully or partially vaccinated.

“I have not heard that sneezing is common with breakthrough cases, but overall, I would say that the vast majority of breakthrough infections, if symptomatic, are much milder in vaccinated persons,” says Kristin Mondy, M.D., associate professor and chief of the infectious diseases division at the Dell Medical School at the University of Texas at Austin.

While the notion that you could still get COVID-19 post-vaccination might be unsettling. The vaccines never promised 100%, but they still come pretty darn close.

“The vaccine is safe and overall, incredibly effective — at least 88 percent against the newest delta variant, [and] the risk of serious disease is very, very low for an average individual who has received a COVID-19 vaccine compared to those who are unvaccinated,” says Mondy. “I can’t stress enough that if everyone does their part and gets vaccinated, then we can achieve herd immunity and prevent the spread of new variants [as well as protect] vulnerable populations.”

Reference: AARP (Aug. 3, 2021) “This Is What a Breakthrough COVID Infection Feels Like”

Suggested Key Terms: Elder Care, COVID-19 (coronavirus), Senior Health

What Happened to Charlie Daniels’ Estate?

Billboard’s recent article titled “How Charlie Daniels’ Family and Team Are Locking In His Legacy” explains that before that could happen, though, Daniels suffered a hemorrhagic stroke on July 6 and died later that day in a Hermitage, Tennessee hospital. Now, a year later, Charlie Daniels Jr., the singer’s only child is planning to preserve the artistic legacy of the country legend. The country singer did have a last will, and he was also survived by his wife, Hazel. Nonetheless, he hadn’t done much estate planning.

“He was champing at the bit to get back on the road,” remarked Charlie Daniels Jr., who worked for his father for 20 years. “We had no idea this was coming,” says Daniels Jr. “After the initial shock, we had to start trying to sort through it all.”

The review of the Daniels estate includes combing through his holdings, such as music royalties, recordings, instruments and equipment for tax evaluation. “There’s a lot of work to be done,” says David Corlew, who worked with Daniels since 1973, managed him since 1989 and had run Blue Hat Records with him since 1997. “It took us 50 years to build what Charlie represented, so we’re not going to unravel it anytime soon.”

Charlie Daniels was best known for his dynamic fiddle playing and Southern rock barnburners like “The Devil Went Down to Georgia” (his only No. 1 hit on Billboard’s country chart), “The South’s Gonna Do It Again,” and “Long Haired Country Boy.” However, he was also a top-notch musician who played on Bob Dylan’s Nashville Skyline album and toured with Leonard Cohen.

Blue Hat has released Duets, Daniels’ first posthumous collection. This album combines the 2007 album Deuces—which included collaborations with Dolly Parton, Darius Rucker, and Brad Paisley—with previously released duets, including one with Garth Brooks. “Charlie always liked dedications on every album,” says Corlew, “and we decided we would dedicate this one to the greatest duo of all — him and Hazel.”

Corlew estimates that the singer’s vault contains at least 40 master recordings, including multiple previously unreleased tracks, that he owned, as well as decades’ worth of Volunteer Jams, the now-legendary concerts Daniels hosted from 1974 to 1996 at various venues around Nashville and starred a wide range of artists, from Billy Joel and James Brown to Don Henley and John Prine.

Daniels Jr. is also working with Sony to release or reissue recordings from Daniels’ 1975-91 tenure on Epic Records, especially Honky Tonk Avenue, an unreleased concept album Daniels recorded in 1984, when he was moved from Epic in New York to the company’s Nashville division. “The powers that be in Nashville didn’t think it was commercial country enough,” says Daniels Jr.

The younger Daniels has also set up Charlie Daniels Brands to house licensed product partnerships, including a line of meats from Tyler County Market that launched shortly after his dad’s death.

“Some people saw it as ‘They’re just trying to capitalize on Dad’s death,’ not knowing you can’t put a deal like this together overnight,” says Daniels Jr. “It had been going for years.”

Daniels’ estate also closed the singer’s touring operation, laying off 25 staffers and it’s in the process of selling some of his work and personal items through a music memorabilia.

“We have 4,000 pieces of equipment we need to sell, but it’s hard for me to walk into that studio,” says Corlew. “It’s heart- tugging. There’s this sentimental aspect to every part of this wind-down. Everywhere you look, there’s Charlie.”

Reference: Billboard (June 24, 2021) “How Charlie Daniels’ Family and Team Are Locking In His Legacy”

Suggested Key Terms: Estate Planning, Wills, Probate Court, Probate Attorney

How Important Is a Power of Attorney?

People are often surprised to learn a power of attorney is one of the most urgently needed estate planning documents to have, with a last will and health care proxy close behind in order of importance. Everyone over age 18 should have these documents, explains a recent article titled “The dangers of not having a power of attorney” from the Rome Sentinel. The reason is simple: if you have a short- or long-term health problem and can’t manage your own assets or even medical decisions and haven’t given anyone the ability to do so, you may spend your rehabilitation period dealing with an easily avoidable nightmare.

Here are other problems that may result from not having your incapacity legal planning in place:

A guardianship proceeding might be needed. If you are incapacitated without this planning, loved ones may have to petition the court to apply for guardianship so they can make fundamental decisions for you. Even if you are married, your spouse is not automatically empowered to manage your financial affairs, except perhaps for assets that are jointly owned. It can take months to obtain guardianship and costs far more than the legal documents in the first place. If there are family issues, guardianship might lead to litigation and family fights.

The cost of not being able to pay bills in a timely manner adds up quickly. The world keeps moving while you are incapacitated. Mortgage payments and car loans need to be paid, as do utilities and healthcare bills. Lapses of insurance for your home, auto or life, could turn a health crisis into a financial crisis, if no one can act on your behalf.

Nursing home bills and Medicaid eligibility denials. Even one month of paying for a nursing home out of pocket, when you would otherwise qualify for Medicaid, could take a large bite out of savings. The Medicaid application process requires a responsible person to gather a lot of medical records, sign numerous documents and follow through with the appropriate government authorities.

Getting medical records in a HIPAA world. Your power of attorney should include an authorization for your representative to take care of all health care billing and payments and to access your medical records. If a spouse or family member is denied access to review records, your treatment and care may suffer. If your health crisis is the result of an accident or medical malpractice, this could jeopardize your defense.

Transferring assets. It may be necessary to transfer assets, like a home, or other assets, out of your immediate control. You may be in a final stage of life. As a result, transferring assets while you are still living will avoid costly and time-consuming probate proceedings. If a power of attorney is up to date and includes a fully executed “Statutory Gift” authorization, your loved ones will be able to manage your assets for the best possible outcome.

The power of attorney is a uniquely flexible estate planning document. It can be broad and permit someone you trust to manage all of your financial and legal matters, or it can be narrow in scope. Your estate planning attorney will be able to craft an appropriate power of attorney that is best suited for your needs and family. The most important thing: don’t delay having a new or updated power of attorney created. If you have a power of attorney, but it was created more than four or five years ago, it may not be recognized by financial institutions.

Reference: Rome Sentinel (July 25, 2021) “The dangers of not having a power of attorney”

Suggested Key Terms: Power of Attorney, Will, Health Care Directive, Guardianship, Incapacitated, Nursing Home, Medicaid, Eligibility, HIPAA, Statutory Gift, Probate, Assets, Estate Planning Attorney, POA

Do You Pay Income Tax when You Sell Inherited Property?

From the description above, it’s clear the family had a plan for their land. However, from the question posed in a recent article titled “I inherited land that recently sold. What will I owe in taxes?” from The Washington Post, it’s clear the plan ended with the sale of the property.

For an heir who is expecting to receive a share of the proceeds, as directed in the mother’s last will, the question of taxes is a good one. What value of the land is used to determine the heir’s tax liability?

The good news: when the great grandfather died, the land passed to the mother and her siblings. To keep this example simple, let’s assume the great-grandfather’s estate was well under the federal estate tax limits of his time and there were no federal estate taxes due.

Next, the mother and her siblings inherit the land. When a person inherits an asset, they usually inherit both the asset and the step-up in the value of the asset at the time of the person’s death. If the great-grandfather bought the land for $10,000 and when he died the land was worth $100,000, the mother and her siblings inherited it at that value.

When the uncles sold the land after the death of their sister, the mother, her heirs inherited her interest in the land. If the person asking about taxes is an only child and an only beneficiary, then he should receive his mother’s one-third share of the land or one-third share in the proceeds. With the stepped-up basis rules, the son inherits the land at its value at the time of the mother’s death.

Assuming the land was worth $300,000 at the time of her death, the son’s share of the land would be worth $100,000. That’s his cost or basis in the land. If he sold the land around the time she died or up to a year after her death, receiving his share of $100,000, he would not have any federal income or capital gains to pay.

If the family sold the land for $390,000 recently, the son’s basis in the land is $100,000 and his sales proceeds would be $130,000, or a $30,000 profit. He would be responsible for paying taxes on the $30,000.

If the land was sold within a year of the mother’s death, there would be no tax to pay. However, after one year, any profit is taxed at the capital gains rate.

There will also be state taxes due on the profit and there’s an additional 3.8 percent tax on the sale of investment property. If the son used the home on the land as a primary residence, there would not be an investment property sales tax.

In this kind of situation where there are multiple heirs, it’s best to consult with an estate planning attorney to ensure that the transaction and taxes are handled correctly.

Reference: The Washington Post (July 26, 2021) “I inherited land that recently sold. What will I owe in taxes?”

Suggested Key Terms: Inherited Property, Trust, Step Up in Basis, Federal Income, Capital Gains Tax, Investment Property, Estate Planning Attorney, Proceeds

Do a Married Couple without Children Need a Will?

While estate planning for couples with no children seems like it would be very simple, the opposite is almost always the case, according to this informative article titled “Three keys to estate planning for couples without children” from The News-Enterprise.

If there’s no last will, intestate succession laws dictate who will receive property.

There are three relatively simple ways for couples to be sure their wishes will be followed, and property distributed as they want.

A secondary level of beneficiaries. Couples don’t always die at the same time, although it does happen. For the most part, upon one spouse’s death, assets owned together, including Payable on Death, or POD accounts, remain in the possession of the surviving spouse. If all of the assets are owned jointly, the surviving spouse may be able to avoid probate altogether. However, they should check with an estate planning attorney to be sure their state will accept this.

There should be provisions in the last will, in case of a simultaneous death. This lets the more important provisions focus on the beneficiaries. While property may pass easily outside of probate to the survivor, the same will not be true if property is to pass to beneficiaries. The estate will go through probate.

If at all possible, couples should have the same designated beneficiaries. If the couple intends to leave everything to the surviving spouse, they will need to decide who will receive joint property after both have died.

Last wills for each spouse must be created to work together. Designating separate lists of beneficiaries in each spouse’s last will and testament ultimately results in the marital property being left only to one spouse’s loved ones. The result: the other spouse’s family can end up being disinherited.

One way to address this is to create marital shares of property. Couples generally divide marital property in equal shares, although couples in blended families may choose to use a different fractional share.

For each fractional share, each spouse should write out their own list of beneficiaries, being sure that the total ends up being 100%.

Another point to be determined: will survivors within the group receive a larger share pro rata, or will children of the deceased beneficiaries receive their shares? This needs to be clarified when the estate plan is created to avoid potential problems for beneficiaries.

Beneficiaries could potentially be changed after the death of the first spouse, so if the couple wants to prevent anyone from being disinherited, they can use a revocable living trust. This can lock up the deceased spouse’s shares in a manner to allow the property to remain available for the survivor, but the survivor cannot change beneficiaries for the deceased spouse’s share.

Estate planning for couples with no children can have its own pitfalls, so consult with an experienced estate planning attorney, who will know how to protect all members of the family.

Reference: The News-Enterprise (July 27, 2021) “Three keys to estate planning for couples without children”

Suggested Key Terms: Last Will and Testament, Estate Planning Attorney, Beneficiaries, Surviving Spouse, Revocable Living Trust, Payable on Death, Deceased Spouse, Probate, Simultaneous Death, Marital Property, Fractional Share, Revocable Living Trust

What are the Advantages of a Testamentary Trust?

One reason to have a last will and testament is to protect minor children. A will offers a means of providing for a minor child through a testamentary trust, which is also a good tool for leaving an inheritance to someone who might not use their bequest wisely, says the recent article “What is a Testamentary Trust and How Do I Create One?” from wtop news.

Trusts are legal entities that hold assets, and money or other assets in the trust are managed according to the wishes of the person who created the trust, known as the grantor. A testamentary trust is created through the person’s will and becomes effective upon their death. Once the person dies, their assets are placed in the trust and are distributed according to the directions in the trust.

A trust can also be created while a person is living, called a revocable trust or a living trust. Assets moved into the trust are distributed directly to heirs upon the person’s death and do not go through the probate process. However, they are administered without probate, as long as they are in effect. Living trusts are also managed outside of the court system, while testamentary trusts are administered through probate as long as they are in effect.

A testamentary trust is used to manage money for children. However, it can also protect assets in other situations. If you are concerned about an adult child getting divorced and don’t want their inheritance to be lost to a divorce, a trust is one way to keep their inheritance from being considered a marital asset.

The oversight by the court could be useful in some situations, but in others it becomes costly. Here’s an example. Let’s say a testamentary trust is created for an 8-year-old to hold assets until she turns 25. For seventeen years, any distribution of assets will have to take place through the court. Therefore, while it was less costly to set up than a living trust, the costs of court proceedings over the seventeen years could add up quickly and easily exceed the cost of setting up the living trust in the first place.

If someone involved in the estate is litigious and likely to contest a will or a trust, having the court involved on a regular basis may be an advantage.

Having an estate planning attorney create the trust protects the grantor and the beneficiary in several ways Trusts are governed by state law, and each state has different requirements. Trying to set up a trust with a generic document downloaded from the web could create an invalid trust. In that case, the trust may not be valid, and your wishes won’t be followed.

Once a testamentary trust is created, nothing happens until you die. At that point, the trust will be created, and assets moved into it, as stipulated in your last will and testament.

The trust can be changed or annulled while you are living. To do this, simply revise your will with your estate planning attorney. However, after you have passed, it’ll be extremely difficult for your executor to make changes and it will require court intervention.

Reference: wtop news (July 19, 2021) “What is a Testamentary Trust and How Do I Create One?”

Suggested Key Terms: Testamentary Trust, Grantor, Minor Child, Last Will and Testament, Assets, Annulled, Probate, Living Trust, Beneficiary, Executor, Invalid, Assets, Estate Planning Attorney

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