Episode 27
In the last episode, we discussed the benefits of having a revocable living trust as your estate plan instead of a will.  In this episode we’ll cover how to set up a living trust and how to plan the distribution of your assets.


SHOWNOTES:
 

How to set up a living trust

  • You can use an online provider like LegalZoom or RocketLawyer, or you can find an attorney that specializes in estate planning in your area.
  • The cost for an attorney to set up your estate plan will be between $1,200 to $2000 for a couple or $1,000 to $1,500 for a single person.
  • LegalZoom.com - Between $249 to $299 to set up a living trust.
  • Rocket Lawyer - $39.99 per document or $39.99 per month membership,   which includes a 30 minute session with a lawyer on every legal matter, ask a lawyer your legal question, and all documents.
  • If you’re a church or non-profit organization, you can look into Financial Planning Ministry, who specializes in estate plans and has a full-service process for your members or employees.
  • Whichever you decide to use, make sure you do your homework.  
    • Learn about estate plans and educate yourself on the basics so you’ll know which one is best for you.
    • LegalZoom, RocketLawyer, and FPM are all great resources to learn from.

 

Checklist for creating a living trust

  • List of your assets you want to include in the trust including your house, car, jewelry, stocks, bonds, life insurance policies, etc.
  • Documents - titles and deeds of property, stock certificates, life insurance policies, etc.
  • Choose your beneficiaries.
  • Choose a successor trustee and a secondary trustee.
  • Choose someone to manage property for minor children.
  • Prepare the trust document.
  • Sign and notarize the trust.
  • Fund the trust - transfer property and assets into the trust.
  • Store and keep your trust up to date.

 

Medical Directive

 

Health-care proxy:

  • This is a legal document in which an individual designates another person to make health-care decisions if he or she is rendered incapable of making their wishes known. The health-care proxy has, in essence, the same rights to request or refuse treatment that the individual would have if capable of making and communicating decisions.
     

Durable Power of Attorney
 

  • Through this type of advance directive, an individual executes legal documents that provide the power of attorney to others in the case of an incapacitating medical condition. The durable power of attorney allows an individual to make bank transactions, sign social security checks, apply for disability, or simply write checks to pay the utility bill while an individual is medically incapacitated.

 

How to distribute your estate

 

Without specific instructions to direct asset distribution, family members can be left guessing what a deceased person would want -- or decide what to do themselves.

In some cases, a probate court has to step in and resolve bitter disputes by distributing numerous items. It’s a textbook example of the headaches, heartaches, and expense that can result from inadequate estate planning.

To help avoid this in your family, there are a number of steps you can take to distribute your estate:

  • Give away gifts while you are still alive.
    • Remember, you’re allowed to give up to $14,000 to as many individuals as you like.  Couples can give $28,000 per year.
    • If there are specific items you want to give to loved ones, present them now. In other words, get them out of your estate.
    • It can be rewarding to see your prized possessions go to individuals who appreciate them.
    • Depending on the size of your house, you may have thousands of items.
    • Throw away or donate things you no longer need. (A donation to a qualified charity may result in a tax deduction.)
       
  • Make specific bequests in your will or in a letter of intent.
    • If you want your car to go to your daughter or your golf clubs to go to your grandson, put it in writing.
    • Without detailed instructions and guidance, the executor may have to devise an equitable system for distributing your possessions.
    • That can place a large burden on the executor and lead to disputes among your heirs.
       
  • Choose your executor carefully.
    • The executor generally exercises discretion in distributing personal and household items.
    • So it's important to name a trustworthy person with a fair, impartial, reasonable personality -- especially if there are sibling rivalry issues.
    • You want someone who will fulfill your intentions.
    • The right executor can reduce the chance of litigation.

No matter who you name as an executor, he/she will appreciate clear, written instructions.

 

Guide for dividing your estate among your heirs

  • Use a “fair” division of all your assets when appropriate.
    • If one of your beneficiaries is disabled, they may need more resources to take care of themselves after you are gone. You might consider establishing a trust for their care.
    • Some of your beneficiaries might be your step-children. In this situation, they will probably inherit from their biological parents. You probably will want to leave them less than you leave to your biological children.
    • You might have given one beneficiary gifts during your life. For example, you might have provided the down payment for a child’s home.
    • One beneficiary might have been instrumental in growing a family business. It makes sense to leave them the business instead of your other children.
    • One of your beneficiaries might waste money because of a gambling or substance abuse addiction. In this case, a trust can help ensure that they cannot spend the money unless they meet certain conditions.
       
  • Ask your heirs if they want sentimental gifts.
    • Something small, like a tea cup, might not have much monetary value. However, it could be your youngest daughter’s favorite item from childhood, and she might resent you if you don’t give it to her. You can head off disagreements after your death if you ask your beneficiaries what they want.
    • In your will or trust, you can identify who gets what property using a separate memorandum. Make sure you mention the memorandum in your will or trust.
    • It might be easiest to give sentimental objects away during your life, particularly if they aren’t worth much.
    • However, problems can arise if the sentimental gift is valuable. Keep in mind the “fair” measure for distribution to avoid making the other beneficiaries resentful.
       
  • Set expectations in advance
    • Discuss your estate plan with your family.
    • Your heirs may be expecting a certain inheritance and perhaps planning on it.
    • If they aren’t inheriting as much as they expect, let them know.
    • The worst thing you can do is to blindside someone after death.
    • If you're worried about fighting or resentment, write out explanations and justifications for your gifts. Leave behind messages stating why each person is receiving each gift.

 

RESOURCES
 

Legal Zoom
Rocket Lawyer
Financial Planning Ministry