COVID-19 Creates A Stark Reminder That Even A Basic Estate Plan Is Far Better Than No Plan

COVID-19: An Example of Just How Unpredictable Life Can Be. Why a Revocable Trust May Be A Great Starting Point For You

Introduction

If COVID-19 has made you take a closer look at your financial plans, you’re not alone. You may have only recently started to establish an estate plan, or you may be rethinking the plans you had previously put in place. Now is a great time to review your financial strategies and consider establishing a revocable trust as part of your estate plan.

Chances are, you know the fundamental differences between a will and a trust, but have you considered why a trust might be the better decision for you? We review the differences and benefits of each.

What is a Will?

A last will and testament give instructions to the court of your final wishes, including who is in charge of implementing them, how the property is to be distributed, and who will care for any children under the age of 18.

The Probate Process

In order to establish a will, you will need to work within the probate court system. This requires that you file all documents with the court, and the documents then become a matter of public record. Many people choose to establish a trust to avoid the public record, protecting their family’s privacy.

Establishing a will can also take a great deal of time, particularly in the pandemic’s current environment. The probate court process usually is very time consuming, and with the court closures due to COVID-19, the process has become even slower. Many probate courts are not currently open, and those that are open may be experiencing longer processing times due to backlogs. Additionally, probate can take several months before your loved ones actually gain access to your assets upon your death.

Establishing a will through probate is also a costly process. You will most likely want to hire an attorney, and in many cases, the process will cost more than it would to establish a trust.

What is a Revocable Trust?

A revocable trust is a living trust that can be changed or canceled by the grantor at any time during the grantor’s life. The assets within a revocable trust only transfer to its beneficiaries after the grantor has passed.

As the grantor of a revocable trust, you are still able to:

  • Utilize the assets within the trust
  • Distribute income earned to yourself
  • Adjust the provisions of the trust
  • Close or modify the trust at any time

 

When you establish a revocable trust, you will need to name a trustee who is responsible for managing the assets in the trust. In most cases, the grantor names themselves as the trustee and also names a successor trustee. A successor trustee manages the distribution of the trust’s assets after the grantor’s death.

Avoiding probate is a primary objective for many who establish a revocable trust v. a will. Additionally, trusts can maximize the efficiency of asset transfer to future generations.

What are the Benefits of a Revocable Trust, Especially During COVID-19?

As you consider whether a will or a trust might be right for your financial plans, you will want to factor in how COVID-19 has affected each.

Avoid Probate

Opting to establish a will during the pandemic means that you might be subject to further delays in addition to the already lengthy probate process. However, establishing a revocable trust allows you to avoid the time and cost associated with the probate system.

Avoid Complications and Stress

If you decide to use a will instead of a trust as part of your estate plans and your family has property in multiple states, know that your loved ones must go through the necessary probate proceedings in each separate state. This creates tedious work and additional stress for your family at an already difficult time.

Gain Financial and Legal Expertise

If you decide to establish a trust instead of a will, you also have the option to utilize a third-party, corporate trustee. Using a corporate trustee means that you will have the financial and legal expertise of a neutral party acting on behalf of the interests of the beneficiaries. It also relieves the trustee responsibilities of any children or family members in a way that a will does not.

Adding a Pour-Over Will to Your Revocable Trust

If you do decide to establish a revocable trust as part of your estate planning, you will want to consider adding a pour-over will to your trust.

A pour-over will automatically add any assets that were not included in your revocable trust to the trust upon your death. This avoids the possibility that remaining assets would instead be subject to the laws set by the jurisdiction in which a grantor passes away.

Conclusion

While avoiding probate is generally the primary reason people choose to establish a trust v. a will, there are many other benefits to including a revocable trust in your estate planning, especially during the current health pandemic.

Including a corporate trustee as part of your estate planning can further ease confusion and stress. Alliance Trust has helped many people just like you establish a revocable trust. Reach out to speak to an expert and find out if you might benefit from the many Nevada trust strategies such as Asset Protection.

COVID-19: Why Estate Planning is More Important Than Ever

A brief overview of the two most common estate planning strategies

The current global health crisis has left many people uncertain about the future. Now more than ever, having a financial plan in place is crucial. Not only should you consider your immediate and short-term financial goals, but you should also look at long-term planning. Specifically, what plans do you have in place to make sure your wishes are carried out and your family is taken care of after you are gone?

We review the basics of Estate Planning and what to consider in light of COVID-19.

What is Estate Planning?

Uncertain times can undoubtedly make you think, or even worry, about the future. Making sure you have a plan for your financial investments and assets can help ease your concerns.

Estate planning is the process of planning and arranging for the distribution of an estate that you accrue during your life. Although many people don’t consider themselves to own an ‘estate,’ the reality is that nearly everyone does. Therefore, it is essential to understand what estate planning does to protect your family and how to establish one properly.

Estate planning ensures that your wishes are fulfilled, your family is protected, and your estate value is maximized during transfer to your beneficiaries. In addition to providing clear instructions of your wishes, estate planning can help you reduce estate taxes and other expenses by streamlining the distribution of your assets.

An effective estate plan will benefit and protect the next generation (multiple generations in Nevada) of your family and other beneficiaries. In addition to financial arrangements, an estate plan also covers your medical wishes, which can offer further peace of mind during a pandemic.

What are the benefits of Estate planning?

In the face of a global pandemic, having your affairs in order will provide peace of mind for you and your family. While peace of mind during a health crisis is one clear benefit, there are other tangible benefits as well.

  • Privacy for you and your loved ones
  • Clear directive on the division of assets
  • Direct charitable donations
  • Reduce or eliminate estate, transfer, and gift taxes
  • Protect your estate from mismanagement, creditor claims, and divorcing spouses

What to Include In an Estate Plan

An estate includes personal residences, insurance, retirement accounts, personal possessions, household goods, vehicles, intangible assets, and more. And while nearly everyone has an estate, there are different ways to approach estate planning.

Estate planning encompasses several different components, and you may have some of these documents and plans already in place. However, during the pandemic, it is crucial to confirm that you have a comprehensive and current plan in place and to review and update any outdated documents.

Basic Estate Planning Strategies

While wills and revocable trusts are the two most common estate planning solutions, Alliance Trust administers complex, modern, and personalized estate planning solutions as well.

Last Will and Testament

A last will and testament give instructions to the court of your final wishes, including who is in charge of implementing them, how the property is to be distributed, and who will care for any children under the age of 18. However, you may consider using a revocable trust instead of a will for several reasons. When you create a will, any documents filed with the probate court become a matter of public record, and you may want to avoid this for privacy reasons. The probate court process is also very time consuming and expensive, and the current health pandemic has slowed down probate courts even further.

Revocable Trust

A revocable trust means that all of the assets within it remain in your possession while you are alive. You may amend or revoke your revocable trust at any time.

Many people prefer to use a revocable trust instead of a will. A revocable trust will accomplish everything that a will accomplishes, but avoids the expense and time associated with the probate court process. During the pandemic, many courts are not accepting probate petitions. This may further delay setting up your will, and you will want to keep this in mind as you decide which is better for you.

Pour-Over Will

If you decide to go with a revocable trust, you may want to add a pour-over will to your estate planning. The pour-over will is a type of safety net to ensure that any assets not included in your revocable trust will “pour-over” into the trust upon your death.

Essential Estate Planning Roles

Grantor

The grantor is the person who creates or establishes a trust. The grantor will decide what property and assets to include in the trust, as well as who the beneficiaries will be. As the grantor of a revocable trust, you may change or terminate the trust at any point until you die.

Beneficiary

The person or persons who receive the benefit (often asset distribution) from a trust are the beneficiaries. The grantor decides who these individuals are, and the trustee works to make sure the interests of the beneficiaries are being protected throughout the maintenance and distribution of the trust.

Trustee

If you establish a trust as part of your estate planning, you may want to assign a corporate or third- party trustee to manage the execution and distribution of your trust.

A corporate or third-party trustee can offer many valuable benefits such as legal and financial expertise, but can also provide a consistent and unbiased perspective to uphold the trust’s integrity throughout all transactions and for multiple generations.

Click here to learn more about selecting a corporate trustee v. a family member trustee.

Conclusion

Having an estate plan in place can provide you and your family peace of mind during this time of uncertainty. Now is a great time to review your plans and to consider strategies that will further streamline your assets and maximize your wealth.

If you would like to establish a trust to minimize your estate transfer costs and potentially trim taxes, Alliance Trust Company of Nevada’s trust officers are here to help guide you through the process.

Deciding Between a Will and a Trust? The Distinctions You Need to Know

The Basics of Wills and Trusts  and What You Need to Know About Probate

We get a lot of questions about the differences between a will and a trust – but there are a few more distinctions we think you should know. Understanding how to protect your assets and your family requires knowledge of what protections your will, trust, or testamentary trust actually grant you and your beneficiaries.

What is a Will?

A will is a legal document that is used to direct the distribution of assets, and, when applicable, to appoint guardians for children. An attorney drafts your will, and you can work with them to update it as frequently as needed to ensure it’s still applicable to your current situation.

What happens when you don’t have a will?

When a person passes without a will, it’s called dying “intestate.” If this happens, the state distributes the deceased person’s assets according to the laws of the state.

The Basic Components of a Will?

A will is made up of several parts, including the people involved. Every will has a testator, an executor, and a beneficiary, here’s a brief explanation of these roles:

Testator: A testator creates a valid will to be executed upon death.

Executor: The person who carries out the wishes of the testator according to the will.

Beneficiary: A beneficiary is a person (or persons) who inherits the assets and/or estate left by the deceased in the will. A beneficiary can also be an entity (e.g., charity, business, trust) rather than a person.

A will, or testamentary will, is prepared by the testator and signed in the presence of witnesses. To ensure the will is comprehensive and makes legal sense, it’s best to prepare a will with professional assistance from an attorney.

There are other types of wills, but they are less likely to be carried out after the testator’s death. An example of a non-testamentary will is a holographic will. A person writes and signs a holographic will, but not in the presence of a witness. 

While a will covers many assets, there are several exceptions, such as life insurance payouts. Because life insurance policies name beneficiaries, the will cannot override that distribution. For more comprehensive asset protection, you may want to consider establishing a trust.

A will is subject to the probate court, which takes time and costs money, a will also becomes a part of public record, which could be a privacy issue for people.

What is Probate?

Probate is the legal process distributing a deceased person’s estate as designated in their will or by state law or both.

When a person passes without an established trust, the probate process typically proceeds as follows:

  1. The will or the probate court appoints a trust administrator or executor.
  2. The court determines if the will is valid, so it makes sense to draft your will with the help of an attorney. Your will must also have the appropriate witnesses according to your state’s laws.
  3. The court inventories all properties and assets. They cannot be sold nor distributed until the probate process completes.
  4. The court appraises all properties and uses the assets to pay all debts and taxes that may exist.
  5. Assets are distributed according to the will if a valid will exists and according to state law if a valid will does not exist.

 

Why Do You Want to Avoid Probate?

In addition to probate being a public process, it also allows for people to challenge the will, leaving the fate of the will in the hands of the court. Probate is not a quick process. On average, it takes six to nine months to complete. During the probate process, assets become “frozen,” meaning they can’t be sold nor utilized by beneficiaries.

Maintain Family Harmony

Moreover, often, the surprising drawback for families that go through a probate process is that it may disrupt family harmony during an emotional time. Family members may feel entitled to assets or may feel they have a more precise understanding of the intentions of the testator than other family members. Or, as mentioned above, family members may challenge a will forcing avoidable issues with other family members.

A properly established trust ensures that a grantor’s vision and intentions come to fruition.

What is a Trust?

A trust is a legal agreement that takes effect as soon as you create it, unlike a will that only takes effect when the testator passes. The trust distributes wealth at a point specified by the grantor.

Trusts are flexible (but do not have to be flexible) agreements that are easily customized to meet the needs of the grantor and the beneficiaries. Contrary to wills, trusts avoid probate court: they do not become public record, and the family maintains a deeper level of privacy.

The Basic Construction of a Trust

The roles of those involved with a trust are similar to those of a will but with slightly different terminology:

Grantor: The grantor establishes a trust.

Executor: The executor is the person or business entity responsible for the execution of the trust.

Beneficiary: The beneficiary receives distributions from the trust.

There are two basic types of trusts – inter vivos (living) and testamentary. 

Living Trust

A grantor establishes a living trust when they are still alive and is either revocable or irrevocable. Revocable trusts have more flexibility than irrevocable, but both types avoid probate and help retain privacy.

A trust allows the grantor to decide who receives trust distributions and when. The trust gives complete control to the grantor, avoids probate, and, when combined with a will, creates a comprehensive estate plan.

Testamentary Trust

Not all people establish trusts ahead of time, some trusts come into existence when the grantor dies, and their will directs the formation of a trust. This type of trust is called a testamentary trust.

When a person creates a will, they can specify the creation of a trust upon their death; this does not avoid probate. After assets named in the will go through the probate process, the court creates a trust. Because of this, the trust will always be under the control of the court. 

Sometimes people choose to do a testamentary trust over a revocable living trust because it seems “cheaper” upfront. However, the cost of probate court alone could render this untrue.

Conclusion

A properly established trust will maintain a grantor’s legacy while circumventing the time-consuming and often costly probate process. If you’re looking at the big picture, you can often save time, money, and mitigate family tension by establishing a trust.

Nevada carries the most advantageous trust laws in the U.S. when it comes to privacy, asset protection, and flexibility. Alliance Trust has many estate planning attorneys that may assist you in establishing or evaluating an estate plan that meets your needs now and for many generations. 

We are happy to assist you. We Are Nevada.

 

Awareness of NING Trusts Growing Nationally

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Nevada Incomplete Non-Grantor Trusts (or, “NINGs”) are growing in popularity and usage across the country.  NINGs provide the grantor of the trust asset protection and the potential to minimize local and state income taxes on investable/intangible assets.  As this NASDAQ.com Article on NINGS, these types of trusts are not for everyone.

However, a family living in a high-income tax state with significant taxable income and appreciated investments (or investments expected to appreciate) can benefit from a NING. This is just one of many Nevada trust planning strategies that makes Nevada the Asset Protection Trust Rankings   If you are interested in learning more about NINGs, please read this Article by attorney Gordon Schaller and call Greg Crawford at Alliance Trust Company in Reno at 775-297-4684.

Children Facing Challenges and Your Estate Plan – You Have Options

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For a family dealing with children with handicaps or other challenges, the journey does end when the child turns age 18.  Many parents and families worry about how their adult children will fare after the parents pass away.  Fortunately,  a well crafted family estate plan can provide solutions to these problems.  Children with medical difficulties and handicaps may need a special needs trust to preserve eligibility for government aid and other programs that could be jeopardized by a sudden influx of wealth. For children dealing with substance abuse, a special purpose trust could be the answer.  In some cases, a family may consider disinheriting a child to prevent an inheritance from furthering a destructive lifestyle.  While this is an option, special legal care is needed to ensure that money does not fall into the wrong hands and situation.  Nevada is considered the best state in the country for estate planning, and may offer options and flexibility for your family’s estate plan that your home state does not.  And you do not need to be a resident of Nevada to establish and benefit from a Nevada trust.  Contact Philip Brown at Alliance Trust in Reno at 775-297-4277 to learn more about the advantages of a Nevada Trust.

Estate Planning for Blended Families is Critical

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Family dynamics can always be challenging, but are even more so in blended families.  Friction between ex-spouses and children from other marriages can boil over when parents pass away.  If proper estate planning is not done in advance, the courts step in to divide family assets.   This is never an easy situation, and in the case of blended families this process can create great animosity.  Well regarded Nevada estate planning attorney Scott Halvorsen recently wrote an excellent article on this topic.  Nevada has some of the best trust  and estate laws in the country, and may give you more options and strategies that your home state laws.  If you have questions about how estate planning topics impact your family, please call Greg Crawford at Alliance Trust in Reno, 775-297-4684.

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