The tools available to an estate planning attorney are: wills, trust agreements, powers of attorney, advance directives, contracts, designations and deeds. We address present and future beneficial interests, contingencies, managing tax uncertainty.
These tools, properly used, will reduce if not avoid altogether legal problems, unnecessary legal fees and court costs, and family conflicts.
Let’s assume Betty and Bob have been married for years. They have three children, Bruce, Emily and Sue. Betty survives Bob. She inherits everything.
The assets might have all been owned jointly with survivorship rights, or designated to go to the survivor. Therefore, the administration was not too involved.
Betty thinks she should just put Bruce as a joint owner on the house and the accounts. She knows Bruce will “do the right thing” and make sure his siblings get their share.
Is this a good idea? No. Is there a better way? Yes.
What could go wrong? If Bruce is sued while Betty is alive, Betty’s house and assets could be in jeopardy. If Betty passes, and Bruce gets divorced, his wife could get half.
If Betty passes and Bruce’s siblings plead with Bruce for their share, they will have no legal right to it.
There is a better way. Betty creates a revocable trust (which is really a written agreement that provides instructions Betty’s loved ones are to follow). She makes it so she and Bruce are co-trustees and that Bruce can act alone while Betty is alive.
Betty wants Bruce to handle the bills so she makes him a co-trustee with the full authority to act. Betty’s trust directs Bruce to distribute the property to him and his siblings in equal shares and she leaves it to them “in trust” so they can use the money but can’t lose it if they get sued.
Now, under this better way, if Bruce is sued while Betty is alive, neither Betty’s house nor her assets will be in jeopardy due to Bruce’s actions.
If Betty passes, and then Bruce gets divorced, can his wife get half? Not if his share is left in a spendthrift trust for his benefit.
If Betty passes and Bruce’s siblings plead with Bruce for their share, are they legally entitled to it? Yes. It is Bruce’s job, as trustee, to distribute the trust property as the trust directs once the bills have been paid.
Moral: A little advance planning can make a big difference.
Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate and elder law planning attorney. mwinnesq.com