Nevada Estate Planning & Elder Law Information Blog

What Is The Most Common Mistake You Can Make In Estate Planning?

If someone were to ask me what the most common mistake is you can make in estate planning, my answer would be simple.  The most common mistake is simply not getting around to planning at all.  Remember the old adage "failing to plan is like planning to fail".  Well this is particularly true in the case of estate planning. 

  The best way to protect you and your loved ones, is to make the time NOW to plan your future estate.  Both you and your loved ones deserve to have a secure future.  Nothing is more frustrating or frightening to family members than having to guess at what they believe your wishes would have been.  You can take the guess work out of the equation by following these easy pointers:

1. Make a Will.  Everyone needs one.  If you do not draft a will, the state will decide what happens to your property after you die.  A will allows you to designate to whom and how, you want your property to pass.  Whether you have a minimal, modest or large estate, you will want to designate the person you wish to wrap up your business after you have passed away.  This person is called the executor of your estate.  Additionally, your family will already be dealing with the grief of your passing, you do not want to compound that grief by failing to leave any directions about how you want your personal property distributed.  If you want your wedding ring to go to your granddaughter, or your gold watch to pass to your son -- let them know in your will.

2.  Keep Your Beneficiary Designations Current.  I know I have written about this before, but I cannot say it enough -- in many cases the beneficiary designation will trump what is written in your will or trust, so make sure your beneficiary designations are consistent with your other estate planning documents.

3.  Execute Powers of Attorney to Plan for Incapacity.  Who will take care of things for you if you are unable to speak for yourself?  A Durable Power of Attorney and a Medical Power of Attorney can protect both you and your family's interests.  A Durable Power of Attorney allows the person you choose to make legal and financial decisions on your behalf.  A Medical Power of Attorney allows you to state in advance the kind of medical care you would want in the event you become incapacitated, and further allows you to indicate the person you would want to make medical decisions on your behalf if you are unable to speak for yourself.  If you do not have these documents, and attorney and the court will need to become involved at the time of your incapacity, which is not only time consuming, but can be a real financial burden for your family.      

Make the time today to see a professional about your future.  If you do not already have a relationship with a qualified estate planning attorney, please contact The Herr Law Group at 735-4377.  We would love to meet with you and talk to you about your planning options.

Consider the Effect of Your Will or Trust During a Divorce

Did you know that existing wills and trust are not invalidated by a divorce?  The law in Nevada provides that those provisions or awards to a spouse contained in a will or trust  will be invalidated by operation of law, however the other provisions of your estate plan will not be invalidated.  (See NRS 133.115 and NRS 163.565.  This means that bequests to your ex-husband's family, or designations of your ex in-laws as a guardian will continue to stand until the will or trust is revoked. 

Additionally, you should be aware that this statutory provision does not take effect until the divorce is final.  If the will or trust is not revoked and a party dies during the midst of the divorce litigation, the provisions of the surviving estate planning document will stand. Consequently, if you have a will or trust already in effect, and are going through a divorce, talk to your lawyer about revoking these provisions even before your divorce is over, so you can be sure that your estate plan reflects your true wishes in the event of an unforseen tragedy.

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What Assets Should You Put in Your Living Trust?

In order for your trust to be effective, you must "fund" your trust, by transferring and/or retitling assets in the name of the trust.

The assets you generally should put in your trust include:

• Real Estate
• Banking and Related Financial Accounts
• Stocks, Bonds, and CDs
• Business interests
• Intellectual property
• Oil and Gas interests
• Personal untitled property

Other assets that you should discuss with your estate planning professional include:

• Life Insurance
• IRA and other tax-deferred accounts
• Certain types of stock options
• Professional Corporations
• Automobiles

It is possible to place these latter assets in trust, however because of tax implications and other liability concerns associated with putting these assets into your revocable living trust, you will want to discuss this decision with an estate planning professional before taking action.  If you do not have an estate planning professional, please contact The Herr Law Group to schedule an appointment to speak with our office.

Who Should be the Trustee of Your Revocable Living Trust

In most cases, you will want to be the trustee of your own trust.  You and your spouse can be either separate or co-trustees of your family trust.  If you are a co-trustee, either one of you can act to manage and control the trust.  If one of you becomes incapacitated or dies, the remaining co-trustee automatically assumes control without the need for any court intervention. 

In the event there is no co-trustee, upon your death or incapacity, a successor trustee will be used.  A successor trustee will be named by you in your trust, and can be any individual you choose -- an adult child, relative, or trusted friend.  Another option is to use a corporate trustee.  This is typically a bank or trust company whose job it is to manage your assets.  Corporate trustees are typically experienced investment managers, and can be relied upon to make sound, objective financial decisions on your behalf. 

A successor trustee looks after your personal care, and manages your financial affairs for as long as needed.  If you recover, you will automatically resume control.  In the event you dies, he successor trustee pays your debts and distributes your assets in accordance with the terms of your trust. 

For additional information on selecting a trustee click here to visit the Living Trust Network.

What Is a Living Trust

If you have been reading this blog for a while, you have heard me refer to a Living Trust as an instruction manual.  In fact this explanation might be selling a Living Trust short.  A Trust does carry with it instructions for caring for you, your assets, and your debts, but more than just "instructions", a Living Trust is an entity in which you place all of your assets so that they can be stored together. 

Because the trust now becomes the owner of all of the assets, your can elect to control the trust yourself, or you can elect to give someone else control of the trust.  This can be a real benefit should you become incapacitated and unable to handle your own affairs.  This can also be useful in the case of a spouse who is unfamiliar or uncomfortable handling the family finances.  A trustee can be designated to assist that spouse, without them having to give up any of the benefits of the assets.

Best of all, because legally, you no longer "own" your assets (the trust owns the assets), your estate does not have to go through probate when you pass away, which saves your beneficiaries, both time and money. 

In the meantime, assuming you elect to act as the trustee of your own trust, you maintain full control. As a trustee, you can do everything you did before.  Buy and sell assets, change beneficiaries, and (in the case of a revocable living trust) even revoke or end your trust.   For more information on Living Trusts check out this free information available from the State Bar of California.

Why Do I Need a Trust if I Have a Power of Attorney

A common question is why a trust is necessary if you become incapacitated but have a power of attorney.  After all, if the person holding your power of attorney can transfer and sell assets on your behalf, what is the problem?

The answer is three fold.  First, depending upon the type of power of attorney you have given your designee (i.e. Springing, Durable, Limited, etc), that person may or may not have the authority to act on your behalf once you are found to be incompetent.  Should you die, a power of attorney ends, meaning that your family will have to go through probate to wind up your affairs. 

Next your power of attorney could be refused without additional documents to back it up.  Sometimes, banks and other financial institutions will not honor a power of attorney unless it is on "their" form.  Additionally, unless your power of attorney has been recently executed, others become reluctant to honor the power of attorney, fearing that the power of attorney has grown stale or outdated.

Finally, giving someone your power of attorney without directions on how it is to be used, is a bit like placing a child is a candy shop.  Given someone a blank check to do whatever he or she wants with your finances can be risky.  A trust acts as an instruction manual.  Just as a parent leaves instructions for a  babysitter before going out for the evening, a trust leaves instructions for your trustee about how you want to be cared for, what type of medical treatment you want, and how, in the event of your death you want your finances handled.  Thus the power of attorney with the trust becomes an effective tool, while the power of attorney alone can be very risky. 

Estate Planning Basics

Estate Planning is a tool available to everyone with many different applications.  You should consider estate planning,

• If you wish to control how your assets are distributed
• You want to name a guardian for your children or dependent family members
• You want to protect your family from certain types of creditors, or
• You need to reduce the potential tax burden an inheritance would create for your heirs.

The cornerstone of your plan will be either a will or trust.  The primary distinction between the two, is that a will only becomes effective upon your death.  A trust, sometimes referred to as a "living" trust, becomes effective immediately, and can provide for protective actions to occur upon disability, as well as death.  Circumstances upon which you could become disabled could include an illness, or accident.  Anything that would render you unable to take action for yourself.  In such an event, the trust would allow a trustee to make decisions in your best interest and in keeping with the directions established in your trust document.

A trust sometimes costs a bit more to prepare than a will.  This is because a trust is a more involved document and has broader application than a will.

It is important to know that estate planning documents can be useful to many different people, from many different economic backgrounds.  Estate plans are not just for the "rich and famous", and they are not just for avoiding taxes.  If you have young children, you can use these documents to provide for your children's care in your absence.  If you have an elderly parent, or a special needs relative, you can make arrangements for their financial and physical care, if something were to happen to you.  Estate plans are essentially directions for caring, transferring, and protecting your assets and obligations.

Why Anyone Going Through a Divorce Can Benefit From Estate Planning - Part II

If you and your spouse had estate planning documents drawn up during happier times in your relationship, a divorce is an important time to review those documents, as it is likely that the mutual goals and aspirations you once shared as a couple have changed. For instance, couples often execute reciprocal wills or trusts, in which they leave all their possessions to their spouse. Similarly, the spouse is often designated as the trustee or executor of the estate plan, and may even have power of attorney to act on the other spouse's behalf. If the two of you no longer want to spend your life together, chances are you no longer want that person making decisions for you as your power of attorney, or inheriting your estate under the terms of a previously executed will or trust. It is important for you to share a complete set of your estate planning documents with both your divorce attorney, and an estate planning attorney who can give you proper advice about modifying your plan to reflect your new intentions.

Protect Your Privacy With a Trust

An estate plan which uses a trust to pass property from one person to another, allows for greater privacy for you and your family. 

Did you know that a will must be published in the public record.  One of the most famous cases of this is the will of Jacqueline K. Onassis, wife of President John F. Kennedy.  When Mrs. Onassis passed away, her will went through probate, which required it to be filed in public court documents.   Consequently, with a simple search on the Internet, you can locate several sites where her personal will is now available to everyone to review. 

While reviewing Jackie O's will may be of historical interest, imagine your own documents being treated in this same manner.  In this day and age of identify theft, and privacy concerns, do you really want a description of your property, debts, and last wishes made available to prying eyes?

A trust does not go through probate so it does not have to be published.  Therefore the privacy of you and your heirs is protected.