By: Nicole T. Livingston – Principal and Senior Estate Planning Attorney, Elville and Associates, P.C.
January 8th — At the first meeting with a prospective client, I begin by asking them to tell me about their family and their assets, because that is what estate planning is all about. We need to discuss what their goals are and determine the best approach for writing a document to meet their specific needs. Who should receive their assets? When should their beneficiaries receive the assets? How should they receive your assets upon your death? And, all of this at the least cost.
A revocable trust is a legal document, often considered a substitute for a Last Will and Testament. In other words, you write a revocable trust instead of a formal Last Will and Testament. The trust is similar to a contract. There are three parties to a trust. (1) The Grantor is the person who establishes or writes the trust. (2) The Trustee is the person who controls the money titled in the name of the trust. (3) The Beneficiary is the person who receives the benefit of the money in the trust. Typically, when drafting a revocable trust as a basic estate plan, the client occupies all three positions. He or she writes the trust, controls the money in the trust, and all the money in the trust is spent for his/her benefit. During lifetime, there is no change in access to accounts, selling or buying assets, or control. You are still in control of your assets during your lifetime.
The purpose of the revocable trust is to ease the administration of your estate upon your death by avoiding the probate process. After you write your trust, you change the title of your accounts and real estate to the name of your trust. You also designate the trust as the beneficiary of some accounts, often life insurance policies. Retirement accounts and annuities pass by beneficiary designation; and sometimes, you incorporate your trust as the beneficiary of these accounts. As retirement accounts are assets that have different income tax consequences upon your death, there is no one size fits all to naming a beneficiary. Incorrectly designating a beneficiary on your retirement account can have serious income tax ramifications upon the beneficiary who receives such assets. You need to ask your attorney for advice regarding naming a beneficiary of a retirement account or an annuity.
If you align your assets properly to your trust, upon your death, your estate beneficiaries will avoid the probate process. Probate is the process of transferring assets upon your death. However, if your assets are titled in the trust, then your successor trustee steps in and distributes the assets in the trust according to the written instructions you provided in the trust document itself. The purpose of establishing a revocable trust is to ease the administration of your estate upon your death by avoiding probate.
Sometimes, you can avoid the probate process by designating beneficiaries to all your accounts so the accounts pass immediately to the designated person, or you jointly title assets with another person. During the initial conversation with your attorney, it is important to talk about your family. If your beneficiary is young, disabled, or irresponsible, you may not want the money to flow into their hands immediately upon your death. Discussing who should receive your assets, when they should receive the assets, and how they receive the assets is important. Your attorney can provide advice as to the best way to protect your beneficiaries and ensure that your goals are met upon your death. You spent a lifetime accumulating your wealth, you do not want to be penny wise and pound foolish when you draft your estate plan. As an experienced estate planning attorney who has drafted thousands of estate plans, I can offer suggestions you may not have considered. Statistics offered by caring.com reflect just under half of Americans don’t engage in estate planning for a number of reasons; however, the process is rather straightforward and offers peace of mind and satisfaction once it is complete. To get started, I offer a free consultation which is the first step to protecting your loved ones and writing an estate plan.
Nicole Livingston is a principal and senior estate planning attorney with Elville and Associates, an estate planning, elder law, and special needs planning firm based in Columbia and Annapolis. To learn more about Nicole and her background, please click here. To contact Nicole with questions or to set up a free initial consultation to begin your planning or review outdated documents, please email her at email@example.com, or call her at 443-393-7696.