Varian Law LLC

A Trust Can Reduce Risks to Your Estate

What type of Trust is right for you?

There are many different types of Trusts, and they are all designed to achieve many different types of goals.  There are also many ways to use various types of Trusts within an estate plan, and it most likely will be beneficial for you to learn which ones will help achieve your goals, according to The Daily Sentinel in “Are you prepared for threats to your estate?”

Generally speaking, your Will ensures that your probate assets go to the people you want to receive them.  However, a basic Will may not achieve your goals.  In comparison, the proper use of a Trust can protect your assets and help ensure that your assets are distributed to the people you want, when you want, and how you want. One of the goals of a well-drafted Trust is to protect you, your Estate and your loved ones from unwanted and unintended outcomes.

Here are a few ways Trusts can protect your legacy and your family:

• If your spouse predeceases you and you are incapacitated from a stroke, a fall or other illness, a Trust can be used to ensure that your assets are protected and used to take care of your needs.
• Seniors, especially those who have lost a spouse, tend to be vulnerable to scams from both people they know and strangers who connect with them through telephone or email. A properly designed Trust can place a layer of protection on the assets and require a second (or even third) person to release funds.
• If your beneficiaries have financial problems, get divorced, encounter legal issues, or develop drug or alcohol problems, a properly designed Trust can protect your Estate from being taken by others.

Every family is different, and every family presents its own unique circumstances.  Everyone should meet with an experienced estate planning attorney and talk about how your estate plan can be designed to protect your family.

One last thought: if your family situation is so overwhelming that you feel like doing nothing, think again. If you don’t have a properly designed estate plan in place, your decades of work may be squandered, your children may have to spend more money in the court system than you would have wanted, and your legacy may disappear. 

Reference: The Daily Sentinel (Dec. 1, 2018) “Are you prepared for threats to your estate?”

Tax Overhaul Limits Income Tax Deductions

Income Tax Deductions for State and local taxes now face a new limit.

One of the more controversial changes in the new Federal tax laws passed in late December was that the itemized deduction for State and local taxes is now limited to $10,000.

Some State governments have tried to figure out a way around the limit for their citizens.  However, the IRS shot most of those down.  However, some estate planning attorneys might have found a solution, according to Bloomberg in "How the Rich Can Dodge Trump's Property Tax Hike."

The idea is to first create an LLC in a non-income tax State, such as Delaware or Alaska.  Real estate ownership is then transferred to the LLC. After that, several non-grantor trusts are created. Ownership of the LLC is then divided up and transferred to the new trusts. When tax time comes around each non-grantor trust can arguably take a $10,000 deduction for any property taxes that were paid by the LLC.  Effectively, the new deduction limit can be rendered moot.

Of course, the solution still faces the scrutiny of the IRS.

Reference: Bloomberg (June 15, 2018) "How the Rich Can Dodge Trump's Property Tax Hike."

The Wasting of an Inheritance Can Be Prevented

An inheritance can be wasted in many ways, but that waste can be prevented.

There are many possible scenarios that could lead to a wasted inheritance, and fears that this will happen appear to be on the rise.  In the next few decades, the largest transfer of wealth from one generation to another will occur as Baby Boomers pass away.  However, there are a few things that can be done to prevent waste, according to the Wills, Trusts & Estates Prof Blog in "Will the Next Generation Squander the Largest Wealth Transfer in History?"  These things include (but are not limited to):

• Talk to your potential heirs about the inheritances they will receive, and let them know how you would like them to manage it and spend it. Tell them why it is important to you that they handle their inheritances in a certain way.
• Do not focus on how much you will be leaving to your heirs. Instead, focus on values and how handling the money properly can create a benefit for society.
• Use estate planning techniques and devices to ensure the prevention of waste by limiting how and when an inheritance can be spent.

An experienced estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, and that may include a plan to prevent your heirs from wasting an inheritance.

Reference: Wills, Trusts & Estates Prof Blog (May 29, 2018) "Will the Next Generation Squander the Largest Wealth Transfer in History?"

What type of Trust should you use?

Individual circumstances determine the best type of trust to fit your unique circumstances.

Much of the confusion over trusts, is a result of some impressive sounding names that do not actually describe what the trust accomplishes. Therefore, deciding on which type of trust is the best one is not the right way to think about trusts. You should instead think about your needs, according to Kiplinger in "What Type of Trust Solution is Best for You?"

There are many different types of trusts, and they each are designed to achieve different goals.  The best way to think about trusts is to first determine why you want a trust. What do you want the trust to accomplish? For example, do you want a trust primarily for tax reasons, or do you want a trust primarily to make sure your beneficiaries are financially secure if something happens to you?

An experienced estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, and that may include trusts that will help you achieve your goals.

Reference: Kiplinger (April 30, 2018) "What Type of Trust Solution is Best for You?"

The Author of “To Kill a Mockingbird” Maintains Her Privacy With A Trust

The author of “To Kill a Mockingbird” was quickly put into the limelight, but she quickly stepped out of it and has remained out.

When Harper Lee, the author of To Kill a Mockingbird, died in 2016, there was considerable publicity as writers attempted to uncover all the details of her life.  However, they met with little success.  Lee’s Last Will has been unsealed, but it does not reveal very much, according to Al.com in "Harper Lee's will is unsealed but questions about the legend of American literature remain."

Lee's Last Will directs that all of her assets, including her literary property, be put into a previously created Trust.  Details about the Trust are not part of the public record and remain private.  And there does not appear to be a way to make them public.  The Trust's beneficiaries and the Trustee are not known.

What Lee created is known as a Pour-Over Will, which simply transfers assets to a pre-established Trust after someone passes away. Since Trusts do not have to go through probate and are private, this is a great method to use for people who do not want the details of their estates known to the public.

An estate planning attorney can advise you in creating an estate plan that meets your unique circumstances, which may include a privacy issue.

Reference: Al.com (Feb. 27, 2018) "Harper Lee's will is unsealed but questions about the legend of American literature remain."

How Does One Revoke a Trust in New Jersey?

A common question was presented to a column about trusts, according to the NWI Times in "Can an individual establish more than one trust?" The question was if a second trust wipes out the first trust.

The confusion over trusts is often created because most people are more familiar with Wills and most everyone knows that a person cannot have more than one Will. Creating a new Will is an automatic revocation of any previous Wills.  However, trusts are not governed the same way.

It is possible for a person to have more than one trust.  There are many different types of trusts, and they all serve different purposes and achieve different goals.  Whether and how a trust can be revoked depends on what type of trust it is.  Some trusts are created to be revocable at any time, and some trusts are irrevocable.  Sometimes even irrevocable trusts can be revoked (or at least terminated), but there are often adverse consequences for doing so.  

An experienced estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, which could include the creation or revocation of a trust.

Reference: NWI Times (Feb. 18, 2018) "Can an individual establish more than one trust?"

Children Should Not Always Be Treated The Same In Estate Planning

A challenge can be created when one child is responsible and others are not.

Varying degrees of financial responsibility by children can be a challenge when creating an estate plan, according to Market Watch in "My son is responsible, my daughter is in debt -- how do I split my estate?"

A common way to meet the challenge if financial responsibility is not the same among your children is to create an estate plan which involves Trusts that contain varying degrees of restrictions concerning how the Trust assets can be used.  Detailed provisions can be written into Trusts so that an irresponsible child cannot waste any of their inheritance on frivolous things.  

An experienced estate planning attorney can advise you on creating an estate plan that fits the unique circumstances of your family.

Reference: Market Watch (Feb. 16, 2018) "My son is responsible, my daughter is in debt -- how do I split my estate?

Estate Planning in New Jersey Does Not Have to Be Complicated

Once you take the initial steps, estate planning often becomes an easy process.

You may only need a few essential documents to get your estate plan underway, but many people often delay because of the concern of complications, according to Forbes in "More Than Half of Americans Don't Have These Essential Estate Documents, Do You?"

A validly drafted general durable power of attorney can prevent the significant costs associated with guardianship proceedings if you were to become unable to manage your own affairs in the future.  And an Advance Directive (which includes a "Living Will") that is prepared in accordance with New Jersey law can help carry out your wishes with respect to the termination of medical treatment and, like a power of attorney, can also prevent significant costs in the event that you become unable to make your own medical decisions in the future.

In addition to those two basic documents, you would most likely need a Will and some form of Trust.  Both Wills and Trusts can vary tremendously in their complexity and purpose.

An experienced New Jersey estate planning attorney can advise you on creating an estate plan that meets your unique circumstances, which may include the creation of a Will and Trusts.

Reference: Forbes (Jan. 26, 2018) "More Than Half of Americans Don't Have These Essential Estate Documents, Do You?"

Planning for Your Horses in New Jersey

Horses may have become part of your family.  However, under the law, horses and other pets are considered tangible personal property.

The law considers your horses and other pets in the same category as your tangible personal property, such as your automobiles and silverware.  However, there are options to guarantee their care, according to Newsmax in "Equestrian Legacy Planning Through Trusts."

In New Jersey, you can set up a trust for the benefit of your horses. You can put assets into the trust and leave directions for how those assets are to be used to take care of your horses.

A trustee can then be appointed to make sure your wishes are carried out when you are no longer around to care for your horses. This will ensure that there is a legally enforceable way for you to make sure that the horses are cared for as you want.

An experienced New Jersey estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, which may include a trust for your horses and other pets.

Reference: Newsmax (Jan. 17, 2018) "Equestrian Legacy Planning Through Trusts."

Education Can Be Funded by a Trust

There are many different ways to fund a college education and a trust is one of them.

If a family should decide they do not want the younger generations to be be heavy in debt upon graduating from college, there are a couple of different options, according to the Wills, Trusts & Estates Prof Blog in "Funding Education? Consider A Trust Instead of a 529 Plan."

A 529 plan is a great way for families to save for education.  It allows for tax-free investments for educational expenses. However, the investment opportunities can be somewhat limited and people can only sign up for plans that are made available from state governments.

Some people may be better off using trusts for educational expenses.  With trusts there are more investment options and if the money is not needed for educational expenses, then it can more easily be used for other things.

An experienced estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, and that may include funding education for future generations.

Reference: Wills, Trusts & Estates Prof Blog (Nov. 16, 2017) "Funding Education? Consider A Trust Instead of a 529 Plan."