Complete Package Includes:
Durable Power of Attorney * Health Care Surrogate * Living Will * Designation of Pre-Need Guardian
* Designation of Guardian for Minor Children * Pourover will If selecting a trust
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(please click on any box below for a thorough explanation of each term)
WHAT IS A REVOCABLE TRUST?
A revocable trust is a document (the “trust agreement”) created by you to manage your assets during your lifetime and distribute the remaining assets after your death. The person who creates a trust is called the “grantor” or “settlor.” The person responsible for the management of the trust assets is the “trustee.” You can serve as trustee, or you may appoint another person, bank or trust company to serve as your trustee. The trust is “revocable” since you may modify or terminate the trust during your lifetime, as long as you are not incapacitated.
During your lifetime the trustee invests and manages the trust property. Most trust agreements allow the grantor to withdraw money or assets from the trust at any time, and in any amount. If you become incapacitated, the trustee is authorized to continue to manage your trust assets, pay your bills, and make investment decisions. This may avoid the need for a court-appointed guardian of your property. This is one of the advantages of a revocable trust.
Upon your death, the trustee (or your successor if you were the initial trustee) is responsible for paying all claims and taxes, and then distributing the assets to your beneficiaries as described in the trust agreement. The trustee’s responsibilities at your death are discussed below.
Your assets, such as bank accounts, real estate and investments, must be formally transferred to the trust before your death to get the maximum benefit from the trust. This process is called “funding” the trust and requires changing the ownership of the assets to the trust. Assets that are not properly transferred to the trust may be subject to probate. However, certain assets should not be transferred to a trust because income tax problems may result. You should consult with your attorney, tax advisor and investment advisor to determine if your assets are appropriate for trust ownership.
- Irrevocable trust: In contrast to a revocable trust, an irrevocable trust is one in which the terms of the trust cannot be amended or revised until the terms or purposes of the trust have been completed. Although in rare cases, a court may change the terms of the trust due to unexpected changes in circumstances that make the trust uneconomical or unwieldy to administer, under normal circumstances an irrevocable trust may not be changed by the trustee or the beneficiaries of the trust.
- An irrevocable trust is a type of trust where its terms cannot be modified, amended or terminated without the permission of the grantor’s named beneficiary or beneficiaries. The grantor, having effectively transferred all ownership of assets into the trust, legally removes all of their rights of ownership to the assets and the trust.
- This is in contrast to a revocable trust, which allows the grantor to modify the trust, but thus loses certain benefits such as creditor protection.
The main reasons for setting up an irrevocable trust are for estate and tax considerations. The benefit of this type of trust for estate assets is that it removes all incidents of ownership, effectively removing the trust’s assets from the grantor’s taxable estate. It also relieves the grantor of the tax liability on the income the assets generate. While the tax rules vary between jurisdictions, in most cases, the grantor can’t receive these benefits if they are the trustee of the trust. The assets held in the trust can include — but are not limited to, a business — investment assets, cash and life insurance policies.
Today’s irrevocable trusts come with many provisions that were not commonly found in older versions of these instruments. These additions allow for much greater flexibility in trust management and distribution of assets. Provisions such as decanting, which allows a trust to be moved into a newer trust that has more modern or advantageous provisions can ensure that the trust assets will be managed effectively now and in the future. Other features that allow the trust to change its state of domicile can provide additional tax savings or other benefits.
Special Needs Trust
A special needs trust, also known in some jurisdictions as a supplemental needs trust, is a specialized trust that allows the disabled beneficiary to enjoy the use of property that is held in the trust for his or her benefit, while at the same time allowing the beneficiary to receive essential needs-based government benefits. A Special Needs Trust is a specific type of irrevocable trust that exists under Common Law. Several Common Law nations have established specific statutes relative to the creation and use of Special Needs Trusts, and where they exist a Special Needs Trust will not be valid unless it comports with the requirements listed in the statute. The applicable Federal statute in the United States is found at Title 42 United States Code Section 1396p(d)(4)(A). Several States have established their own statutes.
Generally, irrevocable trusts can be used for minors, beneficiaries with disabilities (either physically or mentally challenged), and as a method of asset protection. In addition to the public benefits preservation reasons for such a trust, there are administrative advantages of using a trust to hold and manage property intended for the benefit of the beneficiary, especially if the beneficiary lacks the legal capacity to handle his or her own financial affairs. However, Special Needs Trusts can also be used as asset reservoirs, allowing otherwise neurotypical individuals to qualify for governmental benefits.
Life Insurance Trusts
A life insurance trust is an irrevocable, non-amendable trust which is both the owner and beneficiary of one or more life insurance policies. Upon the death of the insured, the trustee invests the insurance proceeds and administers the trust for one or more beneficiaries. If the trust owns insurance on the life of a married person, the non-insured spouse and children are often beneficiaries of the insurance trust. If the trust owns “second to die” or survivorship insurance which only pays when both spouses are deceased, only the children would be beneficiaries of the insurance trust.
In the United States, proper ownership of life insurance is important if the insurance proceeds are to escape federal estate taxation. If the policy is owned by the insured, the proceeds will be subject to estate tax. (This assumes that the aggregate value of the estate plus the life insurance is large enough to be subject to estate taxes.) To avoid estate taxation, some insureds name a child, spouse or other beneficiary as the owner of the policy.
There are drawbacks to having insurance proceeds paid outright to a child, spouse, or other beneficiary.
- Doing so may be inconsistent with the insured’s wishes or the best interests of the beneficiary, who might be a minor or lacking in financial sophistication and unable to invest the proceeds wisely.
- The insurance proceeds will be included in the beneficiary’s taxable estate at his or her subsequent death. If the proceeds are used to pay the insured’s estate taxes, it would at first appear that the proceeds could not be on hand to be taxed at the beneficiary’s subsequent death. However, using insurance proceeds to pay the insured’s estate taxes effectively increases the beneficiary’s estate since the beneficiary will not have to sell inherited assets to pay such taxes.
The solution to both drawbacks is usually an irrevocable life insurance trust.
If possible, the trustee of the insurance trust should be the original applicant and owner of the insurance. If the insured transfers an existing policy to the insurance trust, the transfer will be recognized by the Internal Revenue Service only if the insured survives the date of the transfer by not less than three years. If the insured dies within this three-year period, the transfer will be ignored and the proceeds will be included in the insured’s taxable estate.
Insurance trusts may be funded or nonfunded. A funded life insurance trust owns both one or more insurance contracts and income producing assets. The income from the assets is used to pay some or all of the premiums. Funded insurance trusts are not commonly used for two reasons:
- the additional gift tax cost of transferring income producing assets to the trust and
- the grantor trust rules of IRC §677(a)(3) cause the grantor to be taxed on the trust’s income.
Unfunded insurance trusts own one or more insurance policies and are funded by annual gifts from the grantor.
Customarily, the trustee of the insurance trust is authorized, but not required, to either purchase assets from the insured’s estate or loan insurance proceeds to his or her estate. Since the trustee of the insurance trust possesses all incidents of ownership in the insurance policy, the insurance trust provides the insured’s estate with liquidity while shielding the insurance proceeds or assets purchased with the proceeds from estate tax when the insured dies, provided the trust has the appropriate settlor and trustee.
A land trust is a legal agreement in which a property owner transfers the title to a property to a trustee. The property owner is typically the beneficiary and directs the trustee in all matters relating to the management of the property, as outlined in the trust agreement or deed. The property owner also retains all property rights including the freedom to develop, rent and sell the property.
One of the main advantages of this type of trust is that the actual property owner remains anonymous. In public records, the name of the trust is the holder of the property. This type of arrangement can not only bring some legal protection, but it can also help the property owner negotiate prices if he or she is particularly wealthy.
A pet trust is a legal arrangement to provide care for a pet after its owner dies. A pet trust falls under trust law and is one option for pet owners who want to provide for their pets after they pass away. Alternatives include honorary bequests made through a will and contractual arrangements with the caregiver.
Pet trusts stipulate that in the event of a grantor’s disability or death a trustee will hold property (cash, for example) “in trust” for the benefit of the grantor’s pets. The “grantor” (also called a settlor or trustor in some states) is the person who creates the trust, which may take effect during a person’s lifetime or at death. Payments to a designated caregiver(s) will is made on a regular basis.
A gun trust can be used to stay in compliance with federal, state, and local laws that apply to certain firearms. Thesetrusts may be called NFA Gun Trusts because they are used for weapons covered by the National Firearms Act. CLICK HERE to be directed to our gun trust website
Last Will and Testament
A last will and testament is the legal document by which you identify those individuals (or charities) that are to receive your property and possessions upon your passing. These individuals and charities are commonly referred to as the beneficiaries under your last will and testament. In addition, within the provisions of your last will and testament, you nominate an Executor to be responsible for the proper administration of your estate and the disposition of your property to your intended beneficiaries. The Executor may be an individual or an institution. After your death, the person or entity you have nominated to be your Executor petitions the court to be appointed Executor of your estate. After being appointed, the Executor manages your estate’s financial affairs and ensures that your property is distributed in accordance with your wishes as indicated in the last will & testament.
Also, if you have young children, you may use the last will and testament to nominate a Guardian(s) for your children who are under 18 years at the time of your death and for whom a guardianship would be necessary (i.e., meaning that your children’s other parent is already deceased at your death).
A pour-over will is a legal document that ensures an individual’s remaining assets will automatically transfer to a previously established trust upon their death.
BREAKING DOWN Pour-Over Will
A pour-over will works in conjunction with a trust. In estate planning, trusts provide a way to avoid the probate process when transferring assets after the grantor’s death. When the time comes to settle an estate, assets funded into the trust get distributed to beneficiaries as directed by the grantor. A pour-over will covers assets that the grantor has not funded into the trust at the time of death. Absent explicit directions provided via a will, remaining assets would instead be subject to laws of intestate succession as established by the jurisdiction in which the individual died.
Pour-over wills act as a backstop against issues that could frustrate the smooth operation of a living trust. They ensure any assets a grantor neglects to add to a trust, whether by accident or on purpose, will end up in the trust after execution of the will. The will can also provide extra protection against legal issues with a trust by stipulating that the assets intended for the trust be distributed to the trust’s beneficiaries should it become invalid or, in the case of an unfunded trust, should it become legally difficult or impossible to fund at the time of the grantor’s death.
Durable Power of Attorney
A power of attorney is a legal document that gives someone the authority to act on your behalf. The person who gives the authority is called the principal, and the person who is given authority is called the agent or the attorney-in-fact. There are basically three types of power of attorney:
General Power of Attorney. This gives someone the authority to act in a broad range of matters, such as buying and selling real estate and personal property, managing your banking and investments, operating a business, handling taxes and lawsuits, and applying for government benefits.
Limited Power of Attorney. Also called a special power of attorney, this gives someone the authority to act only in a limited situation, which you specify in the document.
Health Care Surrogate
A Florida Health Care Surrogate designation provides you with the opportunity to name a trusted person to make health care decisions for you in case you can’t and also allows you to spell out what kind of medical treatments you do or do not want to receive under certain circumstances.
The person you choose as your healthcare agent does not have to live in Florida, but it should be someone who will travel to wherever you are, if necessary. This person will be responsible for making your healthcare decisions for you, so it should be someone who is reliable and who you can trust to carry out your wishes. They should also be able to carry out their duties regardless of any potential family opposition, as long as they are doing what you have directed.
On October 1, 2016, two key changes to the Florida Health Care Surrogate Act went into effect: (1) the person designated as a health care surrogate can act immediately, prior to any determination of incapacitation; and (2) a parent or guardian may now name a health care surrogate for a minor child in the event the parent/guardian is unable to act.
Choosing the right health care surrogate is a cornerstone of your advance medical directive, which is a written document, properly witnessed by another person that provides instructions concerning any aspect of a person’s health care
This written document sets out how you should be cared for in an emergency or if you are otherwise incapacitated. Your living will sets forth your wishes on topics such as resuscitation, desired quality of life and end of life treatments including treatments you don’t want to receive. This document is primarily between you and your doctor, and it advises them how to approach your treatment. Try to be as specific as possible in this document, realizing that you can’t account for every possibility, which is where the durable power of attorney for health care comes in.
A “preneed guardian” is a person named in a written declaration to serve as guardian in the event of the incapacity of the declarant as provided by statute. Florida’s preneed guardian statute works as follows:
- A competent adult may name a preneed guardian by making a written declaration that names such guardian to serve in the event of the declarant’s incapacity. The written declaration must reasonably identify the declarant and preneed guardian and be signed by the declarant in the presence of at least two attesting witnesses present at the same time.
- The declarant may file the declaration with the clerk of the court. When a petition for incapacity is filed, the clerk shall produce the declaration.
- Production of the declaration in a proceeding for incapacity shall constitute a rebuttable presumption that the preneed guardian is entitled to serve as guardian. The court shall not be bound to appoint the preneed guardian if the preneed guardian is found to be unqualified to serve as guardian.
- The preneed guardian shall assume the duties of guardian immediately upon an adjudication of incapacity.
- If the preneed guardian refuses to serve, a written declaration appointing an alternate preneed guardian constitutes a rebuttable presumption that such preneed guardian is entitled to serve as guardian. The court is not bound to appoint the alternate preneed guardian if the alternate preneed guardian is found to be unqualified to serve as guardian.
- Within 20 days after assumption of duties as guardian, a preneed guardian shall petition for confirmation of appointment. If the court finds the preneed guardian to be qualified to serve as guardian pursuant to ss. 744.309 and 744.312, appointment of the guardian must be confirmed. Each guardian so confirmed shall file an oath in accordance with s. 744.347 and shall file a bond, if required. Letters of guardianship must then be issued in the manner provided in s. 744.345.
One of the fundamental advantages to the preneed guardian advance directive is it essentially insures that the person or professional you want to serve as your guardian is in fact the one selected by the court. Of course, this is subject to the qualification and fitness of the person selected. For example, in Davis v. King, 686 So. 2d 763 (Fla. Dist. Ct. App. 5th Dist. 1997) in a contested guardianship litigation, the court found the preneed guardian unqualified to serve as plenary guardian upon a determination of the ward’s incapacity based on evidence that the preneed guardian had paid off her mortgage using the ward’s money, had purchased real property owned by the ward for less than market value, and that the ward’s bank account had been depleted during the same time period.
Guardian for Minors
A guardian of a minor is a person that has the powers and responsibilities of a parent concerning the child’s support, care, education, health, and welfare. A minor is a child under 18 years old. Guardians must at all times act in the child’s best interests.
Real Estate Deeds
A deed is the written document which transfers title (ownership) or an interest in real property to another person. The deed must describe the real property, name the party transferring the property (grantor), the party receiving the property (grantee) and be signed and notarized by the grantor. To complete the transfer (conveyance) the deed must be recorded in the office of the County Recorder or Recorder of Deeds.