WILLS, TRUSTS, & ESTATE PLANNING
Establishing Priorities. Estate Planning is not a cut and dry process, and involves much more than simply addressing after-death concerns. To be sure, estate planning normally involves drawing a Will. But for thoughtful individuals who care (as do most) about secure and fruitful lives for themselves and their families, it involves much more. Foremost, estate planning is about establishing priorities. What is most important to you? Is it amassing a million, or several million, dollars? Is it establishing a legacy as a philanthropist or as a professional or business person who has made the world a better place through his or her efforts or creativity? Is it being the best possible parent? Is it structuring your business in the most tax advantageous way? Is it planning for the succession of the business or professional practice that you have built? Is is leaving a nest-egg that can be managed after death in the best possible way for your spouse or children or grandchilren? Is it planning for a secure retirement? Is it protecting your assets from potential creditors (the proverbial surgoen who fears that some day he or she may mistakenly leave a scapel inside the patient)? Is it protecting your children or grandchildren, after your death, from their potential creditors? Or is it a number of these things? None is necessarily inconsitent with any other. None is a “bad” versus “good” priority. At the same time, focusing on the most important of your priorities is very important to the best possible estate planning.
Working with your other advisors. As an estate planning attorney, I consider it my responsibility to encourage you to focus upon your priorities, and then to bring my tool-kit of skills and experience to help you to fulfill these priorities during your life, and after your life ends. My process, preferably, does not involve working alone. You are likely to have other advisors, including your CPA, your insurance professional, and your financial advisor. Working together, we can each help you fufill your priorities better than if we work with you completelly separately. I never consider myself to be in competition with such advisors; but rather believe that we each bring different skills to the table, and that by working together, we can achieve the optimal result for you.
Involving the Family in Your Estate Planning. The extent to which you involve your children or other family members in your estate planning is totally a matter of your choice. There is a wide variety of attitudes of my clients in such regard, and none is right or wrong. Involving children does not necessarily, or even probably, involve giving them a “say” so much as it may involve providing them with knowledge as to your affairs or your plans, seeking their input if you wish, and thereby preparing them to receive what they will receive and to be better prepared to assume their prospective roles responsibly. I encourage family meetings, if you consider them to be beneficial. Among other things, bringing your children into the process, particularly if there is to be a differentiation between the benefits that you plan to give one descendant versus another, is often the best protection against hard feelings or possible litigation after you are gone.
If you are married, I do not encourage you to plan separately from your spouse, although that is you privilege. If I am providing estate planning to you and your spouse as a couple, I do not permit confidentiality of my commuications with one of you vis-a-visthe other
spouse. Additionally, if I am representing both of you and come to the conclusion that there is a potential conflict of interest, I will not continue representing both of you, and may conclude, because of the circumstances of my representation prior to the time that conflict became apparent, that I cannot thereafter represent either of you.
A continuing Relationship. I do not regard estate planning as a one-time affair. Of course, a client who retains me to prepare a Will, Living Trust and other ancillary documents, is free to never contact me again. But I encourage a relationship in which periodically we will review together your documents and family and/or business circumstances, in order to determine whether adjustments are appropriate to meet those changing circumstances.
Living Trusts. A Last Will and Testament, of course, can constitute your primary estate planning document; and it can set forth, both through its terms, and through explanations of your underlying intentions, whom you intend to benefit, what you are bequeathing to each beneficiary, and the terms of each trust, if any, that you are creating to hold and manage the assets you are bequeathing to each beneficiary.
However, as described in more detail hereafter, I believe that the use of trusts is the key to effective estate planning; and that planning begins, optimally, at the outset, through the use of what is known as a Living Trust, often referred to as a Will substitute, to hold a substantial portion of your assets during your life. In such case, your Living Trust (to which you have optimally transferred, during your life, most or all of your assets not held in an IRA or other retirement account), contains the dispositive provisions that would otherwise be contained in your Will.
None of the assets that you have been placed in your Living Trust during your life will have to pass through probate, upon your death, to get to your intended beneficiaires. Your successor Trustee, named in the Living Trust, will simply follow the terms of the Living Trust in distributing the assets of the trust upon your death.
If the use of a Living Trust is a key part of your estate planning, your Will serves a more limited purpose, namely that of simply pouring over to your Living Trust, upon your death, any assets that have not been transferred to your Living Trust during your life, unless the disposition of such assets is controlled by some other document such as a beneficiary designation on your IRA, a payable-on-death designation on a financial account, or are held in joint tenancy and therefore automatically pass to the survivor upon your death. Any assets that are not in your Living Trust at the time you die, and that are “poured over” to your Living Trust upon your death, pursuant to the terms of your Will, must go through “probate,” which means a process whereby your Will is filed with the probate court. Pursuant to the probate court’s approval, the assets in your probate estate will be transfered to your Living Trust where they will be combined with other assets already in your Living Trust and then be distributed pursuant to the terms of your Living Trust.
A Living Trust, which I recommend in most instances as an important part of estate planning, is a trust that is revocable and amendable by you at any time prior to your death, and which, therefore, does not place any assets which you have contributed to your Living Trust outside of your control. The advantages of not having to go through probate to effectuate your plans, upon death, is that you avoid delays and expense, and the necessity of supervision of the disposition of your assets by the probate court. The probate process is explained in more detail below.
However, the advantages of estate planning through the use of a Living Trust as a bedrock document are greater, and in various respects, more substantial than simply avoiding the expense, delay, and court supervision inherent in probate. Whereas a Will is a public document, estate planning through the structure of a Living Trust maintains confidentiality in your dispositions to a considerably greater extent than is possible in the probate process. If you desire to lay out your underlying intentions in a detailed and comprehensive manner, explaining why you are making the dispositions you are making, and in the form you are making them (e.g. the terms of the trusts you are establishing for your descendants), and if you desire to explain why you are benefiting one descendant differently from another, it is often much more natural to make such explanations of your intentions in a trust instrument that will not be exposed to the world at large, as opposed to a Will filed in the probate court.
Perhaps the most important reason for the use of a Living Trust in estate planning is that it serves as a vehicle that, should you become incapacitated during your life, best insures the continued fulfillment of your priorities for yourself and your family members, or others, while you are still living. That is because your Living Trust can, and should, not only serve as a Will substitute, but should also carefully elaborate upon your priorities and intentions as to the use of the assets in your Living Trust for your own benefit and comfort, and for the benefit and comfort of your famiy members and others, during your life, should you become incapacitated. Your Living Trust can and should correspondingly direct the successor Trustee of the Living Trust, during your life, as to how he or she should manage, distribute, invest and preserve the assets of your Living Trust for your benefit and for the benefit of others, during the period you are incapacitated.
You will ordinarily be the Trustee of your own Living Trust for so long as you can continue to occupy that role; but if you become incapacitated, and are therefore unable to continue to manage your assets, you will have named a successor Trustee in your Living Trust who will step in and continue to fulfill your priorities according to the directives and expressions of intent specified in your Living Trust instument.
>Trusts for Successive Generations. More and more, clients, once they are aware of the advantages, wish to leave their assets, including their IRAs or retirement plan accounts, in trust for the next generation; and very often, in trusts that will continue from generation to generation. This objective is not inconsistent with permitting successive generations to have substantial control over the assets left to them. The extent to which your descendants will have control over the assets you leave them in trust depends upon the specific provisions you choose, with my advice, to place in your Living Trust, or in your Will if you have not chosen to use a Living Trust. The disposition of your assets in trust for your descendants enables you to protect the assets you leave behind from your descendants’ creditors, or from your descendants’ imprudence. The careful selection of the persons whom you name as Trustees is very important. The ability of a descendant, whom you have named as sole Trustee of a trust created for his or her benefit, to appoint an “Independent” co-Trustee or successor Trustee, can be an important provision whereby your descendant can protect the assets of his or her trust from creditors or the unexpected consequences of life.
The use of trusts also enables you to determine how your assets will pass to more than simply the next generation. Typically I advise my clients that what was once a standard provision that the assets of a trust established for a descendant be distributed when the descendant reaches a specified age or ages (e.g. 1/2 at age 30, 1/2 of the remainder at age 35, and the rest at age 40) is no longer the best solution; and that by continuing a trust throughout your descendant’s life, you are protecting your descendant, while providing to him or her as much control over the trust assets as you specify in the trust instrument. By creating a trust for a descendant that lasts through his or her life, you are also able to determine what will be the disposition of the remaining assets in the trust when that descendant dies. In fact, if you desire, the trust or trusts you create can continue to exist from generation to generation.
Estate tax laws may obviously change. A year from now, or five years or ten years from now, Congress could revise federal law to apply the federal estate tax to a considerably larger segment of the population than now. By providing for a trust that will continue from generation to generation, it is possible to assure, or at least increase the likelihood, that the assets in the trust will not be subject to estate tax in each succeeding generation, regardless of changes in the federal estate tax law.
Second Marriages. Many of my clients are in second marriages, and both partners have children by their first marriages. No matter how solid the second marriage is, each partner does not want, in most cases, to leave all of his or her assets outright to the surviving spouse so as to leave the surviving spouse total discretion as to how those assets will be passed on by the surviving spouse. Rather, if you are the first to die, you will normally want to feel assured that your assets, to the extent remaining upon your spouse’s succeeding death, will be appropriately allocated, in whole or in part, to your descendants. The use of trust planning is essential to achieving such an objective. You can provide, in the trust documents that I create on your behalf, that if you die first, your spouse will be the beneficiary, in part or in whole, during his or her life, of the totality of your assets, and that to the extent there are assets remaining in the trust upon your spouse’s death, those assets will be distributed, in part or in whole, to (or in further trust for) your descendants.
“Situs” of your trust. A trust for your descendants that you establish through the provisions in your Will or Living Trust can designate a “situs” (i.e. the state or other jurisdiction whose laws will govern the operation of the trust) other than Florida or other than the state in which your descendants may live. Situs selection is an increasingly important tool in achieving the application of another state’s or nation’s law that may better serve your priorities, protect your assets from creditors, or address the situation of a particular beneficiary, than does Florida law.
Trust Protector. In trust planning, the selection of a “Trust Protector” has become an increasingly important planning technique for giving a trusted individual, after your death, whom you name as “Trust Protector,” the power to make trust amendments, or changes in trustees, necessitated by unexpected developments either in the law or in the circumstances of your descendants. I will help you make decisions in such regard.
Designation of Health Care Surrogate. None of us (unfortunately) is immortal. More to the point, a greater risk than unexpected death is the unexpected and unhoped for event (e.g. a stroke) that will render you unable thereafter to manage your affairs. Few of us, in such event, want there to have to be a court proceeding in which someone is appointed as your Guardian to manage your personal and financial affairs thereafter. Guardianships are complicated, expensive, and very intrusive, and place the Court in the position of being a perpetual overseer of how your needs are being addressed. Fortunately, in most situations, a judicial Guardianship won’t be necessary if you plan ahead. The handling of your financial affairs can be accommplished, for the most part, by your having placed your assets, to the extent possible, in a Living Trust, as above described, and otherwise by the use of a Durable Power of Attorney (hereafter discussed). However, in regard to planning, in particular, for your health care needs after you have suffered a debilitating event, your execution of a Designation of Health Care Surrogate is the most effective procedure — and one provided for under Florida Law. In the Designation of Health Care Surrogate that you execute, you can appoint a trusted family member, or other person, to make all health care determinations for you in the event you are unable to make them for yourself, whether your incapacity is temporary (e.g. you are under anaesthesia in an operation, and an immediate decision needs to be made) or whether your incapacity is most likely indefinite (e.g. the consequences of a stroke). To the extent you want to amplify upon, or carefully circumscribe, the authority of your health care surrogate, you can do so.
Under Florida law, your health care providers are required to follow the directives of your designated surrogate, including the withdrawal of life sustaining measures if you are in a vegetative state or terminal condition, unless such directions are contrary to accepted medical procedure or widely accepted norms. Your document can specifiy an alternate surrogate should your first designated surrogate not be available to give directions. I take the execution of a Designation of Health Care Surrogate very seriously and make sure it comports with what you want.
Normally, your Designation of a Health Care Surrogate will be accompanied by what is known as a “Living Will,” also sanctioned under Florida Law, in which, if you decide to do so, you give specific directions that in the event you are in a vegetative state, or otherwise in a terminal condition, life-prolonging procedures shall be discontinued, except to the extent necessary to provide you with comfort and the lack of pain. Although the Florida statutes provide a model of a Living Will, the document can be customized by me to meet your specific preferences.
Durable Power of Attorney. Placing your assets in a Living Trust basically enables you to avoid most of the un-met needs that you would otherwise have for the managment of your financial affairs if you become incapacitated and cannot manage your own affairs. However, a Living Trust cannot serve to manage all of your affairs. There are assets, which as an IRA or other retirement account, that cannot be placed in your Living Trust. Therefore, If you wish to appoint someone whom you trust to give directions, during your life, with respect to your retirement accounts, including changing the beneficiaires on one or more of your retirement accounts, should circumstances make such a change important, a Durable Power of Attorney is a necessary means to do that. Or, there may be some other kinds of assets that have not been transferred to your Living Trust, either because you failed to transfer them, or because they came into being at a later time, such as a claim that you may have against someone, arising after you executed your Living Trust. Or, there may be certain actions which, however, mundane, cannot be handled by a Trustee of your Living Trust, such as picking up mail for you at the post office, or depositing a Social Security check. I am able to, and normally do, in the course of estate planning, draft for you a Durable Power of Attorney that enables the trusted person you have appointed to undertake all such actions.
As necessary as a Durable Power of Attorney is to handle the above types of situations, it is not as preferable as a Living Trust to handle the management of assets that can be transferred by you to your Living Trust, since your Living Trust can, and should, set out detailed directions to your Trustee as to the manner in which you want your assets handled for your benefit, and the benefit of others, when you are incapacitated. Also, a Durable Power of Attorney becomes void at the moment of your death; and the disposition of your property upon your death can only be accomplished through your Living Trust or your Will.
The Durable Power of Attorney that I will draft for you is designed to meet all of your needs, during your life, that cannot be met by the Trustee of a Living Trust. Your “agent”, namely the person you have appointed in your Durable Power of Attorney, has a fiduciary reponsibility to exercise his or her powers in a manner that he or she believes you would approve of and that are in your best interests.