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Welcome to the Resource Center. Sage Law, LLP believes in the team approach to estate planning. We work closely with our clients’ other professional advisors, including their investment advisors, insurance professionals and Certified Public Accountants. We have provided the information below in order to help educate the advisor community about important estate planning topics.
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As the name implies, an educational trust is a trust created to pay for loved ones’ education. Often parents, grandparents – or even aunts or uncles and friends – desire to create or continue an education legacy. In addition to legacy, other educational trust benefits are tax minimization, asset organization, asset protection, peace of mind, privacy, flexibility, and family unity.
Education trusts can own a multitude of assets, including, but not limited to, life insurance and 529 plans:
- Life insurance is sometimes used to fund educational trusts, especially dynasty trusts which can continue for generations. If assets are to be used for tuition only and will be paid directly to the educational institution, there’s no need to allocate generation-skipping tax exemption; however, if funds can also be used for room, board, books, and travel, it typically makes sense to allocate both estate and generation-skipping tax exemptions when funding the trust. Life insurance is an effective way to leverage those valuable tax exemptions.
- Educational trusts can own 529 plans. Growth and distributions are income tax-free. Some state 529 plans offer asset protection, but if not, no need to worry because the educational trust offers asset protection in all states. This means assets can’t be seized in a lawsuit or other creditor attack.
The educational trust is essential should you become incapacitated and when you die. Those you name as successor trustees will follow the directions you provide in the trust document. They will manage the assets and make distributions on behalf of your beneficiaries as you would have done yourself:
- For example, trust assets are available to pay for your beneficiaries’ education, but not available for them to frivolously waste or to have seized in a lawsuit.
- And, court supervision is not necessary or required, so funds are not wasted and your personal family and financial matters are kept private.
If one trust is used, the educational trust provides flexibility to move assets between beneficiaries as needed. In the alternative, if multiple educational trusts are established, each beneficiary uses her special gift for her education.
If you have an education legacy you’d like to create or continue as well as children you love, we’d be happy to discuss whether an education trust makes sense for you and your family.
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We know how you feel – the last thing you want to think about is paperwork and making decisions about guardians, death, and money. But, and it’s a big “but,” estate planning is likely the most important paperwork you’ll ever do based on the most important decisions you’ll ever make. It’s part of being a good parent and part of protecting your babies, no matter how old they are. And, of course, you and your spouse need protections too. We promise to make the process easy.
It’s All About the Kids
We know you’ll do hard things for your children, even if you wouldn’t do them for yourself, so let’s talk about the hardest thing for any parent: naming guardians for minor children. We know this is tough; we also know that no one – no one – could ever do as good a job at raising your children as you could. But, there’s someone who could muddle through.
So, first, we’ll name guardians (and backup guardians) in your will. Also in your will, we’ll appoint someone to settle your estate and distribute your assets. And, if your children are minors or you have sizeable assets, we’ll evaluate whether a trust is a good fit.
You have the power to protect the assets you leave for your children so that they’re not spent down on court fees, seizable by future creditors such as divorcing spouses and lawsuits, or discoverable by nosey neighbors and predators.
It’s Not All About the Kids
We know you put your children first, but think about the flight attendant’s directions on the airplane. You need to put your own oxygen mask on first and then help your kids. We include protections and help for you in your estate plan as well.
We’ll appoint trusted helpers to make financial and health care decisions on your behalf if you cannot make those decisions yourself. We’ll also talk about your healthcare wishes and asset protection, minimize taxes, evaluate insurances, and make sure you and your spouse’s needs are met.
Let’s Continue the Conversation
We know we’ve brought up topics that make you feel uncomfortable – they make everyone feel uncomfortable. But, we promise to make it as easy as possible, be respectful of your time, and get you, your spouse, and your children (and pets) protected.
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We’re guessing you don’t like to think about it – and – don’t like to talk about it, so we suggest you include incapacity planning in your estate plan and, then, move on to living your good life. Once you have protections in place for yourself and those you love, you can sleep well at night, focusing on good things.
Every estate plan needs to include incapacity planning (aka “disability planning”). Simple forms include powers of attorney for health care, day-to-day personal affairs, and business. More comprehensive forms of incapacity planning include trust planning.
- Healthcare Decisions and Control. Consider your health care for a moment. As long as you are able to provide informed consent, you will continue to make your own healthcare decisions. But if something happens and you can’t, even if it’s for a little bit, don’t you want to be the one who selects the person who will make those decisions on your behalf? Most folks do. We’ll show you how to use powers of attorney, HIPAA releases, and trust planning to keep you in control and protect yourself and those you love.
And then there’s life support machines and medical heroics. If you don’t want to be kept alive by machines for 15 years like Terri Schiavo, you need a living will.
- Financial Decisions and Control. And, if you can’t pay your bills and manage your day-to-day affairs, don’t you want to be the one who selects the person who takes over for you? If you don’t decide, the court will freeze your assets and make that decision. Your loved ones will have to go to court and pay attorney and court fees so someone can be appointed to take care of your tasks. Worst of all, the court has the power to appoint a stranger, who will charge significant fees and have access to your money, property, and bank accounts.
That person won’t give money to your spouse and children. His job will be to pay your bills and manage your money in your best interests, no one else’s. Your spouse will lose control of assets.
- Minor Children Decisions and Control. And, what about your minor children? Who’s authorized to care for them if you can’t?
We’ll help you get your disability plan in place – as part of your comprehensive estate plan – then – you can move through your life, knowing you were responsible and did the right thing. You protected yourself, those you love, and your assets. And don’t worry, incapacity planning is not as bad as it sounds.
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There are several different kinds of powers of attorney such as for finances, healthcare, business, real estate, and funding. They’re all important, and all have their place. Whichever kind of powers of attorney you need, we’ll make sure you have them as part of your comprehensive estate plan.
You, the person creating the power of attorney will be known as the “principal” and the person you name to help you is the “agent.” Be sure to name contingent agents in case the primary agent is unable or unwilling to serve when the time comes.
In any power of attorney, you’re granting very powerful authority, the authority to sign your name to legal documents. Be sure that the agent you name is a good fit for particular tasks covered by the power of attorney, is unequivocally trusted, and has consented to being named. It’s a big responsibility which shouldn’t be sprung on anyone.
By way of:
- The general power of attorney, you authorize someone to sign your name to contracts, manage your assets, give away your assets, purchase real estate, handle your mail, and participate in estate planning on your behalf, etc. The durable power of attorney is usually a very general power of attorney, covering a long list of powers.
- The healthcare power of attorney, you authorize someone to make healthcare decisions on your behalf if you cannot.
- A business power of attorney, you authorize someone to take care of some element of your business.
- A real estate power of attorney, you authorize someone to sign your name to a real estate deal.
- A funding power of attorney, you authorize someone to sign your name to transfer assets into your trust.
Powers of attorney are used for both convenience and necessity. For example, a real estate power of attorney is convenient if you don’t want to miss work to attend a real estate closing; a durable power of attorney is necessary if you become incapacitated and need someone to manage your day-to-day personal business affairs.
Of course, the courts have a way around you not having a power of attorney in place, but if you’re like most folks, you won’t like it. Here’s the court’s plan: if you become disabled with no disability plan in place, your loved ones will be forced to go to court to have you declared mentally incompetent so that the court can authorize someone to make decisions and handle your affairs. This process is called “guardianship” or “conservatorship,” depending on your state of residence.
As you might guess, a court procedure is public, costly, time-consuming, and stressful. You can avoid putting yourself and your loved ones through a guardianship or conservatorship by making sure you have up-to-date, valid powers of attorney in place. And, we usually recommend having disability provisions in a trust as well because sometimes powers of attorney are not honored; financial institutions fear the liability of honoring powers of attorney that aren’t valid. Powers of attorneys with disability trust provisions is the solid belt and suspenders approach we recommend for many of our clients.
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A revocable living trust is a commonly used estate planning vehicle and many of the plans we design are centered around this particular trust. We love their flexibility, convenience, and protection.
Though a significant financial investment is necessary, the benefits of trust planning outweigh the costs for most of our clients. For example, a trust provides organization as well as disability, death, tax, charitable, and asset protection planning. We can also add protections such as remarriage protection and bloodline protection to protect against assets being lost during remarriage of your spouse.
Best of all, when you set up a trust and fund your assets into it, you maintain full control. You can take your assets in and out of the trust as you like, purchase additional assets, sell assets, change the terms of the trust, and dissolve the trust altogether. You don’t even need to file a separate tax return and you just use your own social security number – no EIN is needed.
Revocable living trusts are so easy that you’ll forget you have one until get the bank or investment statement arrives in the mail and you see the account is in the name of your trust instead of your individual name.
While we love the asset protection a trust affords if carefully crafted, our clients also love the privacy and probate avoidance benefits. You may not realize this, but when you die without a trust, your will, if you have one, and all of your assets, debts, beneficiaries, beneficiary contact information are filed at the courthouse. This means anyone with Internet access can hop online or go to the courthouse and see who you owed, how much you had, and who got what.
Probate fees and an up to two year timeline are bad enough, but the public aspect of probate makes our clients irate. They want to keep their private affairs private after their death, just as they did in life. They don’t want their nosey neighbor or predators to descend on their beneficiaries or to have access to information that is private.
Our clients also like avoiding probate because it tends to take a long time to settle, costs money, and delays their loved ones’ ability to move on and get back to life after a tragic experience. All these benefits can be had during your lifetime as well. If you are incapacitated and unable to manage your affairs for a period of time, your trust avoids living probate (aka “guardianship” or “conservatorship”) as well.
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We suggest you consider including special needs planning language in your revocable living trust just in case a loved one such as a child, grandchild, or parent, at some point, qualifies for governmental benefits because of a special need. If assets flow to a beneficiary who qualifies for benefits, he will be disqualified until all of your money has been spent down, wasting your gift.
When you include special needs planning in your trust, you instruct the trustee to distribute assets that will supplement, as opposed to supplant, government benefits. That being said, there may come a time when it’s in your beneficiary’s best interests to go ahead and use trust assets even if disqualification occurs. You can give the trustee that power to make good decisions at the time.
So long as your beneficiary doesn’t have “demand rights,” the right to demand that the trustee distribute assets, he can receive Medicaid and Supplemental Security Income (SSI) in addition to trust benefits such as trips, special events, and excellent care.
When a special need has already been identified, we sometimes create a free standing special needs trust. We’ll help you identify what kind of special needs planning works best for your family.
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Rest assured, we are here for your loved ones if you become incapacitated and when you die. We hold their hands (sometimes, literally), guiding them through administration while following the instructions you’ve outlined in your estate plan. Remember, your estate plan is really just a legal instruction book. You’ve made good decisions and, with our guidance, your successor trustees, executors, and other trusted helpers will carry out your wishes.
We help your trusted helpers such as successor trustees and executors understand their duties; gather, protect, and manage assets; file all appropriate tax returns; pay legitimate bills; create sub-trusts; collect death benefits; dissolve trusts; consider disclaimers; distribute assets to beneficiaries or sub-trusts; and make good decisions.
The bottom line is that your loved ones are not alone, trying to make their way through an unfamiliar world. We are there for them to make sure your instructions and the law are followed. Our goal is to provide your loved ones with guidance, peace of mind, and support so that what you pictured in your mind’s eye when you did your estate planning comes to fruition. Your loved ones are in good hands.
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Your will – also known as your “last will and testament” – is a legal document that tells the probate court how you want your property distributed after you die as well as who has the power and responsibility to settle your estate and raise your minor children.
Through the probate process the court will give the “executor” of your will or “personal representative” in some states, the authority to gather, manage, and protect your assets; pay any legitimate bills; file appropriate tax returns; and distribute your remaining property as you specify in your will.
Your will is only effective after your death and, then, only after a court has authenticated it. “To authenticate” means to determine to be valid. Therefore, a judge must determine your will to be valid and appoint your executor (or personal representative) before she can step in and manage your estate.
Everyone, age 18 or older, needs a will. If you don’t take action and execute a valid will, the court will step in and decide who has access to your private family and financial matters and who raises your children. And, state law determines who inherits from you – shockingly, it may not be who you would select – it might not be someone you even know.
Even if you include a trust in your estate plan to avoid probate, create disability provisions, minimize taxes, and protect loved ones, you still need a will. The only beneficiary of that will, a pour-over-will, is your trust. The pour-over-will also names an executor/personal representative and guardians for your minor children.
Getting a valid and strong will in place is easier than you think. We’ll help you make sure your needs and those of your family are met and protected.