Estate planning is incredibly important and yet is often the most postponed legal issue in a person's life. This is understandable, but it can be incredibly harmful and expensive to do this. Let us make this process simple and painless so that you know your assets are secure in the future.
Nursing homes are beyond the means of many Americans nowadays so Medicaid comes into play more often when placing a beloved spouse or parent into a home. Medicaid requires planning out at least 5 years in advance in order to protect your property and other assets. Springdale Law will work with you to insure that paying for a nursing home is one less thing you have to stress about while deciding to place a beloved family member in a home.
Will and Trust Q&A
1. What is estate planning?
Estate planning is the process of determining who will receive your assets (beneficiary) and manage your estate when you die (executor). Estate planning is a general concept, and it includes forming legal documents such as a will and living trust, and transferring titles of properties.
2. What is a will?
A will is a legal document that expresses your wishes as to how your estate will be distributed after you die and as to who will manage your estate until its final distribution (executor).
3. Who needs a will?
Anyone who plans on dying and would like to decide who will inherit their assets. Intestacy is the state law of dying without a will. The state's intestacy laws will determine who will inherit your assets after you die. A Will is a replacement of the state intestacy law. If you prefer not to have your property distributed by the state's intestacy law, then you should have your own will. However, a will cannot avoid probate court.
4. What is a living trust?
A living trust is a legal document, and also a separate entity ("Michael and Emma's Living Trust.") The living trust holds the ownership rights or title to the assets you transfer to it such as your house and investments. On your death, your successor trustee will distribute these assets to the beneficiary in accordance with the terms of your living trust. In addition, a living trust is a replacement of state intestacy law, and can also avoid the probate court. A living trust can be changed throughout the trustor’s life and can be dissolved if the trustor wishes it to be prior to their death.
5. What are some benefits of creating a living trust?
Trusts can help clients minimize estates taxes, shield assets from potential creditors, avoid the process of probate, which can be very costly and slow, preserve your assets for your children until they are grown, and many more benefits depending on your unique situation, such as having a blended family, and/or minor children.
6. What is the difference between will and living trust?
A will does not take effect until you die. A living trust becomes effective immediately after formation. A will cannot avoid probate court but a living trust can avoid probate court.
7. Should I worry about inheritance tax?
If you are a U.S. resident, then most often the answer is no because the exception is up to $11.58 million. If you are not a U.S. resident, then the exemption is $60,000. Federal inheritance tax is about 40%. By the Internal Revenue Code, U.S. residents will be treated similarly to a U.S. citizen, and will be subject to federal gift and estate taxes on your worldwide assets. IRS regulations define a U.S. resident for federal estate tax purposes as someone who had his or her domicile in the U.S. at the time of death.
8. What is an irrevocable trust?
An irrevocable trust is similar to a living trust except once an asset is transferred to the irrevocable trust, it can not be removed.
9. Why do people choose an irrevocable trust?
Irrevocable trusts can be used when life insurance puts you over the state tax exemption amount so the life insurance can be moved to an irrevocable trust where it won’t count against you. Other uses can be discussed based on your unique situation.
10. How can my children inherit the property after it enters the trust? How long will it take? Will there be a fee? How much?
You will designate a trustee when you create the trust and they will have a fiduciary duty to act in the best interest of your beneficiaries and follow the terms set in your trust.
11. Does a trust protect or separate your assets from your spouse? Do you need your spouse’s consent before transferring a property into a trust? What about your property before marriage? Does marriage override a living trust?
If you live in a community state like Texas, the spouse will need to sign. For property before marriage, your separate property can be added to a trust, but any income generated might be community property. Your unique situations can be discussed with our attorneys to draft the best terms. We also perform family law such as premarital agreements that can be helpful as well.
12. When will beneficiaries in my living trust receive the trust property?
The beneficiaries will receive the property granted to them in the trust upon your death, not when a living trust is formed.
13. Who is the executor?
In a will, the executor is the person who is responsible for property distribution.
14. Who is the trustor?
In a living trust, a trustor is whoever creates the trust. A trustor is also known as a settler or grantor.
15. Can no-U.S. citizen can create a living trust?
Yes. Anyone can create a trust including a U.S. citizen, permanent residence, non-resident alien, or people who have no legal status.
16. Who is the trustee?
In a living trust, a trustee is a person who manages the assets in the trust (management includes collecting rent, buying, selling, or transferring assets) under the terms of living trust. Married couples are often co-trustee, and a successor trustee is chosen as a back-up. The trustee could be your trustworthy friends, family members, or corporate trustee (like a bank trust department or trust company).
17. What if a trustee is not a U.S. citizen?
If the trustee is not a U.S. citizen, then the trust will be taxed as a foreign trust, which means that the taxes will be increased.
18. What is a qualified domestic trust (QDOT)?
If your spouse is a non-U.S. citizen, then you need to form a QDOT.
QDOT allows a non-citizen surviving spouse to take advantage of the marital deduction on estate tax, this means that the surviving spouse pays no taxes on assets. As per the IRS, under Section 2056A, a surviving spouse is eligible for a 100% marital deduction of any estate taxes owed on assets. However, if the surviving spouse is not a U.S. citizen, the marital deduction does not apply. QDOT is the best way to preserve marital assets.
19. If the trustee is not a U.S. citizen, can the trustee be a green card holder?
Yes. Green card holders can be primary trustees and choose a U.S. citizen to be a successor trustee, and they can act jointly as trustee. The green card holder can act independently for anything that is not requiring a qualified domestic trustees.
20. Can the trustee and beneficiary be the same person?
Yes. The trustee and beneficiary can be the same person.
21. If I move to another state, do I need to set up a new trust?
Not really since it will still be a valid trust, but it would be better to have an attorney review it to see if there is an advantage to updating your trust.
22. Why do I need an experienced lawyer for my estate planning instead of downloading an online trust?
Trusts are very useful tools if you know how to use them. A form online can be considered a trust, but it won’t do much for you. The online form may be cheaper up front, but could end up costing more money in the end or not properly protecting your beneficiary how you would. It is really important to discuss your situation with an experienced estate planning attorney to be as protected as possible even after your death.