In “Planning for Your Future Part 1” which appeared in the April 2025 Boom Magazine various documents were mentioned that, depending on your situation, may be beneficial when planning and preparing for your future and your beneficiaries.
Most people believe that their will dictates how all assets will transfer at death but that is not true. Some assets will be distributed automatically upon your death. The following are some examples:
- If you own real property jointly (with someone else) with rights of survivorship, the survivor owner automatically inherits the deceased owner’s share.
- Spouses may also own accounts jointly and the accounts will automatically be in the surviving spouse’s name at death of the joint owner.
- Additionally, if you elect to add beneficiaries on your retirement and/or other accounts, the beneficiaries will automatically receive their portion of the money at your death.
- CAUTION: Each person and his/her beneficiaries are unique so you MUST analyze the impact on taxes and step-up in basis for real property(and other appreciated property). Additionally consider the beneficiaries’ ability to receive and manage assets and/or whether your beneficiaries currently need or may in the future need a means-tested public benefit (ie Medicaid or SSI). This significantly changes the design of the plan for them but can be invaluable to them in the future if you design your plan with this in mind.
Once certain assets are automatically transferred, the rest of your assets may be distributed by a will and/or trust(s). Wills are a common way to distribute property and we will discuss wills in our next article. Another tool that is fairly common means of distributing property is the revocable living trust.
IMPORTANT: There are many different types of trusts and to determine if it fits what you need, first understand your PURPOSE for the trust. We will discuss briefly some reasons why people consider a revocable living trust below.
What is a Revocable Living Trust?
- Grantor (you) creates the trust and is typically the initial trustee. You have full control of any assets you place in the trust during your life if you have capacity. You may make changes to the trust at any time. You may also add directions for exactly how and when you want any of the trust assets distributed and to whom.
- Successor Trustees are VERY important and must be someone you trust 100%. Typically individuals are selected and may even be beneficiaries IF they are able to manage assets responsibly and will follow your wishes. If you do not feel that you have anyone who can function in that role, you may need to find a professional. At times, your CPA, if his/her firm’s policy permits, may assist or you may need to name another corporate trustee. These latter options are more expensive so carefully consider your options about which trustee will work best for your situation.
What are some of the advantages of a Revocable Living Trust?
- You can control the assets during life and death
- During life you can manage assets
- During death you can direct distribution of the assets
- Avoid probate
- Privacy—not publishing through probate court the terms of your trust
- Flexibility—you may change it at any time while you have capacity
What are some things to be considered?
- What is the purpose of your trust?
- Who are you providing for in your trust(if anyone)?
o Type of distribution (support, health, education, etc.)
o Frequency of distribution - What do you want to place in the trust?
o Your home or other real property
o Beneficiaries of account(s) if the beneficiary(ies) should not receive the money all at once
**Tax implications are a major consideration-speak to your accountant and/or an attorney regarding tax implications of a trust as once it is funded the tax rate of a trust is typically greater than the tax rate for individuals.
Companion Document to a Revocable Living Trust
If you elect a revocable living trust, you need a pour-over will. A pour-over will allows any assets remaining at death that were not placed in the trust to transfer to the trust through probate.
In Planning For Your Future (Part 3), we will feature distribution of your assets through use of various types of wills.
Senior Law Solutions, LLC offers a variety of opportunities to assist individuals and their families with aspects of Elder Law Care, Estate Planning, and Life Care Planning with individualized plans. If you have questions or want to learn more, visit www.seniorls.com or call 334. 758.9400.
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