Statutes and legal documents often include strange language and curious terms that might not mean much to the average person. Estate planning documents and their governing laws are certainly no exception. While an estate planning attorney can explain these terms to you, having a basic knowledge of some rules that may apply to you, is a good idea. For instance, the terms “per stirpes” and “per capita” are used to describe how your estate will be distributed. Indeed, per stirpes and per capita distribution of assets are very commonly used terms in this area of the law. So, what exactly do they mean?
“Per stirpes,” like many legal terms, is a Latin term. Literally, it means “by the roots.” When an estate is distributed per stirpes, it means each living member of each “group” of heirs or beneficiaries takes a proportional share of that which the deceased ancestor would have received. For example, a man died with a will and his wife had already passed away. They had four children, but only three of them are still living at the time of the man’s death. The deceased child had two children, both of whom are still living. If the will said the distribution was to his children or their descendants per stirpes, the man’s estate would be divided into four equal shares. The three living children would receive one-fourth share, each. The two grandchildren (children of the deceased child) would share the remaining one-fourth share.
Per capita, a Latin term some may be more familiar with, literally means “by the head.” When an estate is distributed per capita, all living members of an identified group will receive an equal share of the decedent’s estate. A significant difference between per stirpes and per capita is that, if one member of the group is no longer living, his share does not pass on to another group. Instead, that share would pass to the other members of the group. In other words, in the distribution described above, if the will said distribution was "to my children, per capita, instead of the three living children receiving one-fourth shares, they would receive one-third shares. None of the grandchildren would receive any portion of the estate. If, however, the will said distribution was, "to my children and their descendants, per capita," the estate would be divided 20% to each child and 20% to the two grandchildren, because they are in the same group.
Per stirpes is used more commonly in estate planning, most likely because it addresses the typical family situation. However, if you believe a per capita distribution better suits your family situation, then it is important to discuss that with your estate planning attorney. Keep in mind that if you leave a distribution directly to your grandchildren, while your children have also survived you, your estate could be subject to a generation skipping transfer tax. There are specific estate planning tools designed to reduce or eliminate this type of tax, such as a generation skipping trust. So, discuss these options with your attorney.
If you have questions regarding distribution of your assets, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Most of us assume that everyone is required to honor a power of attorney if it is presented to them, but that is not always the case. A power of attorney is often questioned by third parties, such as banks and insurance companies. Many financial institutions require proof that the document is legally valid. Some may even reject the document for various reasons. So, how can you deal with the failure to honor power of attorney documents?
The Uniform Power of Attorney Act
Nearly every state has enacted its own laws concerning powers of attorney. However, not every state requires businesses to honor a power of attorney. As a result of many businesses consistently refusing to honor these important legal documents, lawmakers and regulators began expressing their concern with this inconsistency. As a result, the National Conference of Commissioners on Uniform State Laws approved the Uniform Power of Attorney Act in 2006. Only a few states have adopted this uniform law, including Nevada.
The Uniform Power of Attorney Act was enacted for the purpose of bringing uniformity to powers of attorney, which have rapidly become very common tools in estate planning. One of the provisions of the act addresses “Liability for Refusal to Accept Acknowledged Power of Attorney.” Under this provision, a third party is required to either accept an acknowledged power of attorney or request a certification, translation, or an opinion of counsel within seven business days of presentment. Once this request has been made, the third party must accept the power of attorney within five business days of receiving the requested document. Also significant is the provision that a third party cannot require a different form of power of attorney, which banks had begun to do routinely.
How power of attorney abuse has affected the law
There was a time when a power of attorney was rarely challenged, because exploitation by agents was rare. Unfortunately, the instances of adult children stealing from their parents, through their authority under a power of attorney, increased over the years. This increase in power of attorney misuse eventually prompted lawmakers to focus on the problem of abuse.
This type of abuse gained national attention in 2007 when the son of philanthropist, Brooke Astor, was indicted for attempting to “unjustly enrich” himself, using her power of attorney. He was convicted in 2009 for grand larceny, after he managed to steal more than $1 million from his mother.
The response to abuse was the refusal to honor power of attorney documents
Banks and other financial institutions started taking their own precautions against abuse of powers of attorney. This led to the imposition of tougher requirements for honoring a power of attorney document. As a result, banks regularly rejected powers of attorney if they were signed more than 6 months before presentation. They also routinely rejected a power of attorney from a different state. These higher standards made it more difficult for well-meaning adult children to care for their parents. In some situations, the requirements imposed by these entities were extremely burdensome, and nearly impossible to meet. So, the benefits established by the Uniform Power of Attorney Act are great.
If you have questions regarding power of attorney, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Choosing who should be the successor trustee of a family trust can be a very difficult decision. The successor trustee will be the person who administers the trust assets after you become incapacitated or die. The successor trustee holds, manages, invests the trust assets and collects the income and profits from the investments. The successor trustee will be responsible for paying the expenses of administering the trust and distributing the assets are required in the Trust Agreement. How should you go about choosing the successor trustee of a family trust?
Choosing a proper successor trustee
Generally, when you establish your trust, you are the trustee of a family wealth trust. So, choosing the successor trustee is very important. The individual you choose must be trustworthy, reliable and organized. He or she should be good at following instructions and carrying out the tasks specified in the Trust Agreement. It is also important that the successor be willing to seek professional assistance when it becomes necessary. There are typically three different types of trustees you can consider: an individual, a financial institution, or a licensed professional. Each has its advantages and disadvantages.
Family or friends are common choices for successor trustees
The most popular choice is usually a relative or friend. An individual who is known to you personally, obviously has its benefits. Generally speaking, you will have more trust in that person and you can expect more personal attention from them, both towards you and your beneficiaries. Another benefit might be that this trustee may not charge your estate for their services, which will reduce the overall cost of administering the trust.
The disadvantages may be that a personal friend or family member may not be qualified to handle the responsibilities, or may not be willing or completely available to carry out the tasks. More importantly, if this trustee runs off with the trust funds, or is simply incompetent, there most likely will not be any insurance or bond in place to protect your assets.
Financial institutions can serve as trustees
Another option is choosing a financial institution or a trust company to serve as successor trustee of a family trust. Nearly all major financial institutions have trust departments or associated trust companies that are qualified and very capable of serving as successor trustees of a family trust. Clearly, the knowledge and expertise in managing funds that a financial institution or a trust company possesses is a great benefit. However, this type of trustee typically charges fees for its services and they may take longer to process the administration.
Licensed professional trustees are another option
A licensed professional can also be chosen as a successor trustee of a family trust. One advantage of this type of trustee, as compared to a financial institution or trust company, is that they provide more personal service. One drawback of choosing an individual fiduciary is that he or she may not actually be available to serve at the time needed. Whereas, a financial institution would always be a reliable source of trust administration services.
While settling on a successor trustee may not be an easy decision, it is necessary. You will certainly benefit from understanding your options and obtaining good, sound advice from an estate planning attorney. If you have questions regarding family wealth trusts, or any other trust or estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
One of the primary goals of estate planning is to help your loved ones after your death, both financially and emotionally. Adequate planning can help minimize the financial burden and stress on those you leave behind. Building liquidity into your estate plan can help to provide sufficient financial resources available to cover estate settlement costs, as well as any taxes that may be due.
When a person dies, there are taxes and debts that need to be paid within a short period of time. For example, funeral expenses, medical expenses, unpaid debts, probate costs and estate taxes. For this reason, it is a good idea for there to be some cash available to cover these expenses. When an estate consists mainly of real estate, then there may be an issue with estate liquidity. Estate planning can incorporate steps to provide sufficient liquidity for your estate.
When there are sizable debts or estate taxes to be paid, the trustee or personal representative will sometimes be required to sell assets in order to reduce them to cash. Doing so can have a huge effect on the amount of inheritance the heirs will ultimately receive. More importantly, if there is a family business that you want to remain intact, to be passed on to the next generation, additional consideration must be given to the issue of liquidity.
The term “liquidity” refers to how easy it is to convert assets to cash. The most liquid asset is obviously cash, because it can always be used easily and immediately. There are some types of assets that can be easily converted into cash. These include savings accounts, life insurance proceeds, and stocks and bonds. Certificates of deposit are not quite as liquid, because there is usually a penalty for converting them to cash before their maturity date. In some cases, heirs may be required to sell assets, such as homes and businesses, to meet the taxes and costs. This is typically the last resort. Instead, the best thing to do is plan ahead. This can be done in a number of ways.
Life insurance policies are an effective way to provide estate liquidity. Life insurance policies can be purchased as part of an estate plan, for the sole purpose of covering the claims of creditors, as well as the taxes and other costs. With appropriate planning, life insurance proceeds can also be used to cover federal estate taxes. There are advantages to this method of estate planning. First, the proceeds from the insurance policy will be available quickly. Also, these proceeds are not subject to federal income tax. Another important benefit is the fact that the death costs can be funded for cents on the dollar, since the policy death proceeds are usually more than the premiums that were actually paid.
If you have questions regarding estate liquidity, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
A revocable living trust can be amended whenever necessary, during your lifetime. When clients buy a new house or car, they may ask, "should I amend my trust?" If you are simply purchasing an asset, it is not necessary to amend your trust. You simply title the new asset in the name of your trust. In Nevada, a certificate of trust is a recognized tool to assist you in the titling process.
When should you amend your trust? When your family situation, financial status or any other facet of your life changes, it is always a good idea to revisit your trust and, if necessary, revise its terms. That flexibility is what makes a revocable living trust a very useful estate planning tool. How do you modify your trust? Never attempt to modify your trust on your own. More often than not doing so will land the trust in court where a judge will try to determine what you intended by the modification you have attempted. You entered into the trust process to avoid having your estate go to court; have the process done by qualified counsel.
There are primarily two methods for making changes to a revocable living trust. An amendment to be added to your original trust, is the simplest approach. You can also create a restatement of the terms of your trust, incorporating your changes. Restating the trust is usually best when there are several amendments or when there are a number of provisions in the trust that need revising. Either way, it is essential that you understand and follow the laws of your state, to make sure your trust remains valid and that the changes do not create ambiguity or confusion.
In some situations an amendment is sufficient to effect the changes you require. For example, if you have a child, a simple amendment that adds him or her as a beneficiary, is likely sufficient. If your spouse or a beneficiary passes away, or you change your mind about a particular gift, you can amend the trust to revise those specific terms.
On the other hand, if you anticipate your revisions will be extensive, and possibly complicated or confusing, it may be a better idea to restate the trust altogether and start from scratch. This way you can make sure the terms of your trust are accurate and clear without having to re-title your assets. Revoking the trust and starting again is usually only necessary if a married couple enters into a trust arrangement and later divorces. Revoking a trust will require the trouble and expense of starting over and transferring the property once again. Whether you simply create an amendment, restate the trust, or revoke your trust and start anew, the choice is ultimately yours.
Adding several amendments to an existing trust document can become confusing. Restating the existing trust, you update the entire trust, while keeping the original date of the trust. This way, the property that is already held in trust will not need to be disturbed. Restating voids all prior amendments, thus reducing the possibility of confusion in finally administering the trust estate.
What about amending a shared trust?
If you have created a shared trust, with your spouse for instance, either of you can revoke the trust, as to the share the revoking party contributed. The same is true of amending the trust. Obviously, it is best when amending or revoking the trust, if you both agree to those changes and do so together. Depending on the terms of the trust agreement when one spouse dies, the surviving spouse is free to amend the entire trust, or just those terms of the trust that relate to his or her personal assets. In many trust agreements, the surviving spouse cannot change any terms of the trust which refer to the deceased spouse's trust assets.
If you have questions regarding trusts, or any other estate planning needs in Reno, Nevada please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-WILL (9455).
Wills are very common estate planning tools with great value when it comes to having the freedom of determining to whom your estate will be distributed after your death. Without one, you die “intestate,” which means how your estate is distributed is established by the intestate succession laws in your state. Even with its clear benefits, there can be complications if your will is challenged after your death. Will contests can be expensive and stressful on your family. An easy way to guard against one common challenge to the validity of your will is to create, what is called a “self-proving will.”
The first step in drafting your will is making sure it meets all of the legal requirements to be valid. Each state sets out the specific legal requirements for a valid will. Most states accept wills from another state, as long as the legal document is considered valid under the other state’s laws. The general requirements for a valid will are the same in most states. The will must be in writing, it must be signed by the person creating the will, and it must be signed by at least two witnesses who were present at the execution of the document by the "testator" (the person whose will it is) and the signatures of the other witnesses.
Nevada’s laws regarding “Wills and Estates of Deceased Persons,” are set forth in the Nevada Revised Statutes, Title 12, Chapter 133 Wills, Sections 133.020 through 133.050. In Nevada, every person of sound mind, over the age of 18 years, can create a will. The terms “sound mind” simply means the person has not been determined to be, or is not obviously legally incompetent. As in most states, a will in Nevada must be in writing and signed by the testator and two witnesses.
Witnesses must also be 18 years of age or older and generally competent. The beneficiaries should not be witnesses; rather the witnesses should be independent third parties. A will is not invalid because one of the witnesses is a beneficiary. However, if there are not at least two disinterested witnesses, then the one who is a beneficiary must give up the portion of their gift that exceeds the amount or value they would have received under the laws of intestate succession.
It is not uncommon for wills to be challenged. The benefit of creating a self-proving will is that, the court will automatically accept the will as authentic. Consequently, the probate process, when a self-proven will is involved, is much simpler. There is no need for the witnesses to be located and brought into court to give testimony.
Creating a self-proving will in Reno is not very difficult. The only extra step is for the testator and the witnesses to affirm the will’s authenticity by notarized affidavit, or by affirming under penalty of perjury that they have witnessed the signing of the testator, verified that he or she is over the age of majority and is apparently competent. The process of self-proving a will can be completed at the time the will is executed, or later, including upon the testator’s death. The affidavit is typically made a part of the will and attached to it. Even if the witnesses are available to testify when the testator dies, having a self-proving affidavit eliminates the delay and effort in requiring the witnesses to testify in court.
If you have questions regarding self-proving wills, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Considering how to pass your wealth on to the next generation? Then the generation skipping tax is something with which you should be familiar. The generation skipping transfer tax is a tax assessed on property as it is passed on to a generation that is two or more levels below the generation actually transferring the property. Simply put, if you transfer your property to a grandchild, instead of your daughter or son, the transfer would be subject to the generation skipping tax. The same is true if you transfer your estate to someone who is unrelated, and who is 37 ½ years or more younger than you. This type of transfer would also be subject to the generation skipping transfer tax.
Government tax schemes do not take into consideration those of us who want to include our grandchildren in our estate planning. Instead, the government apparently believes a family’s wealth should only be allowed to trickle down from one generation to the next. However, some grandparents may choose to assist their grandchildren in paying for their education or getting on their feet with their new families. The purpose of the generation skipping tax was to close the obvious loophole in the estate tax, and ensure that taxes will be paid at each level.
In 2009, the federal government created an exemption for property transfers up to $3.5 million from the generation skipping transfer tax. The tax was actually repealed in 2010, but reinstated in 2011, with a $5 million exemption. Since then, the exemption has been increased from $5 million to the current exemption of $5.34 million, as of 2014.
Yes. There are specific estate planning tools designed to eliminate estate taxes at each generational level. A Generation Skipping Trust, also known as “dynasty trusts,” is a kind of irrevocable trust created to deal with this tax, especially.
A General Skipping Trust is intended to avoid, or at least minimize, estate taxes on transfer to subsequent generations. This trust accomplishes this by holding the assets in the trust and distributing the funds in a pre-defined way to each generation. This way, the entire amount of the trust will be protected from estate taxes with each passing generation. Because these trusts also provide protection from creditors and predators, Generation Skipping Trusts are not just for wealthy families.
Another option is gifting assets to your grandchildren. This can potentially reduce the size of your estate, as well as the tax that must be paid upon your death. A grandparent can give his or her grandchildren up to $14,000 per recipient per year without having to report the gift. This money can also be placed in a properly established and maintained gift trust. Although you can make an outright gift, pay health care or education expenses directly, or put the money in a custodial account, putting the money into a trust has some major advantages that you should discuss with your estate planning attorney.
Generation skipping trusts are complex legal documents that should be drafted by a competent, experienced Reno estate planning attorney. They are most knowledgeable about deciding whether a generation skipping trust in Reno would benefit you.
A Power of Attorney is a very common estate planning tool, that can easily be customized to fit each client’s needs. When a Power of Attorney is created, the usual purpose is to handle legal, financial or medical needs for someone else. For instance, a power of attorney can be used to manage bank accounts and pay bills. Or, if one is incapacitated, it can allow an agent to manage their medical treatment. An agent’s actions are governed by the authority given in the power of attorney document, so what an agent can do is determined by the instructions you give. If making gifts on your behalf is a power you want your agent to have, then you can indicate your wishes when the power of attorney is drafted. Deciding whether agents make gifts under your power of attorney is up to you.
When you create and execute a power of attorney, you are known as the “principal”. The person to whom you give the power to act on your behalf, is known as the “agent”. How how much power you give your agent is determined solely by the type of power of attorney you execute and the language you use in that legal document. A power of attorney can be either limited or general.
If you create a limited power of attorney, you need to be very detailed in describing the authority you want to give your agent. Only the powers specifically mentioned in a limited power of attorney can actually be exercised by your agent. So, if you execute a limited power of attorney, and you want him or her to be able to make gifts on your behalf, then you must specifically convey that authority. Otherwise, he or she will not be able to do so.
On the other hand, when you execute a general power of attorney, your agent will be allowed to do nearly anything you, as the principal, would be able to do. A general power of attorney is a very powerful legal document, which conveys significant power. When executing a general power of attorney, you should assume that the agent will have authority over all of your assets. In that situation, the agent will have the ability to make gifts of your assets, in your name. Most states, however, prohibit an agent from making gifts to himself or herself, while acting as an agent, unless that authority is specifically mentioned in the document.
Being an agent is a serious role that should not be taken lightly. An agent is expected to act in good faith, and avoid any conflicts that would prevent him or her from acting in the principal’s best interests. It is considered improper to override the desires of the principal in favor of the agent’s own preferences.
Also, an agent must keep his or her own money and property separate from the property of the principal. Whenever an agent conducts financial transactions on behalf of the principal, only the principal’s funds can be used for the principal’s benefit. The agent is also required to keep accurate and complete records of all transactions.
If you have questions regarding a power of attorney, or any other estate planning needs in Reno, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
So, you just set up a revocable living trust. The next step is funding your trust. How the trust is funded depends on the type of assets you want to transfer to the trust. There are different methods for different types of assets. Understanding the most common methods will make the process less complex. Funding a trust is just as important as establishing the trust. Your estate planning attorney can help.
The goal of funding a Revocable Living Trust is to make sure your property is subsequently governed by the terms of the trust agreement. Once that is accomplished, the trustee will be able to manage those accounts, in the event you become mentally incapacitated, or upon your death. In order for a Revocable Living Trust to function as it should, you, as the trustor, must do more than simply sign the trust agreement.
After the trust agreement is signed and executed, you must then “fund” your assets into the trust. There are three general ways this is done, in order to properly fund a Revocable Living Trust. Which method is required depends on the type of asset being funded. The three methods are:
None of these methods are especially complicated. However, the procedures must be followed in order to properly fund the trust.
Assets such as bank accounts, investment and brokerage accounts (other than retirement accounts such as IRA or 401(k)); stocks and bonds held in certificate form or street form, and real estate, are funded into a Revocable Living Trust by simply changing the owner of the asset from your name into the name of the trust itself. Some institutions may require only that the name on your account be changed; while others may require you to close the original account and open a new one in the name of your trust.
If you have personal property that requires no certificate of legal title (e.g., Jewelry, artwork, antiques); personal loans, partnership and membership interests in limited liability companies, these types of assets are funded into a Revocable Living Trust by assigning ownership rights from your name into the name of the trust. This is done by creating a document called an assignment that the owner simply signs. Royalties, copyrights and patents can be assigned, but should also be changed in the office or agency that issued the certification.
Any asset that requires the naming of a beneficiary, like life insurance, certificates of deposit that will charge a fee for re-titling, and other such accounts, is not re-titled into the name of the Revocable Living Trust. Instead, the primary beneficiary of these accounts or policies is changed to the trust.
Retirement plans such as IRAs, 401(k)s and the like are trusts in and of themselves. Under limited circumstances, a Revocable Living Trust may be designated as a beneficiary, but often there are adverse tax consequences. You will want to discuss the pros and cons with qualified counsel before naming a beneficiary on those assets. Simply put, any property that is titled in your personal name must be probated when you die. If you overlook the importance of funding your Revocable Living Trust, your estate plan will not be as effective as you or your family anticipated when the trust was created, and the trust will not serve its purpose.
If you have questions regarding funding a trust, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Living Trust vs Power of Attorney? The answer may surprise you. In order to create a comprehensive estate plan, you actually need both. Estate planning is much more than simply transferring your assets to your loved ones when you die. Although both a living trust and a power of attorney essentially provide the same benefit, a way to manage your affairs when you are incapacitated, most comprehensive estate plans include both.
A living trust controls not only the management of your assets if you ever become incapacitated, but it also addresses the distribution of your assets after your death. With a living trust, you must re-title your assets to your living trust in order for it to become effective. The living trust is meant to give your agent, referred to as the “trustee,” the authority necessary to manage all of the assets you place in the trust. What a living trust does not do, is give your trustee authority over any of your assets that are not included in your living trust.
What happens when your trustee realizes, after your incapacity, that you failed to transfer some of your assets to your living trust. Not to mention all of the assets that were intentionally left out, such as retirement accounts, annuities, and Social Security benefits. How will your agent manage any of these assets for you, upon your incapacity? The living trust does not give your trustee the power to manage assets not titled in the name of, or assigned the trust. This is where the durable power of attorney becomes necessary.
If you also include a Durable Power of Attorney in your estate plan, your agent will have the authority to manage the remaining assets, including those you unintentionally left out of your trust, as well as your annuities, retirement accounts and social security funds. You can also control the extent of your agent’s powers over your assets.
A general power of attorney gives broad power to the agent relating to certain categories of decisions, such as legal, financial or business decisions. A limited power of attorney can be created for the specific purpose of allowing someone to make decisions for you, only as to a particular activity, such as selling your real property when you are away, or making investment decisions in the event you cannot. Another example would be creating a power of attorney to allow a business partner to use specific assets for the benefit of your business if you become incapacitated. If you own rental property, for instance, your agent can be given the authority to handle all aspects of managing that property. Health care or medical powers of attorney allow another person to make medical decisions in the event of your incapacity - also a limited power of attorney.
Comprehensive estate planning should include both a Living Trust and a Power of Attorney. Your agent should be aware of the relationship between these two documents in order to know which document should be presented when attempting to manage your affairs in the event of your incapacity.
If you have questions regarding trusts or powers of attorney, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
It is not uncommon to revise a will more than once throughout your lifetime. Circumstances are bound to change, and so must our estate plans. Like a will, you can revoke living trusts whenever you desire. In fact, that is one of the benefits of creating a revocable living trust – its flexibility.
The choice is always yours. However, there are some situations where an amendment may be sufficient. For example, if you get married or have a child, if you eliminate substantial property that was to be specifically distributed to a particular person in the trust, if your spouse or a beneficiary dies, an amendment would be in order. If you change your mind about who should inherit a particular item, or if you move to a state that has different laws that will affect the terms of your trust, an amendment may also be necessary.
If, on the other hand, if you need to make extensive revisions that may prove to be somewhat confusing, or if you get divorced, either restating or revoking the trust entirely is usually required. Either way will allow you to start fresh and be sure to include those terms that will meet your changing needs.
If you want to make changes to a will, it is easy to revoke the will entirely by simply executing a new one. Well drafted wills revoke all prior wills. It is a little more complicated with a living trust, however, because the property in the trust has already been transferred. You could revoke the trust, draft a new one and transfer the property again. Because the expense and trouble of doing this is substantial, restating the living trust agreement is usually a better option. A joint married living trust, however, will require revocation of the trust in the event of a divorce.
Simply adding amendments to an existing trust document can get confusing. However, if you restate the existing trust, without revoking it entirely, but include in the restatement any necessary changes, you can keep the original date of the trust and not have to re-title the property that is already held in trust. By doing so, you also eliminate the headache of trying to go through many amendments, which can create confusion, waste time and cost more in administration fees.
Look at it this way. You create a living trust transferring your house to the living trust, making yourself trustee. You name your sister as your successor trustee. Let’s say three years later, you decide you should name your brother as successor trustee, instead. That would require a simple amendment. Then you decide to change a beneficiary; now another amendment. Next, you decide that you really wanted your sister to be a trustee after all. Next, your attorney informs you that there has been a significant change in the law, so you amend again. After several of these, it would be easy to miss something. To eliminate the possibility of confusion, you can simply create a new trust that clearly indicates it is a restatement of the original trust. The restated trust will make it explicit that all trust amendments are now irrelevant and the terms you want are now in effect. It’s that simple.
If you create a joint trust with your spouse, for example, either of you can revoke the trust as to the share of the assets the revoking spouse contributed. The same is true of an amendment. You can see, however, that if you decide to revoke or change any of the terms of the trust, it is best if both of you agree to do so in writing. After one spouse dies, the surviving spouse is free to amend the terms of the trust, if the trust is a "married simple trust". If the trust divides into a trust for the surviving spouse and another trust for the deceased spouse's assets, the surviving spouse cannot change any terms of the deceased spouse's trust.
If you have questions regarding revoking, restating or amending a trust, or any other estate planning needs in Reno, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Joint ownership in property can be created in one of three forms: with rights of survivorship, as community property, or as tenants in common. The type of ownership you have in certain property will determine how that property is transferred at your death.
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Trusts are a vital wealth planning tool, not only for asset protection, but also for safeguarding the family’s wealth, regulating access to property and assets by younger family members, and providing long-term oversight and investment management for families. The trustee is responsible, either directly or indirectly, for investing those assets and making sound decisions in making distributions to beneficiaries.
Regardless of the size of your estate, it is important to consider protecting your assets and creating a plan to ensure that your family wealth will be passed on as you wish. The goal of asset protection is to shelter the wealth you have created from unnecessary risks. A family wealth trust can be the most effective and flexible option for protecting family wealth. When your estate planning attorney properly customizes a trust for your family, the benefits will far exceed simply leaving assets to family members in your will. Remember, a Family Wealth Trust is not just for the wealthy.
What Is a Trust?
A trust is just an agreement between a trustor, trustee and beneficiary regarding how and when assets will be transferred. The “trustor” is the person who owns the assets in and creates the trust. The “trustee” is the person to whom the legal title of the assets passes. The “beneficiary” is the person who eventually receives the assets after specific conditions have been met. Trustees can be friends, relatives or professionals, such as attorneys or accountants. In some cases, an entity such as a bank or a trust company can serve as trustee.
How do Family Wealth Trusts actually provide protection?
Usually, a family wealth trust becomes irrevocable when the trustor dies. This simply means its terms cannot be changed once it has been created. Furthermore, the assets are no longer part of the trustor’s estate once the trust becomes irrevocable. So, when the trustor passes away, these assets are not considered part of the personal estate and will not be subject to the beneficiary's creditors. This is only one advantage of this type of trust.
A Generation-Skipping Trust
Another option to consider is the Generation-Skipping Trust, which will allow you to retain your tax exemption on gifts to your grandchildren and avoid the tax on any amounts exceeding that exemption. In 2014, the Generation-Skipping tax exemption is $5.34 million, which is the same as the federal estate tax exclusion. This is also a beneficial estate planning tool, if you want to leave assets to your grandchildren. For instance, you can put $100,000 in a generation-skipping trust and allow it to accumulate earnings for any number of years. Still, your lifetime exemption would only be reduced by the original $100,000. If you have any questions about these or any other asset protection tools, please contact our office.
In the case In re Estate of Karter Wu (Supreme Court of Queensland, Australia), Mr. Wu created and stored his Last Will and Testament on an iPhone, along with a series of other documents, most of them final farewells.
Wu’s iPhone Will named an executor and successor, set forth how he wished to dispose of his assets at death, dealt with his entire estate, and authorized the executor to deal with his financial affairs. The Will began with the words “This is the Last Will and Testament of Karter Wu.” At the end of the document, Wu typed his name where the testator would normally sign his name, followed by the date and his address. The Australian court admitted the Will to probate.
The law for the execution of a valid Will in Queensland, Australia, is set forth in the Succession Act of 1981. The Act provides the requirements for execution, however, it provides that, if the court is satisfied that a person intended a document to form his Will, then the document shall be considered a Will as long as it purports to state his testamentary intentions. Australian law defines a “document” to include any disc, tape, article, or any materials from which writings are able to be produced or reproduced. Citing a New South Wales, Australia, case that held a Word document stored on a laptop computer to be a document, the court held the electronic record on the iPhone was a document for purposes of the statute. Since the record contained on the iPhone named an executor, authorized the executor to deal with his financial affairs, and provided for the distribution of Wu’s entire estate at a time he was contemplating his imminent death, the court held that it met the requirements of the Succession Act 1981.
California Probate Code § 6110 provides that a Will shall be in writing and signed by the testator, or signed in the testator’s name by some other person in the testator’s presence and at the testator’s direction, or by a conservator pursuant to court order. The Will must have the signatures of two witnesses. If the Will does not meet these requirements, it shall be treated as if it did meet the requirements if the proponent of the Will establishes by clear and convincing evidence that, at the time the testator executed the Will, he or she intended the document to be his or her Will.
Similarly, New Jersey law provides at N.J.S. 3B:3-2 that a document or writing is treated as complying with the normal rules for executing a Will if the proponent of the writing establishes by clear and convincing evidence that the decedent intended the document to constitute the decedent’s Will.
The California and New Jersey statutes are based on § 2-503 of the Uniform Probate Code. The impetus for the enactment of this section of the Uniform Probate Code may have been a case where an attorney attempted to probate the unsigned draft of a Will of a decedent who was killed in the World Trade Center attack on September 11, 2001.
California Probate Code § 6130 further provides: “a writing in existence when a Will is executed may be incorporated by reference if the language of the Will manifests this intent and describes the writing sufficiently to permit its identification. California Probate Code § 6131 states: “a Will may dispose of property by reference to acts and events that have significance apart from their effect upon the dispositions made by the Will, whether the acts or events occur before or after the execution of the Will or before or after the testator’s death. . . .”
Recently, a Will was admitted to probate in California where the Will referred to the disposition of assets in accordance with recordings that the decedent had left, both prior to the execution of the Will and would leave after the execution of the Will, on his answering machine at his residence. The judge found that the recordings constituted a writing within the meaning of the California Probate Code and were to be incorporated by reference and were to be considered to be acts of independent significance. Therefore, the recordings were given effect with regard to the disposition of property as governed by the Will.
While the existence of these statutes in many states have broadened what may be admitted as a Will for probate, it is not a good idea to rely on these statutes to assure that one’s Will will be accepted by the local probate court. Having a Will drafted by an attorney experienced in estate planning and drafting is always the best course of action to assure there will be no problems with the disposition of one’s estate at death.
Furthermore, there are many reasons why one may not wish to subject his or her estate to probate upon death, including potential additional costs, delays in administration, and the publicity of both the extent of the decedent’s wealth and the identification of the beneficiaries of the estate. There are many ways to avoid a probate administration at death, including the execution and funding of a revocable or irrevocable trust during the individual’s lifetime.
For more information about the ways to avoid probate, contact our law office. Our office focuses on estate planning, probate administration, and methods to avoid probate for those who have a desire to do so. We work with clients of all wealth levels and ages. As a member of the American Academy of Estate Planning Attorneys, our firm is kept up-to-date with information regarding estate planning and estate and trust administration strategies. You can get more information about scheduling a complimentary estate planning appointment and our planning and administration services by calling Gerald M. Dorn, Esq. at (775) 823-9455
Dying “intestate” simply means you did not have a will. Each state has its own “intestate succession” laws. Nevada is no exception. How your property is distributed upon your death, depends primarily on which relatives survive you, or are still living at that time.
The Laws of Intestate Succession in Nevada.
Generally, only assets that you own alone in your name only will pass through intestate succession. Examples of property that does not pass through intestate succession, assuming the beneficiaries or joint owners are living at your death include:
Instead, these assets will pass to the surviving co-owner or beneficiary you named, whether or not you have a will.
Which relatives are in line to inherit in Nevada?
If you have children when you die, but no spouse, parents or siblings, then your children will inherit your estate. Next in line would be your spouse, parents and your siblings, in that order.
Because Nevada is a Community Property state, your spouse will inherit your share of the community property upon your death. “Community property” is property acquired while you were married, except gifts and inheritances given to only one spouse, even if acquired during marriage.
So, if you have a spouse and children who survive you, your spouse inherits all of your community property and 1/2 or 1/3 of your separate property. If only your spouse and parents survive you, they split your separate property equally, but your spouse inherits all of the community property. The same is true for siblings and a spouse, if your parents are not living at the time of your death.
Who are legally considered to be “children?”
Children who have been legally adopted receive a share along with any biological children. However, foster children or stepchildren that were not legally adopted do not automatically receive a share. Children you placed for adoption and who were legally adopted by another family are no longer entitled to a share of your estate.
Special Circumstances in Nevada
There are a few other special circumstances that warrant mentioning. Children you conceived, but were not born before your death (posthumous children) can still receive a share. Children born outside of marriage can only receive a share of your estate if it can be proven that you acknowledge them as your children and contributed to their support.
So-called “half” siblings inherit as any other sibling would. Relatives entitled to an intestate share of your property will inherit whether or not they are citizens or legally in the United States. Finally, Nevada’s “killer” rule says, that anyone who feloniously and intentionally kills you, will not receive a share of your estate. If you have any questions regarding inheritance and intestate succession, or need assistance in will drafting in Nevada, please give us call.
A very common question asked by estate planning clients is “what happens to my property if I am single when I die? The answer to this question generally depends on three things: (1) whether you have a will, (2) the laws of the state you live in and (3) which of your relatives are still alive when you pass away. This would be true even if you are married when you die. Each state has its own set of “intestate succession” laws which determine where you property will go if you die without a will. If you have a will, on the other hand, the terms of your will determine who will inherit your property.
A will is an estate planning document that allows you to specify the individuals, institutions or other organizations (including charities) you want your assets distributed to when you pass away. Whether you are married or single when you die, the terms of your will always determine where your property will go. If you die without a will, or “intestate,” the laws of your state will determine how your assets are distributed.
In Nevada, if you have children but no spouse, your children will inherit everything. If your parents are living, but you have no children when you die, they will inherit everything. Likewise, if your parents are deceased and you have no children, but your siblings survive you, they will inherit everything. If any of your siblings are deceased, the share they would have received will go to their descendants.
If you do not have a will, and you have children, In Nevada they will receive what is called an “intestate share” of your estate. The size of the share will depend on how many children you have, because they will share equally. They must legally be your children; it will not go to step children. If you legally adopt a child, he or she will receive an intestate share along with any biological children. However, foster or stepchildren who have not been legally adopted do not receive a share.
If you have a child who was legally adopted by another family, that child will no longer be entitled to a share of your estate. Men who have children born outside of marriage can only receive a share if paternity has been acknowledged or proved in court. A child that was conceived by you, but not actually born before your death, will still receive a share of your estate in Nevada.
There are a few miscellaneous rules or definitions that may apply to your particular situation. For example, “half” relatives inherit as if they were “whole.” So, your brother with whom you share a mother, but not a father, will have the same right to your property as he would if you had both parents in common. Citizenship does not affect inheritance, either. Nevada also recognizes what is known as the “killer” rule, which provides that if someone commits a felony and it results in your death, that person cannot inherit any part of your estate.
If you have any questions regarding inheritance and intestate succession laws in Reno Nevada, or need assistance in will drafting in Nevada, please give us call.
You have to be concerned about taxation when you are planning your estate. Taxes on asset transfers at death are going to be a factor for many high net worth families. Nevada, however, has no inheritance or estate tax, so we only have to be concerned about the federal estate tax.
There is an estate tax credit or exclusion. In 2014 the amount of this exclusion in this country, including Reno Nevada, is $5.34 million. Lifetime asset transfers exceeding this amount are potentially subject to a transfer tax of 40 percent.
The question of whether or not an inheritance recipient will be required to pay taxes is a multifaceted one. If the assets that comprise the estate do not exceed $5.34 million in value, the estate as a whole will not be taxed. So the answer is no on this level, when the estate is worth less than $5.34 million.
If it was worth more, the individual beneficiaries do not pay the estate tax. The estate is responsible to pay the tax, so it comes out before other transfers, which means that the value of the estate as a whole would be reduced by the imposition of the tax.
Many laypeople would naturally think that an inheritance tax and an estate tax are exactly the same thing. They assume that these are just different terms that describe the same death tax.
In fact, an inheritance tax is something that is by definition different from an estate tax. As we have already touched upon, an estate tax is imposed on the entire estate. An inheritance tax is levied upon each person receiving an inheritance.
Fortunately, there is no inheritance tax in the United States on the federal level and as mentioned above, we do not have a state level inheritance tax in the state of Nevada. However, there are some states in the union that do have inheritance taxes. As we said, the beneficiaries of the estate typically pay an inheritance tax in those states. State level estate taxes are typically paid by the estate, similar to the federal estate tax.
In fact, residents of New Jersey and Maryland are faced with the prospect of paying a state level estate tax, a state level inheritance tax, and the federal estate tax.
It should be noted that states that have an inheritance tax generally exempt very close relatives like spouses and children.
You may wonder if you are going to be forced to report an inheritance on your annual tax return claiming it as income. If you receive a bequest, generally speaking it is not going to be looked upon as taxable income.
However, if the inheritance was to appreciate during the administration process before it was distributed, the gains could be taxable. Similarly, if income is generated during that time, it could be subject to income tax.
Of course, if you sell property that you inherited at a later date after it appreciated, the capital gains tax would be a factor, but the cost basis is stepped up to the value as of the date of the deceased owner's death, so the tax would only be for the appreciation after that date.
This post provided a little bit of information about estate planning and taxation in Reno Nevada. To learn all of the details, contact our firm to schedule a free tax efficiency consultation.
It can be intimidating to consider the possibility of relinquishing control over your property. People sometimes assume that you do surrender control of assets when you create a trust.
In this post we will provide some clarity about creating a trust in northern Nevada.
There are different types of trusts. Perhaps the most commonly utilized trust in Reno NV in the field of estate planning is the revocable living trust.
These trusts are largely useful to enable probate avoidance. If you use a last will to state your final wishes, the estate must be probated before your heirs receive their inheritances.
This process can be expensive and time-consuming. Most people would like to facilitate timely asset transfers.
When you use a revocable living trust to arrange for these transfers the distributions to the beneficiaries will take place outside of probate.
Because of the fact that the trust is revocable, you do retain control of assets that you convey into this type of trust.
You can act as both the trustee and the beneficiary while you are still living, and most people will do this. As a result, you can control investments and give yourself distributions as you see fit.
The control doesn't stop there. Because the trust is revocable, you can actually dissolve or revoke it at any time. The terms that you originally set forth are not etched in stone either. You can change them and add or subtract beneficiaries.
There are irrevocable trusts as well. With some exceptions, these trusts do require you to surrender incidents of ownership, so you do not continue to have control of the property that has been conveyed into the trust.
Because the trust is not revocable, you cannot dissolve it, and generally speaking the terms cannot be changed.
Why would you want to create a trust that did not allow you to retain control? There are a number of reasons.
Certain estate tax efficiency strategies involve irrevocable trusts. Because the assets would be owned by the trust rather than the estate, there are certain benefits.
In addition, when you surrender incidents of ownership by placing assets into an irrevocable trust they are generally going to be protected from creditors and claimants seeking redress. Nevada does allow some irrevocable trusts to be "self-settled," so some incidents of ownership are retained, but these are sophisticated strategies that require the advice of competent counsel to establish and fund.
The best way to proceed if you have questions about estate planning would be to discuss everything in detail with a licensed Reno Nevada estate planning lawyer.
Rather than looking for answers to general questions about what trusts can and cannot do, you would be better off consulting with an attorney. You can explain exactly what you want to accomplish, and your attorney can give you direct answers to your specific questions.
