Owning a family business requires a business succession plan if you want the business to continueon after your retirement or death.
Topics covered in this whitepaper include:
Click here to read the whole article or download the PDF.
A family pet is not only a friend for life, but your cat or dog may become as much a part of your family as any other member. As such, pet owners are understandably concerned about what will happen to their pets after they pass away. It is unfortunate that pets cannot simply be named as beneficiaries, because that would make pet planning so much easier. But, since pets cannot own property, you will need to establish an appropriate pet plan to protect the future of your family friend. Your estate planning attorney can guide you in this process, so you will know what to include in a pet plan.
What are my pet planning options?
There are two main components of every pet plan: the caregiver and financial support. The goal of your pet plan should be to appoint a proper caregiver to care for your pet and make sufficient funds available for that care. There are three basic types of pet plans, ranging from the formal to the informal; from simple agreements to complex trusts.
The general provisions of a good pet plan
A comprehensive pet plan allows you to provide detailed instructions for the care of your pet, including your preferences and your pet’s preferences. The ability to add any instructions you would like, gives you peace of mind for the future. In order to cover all of the necessary provisions, there are four topics that should be included in your pet plan.
Appointing a caregiver to care for your pets
Your pet plan needs to specifically identify the individual you want to provide care for your pet, after your death. It is also wise to name an alternative caregiver, in case your initial choice is unable to fill the role for whatever reason.
Instructions regarding your pet’s needs and routines
Describing your pet’s normal routines and certain preferences, such as type of food, favorite toys, etc., can ensure your pet’s continued happiness. It may also be important to include information regarding your pet’s veterinary care, pre-existing medical issues, dietary restrictions, and the like.
Source of funding for the care of your pet
Establishing a source of funding for your caregiver to use in providing care for your pet is obviously a crucial component of a pet estate plan. Your estate planning attorney can help you to estimate the amount of funds needed to cover your pet’s expenses. This sum of money should be placed in trust, so that the funds can only be used for that purpose. Many clients also include instructions on what should be done with any funds that may be remaining after your pet’s death.
Appointment of a trustee over the funds
The role of the trustee in pet planning is to ensure that your instructions are being followed and that the money you set aside for your pet’s care is being used only for that purpose. The trustee can be the same individual you select to be the caregiver, or it can be a separate individual, if you would be more comfortable with a system of checks and balances.
If you have questions about creating pet plans, or any other pet estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Dying “intestate” means that you did not create a plan for how your estate should be handled upon your death. When you have no plan, the probate court will determine how to handle your assets, based on the laws of intestate succession.
Learn more about intestate succession in Nevada in this presentation.
In Nevada, if the deceased person's assets exceed $20,000, or if there is real estate involved, probate is normally required.
Topics covered in this whitepaper include:
Click here to read the whole article or download the PDF.
Contrary to what many people believe, trusts do not inherently protect assets. The amount of protection a trust can provide for your assets depends on how the terms are written. Some types of trusts can, indeed, protect your assets from creditors. However, not every trust can. Irrevocable trusts and asset protection can go hand in hand, if the trust is properly established.
Which type of trust can provide asset protection?
Protection from creditors can be accomplished to some degree with trusts, if it is an irrevocable trust. “Irrevocable” means the trust cannot be modified or revoked once it is created. Since you no longer control the property, and it cannot be revoked, the money is no longer considered to be yours. As such, that property is no longer subject to your creditors.
What are the proper terms to include for asset protection?
As with anything else you want to accomplish, the proper terms or provisions in a trust can ensure asset protection. First of all, the interest you leave to your beneficiary must either be contingent on some future event, or be subject to the sole discretion of the trustee.
Another option is to include, what is known as, a “spendthrift” provision. This type of provision keeps creditors from making a claim against a beneficiary’s interest. Just remember that the assets are only protected by these types of provisions, as long as the assets remain in the trust. Once they have been transferred out of the trust, they become subject to a creditor’s claim.
What is the difference between a revocable and an irrevocable living trust?
The purpose of a revocable living trust is to avoid the expense and delay of the probate process. Typically, a revocable living trust is used along with a will in estate planning. Property in a trust can be distributed upon your death with court approval. Thus, your heirs are not required to wait nine months, a year or more before receiving their inheritance.
A Revocable Living Trust is subject to creditors
A revocable living trust cannot provide protection for your assets because the property in the trust is still considered to belong to you. You are named as the trustee so you will still have control over the trust assets during your lifetime. Since the property is essentially yours, it remains subject to the claims of your creditors.
Another reason that a revocable living trust does not protect your assets is because you have the power to revoke the trust at any time. If you do, the trust property immediately becomes yours once again. Also, all of the income your trust assets may generate belongs to you and must be reported on your personal income tax return. All of those characteristics of a revocable trust mean it is not an asset protection vehicle.
If you have questions regarding irrevocable trusts, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
To learn more, please download our free asset protection planning mistakes in Nevada here.
Planning for the future of your beloved family pet should be an important part of your overall estate plan. There are several options for including the proper provisions in your estate plan, to provide for your pet’s lifetime care after your death or incapacitation. The most common options are pet trusts and pet care agreements. However, you can also choose another simple method: wills used in pet planning.
What are my choices for pet planning?
A pet trust creates an agreement with a trustee you select to manage your pet’s care and make sure your instructions are followed. This method can be more expensive and complicated to set up, but it is legally enforceable. More commonly, a pet provision will be placed in your living trust. Adding provisions for your pet in your will is a possibility, but is essentially unenforceable.
Pet provisions in wills are unenforceable
Wills are very common, very useful estate planning instruments. However, they are not very effective when it comes to planning for your pet. This is generally because the provisions you include regarding your pet are not legally enforceable without creating a testamentary trust which would require the supervision of a court for the remainder of the pet's life. Pets are considered, under the law, to be personal property. Therefore, once they are distributed to the beneficiary you choose to care for them, that person has the discretion to do what they want with the pet.
In other words, you have no control over what your beneficiaries do with the property they receive. Once the pet becomes their property, the caregiver is not legally required to keep your pet. The same is true for any money you leave behind for the care of your pet. Simply including provisions in your will could mean that your pet will be turned over to a pet shelter. There are no guarantees.
Wills do not provide for immediate protection
Even if you are certain that the caregiver you have chosen will take great care of your pet, you must consider that the protection of your pet, under the will, is not immediate. Wills must go through the probate process before the property can actually be distributed. This would include your pet. So, until that process is completed, the will does not provide any protection for your pet. If you choose to use this method, be sure to discuss with your personal representative, alternative care for your pet during that interim period.
Another issue to consider is the fact that a will cannot provide protection for your pet if you simply become incapacitated. A will only becomes effective upon your death. So, separate arrangements must be made to provide care in the event you are unable to do so. This is a benefit of having a pet trust or pet protection agreement in place.
Although there are some aspects of a will that may not make it the best option for pet planning, a will can still be used in combination with a pet trust or a pet provision inside a trust, to provide the best plan for the future care of your beloved pet.
If you have questions regarding pet provisions in a will, or any other pet estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
To learn more, please download our free Nevada pet trusts report here.
A trustee is an integral part of a living trust. The trustee is the person who makes sure the terms of your trust are followed. Depending on the terms of your trust document, the trustee will ultimately handle your financial affairs, including paying bills, investing and keeping accurate records. So, who should be the trustee of a living trust?
You can be your own trustee
Yes, you can be the trustee of your own living trust, if you choose, as long as you are competent to do so. Your spouse can also serve as trustee with you. In fact, it is common for most married couples who jointly own their assets, to be co-trustees. This can be helpful because, if either of you becomes incapacitated or passes away, the other spouse will be able to immediately continue handling the trust property. No court intervention would be required. This is one of the reasons many couples choose a living trust as opposed to a will. However, it is not necessary for you to be your own trustee.
Choosing a relative or friend to be trustee
Another common option is to select an adult relative, such as a child, or a trusted friend. Choosing someone you know personally, certainly has its benefits. Typically trustee fees of friends or family members are significantly less than corporate or professional trustees. You are also more likely to receive their personal attention. Whereas, a financial institution is responsible for managing many trusts at a time, and may not be able to provide personalized service.
Financial institutions and professionals
You can also choose a financial institution to be the trustee of your living trust. Most major corporate trustees and trust companies are qualified and quite capable of providing trustee services. The knowledge and expertise in administering a trust can provide peace of mind. A licensed professional may also be an option. This could include an attorney or Certified Public Accountant.
Can Trustees Get Help?
Yes. If you decide to take on this responsibility yourself, don’t worry. You can absolutely seek the assistance of an expert. In fact, it is strongly suggested that you do. Estate planning attorneys, especially those who are experienced in trust administration, are there to guide you through the entire process.
It is also advisable to hire a tax preparer or accountant when the time comes to file the trust's tax return, as well as to advise you on income tax issues that may arise when you sell or distribute the trust assets.
If you have questions regarding trust administration, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Planning for the future of your pet may be as important as any other part of your estate plan. Basically, there are three estate planning documents that can be used specifically for pet owners. Provisions can be included in a will, which give the pet to a chosen caregiver along with funds to support the pet. A pet trust allows a trustee to oversee the care of the pet and ensure that the owner’s instructions are being followed. Finally, a pet protection agreement is another legally enforceable document, which provides essentially the same protection as a pet trust. So, when it comes to pet planning, you may want to compare wills vs trusts, in determining which method to use to protect the future of your pet.
The disadvantages of using a will for pet planning
Contrary to popular belief, your pet’s future may not be properly protected simply by mentioning them in your will. First, any instructions you include in your will, pertaining to your pet, are not legally enforceable, unless you provide a testamentary trust that has to be enforced by annual reports to the court. The purpose of a will is, essentially, to distribute assets. Once your pet is distributed to the person you choose as caregiver, that pet becomes his or her property. However, the caregiver is not obligated to keep or care for the pet. The same is true if you leave specific funds to the caregiver for the purpose of caring for the pet. The will cannot force the beneficiary to use the funds in any specific way.
Another problem with wills is that their terms are not put into effect immediately. Wills must go through probate, which is a lengthy court proceeding. With only a will, a special hearing establishing the caretaker's right to provide for the care of your pet during that waiting period before the final settlement of the estate may be necessary. Also, wills cannot provide for the care of your pet in the event you only become incapacitated, because wills only become effective upon your death. These inherent problems with wills do not mean that a will should never be used for pet planning. Instead, pet provisions in a will need to be supplemented by a pet trust or a pet protection agreement.
The benefits of pet trusts in pet planning
Pet trusts provide better protections and have more advantages than using a will alone to plan for your pet’s future. First, a trust can be drafted to become effective upon the owner’s death, as well as during the owner’s lifetime. This means that, in the event the owner becomes incapacitated, there will be provisions for the pet’s care that go into effect immediately.
One of the most important benefits of a pet trust is the ability to control the disbursement of funds for the pet’s care. You can appoint a trustee, separate from the guardian, who is responsible for investing and distributing the funds. The trustee can ensure that the instructions you provide in the terms of the trust are followed by the guardian. With these extra protections, the benefits of a trust over provisions in a will, are clear.
If you have questions regarding pet trusts, or any other pet planning tools, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
A pet protection agreement is a document that allows you to decide ahead of time who will take care of your pets and exactly how they will be cared for. In Nevada, it can be a contract between you and a caretaker, a stand-alone pet trust or a provision in your own revocable living trust. The Agreement allows you to name a caretaker and specify all of the terms of your pet's care you desire. Pet protection agreements can become effective upon your death, or in the event of your incapacity. There are many options as to the terms that can be included in a pet protection agreement form. The choice is yours.
Choosing a Caretaker
In addition to identifying yourself and your pets, you must choose someone to serve as the caretaker for your pet. That person will be ultimately responsible for the care and well-being of your pets, if you become unable to provide that care yourself. By signing the pet protection agreement, the caretaker becomes legally bound by its terms and makes the document legally enforceable. It is wise to also include the identity of a successor or alternative pet caretaker, in case your first choice is unable to take on the responsibility for any reason. You can decide to choose either an individual or an organization to serve as caretaker.
Identifying an organization of last resort
In the unlikely situation that neither the pet caretaker nor the successor caretaker is willing or able to care for your pet, the only other option would be to deliver the pet to a shelter. In that case, you can still identify in your pet protection agreement, or trust which organization that should be. You can also specify whether you want the shelter to find a temporary or permanent home for your pet, or simply choose what is in the pet’s best interest.
Leaving funds for the financial support of your pet
It is recommended, for the benefit of the caretaker and your pet, that you provide a source of financial support or your pet’s care. This is optional, of course. If you do choose to leave funds or property to support your pet, you should consider the number of pets you have, their ages and life expectancy, healthcare and medication needs, lifestyle and socialization, daily routines, food and diet and your pets’ preferences. The financial elements that should be planned for include the funds needed for your pet’s overall care, compensation for the caretaker, and how the funds will actually be provided for. Finally, it is a good idea to identify beneficiaries to receive any remaining funds left after the pet passes away.
Choosing a Distribution Representative
Some pet owners choose to identify someone other than the pet caretaker to be responsible for the funds. This person is typically referred to as the “distribution representative” in a contract, or the trustee, in a trust. This person holds on to the funds and then disburses them to the caretaker as needed. Otherwise, the pet caretaker can act in both offices and be responsible for handling both the pet and the funds.
Medical treatment and end of life care
Providing information relating to your pet’s medical conditions and required medications is just as important as including community of care information. Contact information for the animal hospital or veterinarian’s office you typically use is a good idea. Your wishes regarding your pet’s end of life care should also be addressed. State whether you want your pet to be euthanized, according to local laws, and your choices regarding final disposition.
If you have questions regarding pet protection agreements, trusts, or any other pet planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
A power of attorney is an essential component of every comprehensive estate plan. This valuable tool can provide specific instructions for what should be done in the event you become incapacitated in the future and can no longer express your wishes. A power of attorney is a very versatile tool that can be tailored to your specific needs. It can also be crafted to bestow very limited powers or very broad authority. However, regardless of how effective this tool can be, power of attorney mistakes could create unnecessary problems for you or your loved ones in the future.
Creating a Power of Attorney to Quickly
Take your time to properly draft your power of attorney document. A common mistake people make is trying to create the document quickly in order to get the tedious task finished. However, this can often lead to loopholes, inconsistencies or ambiguous language that will create serious problems down the line. Take the time to discuss your goals for the future with your estate planning attorney.
Choosing the Wrong Attorney-in-Fact
Creating a power of attorney requires the appointment of someone as the agent or attorney-in-fact. This individual will have the authority to make very important decisions on your behalf. However, if you select the wrong person, your wishes may not be carried out as you planned and the financial and medical decisions made on your behalf may not actually be in your best interest. Take time to seriously consider your choice before you make it.
Granting Excessive Authority
A power of attorney can be created to give very limited or very broad authority. The choice is yours. However, because your agent will be able to make very important decisions on your behalf, understanding how much power to give your agent is critical. You need to consider whether you want your agent to make decisions regarding your medical care and whether those decisions should include your end-of-life choices. How much control do you want your agent to have over your finances? You can be as limiting and specific in your instructions as you choose.
Not Updating a Power of Attorney
Even if you have created the perfect power of attorney, if your circumstances or your wishes change, but your power of attorney does not, it could be rendered useless, at best. You must update your power of attorney to reflect any changes. Otherwise, you or your family may face challenges or issues in the future that could result in substantial emotional and/or financial problems. For example, if your family situation has changed, an inappropriate person may be given the authority to make medical decisions on your behalf, should you become incapacitated.
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.
Possibly one of the most important decisions you make concerning your trust is who will serve as your trustee. The trustee has a duty to comply with the terms of your trust. These duties include distributions of income and principal, making prudent investment decisions, managing real property and exercising discretionary authority. While it is common for parents to name a child or trusted friend, there are other choices, such corporate trustees. The benefits of a corporate trustee should not be overlooked.
Why should I choose a corporate trustee?
A corporate trustee is a highly trained professional that can offer experience, stability, objectivity, and confidentiality. Most are insured and bonded. Also, many corporate trustees belong to a team of professionals from various disciplines that can assist and advise the corporate trustee on issues that might arise concerning the administration of your trust.
Experience
The trustee you select will be responsible for the financial well-being of the trust estate. This includes investment of trust assets. Your trustee must feel comfortable making investment decisions or choosing and supervising an investment manager, weighing and evaluating requests for distributions, which sometimes means making hard decisions. If your trustee is a relative or friend they may not possess the investment know-how or backbone to say no to a beneficiary's request for a distribution.
Your trustee must also be capable of maintaining adequate records, including accounting for the receipt and disbursement of income and principal from the trust. The trustee must also prepare and file all tax returns to the appropriate taxing authorities. A corporate trustee will keep abreast of the ever-changing tax laws and trust reporting and administration standards.
Stability
A primary purposes of stablishing a trust is to prepare for the future. So, it is important to remember that, over time, age or illness could potentially prevent your trustee from performing his or her duties. Although a successor trustee could also be named in your trust agreement, having the stability and continuity that a corporate trustee will provide, may be a preferred option.
Objectivity
The reality is, even in the perfect family, relationships can sometimes become strained. While your trust might be carefully written to explain your intentions and provide clear instructions, it may be difficult for a child or friend to avoid disputes and act objectively. With a corporate trustee, on the other hand, an objective third person will make decisions free from bias or influence from family or friends.
Confidentiality
Estate planning is inherently a delicate topic. Family relationships, financial status and other private matters are commonly involved. For most clients confidentiality is very important. The temptation of a trustee that is a relative or friend to discuss your private affairs may be too great. Inadvertent disclosures are also common with inexperienced trustees. You can be sure that a corporate trustee with keep your private matters confidential.
If you have questions regarding corporate trustees, or any other estate planning issues, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
The purpose of estate planning is to prepare yourself and your family for not only your death, but also the possibility of your incapacity. Planning for both possibilities involves creating a comprehensive estate plan. Typically, that would require more than just your last will and testament. Many clients ask: “Do I need more than a will?” The answer is typically – yes.
What is Estate Planning?
Estate planning is more than just drafting a will. Most people are concerned with more than simply making sure their property is inherited by the individuals they choose. Minimizing estate taxes is another concern. But more importantly, planning for the possibility of temporary or permanent incapacity, should be considered. Incapacity planning allows you to provide protection for you and your family, in the unfortunate event you are no longer able to make decisions on your own.
A Will is the most basic estate planning tool. It allows you to leave written instructions describing how you want your estate to be distributed upon your death. The only disadvantage to a will is that it will require your estate to pass through the probate process before your assets will be distributed. Probate can often be a lengthy and expensive court proceeding.
What does a comprehensive estate plan include?
A will is a necessary component of any estate plan. No matter how much the value of your assets may be, having a will ensures that your money and personal belongings will go to the beneficiaries you choose, at your death. Without a will, a disinterested judge will make these decisions for you, based on the laws in your state. But there are other issues that should be addressed in your estate plan.
A comprehensive estate plan should also include instructions for your medical and personal care if you become disabled. It should also name a guardian for any minor children, who will care for them and/or manage their inheritance. Planning for life insurance benefits for your surviving family, disability income insurance if you become unable to work, and long-term care insurance to assist in financing your medical care in the event of an extended illness or injury, is also an important element of estate planning.
Planning for Mental Incapacity
There are different life situations that can lead to incapacity, including medical and mental health conditions. Luckily, some incapacity is only temporary, but it must still be planned for. Planning for mental incapacity requires consideration of both the personal decisions that need to be made, as well as, the necessary financial decisions. If you become incapacitated, without a plan in place, a court-supervised guardianship or conservatorship may be appointed to take care of you. That means you lose all control over how your affairs are handled.
Advance Medical Directive
An Advance Medical Directive, also known as a Medical Power of Attorney in some states, allows you to delegate medical decisions to trusted individuals, in the event you become incapable of making those decisions on your own. Planning for incapacity allows you to choose that person now, while you still have the capacity to do so.
These are just a few examples of other estate planning tools that can be used, in addition to a will, to plan for your future and the future of your loved ones. If you have questions regarding wills, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
In addition to simply owning property in only your name, there are different types of joint ownership, as well. In Nevada, there are three recognized types of joint ownership of property: joint tenancy with right of survivorship, as community property with right of survivorship, or as tenants in common. The type of ownership you have in a particular property will determine how that property will be transferred at your death. Each type of property ownership has its own requirements, limitations, and advantages and disadvantages of joint tenancy. Understanding these different aspects of ownership before you make a choice, can lessen the possibility of problems in the future.
A joint tenancy is established when you own property with another person or persons, and you each hold an equal, undivided interest in that property. As a joint tenancy, you have the right to sell your interest in the property, or give it away, at any time, but doing so, will likely convert it to tenants-in-common. There could be exceptions such as if there were any restrictions created by contract, for instance. A joint tenant does not always have to be your spouse. You can have a bank account, for example, in your name and the name of your son or daughter.
Joint tenancy can have many advantages. First, property that is jointly owned, is not required to go through probate. Instead, the property is immediately available to the surviving joint tenants. This benefit can easily reduce the expense of probate. Another important benefit of joint tenancy is the fact that property that is jointly owned, may be protected from the creditors of the deceased owner.
There can be a few disadvantages. For example, when a married couple are joint tenants, and they later decide to divorce and remarry, modifying the title to that particular property can be complicated. Further, you lose significant capital tax advantages if you choose joint tenancy instead of community property ownership. Another issue that may arise with joint property in general is the fact that one tenant can sell the property without the approval of the other tenants.
Some joint tenancies contain the term “right of survivorship.” This term means that the property is automatically transferred to your surviving joint tenant upon your death. The surviving owner or owners continue to own the property. It also means that the heirs of the deceased owner receive absolutely nothing. Property owned in joint tenancy cannot be transferred by will. Property or accounts that are titled as joint tenancy do not require the term "right of survivorship," as it is assumed.
Only nine states treat the property of married couples as Community Property and Nevada is one of them. This means that, in Nevada, any property you owned before you were married is considered to belong to you separately. However, any property you obtained during your marriage is considered community property, which means your spouse owns an equal interest. The only exceptions are gifts or inheritances you received alone, during the marriage. Titling your property, real or personal, in community property gives the surviving spouse a stepped-up basis in appreciating assets, so they can be sold with little or no capital gains tax. In Nevada we can title our assets as Community Property with Right of Survivorship, so you get the same advantages as joint tenancy, but the capital gains tax advantage, as well.
If you have questions regarding the advantages and disadvantages of joint tenancy, or any other estate planning issues, please contact Anderson, Dorn & Rader, Ltd. You can reach out to us either online or by calling us at (775) 823-9455.
When you establish a revocable living trust, you typically appoint yourself as the initial trustee; in other words, you choose yourself to manage your own assets. You also choose a person or entity to succeed you as trustee, should you become incapacitated or die. Choosing who should be the successor trustee of your revocable living trust is an important decision. The most important things to consider are the qualities needed in a good trustee. Any trustee, whether the initial trustee or a successor, will inevitably be the person who has complete authority to manage and invest the assets you have placed in trust. The trustee is also responsible for administering the trust and properly distributing the assets. A successor trustee of revocable trust is responsible for the same tasks as the initial trustee. That person should be as trustworthy and competent as your initial choice.
Choosing the right successor
Deciding who your successor should be, in the event you are no longer able to carry out your obligations, is an important decision. The person you select must not only be trustworthy, but also organized and reliable. Your successor trustee should be an individual you are confident will follow your instructions, as stated in the terms of your Trust Agreement.
It is also a good idea to choose a successor whom you believe will be willing to accept professional assistance, if ever required. There are different types of trustees available to choose from. A trustee can be an individual, a financial institution, or even a licensed professional, such as an accountant. Each type of trustee has its own advantages and disadvantages.
Relatives and friends are common choices
The majority of clients designate a relative or close friend to be the successor trustee. There is an obvious advantage to choosing someone with whom you are personally familiar. You are more likely to trust that person and be assured that your estate or affairs will receive their personal attention. A financial institution would be more impersonal, as it is responsible for managing many trusts at a time. Another advantage to choosing family and friends is that they are less likely to charge a fee for their service as trustee, which can reduce the cost of administering the trust.
Disadvantages to choosing family and friends
Designating family or friends is not the best choice in every situation. Although they may be trustworthy, they may not be very qualified to handle the responsibilities of a trustee, especially if you have a complex estate. A professional trustee or a financial institution may be a better choice, depending on the nature of your estate. Another less obvious disadvantage is the fact that, selecting an individual, such as a relative or friend does not provide you with any protection. For instance, if your relative or friend decides to run off with your money, or is simply incompetent, you may have little recourse, because your trust agreement typically waives the requirement of a bond. On the other hand, a financial institution or professional trustee will typically operate under a bond or insurance coverage to protect your assets.
Financial institutions as trustees
Selecting a financial institution as a successor trustee is a common choice, as well. Most major financial institutions also have trust companies that are certainly qualified and very proficient in serving as a successor trustee of a living trust. The knowledge and expertise of a financial institution, gained from managing funds as a normal course of business, is an obvious benefit. The downside, however, is that financial institutions typically take longer and will charge a fee for their services. These fees, however, are typically reasonable when the services rendered are considered.
Licensed professional trustees
In addition to expertise, an advantage of selecting a licensed professional as a successor trustee is that the time taken to administer the estate is generally less than most financial institutions or trust companies. Your estate planning attorney can discuss your options with you and help you decide which type of trustee will best fit your needs.
If you have questions regarding successor trustees, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
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.
