Downs Law Firm, P.C.

Trusts

handling inherited investments

Handling Inherited Investments?

Receiving an inheritance can be a double-edged sword. On the one hand, it’s overwhelming, thanks to the intense emotions associated with losing a loved one combined with the confusion about what to do with the newly acquired assets. On the other, an inheritance can re-invigorate your finances and create new opportunities for you and your family.

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credit card bills at death

Who Pays Your Credit Cards When You Die?

Unfortunately, credit card debts do not disappear when you die. Your estate, which includes everything you own–your car, home, bank accounts, investments, to name a few–settles your debts using these assets.

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Sharing passwords

Serving as an Executor or Trustee Can Be a Challenge 

Administrating an estate or trust? Let’s take a look at just how hard it can be. People often name a family member or close friend as an executor or trustee. However, sometimes it is wise to think it through and consider the possibility of a professional administrator as a trustee, according to Kiplinger in “Why You May Need a Pro Trustee: Trust Administration is Not Just Common Sense.” The article details some of the problems that can arise despite good intentions. Let’s call our client Linda. She wants to identify a successor trustee. Linda’s parents had identical estate plans with trusts that were set up for Linda and her two siblings Jack and Diane. Linda was the family’s responsible one, so she received her share in each estate outright and served as the trustee for the other separate trusts, two for Jack and, two for Diane since the second of her parents died some 10 years ago. This is not unusual—parents will often give the responsible person in the family, the role of the trustee when their siblings are seen as less likely to perform the necessary tasks. These four trusts were close in value, with about $440,000 in each. They were identical in other ways: the trustee had the power to pay from income and principal each year for the beneficiary’s health, maintenance and support, but there was no requirement to distribute anything. Linda had done a great job, in keeping with her reputation. For 10 years she recorded every transaction. Because she knew her siblings resented her serving as trustee, she never paid herself a fee. Linda was tired, and she wanted to let someone else be in charge of the trusts. When the trusts were presented to an institutional trust officer, it was clear why the trusts had never been merged. Linda’s mom had executed an amendment to the estate plan after Linda’s dad died that ensured that when these siblings passed (that would be Jack and Diane), the trusts would pass to their descendants. Linda’s mom executed this amendment so that when Jack and Diane passed away, the trust from the mother would be divided among her surviving children. This meant that Linda would get another share, and Jack and Diane’s children would get less benefit from that trust. Linda’s mom thought she was doing a good thing. However, her decision put Linda in a bad position. She became an “interested” trustee, with the power to make decisions that would eventually put more funds into her pockets or diminish her share. Of course, that would only happen, if she outlived her siblings. Linda had been diligent and responsible, insuring that the trusts had the exact same asset allocation and investments, paying out income from the trust and when one called asking for money, giving both the same additional amount from the mother’s trust and the father’s trust, even though any distributions made from the mother’s trust make her less likely to receive a larger share in

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Estate Planning myths

Don’t Fall for Estate Planning Myths!

Your work isn’t done just because you have a will. There are many myths floating around about wills, trusts and estate planning. Those myths can easily confuse people who haven’t taken the time to bust them, before getting on to the real work … taking care of the family, according to the Cleveland Jewish News in “Estate planning myths common, but debunkable.” One common myth is that a trust is completely creditor protected. While there are some trusts that achieve this goal, there are many that don’t. It is easier to provide that to your beneficiaries that to yourself. Another myth is that once an estate plan is completed, there’s no need to revisit or make changes. We look at the planning you put in place as essentially an ongoing rough draft. Perhaps the biggest myth around estate plans is that they are only needed by wealthy people. Actually, everyone needs a will. A property power of attorney can save your loved ones thousands of dollars and massive aggravation. People chat with their friends and neighbors and pick up snippets of information, which is usually incorrect. As with any kind of story, once a piece of information has moved through a few different people, it becomes confusing, even if it started out accurate. The value of such “Street lawyers” is usually what you pay for it. Unless it comes from an estate planning attorney, don’t get any legal advice at a neighborhood or family gathering. The results can be disastrous. If you think having a trust alone is enough to prevent your heirs from having to pay any taxes, your kids will be in for a big and expensive mistake. If you don’t set up guardianship for your minor children, then the court will appoint a guardian. It’s entirely possible that it may be a person you would never have wanted to raise your children. If a separate financial trustee is not named, there won’t be any checks and balances on how the money left for your children is spent. If you don’t have an estate plan in place, and especially if your family includes minor children, make an appointment to speak with an estate planning attorney who can advise you on an estate plan that fits your unique circumstances. Reference: Cleveland Jewish News (Sep. 20, 2018) “Estate planning myths common, but debunkable”

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