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15 Things to consider when creating a trust

Posted on: June 8, 2022 at 1:06 am, in

In the realm of financial planning, creating a trust can be one of the most important steps in terms of achieving solid asset protection and designing an adequate estate plan. It doesn’t have to be a difficult process, but it does require thoughtful consideration and planning.
creating a trust for family: grandparents with grandson and granddaughter.
Choose the right legal or financial professional to Protect your Wealth for your family
Most individuals, and even most estate planning attorney’s unfortunately, are not familiar with estate law and how statutes can affect estate planning across different jurisdictions. It is unreasonable to expect someone who is not a legal or financial professional to be able to easily understand everything; however, certain key aspects of it can be sufficiently learned so that a do-it-yourself option becomes available.
creating a trust   Learn the 3 core secrets to successful asset protection by clicking here
The following 15 key points are of the essence when creating a trust. Once this information is fully understood, potential grantors will understand how to the point that they can begin the process of setting one up themselves.

1 – The Need and Purpose

They were originally created when the Renaissance period reached the nascent common law system of the English royal court. These legal instruments were born out of an important necessity: when English knights marched across Europe as Crusaders, they conveyed property ownership to trustworthy individuals to handle affairs such as managing land, paying feudal dues, etc. If the knight did not return to England after a battle, the terms of the entity would establish that the estate would transfer to beneficiaries, who were usually the spouse and children. In the absence of a structure, the Crown would simply claim royal rights over the deceased knight’s property, often leaving his surviving spouse and family penniless.
making a trust for Asset protection is like a puzzle
Good asset protection is like a puzzle placing together the right pieces in the right place
The historic needs of legal structures have not changed. They are still legal documents that establish a fiduciary relationship whereby personal ownership of assets is relinquished and the property is transferred so that it can be managed by a trustee for the benefit of others.
The modern purposes of these entities are: asset protection, wealth management, avoiding probate, Medicaid planning, and estate planning. Individuals and couples whose assets including real estate are worth more than $100,000 should consider creating a trust for their own benefit and to protect the financial futures of their loved ones.  Please note, that only an irrevocable version protects assets from anything other than probate.

2 – The Laws and Rules Governing

In the United States, these entities fall under the laws of property, which can be different from one state to another. The most important aspects of them that can differ from one state to another are: validity, construction and administration. Validity deals with state-specific laws and rules that may render it invalid from one jurisdiction to another. For example, at one point many states adopted a rule against perpetuity, which is intended to prevent legal instruments from placing restrictions on property for too long; however, states such as Florida allows property interest that is non-vested to remain for 360 years instead of the suggested uniformity of 21 to 90 years.
Although there seems a fair amount of uniformity in terms of the laws that govern most estate planning across all states, it is imperative that individuals who set one up in one state to draft new documents when they move to another state or make sure that it’s amendable to change the situs. Once someone learns how to create one, the second time around will be substantially easier.

3 – Parties Involved

This structure create legal relationships that require at least three parties: grantor (also known as settlor), trustee and beneficiary. Each of these parties can be represented in plurality, which means that there can be more than one grantor, trustee, and beneficiary.
When learning about how to create one, the grantor must assume a decision-making role that includes certain responsibilities such as choosing the type, appointing the trustee, naming the beneficiaries, relinquishing property, and transferring the assets. Depending on the type and the way the assets are transferred, the grantor may incur into gift taxes; nonetheless, skilled advisors can come up with a strategy that can alleviate this financial burden even if your estate exceeds the federal limits for a gift exemption. The role of the grantor is pretty much completed after the assets are transferred and the paperwork is properly filed and settled.
The trustee is the party that takes over the management and oversight. The duties and responsibilities of the trustees are defined by the grantor during the construction. In some cases, grantors initially serve as trustees until they appoint someone else; some individual grantors set it up in a way that will appoint a trustee only when they become unable to assume management.
The beneficiaries are the parties who are named to eventually receive the benefits of the assets contingent on a trigger event – usually the death of the grantor(s). Beneficiaries also have duties and responsibilities: they may have to pay taxes based on the assets they receive as benefits, and they are also responsible for requesting an audit the work of the trustee to ensure that it’s being managed in accordance to the law and to the wishes of the grantor.

4 – How It Can Help a Family

With every created structure, there is an implied desire of keeping property and assets safe for the benefit of families. This implied desire is the historic factor that prompted the creation in the first place.
how to create a trust and structure your family trust properly: married couple with son and grandparents
Structure your structure properly so conditions can be placed on distribution of assets when someone passes away
These things can be structured in ways that serve the interests of individuals who can be grantors, serve as trustees and also become beneficiaries; notwithstanding this asset protection strategy, creating an irrevocable trust (IT) is something that is more commonly associated with effective financial planning and protection for families.
With a properly structured entity, conditions can be placed on the distribution of assets when someone passes away. Gift and estate taxation can be reduced or eliminated, and family affairs can be kept away from public scrutiny by means of skipping probate court proceedings. Family fortunes can be protected from lawsuits and overzealous creditors, and trustees can be appointed with the understanding that they must adhere to the terms of the contract and help to make it grow.

5 – Do-It-Yourself (DIY) Platform

Asset protection and wealth preservation are part of an industry that generates billions of dollars in administration fees each year. Attorneys and CPA firms that offer services often charge hefty fees their planning expertise. As a result, many individuals and families shy away from setting up structures to protect wealth that they have worked hard to accumulate over several decades.
Although there is a certain amount of complexity involved,  there are several DIY approaches that take each step into account making it easy that prospective grantors can take advantage of.
DIY structures are the result of advances in software and database technology and are so sophisticated and accurate today, that even most attorneys use them for their clients. Using an online platform that presents grantors with questionnaires about their finances, civil status and estate planning goals. The questions are related to the 15 key points discussed herein; once all the answers have been provided and the questionnaire is completed, two reviews take place. One review is automatically conducted by the software; the other review is conducted by seasoned professionals with years of experience. Once the correct documents are drafted, they are sent to the grantor for execution accompanied with instructions and guidance.
Once prospective grantors become familiar with the 15 key points presented in this article, going through the DIY process of creating an irrevocable version becomes a task that is not only easy to manage, but also beneficial in terms of avoiding considerable legal fees. 

6 – Choosing the Trustee

Proper selection of a trustee is crucial. Some individuals who choose a living trust as an instrument primarily for asset protection and not so much for estate planning may be tempted to serve as grantors, trustees and beneficiaries, but there some caveats in this regard. A similar situation arises in family structures, whereby parents may want to automatically choose their oldest child to serve as trustee.
The choice of trustee should take into account a few factors: knowledge, experience, potential conflict of interest, access to the assets, management abilities, cost, and relationship. Grantors are likely to immediately think about appointing relatives as trustees because they feel that they have confidence in to manage their assets and handle their financial affairs, but this could be a problem insofar as creating a burden for a trustee who has his own family and work responsibilities.
Independent trustees should always be preferred because they fulfill the aforementioned factors and they create a fiduciary duty which is golden in the eyes of a court. Fiduciary duty is synonymous with a legal obligation to protect the assets. A CPA, for example, is a professional under the oversight of a state regulator. Appointing a CPA to handle trustee duties is the best course of action for grantors who believe that appointing multiple trustees is a wise choice. While there are no limits with regard to whom you choose or the number of trustees who may be appointed, the conflict of interest factor is amplified with the presence of more individuals acting in a fiduciary capacity.
If for some reason the grantor feels that he or she must appoint various trustees, a protector provision may be included to ensure that potential conflicts between trustees can be quickly resolved.

7 – Including a Protector

Grantors who choose to appoint an independent trustee such as a CPA, friend, in-law, or lawyer do not have to worry about completely and permanently ceding all control of the assets and property transferred to the entity. Within the agreement document, a protector provision can assign powers to an individual or an entity for the purpose of replacing the trustee as needed.
The protector strategy began being used by asset protection lawyers that operate in offshore financial havens such as the Cayman Islands, Cook Islands, and other jurisdictions and has since been implemented into the better domestic trusts. 
Prospective grantors in the United States do not have to go offshore for the purpose of strong asset protection. States recognize that trustees and protectors can coexist within a fiduciary agreement. One such state is Delaware, where an individual or entity serving in this capacity is called an adviser under section 3313 of the Delaware Code.
The powers that can be assigned to a protector may include: the ability to replace trustees as needed, the right to control spending, the power to veto distributions, and the ability to step in whenever a conflict between trustees arises.

8 – Revocable vs. Irrevocable

Of all the legal strategies that can be applied when creating one, the most important to understand is the difference between revocable and irrevocable.

Watch the video on revocable vs irrevocable 
RT’s are designed to give grantors an opportunity to easily undo the terms of the agreement so that they can retain control and ownership over their assets. RTs can also be modified at will by grantors.
Irrevocable versions are designed to give grantors maximum benefits in terms of asset protection, estate planning, tax advantages, Medicaid planning, and others. Unlike RTs, grantors do not retain ownership or control of assets held in irrevocable structure, and the terms cannot be modified as easily.
Generally speaking, irrevocable versions are the better choice for individuals and for families.

9 – Married Couples 

Couples who are either legally married or who live together under the terms of a common law marriage or civil union can draft agreements that reflect their lifestyle and their financial goals. To this effect, a joint irrevocable structure can be created to meet the needs of most couples. In such case, one or both spouses act as the grantor, but each spouse can designate beneficiaries who can receive a share of property owned in common.
The terms that govern the property held in a joint structure can be dictated by both spouses. The estate planning benefit, when one spouse dies, the assets and property remain in the structure for the enjoyment of the benefits. A provision can be included for the purpose of a final distribution to take place once both spouses pass away.
Preplan a divorce with prenuptial agreements: husband and wife in bed with wife in distress
You can preplan a marriage with a prenuptial agreement
Individual structures can also be created by married couples who wish to keep their property separate. Reasons for doing this include: second marriages and the desire to not cede control of assets and property to a spouse. Couples who are engaged and wish to keep their property separate throughout their union can also set up individual an irrevocable structure vs a Prenup which work 100% of the time in divorce situation whereas a prenup usually creates more problems than it solves; there is nothing more romantic than asking your wife to preplan a divorce with a prenup before you commit to spending the rest of your life together.

10 – Naming Beneficiaries and Distributing Benefits

This is something that is done for the benefit of others, who are usually spouses, children, and relatives; these are the beneficiaries. By creating a one, grantors have certain advantages and can even create incentives with regard to financial planning for children and minor beneficiaries.
One common concern among grantors as they grow older is whether their children and grandchildren could be negatively affected when they inherit a substantial amount of money. When it comes to beneficiaries who are minors, it allows grantors to specify those incentives and conditions that must be met before the trustee can make a distribution. Age is an example of a broad condition; in these cases, a minor must reach certain ages before distributions are made. An incentive would be a specific condition, which could be graduating from high school or from college to encourage that beneficiaries pursue education or careers.
Avoiding lump sum inheritances that may be squandered by potentially not-yet-mature beneficiaries is a popular and wise provision among grantors in the United States.
Guardians can also be nominated for minor beneficiaries when creating an irrevocable structure, and this is a designation that should also be made in a will.

11 – Exclusions

When learning how to create a trust, prospective grantors must think about every angle that could apply in terms of estate planning and distribution of wealth over the next 50 years. One particular angle that certainly merits careful thought is not so much who will be the beneficiaries; it is important to think about who must be specifically left out of distributions.
Similar to leaving people out of a will or disinheriting someone, it can be set up in a discretionary manner so as to designate who should really benefit from the estate and who shouldn’t. Exclusions can be specified in DIY versions, but they must not run afoul of provisions against disinheritance in certain states.

12 – Depositing Assets

Transferring assets into a structure is known as “funding the structure.” Just about any type of asset or property can be transferred, and this includes personal and business assets. Cash, life insurance policies, investment accounts, precious metals, and even companies can be transferred, but grantors should keep in mind that they are ceding ownership to the entity, which means that business and investment decisions will be made by the trustee after consulting with their financial advisor, you.
A trust can have a home with a mortgage charged against it: Creating a trust
It can have a home even though a mortgage is charged against it
With regard to real estate, if the property is shared with a business partner in what is known as a tenancy-in-common agreement, your equity share can be added. Personal checking accounts, everyday vehicles that have no luxury or collectible value, 401(k) and retirement accounts, and assets that are not really valuable typically are left out.
If your home has a mortgage, it can still be added and, due to the St. Germain Act of 1982, the bank cannot call your loan due or accelerate your payment schedule with them. If you stop paying your mortgage, however, they can still foreclose on the home because they are still the first lien-holder. What they cannot do is go after other real estate or assets that are properly added.

13 – Jurisdiction and Venue

When choosing the state where the entity will be created, it is important to know about the applicable statutory provisions; this is known as the situs. The significance of choosing the situs cannot be ignored, and this was something that was partially discussed in the second point of this article with regard to the rule against perpetuities. Some states offer stronger asset protection than others; however, when real estate property will be transferred into the entity, the situs should be the same state where the real estate assets are located.
This means people with a summer home in Michigan or a winter home in Florida and Colorado, will likely need to set up more than one structure.

14 – Reasons for it

Protect your assets before entering into a nursing home: ill husband in bed with wife nursing him
Protect your assets before entering into a nursing home with an irrevocable structure
Learning how to create an irrevocable structure is mostly a matter of function; understanding the reasons for creating an irrevocable structure and how financial goals will be achieved takes more thought and consideration. When the goals are clearly defined, drafting the agreement is easier.
The most common goals chosen by grantors include: passing wealth efficiently by avoiding the probate process, reducing estate taxation, preserving assets for charities, retaining control over wealth distribution, and protecting assets by keeping them within the family instead of a creditor or nursing home.

15 – Building a Legacy 

Irrevocable trust asset protection schematic diagram of the different types of relationships involved
An irrevocable structure asset protection diagram of the different types of relationships involved. (Click the above diagram to enlarge)
At some point in life, prospective grantors shift their focus from wealth creation to wealth preservation. These structures are not merely for estate planning; they can be used in life to structure distributions to minors as they grow older and start building their lives, or they can also be used to alleviate tax burdens so that gifting to charities can be conducted for maximum benefit.
A properly managed entity can help to build a legacy by providing business continuity over a family fortune across generations. This is how a legacy can be built; financial success does not have to always live in the present, it can also be preserved and protected so that a family can always enjoy its benefits.

We look forward to our visit with you and your professional representatives to assist you with the advancement of your estate planning.
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Rocco Beatrice, CPA (Certified Public Accountant), MST (Master of Science in Taxation), MBA (Master of Business Administration), CWPP (Certified Wealth Protection Planner), CAPP (Certified Asset Protection Planner), CMP (Certified Medicaid Planner), MMB (Master Mortgage Broker)
Managing Director, Estate Street Partners, LLC
Riverside Center Building II, Suite 400, Newton, MA 02466
tel: (508) 429.0011
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This statement is required by IRS regulations (31 CFR Part 10, 10.35): Circular 230 disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Top 10 Things to Do When Being Sued

Posted on: June 6, 2022 at 4:43 am, in

The threat of a lawsuit, or the prospect of litigation, sends most people into an emotional state somewhere between panic and outrage, especially if that person hasn’t protected their assets ahead of time. Running a business or getting through the daily routines of personal life can be overwhelming without the added stress of a process server, marshal or sheriff coming to your home or office with a summons and complaint.
Most people have never been involved in a lawsuit, so seeing your name or the name of your business in the caption followed by the word “DEFENDANT” can be unsettling. There are ten things you should know about lawsuits that will help you make the right decisions once the process server leaves.

1. It will not go away on its own. Lawsuits must be taken seriously.

Regardless of how frivolous or inconsequential the lawsuit might seem to be, ignoring it can have serious consequences. Failing to file a formal, written answer to the allegations contained in the lawsuit can result in a default judgment against you in favor of the opposing party. A default judgment means potentially your plaintiff can go to your bank and freeze your account or go to the registry and put a lien on your home or rental property. You won’t find out about it until checks start to bounce and you “swear there was at least $10,000 in that account.”

2. That ticking sound is a clock.

The defendant in a lawsuit must file a formal answer or make a motion within a limited period of time that is set by the laws in each jurisdiction. Getting angry and tossing the lawsuit papers into a corner in your home or office to be dealt with later is a mistake. Some states limit the time to submit an answer to just 20 days or less from the date the defendant is served.

3. I can do this without a lawyer.

Without getting into all of the reasons why representing yourself in a lawsuit is a mistake, and there are many, be aware that the laws in some states, such as New York, require that an attorney appear on behalf of a corporation that is a defendant in a lawsuit. Yes, lawyers cost money that most people or small businesses cannot readily afford, but lawyers know the defenses allowed under the law and the procedures that to follow to avoid a costly errors.

4. Choose a lawyer you can depend upon.

If you are using an attorney for the first time, make certain your lawyer is familiar with the issues raised in the lawsuit. Attorney’s today are as specialized as doctors; one does not go to a brain surgeon to fix a broken leg. Ask the lawyer how many lawsuits like yours he has taken to verdict. Lawyers who settle most of the cases they handle might be good negotiators, but you also want to know that the attorney you choose can handle a trial if one is necessary.

5. Be honest with your lawyer.

The second worst mistake you can make is to attempt to defend a lawsuit without having legal representation. The worst mistake is having an attorney but failing to disclose all the facts in an honest and forthright manner. The lawyer you hire is on your side regardless of how good or how bad the facts and the evidence make you look. Lying to your lawyer, or withholding information because it portrays you in a bad light, will make it difficult for your lawyer to represent you and often times you are doing yourself a disservice because when that information you are hiding comes out in court, your lawyer will be caught off guard with no strong, well-thought out response.

6. Don’t ignore insurance options.

Some types of insurance policies provide coverage in the event of a lawsuit. Automobile insurance or homeowners insurance are two policies with which most people are familiar, but there are other types of insurance, such as malpractice or errors and omissions policies that provide coverage in the event of a lawsuit. In most instances, the insurance company will take the lead, pay for your defense, and often times negotiate a settlement.

7. Listen to the expert you hired.

You are paying your lawyer to give you expert legal guidance, but the money is wasted unless you listen and heed the advice that is given to you. Telling your lawyer how you think your lawsuit should be handled ignores the fact that your handling of the situation is probably what got you into a lawsuit in the first place.

8. Fighting over principle can get expensive and distracting.

Whether you are the defendant being sued or the plaintiff who started the lawsuit, at some point you have to consider exactly what it is that you are fighting about. Does defending or prosecuting the lawsuit make sense economically? If you find yourself spending large sums of money on legal fees, court costs and related expenses that will exceed the amount you will recover if you win, it is probably time to reevaluate your position. Perhaps it is time to stop fighting and consider a negotiated settlement to put an end to the litigation. A lawsuit that goes to trial can easily cost $100,000-200,000. Imagine trying to run your business with a lawsuit hanging over your head for 3 years. The stress distracts you from positive things like growing your business.

9. Don’t assume your legal expenses will be paid by your opponent.

Absent an agreement, such as a contract or a law requiring the losing party in a lawsuit to pay the other party’s legal fees, the parties are responsible for their own costs of defending or prosecuting a lawsuit in the United States. Even if you have a contract that states the loser in a dispute will pay legal fees, it is rare that courts award full legal fees.

10. Expect to be in it for the long haul.

People want lawsuits to end quickly so they can go about their normal lives and business, but answers, counterclaims, motions and discovery can take months or, sometimes, years to complete. Lawsuits begin with a flurry of activity that dies down as the case progresses beyond the initial pleadings establishing each party’s position. The pace picks up again months later as each side engages in depositions and other discovery procedures. Patience and trusting in your legal representation are keys to lawsuit success.

Bonus Tip: When You are Being Sued

Evaluate your options. Most lawyers will tell you that you cannot take action to protect assets once you know there might be a lawsuit coming. Most lawyers tell you this because they don’t fully understand fraudulent conveyance and how to manage the resulting 4-5 years statute of limitations on asset transfers. If there is an opportunity to make it difficult for someone to sue you – even late in the game – it could put you in a position to negotiate with your attacker and thus minimize the pain, stress, costs, and distraction that a lawsuit can bring.

Avoiding Fraudulent Conveyance: Derivative Financial Instrument®

Posted on: December 8, 2021 at 12:56 am, in

Avoiding Fraudulent Conveyance: Derivative Financial Instrument®

The bolt part of the Derivative Financial Instrument®
Our Derivative Financial Instrument®

Asset Protection: Part 4 of 4, by Rocco Beatrice, Sr.

Our Derivative Financial Instrument® is the most decisive critical part of your estate planning:
Combination lock to unlock the Derivative Financial Instrument®
Derivative Financial Instrument®
Our Derivative Financial Instrument® is a financial intermediation of a contractual method of [E]xchange in money or money’s worth, designed and implemented, to avoid fraudulent conveyance claims by a [P]ast; [P]resent; and a [F]uture (not yet born) creditor.
Our Derivative Financial Instrument® is engineered for estate planning to avoid the [T]trigger for: – IRS income taxes, gift taxes, estate taxes, and probate.
When timely and properly implemented, our Derivative Financial Instrument® will set the legal defense for potential civil conspiracy issues that may be advanced by the [P]ast; [P]resent; and [F]uture (not yet born) creditor.
The bolt part of the Derivative Financial Instrument®
Our Derivative Financial Instrument® is a restricted> long-term cash – asset class derivative contract executed at “fair market value,” non-marketable, non-amendable, non-assignable, non-transferable, non-anticipated, non-encumberable, whose market value is derived from the underlying asset, indexed to an IRS supported interest rate, terminating at death.
Our Derivative Financial Instrument® is the most critical decisive component to our Ultra Trust©
The bolt part of the Derivative Financial Instrument®
Our Ultra Trust© is an Irrevocable Grantor-Type Trust under Internal Revenue Code (IRC) 671-679 and IRS Regulation 7701-7. When implemented with an Independent Trustee, and an Independent Trust Protector, secured to our Derivative Financial Instrument®; our Ultra Trust© is financially engineered to avoid Fraudulent Conveyance claims, defend a claim of Civil Conspiracy, eliminate the Probate process, eliminate Estate Taxes, mitigate and eliminate the Medicaid and/or Medicaid state recovery under the Federal Medicaid Act 42 USC 1396 et. Seq., providing you with a secured unchallengeable estate plan.
The nut and bolt part of the Derivative Financial Instrument®
Unchallengeable Estate Plan: Our Ultra Trust© locked to our Derivative Financial Instrument®
In finance, a “derivative” is a contract that derives its value from the performance of an underlying entity. The underlying entity can be a class of assets, i.e. cash or near cash, a futures contract, an option, collateralized debt obligation, insurance contract, a credit default swap, a stock, a time deposit, a general debt obligation , bonds, mortgages, or any underlying asset used as “the medium of [E]xchange.”
Intermediation is the process of matching positives with negatives to develop a desired outcome in a new contractual obligation method of [E]xchange between third parties.
The underlying entity(ies) considered in our Derivative Financial Instrument®:
  • Estate Planning
  • Gift Taxes
  • Intentionally Defective Grantor Trust (IDGT)
  • Grantor Retained Annuity Trust (GRAT)
  • Grantor Retained Unitrust (GRUT)
  • Commercial Annuity
  • Private Annuity
  • Installment Sale
  • Self Canceling Installment Note (SCIN)
  • Treasury General Counsel’s Memorandum (GCM) 3953, May 7, 1986
  • Estate of Moss v. Commissioner, T.C. 1239 (1980) acq. in result, 1981-2 C.B.1
  • Estate of Costanza v. Commissioner, T.C. Memo 2001-128; reversed and remanded
  • 6th Circuit, No. 01-2207, February 18, 2003
  • Estate of Frane v. Commissioner, 998 F. 2nd ( 8th Circuit 1993)
  • Lazarus v. Commissioner, 58 TC 854, August 17. 1972
  • Estate of Musgrove, 33 Fed Cl. 657 (1995)
  • Estate of Kite, T.C. Memo. 2013-43
  • Estate of William M. Davidson, U.S. Tax Court Docket No. 013748-13
  • United States v. Davis, 370 U.S. 65 (1962)
  • International Freighting Corp. v. Commissioner, 135 F.2d310 (2nd Cir. 1943),
  • United States v. General Shoe Corp., 282 F.2d 9 (6th Cir. 1960);
  • Wood v. Commissioner, 39 T.C. 1 (1962)
  • CCA 201330033; Treas. Reg. § 25.2512-8
  • Revenue Ruling 80-80, 1980 1 C.B. 194
  • Revenue Ruling 55-119, 1955 – 1 C. B. 352
  • Revenue Ruling 86-72, 1 C.B. 253
  • Revenue Ruling 68-392, 1968 -2 C. B. 284; and 69-74, 1969-1 C. B. 43
  • Treasury Regulation 1.1275 4(c); (j); and § 25.7520-3
  • Treasury Regulations § 1.72-6(e); and 1.1001-1(j), October 2006
  • Life expectancy (determined under Reg. 1.72-9, Table V)
  • Federal Medicaid Act 42 USC 1396 et. Seq.
  • Internal Revenue Code (IRC) 72; and (IRC) 7520
Fair Market Value:
Fair market value is defined as “the price at which the property would change hands (the [E]xchange) between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts to the transaction.” The fair market value of our Derivative Financial Instrument® is generally determined under the annuity tables prescribed by the IRS. See 26 U.S.C. 7520(a); Treas. Reg. 20.7520-1. These tables provide a factor composed of an interest rate component and a mortality component that is used to determine the present value of an annuity. Treas. Reg. 20.7520-1.
Fraudulent Conveyance:
A fraudulent conveyance, or fraudulent transfer, is an attempt to avoid debt by transferring money to another person or company. In civil litigation the creditor attempts to void the transfer and make the asset available to him in satisfaction of his claim.
A transfer will be fraudulent if made with actual intent to hinder, delay or defraud any creditor. Thus, if a transfer is made with the specific intent to avoid satisfying a specific liability, then actual intent is present. However, when a debtor prefers to pay one creditor instead of another that is not a fraudulent transfer.
Under the Uniform Fraudulent Transfer Act you would be committing a crime, see Section 19.40.041
…. (a) a transfer made or obligation incurred by a debtor is fraudulent as to a creditor whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (1) with actual intent to hinder, delay, or defraud any creditor of the debtor.”…
Fraudulent conveyance has to do with transferring assets at “less than the fair cash value” thereby defrauding a potential creditor or the “intentional divesting of assets” which would have been available for satisfaction of his creditor claim. This intentional disregard, can become a sticky-wicky, for a judge who does not like to be undermined in “his” court-room.
Civil Conspiracy:
The “civil conspiracy theory” has been defined by the courts as: (1) an agreement (2) by two or more persons (3) to perform overt act(s) (4) in furtherance of the agreement or conspiracy (5) to accomplish an unlawful purpose /or/ a lawful purpose by unlawful means (6) causing injury to another.
To be convincing, the creditor must allege not only the conspirators committed the act but also the act was tortious in nature. The conspiracy alone is not enough to trigger a claim for civil conspiracy without the underlying tort.
Avoiding the “Trigger:”
Gifting, by definition, is a Fraudulent Conveyance or Fraudulent Transfer because there is NO Exchange at the fair market value. Our Derivative Financial Instrument® solves this problem because the [E]xchange is at the fair market value.
REMARKABLE: Our Derivative Financial Instrument® is contract for which, NOT EVEN BANKRUPTCY COURT CAN UNWIND because it’s at Fair Cash Value and not to the detriment of the Creditor. The Derivative Financial Instrument® protects the assets even after the owner loses a lawsuit. This is because the courts cannot set aside the purchase . . . it’s not voidable by a creditor as a fraudulent transfer, nor by a bankruptcy court as an “executory contract.”
The “Trigger” for Estate Taxes is the value of ALL assets owned by the individual at the DATE OF DEATH, “the Gross Estate.” Our Ultra Trust©</> eliminates the “Trigger” because on the date of death, ALL assets are owned by your Ultra Trust© with an independent Trustee, and Independent Trust Protector. You cannot file an estate tax return. You cannot Trigger the estate tax return, you own nothing on the date of your death. Your Gross Estate is below the taxable threshold.
Read part 1 of 4: Asset Protection Strategy
Read part 3 of 4: Irrevocable Trust Structure
We look forward to our visit with you and your professional representatives to assist you with the advancement of your estate planning.
Rocco Beatrice Senior profile photo
Rocco Beatrice Sr sig
Estate Street Partners logo
Rocco Beatrice, CPA (Certified Public Accountant), MST (Master of Science in Taxation), MBA (Master of Business Administration), CWPP (Certified Wealth Protection Planner), CAPP (Certified Asset Protection Planner), CMP (Certified Medicaid Planner), MMB (Master Mortgage Broker)
Managing Director, Estate Street Partners, LLC
Riverside Center Building II, Suite 400, Newton, MA 02466
tel: 1+888-938-5872 +1.508.429.0011 fax: +1.508.429.3034
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“Helping our clients resolve their problems quickly, effectively, and decisively.”
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What is Probate? Probate Process Defined

Posted on: September 21, 2021 at 2:42 am, in

Estate Street Partners offers advanced financial advice to ensure maximum asset protection from probate costs

Protect your assets from lawsuits, divorce, Medicaid.
What’s probate? It’s a big fancy word. Basically, probate is a redistribution of your wealth and assets. The probate process begins on the date that you die. Everything that is in your name has to go to probate. Whether or not you have a will, all your assets go to probate. Each of the 50 states has different rules for the probate process but the common theme in all of it is that the court system takes over.

The Probate process and the Will

If you have a will, the will itself is a member of a public record. If you don’t have a will, the state will determine who gets your assets. Creditors can file a claim, long lost relatives could file a claim or anybody can file a claim on your assets. In the probate process, the court determines who gets what, and determines the verification of the claim. The entire probate process including lawyers, accountants, appraisers, court costs takes time and money.

The Cost of Probate & How the Ultra Trust® Protect Your Assets from Probate

In some states the probate process can take 2 years and cost 14% of the estate. With the Ultra Trust®, what we consider to be the best irrevocable trust asset protection plan, you don’t own any assets, you don’t have to go through the probate process. And because you don’t own any assets, you don’t have to file an estate tax return. So your beneficiaries or heirs don’t have to worry where the assets are going to go – in other words, your assets are protected. Your beneficiaries do not have to worry about what the probate process is, or who they will need to speak with. They can be at peace because you protected them with your estate planning ahead of time from the fiasco.
Therefore, the probate process is to determine who gets what after you die. So everything in your name goes to probate. They determine who gets the house, who gets this asset, who gets that asset, and whatever other assets you have when you pass away. The estate tax is based on how much the wealth or estate is worth. Before the estate is distributed, the government would like to get the biggest chunk. You can avoid all this with an asset protection plan called the Ultra Trust® irrevocable trust.
Continue to read part 8 of 11 on the Ultra Trust® benefits as one of the best irrevocable trust plans for asset protection here: What is estate tax?
Rocco Beatrice, CPA, MST, MBA, Managing Director, Estate Street Partners, LLC.
Mr. Beatrice is an asset protection award winning trust and estate planning expert.
To learn more about irrevocable trusts and senior elder care visit:

Being the Trustee of Your Own Trust

Posted on: June 21, 2021 at 4:02 am, in

What do you mean, I Shouldn’t be the Trustee of “my own” Irrevocable Trust? Have no discretion as the trustee with regard to trust asset distributions.

Being trustee of your own trust can undo what the purpose of the irrevocable trust should be doing; this is, protecting your assets. We understand the confusion. Some lawyer told you that you could be your “own trustee.” At Estate Street Partners, although we will honor your wishes in the end, we strongly believe and advise in the safest option, period.

Being “Your Own” Trustee

First, let’s take a look at why we believe that you should not be your own trustee. While you, as the grantor, may technically be allowed to serve as the trustee of your UltraTrust irrevocable trust, you may end up in a precarious situation. If you have any discretion, as the trustee, with trust asset distributions, these assets may be included in your estate for tax, Medicaid, bankruptcy, debt collection and other purposes.
The key here is: “any discretion.” As a trustee, you need to have a lot of discretion to manage the assets of the trust. If any of those discretions are types that cause the court or government agency to claim that you have discretion to distribute assets in such a way that would benefit you, at the very least you will have to pay a lawyer a lot of money to defend you. Estate Street Partners would rather see you relaxing on a beach than stressing in a court room.
Here is an example of the difficulties when a grantor merely “can become” the trustee:

Estate of McTighe v. Comm’r, 36 T.C.M. 1655 (1977).

Fred set up some irrevocable trusts for his sons. When Fred died, the IRS attempted to tax the money left in the trust. The trust challenged the IRS in court. The IRS argued that since Fred had left himself the power to appoint himself the trustee, that he had sufficient control over the trust and should therefore be taxed on it. The trust argued that he never was the trustee and therefore the assets should not be taxed. The IRS won the case because the power to appoint himself as trustee gave him enough control over the trust to keep it in his estate.
Here is an example of very little discretion:

Estate of Farrel v. U.S., 553 F.2d 637 (Ct. Cl. 1977).

Marian set up an irrevocable trust and funded it. She wrote into her trust documents the ability to “fill in” as trustee whenever there was a gap in trustees (i.e. a trustee death or resignation). Otherwise, she could not fill in as trustee. Twice, there was a gap in trustees during Marian’s lifetime, but neither time did she assume the role of trustee, but rather appointed someone else. When Marian died, the IRS imposed a tax based on the amount in the trust. The trust appealed and lost as Marian still had a “thread” attached to the trust.
As you can see, being the trustee of your own trust is a quagmire that can potentially eliminate the advantages of an irrevocable trust. We would like you to reap the full benefits of the UltraTrust irrevocable trust and therefore kindly encourage you to elect a trusted non-family member as a trustee.

What is a Revocable or Living Trust?

Posted on: May 21, 2021 at 4:15 am, in

What is a revocable or living trust?

First, a trust is a contract that names a trustee to manage any assets owned by the trust. A grantor (aka settlor) gives something to another person with contractual instructions as to what they can and cannot do with the property. Put simply, the grantor is giving an item to another person to hold for them until certain events occur. The trustee does not own the assets, the trust does.
Revocable trusts can be changed by the grantor or “revoked” at any time. For this reason, the courts view the property within a revocable trust as still being owned by the grantor. The grantor continues to pay taxes on any income and can control the property as if it were their own.

What are the advantages of a revocable trust?

Two main advantages of a revocable trust are the avoidance of probate and the possibility of “controlling one’s assets from the grave.” A revocable trust can hold every type of asset. If one places all of their assets in a revocable trust, there is nothing left for the probate court to do and thus there would be no need for probate court. Essentially, all of the assets have already been gifted (to the trust).
The trust becomes irrevocable at death because the grantor is no longer alive to make changes or revoke the trust. The trustee must then follow the instructions outlined within the trust document. The document could just describe how to distribute all of the assets, such as in a will, and then dissolve, or it may contain provisions for the trustee to continue to manage the assets for the benefit of the beneficiaries. These provisions may be good for protecting assets for the heirs from the issues described above. For example, the young adult beneficiary may not have access to the full assets of the trust, but rather the trustee could give out assets at certain ages, for certain events or have instructions to cut out the beneficiaries payments if they do not graduate college or run up significant debt or become chemically dependent.

What are the disadvantages of a revocable trust?

Like a will, a revocable trust offers no protection from estate or death taxes. Because the assets are still considered property of the grantor, they are, before the time of death, considered an uncompleted gift. When the assets are then gifted to the trust at death, they are subject to the same estate tax as a will.
A revocable trust, however, offers no financial protection during the grantor’s lifetime. For example, if a grantor is successfully sued, the plaintiff may still take assets from the revocable trust to satisfy their claims. Medicaid also considers assets in a revocable trust as countable assets. In other words, a person entering a nursing home must “spend down” nearly all of the assets in a revocable trust to qualify for Medicaid to help pay for their nursing home care. All of these issues stem from the basic premise that if a person has access and/or direct control of assets (such as a revocable trust – they can be forced to revoke it and use the assets) then these assets are accessible to any creditors such as a nursing home or a winning plaintiff.
Protect your assets for yourself and your children and beneficiaries and avoid tax dollars. Assets can be protected from frivolous lawsuits while eliminating your estate taxes and probate, and also ensuring superior Medicaid asset protection for both parents and children with our Premium UltraTrust Irrevocable Trust. Call today at (888) 938-5872 for a no-cost, no obligatioin consultation and to learn more.
Rocco Beatrice, CPA, MST, MBA, CWPP, CAPP, MMB – Managing Director, Estate Street Partners, LLC. Mr. Beatrice is an “AA” asset protection, Trust, and estate planning expert.

An Irrevocable Trust vs. an A/B Trust: Pros and Cons

Posted on: March 21, 2021 at 4:23 am, in

The A/B Trust used to be one of the most popular estate planning products in a lawyer’s arsenal. Here’s how it previously worked: The first spouse dies and that spouse’s assets are placed into a trust using the first spouse’s estate tax exemption. The second spouse dies and their assets go to the children using the second spouse’s estate tax exemption. The assets in the first spouse’s trust then are passed to the children, thereby using both spouses estate tax exemption.
After years of this, the estate tax code was re-written combining the spouse’s exemptions making the A/B trust obsolete for this purpose. Some lawyers continue to use this method of estate planning even though it does some things poorly and others not at all. Although an A/B trust will pass the assets to the beneficiaries as good as other products, it has problems in the areas of privacy, asset protection, and Medicaid planning.
First, an A/B method of estate planning offers absolutely NO asset protection benefits while both spouses are alive and minimal protection after one spouse passes. In fact, if an attorney for a lawsuit checks a person who created an A/B trust for assets, they will see that they still own the assets in their name. While both spouses are alive, depending on how the lawyer drew up the estate plan, either each spouse has their assets in their own name with a will including a testamentary trust (a trust that doesn’t exist until death) or they each have their own revocable trust with half the marital assets.The A/B Trust used to be one of the most popular estate planning products in a lawyer’s arsenal. Here’s how it previously worked: The first spouse dies and that spouse’s assets are placed into a trust using the first spouse’s estate tax exemption. The second spouse dies and their assets go to the children using the second spouse’s estate tax exemption. The assets in the first spouse’s trust then are passed to the children, thereby using both spouses estate tax exemption.
Having assets in one’s own name or assets in a revocable trust doesn’t help for asset protection. In both scenarios, one has access to the assets, which means that one’s creditors can attach these assets as well as courts in the event of a lawsuit. After one spouse passes, the will creates an irrevocable trust or, alternatively, the revocable trust becomes irrevocable. The deceased spouse’s assets are now in an irrevocable trust and protected from creditors and the courts, but chances are that the prime years to get sued or go in debt happened a long time ago. Why not have an irrevocable trust in the first place?The A/B Trust used to be one of the most popular estate planning products in a lawyer’s arsenal. Here’s how it previously worked: The first spouse dies and that spouse’s assets are placed into a trust using the first spouse’s estate tax exemption. The second spouse dies and their assets go to the children using the second spouse’s estate tax exemption. The assets in the first spouse’s trust then are passed to the children, thereby using both spouses estate tax exemption.
An A/B trust also offers little protection from a Medicaid spend-down. Again, like above, while the spouses are alive, they will be subject to a Medicaid spend-down in order to qualify for long-term care benefits. The community spouse can keep a predetermined amount, but the rest will be spent down to a minimal amount ($1,500-2,000, depending on the state). Also, again, once one spouse dies, those assets are protected from the spend-down, but the other half of the assets are subject to the other spouses long-term care bills. An irrevocable trust would protect 100% of all of the assets.The A/B Trust used to be one of the most popular estate planning products in a lawyer’s arsenal. Here’s how it previously worked: The first spouse dies and that spouse’s assets are placed into a trust using the first spouse’s estate tax exemption. The second spouse dies and their assets go to the children using the second spouse’s estate tax exemption. The assets in the first spouse’s trust then are passed to the children, thereby using both spouses estate tax exemption.
An A/B trust doesn’t really do anything well. Instead of protecting half of the assets, a good irrevocable trust can protect all of the assets. The irrevocable trust takes all of the assets out of both spouse’s names so that they don’t own them anymore. If they don’t have title, the assets aren’t counted by Medicaid, aren’t included in the calculation for the estate tax, and cannot be found in a public record as being owned by you, thus they can’t be taken by creditors in the event of a lawsuit. In fact, if an attorney for a prospective lawsuit checks a person who created an irrevocable trust to hold assets, they won’t see any assets in your name and the lawyer probably won’t be interested in taking the case against you on a contingency basis. The lawsuit is stopped before it starts. There is a downside of an irrevocable trust; the persons creating it don’t have ownership of the assets past what they put in the trust documents. So, for the scared, there is the A/B trust and for the protected, the Ultra Trust irrevocable trust.The A/B Trust used to be one of the most popular estate planning products in a lawyer’s arsenal. Here’s how it previously worked: The first spouse dies and that spouse’s assets are placed into a trust using the first spouse’s estate tax exemption. The second spouse dies and their assets go to the children using the second spouse’s estate tax exemption. The assets in the first spouse’s trust then are passed to the children, thereby using both spouses estate tax exemption.

Selecting a Trustee: 7 Truthful Tips When Choosing a Trustee.

Posted on: September 30, 2020 at 10:34 pm, in

When selecting a Trustee the most important qualities are honesty, stability, dependability, organization, financial experience, and ability to devote time and energy on an impartial basis for the benefit of all Beneficiaries. The Trustee is the most pivotal and critical part of any Trust Agreement.

Selecting a trustee is very important. So choose wisely. Read on to learn the aspects that constitute a trust and how selecting a trustee should be decided upon by you.

The Concept of a Trust Agreement

A Trust is a written contract between the Grantor and the Trustee for the benefit of all Beneficiaries which can include the Grantor and anyone else he chooses including spouse, children, grandchildren, friends, or charities.
A Trust can be created during one’s life or by will upon death. A trust that is created at death by virtue of a will, is referred to as a Testamentary Trust by the “Testator” (the dead guy). A trust created during the life of an individual is referred to as, the “Settlor,” the “Grantor,” or “Trustor.” The Trust instrument is referred to as “inter vivos” formed during the life of its creator.
A Trust is an integral part of any estate plan for the purpose of avoiding the Probate Process, minimize the impact of taxation on the transfer of wealth from one generation to another or from one individual to another, or to protect against unwanted and unpleasant potential events like a lawsuit. A Trust can financially provide for a spouse, a minor child or children or yet unborn children, an incapacitated or disabled person, or for persons incapable of managing their financial affairs. A Trust must have enough provisions to adapt itself way beyond the life of the grantor(s) and the Trustee is at the center of the goals of the Trust creators.
Once a Trust is created, the Trust becomes the new legal titleholder of assets either transferred to the Trust, as a gift or as a sale. In order to avoid fraudulent conveyance, the individual giving up his legal right to possession or title and the right to own must in return receive equal fair cash value at the time of the transfer. Otherwise, it’s a “fraudulent transfer” to the detriment of all potential creditors or it’s a gift subject to a gift tax.

The Gift Tax on Taxable Gifts

The gift tax applies to the fair cash value given up at the time of the transfer (not the amount that was originally paid). Taxable gifts are reported on IRS form 709, taxable to the person giving up the right of possession by gifting his assets. The person receiving the gift (in this case the Trust) always receives the gift Tax Free. (Note: the person receiving the gift always obtains it tax-free and the person giving the gift is always taxed on it unless it’s less than $12,000 per person beginning in 2006).

Trustee’s Power Derived from Grantor

A Trust can be revocable or irrevocable, grantor or non-grantor. Revocable is when the “Grantor” retains a power to “void” the Trust Contract. Irrevocable is when the Grantor “severs” all power of possession, the legal title to own the Trust. The concept of “possession” is the legal right to own and vested exclusively to the TRUSTEE. The Trustee’s power is derived from the Grantor(s) by a written agreement (Trust Agreement). The most important person is therefore the Trustee.

Consequences When Grantor Names Himself Trustee

If there is a provision in the Trust Agreement for the Grantor to name himself as the Trustee for his list of Beneficiaries, which includes himself, then he runs the risk of frivolous liability and harsh tax consequences since he has elected himself the Pope by blessing himself and kissing his own ring.

Factors to Consider When Choosing a Trustee:

A true Trustee is an independent person not related to the Grantor(s) by blood or marriage or is an independent trust company, bank, or corporate body. The selection of a Trustee is the most significant part of any Trust Agreement.
When choosing a Trustee, several factors should be considered:
  1. Location of the assets. Real estate, for example, has a definite location and the Trustee more familiar with the financial and tax implications of the property should be given weight.
  2. The individual Trustee’s physical location (home address) in relation to the Beneficiaries.
  3. The types of assets. Tangible or intangible, cash or near cash.
  4. Relationship of the individual Trustee to the Grantor’s family.
  5. An understanding of the intra-family dynamics of all the Beneficiaries.
  6. Familiarity with the financial management of himself and others he may employ.
  7. The financial ability and level of experience with the assets entrusted.
  8. If it’s a family business, the nature and familiarity of the business.
  9. The willingness and vitality to serve as an impartial fiduciary.
  10. The legal capacity to interpret and administer the agreement fairly to all Beneficiaries.
  11. The willingness to accept the appointment and the willingness to accept potential legal liability from disgruntled beneficiaries.
  12. Succession planning for a successor Trustee.

Some Bad Trustees

When choosing a Trustee that is intended to last longer than the life of the original Grantors certain types of Trustees may not be the best qualified to serve.
  1. Corporate Trustees or Trust Companies. For the most part, these types of Trustees are nothing more than business robots driven by numbers staffed by individuals who have no connection to the Grantors or the Beneficiaries. They administer the Trust assets but they lack the sensitivity of the people they are hired to serve. Generally, they are very slow in responding to the needs of Beneficiaries and usually react in the interest of the Trust Company not their clients.
  2. Banks as Trustees. They are too slow in making decisions, are ultra-conservative, and always afraid to make decisions without first consulting their legal department. They have self-preserving motives and generally have no clue or understanding about the individual family dynamics of the people they are intended to serve.
  3. Lawyers are very up on the ins and outs of legal maneuvers and they have been trained to handle legal matters but generally have no financial experience or expertise in the management of assets. Even when they hire others in those financial roles, they are usually way too expensive and in some cases, they make the assets their life’s insurance policy.
  4. Accountants are good at keeping scores but generally lack visibility into the future. They have been trained to accumulate information but very tunneled visioned to make investment decisions. While there are notable exceptions to lawyers and accountants, generally they lack qualities to administer and provide full service or to take legal liability to serve as Trustees.
  5. Family members as Trustees. It’s not a very good idea to have a family member become the Trustee of anything. The problem is mistrust. If you want to watch a family tear itself apart when it comes to money, especially with lots of money, you can go to family court or watch Anna Nicole Smith’s made-for-TV drama.

Selecting a Trustee is Complicated

Selecting a Trustee can very complicated and you will not generally find individuals ready and willing to assume those fiduciary responsibilities, even when compensation is not an issue. Some Grantors have opted for co-Trustees and even Trust Protectors to ease the responsibility. See my article on “Trust Protectors.” Generally, Trustees are more willing to accept the position if they know that they have a backup for consultation with someone who is closer to the Grantor’s family.

Irrevocable Trust vs Will: The Top Five Differences

Posted on: July 21, 2020 at 4:19 am, in

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When meeting with your financial planner to prepare or modify your estate plan, a discussion about the best ways to accomplish your goals will invariably involve irrevocable trusts vs will. Depending upon the types of assets you own, family circumstances, possible health concerns, and other factors, your financial advisor might recommend the use of an irrevocable trust either alone or in collaboration with a will.
Irrevocable trusts can be an effective estate-planning vehicle even though they involve relinquishing ownership of all or part of your assets to the trust. Understanding the role wills and trusts play in an estate plan can help to ease concerns. You can begin with the following top five differences between an irrevocable trust and a will:
If the children experience financial difficulty during the life of the parents, creditors may be able to put a lien on the residence. They could not force a foreclose on the lien while the parents were alive, but the existence of the lien would still cause problems for the children when the property transfers following the death of both parents. If a child gets divorced, the house in a life estate is considered a marital asset and the ex-spouse could get half.

1. Trust vs Will: Irrevocable trusts will reduce your estate tax liability.

The law treats assets properly transferred into an irrevocable trust as no longer being owned by you. One of many benefits of this fact is the removal of the property from your taxable estate when you die for both the federal government and your state government – 20 STATES ask for a piece of your estate (find out if your state does) and their exemptions are much lower than the federal government. However, neither the property nor its appreciated value will increase your estate tax obligation.

Trust vs Will

Unlike an irrevocable trust, a will does not change the ownership of your assets during your lifetime. A last will and testament does not become a legally enforceable document until it is probated with the surrogate’s or probate court after your death. The assets you own during your lifetime are taken into account when determining the value of your taxable estate when you die.

2. Trust vs Will: Avoiding the costs and delays of probate.

When considering a Trust vs Will, one of the biggest considerations is probate. Property passing to your heirs and beneficiaries through a last will and testament require a probate proceeding for the appointment of the person you designated in your will as your executor or personal representative. The executor named in the will does not have power to act until granted that authority by the probate court.
This can mean additional expenses for lawyer’s fees, appraisers, accountants, and court costs as well as delays unfreezing assets as they are evaluated by the court; a probate can take 6-12 months depending on the state – more if there are challenges. Difficulty processing the paperwork involved in a probate proceeding or challenges to the validity of the will from disgruntled relatives left out of the will can delay the transfer of assets to your designated heirs and beneficiaries.
An irrevocable trust avoids probate for the assets you transferred to the trust during your lifetime. When you die, your trustee distributes the property remaining in the trust in accordance with its terms. Court proceedings to appoint a representative are unnecessary because your trustee already is empowered to manage the trust assets.

3. Trust vs Will: Privacy – Protecting assets from creditors.

Property in an irrevocable trust that has been properly drafted, executed, and funded in any state is treated as legally belonging to the trust and no longer belongs to you; the trust property is out of reach of your personal creditors. When created under the guidance and advice of an expert, an irrevocable trust can be an effective shield against personal creditors. If an attorney for a prospective lawsuit checks a person who created an irrevocable trust to hold assets, they won’t see any and the lawyer probably won’t be interested in taking the case on contingency. The lawsuit is stopped before it starts.
A will does not transfer your assets out of your name during your lifetime. As a result, assets you own might be subject to claims by your creditors. When you die, your creditors can file claims against your estate and might be entitled to payment from your estate assets before they are distributed. If an attorney for a prospective lawsuit checks a person who created a will for assets, they will see that they still own the assets in their name and will be able to attach or freeze assets with a preliminary judgement.

4. Planning for long-term care.

When considering a Trust vs Will, one of the biggest considerations is long term care. Assets you and your wife own are taken into consideration when determining your eligibility for Medicaid nursing home assistance. Unlike Medicare that does not involve income and asset limits to qualify, Medicaid is not available if your income or assets are above the limits set by Medicaid.
This can become an issue for elderly individuals in the need of a higher level of care than they can receive at home. Medicaid pays the costs of extended nursing home care if you qualify financially. Some attorneys and financial planners use irrevocable trusts instead of wills to assist people to plan for future nursing home costs. Assets in an irrevocable trust that is properly drafted, executed, and funded are not counted by Medicaid in determining eligibility, but the laws are complex and should be discussed fully and completely with a Medicaid Planning expert.

5. Property in an irrevocable trust is out of the creator’s reach.

The benefits derived from having your assets out of your name and owned by a trust that is properly drafted, executed, and funded are lost on some people who are concerned about giving up ownership to a trust managed by a trustee. A will does not create this type of concern during your lifetime, but a will does not offer any of the benefits and protections of an irrevocable trust and the executor designated in your will controls your estate after your death in much the same manner as a trustee giving rise to the same potential concerns.
The peace of mind that a creator or grantor of a trust achieves depends upon the terms and conditions of the trust agreement. A trustee is a fiduciary owing a legal duty of loyalty to the trust and those who benefit from it. The laws impose serious penalties and consequences on trustees who violate their fiduciary duties.
If you are looking to avoid probate as well as minimize estate taxes, protect asset from Medicaid, or Protect assets from creditors, then you may want to consider what makes a good irrevocable trust because they are not all the same even though they both have the name irrevocable trust.

Top 8 Things People Overlook with Estate Planning

Posted on: May 5, 2020 at 4:45 am, in

1. The Entire Estate Plan

What do Jimi Hendrix, Steve McNair, Michael Jackson, and Bob Marley all have in common? They all died without a proper estate plan or even a will and their heirs paid the price in legal fees, court costs, and endless delays. Many people die “intestate,” (without a will). Even though the states have continued to improve their intestate laws, your assets and your family’s lives could be stuck in probate court for 12 months or more if things aren’t completed correctly. That’s if your relatives don’t start fighting over your belongings. Or, how about this scenario? You die the day after your son turns 18. He inherits assets worth $800,000 and your life insurance pays him $1,000,000. An 18 year old with $1.8 million is a scary thought.

2. Failure to Review Beneficiary Designations and Directing of Assets

As you age or as you have aged, you acquire many different asset growing instruments. You have several different retirement accounts, life insurance accounts, investment accounts, and real property. All of these accounts may list beneficiaries. A lot of people forget about these accounts and they list people who you may no longer wish the assets to go to. Also, there may be specific ways to leave these assets in order to maximize the avoidance of taxes, avoid probate, and protect them from the nursing home spend-down.

3. Failure to Take Advantage of the Estate Tax Exemption in 2013

If you have a lot of assets, chances are you are going to be subject to federal estate tax. This year’s exemption is $5.25M, but nobody knows what it will be 5-10 years from now, so it is prudent to take advantage of the exemptions while you can. With the United States debt growing to $17 Trillion, the likelihood of these exemptions lasting forever is slim. There are exemptions amounts and there are gifting exemptions. If you don’t take advantage of these exemptions while living, your estate will pay them when you are gone. A will doesn’t do it and all versions of revocable trusts don’t either.

4. Leaving assets outright to adult children

How about this scenario? We already discussed the $1.8 million teenager, but how about this one: You pass away, and all of your estate goes straight to your son… no wait, your son’s debtors. That’s right, your child could be in debt and all of your hard earned savings goes to pay off the dumb decisions your child made. Even worse, your son gets a divorce 6 months after he inherits your 50 years of assets; blood, sweat, and tears. His ex-wife now snatches $900,000 just because they were married for 4 years.

5. Leaving assets outright to minor children

Whether because you died intestate or whether your will specified that the assets go to the children, assets to minor children will normally be managed by whomever you decided should be guardian of your children. Your sister Meg may be great at teaching and fostering great children, but not so good at investing or banking. By the time your children are 18 there could be nothing left for them.

6. Don’t overlook states’ inheritance taxes

You may not think that you have enough assets to trigger inheritance taxes because the federal exemption is $5.25M in 2013, but it has changed 30 times in the last 40 years and with the current federal deficit nearing $20 Trillion, do you really think that it will be at $5.25M in 5-10 years? Plus, did you forget about state inheritance taxes? Usually state taxes are at a smaller rate, but they also usually have a much smaller exemption. That means that your assets plus your $500,000 will put your heirs into a taxable situation. For example, Minnesota’s exemption is only $1M and the tax is 16%. Check out your state estate taxes.

7. Use no-contest clauses properly

Lawyers love to talk about the no-contest clause when you are in their office. The no-contest clause basically states that anyone who contests the will, collects nothing. Sounds bulletproof, right? I mean who would challenge that will? Well, if the will is not legal, then neither is the no-contest clause. Additionally, even if the will is effective, what stops a person who is collecting nothing from contesting the will. Nothing does, because they have nothing to lose. So, maybe you want to leave that person some money so if they challenge the will they lose it. Even better, you don’t want to use a will at all.

8. Picking the right trust for the right purpose

There are basically two types of trusts: revocable and irrevocable. If you want to avoid probate, but not protect your assets and/or plan for Medicaid, the revocable trust is for you. With this type of trust, you can take your assets out whenever you want, but Medicaid and your creditors can also. An irrevocable trust can hold your assets with all the benefits of an irrevocable trust, but if written correctly, it can protect assets from creditors. The difference here is that once the trust is set up and you put asset into it, you no longer own them, but you can still get the benefit from them – similar to leasing a car; it is in your driveway to drive whenever you like, but you don’t own it.