Living Trusts vs. Wills, Part 3
December 5, 2007 | Leave a Comment
As Memphis and Mississippi estate planning lawyers we’re always here to help you. I’m continuing with the Living Trusts vs. Wills series. In this section I’ll be looking a little more in depth at living trusts.
7. What is a living trust?
A living trust is a legal document that, just like a will, contains your instructions for what you want to happen to your assets when you die. But, unlike a will, a living trust avoids probate at death, can control all of your assets, and prevents the court from controlling your assets if you become incapacitated.
8. How does a living trust avoid probate and prevent court control of assets at incapacity?
When you set up a living trust, you transfer assets from your name to the name of your trust, which you control — such as from “Bob and Sue Smith, husband and wife” to “Bob and Sue Smith, trustees under trust dated (date of trust).”
Legally you no longer own anything (don’t panic: everything now belongs to your trust), so there is nothing for the courts to control when you die or become incapacitated. The concept is very simple, but this is what keeps you and your family out of the courts.
9. Do I lose control of the assets in my trust?
Absolutely not. You keep full control. As trustee of your trust, you can do anything you could do before — buy/sell assets, change or even cancel your trust (that’s why it’s called a revocable living trust). You even file the same tax returns. Nothing changes but the names on the titles.
10. Is it hard to transfer assets into my trust?
No, and your attorney, trust officer, financial adviser and insurance agent can help. You need to change titles on real estate (in- and out-of-state) and other titled assets (stocks, CDs, bank accounts, other investments, insurance, etc.). Most living trusts also include jewelry, clothes, art, furniture, and other assets that do not have titles.
Also, beneficiary designations on some assets (like insurance) should be changed to your trust so the court can’t control them if a beneficiary is incapacitated or no longer living when you die. (IRA, 401(k), etc. can be exceptions.)
11. Doesn’t this take a lot of time?
It will take some time — but you can do it now, or you can pay the courts and attorneys to do it for you later. One of the benefits of a living trust is that all your assets are brought together under one plan. Don’t delay “funding” your trust. It can only protect assets that have been transferred into it.
12. Should I consider a corporate trustee?
You may decide to be the trustee of your trust. However, some people select a corporate trustee (bank or trust company) to act as trustee or co-trustee now, especially if they don’t have the time, ability or desire to manage their trusts, or if one or both spouses are ill. Corporate trustees are experienced investment managers, they are objective and reliable, and their fees are usually very reasonable
Can I use a do-it-yourself will kit or trust kit?
November 26, 2007 | Leave a Comment
I get this question all the time by potential estate planning clients calling both my Germantown and Olive Branch offices. Here is the short answer, yes but beware. (As a side note I had a friend once who told me that he’s never heard a lawyer simply say yes before. I told him that’s because in law school virtually every exam answer starts with either “yes, but” or “no, but”. Unfortunately there is almost no straight answer for anything when it comes to legal issues.)
A well-tailored estate plan ordinarily has many more elements than can be successfully addressed in a do-it-yourself estate planning kit, will kit or trust kit. While a do-it-yourself will or trust should be valid in both Tennessee and Mississippi if it is propertly executed and witnessed, the likelihood of ending up with a proper will or trust is about the same as if you attempted to fly and land a 747 by just reading the flight manual. Heck, you might get away with it, but the affects if you don’t are catastrophic. There is simply no substitute for the experience of a professional estate planning lawyer.
One probelm with the use of these cheap (and I truly mean “cheap” here, with all the bad connotations that come with that word) estate planning kits is that people simply fill in the blanks and think that what they have done constitutes an estate plan. What many people don’t understand is that a poprer estate plan or trust must actually be funded. An estate plan is not complete simply because a piece of paper was signed. Assets must be transfered properly or else the plan is worthless. Also, all types of assets that the person owns or controls that pass to beneficiaries independently of a will, such as retirement plans and life insurance, must be considered. The beneficiary designation forms for these assets will not be found in a kit.
In my years of experience I’ve found that people who believe that they need a “simple” estate plan are often surprised to find that they have failed to consider critical points, such as the possibility of simultaneous deaths and the significant benefits that trusts offer.
A do-it-yourself kit may pass muster from a basic legal standpoint if executed properly, but its success should not be measured by whether the resulting documents are legal, but by whether one’s objectives are accomplished.
Living Trusts vs. Wills, Part 2
November 20, 2007 | Leave a Comment
I’m continuing the series on Living Trusts versus Wills that I started last week. These are more questions that our Memphis area law firm estate planning lawyers answere frequently for our estate planning clients.
I’d love to hear your specific questions or comments that about Mississippi Law or Tennessee Law. If there is a particular topic that you would like to see covered please contact us and we’d be happy to address it.
4. Is it true that joint ownership with rights of survivorship avoids probate?
Not always. Joint ownership can just postpones probate. With most jointly owned assets, when one owner dies, full ownership does transfer to the surviving owner without probate. But if that owner dies without adding a new joint owner, or if both owners die at the same time, the asset must be probated before it can go to the heirs.
Be on the lookout for other problems though. For example, when you add a co-owner, you lose some control. Your chances of being named in a lawsuit and of losing the asset to a creditor are dramatically increased, even if you have done nothing yourself. There could be gift and/or income tax problems. And since a will does not control most jointly owned assets, you could end up accidentally disinheriting your family.
With some assets, particularly real estate, all owners must sign legal documents to sell or refinance. So if a co-owner becomes incapacitated, you could find yourself with a new “co-owner” — the court–even if the incapacitated owner is your spouse.
5. Why would the court get involved if someone is incapacitated?
If you can’t conduct normal business due to some type of mental or physical incapacity (Alzheimer’s, stroke, heart attack, etc.), only someone appointed by the court can sign for you - even if you have a will. (Remember, a will only becomes effective after you die.)
The court can be like a dreaded disease. Once it gets involved, it usually stays involved until you either recover or die. The court and it’s appointee, not your family, controls how your assets are used to care for you. This public process can be expensive, embarrassing, time consuming and difficult to end if you recover. Worse yet this process does not replace probate at death - by just having a will (or worse nothing at all) your family could have to go through the court system twice!
6. Does a durable power of attorney prevent the court’s involvement if you become incapacitated?
A durable power of attorney is a document that appoints someone and gives them the authority to manage your financial affairs if you are unable to do so. A major probelm here in Memphis and in Mississippi however that we lawyers come across is that many financial institutions will not honor one unless it is on their form. And, if accepted, it may work too well — giving someone a “blank check” to do whatever he/she wants with your assets. A durable power of attorney can be very effective when used with a living trust, but risky when used alone.
Will Contests Featured on Dr. Phil Show Today
November 13, 2007 | Leave a Comment
The November 13, 2007 episode of the Dr. Phil show will be all about will contests and estate planning blunders. For all of you out there who wonder if people really fight over wills this should be your chance get an earful.
The teaser for the show identified four sisters who were bitterly embattled in a will contest for the $400,000 inheritance left by an aunt. It seems that the aunt went away to stay with one of the sisters immediately before passing away, and during that time the original will was changed (this is a called a codicil to a will) in a way so that the sister and her kids received quite a large proportion of the estate.
This brings up an interesting question that each and every one of you should be thinking about when doing your estate planning here in Tennessee and Mississippi. Are you sure that your heirs will not be fighting over what you leave them in your will? Probably not.
This is another reason why almost everyone should seriously be considering having a Mississippi lawyer or Tennnessee Lawyer create a living trust for them. If a living trust had been in place for the Aunt all of the bickering, hurt feelings and very costly legal fees would have been avoided.
To find out more information about how the Ferrell Law Firm can help you with your Memphis living trust or Mississippi living trust give us a call today at 901-881-6352.
Living Trusts vs. Wills, Part 1
November 12, 2007 | Leave a Comment
Over the next few weeks I’m going to be blogging on the benefits of a Living Trust versus a Will. In my practice as an estate planning attorney in Mississippi and in my law firm in Tennessee I find that creating and using a living trust is often times the best avenue for protecting a family’s assets and making these as easy as possible for the family. This is true for all types of clients but especially true for clients with children.
Mississippi and Tennesse Estate Planning Series:
The Benefits of a Living Will
1. I already have a will. Why would I want to create a living trust?
Contrary to what you have probably always been told, a will may not be the best plan for you and your family - mainly because a will does not avoid probate when you die. For Tennessee residents A will must be verified by the Shelby County Probate Court, For Mississippi Residents a will must be verified by the DeSoto County Chancery Court before it can be enforced.
Also, because a will is only seen and triggers actions after you die, it provides no protection if you become physically or mentally incapacitated. So the court could easily take control of your assets, without your input of what to do, before you die - a concern for millions of older Americans and their families.
Fortunately, there is an extremely simple and proven alternative to a will–the Revocable Living Trust. It avoids the process of probate, and lets you keep complete control of your assets while you are living - even if you become incapacitated - and after you die.
2. What is probate?
Probate is the legal process through which the court fees that, when you die, your debts are paid and your assets are distributed according to your will. If you don’t have a valid will, your assets are distributed according to Tennessee or Mississippi law of intestacy. For a more detailed look at what probate is look at the probate section of the Resources and FAQ page.
3. What’s so bad about probate?
It can be expensive. Legal and executor fees and other costs must be paid before your assets can be fully distributed to your heirs. If you own property in other states, your family could face multiple probates, each one according to the laws in that state. Because these costs can vary widely, be sure to get an estimate.
It takes time, usually anywhere from nine months to two years, but in many instances it can take much longer. During part of this time, assets are usually frozen so an accurate inventory can be taken. Nothing can be distributed or sold without court and/or executor approval. If your family needs money to live on, they must go to the Chancery Court or Probate Court to formally request a living allowance, which may be denied.
Your family has no privacy. Probate is a public process, so any “interested party” can see what you owned and who you owed. The process “invites” disgruntled heirs to contest your will and can expose your family to unscrupulous solicitors.
My next post will look more in depth into the probate of the will. This will lead into a look at how a living trust can be beneficial to people looking to avoid the high cost and long length of time associated with the probate process.
If you would like to gather more information about Living Trusts in Tennessee or Mississippi please call the Ferrell Law Firm at 901-881-6352 today!
Celebrity Estate Planning Blowups
November 12, 2007 | 2 Comments
I received the following article courtesy of WealthCounsel. I’m including it here for all of my Tennessee and Mississippi Estate Planning clients who might find it interesting.
The Worst Estates of the Year
Life is short-sometimes tragically so-and an estate plan is never truly
finished. The year’s most notable estate blowups were all sadly avoidable, if
only they had left clear intentions for everyone on their list.
Anna Nicole Smith
A $500 million baby . . . maybe
Only 39 when she died in February of an accidental overdose, Anna Nicole
Smith had not updated her 2001 will that named her son, Daniel, who had died of
an accidental overdose several months earlier, as sole heir. Probate court
will most certainly award her modest assets of roughly $700,000 to her only
surviving child, daughter Dannielynn. As for her share of billionaire
ex-husband J. Howard Marshall II’s estate, the court will likely name her daughter
the rightful heir of close to $500 million.
But where that money ends up will depend on the man who controls it-either
Dannielynn’s biological father, Larry Birkhead, or her mother’s lawyer and
companion, Howard K. Stern, who is named as executor and is likely to be a
trustee. Dannielynn’s financial future would have been safer if her mother’s
will had spelled out full provisions for a trust, says James Ferrell, a
trusts-and-estates attorney in Memphis, Tennessee. Ferrell has handled many estate
disputes involving people who have omitted certain children from their
wills, but the Smith case is virtually unprecedented. In most states, if a
wealth holder wishes to prevent a biological child from inheriting assets, it
must be stated in the will. Otherwise laws of intestacy will assume the child
was omitted unintentionally.
Vital “Step 2″ of the Living Trust Process
November 12, 2007 | Leave a Comment
I’ve published posts on the overall scheme in regards to revocable living trusts (Part I and Part II), but the issue of funding your living trust is so important that it warrants a post of it’s own.
It’s essential to remember that setting up your living trust is a two-step process. Step #1 is having the document prepared and formally executing it. Step #2 is funding it. Too many clients complete Step #1 and think that the process is over when they are really only halfway done. If you do not complete Step #2 then your estate will have to go through probate, which would obviously be a shame since the main reason for setting up a living trust is to avoid probate.
In regards to your real estate, your attorney should prepare a “quitclaim deed to trust” for you to sign which will transfer ownership of your real estate to your living trust, thereby funding the trust with your real estate. This normally takes place at the same time that you execute the trust itself.
As far a bank and investments accounts go, you will usually just need to fill out and sign a one-page document. Again, just like with the real estate, you are changing the title to the account so that the records of the financial institution indicate that your trust is now, technically, the owner of the account.
Please note that anything that has a designated beneficiary (life insurance, qualified retirement accounts, annuities, etc.) are already set up to avoid probate, regardless of whether you have a living trust. But it is generally a good idea to name your trust as the beneficiary of these assets, especially if you are a married couple and your attorney has set up credit shelter planning in your trusts to address estate tax concerns or if you have set up trusts for children in your living trust. Be sure to check with your attorney. Again, remember that this would be a change of beneficiary, not a change of ownership. Closing one of these accounts out and opening a new one in the name of your trust might trigger unnecessary penalties and taxes.
Wills in Tennessee
November 8, 2007 | Leave a Comment
Courtesy of the Shelby County Tennnessee Probate Court, http://co4.shelbycountytn.gov/court_clerks/probate_court/wills.htm
What is a Will?
A will is a legal document by which you instruct what is to be done with your property after your death. It must be properly signed and properly witnessed. Any person who is of sound mind and is eighteen (18) years of age may make a will in Tennessee.
What Happens If You Do Not Have a Will?
If you die without executing a will, Tennessee law will govern how your property is distributed.
- If you are married and without children at your death, your estate will pass entirely to your surviving spouse.
- If you are married and have children, your estate will pass to your children and your surviving spouse.
- If you are unmarried but have children, your estate will pass entirely to your children.
- If you are unmarried and without children, your estate will pass to your parents if they survive you, otherwise to your brothers and sisters.
- Ultimately, if no family member is ascertained, the estate will pass to the State of Tennessee.
What Should Be Included In a Will?
Generally, your will should:
- appoint a Personal Representative (sometimes called an Executor or Executrix) to carry out the terms of your will and the laws that apply to all estates;
- provide for how you want your property to be distributed (include real estate, bank accounts, savings bonds, stock, furniture and personal items). You should consult an attorney about the advantages of setting up a trust to minimize taxes and control how and when your property is received by the beneficiary. Note: if you hold any property jointly with right of survivorship, the joint tenant will automatically assume your interest in the property, and therefore, the property should not be listed in your will as an asset of your estate;
- appoint a guardian for your minor or incompetent children to ensure their well-being;
- address any other personal concerns, such as funeral arrangements and the like.
Is a Handwritten Will Legal?
Yes. A handwritten will is legal in Tennessee, provided that the document is entirely in your own handwriting and is signed by you. This is known as a “Holographic Will.” Following your death, the authenticity of your handwriting must be proven by two (2) individuals.
A will is a very technical document. While a handwritten will may work well for you, there is a high likelihood that it may not work well for you. It is strongly recommended that such a document be prepared by an attorney who has experience in this area of law. If your will is invalidated at your death for whatever reason, Tennessee law will govern how your property is distributed as if you had died without a will.
How Do You Revoke Your Will?
Your will does not take effect until your death, therefore you may revoke it at any time. This may be accomplished by:
- physically destroying it;
- by signing a document expressly revoking your will; or
- by signing another will
If you get divorced after you sign your will, the will is automatically revoked as to any provision concerning your ex-spouse. If you marry and have children after signing your will, the entire will is automatically revoked. Therefore, it is important to remember that after these events occur, a new will must be drawn.
Other Related Considerations
Your may also want to consider consulting an attorney about devising a “Living Will” or a “Durable Power of Attorney for Health Care.”
A “Living Will” is a legal instrument that expresses your considered decision to refuse medical attention should you become terminally ill and unable to communicate your wishes.
A “Durable Power of Attorney for Health Care” allows you to appoint a person to make health care decisions for you should you be unable to do so for yourself.
Advance preparation of these instruments could spare you and your family considerable pain.
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Developed by Shelby County Government for the convenience of its citizens and the Web community.
A Look at Living Trusts vs. a Power of Attorney
November 8, 2007 | Leave a Comment
Germantown, Tennessee
I recently read an article on the Aspen Daily News’ website which was really a cut above most “you need to have an estate plan” articles — good use of detail and examples.
Unfortunately I can’t hyperlink to the original article but here is an excerpt that I copied that I want to focus on:
In event of your disability, give someone you trust the power to manage your property. It’s called a power of attorney (although the person doesn’t have to be an attorney).
But there’s a problem: Some financial institutions won’t accept powers of attorney created more than six months before. You’re unlikely to renew a power of attorney this frequently. For a better solution, ask an estate planning attorney to draft a living trust for you. (The cost is probably $1,500 to $3,000.) The ownership of all your property is changed from your name to the trust’s name. As the sole trustee, you can do anything you like with the property.But if you become disabled, a person named in your trust steps in as successor trustee to manage the property on your behalf and for your benefit. All financial institutions accept this, no matter when the trust was written.
I haven’t had a problem getting “old” powers of attorney (any POA created by someone in the last 5 years) accepted by financial institutions, but a living trust really works better than a property power of attorney in the case of disability. Or, rather, I should say that a fully funded living trust works better. If you transfer ownership and change beneficiary designations to your living trust and then become disabled, your successor trustee really can step right in and handle your property for your benefit. If you set up a living trust but don’t fund it, and then become disabled, your property power of attorney can (hopefully) be used to fund your living trust at that time. I always include specific language allowing an agent, under a property power of attorney, to take care of this funding.
And, of course, a health care power of attorney is very important as well.
Let me put it simply: If you become disabled, having a fully funded living trust and powers of attorney will save you and your family a lot of time and money.
Wacky Laws! (Not in Memphis or Mississippi)
November 7, 2007 | Leave a Comment
I thought that some of you might be interested in seeing a few crazy laws that don’t actually pertain to wills, trusts, probate or estate planning in Memphis or northern Mississippi.
Castaic, CA: If a dentist accidentally pulls the wrong tooth the patient has the right to pull one of the dentist’s teeth in return.
Indiana: “Spiteful gossip”, defined as “talking behind a person’s back”, “unwarranted”, or “without cause”, is illegal.
Tuscon, AZ: It is against the law for a car to back up.
Just think about Tuscon’s law today when you’re ready to go home from work and be grateful that you live in Memphis and Desoto County. I’m almost surprised that Germantown hasn’t put something similar to this in place. (I’m just kidding city hall, you know I love you guys. More laws and regulations are great for business!)
