Trust

Three Ways of Distributing Your Children's Inheritance That You Need to Consider

Three Ways to Distributing Your Children's Inheritance That You Need to Consider

When it comes to deciding how and when your children will eventually receive their inheritance, there are three options that are commonly chosen: outright, in stages, or in a lifetime trust. All three choices have their pros and cons so there is no right or wrong choice. As you will see, what it usually comes down to is the age, experience, and family/financial situations of your beneficiaries. 

1. Inheritance is immediately distributed outright

This is the most simple way to go because the inheritance is simply distributed directly to the beneficiaries once all of the decedent's bills and taxes have been paid.

While this may be a good choice for some, there are some drawbacks. Namely, this may not be the best choice for beneficiaries that are young or poor at managing money (it will be gone in no time), for those that are in a bad marriage (the inheritance could be lost in a divorce), for those that are in a profession that is high-risk (the inheritance could be lost in a lawsuit), or for those that are already wealthy (the inheritance will only increase their estate tax bill).

2.  Inheritance is given out in stages

This option holds a beneficiary's inheritance in a trust fund and pays the beneficiary one or more lump sums in stages - in other words when the beneficiary reaches a certain age or achieves a specific goal; then they'll receive an outright distribution of their inheritance.

For example, you could pay a beneficiary 50% of their inheritance when they reach the age of 25 and then the balance at 30, or 50% when they earn a college degree and then the balance when they complete graduate school or reach the age of 35.

Meanwhile, the property held back in the beneficiary's trust fund could be used by the Trustee to pay for the beneficiary's college or graduate education, medical bills, a car, housing, and any other day to day needs.

However, once the beneficiary receives a lump sum distribution, the same drawbacks as leaving an entire inheritance outright will apply. This option also requires a responsible trustee to manage the trust fund, which often entitles the trustee to compensation for his or her services in managing the trust (unless a trusted friend or family member is willing to do it for free).

3.  Inheritance is left in a lifetime trust

This option holds a beneficiary's inheritance in a trust fund for the beneficiary's entire lifetime. Similar to Option 2, while property is held in the trust, the Trustee can take out trust funds at anytime to pay for a beneficiary's day to day needs. 

With a lifetime trust, often times the Trustee is a third party while the beneficiary is younger (to protect the beneficiary from bad decisions and outside influences). Then, when the beneficiary is at an age where he or she will be responsible enough to take full control, the beneficiary is made the Trustee of his or her own trust.

This option has many benefits.  Any assets held in the trust are shielded from a beneficiary's creditors for their entire lifetime. This protects the assets from claims made by a beneficiary's spouse in a divorce, from any bankruptcy proceeding, and from claims made against the beneficiary in a lawsuit. This option would also ensure that any assets remaining at the beneficiaries' death would pass free of probate, state inheritance taxes, and federal estate taxes. 

However, like Option 2, this option does require ongoing trust management by a trustee - although once the beneficiary is named the trustee this is not much of an issue.

Call J. Cutler Law Today

At J. Cutler Law, we offer free consultations for you and your family regarding the right estate plan for you. We can help you outline all of your estate planning options based on your needs and advise on the best course of action. Call us today for a free consultation at (801) 618-4469 or contact us online.

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The Reason Why You Should Have A Will - Even If You Don't Have Many Assets

The Reason Why You Should Have A Will - Even If You Don't Have Many Assets

"If you don’t have a will, the state has one for you. Regardless of how old you are or how much wealth you have, would you rather have government officials dictate where your property goes or would you rather decide that for yourself?”

Beginner's Guide To Completing Your Estate Plan

If you dread the idea of estate planning then, trust us, you are not alone. Many people avoid making proper legal arrangements for their end-of- life desires and assets for as long as possible.

While it is certainly understandable – both because there is some work required and the fact that thinking about death is unpleasant for some – this is the type of thing that should not, and need not, be procrastinated.

The first step is to have a clear understanding of exactly what estate planning entails. Estate planning is simply the legal specification of your desires for the management of all of your property after your death. Estate planning also often includes provisions for your healthcare if incapacitated before death and the desired arrangements for your body after death.

These are decisions you will want to make after giving them proper thought and consideration but just deciding on a course of action is not enough. Unfortunately there are a couple legal hoops that need to be jumped through to make your end-of- life wishes legally binding and enforceable after your death. You will want to consult with a trustworthy attorney in order to arrange your estate planning but below are a few things that everyone should know about the process.

While the term “estate” might leave you inclined to think of estate planning as only necessary for the wealthy it is, in fact, not a matter of wealth at all. You don’t need to live in Wayne Manor to have what is legally considered an estate.

By legal definition, your estate is just the umbrella term for all the property and assets that you own. This extends beyond just homes, cars, and jewelry to other intangible property such as bank accounts and insurance policies. With this understanding in mind, you can see that you don’t need to be of retirement age for estate planning to make sense.

If you own property and would like to have a say in what happens to it when you die then you will want to tackle your own estate planning sooner rather than later. Without legally binding estate planning, your end-of- life circumstances (both in terms of property and your own healthcare/burial matters) will be left to the whims of local laws, relatives, and doctors.

No two estates are the same so no two estate planning processes are the same either. In some cases the transferal of property is simple and clear and requires just a few pages of legal documentation. In most cases, however, arranging who gets what and when they will get it requires a number of different legal documents.

In addition to a declaration of what property goes to what person, you also want to consider aspects such as legal guardianship of dependent children, who will act as your agent in making decisions after your death, and how to handle any outstanding debts and taxes.

The most basic and essential document is a will but most people also find it necessary to set up a trust in order to legally arrange for a person (or people) to have the right to manage all or some of your assets upon your death without going through probate court (which is costly and time-consuming).

Trusts can be set up as revocable or irrevocable, with the former meaning that it can be amended down the road if you so desire and the latter meaning that once finalized it cannot be changed.

Wills and trusts are just two of the most crucial documents needed to properly arrange for your wishes to be carried out after your death. Depending on your circumstance, there may be other estate planning documents that you need and you will certainly want to consult with an attorney in that process.

Call J. Cutler Law Today

At J. Cutler Law, we offer free estate planning consultations for you and your family. We handle all the steps of estate planning, can help simplify the process for you, and are available to consult on any stage of the process. Call us today for a free consultation at (801) 618-4469 or contact us online.

What Everyone Needs to Know About Estate Planning

Curious about estate planning but don't know where to start?

Then check out the slideshow below to learn the basics about estate planning. (Click the bottom right corner for full-screen).

Call J. Cutler Law Today

To determine what estate planning documents are best for you, or to answer any of your Estate Planning questions, call J. Cutler Law for a free consultation at (801) 618-4469 or contact us online.

How Do I Know If My Estate Is A Small Estate?

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Not all estates need to go through the probate process, and not all estates need to be written as trusts.

For many individuals who do not own a significant amount of property, the small estate procedure will assist heirs in resolving outstanding estate issues.

The Purpose of Small Estates

Small Estate procedures were created to assist heirs in obtaining the deceased’s property and assets without the lengthy process of probate. Small estates can also be done relatively quickly while keeping both time and costs low, both of which appeal to those involved.

Small estates can be completed through affidavits executed by either the spouse or heirs of the deceased. They give the affidavit to the holders of the deceased property to get the property.

In certain states, you must present the affidavit to the Court first before going after the property. In Utah, if the value of the entire probate estate does not exceed $100,000, the estate is considered a “small estate,” and it can be closed within thirty days after the death.

Determining the Value of the Estate

Small estate procedures can happen with or without the will. All that matters is the total value of the property involved in the estate.

To determine the value of the estate, it is recommended you make a list of all of the deceased’s assets. Come with an accurate value as best you can with respect to the various assets, and if you are unclear on certain line items, attempt to get an appraised value.

Certain assets are not included in this list, including property in joint tenancy, retirement plans, payable-on-death (POD) accounts, real estate transferred through a transfer-on-death deed, or a transfer-on-death brokerage account. Life insurance proceeds are similarly excluded from the list of assets.

The Small Estate Affidavit

The spouse or heirs need to file out a simple affidavit and wait for a 30-day period before distributing the assets.

The small affidavit can be used to collect property, except real property, if the deceased living in Utah at the time of death or his property was located in Utah; the person signing the affidavit is a surviving spouse, child or heir of the deceased, or if this individual is named as a beneficiary in the will; the person who signs the affidavit is entitled to receive the deceased’s property, 30 days have passed since the death of the decedent; no one else is appointed or is seeking to be appointed as personal representative in any state; and the deceased’s estate value is not more than $100,000.

Summary Probate Small estates can be subject to a summary administrative procedure. If, after look at all property and appraising the value of the estate, minus lines and encumbrances, it does not exceed the homestead allowance, exempt property, family allowance, costs and expenses of administration, reasonable funeral expenses and any medical and hospital costs of the deceased’s last illness, the personal representative can distribute the assets without giving notice to creditors.

The personal representative then files a sworn closing statement with the court stating the nature and value of the estate assets, the value of the estate, any debts that were outstanding as part of the estate, and a statement that the personal representative has fully administered the estate, paying off needed debts and disbursing the assets. A closing statement needs to be given to all beneficiaries and creditors showing that their claim has been satisfied in full.

Call J. Cutler Law Today

To determine if assets are classified as a small estate, or to answer any of your Estate Planning questions, call J. Cutler Law for a free consultation at (801) 618-4469 or contact us online.

Probate Vs. Non-Probate Assets in Estate Planning

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You may hear a lot about probate assets and non-probate assets and not understand what the terms mean and why the difference matters.

Whether an asset is probate or non-probate affects how quickly you get the asset as well as the oversight needed to distribute the asset to the rightful beneficiaries.

What Is the Difference?

Assets that do not have to go through probate can be transferred to beneficiaries much more quickly. Probate can take months, if not longer, depending on the complexity of the estate.

Often beneficiaries will need assets and funds quicker than that time will allow, and these non-probate assets help make this possible.

Common Assets That Go Through Probate

The probate process is required for any property that was solely titled in the name of the deceased person.

For instance, if the deceased owned real estate or a car titled only in his or her name, that property would be handled via the probate system. In addition, if property was owned as “tenants in common” with a deceased person and another individual, that portion of the property owned by the deceased would be handled via probate.

All this property goes into the “probate estate,” and this will be handled by the personal representative or executor, as well as the Judge in the probate court.

Many choose to hire an attorney to assist with this process, as well as an accountant for purposes of estate taxes, should those apply.

Assets That Don’t Need to Go Through Probate

Not everything goes through probate. Many assets can be handled without filing a single document in court, if done properly prior to the deceased’s death.

For instance, if the deceased is married and owned most of his or her property jointly with his or her spouse, that property would quickly pass onto the spouse upon the passing of the deceased.

Living trusts are the most common method people use to avoid having their assets go into probate. Trusts are created giving the Settlor (i.e., you) the power to modify or change as many times as you wish during your lifetime, and then, upon your death, the trust is under the control of the Trustee, someone you name specifically within the document to handle your assets and debts, as well as any outstanding affairs that need to be handled before the trust can be closed.

These assets are not taxed under estate taxes and can be distributed quickly outside of the court system. The caveat to trusts, however, is once the document is created, you will need to change legal ownership of your property to “The Trust of ‘X’.” Otherwise, you are walking around with a document that holds absolutely no power over anything you own, and all your assets will go to probate in the end.

Life insurance proceeds are out-of-probate assets that go directly to the beneficiaries listed on the accounts. Some people choose to list the estate as the beneficiary of a life insurance policy, though this somewhat defeats the purpose of having a non-probate asset like this.

Retirement accounts, IRAs, 401(k) accounts, and pension plans all have beneficiary designations, and these assets also go outside of probate.

Any property that is held in joint tenancy with right of survivorship or property that is owned in Securities registered in transfer-on-death form, funds that are available in a pay-on-death bank account, U.S. saving bonds that are also registered in a pay-on-death form, or real estate that is valid on a transfer-on-death deed are also handled outside of probate.

If you have registered your car or boat in a transfer-on-death form, this asset would be dealt with outside of probate. However, this option is limited only to a handful of states.

Call J. Cutler Law Today

At J. Cutler Law, we offer free probate consultations for you and your family. We can help you decide what trust best fits your family’s needs. Call us today for a free consultation at (801) 618-4469 or contact us online.

5 Reasons Why You Should Do Your Estate Plan This Year

If you're like most people, you understand that estate planning is a good idea. You know that an estate plan ensures that your property goes to the right people and ensures your children are properly taken care of. Although you probably understand the importance of estate planning, you know it's all too easy to put off actually sitting down and making your plan.

If you can relate, then what better time then the New Year to resolve to actually finish your estate plan? While you may already have several New Year's resolutions swirling around in your head (or better yet already written down), a resolution to prepare your estate plan is a realistic goal that can be achieved by anyone.

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So to further encourage you to make finishing your estate plan a goal for the New Year, let us offer five reasons why your estate plan should be done this year:

1. Your Property Will Go To The People You Want

Without an estate plan you do NOT get to decide where your property goes when you die. Instead, state law determines who gets what. This may be the number one reason to do your estate plan. Even if you are not wealthy, you can still prepare a simple will or living trust to ensure your property is transferred to the people you want.

2. Your Children Will Be Taken Care Of According To Your Wishes

If you have young children and die without an estate plan then state law also determines who is the personal guardian of your minor children and who is the financial manager of their inheritance. This is why you'll want to ensure that your children are taken care of according to your wishes. In your will, you can name guardians to raise your children and managers to look after their inheritance. 

3. Your Medical And Financial Decisions Will Be Made By People You Trust

If you ever become incapacitated you will want to ensure the people you trust make important decisions for you instead of a court order or court appointed receiver. Part of estate planning is preparing for what would happen if you ever become unable to make medical and financial decisions for yourself. This can be done through a health care directive and a durable power of attorney. These documents can save your family much heartache.

4. You Will Save Time And Money By Avoiding Probate

Probate is the court process for wrapping up an estate. It's often time-consuming and expensive and rarely provides any benefit to the beneficiaries. With a little estate planning you can keep most or all of your estate out of probate, saving your loved ones time and money.

5. You May Reduce Your Estate Taxes

For the year 2017, if you pass away and your estate is worth more than $5,490,000 then your estate will be subject to federal estate taxes. If you already own this amount, or plan to eventually, then you will want to use your estate plan to reduce the tax that your estate could owe after your death. 

 

Hopefully these five reasons encourage you to make estate planning part of your goals for the New Year. Estate planning may seem overwhelming and time-consuming but it does not have to be. Keep in mind that many people need only a simple estate plan. You may even be able to prepare all your documents yourself. Or you might discover that having a lawyer do all the work for you is easier. Either way, planning your estate is a worthwhile goal that you can achieve this year. To start, get a free consultation to discuss what is best for you.