This post is the fourth in a series regarding estate planning. So far the writings have covered the goals of estate planning and how things can go wrong if a person has not done it. They also discussed how a will can help with the first estate planning goal of transferring a person’s assets the way she wants after her death (although it has significant limitations), and how a trust can overcome those limitations.
This post will go into more detail about options regarding distribution of a person’s assets after his death. This information pertains both to wills and to trusts, although most often these provisions are in trusts because most people want to avoid the effort, time delay, fees, and other expenses of having a probate decedent’s estate court proceeding after their death. A will often does not avoid that.
A trust can have language that helps when a person has children who are minors, or even young adults who are not mature enough to receive and manage the assets responsibly. In that case, the trust can contain language so that the successor trustee chosen by the person who created the trust will hold all of the assets for the children of the person who created the trust until they get to be an age when they are mature enough to receive and manage them responsibly. In the meantime, the trust can specify that the family house can remain available for her children to live in it, and the other assets can pay for college, etc., for her children. The trust can even include language that staggers the outright distributions so that each of her children receives certain percentages of the assets at specific ages.
Without a trust, a guardianship court proceeding may be needed for minor children to receive assets after a parent’s death. Minors younger than 18 years of age cannot own assets. A guardianship court proceeding is very similar to the conservatorship court proceeding mentioned here in a prior writing, and it is something best avoided.
Similarly, a person may want to leave assets to someone who has a disability and is receiving government benefits based on financial need. Receiving the inheritance outright may remove the financial need and cause the government benefits to terminate. Instead, a trust can include language providing that any distribution to that person be held by the successor trustee (chosen by the person who created the trust) in a type of trust called a special needs trust. A special needs trust will allow the person receiving government benefits to benefit from the inherited assets without causing loss of government benefits. That way the government benefits can continue to pay for the basics while the inherited assets improve quality of life.
Finally, a trust can include provisions to protect someone who is to receive assets and also has an alcohol or substance abuse issue.
For married couples, a trust provides additional benefits. It can minimize the estate taxes payable by both spouses at their deaths and defer payment of any such estate taxes until the death of the second spouse to die. It also can ensure that, after the death of the first spouse to die, the surviving spouse cannot change who will receive all of the assets after his or her death.
These are options that a person may choose if desired. They are not necessarily required. And all of them can be included in a trust or a will.
So now these writings have covered the first goal of estate planning, which is transferring a person’s assets the way he wants and efficiently after his death.
The next post (#5 of 6) turns to the second goal, and arguably the more important goal, of estate planning–making sure that someone that a person knows and trusts will have the legal authority to take care of that person if he cannot take care of himself anymore in the future for some reason.