Trusts: Revocable Living Trusts, Irrevocable Trusts, Testamentary Trusts, Special Needs Trusts, etc.

Trusts come in various forms, ranging from simple to complex, and serve different purposes in legal, personal, investment, or tax planning. At its core, a trust is a legal entity involving at least three parties: the trust-maker, the trustee (trust manager), and the trust beneficiary. Often, these three roles are fulfilled by a single person or a married couple. For instance, with a revocable living trust, an individual may establish the trust (the trust-maker) and appoint themselves as the current trustee (trust manager), managing the trust assets for their personal benefit (trust beneficiary).

Establishing a trust can yield several advantages, including the avoidance of probate court. In most cases, assets held in a revocable living trust can be immediately transferred to the trust beneficiaries or heirs upon the trust-maker(s)'s death, bypassing the need for probate. Certain trusts may also provide tax benefits for both the trust-maker and the beneficiary. They can safeguard assets from creditors or designate someone to manage and invest property on behalf of the trust-maker(s) and the named beneficiaries. Moreover, well-drafted trusts remain effective even if the trust-maker dies or becomes incapacitated. Contact our estate planning lawyer to explore the potential benefits of establishing a trust for you and your family.

Quick. When you think of Overland Park estate planning, what comes to mind first? Is it wealthy folks living in mansions, traveling in private jets and riding in limousines? Actually, estate planning is for everyone. From the wealthy to the not so wealthy, beginning at age 18.

But what is meant by “Life & Estate Planning”? After all, isn’t estate planning just an after death plan for the distribution of your stuff? Oh, no. The focus is on planning to protect you, everyone you love, and everything you have whether you are healthy, incapacitated, or deceased.

As you can imagine, approached with this comprehensive mindset, this subject fills volumes of very dry, scholarly tomes. Unless your professional calling is to be an estate planning attorney, these scholarly tomes can (and will) cure anyone of insomnia. So, what do you really need to know to enjoy Life & Estate Planning Peace of Mind?

No Life & Estate Plan will be of value unless it begins with solid planning for your own potential incapacity. Here is why: The law requires each adult American to make his or her own personal, health care, and financial decisions. However, if you have not legally appointed the agent of your own selection in advance of your incapacity, then a probate judge, who may not know you or your wishes, will appoint one for you. This process may invade your privacy by making your personal and financial circumstances a matter of public record. In fact, since this legal process employs three lawyers (at a minimum), we call it The Lawyer Full-Employment Program.

Consequently, each adult American needs a Durable Power of Attorney for Financial Decisions and an Advance Health Care Directive (i.e., Health Care Treatment Directive/Durable Power of Attorney for Health Care Matters and Anatomical Gift Declaration). Note: These legal instruments may be combined into one instrument or remain separate instruments. Why separate instruments? Which approach do I recommend?

You may want to appoint different agents to make your financial and health care decisions. For example, you might have the “numbers” person (a family member with a financial or business background) handle your financial decisions and the “medical” person (e.g., a family member or friend with a medical background) handle your health care decisions. Accordingly, my Overland Park estate planning practice is to prepare separate instruments.

As Benjamin Franklin famously observed, there are but two (2) certainties in life: Death & Taxes. Unfortunately, proper planning can completely avoid only one of these certainties (taxes). We will address that certainty first.

Transferring your wealth to anyone but a bona fide charity is subject to taxation upon your death. However, under the Tax Cuts and Jobs Act of 2017 (TCJA), each taxpayer may exempt $13.61 million* (as indexed annually for inflation) from this death tax. Yet, a double exemption is not automatic for married couples.

Although a married couple may protect up to $27.22 million* of their assets from federal estate taxes through proper estate planning, close coordination between your Overland Park estate planning attorney and your other professionals is required. Otherwise, you might be shortchanging your loved ones and unnecessarily enriching the IRS.

Since death is a 100% certainty on the actuarial tables of every life insurance company I have consulted (with a long history of anecdotal evidence in support), it seems only logical to make proper legal plans to protect your loved ones and your things when it is your turn. And planning is essential, whether you have a little or a lot. For instance, silver and gold aside, most parents consider their children their most valuable assets.

Parents often devote considerable time and treasure to providing their children with education, social/athletic activities, and religious training. Incredibly, however, these same parents may fail to legally appoint guardians (i.e., backup parents) for their minor children in the event both parents die. Who would you nominate as guardians to take your place and rear your minor children to adulthood? What special instructions would you give the guardians regarding their upbringing? By the way, listing the guardians on a cocktail napkin in the airport lounge will not work. Before tragedy strikes, you must legally appoint the guardians in your Last Will and Testament and/or your Revocable Living Trust.

Overland Park Probate is the court process for transferring assets owned by decedents who did not make legal arrangements to avoid probate while alive. The only time and place a Last Will and Testament has any purpose is in probate. Over the years, much has been said and written about whether probate should be avoided. Bottom line: Probate is more burdensome in some states than others, and you should evaluate the cost-benefit of probate/probate avoidance for your unique circumstances. When all is said and done, the ultimate key to whether an estate plan is successful hinges on the proper creation, implementation, and maintenance of your plan over time.

Question: Would your loved ones, fiduciaries, and professional advisors know where you keep your legal, financial, real estate, tax, and personal records? We have a system to help you get and stay organized, so you do not send them on a very unpleasant “paper chase” or “treasure hunt” after you are incapacitated or gone.

[* Note: This estate tax exemption is indexed yearly for inflation. Nothing in the political arena of tax law is truly “permanent” in my experience. Depending on your legal residence, be forewarned that many states impose their own estate or inheritance taxes, independent of any federal estate taxes. Kansas and Missouri do not have their own estate or inheritance taxes. Accordingly, careful monitoring of the economic, political, and legal climate is required.]

Have you ever noticed that no one values a dollar like the person who earned it? Appropriately, then, the third challenge is Inheritance Protection. Indeed, an inheritance representing an entire life of work and thrift could be lost or taken if this challenge is ignored. How?

If you do not incorporate Inheritance Protection into your estate distribution planning to protect any inheritance for (and maybe from) your heirs, then your hard-earned assets could be squandered by your surviving spouse’s new spouse, your children/grandchildren, or lost to their divorces, lawsuits, or bankruptcies. Alternatively, instead of outright or staggered distributions of your estate, consider establishing Long-Term Discretionary Trusts with Spendthrift Provisions for your heirs. Such arrangements may even include incentives to encourage positive behavior and discourage negative behavior. Our Overland Park estate planning can help with inheritance protection.

Believe it or not, there may not be an “estate” to plan (regarding assets) unless you play a little legal and financial defense. For example, the type of assets you have and how the title is held to them can protect them from potential creditors. Some of this protection is afforded by state law (Kansas and Missouri have some crucial differences here). Other less obvious protections are created by strategically analyzing your assets and tactically repositioning and retitling as needed. Sometimes, specific legal entities need to be considered, too.

Do you have proper insurance protection? I assume you have insured your things through auto, home, and umbrella policies. But have you insured yourself?

For example, disability income insurance is needed to continue your income should you become incapacitated during your earning years, life insurance is required to protect your family upon your death (and perhaps to provide estate liquidity for post-mortem expenses, debts, and taxes), and long-term care insurance is needed to avoid depleting your estate due to nursing home costs. After all, you do not want the only thing your children to inherit to be an elderly you?

Many otherwise proper Life & Estate Plans unnecessarily risk failure due to inadequate risk management. Drawing on my education, training, and experience as a Certified Financial Planner® certificant since 1991, I can work with your financial professionals and accounts to help ensure these crucial financial risks are covered.