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Podcast Recommendation: The Thing about Pam

I love a good podcast. They’re perfect for diving into a story or learning about something new while driving, walking, or just chilling on a quiet weekend morning. Don’t worry. I’m not here to suggest an estate planning podcast. (While I would queue that up, not many people share my affinity for the nuances of trusts and estates.) However, Dateline NBC‘s new podcast, “The Thing About Pam” does involve some estate planning aspects. I don’t want to give away the true-crime plot as it’s super interesting and definitely a bit spooky, which is fitting for Halloween, but life insurance policies play a major role in a few ways.

The Thing About Pam

the thing about pam

Allegedly, a victim was killed just four days after changing the beneficiary to her life insurance premium (around $150,000). Furthermore, an elderly woman with dementia supposedly fell off a balcony and the beneficiary received around $100,000 from the senior citizen’s life insurance. Perhaps not so coincidently, the same person was the beneficiary of both life insurance policies⁠—and both policyholders died under suspicious circumstances.

Life insurance was also used at a suspect’s homicide trial as one of the main motives for premeditated murder.

For fans of true crime tales, there’s a lot to unpack in this podcast and for Iowans, in general, it’s a good reminder about the role life insurance beneficiary designations work with your estate plan.

Don’t Forget About Beneficiary Designations

Quick Lowdown on Life Insurance

Life insurance is a vehicle for non-probate wealth transfer. This means that life insurance passes outside of probate (the legal procedure by which a decedent’s estate is distributed) to the beneficiary named on the policy. Multiple persons can be named, but generally, most policies don’t allow for class beneficiaries such as “my children” or “my nephews.”

Life insurance can be a great tool to provide estate liquidity and achieve estate planning goals such as passing along a family allowance for surviving spouses and dependents. Life insurance can provide debt relief, income replacement, and be a step toward wealth accumulation. Additionally, proceeds are paid to beneficiaries income tax-free!

Where life insurance can get complicated or leave intended beneficiaries named elsewhere in estate planning documents without remedy is where the policyholder passed away and left someone no longer a part of their life as a named beneficiary.

6 Simple Tips for Beneficiary Designations

For instance, let’s say Annie had named her ex-husband Bob as her life insurance beneficiary back before they got divorced. Divorce does not automatically remove an ex from the policy. Because most life insurance policies are revocable (meaning the policy owner could change the beneficiary at any time) Annie could have changed the beneficiary designation, but for whatever reason forgot to. Consequently, Bob takes the life insurance money, despite the fact that Annie, at the time of her death, would have likely preferred to name someone else (like her brother Cam or niece Deb) on the policy. and then died without ever changing it.

Smart Estate Planning

In the world of wills and trusts, planning ahead means planning for many different scenarios to ensure that your property passes to who you want when you want. Of course, no one (like the victim in the recommended podcast) tends to think their life insurance policy will be part of litigation (or a criminal murder case for that matter), but that’s why it’s important to enlist an estate planner who can analyze the whole picture, not just individual pieces.

Estate Planning Basics: What You Need to Know, but Were too Bored to Ask

I offer a free estate planning consultation as well as this free estate plan questionnaire to help you get started on the important set of legal documents. I’d also love to hear what you think about the podcast and get your recommendations for other great series to listen to! Contact me via email or by phone at 515-371-6077.

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Ultimate Estate Planning Checklist

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Checklist with coffee and croissant

It’s National Estate Planning Awareness Week! In an effort to break down the barriers, myths, and excuses surrounding estate planning, I’ve created this handy dandy ultimate estate planning checklist. It runs down just about everything you need in terms of a comprehensive, quality estate plan including the six major documents, reviewing beneficiary designations, considering if a trust is applicable to you, and discussing your estate plan with your loved ones.

Estate Planning Checklist GFLF

 

I would love to help you check these items off your list. If you want to get started, download my Estate Plan Questionnaire. Or, you can contact me to discuss your individual situation and what estate planning provisions make the most sense for you!

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How a Letter of Instruction Works with your Estate Plan

letter of instruction

When I prepare estate plans for my clients, they typically include six key documents. For more complex estates, the plan may also involve trust and/or business succession documents. However, to make estate planning as simple and the least chaotic for your loved ones tasked with fulfilling your wishes, I also recommend drafting another document: a letter of instruction.

What Exactly is a Letter of Instruction?

Think of a letter of instruction like an easy-to-read-and-understand summary shortcut for your estate plan’s executors and representatives. Its main purpose is to help guide the person(s) settling an estate through the process, step-by-step, in plain, clear language.  The letter can serve as a cheat sheet of sorts. It’s not legally required and certainly doesn’t take the place of a valid will, but it’s a meaningful nod to those you have tasked with handling your affairs.

Avoid the Worst Case Scenario: Litigation over an Estate Plan

Your letter of intent doesn’t have to go by any specific form or outline, so some people tend to use it as a way of giving personal instructions and giving details beyond what is articulated in your estate planning documents. A useful letter of intent can include the following information:

  • Location(s) of:
    • Important papers such as birth certificates, any divorce/marriage certificates, citizenship papers, etc.
    • Estate plan.
    • Titles and/or deeds to real estate and rental property.
    • Recent copies of all financial statements like tax returns and other potentially important legal documents.
    • Safety deposit boxes and the respective keys.
    • Tangible property that may not be readily accessible
  • Names, passwords, account numbers, and PIN numbers for financial accounts.
  • Social security number.
  • Contact information for:
  • Instructions for the care of any pets. (You may also want to establish an animal care trust.)

6 Estate Planning Resolutions You Can Actually Keep

Regular Updates & Safe Storage

Like your other estate planning documents, the letter of instruction should be reviewed annually and updated as needed. Because the letter of intent includes confidential personal information it should be stored in a secure place that can also be accessible by your estate plan’s executor.

Estate Planning: On Valentine’s Day Skip the Heart Box & Go for Secure Storage

But First, an Estate Plan!

Before you go about drafting a letter of intent, it’s important to place a priority on executing an estate plan that helps you meet your goals and define your legacy. My free, no-obligation Estate Plan Questionnaire (the first of the six key estate planning documents) is a great place to get started. Otherwise, contact me by phone or email with any questions and to discuss which estate planning strategies may be best for you and your family.

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(Legal) Word of the Day: Settlor (AKA Donor or Grantor)

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Settlor (or Donor or Grantor)

The person who creates a trust is called the settlor (sometimes called the donor or grantor). It is the settlor’s intent which is of paramount importance. It is the intent of the settlor that determines whether a trust has been created.

Here’s a great read with a rundown on the basics of what a trust is:

(Legal) Word of the Day: Trust

Intent Is Everything

If a settlor transfers property to a recipient with the intent that the recipient hold the property for someone else, then a trust has indeed been created. If the settlor transfers property with the intent that the recipient use the property for her own benefit, then NO trust has been created.

BONUS WORD! Precatory Trust

What if a settlor transfers property to a recipient with just a wish that the recipient use the property for the benefit of someone else, but does not impose any legal obligation? In such a situation, no legal trust is created. Instead, this is called a precatory trust, but is not a trust at all, because the settlor placed no legal responsibilities on the recipient. A precatory trust is, again, not a trust and is not governed by the law of trusts.

Three Easy Hypotheticals

  • Let’s look at three quick examples to make this clear. Mack gives stock to Julie. Mack intends that the stock be for Julie’s own use. Mack is NOT the settlor of a trust, because no trust has been created.

Stock market sheet

  • Grace gives a vacation house to Maddie, intending that Maddie hold the house for the benefit of Zach. Grace is the settlor of a trust. If a settlor transfers property to a recipient with the intent the recipient holds the property for the benefit of someone else, then a trust is created.

vacation home on lake

  • Thomas gives a coin collection to Parker, just wishing that Parker would hold the coins for Danna. This is a mere precatory trust, not a trust at all because the settlor is not imposing any legal responsibilities on the recipient.

coin collection

Questions? Let’s Talk.

When it comes to estate planning, I’m all about breaking down the legalese barriers. This hopefully clarified the definition of settlor, but you may have questions…which is great! Contact me to discuss further the status of your estate plan and decisions regarding your trust. Reach me by email at gordon@gordonfischerlawfirm.com or phone at 515-371-6077.

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Love, Death, & Taxes: Estate Planning Considerations for Same-Sex Spouses

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hands of 2 grooms

Everyone needs an estate plan! This goes for if you’re a young professional or have minor children or are retired. And, it goes for all married couples! 

This year marks a decade since Iowa Supreme Court decision of Varnum v. Brien, which legalized same-sex marriage in the state. This case was a precursor and set a standard echoed subsequently in other states and eventually at the national level. The Supreme Court’s opinion in Obergefell v. Hodges, which legalized same-sex marriage was a major win for both LGBTQ and human rights. 

Love is love written on card

The 10-year marker of the Varnum decision reminded me that Obergefell had an enormous impact on estate planning. With same-sex marriage now recognized across the country, it opened a multitude of previously unattainable tools and tax-savings that come along with a legal and recognized marriage. Yet, same-sex couples still may have situations that require extra or special planning. You may be surprised to learn that It can’t be it covered by a single article, so I’ll hit the high points. Here are five considerations for same-sex spouses engaged in estate planning.

Unlimited Marital Deduction

The unlimited marital deduction is a money-saving must for all married couples. The unlimited marital deduction is an essential estate preservation tool because it means an unrestricted amount of assets can be transferred (at any time, including at death) from one spouse to the other spouse, free from taxes (including the estate tax and gift tax). Prior to Obergefell, same-sex couples had to depend on their individual applicable exclusion in order to provide for a surviving partner.

(Note that the marital deduction is available only to surviving spouses who are U.S. citizens. If your spouse is not a U.S. citizen, look at other tools, such as a qualified domestic trust (QDOT), which may act to minimize or eliminate taxes.)

marriage equality flags

Guardianship of Minor Children

A will is so critically important for several reasons, including the fact a parent can make a designation of guardianship for minor children should something happen to the parent while the child is still under age 18. Without a will, no guardianship can be established, and Iowa Courts must choose guardians. Unfortunately, with no clear evidence as to what the former caregivers would have preferred, the Court must make its “best guess” as to who the parents would have preferred and what would be in the best interest of the child. The Court may, or may not, choose who the caregivers would have named.

Child smiling on bridge

Establishing guardianship is SO important for all parents, but especially so for same-sex parents. The legal relationship between a minor child and a parent in a same-sex marriage should specifically be identified in the estate plan. Additionally, if only one spouse is currently the natural or adoptive parent of a minor child, the spouse of the said parent should consider adopting the child to legalize the relationship. Without this officially established relationship, the death of the adoptive/natural parent could open the door for a custody battle with the deceased’s family or the child’s birth parents. To avoid litigation (and avoiding litigation in estate planning is always a good idea), co-parent adoptions protect each parent’s rights regarding guardianship.

If adoption isn’t on the table, it’s smart to create a trust with specific provisions for the relationship between the non-legal parent and the minor child if someone else were to become the guardian.

(Expert advice: The adoption tax credit is not available for a spouse adopting a spouse’s child. If adoption is in the plans it may be financially advantageous for the adoption to take place prior to marriage.)

Give Your Assets to your Child(ren)

Adoption also plays an important role not just in guardianship but in the passage of assets. Typically, when parents die their assets are passed on to their child(ren). If this is indeed an estate planning goal for a same-sex couple, adoption should definitely be considered since it’s more common in same-sex marriages for only one parent to be biologically related to the child.

The term for adoption by a spouse (without the “first parent” losing any parental rights) varies from state-to-state and can be called second-parent adoption, co-parent adoption, stepparent adoption, or confirmation adoption.

mom daughter blowing kiss

Once an adoption is final, an adoptive parent has all the permanent legal rights and responsibilities of a parent-child relationship, exactly the same as that of a birth parent.

Without the legal determination and an estate plan the child(ren) may not get anything as the couple’s assets could flow instead to other family members.  

Professional Planner

For all the aforementioned considerations and more, it’s smart for all couples, but especially same-sex couples, to avoid the DIY online estate plan templates. Most of these services don’t include the specific provisions and important estate plan needs of LGBT couples. Seek out a lawyer with ample experience in estate planning who understands the potential legal challenges your estate could face so they can adequately protect your assets from potential peril. For instance, if you think the situation could arise where family members who disprove of the marriage or decisions regarding the estate could create future conflict, your lawyer should be able to advise on how a “no contest” clause to be incorporated into the estate plan.

9 Reasons You Need a Lawyer to Write your Estate Plan

Comprehensive Review

As stated before, given the tax-saving tools that marriage provides, it’s nothing but beneficial to review any and all existing estate plan documents of each spouse. (Married couples often seek joint representation in estate planning, but individual representation can help couples avoid conflicts of interest.)

In your estate plan review confirm that definitions accurately reflect relationships with verbiage such as “spouse,” “children,” “husband,” “wife,” and the like, so there’s no ambiguity when it comes to execution of the plan.

Following marriage, it’s also a good idea to take a look at re-titling property (such as a home) from sole ownership to joint tenancy. This means that if one spouse were to pass, the other would get the property without it passing through probate. (Depending on your situation, you could also consider “tenancy in common” as another option for holding property titles under multiple names.)

Additionally, don’t forget to check your beneficiary designations on accounts such as savings/checking, insurance, 401k, and retirement benefits, as these designations actually trump your will.

Ask your professional advisors—lawyer, financial advisor, insurance agent—to help you maximize your money-saving benefits when it comes to gift, income, and federal/state estate taxes.

two brides getting married

Get Started

You’ve worked hard for the assets you’ve built and the property you’ve acquired. Almost assuredly you want these assets to pass to the ones you love—the ones you’ve built a life with and around. Don’t let legal loopholes, family members that will never fully understand that love is love, or guardianship issues get in the way you crafting your legacy. It’s never too early to get started on your estate plan (with my free, no-obligation) estate plan questionnaire. I’m always happy to discuss the topic over the phone (515) 371-6077 or via email.

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If You Die What Happens to your Cats?

Pets are a huge part of many families. They are there to snuggle you, greet you every day when you come home, and share so many of life’s best memories with you.

For most people, planning what happens to your loved ones, including pets, is a big contributor to sound peace of mind. In the past, probate and trust laws did not allow pet owners to provide for the care of their pets after death, however, in 1990, the National Conference of Commissioners on Uniform State Laws enacted the first pet trust statute in the Uniform Probate Code. Fortunately, the State of Iowa is one of the majority of states that have adopted a law on animal trusts, most often referred to as “pet trusts.” It reads as follows:

633A.2105 Honorary trusts — trusts for pets.

  1. A trust for a lawful noncharitable purpose for which there is no definite or definitely ascertainable beneficiary is valid but may be performed by the trustee for only twenty-one years, whether or not the terms of the trust contemplate a longer duration.
  2. A trust for the care of an animal living at the settlor’s death is valid. The trust terminates when no living animal is covered by its terms.
  3. A portion of the property of a trust authorized by this section shall not be converted to any use other than its intended use unless the terms of the trust so provide or the court determines that the value of the trust property substantially exceeds the amount required.
  4. The intended use of a trust authorized by this section may be enforced by a person designated for that purpose in the terms of the trust or, if none, by a person appointed by the court

Pet trusts include the following elements:

  • Selecting a caregiver to attend to the daily needs of your pet.
  • It is recommended to name a second caregiver, in case the first can’t adequately care for the pet or decides not to do so.
  • You can include instructions for day-to-day needs as well as overall healthcare. You can be as general or as specific as you’d like.
  • You can set aside monetary distributions, on the condition that it is used for your pet’s needs.
  • The monetary distributions may include a reward/stipend for fulfilling the caregiver role.

Animal Care Trust: Continued Care & Love for Your Pet

Let’s talk about your furry friends and how we can ensure they are provided for in case something happens to you. Give me a call at 515-371-6077 or shoot me an email at gordon@gordonfischerlawfirm.com.

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(Legal) Word* of the Day: ILIT

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GoFisch blog

Mark Twain famously said, “A classic is something everybody wants to have read, but no one wants to read.” Life insurance is a little like that. Everyone needs it, but we don’t like to talk about it much.

Life Insurance as Key Estate Planning Tool

Life insurance is an amazing estate planning tool. I cannot stress enough the importance of life insurance. I, of course, don’t sell it, so I have no economic stake here. It’s just that life insurance is generally reasonably and affordably priced, yet still so helpful with so many financial goals. Replacing a breadwinner’s earnings is one of the most commons ways it is utilized. But, it can also provide liquid assets for a small business when a key partner dies. Life insurance can also cover costs that you might forget about, like funeral costs or unpaid taxes. While there are many advantages to life insurance, and you most definitely need it, life insurance can also create estate planning issues.

Expert Interview: Life Insurance & Your Estate Plan

Three Estate Planning Issues Life Insurance May Create

The major issue created by life insurance is that of the “sudden windfall” to your beneficiary. Do you really want, say, your 19-year-old to inherit several hundred thousand dollars at once? Even oldsters with experience managing finances may find a huge influx of cash to be overwhelming.

Another issue to consider: does your beneficiary receive government benefits? If so, proceeds from your life insurance policy might make your beneficiary ineligible for further benefits. By the way, don’t think that those receiving government aid are all elderly. Quite the opposite! A vast majority of Medicaid recipients are under age 44. Regardless of age, any beneficiary on Medicaid, or similar government aid program, is at risk of losing benefits without careful estate planning.

Finally, for high-net-worth (HNW) individuals and families, there is the issue of the federal estate tax. Everything owned in your name at death is included in your estate for estate tax purposes. Yes, that includes the death benefit proceeds of your life insurance policy. Considering that many policies carry quite hefty death benefits (several hundred thousand dollars, or more, not being unusual), this is definitely something for those with HNW to carefully consider.

Back to School: Economics of Charitable Gifts of Life Insurance

In Trusts we Trust

I’ve explained trusts generally before. A quick primer: in simplest terms, a trust is a legal agreement between three parties: grantor, trustee, and beneficiary. This allows a third party (the trustee) to hold assets for a beneficiary (or beneficiaries).

There are a nearly infinite variety of trusts. One type of trust is an irrevocable life insurance trust or ILIT.

So, what IS an Irrevocable Life Insurance Trust?

Think of an ILIT as an “imaginary container,” which owns your life insurance policy for you. This provides several benefits. An ILIT removes the life insurance from your estate, i.e., lowers estate tax liability. Like other trusts, an ILIT allows you to decide how, when, and even why your named beneficiary receives life insurance proceeds.

Latest Iowa Lawyer Issue: Read GFLF’s Article on Irrevocable Life Insurance Trusts

Wait, what was that about the three parties?

The grantor is you, the purchaser of life insurance.

The trustee can be anyone you, as grantor, chooses — an individual(s) or a qualified corporate trustee (like the trust department at your bank). But, note a major difference between an ILIT and other kinds of trusts – with a large number of other trusts, you can name yourself as trustee. With an ILIT, you wouldn’t want to do so, because the IRS may then determine that life insurance really hasn’t left your estate.

Who can be a beneficiary of an ILIT?

Most often, spouses, children, and/or grandchildren are the named beneficiaries of an ILIT. But really, it can be any individual(s) you, as grantor, choose.

Your beneficiary and your life insurance proceeds

The conditions under which a beneficiary receives distributions from an ILIT is up to you. You can, for example, specify that your beneficiary receives monthly or annual distributions. You can decide the amounts. You may even dictate that your beneficiary receives distributions when s/he reaches milestones which you choose. For example, you can provide for a large(r) distribution when a beneficiary reaches a certain age, graduates from college or post-graduate program, buys a first home, marries, or has a child. Or, really, just about any other condition or event that you decide is appropriate.

You also have the option to build in flexibility, so that your trustee has the discretion to provide distributions when your beneficiary needs it for a special purpose, like pursuing higher education, starting a business, making an investment, and so on.

And, of course, if your beneficiary is receiving government benefits, an ILIT can account for that, as well.

Good gosh, is there anything an ILIT CAN’T DO?

Once again, an ILIT is irrevocable. While an ILIT provides a great deal of flexibility, there’s one action for certain you can’t take — you cannot transfer a policy owned by an ILIT into your own name. So, if you think that someday you may need to access the policy’s cash value for your own purposes, you probably shouldn’t set up an ILIT.

Options for “ending” an ILIT

Now, I suppose, there’s nothing requiring you to continue making insurance payments into your ILIT. Depending on the kind of policy you have, your policy may lapse as soon as you miss your premium payment. Or, if your policy has cash value, these funds may be used to pay premiums until all the accumulated cash is exhausted. So, that’s an option for “ending” an ILIT.

101 Assets You Could Place in a Trust

I bet you have some questions. Let’s talk!

An ILIT can provide you, your loved ones, and your estate with significant benefits. To learn more, contact me at my email, gordon@gordonfischerlawfirm.com, for a free consultation, without obligation. You can also give me a call at 515-371-6077.

*Yes, you’re right – ILIT is really not a word, but an acronym. You caught me. It’s just that Legal Word of the Day sounds more exciting than Legal Acronym of the Day. Also, congratulations to you for being the kind of person who reads footnotes.

**In 2019 an individual must have an estate of more than about $11.18 million, and a married couple an estate of more than $22.8 million, before they need to worry about federal estate taxes.

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101 Assets You Could Place in a Trust

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Businessman taking notes and planning in a meeting

Q: How many elephants will fit into a Minivan?

A: Four: Two in the front, two in the back.

Q: How many giraffes will fit into a Minivan?

A: None. It’s full of elephants.

Jokes aside, you can fit just about any asset into a trust. Here is a “short” list of assets actually placed into trusts:

  1. Airplanes
  2. Antique automobiles
  3. Antiques
  4. Artwork
  5. Assets held by C Corporation
  6. Assets held by S Corporation
  7. Autographed books
  8. Barn doors
  9. Beach house
  10. Beanie Babies
  11. Boats
  12. Bonds
  13. Books
  14. Bookstore
  15. Boxes
  16. Boxing gloves
  17. Broadway musical
  18. C Corporation stock
  19. Cheese shoppe
  20. Chocolate store specializing in “I love chocolate” t-shirts
  21. Chocolate store specializing in baking chocolate
  22. Chocolate store specializing in bars of chocolate
  23. Chocolate store specializing in candy-coated chocolate
  24. Chocolate store specializing in chocolate and almonds
  25. Chocolate store specializing in chocolate mixed with peanut butter
  26. Chocolate store specializing in couverture chocolate
  27. Chocolate store specializing in dark chocolate
  28. Chocolate store specializing in milk chocolate
  29. Chocolate store specializing in organic chocolate
  30. Chocolate store specializing in hot chocolate
  31. Chocolate store specializing in liqueurs chocolate
  32. Chocolate store specializing in semi dark chocolate
  33. Chocolate store specializing in sweet chocolate
  34. Chocolate store specializing in white chocolate
  35. Chocolate store* (You’re now probably quizzically asking, “Should I send Gordong chocolate?”)
  36. Coin collections
  37. Comic books collection
  38. Commercial and residential real estate
  39. Condominiums
  40. Credit card rebates
  41. Cupcakery
  42. Depression-era glass
  43. Dolls
  44. Enamelware
  45. Equestrian ribbons
  46. Farmland
  47. Ghosts
  48. Gold bullion
  49. Grain
  50. Guitars
  51. Hedge fund carried interest
  52. Historic papers
  53. Installment notes
  54. Intellectual property
  55. Law firm
  56. Life insurance
  57. Limited liability partnerships
  58. Livestock
  59. Marbles
  60. Mineral rights
  61. Monica (my wife)
  62. Moonstone
  63. Music store
  64. Mutual funds
  65. NHL team
  66. Oil and gas interests
  67. Olives
  68. Operating partnership units
  69. Paint-by-number landscapes
  70. Painted planks
  71. Paintings
  72. Patents
  73. Photographs
  74. Pickles
  75. Pooled income funds
  76. Racehorses
  77. Real estate
  78. Restaurant
  79. Restricted stock (144 and 145)
  80. Retained life estate
  81. Retirement benefits
  82. Royalties
  83. S Corporation stock
  84. Sculpture
  85. Sculpture garden
  86. Sea urchins
  87. Seat on New York Mercantile Stock Exchange
  88. Seats at events
  89. Snow globes
  90. Soda pop bottles
  91. Spirits of the damned
  92. Stamp Collection
  93. Stocks
  94. Tangible personal property
  95. Taxidermy
  96. Teddy bears
  97. Timber deeds
  98. Vacation home
  99. Vehicles
  100. Violin
  101. Wines

*Yes, this is a cry for help. I love sweets, especially chocolate, way too much.

Four Major Ways to Classify Trusts

Why put assets in trust?

There can be many reasons to use a trust, and specific benefits can accrue from specific trusts. In general, there are four great reasons to initiate a trust.

1. Save money

Using a trust, you avoid probate, which can save you lots of money. Probate will generally take two percent-plus of your estate, and even “just” two percent of your entire estate can add up to a lot of money. Avoiding probate also helps you avoid fees, costs, and taxes.

2. Save time

timer with sand in it

Using a trust, you avoid probate, which can save you lots of time. Going through probate, even here in Iowa, can take several months, to a year, or even more. Your heirs and beneficiaries may not receive their inheritances until the end of this probate process. Again, with trusts, you bypass probate. With trusts, your beneficiaries can get their inheritances in mere days, or weeks, rather than several months.

3. Flexibility of distributions

Don’t want your 18-year-old to inherit half-a-million dollars in one fell swoop? I agree it’s not a good idea. Trusts offer flexibility for the payout of inheritances. You set the ground rules of when and how distributions are made. For example, you might decide your children can receive distributions at certain ages. (For example, one-third at age 25, one-third at age 30, and the remaining at age 40). Or, you might decide your children can receive distributions at the attainment of certain milestones, such as marriage, the birth of a child, buying a first home, or receiving a certain degree

4. Privacy

Probate proceedings are public. Your will, once you pass and it is filed in court, is a public record. Some desire privacy about financial matters (say, about their family business) even after death.

Also, privacy can prevent hurt feelings among family members. For example, do you really want your Cousin Joe to know he received significantly less than all the other cousins?

What are the drawbacks to a trust?

It’s more expensive to set up a trust than basic estate plan documents, although I would say those costs are greatly outweighed by the money you’ll save your estate in the end. It’s also a bit of an administrative hassle, as your assets (such as car, house, stock funds, etc.) have to be retitled in the name of the trust. Again, though, I believe this inconvenience is much outweighed by the smooth operation of a trust at death.

Let’s talk about trusts!

(Legal) Word of the Day: Trust

Have an asset that didn’t make the list of 101 items? It can probably still go in a trust (even if it isn’t chocolate related!). Sometimes it’s hard to know if a trust may be right for your personal situation. It certainly doesn’t hurt to take me up on my offer for a free one-hour consultation. Give me a call at 515-371-6077 or shoot me an email at gordon@gordonfischerlawfirm.com.

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3 Must-Reads: Estate Planning Made Simple

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Gordon Fischer Estate Planning Simple

You know you need an estate plan, but you still don’t understand really what you need or where to start. What to do? I’m here to help and it’s one of my personal missions to break down estate planning so it’s as easy and accessible as possible.

Here are three blog posts, all relatively short and simple, that should help.

First, I provide the very basics of estate planning which features the six “must have” estate planning documents everyone needs.

What We Talk About When We Talk About Estate Planning

For many, the six “must have” estate planning documents is enough. Some Iowans will also want or need a trust.

Second, here are the basics of what you need to know about trusts.

Trusts can be needed and utilized for a number of reasons. Perhaps someone’s assets are too large, too numerous, and/or too complicated and a trust is needed. Perhaps the person simply has a desire to avoid probate. Trusts can also provide a measure of privacy that, say, wills, do not.

Four Major Ways to Classify Trusts

Third, you may ask, how does someone go about actually getting these documents? What’s the process of putting together an estate plan? Well, probably every lawyer has a different estate planning process. I naturally prefer mine – I think it’s very client-focused and client-friendly, and allows plenty of give and take between me and you. We’ll have an ongoing dialogue between us to ensure the best plan for you. Really, it only takes five steps to have a full and complete estate plan.

Estate Planning: Just Five Easy Steps from Start to Finish

Let’s Talk.

After reading these posts you may still have questions or will want to discuss your personal estate situations. I would love to schedule a time to meet or discuss over the phone. Shoot me an email or give me a call and we’ll start the conversation on what YOU need to leave a lasting legacy and secure future for your loved ones.

If you’re feeling good and want to get started on your estate plan, the best place to begin is with my free, no-obligation Estate Plan Questionnaire.

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Four Major Ways to Classify Trusts

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number four on wood

We dove into the definition of the term “trust,” but that’s just the tip of the iceberg when it comes to learning about the important agreement that’s often used for purposes including estate tax liability reduction, estate property protection, and probate avoidance. There are four standard ways of classifying trusts.

Trust Classifications

handshake over table

Trusts may be classified by their purpose, duration, creation method, or by the nature of the trust property. One common way to describe trusts is by their relationship to the life of their creator. Those created while the grantor is alive are referred to as inter vivos trusts or living trusts. Trusts created after the grantor has died are called testamentary trusts. Another helpful classification of trusts is comparing those which are revocable to trusts which are irrevocable.

Inter Vivos Trust

An inter vivos trust, also known as a living trust, may be either revocable or irrevocable. In a revocable trust, the grantor can retain control of the property, if the grantor so wishes, and the terms of the trust may be changed or even canceled. An irrevocable living trust, on the other hand, may not be changed or terminated after it is executed.

What the Queen of England can Teach us about Trusts

Testamentary Trust

A testamentary trust is most often a component of a will. The testamentary trust is created when the trustor passes away. The designated trustee then steps in and distributes or manages the assets of the trust according to the deceased’s wishes.

Show Your Kids You Love ‘Em with a Testamentary Trust

Revocable Trust

A revocable trust allows assets to pass outside of probate, yet allows you to retain control of the assets during your (the grantor’s) lifetime. It is flexible in that it can be dissolved at any time, should your circumstances or intentions change.

A revocable trust typically becomes irrevocable upon the death of the grantor. You can name yourself trustee, or co-trustee, and retain ownership and control over the trust, its terms, and assets during your lifetime. You may also make provisions for a successor trustee to manage them in the event of your death or incapacity.

Although a revocable trust allows you to avoid probate, it’s subject to estate taxes. It also means that during your lifetime, it is treated like any other asset you own.

Irrevocable Trust

An irrevocable trust typically transfers your assets out of your (the grantor’s) estate and potentially out of the reach of estate taxes and probate, but cannot be altered by the grantor after it has been executed. Therefore, once you establish the trust, you will lose control over the assets and you cannot change any terms or decide to dissolve the trust. An irrevocable trust is preferred over a revocable trust if your primary goal is to reduce the amount subject to estate taxes by effectively removing the trust assets from your estate. Also, since the assets have been transferred to the trust, you are relieved of tax liability on the income generated by the trust assets (although distributions to others may have income tax consequences). Trust assets in an irrevocable trust may also be protected in the event of a legal judgment against you

Latest Iowa Lawyer Issue: Read GFLF’s Article on Irrevocable Life Insurance Trusts

Let’s Get Started

You probably still have some questions on trusts…which is why I’m here! Don’t hesitate to contact me. I offer a free one-hour consultation at which point we can discuss your personal situation, see if a trust is right for you, and set up the steps to take for success.

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