Trusts & wills
The foundation to any estate plan.
An estate plan works while you are still living, and during an illness, a hospital stay, and any stretch when someone else has to be able to sign. It also determines who manages your property, how your property is managed, and how your property is distributed after your death.
Who this is for
Anyone whose plan is out of date
Families with young children
Where naming a guardian is the reason the plan finally gets written.
Property in multiple states
A cabin, a rental, or inherited land that would otherwise be subject to probate in another state.
Blended families
Providing for a spouse and for children from an earlier marriage, without one displacing the other.
Adults with no plan
Where state law decides instead.
Outdated plans
When agents, beneficiaries, tax law, and family circumstances evolve over time.
What each document does
Four important things to know
A will does not avoid probate
A will is a set of instructions for probate. Whether probate is avoided is a function of how assets are titled and what beneficiary designations say, not the will itself.
A trust only works once it is funded
A revocable trust controls what has been transferred into it. Deeds, account beneficiaries, and entity interests all have to be aligned. An unfunded trust is a document that governs nothing.
Powers of attorney do the daytime work
A financial power of attorney and a health care power of attorney operate during life, and they are the documents a family actually reaches for during an illness.
Beneficiary designations outrank the will
Retirement accounts, life insurance, and payable on death beneficiaries receive funds and property separate from a will. A beneficiary form from years ago will override the will that contradicts it.
Scope
Two numbers people are surprised by
Two figures come up in nearly every first conversation, and neither of them has anything to do with tax.
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Documents in a core set
A financial power of attorney, health care power of attorney, living will, HIPAA authorization, will, and revocable trust. Most plans are built from these documents.
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When a parent's authority ends
At the age of majority a parent no longer holds automatic authority over a child's financial accounts or medical decisions. A student leaving home should consider having a financial power of attorney and health care power of attorney.
Whether a revocable trust belongs in the set depends on what is owned and where it sits. For a straightforward estate held entirely in South Dakota, a will with correct beneficiary designations is sometimes the better answer, and that is a conversation worth having before anything is drafted.
Control
What you do not give up
A revocable trust sounds like handing everything over to something or somebody else. During your lifetime, very little actually changes.
- You serve as your own trustee, in nearly every case
- You can amend or revoke it, at any time, for any reason
- No separate tax return, income stays on your personal return
- You can sell, refinance, or mortgage, property held in the trust
- You can change beneficiaries, without anyone else's consent
- Your accounts and advisors, ordinarily continue unchanged
What it does not do
Four limits worth hearing early
Each one of these tends to come up eventually.
A revocable trust gives no creditor protection
Because you retain full control and can revoke it, the property remains within reach. Protection from future creditors calls for a different and irrevocable structure.
Funding is not a one time task
Accounts opened later, property bought later, and entity interests acquired later all have to be aligned. A plan drifts out of date quietly.
It does not reduce estate tax on its own
A revocable trust is a probate avoidance and administration tool. Tax planning is done through additional provisions, and for most estates it is not the reason to have one.
Out of state property may still need a filing
Real estate in another state is governed by that state's law. Holding it in a revocable trust is usually what avoids a probate proceeding there.
Next step
Most of this is settled in one conversation.
Come with your estate planning goals, and the rest will follow. If what you have still does the job, that is what you will hear.
Initial consultations are provided without charge.
Further reading: What is said about trusts, and what the law actually provides