With over three decades of experience, attorney James P. Peterson operates his own private law firm where he provides knowledgeable, professional and compassionate legal services to individuals and families. The firm provides a personal service, focusing on each client’s unique familial and financial situation. James P. Peterson Attorney at Law proudly serves clients in San Antonio, Boerne, New Braunfels, and the outer reaches of Texas.
Tomorrow is not guaranteed, regardless of our enthusiastic devotion to our family vacations of the future. Your death IS guaranteed, and it will have enormous impacts on your loved ones. Aside from emotional stress, your death/incapacity can create sudden overwhelming workloads, shocking disputes among family members, and lock-downs from financial institutions. Not to mention the expense and delay and frustration of dealing with courts and lawyers when things go south. (Sorry about that.) Planning ahead to minimize those problems is the essence of “estate planning.” If you enjoy headaches, consider the complex legal issues of blended families, disgruntled/estranged/disinherited family members, disabled spouses/children, creditors, vacation houses, small businesses, the nosey in-laws, scammers, internet opportunists, and of course, taxes. “Estate planning” is not reserved for the rich. Everybody needs it, even plain vanilla folks.
According to a study by Caring.com, two out of three people in America do not have important estate planning documents. You’ve probably heard their children bemoan their stories. But planning isn’t that difficult. It could be as simple as having medical and financial powers of attorney. Consider the true story of the 30 year old childless unmarried man that suffered a head injury, with $200,000 in savings, but no legal documents. His court supervised guardianship cost several thousand dollars up front, and then tens of thousands more over the years for annual reports and accountings to the courts, with still many decades of legal expenses yet to come. That didn’t have to happen, and it doesn’t have to happen if you suffer a stroke, dementia, or Alzheimer’s Disease. It’s takes basic planning.
Medical and financial powers of attorney are the most fundamental documents, along with HIPAA releases and Directives to Physicians, that make it cheaper and far easier for your family to take care of you during a short or long illness where you can’t speak for yourself, and avoiding the involvement of a court supervised guardianship. But what about wills and trust?
Wills take effect when you die, after a lawyer takes it to Probate Court with the executor and a witness to prove the validity of the will, and the executor is officially sworn in. It takes about a month to get to that point. In Texas, the public records will display the will itself, the court approved inventory of estate assets, routine pleadings, newspaper notices, and various requests for court action if the will contains ambiguities or problems with minors, etc. The entire probate file is on public display and is very easy for problem seekers to interrupt, i.e. file a formal contest and bring everything to a screeching halt. When all goes according to perfection, it’s all over in one to three months, a few visits with the lawyer and only $1,500 to $3,000 in legal expenses.
Trusts don’t go to Probate Court! There is virtually zero public record of most trusts. No copies of your trust documents, no public notices to creditors, no invitations to sue your estate, no nothing. At your death, the new Trustee simply steps into your shoes, documents the file, notifies the banks, and carries out the remaining terms of the trust. Can a disgruntled heir still sue? Yes, of course. But he or she has a much more challenging time of it, for a variety of reasons. Again, your trust documents are NOT a part of the public record.
There are many types of trusts, each having a particular purpose, such as an “ILIT” which holds life insurance to avoid federal estate taxes, or a “Special Needs Trust” which hold the assets of a disabled person while allowing him or her to receive Medicaid or other federal benefits, or a “Miller Trust” for a person with slightly too much income to qualify for Medicaid when moving into a nursing home. But by far the most common trust used in America today is the Revocable Grantor Trust, which largely takes the place of a will and provides benefits during one's lifetime and a smooth transition after death or incapacity.
A Revocable Grantor Trust takes effect when you sign it. After signing it, you should in short order transfer your assets to the trust, after which you go on living as you always have. If you are lucky enough to grow old and tired of managing your finances, you resign as trustee and allow your next-in-line to take over (as either a co-trustee or successor trustee), typically one of your children. A similar process takes place if you have a debilitating stroke or if you die. When you die, the trust does not die; it carries on. It simply changes trustees, who then carry out the terms of the trust. In most cases, it’s smooth and virtually seamless. If you have already allowed a family member to step in as co-trustee or sole trustee, there is not one single second of delay in financial affairs. This by itself can relieve tremendous anxiety from a surviving spouse or children and is the number one reason trusts are better than wills.
A trust ties up your assets? Wrong! Spend, invest, and give to your heart’s content. No limits.
A trust saves taxes? Wrong! Revocable Grantor Trusts are tax neutral and invisible to the IRS. The trust uses your own social security number and has zero impact on the IRS and your tax returns.
A trust costs more? Yes, a little in the front end, but it saves enormous amounts of cash at the tail end. And how do you put a value on your family’s lack of frustration and stress?
A Power of Attorney is just as good if I’m disabled? Kind of, but not really. If you suffer a stroke or similar disability, a Revocable Grantor Trust takes the place of a durable power of attorney. However, if you have a co-trustee, it’s like having a co-signer on all your accounts, with no interruptions, except that they are required to obey the duties and restrictions set forth in your trust. Of course, a power of attorney terminates immediately upon death, and a trust does not.
1. It’s very cost effective over time, especially considering the avoidance of probate expenses.
2. It’s completely private, out of the view of everyone that isn’t directly connected to it.
3. It’s easy to amend, but you should use an attorney.
4. It facilitates a seamless transfer of authority when you become incapacitated, die, or simply want someone else to handle things for you.
5. It can continue on for several future generations if desired.
6. It can give you peace of mind.
7. Best of all, a trust robs your attorney of legal fees when you die. ;-)
1. It costs more up front. Typically doubling the cost of doing an estate plan without the trust.
2. It’s more work up front. You have to move your assets into the trust in order for everything to work smoothly in the years and decades ahead.
Setting up a trust can be an easy process and involves the following steps:
1. Think about as many “what if’s” as you can and decide which matter most.
2. Discuss your concerns with your attorney and listen for feedback.
3. Make decisions about who gets what when, and a pecking order of who’s in charge.
4. Your trust agreement is the “rule book.” Read it and ask questions of your attorney.
5. Sign and notarize the trust. Deed all your real estate into the trust.
6. Change your bank accounts and investments over to the trust. Use caution with IRAs.
7. Re-title your vehicles into the trust.
8. Designate the trust as beneficiary on life insurance and certain financial accounts.
9. Don’t worry about the IRS. It’s 100% invisible to them until you die. It’s a non-issue.
10. Go fishing or have a Lady’s Night Out. Whatever makes you smile.
Having the insight of experienced attorney is important in order to ensure that you end up with a trust document that actually does what you want it to do, covering the important contingencies, protecting your family into the future, and minimizing their hassles and expenses. A thoughtful attorney will treat you with respect, educate you, offer advice to promote your goals, and write up the documents to carry them out. Attorney James P. Peterson continues to enjoy the honor of being such an attorney.
James P. Peterson Attorney at Law has been helping individuals and families for over three decades. He provides skilled legal advocacy to help you make decisions that will ensure the care of your family in the long term. If you are in San Antonio, Texas, or the Boerne and New Braunfels areas, contact the firm for a complimentary strategy session.