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Changing Behaviors

Much is written about the role of estate planning and the “hand from the grave” – Trusts that “rule” after the death of the person establishing the Trust.

First, let’s review some legal terminology for the sake of this article:

The person establishing the Trust is known in legal parlance as Donor, Settlor, Trustor and in some cases also the Trustee.

The Trustee is the individual(s) or institution/entity administering the Trust. The Trustee is responsible for carrying out the terms of the Trust.

(Usually, the Trustor and the Trustee are different entities, but in some cases they can be the same entity.)

The Beneficiary is the person(s) who will receive ‘something’ from the trust (money, land/property, art work, etc.) In short, the Beneficiary ‘benefits’ from the Trust – now or into the future.

Now that we have some simplified legal terminology in place — what happens if a parent or grandparent wants to make a bequest to a child/grandchild, but that child/grandchild is not quite reliable?

The Beneficiary may suffer from conditions such as an addiction to alcohol, gambling, gaming, narcotics, etc. – or they may just be unprincipled  with money or have poor decision- making skills.

ENTER…the Incentive Trust… a trust that may encourage good habits; motivate in some way; prevent ‘misuse’ of inheritance funds; reward ‘good’ behavior (or at least behavior in line with the Trustor);  and assist loved ones to make better decisions for the long term.

But, and there is always a ‘but’…the Incentive Trust is ‘tricky’.

Money can sometimes be the means of destruction, particularly for those with addictive personalities.

But the withholding of funds is equally difficult.

Incentive Trusts, like all trusts, must be structured with great care if the Trustor is to obtain the outcome they anticipate. They should have the labeling – “Use With Care”

Take one simplest example of an Incentive Trust –

A grandparent establishes an Incentive Trust for their grandchild. The grandparent really wants the grandchild (the Beneficiary) to graduate college.  So they state that the grandchild, in order to receive his/her Trust funds, must graduate college. So far…simple.

But…what about grade point average? Which accredited college?  Does an On-line college qualify? Length of time to graduate (4 years or twenty years)? Will the type of degree matter?  Where are the funds to attend college coming from? Will payments for college be made to the Beneficiary or directly to the college?  How much discretion will be given to the Trustee (the person or institution administering the Trust)?  Will there be benchmarks?  How many different colleges can the Beneficiary attend (how often can they change colleges?)  How many courses must Beneficiary take each semester?  Can the Beneficiary marry and have children while attending college?

Well…You get the idea. Simply stating for Trust purposes that the Beneficiary must graduate college….is not nearly enough of a directive.  Such a lack of directive can leave much to the discretion of the Trustee.

Likewise; preventing bad behavior is equally fraught with serious questions.

An example: a child is addicted to drugs; to gambling;  or to alcohol.  The parent wants that child to be provided for (under the terms of a Trust.)

What precise behavioral changes will qualify for the child (the Beneficiary) to receive their funds from an Incentive Trust?

What if the child ‘substitutes’ one addiction for another?

Will child be required to submit to periodic drug testing? Help programs?

What specifically would ‘qualify’ as alcohol abuse or gambling?

How long will the child be required to remain drug free?

At what age, if any, will all Trust funds be given to the Beneficiary? Or should funds be administered as a monthly ‘stipend’?

If the child cannot keep to the terms of the Trust, what happens to the funds in the Trust?

Will the Trust provide for ‘intervention’ or help for the child to cope?

 

Is an Incentive Trust the best trust vehicle for every circumstance? As with many things…the devil is in the details.

A qualified Estate Planning attorney is probably the best ‘investment’ that you can make when establishing a Trust – if you want to achieve the outcome that you anticipate in the future.

Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.”                 –Ayn Rand

Working to Preserve Your Wealth and Protect Your Future…in a Constantly Changing World

Please read my full Disclaimer and How I Can Help You

Visit my website: www.attorneybarbaradalvano.weebly.com for more articles and interesting infographics

 

Approaching the End of the Year

As unbelievable as it seems, this is the final eight weeks of 2016. The next few months will be a blur of holiday planning, shopping and events that will keep a family busy, busy, busy.

Remember to put on your calendar a note to locate, to organize and to review your important documents. Tax time will soon roll around and rather than waiting until the final days of December (which will be far too busy anyway) – NOW might be a good time to:

Review your financial documents and make any adjustments;

Meet with financial advisors and CPAs;

Begin to consider any asset allocation changes for tax planning purposes; and

Review all your estate planning documents.

If you do not have an estate plan, consider the pros and cons of developing one. ( See my Infographic about having a will vs having a trust)   http://www.attorneybarbaradalvano.weebly.com

Do any of the following describe a 2016 event in your life?

  •  Acquired significant assets;
  • Began to plan for retirement;
  • Planning to adopt a child;
  • Made a change of lifestyle;
  • Moving/moved to another state;
  • Are in the process of a divorce, marriage or remarriage;
  • Going into business;
  • Planning to exit a business;
  • Starting a family;
  • Experiencing a significant change of health;
  • Had a death in the family;
  • Changed jobs/lost a job

Then… now is the time to meet with an attorney who can advise on how to start the estate planning process; alter your estate plan; review your legal documents/contracts and discuss your future alternatives.

Keep in mind that without a Will – if anything happens to you – your assets, your family and your future might fall into the “default” position of having the state decide for you.

 

“Working to Preserve Your Wealth and Protect Your Future…in a Constantly Changing World”

Please read by Full Disclaimer and “How I Can Help Your”

Visit my website: http://www.attorneybarbaradalvano.weebly.com for more articles and interesting  infographics

Will or Revocable Trust…Are You Confused?

This is a reblog of a post from my website about Will or Revocable Trust.

There still exists confusion about what a Will can and cannot do in terms of protecting assets and passing on your cherished possessions to loved ones. If you are temporarily incapacitated your will does NOT “come into effect” so to speak. To put is very simply, a Will can (among other things) distribute/allocate assets upon your death. (One of the other things that a will can also do is…disinherit people, but that is not the topic of this blog.)

A Will does not provide for management of assets while you are living.

The focus of this post is about how a Revocable Trust-based Estate Plan and a Will-based Estate Plan differ when it comes to the level of protection you want during any period of incapacity.( There is also something called an Irrevocable Trust, and again that would be another topic.)

Protecting Your Assets if You Are Incapacitated

If you have a Revocable Trust-based Estate Plan and you are serving as sole Trustee, a successor Trustee whom you have named in the Trust Agreement will assume the role of Trustee upon your incapacity. Generally, this is a smooth transition, particularly if you have transferred all of your assets to your Trust prior to the onset of any disability. The successor Trustee continues to administer the Trust according to the terms of the Trust Agreement. There is no need for court involvement in the transition. If you were serving as a co-Trustee, then the co-Trustee can continue in that role, again without any disruption to the administration of the Trust.

A Will does not provide for lifetime management of assets during incapacity. If you have a Will-based estate plan, the way you protect your assets during incapacity is through a general durable financial power of attorney.

Authority and Duties

Both state law and the Trust Agreement define the authority of, and impose duties and responsibilities on, a Trustee of a Revocable Trust. Similar, but not identical powers, duties and responsibilities apply in the case of an agent serving under a general durable power of attorney. You would be advised to make sure that you document conforms to the most recent state laws.

The Revocable Trust Agreement is a comprehensive instrument. It will contain all of the terms and provisions for the management of the Trust property. For example, the Trust Agreement will include provisions detailing: (1) how Trust property is to be invested; (2) distribution of Trust property (both during your lifetime and after death); (3) who you want to designate to serve as the initial and successor Trustee; (4) the terms under which the Trustee serves, including when a Trustee can be removed and replaced; (5) the procedures for accounting for income and other transactions of the Trust property; (6) the location of the Trust and its movement to another state; and (7) overall administration of the Trust.

When incapacity strikes and the named successor assumes the role of Trustee, various duties and responsibilities are triggered. For example, the Trustee has the duty of loyalty to the Trust beneficiaries (including you as the settlor) and must avoid deriving any personal benefit from the Trust (but can be paid reasonable compensation) while serving as Trustee. The Trustee must act impartiality with respect to all Trust beneficiaries and deal in good faith and fairly with all of the Trust beneficiaries. All transactions involving Trust property must be accounted for and Trust beneficiaries are entitled to receive such written accountings. The Trustee has investment duties and must invest Trust property prudently. Some of these duties and responsibilities may be modified in the Trust Agreement.

Now, let’s look at a General Durable Power of Attorney document. A general durable power of attorney is a flexible tool by which you can describe in great detail all of the powers, duties, rights and other terms of your relationship with your agent (note the term agent used here and NOT Trustee). For example, you can describe the level of authority your agent has regarding your real estate, retirement plans, securities, bank accounts, household items and personal effects and insurance policies. You can authorize your agent to collect and open your mail, have access to passwords and user names for e-commerce and other “online” accounts and take possession of your personal papers. Your agent would be able to file tax returns and pay your tax obligations. You can also direct your agent to use your property not only for your benefit, but for the benefit of your spouse and family members.

With a general durable power of attorney, you can give your agent broad, sweeping powers to “walk in your shoes” and manage your property and financial affairs with all of the “owner” rights that you could exercise if you were not incapacitated. Your agent does not become the owner of your property; rather your agent is charged with the responsibility to manage your property on your behalf.

You can also set limits on what your agent can do with your property. For example, you might want to limit or restrict your agent’s authority to make gifts of your property. You might not want your agent to alter the disposition of your property at death; in that situation you could prohibit your agent from changing the beneficiaries you have designated for your life insurance and retirement accounts.

Thus, like a Revocable Trust Agreement, a general durable power of attorney can be tailored to your specific circumstances and preferences. In addition, if you become incapacitated, your agent does not need to obtain court approval to act on your behalf.

At a minimum, your agent is required by Colorado law to act within the scope of authority granted by the terms of the written instrument, in accordance with your “reasonable expectations,” to the extent your expectations are known by the agent and if not known, in your “best interests” and finally, in good faith. Your agent’s duties to act on your behalf are couched in terms of your “reasonable expectations” in order to protect your rights to self-determination. These duties cannot be altered by the written instrument.

Additional duties are imposed on the agent, including: (1) a duty of loyalty to act in your best interest; (2) a duty to avoid a conflict of interest that impairs the agent’s ability to act impartially and in your best interest; (3) a duty to act with due care, competence and diligence ordinarily exercised by agents in similar circumstances; (4) a duty to keep a record (without a duty to disclose information) of all receipts, disbursements, and transactions involving your property; (5) a duty to cooperate with the person who is authorized to make health care decisions for you; and (6) a duty to attempt to preserve your estate plan. These duties can be modified in the written instrument and additional duties can also be imposed on the agent.

On balance, concerning the factor of the level of financial protection afforded during incapacity, here are some observations:

•a Revocable Trust might be viewed as a more formal arrangement with well-settled law regarding the interpretation of the authority and duties of a Trustee; and

•a General Durable Power of Attorney might be viewed as a more informal, perhaps more flexible arrangement, enabling the agent to respond to changing circumstances.

All of these points (and more) are “design” features that you will want to discuss with your estate planning lawyer. The level of importance you assign to these factors will be critical in designing an estate plan that achieves your objectives.

The above are very broad, sweeping descriptions of Will, Revocable Trust and general durable power of attorney. Each situation is different. One would NOT be advised to take a legal document from a book or website and try to “adjust” it to fit your unique situation.  If you are incapacitated, you want the appropriate legal document in place to direct your affairs until you are well again.

If you have questions about Estate Planning matters in Colorado, you can contact me.

Please refer to my disclaimer at the bottom of the page, my contact information and the column “How I Can Help You”.

Not As Scary As Halloween

Not As Scary As Halloween – Estate Planning
There are many articles written about the reasons that people avoid thinking about making a will and formulating an estate plan. A few of the top reasons are: people do not like to think about their own mortality; do not know how to broach the subject with loved ones; wait until it is too late; believe that they need to be wealthy to bother with an estate plan; think that they do not have enough assets; feel that it is too complicated or expensive; or just “put it off until tomorrow” and “things will take care of themselves”.
One other possible reason is that people think the estate planning process is just downright SCARY!!
Nothing could be further from the truth. There may be some trepidation at the outset, but most of my clients leave the office with a feeling of “relief”. Yes, dare I say, that they are HAPPY AND RELIEVED that they made the decision to formulate a plan for their future and the benefit of their loved ones.

There are some great infographics on my website (www.attorneybarbaradalvano.weebly.com) to help you “adjust” to the idea of having an estate plan. Feel free to make copies of these four helpful graphics from the site.

First, My 4 Step Plan – Building Blocks of Your Estate Plan.
Second, My Client- It’s All About You.
Third, Building A Strong Estate Plan.
Fourth, How To Plan For Your Attorney Meeting.

What can an Estate Plan do for you? It can offer –

Peace of mind – knowing you have a plan in place for the future
Help preserve your assets – there are often strategies for tax planning in an estate plan
Protect the future of your loved ones – clearly a great motivation
Avoid conflict – with a clear estate plan, there can be far fewer misunderstandings between family members/beneficiaries. A well-crafted plan is a pathway to avoid conflict.
Manage change – deal with the ever changing legal landscape as well as the fluctuatons within your own life.

Working to Preserve Your Wealth and Protect Your Future in a Constantly Changing World.

This post has been brought to you through the Law Office of Barbara Ann Dalvano. This information is provided for educational purposes only and to generate ideas, provoke thought and facilitate conversation. It is not intended to create an attorney-client relationship. Each person’s situation is different and this information should not and cannot be relied upon as legal, tax, accounting or investment advice. Please read the entire disclaimer for more important information.

Barbara Ann Dalvano, Esq.
Phone and Text Message: (719) 963-2933
Email Address: barbaradalvano@yahoo.com

Feel free to visit our website at http://www.attorneybarbaradalvano.weebly.com.

Let’s Talk Conservation Easements…

This article about conservation easements in Colorado was the result of reading in the Aspen Daily News (on line) “Conservation easement approved by Pitkin County for McBride Ranch by Collin Szewczyk, Aspen Daily News Staff Writer, (Thursday, October 23, 2014)…”Deal lands long-time family millions in development rights …Pitkin County commissioners approved an application for the 635-acre McBride Ranch property to be designated as a conservation easement, potentially earning the family millions of dollars in transferable development rights”

Conservation easements are not new and the topic has long been a “hot button issue” in Colorado (and other states.) The websites noted here are only a few of the many sites dedicated to the topic of conservation easements in general (federal and state statutes) and in Colorado specifically.

No doubt I have omitted (unintentionally) many websites that are worthwhile and fully expect to hear from both the “pro” and “anti” groups about Colorado’s conservation easements initiatives. The information offered in this site supports neither a “pro” nor an “anti” view, but attempts to give a balanced view of the topic and suggestions as to where to gain more information.

Taken from an estate planning perspective – Conservation easements is and has been a complex issue and the best advice is… if you are thinking about using this as part of your estate plan, consider the services of both a qualified legal advisor and a financial/tax planning advisor.

As with any legal document or contract, one should have the most up to date information (legislative and financial) and legal advisement relevant to the topic. Consider also the long term perspective of using conservation easement as part of your estate plan.

Although several of the websites noted here are from earlier years (for example 2008) they offer an “historical perspective” about conservation easements and the changing public viewpoints and policies.

Conservation Easements: The Good, the Bad, and the Ugly by Dana Joel Gattuso  (2008)  www.nationalcenter.org  The title basically tells it all.

www.coloradoopenlands.org  “Donating a Conservation Easement” A helpful “how to guide” of the process.  In their article… Step 3 of the process is “advise your attorney and accountant of your plans…”  My opinion is that this should be Step 1.  Gather information and then begin a discussion of the advisability, risk/reward, accountability, of a conservation easement with the landowner and other interested parties (for example family members) and legal and financial counsel.

Department of Regulatory Agencies (DORA) Division of Real Estate- Colorado  www.cdn.colorado.gov/cs/Satellite  According to the definition on the website:

“A conservation easement is a voluntary, legally-binding and perpetual restriction that limits certain uses and prevents future development of a property. (Take specific note of the wording of legally- binding) It is a recorded deed restriction enforced by a non-profit organization or a governmental entity. Important conservation values, such as habitat, open space, scenic views, agriculture, outdoor recreation, or education, are protected forever….Landowners who donate all or a portion of a conservation easement to a non-profit organization or a governmental entity (“conservation easement holder”) may qualify for a transferable state income tax credit if certain requirements are met. Landowners may earn a tax credit at the amount of 50% of the donation value with a maximum credit of $375,000. For a landowner to be eligible for a tax credit, the conservation easement holder must be certified by the Division of Real Estate.”

A further point is that conservation easement law, or the legal/political issues surrounding conservation easements in Colorado are not static.

As an example: For 2014…(citing from the colorado.gov website) “Beginning in 2014, Senate Bill 13-221 established a pre-approval process prior to the tax credit claim for conservation easement donations made on or after January 1, 2014. SB13-221 authorizes the Director of the Division of Real Estate (“Director”) to determine the credibility of appraisal and the nine-member Conservation Easement Oversight Commission (“Commission”) to determine whether the donation is a qualified conservation contribution. The Department of Revenue no longer has jurisdiction to disallow a tax credit for issues relating to the appraisal or conservation purposes…”

UPDATE ON CONSERVATION EASEMENT GUIDELINES: WHAT EVERY COLORADO LANDOWNER SHOULD KNOW by Catherine Keske, Stephanie Gripne, and Lynne Sherrod  published 2008. An older article but a thoughtful analysis of the topic with some historical data.    www.ext.colostate.edu/pubs/natres

www.taxcreditconnection.com “Save Money on Taxes and Protect Open Space: Conservation Easement Income Tax Credits”    I have included this as a very general explanation about Colorado’s unique tax credit initiative.

According to the site:  “You can save thousands of dollars on your state income tax bill by participating in the state of Colorado’s unique conservation easement income tax credit program and help preserve Colorado’s natural treasures. ”  The Article explains and gives example of 2014 use of conservation income tax credit (in Colorado)

Other websites for more information:

www.landtrustalliance.org

www.cclt.org  Colorado Coalition of Land Trusts

Doubtless there are many other sites that can provide helpful background about the topic. Deciding what is right for you will depend on your unique circumstances as a landowner and your individual estate situation.

Please read my disclaimer at the bottom of this page.  Also, there is a column about “How I Can Help You” below.

visit my website:  http://www.attorneybarbaradlavano.weebly.com for more articles and some printable infographics.

Don’t Lose Your Money!

Every year people in the United States “lose” millions of dollars of their own money by allowing their accounts to go into “dormancy”. This includes banking accounts, both checking and savings as well as dividend checks that go uncashed and brokerage accounts. The funds are turned over to the state in accordance with each states “unclaimed property” laws. The law in general is known as “escheatment”, which simply put is “the act of reporting and transferring property to a state when the rightful owner cannot be located” e.g. they have an invalid address OR…and this is important…”when an individual has not made contact during the “dormancy” period”. This also can include not having made any transaction during the “dormancy” period. You might well ask,,,what is the dormancy period ,and THE ANSWER IS…THAT VARIES BY STATE.
Therefore, your unclaimed property, in a word can be “escheated” (YES, THERE IS SUCH A VERB). How can you avoid this?
First, keep track of all banking/financial accounts. E.g. those opened by or for a minor, as well as brokerage accounts
Second, cash any checks you receive in a timely manner
Third, keep in touch with your bank, broker or agency who “handles” your funds. For example, many accounts are on line accounts and are linked to your current email address. if your email address changes, there is no way to contact you.
Fourth, access your accounts regularly. Set up a system to track your accounts and check in on a regular basis. Some accounts require a “transaction” even a small one, for example a $1.00 deposit or transfer. Ask your bank about their “dormancy” period.
Fifth, If you are legitimately contacted by a bank or broker for any update of address or contact information, do not ignore the request. But first, confirm that the bank or broker has actually made the the request/contact…do not be a victim of a scam.
Sixth, Since unclaimed property laws vary greatly from state to state, pay careful attention if: you have moved out of state or changed your address within the state; married or divorced and changed your name; or are managing an estate following a death.
Seventh, Prepare a will that details all of your assets. Keep it current. Your will should include all assets and the disposition of those assets. This is best handled by an attorney.
A site for those in Colorado is http://www.colorado.gov/treasury/gcp/faq.html – an excellent source of information about Colorado unclaimed property laws. FOR EXAMPLE, DID YOU KNOW?…”Safe deposit boxes become dormant and reportable to the State Treasury as unclaimed property three years after the rent has expired.”
Two other helpful sites are:
http://www.missingmoney.com and http://www.unclaimed.org

Please go to bottom of this page to read my disclaimer and the column about “How I Can Help You.
My website is: http://www.attorneybarbaradalvano.weebly.com for more information about Estate Planning and printable infographics.

Don’t Leave Your Legal Documents On Autopilot

I am often asked how often a Will or other Estate Planning document should be updated. Unfortunately, there is no brief answer to that question. In general, your Estate Plan, Will or legal document should be periodically reviewed – annually and/or when there is a personal or family “development”. Such ‘developments’ would include a birth or death in the family (or one of your named beneficiaries); a marked increase or decrease in the value of your assets; a material change in your health; marriage or divorce; relocation to another state (significant is a move from/to a community property state); marriage/divorce of a family member; receipt of a bequest under a Will or a gift. Changes in the tax or probate laws can also trigger the need for a review. (Changes in tax regulations and the laws of Probate can have a significant impact on any Estate Plan)

Purchase or disposal of a property; creating a business succession plan; entering into any contract negotiation or contractual arrangement; buying/starting a business; offering a significant loan; formulating a retirement plan; entering a bankruptcy/insolvency situation; creating/modifying a trust document are all specific examples of where a legal review would be advisable.

My personal thirty years of practice experience covers: Probate of Wills; Administration of Trusts; Making/Changing a Will; Buying/Selling a Business; Creating/Modifying a Trust; Community Property & Relocation; Buying/Selling a Major Asset; Business Succession Planning; Retirement Planning; Business Contracts; Creation of Business Entities and Marital Agreements.

Specific documents that I can help you with include: Wills, Revocable Living Trusts, Testamentary Trusts, Powers of Attorney, Living Wills, Beneficiary Designation Forms, Life Insurance Trusts, Irrevocable Trusts, ‘Grantor’ Trusts, Personal Residence Trusts, Marital Agreements, Owner Buy/Sell Agreements, Purchase and Sale Agreements, Business Contracts, Corporation Agreements, LLC Agreements, Real Estate Deeds, and Will/Probate Documents and quite a few more…

One thing you might consider is that in the long run…”hiring a lawyer can be less expensive than making a legal mistake

Working to Preserve Your Wealth and Protect Your Future in a Constantly Changing World.

This post has been brought to you through the Law Office of Barbara Ann Dalvano. This information is provided for educational purposes only and to generate ideas, provoke thought and facilitate conversation. It is not intended to create an attorney-client relationship. Each person’s situation is different and this information should not and cannot be relied upon as legal, tax, accounting or investment advice. Please read the entire disclaimer for more important information.

Barbara Ann Dalvano, Esq.

Phone and Text Message: (719) 963-2933

Email Address: barbaradalvano@yahoo.com

Visit our website at www.attorneybarbaradalvano.weebly.com.

The ‘Single’ Retiree

There is another published research article (Medicaid and The Elderly, June, 2014) written by DeNardig, French and Jones, 2013) at the * Center of Retirement Research at Boston College (CRR). Their extensive research was primarily devised surrounding data of the ‘single’ retiree (defined by the study as an individual fully retired and never married, widowed or divorced.) You can find the full research study on the CCR website, and it makes for very interesting reading. The study defined the “upper quantile” of these single retirees as those individuals with financial assets in excess of $230,000. (let’s call them the “wealthiest” of single retirees). The reason that this particular study intrigued me was that there was a definition of “permanent” retirement income (that retirement income excluding asset income) and the fact that nursing home care was calculated at an average of $75,000 per year. There is a significant and crucial gap between the “permanent” retirement income and the cost of nursing home care, even for the “wealthiest” of single retirees. In the research study, the “permanent” retirement income included only Social Security, defined benefit pensions, veterans benefits and annuities. It did not include asset income. My own analysis was that even the “wealthiest” of single retirees would require an extreme and significant return from their “other” assets (i.e. the assets other than “permanent” income) in order to meet the ever increasing demands of healthcare in the long term. Although most retirees face the financial pressure of increasing healthcare costs, the fact is that the “single” retiree often has concerns beyond the norm. I bring up this point, since many “singles” foresee no need for any kind of Trust Financial Planning. Often, they simply devise a Will leaving assets to a close relative, a charity, an alma mater, or to a specific ‘cause’ as beneficiary. But, in actuality the formation of a Trust document is as critical for a “single” as it is for someone with an extended family. One of the aspects of the formation of a Trust is that a Trust involves the preservation of wealth/assets and an individual can maintain control of those assets (depending upon the type of Trust.) Clearly, a Will does not preserve wealth in as much as the Will dispenses wealth after death. A clear, well-devised Will is a document to distribute assets and it is subject to the Probate process. A Will is a legal document and it is public. On the other hand, various forms of a Trust are devised for asset protection during a lifetime and for privately dispensing assets after death. This is a very oversimplified explanation, but one can begin to see the benefits of a Trust for a “single” retiree…the correct type of Trust can provide significant flexibility during a lifetime; allows an individual to maintain control of assets; can be difficult to challenge; is private; and is a powerful tool for dispensing assets as well. *About the Center for Retirement Research at Boston College According to their website, “the mission of the Center for Retirement Research at Boston College is to produce first-class research and educational tools and forge a strong link between the academic community and decision-makers in the public and private sectors around an issue of critical importance to the nation’s future. To achieve this mission, the Center sponsors a wide variety of research projects, transmits new findings to a broad audience, trains new scholars, and broadens access to valuable data sources. Since its inception in 1998, the Center has established a reputation as an authoritative source of information on all major aspects of the retirement income debate.”

Working to Preserve Your Wealth and Protect Your Future . . . in a Constantly Changing World. This post has been brought to you by the Law Office of Barbara Ann Dalvano. This information is provided for educational purposes only and to generate ideas, provoke thought and facilitate conversation. It is not intended to create an attorney-client relationship. Each person’s situation is different and this information should not and cannot be relied upon as legal, tax, accounting or investment advice. Refer to the full Disclaimer on this site for more information. Barbara Ann Dalvano, Esq. Phone and Text Message: (719) 963-2933 Email Address: barbaradalvano@yahoo.com

Who Wants To Be A Billionaire?

What do wealthy people who * Drive their own cars? * Cut their own hair? * Wear T-shirts instead of designer suits? * Spend most of their leisure time with family and friends? * Still live in the first house that they purchased? * Are fiscally responsible? have in common. 

They just happen to be in the ranks of the top ten Billionaires in the United States!

There are good lessons to be learned from the mega-wealthy.  One primary lesson is the conservation of capital.  My educated guess would be that all of those families with uber wealth have in place the mechanisms for preserving funds for future generations.  Even if you are not in the billionaire category, the preservation of your hard-earned money might be important to you and your loved ones.

Currently, there is a cornucopia of mechanisms for the transfer/distribution/allocation/preservation of assets to family, loved ones, charities, alma maters, and ‘causes’.  Each year seems to produce another crop of trust fund descriptions.  How does one keep up with the alternatives?  How do you select the appropriate type of trust?  Is one form of trust better than another?  Will the trust meet the purpose for which it is designed, now and in the future?
 
Here are just a few types of trusts:
 
Revocable Living Trust
Grantor Trust   
Irrevocable Trust
Testamentary Trust
Minor’s Trust
Beneficiary Trust
Separate Share Trust
Spendthrift Trust
Blind Trust
Discretionary Trust
And here come the trusts often known by their acronyms…
QTIP – nothing to do with that white cotton thingy
GRAT; CRAT; CLAT; CRUT; CLUT; GRUT; DAPT; GRIT – no I am not making these up
And more specialized trust titles…
Special Needs Trust – this trust has several variations
Miller Trust
Totten Trust
Pooled Trust
IRA Trust
Land Trust
I could go on with more, but you are intelligent and get the idea.  There are many forms of trusts. 

When properly structured, trusts are powerful tools for estate and financial planning.  The appropriate form of trust can protect assets under certain circumstances; cover diverse needs; are often highly specialized; might not be available in every jurisdiction.  A trust is a complex legal document and should be entered into only with the help of an experienced attorney, not taken “off the shelf” or from a book or website.

Working to Preserve Your Wealth and Protect Your Future . . . in a Constantly Changing World.

This post has been brought to you by the Law Office of Barbara Ann Dalvano. This information is provided for educational purposes only and to generate ideas, provoke thought and facilitate conversation. It is not intended to create an attorney-client relationship. Each person’s situation is different and this information should not and cannot be relied upon as legal, tax, accounting or investment advice. Refer to the full Disclaimer on this site for more information.

Barbara Ann Dalvano, Esq.
Phone and Text Message: (719) 963-2933
Email Address: barbaradalvano@yahoo.com

The Revocable Trust

In a prior blog titled, Should I Have a Trust, I described what a Trust is and the two general categories of Trusts – testamentary Trusts and inter vivos Trusts. I also pointed out that an inter vivos Trust can be either revocable or irrevocable. Finally, I defined some common Trust terms. I will now focus on some of the characteristics of revocable inter vivos Trusts.

A revocable inter vivos Trust (also known as ‟revocable trust” or ‟revocable living trust”) can be a very effective estate planning tool to manage assets during a person’s lifetime. A settlor can establish a revocable Trust, transfer his or her assets to the Trust during lifetime and serve as the sole Trustee of the Trust. In this situation, the settlor continues to manage his or her assets as before, but the assets are held in the name of the revocable Trust and the settlor is serving in the role of Trustee. Because the Trust is revocable and can be amended or terminated, functionally little has changed from the settlor’s perspective. The trust agreement typically specifies that the assets and income will be used as directed by the settlor. The settlor retains all control over the assets held in the revocable Trust, in the role as Trustee, and can invest them, sell them, purchase replacement assets and transfer additional assets to the Trust, all without the consent of any third party.

In the trust agreement, the settlor will appoint one or more successors to assume the role of Trustee in the event that the settlor no longer wishes to continue to manage his or her financial affairs. The settlor can also appoint a Co-Trustee to serve with the settlor. One good example of the use of a revocable Trust for asset management is the case of a settlor who expects to travel outside the United States for an extended period of time, perhaps in less settled areas of the world, and wants to appoint a Trustee to manage and administer the assets while the settlor is traveling.

If the settlor becomes incapacitated, very little transition is needed to continue the asset management features of the revocable Trust. The settlor’s assets continue to be held in the revocable Trust. The successor Trustee (or the Co-Trustee if one was serving with the settlor) steps in to manage the assets for the benefit of the incapacitated settlor (and, if desired, his or her family). The Trustee takes on the role of making and implementing financial decisions for the benefit of the settlor. The trust agreement will give the successor Trustee guidelines on how to apply and distribute the assets held in the Trust during the settlor’s incapacity. The successor Trustee has the duty and responsibility to invest the assets in the Trust prudently and to provide accountings of the bills and expenses paid, investments made, assets sold and purchased and income earned.

During his/her lifetime, the settlor will continue to pay the income taxes on the income and gains earned by the assets held in the revocable Trust. There is no income tax advantage (or disadvantage) to be gained from a revocable Trust during the settlor’s lifetime. Moreover, a revocable Trust is not a Medicaid qualification planning vehicle – a settlor cannot make himself or herself eligible for Medicaid assistance with a revocable Trust.

If lifetime asset management is an objective in creating the revocable Trust, then title to certain of the settlor’s assets typically would be transferred to the revocable Trust. The nature of the asset will dictate the method by which the title is transferred from the settlor to the revocable Trust. For example, if real estate is to be transferred to the revocable Trust, then the title transfer is generally accomplished with a real estate deed. In addition, certain types of assets, like real estate, require special attention before being transferred to a revocable Trust, including addressing issues related to mortgages on the real estate, title insurance and homeowner insurance.

There are many types of assets that a settlor cannot or would not transfer to his or her revocable Trust. For example, individual retirement accounts, 401(k) plan accounts and similar retirement assets that the settlor owns or participates in would not be transferred to the revocable Trust during lifetime. Rather, the proceeds of these accounts are paid at death to the person(s) listed in a separate beneficiary designation form provided by the provider or sponsor of the retirement account. Depending upon the circumstances and the settlor’s goals and objectives, it might not be appropriate for the death benefits of these retirement accounts to be paid to the Trust on the settlor’s death. Moreover, particular tax-sensitive assets, such as stock in an “S” corporation, will require that the revocable Trust agreement contain certain clauses so that the tax status of the asset is not jeopardized when held in the revocable Trust, particularly after the death of the settlor.

If the settlor creates a revocable Trust and becomes incapacitated before transferring assets to the Trust, an agent designated in a durable power of attorney signed by the settlor before incapacity occurs can be authorized to transfer assets to the revocable Trust.

A revocable Trust is often used as a “Will substitute” to direct who receives assets at death. The revocable trust agreement contains many of the same provisions that would be included in a Will. For example, additional trusts can be created in the revocable Trust agreement and funded at the death of the settlor with the property held in the revocable trust.

It is important to note that creating a revocable Trust as the cornerstone of an estate plan does not eliminate the need for a Will. Because the revocable Trust contains all of the clauses directing who receives assets on the death of the settlor, it is imperative that all of the settlor’s assets be transferred to the Trust for distribution in accordance with the terms of the revocable Trust agreement. A Will, commonly referred to as a “pour over” Will, accomplishes this by directing that any property owned by the settlor that was not transferred to the revocable Trust during lifetime will be “poured over” and transferred to the revocable Trust at the settlor’s death.

Upon the death of the settlor, the revocable trust becomes irrevocable. The beneficiaries of the Trust are entitled to receive notice about the existence of the Trust and can request information about the Trust property, how the Trust property is invested, the type and amount of expenses that are incurred and paid and the amount of, and to whom, distributions are made.

Under Colorado law, a Trust is required to file a Trust Registration Statement with the appropriate court if its principal place of administration is in Colorado and the Trust has certain characteristics. A fully revocable Trust is not required to file a Trust Registration Statement until such time as the settlor’s power to revoke the Trust has terminated. If all assets of the Trust are distributable outright to beneficiaries upon the settlor’s death, then a Trust Registration Statement need not be filed. Numerous income tax rules come into play when the settlor of a revocable Trust dies; some of the same rules apply when a Will is the cornerstone of an estate plan.

There are many factors to be considered in deciding whether the cornerstone of an estate plan should be a revocable Trust or a Will. An experienced estate planning lawyer can offer the best advice in an individual situation.

Working to Preserve Your Wealth and Protect Your Future . . . in a Constantly Changing World.

This post has been brought to you by the Law Office of Barbara Ann Dalvano. This information is provided for educational purposes only and to generate ideas, provoke thought and facilitate conversation. It is not intended to create an attorney-client relationship. Each person’s situation is different and this information should not and cannot be relied upon as legal, tax, accounting or investment advice. Refer to the full Disclaimer on this site for more information.

Barbara Ann Dalvano, Esq.
Phone and Text Message: (719) 963-2933
Email Address: barbaradalvano@yahoo.com

Feel free to visit our website at http://www.attorneybarbaradalvano.weebly.com.