Years ago, an editor of mine at The Washington Post observed that after every funeral, despite the shock and grief, “somebody has to ask ‘what’s for lunch?’” She wasn’t being cute. Or tough. Just very, very practical. Life goes on!
Earlier this year my family had a horrible, surprise shock. A way-too-young-man died very suddenly. Leaving three children, three sibilings, parents and more friends than most people ever have. It is almost six months since his death. Everybody seems to be coping in their own way. Lots of great memories, stories, etc. Nobody has a monopoly on grief or struggle. But if they do, in this particular case, it’s his oldest daughter. She’s in her 30s. Lives in Brooklyn. Her father lived in Washington State with his youngest daughter, age 10. He was the kind that thought of just about everything: Plenty of insurance for the kids’ school. That sort of thing. But they can’t find a will. Maybe he had one. He was the type. Or maybe not. Whatever, they can’t find it. His elder daughter is his executor and is handling all the chores. It’s meant lots of travel, daily grieving, legal decisions. Some of us have seen the added burden — on top of massive grief — this final ‘chore’ is causing her. I had a will and trust but updated them, big time, after this. Maybe you should too. Not for yourself, but for your loved ones. Eventually a probate court will settle the issue. But it could six months. Or two years. Meantime she is on an emotional/financial hook he would hate.
How the probate court handles the case will depend on state laws. And the court. Some are lots better than others. But not having a will/estate plan means some court, a judge or minor officials who know nothing about you or your wishes will divide your goods according to their guidelines. Maybe not the way you would have done it. In fact, almost certainly not the way you intended.
Although some find it a grim subject, most of the people we leave behind will know what you wanted. A will and an estate plan can reduce or mitigate hard feelings among survivors. Maybe prevent decades-long feuds among children, siblings or spouses over what you wanted. To the question “should you have a will and an estate plan,” the answer, especially if you work or retired from the federal government, is usually yes! Which is why our Your Turnguest today is Tom O’Rourke. He’s a former IRS attorney who now specializes in tax and estate law. The show is live at 10 a.m. EDT on federalnewsnetwork.com or 1500 AM in the Baltimore-Washington area. It will also be archived on our home page, so you can listen later, listen again, or pass it on to a friend. Or all of the above. If you have questions shoot them to me before showtime: firstname.lastname@example.org. Meanwhile, Tom has drawn up a preview of what we’ll be talking about:
Trusts are often thought of as tools for the rich, but are frequently used by individuals with more modest assets. All trusts are vehicles for managing and distributing property or assets. A trust can be used to accomplish any legally permissible goal.
All trusts have three parties. The grantor (also sometimes referred to as the settlor or trustor) is the person who establishes the trust and specifies how assets in the trust are to be held, managed and distributed. The trustee is the person or entity who manages assets held in the trust. The beneficiary or beneficiaries are the person or persons for whom trust property is managed.
There are several broad categories of trusts. A revocable trust is one that can be revoked or changed during the life of the grantor. It is not a separate taxable entity. Rather, it uses the grantor’s social security number as its tax ID number. An irrevocable trust may not be revoked or changed once established. It is a separate taxable entity with its own tax ID number and must file its own income tax return every year. Living — or inter vivos — trusts take effect during the life of the grantor. A testamentary trust is one that takes effect following the death of the grantor.
Some of the more commonly used trusts include the following:
A revocable trust is commonly used to avoid probate.
A children’s trust: A trust for the benefit of a minor designed to hold assets for the child’s benefit until they are sufficiently mature to manage for themself.
A special needs trust: Typically used to provide for a handicapped individual who may be receiving government benefits.
A spendthrift trust: This trust protects assets from the claims of a beneficiary’s creditors.
A pet trust provides for the care of a pet after the death of the pet’s owner.
Trusts used to help minimize or avoid estate taxes. Since the federal estate tax laws have been changed to increase the estate tax exemption ($12,060,000 at present), these tax planning trusts are no longer needed unless the value of your assets exceed the exemption amount. Because the estate tax exemption is scheduled to drop to $5 million, persons with assets above this level may still find these tax saving trusts to be useful. Moreover, these trusts can be used to help minimize state estate taxes in states that have an estate tax. Some of the more common types of tax planning trusts include:
Life insurance trust.
The law is sufficiently broad to allow a trust to accomplish any legally permissible goal. If you can clearly identify your goals, you can structure a trust to accomplish these goals.