4 Points to Ponder for Your Peace of Mind
The house is quiet. The treat you bought yourself is still in the fridge. You and your spouse have a dinner date in the middle of the week. Your cell phone is no longer a constant reminder of the triple life you lead: companion, professional, and parent. You’re a tad stiff in the morning, but nothing that a few asanas and a hot cup of coffee won’t cure. Plus, there’s nothing wrong with a little stiffness after the decades you’ve spent working out, right? Right. Your mind continually and comfortably drifts off to favorite travel destinations or that mid-week date during meetings you must attend in order to be a “sober second” when asked; and you’re getting asked less and less, thank goodness. Life is . . . pretty good. So, while you have some time on your hands, allow me to provide you with 4 points to ponder related to that pretty good life. Your children are out of the house for good, leading their own lives with their own families. Does this mean you have grandchildren to enjoy and then return to the fray? If so, have you thought about providing or helping to provide for their education? Your career has moved right along or your wok has become more and more tolerable. You’ve gone this far, so you’re in it for the long haul. Have you thought about what to do if, working near the end of the long haul, you are injured for a substantial length of time? Can you afford it? Do you have long term disability insurance or a strategy viable to ensure that you’ll still be able to assist with educating the little brutes or brutesses once they’re about to enter high school or university? The end of the long haul is clearly in sight. Accordingly, the previous point bears revisiting. Also, do you have a strategy for making it through the “Golden Years” comfortably? Do you know how you’re going to draw down your retirement funds so to maximize your money and minimize your taxes? People are living longer now so our resources must keep up. Will you be able to just sit on that old porch swing and smile? Family isn’t charity; it isn\’t a cause. Family is a wonderful responsibility and gift shared amongst its members. However, as those responsibilities, even to ourselves, wane and are fulfilled, how have we shown responsibility toward our community? Is there an organization, a group, a center whose work you admire and would like to try to help ensure the work and programming will continue? You see, estate planning isn’t just about planning for death. These 4 points to ponder prove it. How are you going to (1) help family, (2) help yourself heal peacefully, (3) protecting your porch swing, and (4) helping your community?
Fact v. Fiction about Echo-Birdies
As couples mature and children grow less dependent, we start considering life without “the little birdies.” Often, at this stage, if a couple hasn’t created an estate plan or revisited it in years, they decide to continue postponing the initial visit or revisit. Especially if the children are in their late teens, near or in college, a couple or parent postpones this work thinking that planning with the children in mind is nearly over. However, articles and commercials abound about the return of the little birdies…indefinitely. What’s worse is that upon the return, the little birdies sometimes don’t contribute financially to the household maintenance but instead use resources without replenishing them. So I caution people who say to themselves, “Ahhh, she’s in grad school now; we can relax,” to think again, long and hard. Once the children are relatively independent, i.e., still maturing financially and emotionally, parents should revisit the following questions: What are our goals in 10 years and are we on track? What do we want to protect? How should we protect it? Revisiting the Goals If you own a home, you probably want to protect it. Yes, you may consider downsizing or changing geographic locales, but you’re still likely to want to protect ownership of your primary residence. Also, if your child has been accepted or is in the college application process, you’ll probably to want to protect the college education. You’ve saved and worked smartly with a CFP and CPA, and you don’t want to blow your child’s opportunity. Still, what if your child is brilliant or extremely talented and ears a full scholarship? Finally, how’s that retirement planning going? If you, your spouse, partner, or child experience a long-term illness, would you be able to manage financially without sacrificing retirement income? The Fiction v. Fact about Protecting Those Goals Place your home in trust. Fiction: It protects homes from creditors. Fact: Not necessarily. If a homeowner is Trustee of the house placed in trust, that homeowner’s creditors can place a lien on that trust. Even land trusts are permeable. Place education savings in a 529 account. Fiction: 529s are the only way to pay for your child’s education other than traditional savings. Fact: 529s are beneficial under certain circumstances. Other considerations are balancing the funding of this college savings account with saving for retirement. Again, what is your primary financial goal? Place retirement proceeds in a trust. Fiction: Naming a trust as beneficiary for retirement proceeds will reduce or eliminate tax burdens. Fact: Naming a trust as beneficiary for retirement proceeds may actually create undesired tax burdens depending on the retirement account requirements and the trust involved. It may also create problems when required distributions must be made. So putting off a visit or a revisit to an estate plan because the birdies have flown or are about to fly the coop, could be detrimental to future life stages for you and the birdies. Furthermore, if they come back, well, consider learning about landlord and tenant rights. That’s what my grandmother did!
5 Key Blocks for the Build-A-Baby Life Stage
Helping new families through my practice is one of the great benefits of my job. It soothes my soul because I know the family will be protected sooner rather than later and we will all sleep better, though the infants rarely have a tough time sleeping soundly. However, becoming a new parent isn’t always easy. The gamete meeting sometimes just doesn’t take place as soon as we want it to; sometimes our gametes just don’t want to meet at all. On these occasions, Artificial Reproductive Technology (ART) can play a very important role. However, ART can be costly, financially and emotionally. I was on a panel with Lambda Legal a few months ago and an audience member referred to the financial program designed by his company to help parents with this issue as the “Build-A-Baby” program. This particular department helped couples design their financial planning so they could afford ART, which can cost thousands of dollars per month and when you factor in particular types of adoptions, the final costs can be hundreds of thousands of dollars. And, as mentioned, that’s just the financial burden. The emotional burden of waiting and hoping is equally heavy, if not heavier. As opposed to ART, either parent or both parents can take an alternative route and adopt. Still, just as with ART and as above sometimes including ART, adoption can be costly and is always emotionally burdensome. Consequently, it is critical that parents understand how they can protect each other and their families at the very beginning, even, sometimes, before the birth occurs. Another panel I was on recently described it as “Building Your Family Fortress.” The following are the cornerstones for today\’s family, whether you use ART, adopt, or your gametes meet the old-fashioned way: Obtain life insurance that will at least replace the primary wage-earner’s salary for 3-5 years. Have powers of attorney – healthcare and property (what some states refer to as including “advanced directives”) prepared for both parents. Free drafts of Illinois powers of attorney are available here. If you’re a same-sex couple, be sure if one of you is the biological parent, then the other adopts the child. The U.S. is still a patchwork of states, some recognizing your legal rights in a Civil Union or same-sex marriage, and others not. The same applies for straight couples who are not married and one parent is the biological parent. If you’re using ART with an unknown donor, the parent carrying the child should designate the other parent as a short-term guardian to go into effect at some point in time until the adoption is complete. Obtain valid wills, irrespective of the gender-orientation of your relationship because you need to ensure that the guardian of your child is who you want the guardian to be in the case of your death. For straight couples, it is critical that you name a successor guardian. Other blocks can also be used, but these 5 bricks represent the cornerstones of a solid fortress that will protect your family now and in the future.
5 Ways to Protect 4 Critical Relationships
As mentioned in a previous post, once an adult starts working and accumulating assets, even if they’re simply a car and nice living room furniture, he or she also needs to start protecting their livelihood. The same holds twice as true for young couples.* Couples sometimes erroneously believe that they don’t need to protect themselves or their relationship until they get married, enter into a Civil Union, or have children. However, just like working single adults need protection, so do “young” couples. Therefore, once a decision to reside in one household as a loving and committed couple is made, the documents previously discussed – powers of attorney and life insurance – should be revisited to reflect this relationship. Moreover, depending on the legal status of the relationship, or the lack thereof, legally documenting your agreement about your assets is very important. For example, in Illinois, if you’re cohabiting, your relationship lacks legal recognition except by contract. Therefore, an agreement to share expenses and property is the bare minimum of what is required to at least document your relationship and its affect on your assets. Additionally, ensuring your testamentary documents – a valid will and trust – reflect your intentions toward your partner and the rest of your family is equally important. If a cohabiting partner dies intestate (without a will), unlike the surviving partner in a Civil Union or legally married couple, the surviving cohabiting partner will have no rights under Illinois laws. However, the next of kin to the deceased will have rights. Therefore, unless a document, such a shared expense and property agreement, is in place with mounds of receipts and statements providing supporting evidence of the agreement, the surviving partner will have no way of retaining assets that were obtained as a couple. Still, even with this agreement in place, the decedent’s relatives may still challenge by asserting their rights to inheritance under Illinois’ intestacy laws. Thus, to prevent a possible brouhaha, it’s advisable to have at least a valid will prepared, designating your partner as a beneficiary. But remember, because a will is public – see Whitney Houston’s will – your family gets to see who gets what. And if you have an evil twin who doesn’t like what he or she sees, the brouhaha will not be averted. So then what? You might have a revocable living trust prepared. Trusts are private – you can’t see what Michael Jackson left – and become irrevocable upon the grantor’s (trust maker’s) death. Civil Union and legally married couples are more fortunate than cohabiting couples with a caveat for Civil Union couples. The right to inherit and renounce bequests are generally universal rights for spouses through the U.S. and Civil Union couples typically have all the rights of spouses. However, Civil Union couples are not recognized in all states, so spousal rights are not available, placing them in the same position as cohabiting partners in unfriendly states. So for couples without children and without consideration for probate proceedings, the most basic ways to protect your relationships may resemble this:
Crashes, Collapses & Conflagrations, Oh My!
Living in Chicago, the second largest legal community in the U.S., has its benefits: I meet great colleagues who have a wealth of information valuable not only to their clients but also to the general public. So occasionally, The Shark Free Zone will feature a colleague who is willing to share his or her insights. This week, I welcome friend and colleague, Stephen L. Hoffman, discussing injuries, accidents, and insurance to help us protect our loved ones and property… Many of us try to avoid planning for our future. Much as we defer creation of estate planning documents, we are also unprepared when it comes to some basic, everyday requirements such as what to do in the event of an accident. Each year in Illinois, nearly 500,000 auto collisions occur and over 100,000 work injuries or illnesses are sustained. Auto collisions, work accidents, and home fires occur. Odds are that you, a family member, or contact will be involved in one of those events at some point. Personally, I have experienced a fire in my condominium building and an automobile collision, all within the last 5 years. And I\’m careful, cautious, and none were my fault. If you fail to verify that you have adequate insurance coverage, your life could be altered permanently, with no opportunity to undo the damage. If you ARE involved in an accident, then you should be prepared to do or have available a few basic things: Have your automobile insurance information with you and exchange it with the other driver and police. Take photographs of the scene, while you are still there, if possible. Get photos of all vehicles and persons involved, the cause of your fall, any visible injuries, or debris. This preserves evidence. Get medical treatment immediately. Insurance companies WILL use any delay in treatment against you! Contact the police, fill out an incident report, or write about the accident in some way. DO NOT SPEAK to anyone about this. DO NOT give a statement to an insurance adjuster! Contact an attorney immediately. More cases go south early on than at any other point. With respect to insurance, consider the following: Whether you are a driver, owner of a home, or the owner of a business, make sure you understand what your insurance covers and that your coverage is adequate. Get the most coverage from the best-rated company you can afford. Check your liability limits on your car policy. If you have any assets and your limits are below $500,000.00, you probably need to reexamine them. All it takes is a moment of inattention by a driver, including you, who may be uninsured or grievously underinsured, to lose your house, savings, and well-being. If you have substantial assets, a personal liability umbrella policy is likely well within your reach financially, and definitely worthwhile. Know what your homeowner\’s policy provides for in certain events, e.g., a fire in an adjoining condo unit. Can you move into a temporary residence if yours is uninhabitable and for how long? What is the damages limit? Tidbits Auto Insurance Illinois is a mandatory auto insurance state. However, this means that many people only have the BARE MINIMUM in coverage. If YOUR coverage (Uninsured Motorist and Underinsured Motorist) is not robust, you could conceivably be involved in a collision that is not your fault, with virtually no coverage available. Condominium/Homeowner\’s Insurance If you live in a condo, make sure your governing documents require other unit owners to maintain insurance on their units. All it takes is one accidental fire in one unit or a leak that causes a ceiling collapse to leave you and the rest of the association liable. Workers\’ Compensation The Illinois Workers\’ Compensation Act provides for payment of medical benefits, lost wages, and permanency for those injured while performing their job functions. This includes injuries occurring outside of an office and while in transit to or from a job usually. Plan ahead and be ready for the inevitable! Stephen L. Hoffman is the founder of Law Office of Stephen L. Hoffman LLC, a Boutique Personal Injury and Workers\’ Compensation law firm located in Chicago. Stephen is now in his 23rd year of practice representing injured people and fighting for their rights with dignity. Contact Stephen by phone (773-944-9737) or email stephen@hofflawyer.com. Information about Stephen and ways to further access him are through his blog and website, LinkedIn, Twitter (@hofflaw), and AVVO.
5 Reasons Why You\’re Not too Young to Save a Goldfish
It’s hard to believe that summer fun is nearly over and soon laser focus will target the school year, getting those year-end business deals done, and dare I say – holiday planning. Over the summer, my newsletter introduced topics on planning and I’ll end the summer with articles on estate planning for the various life stages. Also, joining me as a guest blogger this month will be a well-respected attorney and colleague, so stay tuned. Now, onto the first life stage where estate planning matters: Young adult working singles. Many people ask, “Why would a young person gainfully employed, but a young single adult nonetheless need estate planning?” The answer is for the same reason older adults need it – to protect themselves and their families, e.g., their parents. Christopher’s Yarn After college graduation, Christopher was offered an entry level position at the company for which he worked part-time while in college. His starting salary didn’t approach 6 figures, but was sufficient to afford him a nice apartment. So he moved out of his mom’s home after about 7 months of work and rented a place with a roommate, Alex. Since Chris telecommuted a couple of days a week, he also had a well-equipped home office. One day, the weather forecast was gloomy, so Chris decided to work from home. He was glad he did because early that afternoon a severe thunderstorm started raging. Chris was number crunching on a report that was due that evening when suddenly his computer froze; the cursor wouldn’t move; control-alt-delete wouldn’t work. Chris bent down and flipped the switch on the power strip and ZAP! That evening when his boss didn’t get the report, she e-mailed Chris and waited for a response. When there was no word from Chris the next morning and he didn’t show up for work, his boss phoned HR. HR tried phoning him but kept getting his voicemail. Later that afternoon, Alex returned home from spending the night at a friend’s. He unlocked the door and saw Chris sprawled across the floor of his home office. Chris’ mother was a single parent who worked 2 jobs to help Chris through college. After he moved out, she quit one job and took a long vacation with a friend in Mexico. Alex had her phone number but couldn’t get through. The only other relative Chris mentioned was an older brother who Chris said couldn’t be trusted to watch a goldfish. Alex called the medics but was stunned. Chris had no healthcare powers of attorney, no property powers of attorney, no life insurance, no will, and an irresponsible brother. He and Alex only met a few months ago, so Alex didn’t know his medical history. Whether Chris survived or not, I can’t say for sure, but upon his employment for 6 months, I would have given Chris the following 5 tips: You can authorize a successor agent under a healthcare power of attorney, who can make healthcare decisions on your behalf if you become incapacitated. Renter’s insurance is very helpful if you telecommute; perhaps not against lightning strikes, but definitely against thieves. A property power of attorney can authorize someone other than an irresponsible brother to manage your bank account and bills while you’re hospitalized. Life insurance will help your mom pay for your services so she won’t have to struggle financially. A will allows you to ensure that your irresponsible brother doesn’t get the goldfish. If you think you’re too young for an estate plan, think again before it storms.
Love & the Law: Privacy? No. Sex? No. History? No. Liberty? Yep, We Were Wrong. Pt 2
Lawrence v. Texas… From the very beginning of the Lawrence Opinion, one could tell that the Bowers decision was in trouble. Sometimes justices write opinions in this manner to throw readers off, but it wasn’t the case in Lawrence when Justice Kennedy opened the Opinion by explaining that the cornerstone of the Fourteenth Amendment is liberty and embedded in liberty is the right to privacy. Facts Houston , Texas police were called to a house on a weapons disturbance tip. They entered the home to witness John Lawrence and Tyrone Garner engaged in sexual activity. Both were charged and convicted of “deviate sexual intercourse,” a violation of a Texas statute. In their defense, they challenged the statute as unconstitutional with regards to the Equal Protection Clause of the Fourteenth Amendment and a similar provision in the Texas Constitution. The Texas Court of Appeals rejected the defense and Mr. Lawrence appealed to the U.S. Supreme Court. The Court saw Lawrence as presenting 3 issues, whether: The Texas statute violated the Equal Protection Clause of the Fourteenth Amendment; The Texas statute violated the Due Process Clause of the Fourteenth Amendment; and Bowers was decided correctly. In analyzing the issues, the Court first turned to Griswold, which established privacy rights for marital relationships but, according to the Court, also set the foundation for individual privacy rights outside of marriage. So Mr. Hardwick was correct. The Court also considered another landmark case, Eisenstadt v. Baird, where personal rights of unmarried persons involving contraceptives was at issue. It then looked at Roe v. Wade and established the following rationale: Per Griswold, Eisenstadt, and Roe v. Wade, the privacy of a woman resulted in a woman’s right to “make fundamental decisions regarding her destiny.” It stands to reason that if the rights apply to women, then they assuredly apply to men. Accordingly, Due Process protection is much more expansive than the language implies. Next, the Court considered Carey v. Population Services International, where the Court ruled that a law prohibiting the sale of contraceptives to persons under 16 years was invalid. The Court took these steps to show where the law had moved on the issue of privacy in intimate relations by the time the Bowers case was to be decided. It explained that Bowers was similar to Lawrence but the Georgia statute in Bowers applied to all Georgia citizens, whereas the Texas statute only applied to homosexuals. So equal protection of the laws was not provided to Mr. Lawrence. The Court then considered the framing of the issue by the Court in Bowers, stating that it was too narrowly framed because it failed to consider the issue of liberty. Hmmm… The Court stated that adults, including members of the LGBT community, may choose the kind of relationships they want to enter into without sacrificing their dignity. Addressing the issue of community and tradition as brought up by the Court in Bowers, the Court gave a history lesson on the law against homosexuals, stating that, in fact, there was no tradition of laws against gays until the late 19th century: Heterosexual couples participated in the same acts that homosexuals engaged in and it was the heterosexual behavior that was at issue initially. The prohibition was targeting non-procreative sexual activity, not homosexual activity per se. “It was not until the 1970’s that any State singled out same-sex relations for criminal prosecution and only 9 States have done so.” Read: Lawrence’s and Geddes’ fundamental right of liberty and the inherent right of privacy found within the right to liberty were violated. The Court acknowledged the importance of the Bowers’ rationale to a certain extent, recognizing that the Court in Bowers was rightfully giving a voice to those who held strong moral convictions. However, the Court qualified that recognition by also stating that the Court’s job is to define liberty, not push through society’s moral ideologies. The Court continued to explain that well-esteemed bodies of American and European jurisprudence considered such laws draconian and restated what it said in Planned Parenthood v. Casey, which was decided after Bowers: These matters, involving the most intimate and personal choices a person may make in a lifetime, choices central to personal dignity and autonomy, are central to the liberty protected by the Fourteenth Amendment. At the heart of liberty is the right to define one’s own concept of existence, of meaning, of the universe, and of the mystery of human life. Having re-established the principals laid out in Planned Parenthood v. Casey, the Court then proceeded to discuss Romer v. Evans, stating that one of the intended results of the Romer decision was the removal of the stigma associated with criminalizing conduct such as gay sex. After discussing Planned Parenthood v. Casey and Romer, the Court pointed out that the rationale for Bowers had been significantly weakened. Still, recognizing the doctrine of stare decisis in which precedent is given a very high amount of deference because of the legitimacy it gives to Court rulings, i.e., the law, and the stability it creates in the law and society, the Court nevertheless pointed out that the doctrine is not absolute. Hence, the Court concluded that Bowers wasn’t right when it was decided, and was not right now and therefore should not stand and, neither should the Texas statute. Thus, ends the Love & the Law series for now. Given the thorough analysis of liberty and the right to privacy performed by the Court in Lawrence, one can only wonder how long it will take before DOMA is constitutionally invalidated as it is a clear violation of the Equal Protection Clause and Due Process Clause of the Fourteenth Amendment, and likewise implicates the Fifth Amendment. Sidebar Recently, Massachusetts has requested that the Supreme Court should hear cases involving DOMA and invalidate the congressional statute because the statute forces States like Massachusetts, which perform and recognize same-sex marriages, to discriminate against its citizens and that per the Tenth Amendment, which authorizes Congress’s Spending power,
Love & the Law: Case Histories At-A-Glance
Updated May 27, 2023 Recently, courts across the country have handed down several decisions involving LGBT relationship rights. Additionally, June 12 was the anniversary of the U.S. Supreme Court ruling in Loving v. Virginia, which held that laws prohibiting interracial marriage were illegal. Because the U.S. Supreme Court is the final arbiter of what is law in the United States, many speculate that the Court is going to eventually rule on the issue of same-sex marriage. So over the course of the next couple of months, I’ll provide a little case history on the decisions below (Griswold, Loving, Bowers, Romer, Lawrence, Prop 8, and Windsor) considered landmark decisions by many in the area of privacy and relationship rights. Windsor v. U.S. is not a Supreme Court case, but may be headed there just the same, and Proposition 8 (\”Prop 8\”) involves the California statute banning same-sex marriages that was ruled unconstitutional by the Ninth Circuit. Proponents of Prop 8 have already stated that they will appeal it to the the U.S. Supreme Court. Why does this matter to estate planners? Because we plan for families and the recent decisions are pointing toward a fundamental shift in the national, legal definition of family.
3 Lessons from Summer Disaster Flicks
One hallmark of summertime in the U.S. is the onslaught of disaster movies. For me, there’s nothing like a great “the-world-is-under-attack-so-blow-‘em-up-real-good!” movie. So when temperatures crept into the 80s and trailers for “world under attack” started showing on TV, I couldn’t help but think about the “disaster” provisions in estate planning documents, aka “contingent beneficiary” provisions. Also, while reading a couple of cases and thinking about questions frequently asked by clients, I knew I had a winning screenplay, or a half-way decent blog post. So grab your popcorn and enjoy the move…I mean post. Ornery old Great-Grandma Cornelia Stamper decides to write her will and leaves one of her oil wells to her son, Harry. She names it “Harry Stamper’s Well.” Before she dies, though, Harry marries Anna and he and Anna have a daughter, Grace. Cornelia isn’t so keen on Anna, so she draws up a trust leaving income from the “Family Stamper’s Well” to Harry for his life and upon Harry’s death, the income from the well should be distributed equally among Cornelia’s heirs. Cornelia dies at the grand old age of 98 and Harry then draws up a trust leaving Harry Stamper’s Well to Grace and continues his life’s work – drilling in Alaska. Suddenly one day, Harry learns from his buddies at NASA that an asteroid is headed for Earth. Harry then changes his trust and adds a charitable contribution provision, giving part of the income from Family Stamper’s Well to the Red Cross and Medicins Sans Fronteirs and the rest to his descendants. Also, Grace has a trust created and leaves the income from Family Stamper’s Well to the same 2 charities. Fortunately, Harry’s NASA buddies blow the asteroid up real good and none of the particles cause any damage to Earth. A year later, while drilling near Russia, Harry is told that aliens attacked Earth and wiped out all his relatives including, Grace. Harry’s heart can’t take it and he dies. However, Grace actually escaped the attack but is the only Stamper left. Grace’s friends, David and Steven, however, blow up the alien ship real good and things return to normal – kinda. Half the world’s population is gone, so the Red Cross and Medicins Sans Frontiers have a lot of work to do. They are counting on Harry’s gift and know that the funds are available because the banks were saved. Go figure. Accordingly, they hire a lawyer; lots of us survived. But their meeting with the lawyer didn’t go well. My clients know why because these were their questions: 1. Can income from a life estate be given away by the owner of the life estate? In other words, could Harry bequeath income from Family Stamper’s Well? No. Cornelia left the income to Harry for his life only and then to Cornelia’s heirs. So unless Grace is feeling charitable during her lifetime, the nonprofits are out of luck until Grace dies. 2. What would have happened if Grace died in the alien attack but Family Stamper’s Well had dried up? In other words, what happens when the “gift” is no longer in the estate? If Grace knew the well was drying up and didn’t change her trust to provide for this event, then the gift would be considered “revoked,” or \”adeemed\” in legalese, and the charities out of luck. If Grace didn’t know and say the well was destroyed by the aliens, then the gift is still considered revoked unless she provided in the trust that the loss should be covered by insurance. 3. What would have happened if Grace died and she didn’t name anyone to take the income? That’s the real disaster. With all of the Stamper beneficiaries dead and no charity named, the income and well would probably go to the remaining population – bankers and lawyers.
Debunking Estate Planning Myths & Developing Weath, pt 5
Finally finishing the “Debunking Estate Planning Myths” series, as discussed in part 4, revocable living trusts let individuals place more than land into a trust. Doing so typically prevents beneficiaries from going through probate, allows other vehicles to grow tax free, and keeps the terms of the estate distribution private. Also, not only do trusts save beneficiaries the time and expense of opening a probate estate, but trusts also minimize estate tax exposure for beneficiaries. Tax minimization relates directly to another intermediate but classic estate planning tool and technique – an irrevocable life insurance trust (ILIT). ILITs are a combination of 2 estate planning tools, a trust and life insurance, used to minimize estate tax burdens for beneficiaries. Life insurance proceeds that would be considered part of the estate are used to fund a trust and deemed removed from the estate altogether. A number of criteria have to be met, such as using a policy that the insured has no interest in the policy, e.g., does not withdraw the cash from a cash value policy. However, if we think about it, typically we don’t buy life insurance for investment purposes but only for income replacement purposes. So if we’re not planning to use the life insurance, then why not let it benefit our loved ones in more than one way and place it in an ILIT? Using particular language in children’s trust provisions is another way to provide beneficiaries with the time needed to mature before having substantial means placed into their hands. Provisions with this language are called “staggered mentoring” provisions, which instruct the trustee to distribute certain percentages of the total trust funds to the children at ages 25, 30, and 35 years, for example. Parents also can place conditions on distributions so that a child doesn’t receive a distribution unless he or she performs on at least an average academic level in college and becomes a productive member of society. Mentioning this tends to result in a few “likes” by parents on my Facebook page. Trusts are also used to provide enhanced tax minimization for the surviving spouse. By using the federal marital deduction and other available elections, families can defer the payment of estate tax payments of the first spouse until the second spouse’s death. Another way that trusts are used is to provide for surviving spouses, partners, and children using retirement proceeds. Typically, beneficiaries should be named directly on retirement accounts. Under certain situations, the retirement account should be maintained as an “inherited” account, and occasionally a trust should be named beneficiary where the individual beneficiary is dependent on a trustee. The trustee then pays out the proceeds over the lifespan of the beneficiary as opposed to the original account owner. Because trustees are the actual legal owners of the trust property, beneficiaries may be protected from creditors because trustees can be given sole discretion to distribute funds, and may pay institutions, such as colleges and hospitals directly. Part 1 | 2 | 3 | 4 | 5