Tag: Revocable Living Trust

Matthew Perry’s Estate Plan Demonstrates the Benefits of Trusts

Post author By Kylie Casper
Post date October 3, 2024
No Comments on Matthew Perry’s Estate Plan Demonstrates the Benefits of Trusts

When Matthew Perry, the beloved star of Friends, passed away last year, the world mourned the loss of a comedic icon. However, as details of his estate began to emerge, a curious puzzle presented itself: despite his reported net worth of $120 million, his bank account held (only) $1.5 million. Admittedly, this seems like a whopping sum to most of us, but this amount appears off for a man who earned millions of dollars for just one episode of the show. Shouldn’t he have had much more money than that? The answer lies in the details of estate planning and using trusts as part of your plan.

In this article, we’ll look at Perry’s estate plan and pull out some valuable lessons. These lessons pertain to all of us, not just the rich and famous. To find out how trusts can benefit you, read on.

What is a Trust?

A trust is simply a legal arrangement where a person (sometimes called a “settlor”) transfers assets to someone ( a “trustee”) who manages those assets for the benefit of someone else (the “beneficiaries”). Many types of trusts can be used for various purposes, including estate planning, asset protection, and providing for loved ones.

The trustees appointed to manage a trust play a crucial role in fulfilling the settlor’s wishes. Choosing the right trustees is essential for the effective management of a trust. Trustees should be trustworthy, financially responsible, and knowledgeable about estate planning. They should also be willing to devote the time and effort required to manage the trust’s assets.

In Perry’s case, it appears he established a trust during his lifetime. This trust, which seems to be named the Alvy Singer Living Trust—Woody Allen’s character in Annie Hall—presumably holds a significant portion of his wealth. In Perry’s case, the trustees were likely responsible for managing his investments, paying bills, and distributing money to the beneficiaries.

Why would Perry have chosen to establish a trust? There are many benefits, which I’ll break down in greater detail now.

The Power and Benefits of Trusts

There are many advantages to using a trust for estate planning. Here are some of the most common.

Protection from creditors and lawsuits. If a beneficiary faced financial difficulties, their creditors would generally not have access to assets held in a trust.

Ongoing support during life, incapacity, and after death. Trusts can provide for loved ones more flexibly than a will. A will is a legal document that outlines how your assets will be distributed after your death. However, a trust can be structured to provide support during your life and for your beneficiaries over time, ensuring their needs are met. If you have a will, your assets will usually be transferred to your beneficiaries – even if they are young or financially irresponsible.

Minimization of estate taxes. Depending on the size of an estate, there may be significant federal and state estate taxes. A trust can reduce or eliminate these taxes.

Court avoidance. A court process called probate takes place after someone dies, and it can be expensive, lengthy, and conflict-laden. If you have a will or no estate plan, court is mandatory. However, the court process may be avoided if you have a trust. This results in less expense, less time, and a decreased probability of conflict. It’s also a public proceeding, and court filings contain personal and financial information you may not want others to see.

Conflict avoidance. The court process is set up to give all heirs and creditors a claim to your assets. They are invited to file a claim and get to see information about your assets.

Greater control over what happens to your assets and your family. When you have to go to court, someone other than you – a judge who’s a stranger to you and your family – will make all final decisions about your money, property, and family. But with a trust, you can make those decisions and exercise control over the outcomes.

Preserving assets when there’s a substance abuse issue. It’s no secret that Perry struggled with substance abuse for much of his life, and it’s possible that because of that, he was advised to create a trust to hold his assets. This was a wise decision. Substance abuse can have a significant impact on financial stability, and it is possible that Perry sought to protect his assets from loss, either by his actions or potential creditors and legal issues related to his addiction. You can do the same for a friend or relative if you want to support them and know they struggle to manage their finances responsibly.

These advantages apply to you, too! You do not need to be wealthy to want a trust. You do not have to be charitable or famous to take advantage of the benefits.

The Appeal of Privacy

Remember when I mentioned above that the court process is public? I also noted that a trust can help you and your family avoid court and its very public nature. If you were wondering, “If it’s true Matthew Perry had a trust, then how come it’s public knowledge that he had $1.5 million in his bank account?” Then kudos! You caught on to something important.

Matthew Perry also had a will, and wills go through probate. Any assets not placed into a trust must be dealt with via your will and, thus, are subject to the court process. Remember when I mentioned that court filings must contain your personal and financial information? That’s how we know about Matthew Perry’s bank account. The funds in his bank account were ostensibly not placed into his trust and are subject to the public probate process. You can look up the court records and read his will – or any will – for yourself.

His will mentioned that he had trust, which is also common. It doesn’t mention the terms of the trust, who the beneficiaries are, what his other assets are, and who gets what. Our public knowledge is limited to what’s in his will. And if his bank account had been placed into his trust, it would have been kept private, too.

In short, assets placed into a trust are kept private, as is your personal and financial information. Assets left out of a trust are public knowledge. So, when you create a trust, you mustn’t just draft and sign the document and call it a day. You must take the next step and correctly place your assets into the trust. If you don’t do that, you lose all the benefits the trust offers.

How We Help You Protect What Matters Most

As more details about Perry’s estate emerge (and sadly, his death), we may better understand his intentions and the legacy he will leave behind. While his untimely passing is a tragic loss, his estate planning offers a fascinating look at the advantages of trusts and how you can also take advantage of them.

We help you create a comprehensive Life & Legacy Plan that may include tools like trusts to protect your assets, maintain your privacy, and ensure your loved ones are cared for—without the headaches of court or the increased chances of conflict. By planning today, you can have peace of mind knowing your wishes will be honored, your family’s future will be safeguarded, and your legacy will be kept private.

Schedule a complimentary 15-minute consultation to learn more. Contact us today to get started.

This article is a service of August Law, a Personal Family Lawyer® Firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Life & Legacy Planning™ Session, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love.

The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

Tags Asset Protection, Estate Planning, Estate Planning Attorney, Matthew Perry, Personal Family Lawyer, Revocable Living Trust, Trusts

What Probate Is and How To Avoid It — Part 2

Post author By Sara Thomas
Post date July 1, 2024
No Comments on What Probate Is and How To Avoid It — Part 2

Unless you’ve created an estate plan that works to keep your family out of court, when you die (or become incapacitated) many of your assets must go through probate before those assets can be distributed to your heirs. Like most court proceedings, probate can be time-consuming, costly, and open to the public, and because of this, avoiding probate—and keeping your family out of court—is often a central goal of estate planning.

In part one of this series, we explained how the probate process works and what it would entail for your loved ones. Here in part two, we’ll discuss the major drawbacks of probate for your family, and outline the different ways you can help them avoid probate with wise planning.

What’s At Stake For Your Family

Probate court proceedings can take months, and sometimes even years, to complete. In the immediate aftermath of your death, that’s the last thing you likely want your loved ones to have to endure.

Without easy and immediate access to your assets, your family could face serious financial hardship at a time when they need the most support. Not only that, but to help them navigate the legal proceedings, your loved ones will almost certainly need to hire a lawyer, which can result in hefty attorney’s fees and the real risk of them hiring a lawyer who is uncommunicative, which only creates more stress for them. All of that is on top of the court costs, executor’s compensation, and all of the various other administrative expenses related to probate. By the time all of those costs have been paid, your estate could be totally wiped out, or at the very least, seriously depleted.

Another drawback of probate is the fact that it’s a public process. Whether you have a will or not, all of the proceedings that take place during probate become part of the public record. This means that anyone who’s interested can learn about the contents of your estate, who your beneficiaries are, and what they will inherit, which can set them up as potential targets for scammers and frauds.

Probate also has the potential to create conflict among your loved ones. This is particularly true if you have disinherited someone or plan to leave significantly more money to one relative than the others, in which case, a family member may contest your will. And even if those contests don’t succeed, such court fights will only increase the time, expense, and strife your family has to endure.

How To Avoid Probate

Before we discuss the more advanced ways you can use estate planning to allow your loved ones to avoid probate, it’s important to point out that not all of your assets will have to go through the probate process—and that’s true even if you don’t have any estate plan at all.

Assets That Do Not Require Probate

Certain assets will pass directly to the individuals or organizations you designated as your beneficiary, without the need for any additional planning. The following are some of the most common assets that use beneficiary designations and therefore, bypass probate:

Retirement accounts, IRAs, 401(k)s, and pensions
Life insurance or annuity proceeds
Payable-on-death (POD) bank accounts
Transfer-on-death (TOD) property, such as bonds, stocks, vehicles, and real estate

Outside of assets with beneficiary designations, other assets that do not go through probate include assets with a right of survivorship, such as property held in joint tenancy, tenancy by the entirety, and community property with the right of survivorship. These assets automatically pass to the surviving co-owner(s) when you die, without the need for probate.

However, it’s critical to note here that if you name your “estate” as the beneficiary of any of these assets, those assets will go through probate before being distributed. The same goes if you overlook a beneficiary designation, or if you die at the same time as a joint property owner—each of those assets will also go through probate, even though they have beneficiary designations.

In addition, we generally recommend that you do not rely on beneficiary designations to handle the distribution of your assets. These designations give you little to no control over how your assets are distributed, and they can result in negative outcomes you did not intend, especially if you have a blended family with children from a prior marriage or if you have no children at all.

Although there are several different types of assets that automatically bypass probate, the majority of your assets will require slightly more advanced levels of planning to ensure your loved ones can immediately access them, without the need for any court proceedings in the event something happens to you. The primary estate planning tool for this purpose are trusts.

Avoiding Probate With A Revocable Living Trust

Trusts are a popular estate planning tool for avoiding probate. Although there are a variety of different types of trust, the most commonly used trust for probate avoidance is a revocable living trust, also called a “living trust.”

A trust is basically a legal agreement between the “grantor” (the person who puts assets into the trust) and the “trustee” (the person who agrees to manage those assets) to hold title to assets for the benefit of the beneficiary. With a revocable living trust, this agreement is typically made between you as the grantor and you as the trustee for the benefit of you as the beneficiary. You act as your own trustee during your lifetime, and then you name someone as a “successor trustee” to take over management of the trust when you die or in the event of your incapacity.

It might seem odd to make an agreement with yourself to hold title to assets for yourself in order to benefit yourself. Yet by doing so, you remove those assets from the court’s jurisdiction in the event of your incapacity or when you die. Instead, those assets transfer to your successor trustee, without any court intervention required. At that point, your successor trustee is responsible for managing the trust assets and eventually distributing them to your beneficiaries, according to the terms you spell out in the trust agreement. This is how a trust avoids probate, saving your family significant time, money, and headache.

The Key Benefits Of A Living Trust

Unlike a will, if your trust is properly set up and maintained, your loved ones won’t have to go to court to inherit your assets. Instead, your successor trustee can immediately transfer the assets held by the trust to your loved ones upon your death or in the event of your incapacity. And since you can include specific instructions in a trust’s terms for how and when the assets held by the trust are distributed to a beneficiary, a trust can offer greater control over how your assets are distributed compared to a will.

For example, you could stipulate that the assets can only be distributed upon certain life events, such as the completion of college or marriage, or when the beneficiary reaches a certain age. And as long as the assets are held in trust, they’re protected from the beneficiaries’ creditors, lawsuits, and divorce—which is something else wills don’t provide.

Finally, trusts remain private and are not part of the public record. So, with a properly funded trust, the entire process of transferring ownership of your assets can happen in the privacy of your attorney’s office, not a courtroom, and on your family’s time.

Transferring Assets Into A Living Trust

For a trust to function properly, it’s not enough to simply list the assets you want the trust to cover. When you create your trust, you must also transfer the legal title of any assets you want to be held by the trust from your name into the name of the trust. Retitling assets in this way is known as “funding” a trust.

Funding your trust properly is extremely important, because if any assets are not properly funded to the trust, the trust won’t work, and your family will have to go to court in order to take ownership of that property, even if you have a trust. In light of this, it’s critical to work with us to ensure your trust works as intended. We will make sure all of your assets are properly titled when you initially create your trust, and also ensure that any new assets you acquire over the course of your life are inventoried and properly funded to your trust. This will keep your assets from being lost, as well as prevent your family from being inadvertently forced into court because your plan was never fully completed.

Living Trusts, Taxes, Creditors & Lawsuits

When you create a revocable living trust, you are free to change the trust’s terms or even completely terminate the trust at any point during your lifetime. Because you retain control over the assets held by a living trust during your lifetime, those assets are still considered part of your estate for estate tax purposes. Similarly, assets held in a living trust are not protected from your creditors or lawsuits during your lifetime. This is an important and often misunderstood point.

Again, a revocable living trust does not protect your assets from creditors or lawsuits, and it has no impact on your income taxes. However, as mentioned earlier, as long as the assets are held by a living trust or a Lifetime Asset Protection Trust, those assets can be protected from your beneficiaries’ creditors, lawsuits, and even divorce settlements. Be sure to ask us about the different trust-based estate planning options we offer to find one that’s best suited for your particular situation.

The primary benefit of a living trust is to pass your assets to your loved ones without any need for court or government intervention, and to ensure your assets pass in the way you want to the people you want.

Life & Legacy Planning: Do Right By Those You Love Most

Although a living trust can be an ideal way to pass your wealth and assets to your loved ones, each family’s circumstances are different. This is why we will not create any documents until we know what you actually need and what will be the most affordable solution for you and your family—both now and in the future—based on your family dynamics, assets, and desires.

Sitting down with us will empower you to feel 100% confident that you have the right combination of estate planning solutions to fit with your unique asset profile, family dynamics, and budget. We see estate planning as far more than simply planning for your death and passing on your “estate” and assets to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today.

Tags Asset Protection, Estate Plan, Personal Family Lawyer, Probate, Revocable Living Trust, Wealth Protection, Will

Estate Planning

Have a Trust? How the Corporate Transparency Act Affects You

Post author By Sara Thomas
Post date June 26, 2023
No Comments on Have a Trust? How the Corporate Transparency Act Affects You

Get ready for an interesting twist in the world of legal and business news. You may already be familiar with the upcoming Corporate Transparency Act, set to kick in next year. If you aren’t, it’s time to get in the know because it could impact you, and if it does, you’ll need support. Starting January 1, 2024, every small business will be obligated to submit an annual report revealing the names of their major owners. Now, here’s where it gets intriguing. If you happen to have a Trust that holds partial or full ownership in a business, that business might be required to disclose private details about your trust, including details about the name of your Trustee or beneficiaries, in your annual corporate report to the government.

But hold on, you might be wondering, how do you figure out if your Trust needs to be reported? Fear not, for I have some answers. Keep reading, and you’ll soon uncover all the essential details!

What Is the Purpose of the Corporate Transparency Act and What Does It Require?

Enacted in 2020 and set to take effect on January 1, 2024, the Corporate Transparency Act aims to tackle money laundering and terrorism financing schemes involving “shell” corporations—companies that exist merely on paper and don’t engage in actual business or trade (like “Vamonos Pest” in Breaking Bad).

Under this Act, small companies will now have to disclose the names of any owners who hold 25% or more ownership in the company, as well as any individuals who exercise significant control over the company’s activities. The goal is to identify and expose shell corporations that are frequently involved in money laundering, as such illicit activities tend to occur within small businesses rather than large corporations.

To comply with the requirements, businesses must submit an annual report to the Financial Crimes Enforcement Network (FinCEN) containing the following details about each owner or controller:

Business name
Current business address
State in which the business was formed and its Entity Identification Number (EIN)
Owner/controller’s name, birth date, and address
Photocopy of a government-issued photo ID (such as a driver’s license or passport) of every direct or indirect owner or controller of the company

Failing to file an annual report could result in serious repercussions, from paying a fine of $500 for every day the report is late up to imprisonment for two years.

Does My Trust Need to Be Disclosed?

Since a Trust can own a business or a share of a business, Trusts are also involved in the Corporate Transparency Act, but under more limited circumstances.

So how do you know if your Trust information will need to be disclosed?

Let’s break it down…

The new rule applies to any company that is created by filing a formation document with the Secretary of State or a similar office, such as corporations and limited liability companies (LLCs).

Non-profits, publicly traded companies, and regulated companies like banks and investment advisors are exempt from the rule. Large companies are also exempt if they have 20 or more full-time employees in the US and generate $5 million in sales. So, if your trust owns a share of any of these types of companies, it does not need to be reported.

If you have an LLC or corporation you created but aren’t actively using to run a business, that company is exempt from reporting due to its inactivity, so your Trust would not be reported in that instance, either.

But, if your Trust owns a share of a small, for-profit company (like a small family business or local investment), the beneficial owner of the Trust will need to be reported to the Financial Crimes Enforcement Network.

The beneficial owner is the person or people who benefit from the Trust or have the power to make major decisions about the Trust assets. Depending on how your Trust is written, this is usually the trustee, but it can also be the beneficiaries of your Trust.

Make sure to contact us to have your Trust reviewed before 2024 to make sure you report the correct beneficial owner of your Trust.

Does the Corporate Transparency Act Affect My Trust’s Asset Protection?

One of the best things about creating a Trust is that it provides you and your family with an extra level of privacy and can be drafted to provide asset protection from divorce or lawsuits for your Trust’s beneficiaries after you’re gone.

Thankfully, having a Trust that owns a business or a share of a business doesn’t take away from the Trust’s ability to provide asset protection to your heirs.

And while the new Corporate Transparency Act rule reduces some of the privacy benefits that come with owning assets in a Trust, the names of your Trust, trustees, and beneficiaries are not made public and are only used by the government for the specific purpose of investigating financial crimes.

Because of this, Trusts remain an excellent tool for providing privacy, avoiding probate, and setting up your family with a lifetime of asset protection and financial security.

Guidance for Your Family Now and For Years to Come

If you have a Trust or are curious about creating an estate plan for your family, you may be wondering how changes in the law will affect your plan in the future and how you can possibly plan for them. That’s where I come in. Unlike many estate planning attorneys who serve their clients once and never see them again, I see estate planning as a life-long relationship.

Your life and the world around you are constantly changing, and your estate plan should too. That’s why I keep my clients informed about any changes in the law that may affect their estate plans and offer to review their plans for free every three years to make sure that their plan still works for them just as well as it did on the day they created it.

If you’re ready to create a custom plan for the ones you love or have questions about how the Corporate Transparency Act might affect you, schedule a free call today. I can’t wait to serve you now and for years to come.

This article is a service of August Law, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article.

Tags Corporate Transparency Act, Estate Plan, Irrevocable Trust, Personal Family Lawyer®, Revocable Living Trust, Trust

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