Question 1

Are there any tax reasons to establish an asset protection trust?

Accepted Answer

In certain situations an asset protection trust can be used to eliminate or reduce the imposition of state income taxes. An asset protection trust may also be used to remove assets from a grantor’s estate while still allowing the grantor to potentially benefit from the trust assets.

Question 2

Who should consider establishing an asset protection trust?

Accepted Answer

Asset protection trusts are typically established by individuals in high risk occupations (i.e., doctors and real estate developers) and very wealthy individuals that realize they are targets for creditors due to their net worth. Asset protection trusts can also be used in lieu of a prenuptial agreement.

Question 3

Is a trust always better than a will?

Accepted Answer

Several years ago, one of my clients saw a highly recommended attorney for Estate Planning. He prepared and recorded a Beneficiary Deed for her home, instructed her to name beneficiaries on her life insurance and bank accounts and drafted a Will that allocated everything else to her two children. The Will was really a precaution–everything I own of value already has a named beneficiary. Then she had a friend tell her she should never have paid for a Will, but should have set up a trust. In addition to the points made by the other attorney that advised her, there are other reasons for utilizing a trust based estate plan. For example, using designated beneficiary on assets instead of using a will or trust to pass them has potential pitfalls that may cause her plan to fail. Another major issue to address is how her property will be managed and controlled in the event she becomes unable to make decisions for herself. A designated beneficiary does not avoid that issue whereas a trust can facilitate those matters better in many cases.

Question 4

What is a Trust?

Accepted Answer

A trust is a document that functions like a will — you use it to leave your property to your heirs, friends and family. However, it has much greater flexibility than a will. For example, let’s assume you’d like to leave your two children your money, but you don’t entirely trust them to use it wisely. You can create a trust, and name a trustee (not one of your children) to administer the trust. You can set certain conditions on when and how the money may be distributed. For example, the money cannot be used for a trip to Las Vegas, but could be used for unexpected medical expenses.

Question 5

What is a will?

Accepted Answer

A will is a document that details specific directions on who will receive your property after your death. It names a personal representative or executors to oversee the implementation of your will. It names guardians or conservators who will care for your dependents and any property of your dependents. It can also name trustees, who will manage any property you direct to be held in trust. You can also detail your wishes for the care of your pets upon your death. After your death, your agent is required to file the will with the court for possible probate. Simply put, probate just means the need to prove the authenticity of your will. Your agent is also required to pay legally enforceable claims such as debts and taxes on your estate, as well as take care of the distribution of property.

Question 6

What does a will not do?

Accepted Answer

A will does not govern the transfer of certain types of assets (called non-probate property) which pass to someone other than your estate upon your death. For instance, real estate owned with rights of survivorship pass automatically to the surviving owner, and that person may or may not be a family member or child.

Question 7

What documents are included in an estate plan?

Accepted Answer

A comprehensive estate plan generally includes a disposing document, such as a will or a trust, a power of attorney for health care decisions, a power of attorney for financial decisions, a “living will,” and a declaration of last remains. Based on your situation, you may need fewer or more documents than the ones listed here. An estate planning attorney will tailor your estate plan to your specific needs and situation.

Question 8

Why do I need an estate plan?

Accepted Answer

Many people assume that the laws of their state will appropriately distribute their property to family members. That is true to a certain extent, however, you give up a lot of rights if you fail to plan. For instance, an estate plan can help you ensure that your intentions for your assets are met, prevent disputes, reduce stress for your family at a difficult time and minimize or eliminate estate taxes.

Question 9

What is a durable power of attorney?

Accepted Answer

A durable power of attorney is a document in which you appoint an agent to act on your behalf and make decisions on financial matters. The document needs to clearly state what powers your agent has while you are incapacitated. For instance, writing checks, depositing funds, making financial decisions for your business, etc. Keep in mind that all powers of attorney expire upon your death, so you should make sure you have a trusted agent or representative in place when conservatorship or guardianship proceedings begin. Please note that many states do not allow your agent to make gifts of your property, change beneficiaries, or create, amend or revoke your will or trust.

Question 10

What is a health care or medical power of attorney?

Accepted Answer

A medical power of attorney in Florida is a legal document that provides another individual of your choosing with the legal right to make medically related decisions on your behalf. For example, if you are in an accident and become unable to communicate, your representative will communicate your wishes to medical professionals. A federal law protects the privacy of your medical information, but you can expressly permit disclosure to a named representative or family and friends (also known as an HIPAA representative). If you create a health care power of attorney, your named agent is automatically deemed a HIPAA representative. However, some states limit this power to a period of your incapacity, so you may want to appoint a HIPAA Representative, who will help you the rest of the time.

Question 11

What is a living will?

Accepted Answer

A living will is a document which will express your feelings about life-sustaining treatments should you become incapable of expressing your wishes. For instance, it will let your family know if you do or do not want heroic measures to sustain your life. You can also indicate that you are willing to be an organ donor if you wish. You can name an agent or representative to make sure your wishes are carried out.

Question 12

What is a Revocable Living Trust?

Accepted Answer

A Revocable Living Trust, also called a Revocable Trust, Living Trust or Inter Vivos Trust, is simply a type of trust that can be changed at any time. In other words, if you have second thoughts about a provision in the trust or change your mind about who should be a trust beneficiary or trustee, then you can modify the terms of the trust through what is called a trust amendment. Or, if you decide that you do not like anything about the trust at all, then you can either revoke the entire agreement or change the entire contents through a trust amendment and restatement. A revocable living trust functions much like a will, although is far more flexible in what it allows you to do. It allows you to achieve significant personal goals with your assets that you would not otherwise be able to achieve. Perhaps most important, it allows your heirs to avoid probate on almost all property you own — real estate, jewelry, heirlooms, bank accounts and more.

Question 13

What does the “age requirement” paragraph mean?

Accepted Answer

The Wills/Trusts drafted by our office often include contingent beneficiaries.  For instance, if you leave everything to your son and provide that if your son fails to survive you, his share goes to his children, his children are your contingent beneficiaries.  In that situation, clients usually do not want their minor grandchildren to receive their assets outright on their 18th birthday.  Rather than using a formal Trust for something that may never occur, we typically put an age requirement paragraph which would specify that if any beneficiary of the Will/Trust is under a certain age, his or her share would be held in Trust until he or she attains the specified age.

Question 14

What other areas of law should an estate planning attorney be familiar with before practicing asset protection planning?

Accepted Answer

An estate planning attorney should be familiar with taxation and business entities, bankruptcy law and creditor/debtor law. Specifically, the attorney must have knowledge of how applicable fraudulent transfers/conveyance laws apply to the proposed estate planning.

Question 15

What is Probate?

Accepted Answer

Probate is the formal legal process of proving a will and appointing an executor or personal representative who will administer the terms of the will — pay taxes, settle debts and distribute assets to the intended beneficiaries. Most states have streamlined the probate process, making it much easier that it once was.

Question 16

What is the difference between Probate and Non-Probate assets?

Accepted Answer

Probate assets are assets that are controlled by a person’s will after they die. In contrast, non-probate assets are not controlled by a person’s will. Common examples of non-probate assets would be when an annuity or life insurance policy has a beneficiary or when a house or bank account is owned in joint tenancy between two or more people. It is important to recognize this difference because it can affect how much of your estate is distributed to your heirs upon your death.

Question 17

What happens if you die without a will?

Accepted Answer

If you die intestate (without a will) the state laws in Florida go into effect. The court will determine who receives your property by default — typically to your spouse or children, or if you have neither, to other family members. Of course, the courts will just be guessing on how your assets should be disposed of and the plan may not reflect your actual wishes. That’s why creating a will is so important — you will have peace of mind knowing your heirs will be taken care of.

Question 18

What things do I need to consider in my estate plan?

Accepted Answer

The more important thing is to determine what matters most to you! Think about the arrangement you want for the distribution of your assets and for the care of your family, children and pets. Establish a relationship with the agents you appoint to handle your property and care for your family. Be sure to choose someone you KNOW will carry out your decisions and perhaps make the right decisions for you when you cannot. Finally, you’ll need to prepare all the legal documents that will express your preferences in health care treatment, life-prolonging care decisions, etc.

Question 19

What is the difference between Joint Tenancy and Tenants in Common?

Accepted Answer

Joint tenancy with right of survivorship means that whoever outlives the other gets full title to that asset. Tenants in common means that when one of the owners dies, his or her share of the asset goes to his heirs. For example, if two individuals are tenants in common on a house and one of them dies, the deceased individual’s share in the property goes to his heirs and the living owner keeps his own share in the house.

Question 20

What is a fiduciary?

Accepted Answer

A fiduciary is a term for a person you name to perform duties for you if you can’t speak for yourself and upon your death. This person should be someone you trust, who will put your interests ahead of their own and perform their duties with care, attention and loyalty.

Question 21

What questions should I ask myself before choosing a fiduciary?

Accepted Answer

Are there state laws that might disqualify my chosen person? Does the person have the skills, time and commitment to perform the duties required? Will this person be discreet with my medical and financial information? Will this person truly follow my wishes? Is the person willing to take on the tasks? Are all my documents in order (powers of attorney, living will, will, trusts, etc)?

Question 22

What is gifting?

Accepted Answer

You have several options for leaving your property and assets to different people. You can make an outright gift to the people you name. You can make a gift based on certain conditions — for instance, the person must be alive at your death. Gifts can be made “in trust.” A trustee will manage the gift for the beneficiary and distribute it according to the terms you specify. In addition, you can name alternate beneficiaries should the initial beneficiaries fail to meet the conditions you set.

Question 23

What is asset protection planning?

Accepted Answer

Asset protection planning is proactive legal action that protects your assets from future creditors, divorce, lawsuits or judgments. It involves a series of legal techniques that can deter a lawsuit, provide settlement negotiation power and help prevent the seizure of your assets in the event of a judgment.

Frequently Asked Questions