Your Bucket List for Estate Planning: Why a Trust Might Be Right for You

A recent movie with Morgan Freeman and Jack Nicholson inspired a lot of people to think about their bucket list – the things they would like to do before they die. While a trip around the world in a sailboat may seem a lot more exciting and glamorous than estate planning, thinking about what you want at the end of your life financially, and for those you love, can be even more important than achieving your bucket list. Join me as we explore a different kind of bucket list – one that will insure your loved ones, and the things that you’ve worked so hard for, are protected.

What is a trust?
When most people hear the word “trust,” they probably think of families like the Vanderbilts or Hiltons, but trusts are not just for the ultra wealthy. Established during the Crusades in the 12th and 13th centuries to protect the rights of landowners while away on their journey to the Middle East, trusts are still relevant and vitally important to the work I do everyday in helping my clients achieve their goals. You needn’t be a Rockefeller or a wealthy Englishman to benefit from the level of protection that trusts can offer in our modern life.

Why are trusts important?
I want you to think of a trust as a bucket. And what are buckets good for? They are helpful to put stuff in. When you create a trust, you are in essence creating a legal “bucket.” By placing assets like houses, vehicles, timeshares and farmland into that trust “bucket,” you are insuring that those assets will be managed according to your wishes, which will be written in the trust agreement by you and your legal advisor. Unlike a will, trusts can help protect and manage assets while you are still alive, but disabled in some regard.

How are trusts used?
So, how do you put stuff into the trust bucket? By directing assets into it, such as retitling bank or investment accounts, doing a deed to your house or farm, or changing beneficiary designations on life insurance. For everything that is in the trust bucket, you leave a set of instructions written in the trust agreement. You also name someone to carry out those instructions. That person (or bank or trust company) is called the trustee. The person you choose as trustee to manage your trust “bucket” has a fiduciary duty, which is one of the highest duties in the law, to carry out your wishes and do what is best for you – not what is best for them. They have to act in your best interest. If they don’t act properly, they can be taken to court.

The most important thing for your plan is to think about what you want to accomplish. What are your goals – for yourself and your family? Once we choose the goals (and I help clients do this nearly everyday), then we can see what tools will best accomplish those goals. A trust can often be the best tool to carry out goals such as:

  • Avoiding the delay and expense of probate court.
  • Transferring assets privately after death. (As opposed to a will, which is a public document.)
  • Protecting assets from a divorce or lawsuit.
  • Giving clear instructions for managing your money during your disability.
  • Organizing assets so someone else can help manage them.
  • Protecting assets from being used for nursing home costs.
  • Leaving money to someone who is too young or too unwise to handle it by himself or herself.
  • Avoiding estate taxes.
  • Preventing family fights regarding a family farm or business.
  • Balancing the wife and kids in a second marriage.

A trust is just one of the legal tools we at the Edwards Group use to carry out your goals and dreams. Our other tools include wills, powers of attorney, living wills, contracts, and deeds. A trust is one of the best tools we have to carry out your wishes and plan for a time when you might become incapacitated or pass away suddenly.

Remember, a trust is nothing more than a tool. It’s not a magic document. All it can do is carry out the instructions written in it. And the only assets it governs are those you actually put in the “bucket.” Call us today at 217-726-9200 to schedule an appointment and get started on your bucket list!

Bills, Debts and Taxes: Will your debts die with you?

So, who pays your debts when you’re gone? Your wife? Your kids? What happens when someone dies, leaving debts and not enough money to pay them?

The Good News

Here’s the good news: No one else is required to pay your debts, as long as they are not on the debt, too. Your wife, your kids, your executor, your power of attorney – none of those people are required to pay off your debts with their money. What they are required to do is use your money to pay your debts. But if your money runs out, then the creditors are just plain out of luck.

The Vital News

Even though your debts die with you, they can still haunt your family and the assets you leave behind. Maybe you’re thinking – I pay my bills on time, why should I worry about debts after I die? Let me give you a few examples about how obligations you leave behind could haunt those you care about most. Let’s think about the various kinds of “debt” – not just overdue bills, but any obligation that may be left unpaid at your death.

Your house. Suppose you have a house with a mortgage. When you’re gone, the mortgage must be paid or refinanced. Will your spouse be able to stay in the house?

Your property. Failure to plan for the skyrocketing costs of long-term care can result in the state putting a lien on your real estate.

Your business. Without planning, your business may be at risk. Does the business depend on a loan or credit line based on you? Without you, will the business be able to access needed bank credit?

Your partners. If you’re in business with a partner, how will your share be bought out at your death? Maybe a lot of your wealth is in the business, but, without a plan, how will your family get the money?

The family farm. Do you have a child who farms and other children who don’t? What is your “debt” to each of the kids? Without a plan, the farmer son may be left without a way to make a living.

College. How strong is your desire to help your kids (or grandkids) get an education? Does it rise to the moral obligation of a “debt”? When you’re gone, how does your plan make sure the funds are there when the kids are ready to go to college?

Uncle Sam. Many of us have IRA’s or annuities. Taxes were deferred during your life, but after you are gone, someone will owe those taxes. Do you know how much tax your family might owe after your death?

You may not leave behind unpaid credit card bills or overdue bank loans, but you may leave other obligations.

You must have a plan in place with enough funds at the right time to take care of them. Without a plan, your family will be left paying – in legal fees, time, stress, frustration, and strained relationships.

A plan to address these issues is more than getting the right kind of legal document. Addressing these issues and others will require you to integrate your legal and financial plan. We help clients do this every day at Edwards Group. Let us help you, too. Call us at 217-726-9200 to schedule an Initial Meeting where you’ll discover where your family is at risk, and how to have true peace of mind when it comes to planning.

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Preparing For the School Bus Accident

If you attend a workshop or meet with me individually, you will probably hear about the “school bus trust”.  What is it?  A “school bus trust” is a trust designed to protect the assets you are leaving to a spouse, child or other loved one, and protect it from liability for a school bus accident.  The trust also protects against other liability such as divorce, remarriage, business downturns, professional malpractice, personal loan guarantees, and other risks.

The “school bus trust” can be designed where your spouse or kids can get the money when they need it, but otherwise the assets are protected from outside threats.

Come to our Wills & Trusts: How to Get Started workshop and hear a lot more about how a “school bus trust” works.

Protecting Your Family Like an NFL Lineman: 4 Risks to an Inheritance

The other day I had a chance to speak at the Rotary Club. My topic, like the article “How (and Why) Athletes Go Broke” in the latest issue of Sports Illustrated, was about protecting the money you’ve worked so hard for. There are many ways your spouse, children or grandchildren could end up losing what was so important for you to leave behind. I know you can’t imagine your loved ones blowing your hard earned money (or maybe you can), but sometimes it happens in the blink of an eye. What are some of the risks to an inheritance?

There are generally 4 risks to an inheritance:

1. Lawsuits

The SI article is riddled with stories of lawsuits. Though it may not be something you think about, imagine your spouse, devastated by your recent death, running a red light and causing an accident involving a school bus. In an instant, all that you worked so hard for could be given away by the courts to the injured parties leaving nothing to care for your family in your absence.

2. Divorce

One NFL owner was once asked by one of his players what the most dangerous thing to happen to them financially could be. His answer: Divorce. Many players, who marry their hometown sweetheart, can never imagine a divorce in their future. Even if your son has married the sweetest girl in the world, there is no way to see what the future holds. Would you be OK giving half your hard earned money to her if they end up getting divorced a few years after you pass away? It happens regularly when people don’t plan ahead.

3. Remarriage

If you die, and your spouse remarries, do you mind if part of the money you left is split with the new spouse, or even later left to the new spouse’s kids? This could either be a gold-digger (or “bimbo” as some of my clients like to say) or a stand up, class-act new spouse. But either way, without planning, there is a risk those assets will end up where you did not intend. Your children could even lose access to the money they would need for college.

4. Wild Spending

Lots of quick money means a happy life, right? Well, that’s not what the stats show. Quick money (winning the lottery, getting an inheritance, or multi-million dollar NFL contract) can lead to wild spending, divorce and bankruptcy. If your children end up with large assets at the young age of 20, they could quickly blow it like any upstart professional athlete. If someone isn’t prepared to manage the money, the money will manage them. You’ve worked hard so your kids will be ok without you, but will they really be better off with a large sum of money that has no safeguards?

Nobody likes to think about these difficult issues, but with proper planning these assets can be protected and your loved ones will be protected – even if you can’t be around to do it. Give us a call at 217-726-9200 or make plans to attend an upcoming workshop on the basics of estate planning, so you can make sure your family is protected.