Estate Planning and Incentive Trusts

When you take stock of your assets and recognize the fact that your estate is going to have a considerable impact on the lives of your heirs, it is important to consider the personalities and proclivities of the each individual involved. There will probably be some family members who are ready to receive their inheritances directly with no strings attached at all, but you may have some nagging doubts about others. Younger people who are not established in their own right may lose their way if they find that they don't really have to gain an education and embark on a career path for financial reasons. And others may have personal problems or difficulty handling money, and these types of things can give you reason to take pause.

Incentive trusts are estate planning tools that you might want to consider to address these concerns. With these vehicles you set up the trust to make distributions based on certain stipulations that are intended to guide the beneficiary in the right direction. For example, many people create trusts that provide academic incentives. You may allow for regular distributions as long as the beneficiary remains in school, and provide for a lump sum distribution upon graduation. You can take that a step further and foster an ongoing work ethic by having the trust match each dollar that is earned by the beneficiary in his or her own right.

In addition to encouraging positive choices, incentive trusts can be used to discourage destructive behavior. For example, you could tie distributions from the trust to completion of a substance abuse treatment program, and add provisions for ongoing distributions contingent upon staying free of the addiction or addictions.

These are just a few common examples of how incentive trusts are used, but you can actually create such a trust with any stipulations you choose to as long as they are not illegal. There are obvious reasons to tread lightly and proceed with caution because you don't want your gifts to be met with resentment, but if you use them wisely incentive trusts can be a very useful inheritance planning solution.

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Incapacitation Planning for GLBT Persons

Planning for when you may become incapacitated is critical for everyone, but especially so for gay, lesbian, bisexual, and transgendered persons, as GLBT couples do not always have the same rights as heterosexual married couples under the law.

It is very important for GLBT people to think through what they want to happen if they cannot take care of themselves and their finances. You may want to have an attorney draw up the following documents and to spell out your wishes in each case.

• Durable power of attorney for finances-If you become unable to pay your bills or look after your finances, a court would probably appoint a biological relative to have control over your finances, if you have not already named someone to act in your behalf in these matters.

• Medical directive or living will-This document spells out your wishes as to prolonging of life and other medical care issues

• Durable power of attorney for health care-Also called a health care proxy, this allows another to make medical decisions for you if you are unable.

• Hospital visitation authorization-This names the people you wish to visit you in the hospital if you are unable to communicate this yourself.

• Instructions for disposition of your body and funeral arrangements-If you do not leave written instructions on these matters, most states will give control over your body to legal relatives.

In addition to these documents, it is very important for GLBT persons to leave a will designating who will inherit your property. If you die intestate, without a will or a trust, your same-sex partner is not legally entitled to inherit your property as a spouse would be.

To make sure your wishes will be protected, contact an estate planning attorney, who can help you with these difficult decisions.

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Estate Planning Legal Basics

Planning for how your heirs and loved ones will inherit what you have built over a lifetime is a weighty and important topic.

If you die without a Will, most states in America have laws which explain how to distribute your assets. The law in your state considers you to have died "in testate" which is a fancy way of saying you didn't have a Will. Each states' laws differ on how a deceased's assets are distributed "in testate", but many state laws are very similar. It is typical of many state laws that estate assets are distributed in a successive fashion to the deceased person's heirs. Determining who is an heir of a person who died without a Will usually goes something like this: (1) children (2) grandchildren (3) nieces & nephews (4) the decedent's siblings (5) the decedent's parents, etc.

That is not a rule, but an example of how your estate will be distributed without proper planning.

Having a Will does not necessarily avoid probate. Probate is also not necessarily bad. The probate process was created so that the Court in the deceased's state, and county-of-death, can effectively administer the deceased's assets under the dictates of the Will. This can solve a lot of headaches for the personal representative or executor - especially when their is any kind of fighting among the deceased children and/or heirs. Sadly, fighting over the deceased's assets is more common than people often think. Having a Court look over this process can be a life-saver for the personal representative.

A deceased person often has assets in many different forms. Some of these assets will be found to be "probate assets" and some of them will be considered "non-probate assets" under the law of their state. It is important to differentiate between what is a "probate asset" and what is a "non-probate asset".

Probate assets are usually those assets which are owned by the deceased person in their name only. What does this mean? It means those assets which the Court can transfer, under the Will, in the probate process. Still confused? Here is an example: the decedent's home (or "real property") is a transferable asset which is subject to probate. Thus, it is a "probate asset".

What is a "non-probate asset"? A non-probate asset is any asset held by the deceased person hat can be transferred without going through the probate process. Non-probate assets can include: real estate held as a joint tenant with rights of survivorship, joint bank accounts, other joint accounts, pay-on-death (POD) accounts, a transfer-on-death (TOD) account, or property held within a Trust which was created by the deceased person prior to death.

If a Will or Trust is created, the deceased person will have appointed either a personal representative (under the Will) or a trustee (under the Trust) to administer the deceased's assets upon his or her death. The initial duty of the personal representative or trustee is to figure out how to lawfully deal with the assets. This is where an attorney comes into the picture. Hiring a good attorney is of the utmost importance in properly collecting and distributing a deceased person's assets upon death.

Next, the attorney and the personal representative of the deceased's person's estate must determine what kind of assets the deceased person had and whether those assets are "probate assets" or "non-probate assets". As was discussed above, there are specific kind of assets which must be discovered and sorted. It is often the personal representative's job to discover those assets, hunt them down, and report their existence to the attorney for review. The total amount of probate assets will provide the attorney and personal representative with a means to determine what approach must be taken to transfer the deceased person's property to his or her heirs. Furthermore, a second reason that this step must be taken is to determine whether the deceased person's estate will be required to file a federal estate tax return and the tax return of the deceased's particular state.

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