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Should I Have a Will or a Trust?

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By Shannon Laymon-Pecoraro, CELA

Many clients come into the office with a preconceived determination of which estate planning documents they need. Some clients believe their plan is overly simple or that they have too few assets to consider a trust (or any estate planning tool for that matter). Other clients enter our offices having heard that they “must have a trust.” It is important to understand, however, that selecting the correct estate planning tool depends on each individual’s unique situation, and there is no one size fits all solution. Understanding the pros and cons of each document allows the client to determine which tool should be used.

The most common reason clients utilize a trust is to avoid probate. In Virginia, probate assets are those assets that fall into the estate and are controlled by the terms of a will or the laws of intestate succession. In simple terms, the assets that fall into a probate estate are those assets held by an individual at the time of their death that do not pass automatically to another person or entity at death.

When probate is necessary, basic costs of administration include recordation costs and probate tax (which are $1.33 per $1,000 worth of probate assets) charged by the court, costs of any necessary surety bonds, and the costs charged by the Commissioner of Accounts to review necessary filings.  As the value of the estate increases, so do the costs of administration. Many clients, as a result, desire to avoid probate to the greatest extent possible.

Attorneys often use inter vivos trusts (most commonly a Revocable Living Trust) to avoid probate. The most important part of the trust, however, is not the document, but funding. It is critical that after a trust is established that assets be retitled into the name of the trust or that the trust be designated as a beneficiary of the assets held in an individual’s name. How you accomplish such funding can be complicated, particularly when retirement accounts are involved. In the event funding does not occur, the asset will fall into the estate, and, as a result, attorneys often drafts wills that pass assets from the estate to a trust.Clients will also use a trust when control over assets would be beneficial. While some clients may desire control to ensure disposition of assets pass through the bloodline without interference, trusts are even more critical when there is a complex family situation. These complex situations often include blended families, family members with disabilities, or creditor issues.

If a client’s dispositive provisions and family situation are simple, a trust may not be necessary to avoid probate. Instead, an attorney may recommend updating deeds to provide transfers at death, holding assets with rights of survivorship, or completing beneficiary designations. With this approach, the assets will pass to the intended recipient outside of probate and a will is utilized as a fail-safe in the event an asset is not effectively transferred after the owner has passed.

Everyone, regardless of the size of his or her estate, should have an estate plan that provides for surrogate-decision making authority during lifetime (think Power of Attorney and Advance Medical Directive) and disposition of assets at death. To discuss which estate planning tools may be right for you and your family, contact the attorneys at Hook Law Center.

Ask Kit Kat: Repeal of Put Bull Ban in Missouri

Hook Law Center: Kit Kat, what can you tell us about Springfield, Missouri where the citizens recently overturned a ban of owning pit bulls or pit bull-mixes?

Kit Kat: Well, this is very interesting and sad at the same time. Pit bulls are not inherently vicious or aggressive dogs, but they have gained a reputation for being so, because many of them have been bred to engage in dog fighting as a sport or for profit. In October 2017, the city council of Springfield, Missouri by a slim majority had enacted a ban on anyone owning the breed. It was an unusual law in that the punishment for violating the law could be seizure of the dog and euthanasia. In less than a year (August 2018), this unjust law, was put on the ballot as one of many issues during the city election cycle. Breed-specific legislation (BSL) seeks to treat particular breeds of animals differently than others in their class. Unfortunately, this is not the only case of BSL in the country.

 It was a great day for pit bulls when the ban on owning pit bulls or pit bull-mixes was overturned by a whopping 68% of the town’s citizens. “This victory is the result of the  tireless efforts of a coalition of local advocates who took action to put this question on the ballot and give voters the opportunity to preserve their right to adopt any breed of dog they choose,” according to Andy Briscoe, Director of State Legislation, Central Region, for the ASPCA.  Hooray for the citizens of Springfield, Missouri!  (“Springfield, MO, Overwhelmingly Repeals Pit Bull Ban,” ASPCA Action, Issue  3, 2018, p.6)

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Posted on Monday, January 21st, 2019. Filed under Senior Law News.
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