Blog – Page 3

*KEY PLAYERS

We at the firm want to thank you for entrusting us with the opportunity to form your trust in 2015. The most common follow up question of our trust clients, is always how to fund the trust. I am submitting this article to you as a thank you and a reminder about the importance of funding your trust.

We often receive our clients through referrals from financial advisors and bankers. After the trust is completed our office advises the client to return to the advisor to change the beneficiaries to the Trustee of the named trust signed on the date the trust was endorsed. Often the financial advisor will be able to change beneficiaries through their software.

Another key player is the client’s accountant or tax advisor. The accountant should advise on the particular tax consequences of certain assets being transferred to the trust. They should be aware of what is in the trust because they will need to file a tax return for the trust as it earns income over the years.

We encourage our clients to check with their tax advisor to gain an understanding of the tax consequences of a transfer to the trust. IRA’s and 401K’s have issues with what to do with the income from those investments and how to handle the mandatory payouts when trustees reach certain ages. Some of the payouts are affected by the age of other beneficiaries in the trust.

*FUNDING THE TRUST

Funding the trust involves changing the beneficiaries of certain accounts to ensure the trust is the beneficiary. Funding the trust often requires attorneys to re-title real property through a deed so that it is owned by the trust. The trust also has an exhibit that should list all the accounts, real property, and any untitled property that is to be owned by the trust.

For younger clients relying on life insurance as a bulk of their trust assets, it is imperative to ensure that the beneficiary of the life insurance is the trust.

Be sure to also check your pay on death accounts and transfer on death accounts to ensure that the trust is beneficiary. If you have checking accounts that are jointly held, that money will go to the person who is the joint owner by operation of law.

Our firm often re-deeds property that the grantors want the trust to hold. If you desire to hold property in the trust it should be deeded to the trust.

Our firm creates a will that corresponds to the trust. In that will we provide that a document can be hand written and signed by the testator to distribute tangible personal property that is not titled. However, if there is an item or multiple items that are expensive and will subject the estate to probate, we encourage the owner to write that the item is to be put in trust. We also encourage the trustee to list said properties in the appropriate trust exhibit. This will ensure that it passes to beneficiaries outside probate and will be distributed according to your wishes described in the trust document.

In conclusion, it takes time, forethought, and strategy to ensure you have properly titled and designated your assets to ensure they are in fact held in trust. Your attorney, financial advisor, and accountant are willing and able to get the assets titled correctly. You are not taking full advantage of the trust until it is funded. Make it your goal in 2016 to update and fully fund your trust.

God speed,

JD Fairchild Esq.

“MY DAUGHTER’S SORRY HUSBAND”

How many times do you hear parents wax poetic about their children’s spouses. It goes both ways, of course. No one is good enough for MY little girl. However, our children grow and marry and have children and have to manage their own affairs.

We watch and counsel and bear with our children as they learn and grow. We observe how they run their family and their finances. In the back of our minds, though, we are hoping to see that they will be fiscally responsible and not need to rely on us. We loan money to them and we try and show them how to budget. All the while, our nest egg grows.

What are we to do when our children or their spouses prove over time that a large inheritance will not only be wasted but may actually harm our children’s relationships and financial well being? How do we leave them wealth with confidence that it will be put to good use?

Estate planning Attorneys hold the tool to enable you to use your wealth for the well being of your children and grandchildren long after your passing. This tool, when used properly protects the earning potential of your wealth and remains separate property in the event of divorce. With proper planning, this tool allows your children access when needed, or for life’s special occasions, but limits abuse and mismanagement by your children.

By know, the reader is probably thinking that I am describing a trust. And the reader is correct. The opening of this article had the purpose of reminding us that our children, even as adults, need us. Some of our children can not be left to themselves when it comes to money. This truth transcends how much wealth we have. Some of us have great children who are simply not great with money. Even smaller amounts of money can be protected and grown to be used for the benefit of our children.

For example, let’s assume that after you have exhausted most of your nest egg and reduced your life insurance you will leave only $50,000.00 to your children. You know that your children make less than this per year, and they struggle every month to pay the car payment and light bill. A trust that invested this amount and earned just 5% year would equate to a little over $208.00 per month. This would pay the light bill of most homes for most of the year forever.

This same $50,000.00 trust could also have provisions to pay deductibles for insurance and co-pays for Doctor visits. Although $200.00 a month plus co pays do not seem like much, they are exactly what young struggling families deal with on a regular basis. But, do our children think of the light bill or the co-pays when the executor hands them a $50,000.00 check?

FUNDING A TRUST

“My Daughter’s Sorry Husband”

Lynchburg & Bedford

Roanoke & Smith Mountain Lake

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