Friday, April 18, 2014

Estate Planning: What you don’t know can Hurt you!

Over the years I have seen some common problems with Trust documents.  Here are some examples:

  1. Unfunded & defunded trusts – the trust is created but no assets (or not all of the assets) are transferred into the name of the trust. Result: The trust does not control distribution. A defunded trust was originally funded correctly, but the house was removed in order to do a re-finance. When the Settlor dies, it may be necessary to do a Hegsted petition or a probate, in order to transfer the assets. Another example: Dad re-marries, and his new wife spends his money on lots of expensive things, or gifts it to her children. At the time of Dad’s death, there is no money left in the trust. The trust says that whatever is there goes to Dad’s children, but the money is gone. 
  2. Underfunded trusts – These are trusts that are created to preserve assets for generations, but don’t contain enough money to pay the expense of the assets. Example: Mom and Dad own vacation property next to a lake. They leave $200,000.00, along with the property, to pay the expenses. The question is what happens when the money runs out.  Example #2) Dad and Mom leave a trust with a specific dollar amount bequest ($100,000.00) to one child, and the rest to be divided between the other children. Unfortunately, the assets of the estate are no longer worth what Mom and Dead believed, and the trust does not have enough money to satisfy the specific gift. If the parents had left the child a percentage bequest (e.g. 10%), then the Trustee could satisfy the gift based upon the assets available, and everyone would know what was supposed to be done. 

Lynn A. Dean,
Estate Planning Attorney
If you have had an estate plan done years ago I recommend you have it reviewed.  

Life is not static, change happens and at the Law Office of Lynn A. Dean, we cut through the confusion of estate planning, and counsel you through the process with compassion and expertise.

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