If you are prioritizing charitable giving in your estate plan, you may want to consider using something called a donor-advised fund (DAF) which has become more popular in recent years.
The value of DAF grants made to qualified charitable organizations increased 9% to $52.16 billion in 2022, and the number of accounts increased 2.9% to nearly 2 million according to the 2023 Donor-Advised Fund Report. Here are some of the basics to know about DAFs:
ABCs of DAFs
Using a trust as part of your estate plan can be beneficial in a number of ways, including maximizing tax code provisions to shield assets from gift and estate taxes, protecting assets from creditors or ex-spouses, or helping heirs be more responsible with their inheritance.
Revocable living trusts can be a vital part of your estate plan, but in order to help you, they can’t just be drafted and forgotten. A trust needs to be properly funded, including additions that are warranted. If you don’t move certain assets (such as cash, securities, real estate, artwork, and other types of property) into the trust before you pass away, the trust will not serve the purpose you intended in your estate plan.
If you are making a trust part of your estate plan and have already made the necessary arrangements, be sure to retitle assets in the name of the trust. This may be easier said than done, and depending on the type of asset, specific requirements will need to be met. Simply transferring assets to a trust is not enough. A transfer of ownership of real estate, for example, typically requires you to jump through extra hoops.
In the last post, I began writing about including care for your pet as part of your estate plan. One option for doing this is to establish a pet trust.
A pet trust is a type of trust established for the care of one or more animals that outlive their owners. Pet trusts are recognized in all fifty states, especially for the care of animals with longer life expectancies, such as turtles or birds, as well as for animals that are more expensive to care for.
Pet trusts will remain in effect for the duration of the pet’s life. If there are multiple pets, the pet trust will remain in effect until the passing of the last surviving pet. When establishing the trust, the owner has a number of important decisions to make, and the trust is able to be fully customized.
If someone close to you passes away and you receive the information that they had named you as trustee, you may find yourself feeling overwhelmed if you do not know what is needed to fulfill this role and if you have not served as a trustee before.
Serving as a trustee isn’t an innate skill that everyone has, and there are many responsibilities and duties that someone must take on in this role. Different states may have some specific duties and responsibilities that vary, but here is a general list to help you begin:
How you title your real estate holdings is key to making sure your assets are transferred according to your wishes after you have passed away. In making decisions about how to title your assets, you’ll want to consider things such as avoiding probate, minimizing estate taxes, and liability protection.
Avoiding Probate
People often want to avoid probate if at all possible. Here are some common ways to do so:
A trust is a legal document that you can use to give assets to others. A trust can be revocable or irrevocable. As the creator of the trust, you can modify a revocable trust at any point throughout your lifetime. If you decide on an irrevocable trust, though, you generally will be unable to make changes to this type of trust after you have created it.
A lot of people are concerned about the term “irrevocable” since they associate this term with permanency and are afraid that this type of trust could turn out to no longer be compatible with their wishes as their life circumstances change. There is, however, a way to deal with changes in life circumstances after the creation of an irrevocable trust using “trust decanting.”
What Is “Decanting” a Trust in Estate Planning?
Last week I started writing about moving trusts from one state to another. In today’s post, I’ll share a few more things to consider if you are moving from one state to another, including the way states may treat marital property differently.
States Treat Marital Property Differently
Although most states are common law states which allow marital property to be owned separately, there are several community property states. In community property states, all of the property owned by marital partners is deemed equally shared, including property that is only titled in one spouse’s name.
If you have a revocable living trust and decide to move from one state to another, your trust should remain valid in your new state. Though the validity of this trust won’t be affected, you might want to make some changes to it since different states can have different laws regarding things such as marital property. Also, if you are moving into a new home you are buying, you will need to transfer this asset to the trust. Below is more information about trusts and moving a trust to a new state:
Using Trusts in Estate Planning
Revocable living trusts are often used in estate plans to help shelter assets from probate, to protect private finances from public scrutiny, and to provide additional control over the disposition of assets after the owner has passed away. Trusts can save money and time when it comes to settling an estate, and they can help ensure that dependents and charities are supported.
Although we may think of phishing emails, robocalls, or other types of scams when we think about financial exploitation, it is far more common for this type of exploitation to be done by relatives, caregivers, neighbors, or friends someone believed they could trust. Financial exploitation is more common than most people realize, but understanding financial abuse and strategies can help people avoid being exploited.
Several studies have shown that individuals who have a cognitive impairment, are in poor physical health, are isolated, or have a learning disability may be more at risk for financial abuse.
Studies have also revealed common characteristics of individuals who financially exploit others, including those who have substance abuse issues, mental illness, or who are financially dependent on the person they are exploiting.
A lot of people are part of a blended family. It’s important for those in this type of family to make sure that stepchildren are incorporated into their estate planning process.
Many stepparents love and care for their stepchildren as their own children, and they may not be aware that this emotional bond is not one that is protected by law. Laws of inheritance do not apply to stepchildren unless they are formally adopted. Without a legal relationship to your step children, you will need to be clear in your estate plan that you wish for your estate to benefit them.
Often, remaining property is left to children equally in estate plans. However, this type of language only applies to biological and adopted children. Although people believe their family will understand the decedent’s wishes and share things evenly, this is not always the case.
Illinois Estate Planning and Elder Law Blog