Read more about the article Should You have a Pet Trust Created? – Annapolis and Towson Estate Planning

Should You have a Pet Trust Created? – Annapolis and Towson Estate Planning

The infamous Leona Helmsley was the subject of as many headlines after her death as when she was alive, mainly because she left millions in trust for her dog, “Trouble.” However, you don’t have to have millions to want to protect your faithful pet’s future in the event of your passing, according to a recent article, “Pet Trusts Are Worth the ‘Trouble’” from Wealth Management.

Pets are legally considered the personal property of their owner, in the same way, one owns a house or a car. If no planning has been done, your heirs can inherit the ownership of your pet. However, they won’t be required to care for your pet. Instead, they can take the pet to a local shelter or, as often happens, abandon it. However, there are steps you can take to protect your animal companion.

Ask two friends or relatives if they would be willing to serve as emergency and/or long-term caretakers. Provide them with contact information for your veterinarian, discuss your wishes about what should happen to your pet and make sure they have each other’s contact information. Have a frank discussion of how expenses will be covered and stay in touch with them. Circumstances can change over time; if they move, have a health issue, or can’t manage the care of your pet, you’ll want to know about it.

Planning for pets has both legal and financial considerations. A pet trust may be created as part of a living trust or as a stand-alone trust. The named trustee has access to funds, and the language of the trust includes directions as to how funds should be used for your pet and how to distribute any remaining funds upon the death of your pet. Pet trusts are now valid in all states.

Note that a verbal agreement to care for your pet may not be legally enforceable. Therefore, you may prefer to use a pet trust. While you can put a provision in your will for the care of your pet, unlike a trust arrangement, there is no continuing obligation for the executor under a will to ensure the pet’s well-being once the estate administration is completed. Instead, you’ll have to count on the moral commitment of the caregiver to take care of your pet.

Planning for your protection shows why a pet trust is a good idea. For example, your Power of Attorney names an agent to act on your behalf in the event of your own physical or mental incapacity. It is possible to include specific funds in a Power of Attorney to maintain and support companion animals. However, this terminates on your death. A trust remains in effect for as long as the terms dictate, whether you are incapacitated or deceased.

Another option is to make arrangements with a humane society or animal rescue group to take possession and care of your pet. This may require making a specific donation to the group and having confidence that the organization will be operational as long as your pet lives.

Speak with your estate planning attorney about your state’s rules on pet trusts and plan for yourself and your beloved animal companion. You’ll then rest easy knowing you are both protected.

Contact us to review your estate plan with one of our experienced estate planning attorneys.

Reference: Wealth Management (April 14, 2023) “Pet Trusts Are Worth the ‘Trouble’”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys 

What Happens to a Pet when Owner Dies? – Annapolis and Towson Estate Planning

Pet trusts are a legally binding arrangement in which the donor (the person creating the trust) formally outlines their wishes for how they want their pet to be cared for.

A few more people are involved in a pet trust, according to the article “’Paws-ing’ to plan: How you can ensure your pet’s future well-being with pet trust planning” from The Gilmer Mirror. A trustee oversees the way trust funds are dispensed, a caretaker, who is in charge of the pet’s care and an enforcer, who makes sure the donor’s wishes are followed. Donors may appoint a caretaker of their choice, or work with an agent to find someone suitable for their pet.

Unlike an informal promise to care for a pet made by a well-meaning friend or family member, the pet trust is legally enforceable, giving it more “teeth” than a verbal promise. There is nothing to stop the person you leave your pet with from doing whatever they wish with the pet, from leaving the pet at a shelter to selling the pet. With a trust, all parties are bound to use the money for its intended purposes and to follow pet care instructions.

What can you ask your pet’s caretaker to do? Anything you feel is necessary. It can be as basic or as detailed as you wish. The pet could be cared for as they were by you, with the same kind of food, attention and affection. They can also continue to be seen by the same veterinarian, if one is named in the trust.

Pet planning has become increasingly popular, as more people see their pets as members of the family. However, pet trusts are not just for house cats or dogs. Work animals, show animals, specially trained service and companion animals and animals used for breeding are also protected by pet trusts.

A pet trust could ensure the future of a highly trained show jumper, or to ensure a working dog ends up at a farm where she continues to herd sheep.

Pet trusts are especially important for people with service animals. A blind person who has bonded with a seeing-eye dog may only wish another blind person to inherit a seeing-eye dog. The trust could ensure that animals who have been trained to provide emotional support, or to detect health conditions like seizures, should go to individuals with these same challenges.

Individuals who live with highly trained service animals should consult an experienced estate planning attorney along with the organization that trained the animal to ensure a pet trust is created within the scope and requirements of the organization, as well as the wishes of the owner. The organization may be better able to place the animal, while adhering to the pet trust’s requirements.

A pet trust helps protect our beloved animal companions and provides peace of mind for their humans. It should be part of your overall estate plan and should be updated regularly.

Reference: The Gilmer Mirror (March 23, 2022) “’Paws-ing’ to plan: How you can ensure your pet’s future well-being with pet trust planning”

 

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What Assets Should Be Considered when Planning Estate? – Annapolis and Towson Estate Planning

The numbers of Americans who have a formal estate plan is still less than 50%. This number has not changed much over the decade. However, the assets owned have become a lot more complicated, according to a recent article from CNBC titled “What happens to your digital assets and cryptocurrency when you die? Even with a will, they may be overlooked.”

Airline miles and credit card points, social media accounts and cryptocurrencies are different types of assets to be passed on to heirs. For those who do have an estate plan, the focus is probably on traditional assets, like their home, 401(k)s, IRAs and bank accounts. However, we own so much more today.

Start with an inventory. For digital assets, include photos, videos, hardware, software, devices, and websites, to name a few. Make sure someone you trust has the unlock code for your phone, laptop and desktop. Use a secure password manager or a notebook, whatever you are more comfortable with, and share the information with a trusted person.

You will also need to include what you want to happen to the digital asset. Some platforms will let owners name a legacy contact to handle the account when they die and what the owner wants to happen to the data, photos, videos, etc. Some platforms have not yet addressed this issue at all.

If an online business generates income, what do you want to happen to the business? If you want the business to continue, who will own the business, who will run the business and receive the income? All of this has to be made clear and documented properly.

Failing to create a digital asset plan puts those assets at risk. For cryptocurrency and nonfungible tokens (NFTs), this has become a routine problem. Unlike traditional financial accounts, there are no paper statements, and your executor cannot simply contact the institution with a death certificate and a Power of Attorney and move funds.

Another often overlooked part of an estate are pets. Assets cannot be left directly to pets. However, most states allow pet trusts, where owners can fund a trust and designate a trustee and a caretaker. Make sure to fund the account once it has been created, so your beloved companion will be cared for as you want. An informal agreement is not enforceable, and your pet may end up in a shelter or abandoned.

Sentimental possessions also need to be planned for. Your great-grandmother’s soup tureen may be available for $20 on eBay, but it is not the same as the one she actually used and taught her daughter and her granddaughter how to use. The same goes for more valuable items, like jewelry or artwork. Identifying who gets what while you are living, can help prevent family quarrels when you are gone. In some families, there will be quarrels unless the items are in the will. Another option: distribute these items while you are living.

If you can, it is also a good idea and a gift to your loved ones to write down what you want in the way of a funeral or memorial service. Do they want to be buried, or cremated? Do they want a religious service in a house of worship, or a simple graveside service?

If you are among those who have a will, you probably need it to be reviewed. If you do not have a will or a comprehensive estate plan, you should meet with an experienced estate planning attorney to address distribution of assets, planning for incapacity and preparing for the often overlooked aspects of your life. You will have the comfort of expressing your wishes and your loved ones will be grateful.

Reference: CNBC (Jan. 18, 2022) “What happens to your digital assets and cryptocurrency when you die? Even with a will, they may be overlooked”

 

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How Can I Protect Assets from Creditors? – Annapolis and Towson Estate Planning

Forbes’ recent article entitled “Three Estate Planning Techniques That Protect Your Assets From Creditors” explains that the key to knowing if your assets might be susceptible to attachment in litigation is the fraudulent conveyance laws. These laws make a transfer void, if there is explicit or constructive fraud during the transfer. Explicit fraud is when you know that it is likely an existing creditor will try to attach your assets. Constructive fraud is when you transfer an asset, without receiving reasonably equivalent consideration. Since these laws void the transfer, a future creditor can attach your assets.

Getting reasonably equivalent consideration for a transfer of assets will eliminate the transfer being treated as constructive fraud. Reasonably equivalent consideration includes:

  • Funding a protective trust at death to provide for your spouse or children
  • Asset transfer in return for interest in an LLC or LLP; or
  • A transfer that exchanges for an annuity (or other interest) that protects the principal from claims of creditors.

Limited Liability Companies (LLCs) can be an asset protection entity, because when assets are transferred into the LLC, your creditors have limited rights to get their hands on them. Like a corporation, your interest in the LLC can be attached. However, you can place restrictions on the sale or transfer of interests that can decrease its value and define the term by which sale proceeds must be paid out. An LLC must be treated as a business for the courts to treat them as a business. Thus, if you use the LLC as if it were your personal property, courts will disregard the LLC and treat it as personal property.

Annuities are created when you exchange assets for the right to get payment over time. Unlike annuities sold by insurance companies, these annuities are private. These annuities are similar to insurance company annuities, in that they have some income tax consequences, but protect the principal against attachment.

You can also ask an experienced estate planning attorney about trusts that use annuities, which are called split interest trusts. There is a trust where you (the Grantor) give assets but keep the right to receive payments, which can be a fixed amount annually with a Grantor Retained Annuity Trust (or GRAT.)

Another trust allows you to get a variable amount, based on the value of the assets in the trust each year. This is a Grantor Retained Uni-Trust or GRUT. If the assets are vacant land or other tangible property, or being gifted to someone who is not your sibling, parent, child, or other descendant, you can keep the income from the assets by using a Grantor Retained Income Trust (or GRIT).

Along with a trust where you make a gift to an individual, you can protect the trust assets and get a charitable deduction, if you make a gift to charity through trusts. There are two types of trust for this purpose: a Charitable Remainder Trust (CRT) lets you keep an annuity or a variable payment annually, with the remainder of the trust assets going to charity at the end of the term; and a Charitable Lead Trust (CLT) where you give a fixed of variable annuity to charity for a term and the remainder either back to you or to others.

To get the most from your asset protection, work with an experienced estate planning attorney

Reference: Forbes (June 25, 2020) “Three Estate Planning Techniques That Protect Your Assets From Creditors”

 

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Don’t Overlook Key Parts of Estate Plan – Annapolis and Towson Estate Planning

The importance of having key estate planning documents cannot be overstated. That includes a will, an advance directive, powers of attorney for health care and financial matters and guardianships for minor children. Trusts may also be part of an estate plan, and they need to be created and funded in a timely manner. However, according to the article “7 Things Your Client’s Estate Plan Might Be Missing: Morningstar” from Think Advisor, there are a number of frequently overlooked additional parts to an estate plan that make a difference.

Financial Overview. This gives a broad outline of your assets and can be a useful discussion starting point, when one spouse manages the money and the other needs to be brought up to speed. It includes information about larger assets, including the home, investments, cars and other valuables.

A Directory. Creating a complete master list of all accounts, including the account number, website addresses and the names of any individuals that you deal with on a regular basis, avoids sending loved ones on a scavenger hunt. Keep this document safe—either encrypt it or keep it in a locked, fireproof safe in your home.

Personal Property. Wills contain directions about property, but not everything gets included. Make a list of any tangible personal property that you want to go to specific people, like jewelry or artwork, and create a detailed memo. It will not be part of the will, but most states consider such memos legally binding, as long as they are mentioned in the will. Your estate planning attorney will know what is best for your situation and in your state.

Plan for Pets. The best way to do this is with a pet trust, which is enforceable. You name a person to take care of your pets, and how much money they should use to care for the pet. The will can be used to specify who should be your pet’s caretaker. You can leave assets for the pet, but the designated person is not legally bound to use the money for the pet’s well-being.

Digital Estate Plan. Make a plan for your digital property, including tangible digital devices, like computers and phones and the data stored on devices in the cloud and online accounts, including social media, websites, emails, photos, videos, etc. Start by making an inventory of all digital accounts, which needs to be stored in the same way your directory is: under lock and key.

End of Life Plan. Advance directives are used to direct your wishes towards life-extending care, but they do not always go into detail. Providing additional information to loved ones who might need to make health care decisions could alleviate a lifetime of guilt. Having conversations is a starting point but putting your wishes into a document is better.

Ethical Will. An ethical will in which the person hands down their belief system to loved ones is a gift and part of your legacy. What would you want the next generation to know about your beliefs? What life lessons do you want to share?

Reference: Think Advisor (July 22, 2020) “7 Things Your Client’s Estate Plan Might Be Missing: Morningstar”

 

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Don’t Neglect a Plan for Your Pet During the Pandemic – Annapolis and Towson Estate Planning

If you have a pet, chances are you have worried about what would happen to your furry companion if something were to happen to you. However, worrying and having an actual plan are two very different things, as discussed at a Council of Aging webinar. That is the subject of the article “COA speakers urge pet owners to plan for their animal’s future” that appeared in The Harvard Press.

It is stressful to worry about something happening, but it is not that difficult to put something in place. After you have got a plan for yourself, your children and your property, add a plan for your pet.

Start by considering who would really commit to caring for your pet, if you had a long-term illness or in the event of your unexpected passing. Have a discussion with them. Do not assume that they will take care of your pet. A casual agreement is not enough. The owner needs to be sure that the potential caretaker understands the degree of commitment and responsibility involved.

If you should need to receive home health care, do not also assume that your health care provider will be willing to take care of your pet. It is best to find a pet sitter or friend who can care for the pet before the need arises. Write down the pet’s information: the name and contact info for the vets, the brand of food, medication and any behavioral quirks.

There are legal documents that can be put into place to protect a pet. Your will can contain general directions about how the pet should be cared for, and a certain amount of money can be set aside in a will, although that method may not be legally enforceable. Owners cannot leave money directly to a pet, but a pet trust can be created to hold money to be used for the benefit of the pet, under the management of the trustee. The trust can also be accessed while the owner is still living. Therefore, if the owner becomes incapacitated, the pet’s care will not be interrupted.

An estate planning attorney will know the laws concerning pet trusts in your state. Not all states permit them, although many do.

A pet trust is also preferable to a mention in a will, because the caretaker will have to wait until the will is probated to receive funds to care for your pet. The cost of veterinary services, food, medication, boarding or pet sitters can add up quickly, as pet owners know.

A durable power of attorney can also be used to make provisions for the care of a pet. The person in that role has the authority to access and use the owner’s financial resources to care for the animal.

The legal documents will not contain information about the pet, so it is a good idea to provide info on the pet’s habits, medications, etc., in a separate document. Choose the caretaker wisely—your pet’s well-being will depend upon it!

Reference: The Harvard Press (May 14, 2020) “COA speakers urge pet owners to plan for their animal’s future”

 

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Avoiding Probate with a Trust – Annapolis and Towson Estate Planning

Privacy is just one of the benefits of having a trust created as part of an estate plan. That is because assets that are placed in a trust are no longer in the person’s name, and as a result do not need to go through probate when the person dies. An article from The Daily Sentinel asks, “When is a trust worth the cost and effort?” The article explains why a trust can be so advantageous, even when the assets are not necessarily large.

Let us say a person owns a piece of property. They can put the property in a trust, by signing a deed that will transfer the title to the trust. That property is now owned by the trust and can only be transferred when the trustee signs a deed. Because the trust is the owner of the property, there is no need to involve probate or the court when the original owner dies.

Establishing a trust is even more useful for those who own property in more than one state. If you own property in a state, the property must go through probate to be distributed from your estate to another person’s ownership. Therefore, if you own property in three states, your executor will need to manage three probate processes.

Privacy is often a problem when estates pass from one generation to the next. In most states, heirs and family members must be notified that you have died and that your estate is being probated. The probate process often requires the executor, or personal representative, to create a list of assets that are shared with certain family members. When the will is probated, that information is available to the public through the courts.

Family members who were not included in the will but were close enough kin to be notified of your death and your assets, may not respond well to being left out. This can create problems for the executor and heirs.

Having greater control over how and when assets are distributed is another benefit of using a trust rather than a will. Not all young adults are prepared or capable of managing large inheritances. With a trust, the inheritance can be distributed in portions: a third at age 28, a third at age 38, and a fourth at age 45, for instance. This kind of control is not always necessary, but when it is, a trust can provide the comfort of knowing that your children are less likely to be irresponsible about an inheritance.

There are other circumstances when a trust is necessary. If the family includes a member who has special needs and is receiving government benefits, an inheritance could make them ineligible for those benefits. In this circumstance, a special needs trust is created to serve their needs.

Another type of trust growing in popularity is the pet trust. Check with a local estate planning lawyer to learn if your state allows this type of trust. A pet trust allows you to set aside a certain amount of money that is only to be used for your pet’s care, by a person you name to be their caretaker. In many instances, any money left in the trust after the pet passes can be donated to a charitable organization, usually one that cares for animals.

Finally, trusts can be drafted that are permanent, or “irrevocable,” or that can be changed by the person who wants to create it, a “revocable” trust. Once an irrevocable trust is created, it cannot be changed. Trusts should be created with the help of an experienced trusts and estate planning attorney, who will know how to create the trust and what type of trust will best suit your needs.

Reference: The Daily Sentinel (Jan. 23, 2020) “When is a trust worth the cost and effort?”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What are Some Estate Planning Tips for People Without Kids? – Annapolis and Towson Estate Planning

If you and your spouse don’t have children, the focus of your financial legacy may be quite different from what it would be if you were parents.

Motley Fool’s article, “5 Estate-Planning Tips for Child-Free Couples,” suggests that you may want to leave some of your money to friends, family members, charitable organizations, or your college. No matter the beneficiaries you choose, these estate planning tips are vital for childless couples.

  1. A will. You need a will because couples without children don’t have natural heirs to inherit their wealth. If you die without a will, your assets should go to your spouse. If neither of you has a will, the state intestacy laws determine which of your family members inherit from you. The family of the first spouse to die may be disinherited.
  2. A power of attorney. Who will make financial decisions for you if you and your spouse become incapacitated? You can select a person to do this with a power of attorney (POA). You can name a person to pay bills, manage your investments and handle property matters if you’re unable to do so yourself.
  3. Up-to-date beneficiaries. If you have retirement accounts or life insurance policies, the distribution of the proceeds at your death is made by a beneficiary designation, not by your will. A frequent beneficiary error is not keeping those designations current.
  4. Give money to charity now. You may think about leaving your assets to organizations that have enriched your life. You can set up a trust to be sure that your money goes where you want. Work with an experienced estate planning attorney.
  5. Remember the pets. If you have furry children, plan for their care when you’re not around to tend to them yourself. One option is to name a person to take care of your animal in your will. You can also put money into a trust specifically intended for the animal’s care or designate an organization that will provide lifetime care for your pet with money you earmark to that purpose.

Remember that child-free couples need an estate plan just as much as couples with children.

Reference: Motley Fool (September 9, 2019) “5 Estate-Planning Tips for Child-Free Couples”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Happens When There’s No Will or the Will Is Invalid? – Annapolis and Towson Estate Planning

The Queen of Soul’s lack of a properly executed estate plan isn’t the first time a celebrity died without a will, and it surely will not be the last, says The Bulletin in the article “Aretha Franklin and other celebrities died without an estate plan. Will you?”

The Rev. Dr. Martin Luther King Jr., Howard Hughes, and Prince all died without a valid will and estate plan. When actor Heath Ledger died, his will left everything to his parents and three sisters. The will had been written before his daughter was born and left nothing to his daughter or her mother. Ledger’s family later gave all the money from the estate to his daughter.

Getting started on a will is not that challenging if you work with an experienced estate planning attorney. They often start clients out with a simple information gathering form, sometimes in an online process or on paper. They’ll ask a lot of questions, like if you have life insurance, a prenup, who you want to be your executor and who should be guardian of your children.

Don’t overlook your online presence. If you die without a plan for your digital assets, you have a problem known as “cyber intestacy.” Plan for who will be able to access and manage your social media, online properties, etc., as well as your tangible assets, like investment accounts and real property.

Automatic bill payments and electronic bank withdrawals continue after death and heirs may struggle to access photographs and email. When including digital estate plans in your will, provide a name for the person who should have access to your online accounts.

Check with your estate planning attorney to see if they are familiar with digital assets. Do a complete inventory, including frequent flyer miles, PayPal and other accounts.

Remember that if you don’t make out a will, the state where you live will decide for you. Each state has different statutes determining who gets your assets. They may not be the people you wanted, so that’s another reason why you need to have a will.

Life insurance policies, IRAs, and other accounts that have beneficiaries are handled separately from the will. Beneficiaries receive assets directly and that bypasses anything written in a will. This is especially important for unmarried millennials, Gen Xers, divorced people, singles, widows and widowers, who may not have specified a beneficiary.

Don’t forget your pets. Your heirs may not want your furry family members, and they could end up in a shelter and euthanized if there’s no plan for them. You can sign a “pet protection” agreement or set up a pre-funded pet trust. Some states allow them; others do not. Your estate planning attorney will be able to help protect your beloved pets as well as your family.

Reference: The Bulletin (Sep. 14, 2019) “Aretha Franklin and other celebrities died without an estate plan. Will you?”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys