Jennifer V. Abelaj, Guest on the Inside BS Show Podcast, hosted by Dave Lorenzo: The Right Way to Plan Your Estate and Gifts to Charitable Institutions (Show 97, originally aired 06-29-2022)
I enjoyed my recent discussion with Dave Lorenzo, who is the host of The Inside BS Show podcast about The Right Way to Plan Your Estate and Gifts to Charitable Institutions.
Dave’s daily podcast includes informative discussions with professionals in the spaces of marketing, sales, business strategy and all the big secrets THEY don’t want you to know. The show will entertain you with great interviews, help you make more money, and give you the inside scoop on all the best secrets most people never share.
I’m so pleased to be a guest on this show and provide information about estate and philanthropic planning. I had a great time chatting with Dave, who is an excellent podcast host and an expert in sales techniques.
Below is a bio for the show, as well as a link to the audio and YouTube. Hopefully you get to learn more about Wills, Trusts and my passion for philanthropic planning. Let me know what you think!
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The Right Way to Plan Your Estate and Gifts to Charitable Institutions
This show is important for anyone who cares about his/her family. Today Dave Lorenzo has a conversation with Jennifer Abelaj, a New York Estate Planning Attorney.
Join us!
Revocable Living Trusts
Revocable living trusts are powerful estate planning documents that can help avoid costly court battles and provide instructions on how certain assets should be managed. Revocable living trusts are created to meet your specific needs, which are discussed during consultation and recommendations by your attorney.
Understanding Common Revocable Living Trust Terms
Revocable living trusts are often complex documents that may contain terms many people do not use in everyday language. Here is a brief list of terms to be aware of when considering forming a revocable living trust:
- Trust—a written document that determines how the grantor’s assets will be handled
- Trustee—the person who manages the trust, which is often the grantor
- Successor trustee—a trustee who takes over when the first trustee can no longer serve in this capacity
- Grantor—the person who makes the trust and maintains ownership of the property while he or she is alive
- Beneficiary—the person who benefits from the assets in trust
- Trust property—any assets that are transferred to the trust, which might include real property, personal property, vehicles, financial accounts, and more
- Revocable—the grantor can alter or void the trust at any time as desired, but when the grantor of a revocable living trust dies, the trust becomes irrevocable
- Irrevocable—the grantor is not allowed to modify or terminate the trust without the approval of a third party named in the trust or court approval
- Living—“living” means that the trust is created during the grantor’s lifetime and becomes effective upon creation; in contrast to “testamentary,” which a trust that goes into effect upon the grantor’s death
- Fiduciary—a person who owes a duty to another person and must put that duty ahead of their own self-interest
What Is a Revocable Living Trust?
A revocable living trust is created during a grantor’s lifetime. It provides instructions for how the trust property should be managed, which may include separate instructions for the grantor’s lifetime, a time of disability, and the time of their death. These instructions can generally be changed at any time, allowing for great flexibility for the grantor to sell assets, change beneficiaries, and make other adjustments as their life changes.
Assets are transferred from the grantor to the trust. The trustee oversees them. When the grantor dies, the trust becomes irrevocable because the trust-maker has died and is no longer able to make changes. Therefore, the trustee must carefully follow the instructions regarding how the trust property should be transferred to the designated beneficiaries.
How Is a Revocable Living Trust Different Than a Will?
Many people hear the terms “revocable living trust” and “will” used together. While both are important estate-planning tools that transfer a person’s property to his or her beneficiaries, there are some key differences, including the following:
- Wills are only effective at the time of death while trusts can go into effect immediately
- Wills must go through probate and are made public while trusts are privately administered and bypass probate
- Trusts can provide instructions on how property is to be managed during the grantor’s lifetime while wills cannot
- Wills allow the naming of a guardian for minor children while trusts do not
Benefits of Revocable Living Trusts
Some of the most important benefits of revocable living trusts include their:
- Timeliness
- Detailed instructions
- Ability to avoid probate
- Privacy
- Flexibility
Timeliness
Revocable living trusts allow a healthy grantor to create an immediate plan for his or her wealth. The trust can also create a set of instructions in case the grantor becomes disabled. This flexibility allows the grantor to potentially avoid the expense and hassle of having a guardian appointed to manage the grantor’s property. Additionally, the grantor can create a plan for after his or her death.
Revocable living trusts allow a healthy grantor to create an immediate plan for his or her wealth. The trust can also create a set of instructions in case the grantor becomes disabled. This flexibility allows the grantor to potentially avoid the expense and hassle of having a guardian appointed to manage the grantor’s property. Additionally, the grantor can create a plan for after his or her death.
Detailed Instructions
Generally, Wills simply state to whom a person’s assets will go after his or her death. There are usually no conditions for how the property will be used. With a trust, the grantor can leave detailed instructions about how trust property is to be used. For example, the grantor can provide provisions about how money for any minor children will be used. A grantor can also allow beneficiaries to live on a property without ever transferring the deed out of the family.
Ability to Avoid Probate
One of the most important benefits of revocable living trusts is that they avoid probate. Probate is a judicial process that involves completing an inventory of the estate, admitting the will, paying off the debts the deceased has at the time of death, and finally transferring assets to beneficiaries. This process is often slow and expensive. Additionally, it can take years for beneficiaries to receive any property that was left for them. Alternatively, trusts avoid the probate process and judicial oversight, so beneficiaries often receive their property more quickly.
Privacy
Wills are entered into public record, so anyone can read the stipulations included in a Will, including who the beneficiaries are and what each beneficiary stands to inherit. This may not be a pressing concern for most individuals, but if an heir is being disinherited or the estate distribution is very personalized, a revocable trust can provide some privacy. Trusts are administered privately by the Trustee, so they avoid the prying eyes of the public.
Flexibility
The grantor can freely change, modify, or even terminate a revocable living trust as he or she sees fit. This gives greater flexibility in case circumstances change or if the grantor has a change of heart regarding how his or her property will be handled.
Disadvantages of Revocable Living Trusts
Some drawbacks to using revocable living trusts include their:
- Expense
- Lack of tax benefits
- Limited credit protection
Expense
Initially, wills and non-probate transfers may be less expensive than revocable living trusts. However, paying more to set up a trust now may provide greater benefits by allowing the grantor’s estate to avoid probate later.
Lack of Tax Benefit
Because these trusts can be revoked and the grantor maintains ownership interest over the property in trust, there is no tax benefit to using a revocable living trust according to the American Bar Association.
Limited Credit Protection
For the same reasons as the lack of tax benefit, revocable living trusts may not provide much protection from creditors.
How to Create a Revocable Living Trust
The simplest way to create a revocable living trust is to work with a lawyer who is experienced in this area of the law. The Jennifer V. Abelaj Law Firm can help create a customized trust that meets your specific needs.
Consider the following four steps when preparing to create a revocable living trust:
- Create an inventory of assets to include in the trust
- Think about who should inherit the assets
- Consider what should happen if you were to become incapacitated
- Transfer the property to the trust once it has been created
Contact an Estate Planning Lawyer
When you are ready to create your revocable living trust, consider calling 212-328-9568 to schedule a consultation with the Jennifer V. Abelaj Law Firm, which is experienced in helping individuals and families create revocable living trusts that meet their particular needs.
When to Review or Revise your Estate Documents
There are certain times when you should consider reviewing your estate documents to determine if they still meet your needs. Sometimes it is based on specific relationship and life events, such as marriage, divorce, birth of a child, or death of a loved one. Other times it is based outside events, such as on the passage of time, growth of your estate value, changes in the law or desire for a different distribution of your estate.
Relationship and Life Events
A life event is generally an obvious time to review your estate plan and consider making changes. Because the life event affects you directly, you are able to know when a change to your documents might be necessary. If you have worked with me in the past, you might recall me saying that your Will is flexible for certain life changes. Even so, it is prudent to review the documents to consider if it would be best to update the estate plan to reflect your current life circumstances.
Marriage or Divorce
A change in your life circumstances may be causing you to reconsider the distribution of your estate, whether by your own choice or by law. In particular, New York State law (EPTL Sec. 5-1.1-A) requires that you provide a portion (approximately 1/3) of your estate to your spouse. In the absence of a pre-nuptial agreement, it may be necessary to revise your documents accordingly. If you become divorced, you may have to revise your estate plan to comply with a Separation Agreement or Judgment of Divorce.
Birth or Death
The birth of a child is always a cause for celebration! You may want to include the child as a beneficiary of your estate or create a trust for the child. You will want to consider who to appoint as guardian of your child if both parents are deceased. This may be a difficult decision to make, but this should not deter you from finalizing your Will because you can always update the appointments later. Without naming a guardian, it will be up to the Court to determine who is the best person to care for the child and it may not be your first choice.
If someone named in your Will dies, consider revising the Will to clear any confusion as to the person’s bequest. You may want to change the distribution of your estate as a result of the person’s death. It is just as important to consider revising your Will or Trust if a named fiduciary dies. You will be able to appoint a successor to ensure there is no gap in administration of your estate or trust.
Outside Circumstances
It is important to be aware of outside circumstances, such as those without a specific identifiable life event, which may affect your estate.
Passage of Time
Clients frequently ask me when they should review their estate documents. If there is no life event, your estate documents may work just as well many years after being finalized. But a good rule of thumb is to review your documents every two or three years. It’s as simple as reading through the documents you have and deciding if you want to make any changes. As you read the documents, consider if you have any questions on the impact of certain provisions or changes in the law.
Growth of Your Estate Value
If you notice that the value or your assets has appreciated since your estate documents were finalized, you should consider reviewing them to determine if tax planning is necessary or beneficial.
The growth of your estate may also provide additional options for distribution of your estate. This includes adding new beneficiaries, creating trusts or providing for charities.
Changes in the Tax Law
For most of us, it is easy to become aware that there has been a change in the tax laws. When such a law is passed, you should review your estate documents to consider if the tax law may impact your current estate plan.
Estate tax planning can only be done while you are alive through your Will, trusts or gifting. If you die intestate or with documents that do not include proper drafting specific to minimize estate taxes, your estate will be subject to estate tax that could have been avoided.
Desire for a Different Distribution of Your Estate
It is common for individuals to revise their documents to modify the distribution of their estates. This may include adding or removing a beneficiary, changing bequests, providing for a disabled beneficiary or modifying a named fiduciary.
Some changes, such as modifying a named fiduciary, may be done easily by use of a Codicil. Substantive changes generally require preparing a new Will or amending and restating an existing revocable Trust.
Be Proactive in Updating Your Estate Plan
Estate planning requires you to makes serious decisions about people and matters that you care about. You may want to “set it and forget it” once your documents are finalized, but don’t let your estate wishes become stale or ineffective because your circumstances changed since finalizing your estate.
If you are considering changing your estate documents, please do not hesitate to contact me. If I previously prepared your estate documents, I will be happy to review the documents and have a brief complimentary discussion on whether changes should be made.
Changing the Trustee of a Testamentary Trust in New York State
A trust is a document created by an individual (i.e., the Grantor) directing a Trustee to hold property or assets for the benefit of another person or entity (the Beneficiary”) based on certain terms and conditions.
Inter Vivos Trust vs Testamentary Trust
An inter vivos trust is created by a Grantor to be administered during the person’s life, and it may be revocable or irrevocable. These come in many forms, but frequently include Irrevocable Life Insurance Trusts (ILIT), Qualified Personal Residence Trust (QPRT), Supplemental Needs Trust (SNT), or Grantor Retained Annuity Trust (GRAT). Inter vivos trusts generally have terms for the appointment of a successor Trustee, usually with a simple document or consent signed by the parties.
A testamentary trust is created under a person’s Will to take effect upon their death. This trust is irrevocable because the individual who created it is no longer alive to make any amendments or revocations. The Trust frequently includes a list of individuals who are to serve as successor trustee. However, unlike an inter vivos trust, appointment of a new Trustee may only be done by an application to the Surrogate’s Court.
Successor Trustee Nominated in Will
If the successor Trustees are identified in the Will or testamentary trust, the petitioner, which may be the existing trustee or the successor trustee or the beneficiaries, must petition the Court requesting that the identified successor Trustee be appointed. In these cases, the process is generally predictable, but can take several weeks for the Court to process the application and appoint a successor Trustee.
Successor Trustee Not Named in Will
If, however, the successor Trustee is not identified, the petitioner must demonstrate that the interests of the current and future beneficiaries are best served by appointing the successor trustee. If any beneficiary is a minor child or a person under a disability, the parent or guardian may have standing to consent on behalf of such beneficiary. In certain cases, the Court may appoint a Guardian ad Litem (GAL) to represent the interests of the minor or disabled person. This process may take several months.
Decree or Order Appointing Successor Trustee
If the Surrogate agrees that the nominated successor Trustee is fit to be appointed and in the best interest of the beneficiaries, he or she will sign a Decree or Order appointing the Successor Trustee. At that time, Letters of Successor Trusteeship will be issued and the appointed successor trustee may begin serving in a fiduciary capacity to carry out the terms of the Testamentary Trust instrument.