Category: Trust Planning

Who Needs to Consider Trusts for their Children in Houston?

There are a lot of reasons to consider setting up trusts for your children, but trust and estates lawyers in Houston see far too many cases where this just is not done.  One of the biggest reasons for not setting up a trust could be that you feel you do not have enough assets to warrant one.  We hear about “trust fund babies” and automatically think of the super wealthy, not regular folks like ourselves.

Really, though, even those in the middle class should be thinking about setting up trusts for their children.  Even if you do not have a lot of extra money lying around, you have other assets that can quickly add up in value.  Add to that the payout from a life insurance policy, and you suddenly realize that you have quite a bit of financial worth that might be left behind to children who are not ready to handle it.  Anything more than about $100,000 is reasonable to consider putting into a trust for children.

What Does the Trust Do?

When you set up a trust with your trust and estates lawyer in Houston, you will discover that there are many different ways to use this tool.  One of the most important benefits of a trust is that it allows you to stipulate how your children will use the money you leave behind.  If your intention is for your kids to use the money for college, but they want to use it to buy a sports car instead, what is to stop them?

In your case, the trust is what can stop them.  You can implement restrictions on how the money is spent.  You can, for example, determine that the funds in the trust are designated for specific functions, such as paying for education or day-to-day expenses.  In some cases, there is a designated adult to help keep things on track, although this person must be chosen wisely.  In other cases, the parent sets age limits on the trust, assuring that the children do not have access to the money until they have more time to mature.

Protecting the Trust

Another reason to consider a trust is to protect your children’s money from misuse by the adult in charge of the funds.  In the case of a “custodial” account, the person in charge can have a lot more say in how the money is spent.  This could translate into frivolous expenses, including paying himself or herself an unrealistic amount to “manage” the funds.  With a trust, however, the person in charge (the “trustee”) is held more accountable and is required to follow your wishes.

If the trustee does manage the funds poorly, it is also possible that your child would have some legal recourse, as the trust is a legal contract.

Talk to a Houston Trust and Estates Lawyer

The best way to determine if a trust is right for you and family is to talk to a Houston trust and estates lawyer.  Our attorneys are available to sit down with you to review your estate plan and consider how a trust or other estate planning tools can best meet your needs.  To schedule a planning session, call us at (281) 218-0880 and mention this article.

Trust Lawyer in Houston Answers, “What is a Trustee?”

When you work with a trust lawyer in Houston to set up a trust, you will be asked to name a trustee. Before you can select someone for this important job, you need to fully understand the role and responsibilities this person will be given.

A trustee is the person who will manage the assets that are in your trust. Many people choose to be their own trustee and can continue to manage their affairs as normal. Married couples can be named co-trustees. In that case, when one dies, the other can continue to make financial decisions without any other legal steps needed.

You can also name a successor trustee. A successor trustee is the person who will take over your decision-making if you (or the co-trustee) are no longer able to do so. In some cases, several successor trustees are named in case the previous one is unable to serve. In other cases, people choose to select two or more adult children who will act together. Some people choose a completely unbiased corporate trustee, usually a bank or trust company, who will take over decision-making.

The following list contains some of the responsibilities that are required of a trustee:

  • Make decisions regarding assets in your trust. This typically involves managing the trust investments, property and making decisions that are in the best interest of the trust beneficiaries. Assets must also be managed according to the terms of the trust and governing law.
  • Keep detailed records for all of the trust transactions.  All transactions need to be accounted for by maintaining a record of receipts and other documentation.
  • Comply with all federal and state law requirements. It is critical that a trustee follows the terms of the trust documents and the trust creator’s instructions. Additionally, a trustee is responsible for complying with federal and state laws, meeting any reporting requirements, and filing federal and state taxes.

Administering a trust is often complicated and confusing. The trustee not only has to manage the details of the trust, they are also dealing with emotions and conflicts that can arise among the beneficiaries of the trust. That is why many trustees contact us to assist. We can help you avoid all of this by walking you through the entire trust administration process. Doing so will relieve you of tremendous stress and might help you avoid litigation brought on by unhappy beneficiaries.

Complete a Complete Estate Plan

When it comes to planning, the focus is typically on making you better prepared for the future. That means limiting taxes, creating wiser investment strategies, knowing when it’s best to claim Social Security and developing sustainable retirement income plans. All of these help you on the path to your financial future and your long-term goals. But The Brainerd (MN) Dispatch reports in “3 common estate planning questions, answered,” that there is, however, one exception. That’s estate planning. While much of financial planning primarily benefits you, your estate planning primarily benefits your family and loved ones. 11-14-16

The basic component of your estate plan is your will but there may be other parts you need. Depending on your estate, you may want to consider a trust, in addition to healthcare directives, powers of attorneys and guardian designations. You should also remember that your will isn't necessarily the only instruction when it comes to distributing your assets. The beneficiary designations on your retirement and brokerage accounts, and the life insurance policies you own will take precedence over what you say in your will. Review beneficiary designations regularly to be sure the money in your accounts or the death benefit on a life insurance policy goes to the right person.

A trust can be complicated, so talk with an estate planning attorney to see if it makes sense and whether you'll actually benefit from using a trust. If most of your assets are covered by beneficiary designations or owned in joint tenancy, those assets are already exempt from probate, so they won’t necessarily benefit from a trust strategy.

The executor or the personal representative is the person who will be responsible for carrying out the instructions in your will, settling your debts and paying taxes on your estate. As far as selecting an executor, it should be someone with the capacity to carry out the needed tasks of the position. It also needs to be someone who is willing to serve and is familiar with your situation such as a family member or a close family friend.

If you don't spend every last dollar you have to your name on the day you die, you'll need to have an estate plan. Speak with an experienced estate planning attorney to develop one.

Reference: The Brainerd (MN) Dispatch (Sept. 23, 2016) “3 common estate planning questions, answered”

How Not to Do It: Spending the Inheritance on Royal Souvenirs and Strippers

For the Scripps family, who were heirs to a media fortune, they simply spent their millions. According to an article on CNBC.com, “The Greed Report: Not a billionaire? You still need an estate plan,” they took luxury cruises around the world and family outings to strip clubs. 11-10-16

Melissa Scripps bought Queen Elizabeth II's coronation chair and Queen Victoria's nightgown. Like his mom, son Michael liked to buy war memorabilia and guns. Oh, and he married a stripper.

When the well ran dry, the family started to fight. Mother and son turned on each other, one family member went to prison and tarnished a name once associated with entrepreneurship and philanthropy. This tragedy provides some lessons for the rest of us.

Everybody needs estate planning in some form or another—it doesn't need to be complex in many situations but everyone needs a plan, even those with social problems, financial problems and marital problems.

A good estate plan will consider all of those problems and keep your assets in the family and away from the government and taxes.

Estate planning doesn’t have to be complex or expensive. Estate planning is sometimes 95% social work and 5% legal, some attorneys say. The legal part they know—it's the social part that takes time. The Scripps family probably should have spent more time on the social part as well: Melissa Scripps' attorney said that at the time she inherited the family fortune, she had never held a real job and only had a high school education.

Maybe some more estate planning might have prevented the Scripps’ century-old legacy from turning into a gigantic family feud.

Reference:  CNBC.com (Sept. 22, 2016) “The Greed Report: Not a billionaire? You still need an estate plan”