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ESTATE PLANNING.


Power to Transfer Property at Death
You have a constitutional right to transfer property at death. Utilize this most basic right to protect your family, control the future, and protect your wealth.

The Law Firm of Travis Charles Smith & Associates, PLLC


Why have a will?
1. Choose who gets your property.
2. Designate a personal representative.
3. Choose a guardian for your children.

Pour-Over Will
 A “pour-over will” is a will that transfers all the decedent’s property into a trust.
The Trust then distributes the property according the terms of the Trust.

There are many reasons for creating a Trust.
A very common reason is to protect the beneficiaries from creditors.




TRUSTS

CREATION AND CHARACTERISTICS
A. Introduction
 1. What is a trust?

A trust is nothing than more than severance of legal and equitable title. You convey title to property to the trust which then severs the ownership of the property into legal and equitable ownership.

The Trustee holds legal title and is the agent sworn to carry out the directions of the Trust. The Beneficiaries hold Equitable Title and thus are entitled to the “fruits” of ownership.


2. Elements of a trust
a. Settlor’s intent to create
b. Res (the property to be transferred)
c. Trustee
d. Beneficiary

3. Never use life estate
A life estate is something studied too frequently in law school, yet an ineffective tool in the real world. Use a trust. The interests of the life tenant conflict with the remainderman. Set up a trust to manage property during life of the life tenant, so if will be in good condition when the next guy comes in.

4. Who may be trustee?
Must be accountable for a fiduciary duty.

B. Creation
 1. How do you create a trust?
a. Intent to create.
(i) No formal words necessary. Need not use words trust or trustee.
(ii) Sole question is whether grantor manifested intent to create trust relationship.

2. Property must exist at time of creation
a. A person can assign future earnings from an existing contract.
(i) Future yield of an existing property right can be transferred.
(ii) Property to be acquired in the future cannot be.

3. Beneficiaries must be ascertainable
a. The class must be definite – “my friends” is not definite.
(i) Must have someone to enforce the fiduciary duties of the trustee.
b. Cannot give Trustee discretion to choose who gets the property.

4. Do trusts have to be in writing?
a. If trust transfers real property, it must be in writing – Statute of Frauds

5. Honorary Trust
a. May be for any specific, designated purpose that is not capricious.
b. Examples:
(i) Trust for the care of a pet,
(ii) Trust for the care of a cemetery plot, etc.
c. The trustee is not legally obligated to carry out the purpose of the trust,
(i) No ascertainable beneficiary; A pet can’t enforce a trust in court.
(ii) If Trustee declines, then property is returned to settlor or settlor’s successors.

C. Rights of Beneficiaries & Duty of Trustee
1. How is the trust res paid out?
a. Mandatory trusts – the trustee must distribute all the income. No discretion who gets what or how much. (There may be a fixed timeline, etc.)

b. Discretionary trust – Trustee has discretion over payment of either income or principal or both.
(i) Support trust – Limits discretion, and sets minimal standard of support.
(ii) Discretionary Support trust
- Explicit discretion, but still a minimal standard of support.
- Duty to inquire into beneficiary’s needs and circumstances.

2. Exculpatory clause
a. Exempts trustee from liability.



D. Rights of the Beneficiary’s Creditors
 1. Discretionary trusts
a. Creditors have no right to this trust fund.
b. Beneficiary cannot compel the trustee to pay him, so neither can the creditor.
c. Support standard
(i) If there’s a minimal standard that must be paid out, beneficiary cannot alienate that benefit, nor can creditors attach onto it.
(ii) However, spouses/children may enforce child support claims.

2. Spendthrift trusts
a. A trust that cannot be alienated by the beneficiary.
(i) The kid can’t get rid of the property. It can go to NO one else.
(ii) Therefore, the property can only go to the beneficiary, thus creditors can’t reach it.
b. A trust is NOT a spendthrift trust UNLESS the settlor expressly inserts spendthrift clause.