Unlike private trusts, which are established to benefit specific individuals or entities, charitable trusts aim to support a broad charitable mission, benefiting the public or a significant segment of it. Understanding a few points about these trusts may help people as they craft an estate plan.
Charitable lead trusts (CLTs) are designed to provide a stream of income to one or more charitable organizations for a specified term. After this term ends, the remaining assets in the trust can revert to the donor or pass to designated beneficiaries, such as family members. This type of trust allows donors to support their chosen charities over a period of time while ultimately retaining or directing the principal to other beneficiaries.
Charitable remainder trusts (CRTs) work in the opposite manner. In a CRT, the donor or other designated beneficiaries receive income from the trust for a period, typically for the beneficiaries' lifetimes or a fixed term of up to 20 years. At the end of the term, the remaining assets in the trust are transferred to one or more charitable organizations. CRTs are particularly appealing to donors who wish to receive income during their lifetimes while committing to a charitable gift in the future.
These trusts are only one part of a comprehensive estate plan. Getting everything set is critical so creators can relay their wishes in a legal manner.
]]>But eventually, they will pass away, and there are a few reasons why you and your parents need to have an open and honest conversation about an estate plan.
The primary goal of discussing estate planning with your parents is to ensure their wishes regarding healthcare, asset distribution and funeral arrangements are respected. Documents such as a power of attorney, advanced health directives and letter of intent can provide clear directions regarding their preferences and who can make decisions on their behalf if they cannot do so.
Probate is the legal process of handling a deceased person’s estate, such as paying creditors and distributing remaining assets to the heirs. It can be a long and costly ordeal. Furthermore, probate records are available for the public to view. A well-crafted estate plan that includes trusts, transfer on death deeds, joint tenancy with rights of survivorship, and named beneficiaries allows your parents to pass their assets directly to their heirs without the hassle of probate.
Family disputes can arise when there are no clear instructions about the distribution of assets. By having an estate plan that clearly outlines who gets what, your parents can help reduce misunderstandings and conflicts among siblings and other relatives.
Having an estate plan can comfort your parents by knowing their affairs are in order and their loved ones will be cared for.
A conversation about estate planning with your parents may be uncomfortable, but it’s essential. Make sure your siblings are part of the discussion to prevent conflict. If you need assistance with the estate planning process, several resources are available.
]]>For example, you could put money in a trust and say that the incentive is getting a college education. The beneficiary is entitled to the full value of that trust, but they can’t access it until they graduate. Another option may be to say that they can take annual payouts from the incentive trust that are equal to their annual earnings. This gives them the incentive to continue working.
The problem with an incentive trust is that the beneficiary may believe that it is overly controlling. This can lead to long-term resentment and could cause some significant problems among family members.
For example, say that the incentive trust is focused on college, as noted above. But the beneficiary wants to join the military and wouldn’t need to go to college. Or they have a business idea and they’d like to start a company before they get a degree. Perhaps they’re good at athletics, so they want to pursue an athletic career, rather than educational opportunities.
The incentive trust may be seen as very restrictive by this beneficiary, who will then feel resentful that the trust is designed to control their life.
This doesn’t mean you shouldn’t use an incentive trust, but just that it’s important to consider all of your estate planning tools from every possible angle. Be sure you know what legal steps you can take to set up a plan that will work for all of your family members.
]]>To serve its intended purpose, however, your will must be up to date. Understanding scenarios that can require a will update can help ensure that it remains relevant.
Here are scenarios that can make your will outdated.
When you marry with an existing will in place, you need to update it, as spouses typically have a right to inherit something - which is likely what you would want anyway.
Also, if you divorce after creating the will, it is important that you update the document to reflect your change in status. This is especially important if you granted healthcare power of attorney to your spouse or if you wish to give the assets they would have got to someone else.
The birth of a child or a grandchild is no doubt an exciting experience in a person’s life. However, it is also an important time to review your will. Some of the updates you need to make on your will following the birth of a child include designating inheritance and nominating a guardian for your little ones.
Assets fluctuate in value and size over time. If you have gained or lost some assets, it’s important that you update your will to reflect these changes. If you have gifted away some assets, changed their ownership or transferred them to a trust, it is important that you update your will to reflect these changes as well.
An outdated will can not only ruin your legacy but also set your loved ones up for unnecessary disputes. Find out if your existing will is truly up to date.
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