Choosing an Executor and Successor Trustee for Your Estate

The Role of Executor of Your Estate

The person you name in your will as the executor of your estate is responsible for managing your estate in the event there are probate proceedings. This involves a court process and working under court supervision to gather and identify assets, debts, and liabilities. Your executor will notify creditors how to make claims against your estate and, if necessary, will handle liquidating assets to pay those debts. The executor must report everything they do to the probate judge and seek court approval for some steps of the probate process, like selling property. 

Unlike some states, the person you name is not required to be a Nevada resident. The person must simply be at least 18 years old, and of sound mind. A convicted felon cannot serve unless a court determines that the conviction would not disqualify the person from serving. You may name a corporate executor, such as a bank, so long as the entity is authorized to conduct business in Nevada.

The Role of Successor Trustee of Your Trust

If you have a revocable living trust, you are the trustee of the trust during your lifetime, with the power to manage assets, change beneficiaries, and even revoke the trust entirely. The successor trustee will step in and run things in the event of your incapacity and will distribute assets of the trust according to the terms of the trust upon your death. In most cases, the successor trustee can perform the job without court intervention. 

In contrast to naming an executor, you can name anyone you wish as a successor trustee regardless of where they live or their criminal background. You can also name a corporate successor trustee or co-trustee if you wish to have professional management of your trust.

Who Should You Name?

A trustworthy family member who has good judgment is detail-oriented, and who will be able to relate to your unique family dynamics would be a good choice for your executor and successor trustee. The person you name does not have to be a financial expert but should be competent to handle basic business matters or find good advisors to help when matters arise. In most instances, people choose their spouse or an adult child as both executor and successor trustee. Sometimes, however, it makes more sense to name a different family member or even a respected friend for these roles. It is not mandatory that your executor and successor trustee be the same person; there are pros and cons to each choice.

At Kling Law Offices, we can help guide you in identifying the person(s) who would best serve as executor of your estate and/or successor trustee of your trust. We recognize that these are important decisions that, once made, can give you peace of mind your affairs will be handled competently and according to your wishes and desires. Please contact our office today for a free consultation to discuss your estate planning needs and options.

Health Care Directives Let You Control Future Medical Decisions

Estate planning is about control: Putting a plan in place allows you to control certain issues even when you are impaired or have passed away. Health care directives are the part of estate planning that provides guidance about medical decisions to be made on your behalf if you are unable to act. 

Despite the importance of health care directives, studies have suggested that only about a third of the population has executed these documents. If you fall into this category, consider taking more control of your future by working with a qualified attorney to create the Nevada documents that act as your advance directives – a Durable Power of Attorney for Health Care Decisions and a Declaration.

While these matters can be difficult to discuss, advance care planning is an opportunity to map out the care you want to receive if a life-threatening injury or illness makes it impossible for you to express your wishes at some future time. Deciding what is important to you and choosing an agent to make those decisions will document your values, goals, and wishes related to critical and end-of-life care. 

By statute, a Nevada Durable Power of Attorney for Health Care Decisions must follow a specific format and allows you to confirm certain statements about desired medical care. In this form, you can indicate the situations in which you want to receive life-sustaining treatment and whether your agent should seek treatment even when there is no hope for recovery or long-term survival.

In Nevada, a “Declaration” is the statutory form that sets out your wishes for treatment in the face of an incurable and irreversible condition that, in your health care provider’s opinion, will imminently cause death. Informally referred to as a “Living Will,” this document lets you designate whether you want treatments administered that will serve only to prolong the process of dying and are not necessary for comfort or to alleviate pain. You are also able to designate the person(s) you wish to oversee these decisions.

When you fail to create a written directive, the State of Nevada prioritizes who can act on your behalf as follows: (1) your spouse; (2) an adult child, or a majority of adult children who are reasonably available for consultation if you have more than one child; (3) your parents; (4) an adult sibling, or the majority of them who are reasonably available for consultation if you have more than one; and (5) the next nearest adult relative (by blood or adoption) who is available for consultation. There are a lot of presumptions built into this list, which may, or may not, suit you. 

As with most aspects of estate planning, if you do not make a plan, the State of Nevada has one for you. If you would rather take control of those matters, you can; contact our office for a free consultation. We believe your estate plan should reflect your wishes and desires so you can have the peace of mind you deserve.

Trust Fund Kids

Incentivizing Your Trust Fund Kid

What do you think of when you hear the phrase “trust fund kid”? Your answer may not be a positive one. The popular stereotype lets us believe trust fund kids are over-privileged, spoiled, and never learn the value of work. Nevertheless, if your desire is to leave an inheritance benefitting your child, a trust fund may be the best choice. That does not mean, however, that your child should receive wealth without having responsibilities or learning its value. Rather, a thoughtfully constructed trust can incentivize your child, allowing him/her to be productive and have a meaningful life with the benefit of inherited wealth, avoiding the stereotype altogether.

A trust fund is simply the collection of assets held in trust for someone, and trusts have many advantages over simple wills for passing wealth to one’s child. Wills direct the distribution of your assets upon death and are subject to probate, which provides court supervision over the collection and distribution of assets. A trust becomes valid upon execution and can hold a wide variety of assets during your lifetime that an administrator will distribute according to the trust’s terms following your death. Properly executed trusts will avoid probate as well as avoiding or minimizing gift and estate taxes. Establishing a trust can also help you ensure a child’s inheritance is managed properly, that a business is kept in the family through generations, that assets are protected in the event of a divorce, and that privacy is maintained, since trusts are not public records.

When establishing a trust, there also are ways to restrict distributions to help motivate that child in productive ways: your trust might require beneficiaries to graduate from college (or an equivalent) or to maintain a specified grade point average to receive trust funds. You might even require a beneficiary be employed or engage in charity work to receive distributions. Conversely, beneficiaries can be cut off, or have distributions reduced, if criteria of your choosing are not met.

In designing an incentive trust for your child, it is important to think broadly and talk through considerations with a qualified advisor. If you have several children, they may have very different personalities or have very different needs as adults. To achieve the result that best suits your goals and desires, it is important to balance potential future blessings and problems—things like one child’s personal financial success, a potential medical emergency, financial hardships, different balances in life-work situations, etc., that can affect the trust’s stipulations and require adjustments to trust distributions. When done correctly, setting up your child to be a trust fund kid can be a wonderful way to give him/her security while he/she fulfills his/her potential in a meaningful way.

If you want to discover how a trust can work for you in passing wealth while incentivizing your child(ren), please contact Kling Law Offices for your free consultation. We would be happy to work with you in designing the right incentive trust for you and your trust fund kid.

Do 529 Plans Fit Into Your Planning?

The 529 plan was originally designed as a savings account specifically to pay for qualified higher education expenses, including tuition, books, room, and board. Further expanding 529 plans, the 2017 tax reforms established qualified withdrawals for K-12 school tuition at public, private, and religious schools. These reforms also allow a person with a disability to roll over a traditional 529 plan into a 529 ABLE account without adverse tax consequences.

Like retirement accounts, 529 plans have tax advantages that help you keep more of your savings. Earnings on accounts grow federal and state tax-exempt and qualified withdrawals are tax-free. Accounts can be set up for anyone (not just your own children) and contributions into the account can be made by anyone. In fact, if you have the wealth, you can take advantage of a special averaging provision for contributions over the annual gift tax exclusion limit without triggering gift tax consequences (just make sure you comply with IRS reporting requirements for the contribution). This means a single $75,000 contribution, or $150,000 if married and filing jointly, may be treated as if it were made over a five-year period. Making an “up front” contribution allows the investment to grow over a longer period, maximizing its value.

Nevada has a variety of well-regarded 529 plans, and each accepts contributions up the State’s maximum allowable account value of $370,000. We have three direct-investment plans, a pre-paid tuition program, and an advisor-sold program. The initial investment requirement varies with each plan and investment options include age-based and static portfolios. Nevada also offers students scholarship opportunities to increase 529 plan savings. Qualified education expenses include up to $10,000 per year for K-12 tuition, while qualified post-secondary institution expenses include tuition, fees, books, supplies, and equipment required for enrollment. Expenses for computer and peripheral equipment, software, internet access, and related services used by the beneficiary while enrolled can also qualify. Notably, you are not limited to investing in your state’s plan; another state may offer a plan with better investment options, lower fees, or preferred features.

The ABLE Nevada Plan allows a person with a disability to establish a 529-style savings plan without necessarily forfeiting government benefits. Qualified expenses under these special plans include education, housing, transport, assistive technology, health care, and other specifically approved expenses. A person can only have one ABLE account, eligibility is based on a disability that began before age 26, and contribution limitations are distinct. While anyone can contribute to an ABLE account, the total annual contributions from all sources is limited to $15,000 for 2018, even though these accounts have the same $370,000 overall limit as traditional 529 plans.

Traditional 529 plans and the ABLE Nevada Plan are valuable tools for educational savings. These plans also offer estate and gift tax advantages that can benefit your overall estate plan. If you would like to explore helping someone with their educational expenses, contact Kling Law Offices for a free consultation to discuss how 529 plans can effectively fit into your estate plan.

College Students Need Estate Planning, Too

Do you have a recent high school graduate in your family? Congratulations! We would like to help you send your child off to college well prepared. Implementing some basic estate planning can make the college experience safer and more secure. These are a few things your child should take care of before he or she flies the nest.

Now that your child is legally an adult, s/he should have a Durable Power of Attorney for Health Care. Although your child is likely to have a healthy and happy time at college, accidents and unexpected illnesses happen. Once your child turns 18 years old, you are not automatically considered a decision-maker on their behalf. If you want to ensure you can make health care decisions for your child in the event s/he is unable to do so, your child should execute a health care power of attorney naming you their health care agent.

A HIPAA Authorization goes hand-in-hand with the health care power of attorney, granting the designated agent authorization to communicate with health care professionals, insurance companies, and to gain access to any necessary medical records. In today’s privacy-protection climate, you would be hard-pressed to get answers to even very basic questions regarding your adult child’s health care without a HIPAA Authorization.

Similarly, a Durable Power of Attorney which addresses finances and property will give you the ability to make financial decisions on behalf of your child, if needed. For instance, if your child is hospitalized, you could use this power of attorney to access financial accounts and records to pay bills and even to manage any student loans, grants, or bursar statements your child may have.

As an adult, your child is protected by the Family Educational Rights and Privacy Act. This Act works well for protecting student privacy, but there are situations when you may want to talk to school officials or have access to your child’s educational records. Without an executed Family Educational Rights and Privacy Act Release, school officials may refuse to talk with you, deny access to records, and decline to share any information about your student’s academic record.

Your child also should consider creating a Last Will and Testament. Although most students have yet to accumulate significant wealth, it would be wise to discuss with your child what happens when someone passes away so you can understand their wishes. Having a properly executed Will allows parents to honor their child’s choices. It should also direct the disposition of personal assets, including digital media accounts, and clarify choices for funeral arrangements.

At Kling Law Offices, we understand the ways in which good planning can make things easier when the unexpected happens. By sending your child off to college with the proper estate planning documents in place, we believe you will feel empowered and secure knowing you have the tools to provide meaningful help in a difficult situation. Call us today for your free consultation about estate planning for your college student.