One of the advantages of marriage over a cohabiting relationship is that a spouse in a marriage is a legal heir, and has a legal right in Georgia to inherit, with or without a will. The only way cohabitants can inherit in Georgia is through a will or through a living or testamentary trust.
Trusts are rights and properties held by one party for the benefit of another. There are many reasons for a cohabitant to enter into a trust agreement. These include maintaining control over assets, avoiding probate, and avoiding inheritance taxes. A testamentary trust is a trust created by a will or a living or an inter-vivos trust document. A testamentary trust does not have the tax advantages of a living will, but does allow the beneficiary to use the property during his or her lifetime. The remaining principal or corpus would go to a second person after the beneficiary’s death. A living trust is a written agreement in which a trustee agrees to hold assets contributed by the grantor for the benefit of third parties or beneficiaries. In some states, but not all, the trustee, grantor, and initial beneficiary may all be the same person. A will or a testamentary trust becomes effective only upon the death of the testator. However, a living trust becomes effective immediately. As long as a living trust is not irrevocable, it can be amended or revoked at any time, and the grantor retains absolute control over the assets transferred to the trust, if he is the trustee. At the time of the grantor’s death, the living trust either becomes irrevocable or it terminates with the trust assets going to designated beneficiaries, or it continues to stay in existence, with the trustee continuing to hold assets for the benefit of the remaining beneficiaries. It is one way to avoid the expense of probate.
There are both disadvantages and advantages to wills and to living trusts. Some of them are as follows:
• Privacy – A will, when it is probated, becomes public knowledge, as do the assets listed under the will. A living trust, unless there are extraordinary circumstances, never becomes public; thus, neither the assets nor terms of the trust become public record.
• Probate – In order to be enforced, a will must go through a form of probate procedure in the court system for which there are fees, usually based on the size of the estate and possibly on the identification of the beneficiaries if they are minors (since guardians may have to be appointed; however, see below). Beneficiaries normally cannot receive the bulk of the assets until probate is completed, which could take a year or more. With a living trust, probate is avoided, and trust assets are distributed almost immediately by the trustee to the beneficiary.
• Complexity – A living trust agreement is more complex in that the assets, while the grantor is alive, must be transferred to the trustee and held in the name of the trust. The trustee is the one who distributes the assets and income and manages the corpus (the body) of the trust. A will, however, takes effect only upon the testator’s death, and is usually less expensive to draft and to change than a living will. However, as stated above, probate is more expensive to hold property.
Another method of estate planning for cohabitants is through joint tenancy, where title to either real or personal property is held jointly. The joint tenants own equal shares and jointly own the property. Each joint tenant may sell his or her one-half interest. However, when one dies, the remaining owner automatically takes over ownership as a right of survivorship.
Tenancy in common is a way for two or more people to hold property. Each has the right to bequeath or sell his or her share of the property to someone other than the co-owners. It is often also easier to sell an interest as a tenant in common rather than as a joint tenant. At the tenant’s death, his interest passes either through his will, through a living trust, or by intestacy.
Each of these Georgia estate planning techniques should be considered by a cohabitant, in that each has its own pros and cons and every case is different. Having no method of estate planning is a disaster for a cohabitant, because the intestacy laws of Georgia will not allow the cohabitant to receive any of the estate. Thus, it is essential for a couple living together to meet with a Georgia estate planning attorney to discuss estate planning, living wills, and durable springing powers of attorney so that they can fully understand their rights and obligations and can deal with these problems in a way that is suited for their personal needs at a time that is not pressured or emotionally chaotic.
Image courtesy of David Castillo Dominici at FreeDigitalPhotos.net
Tip #1: Update your will immediately.
This may not be top-of-mind, but updating your will is extremely important if you are going through a divorce. Having your assets go to your ex can be like adding insult to injury…and can tie up your estate for years to come.
Tip #2: Update your life insurance policy and retirement beneficiaries.
Actor Dennis Hopper was in the middle of a highly contentious divorce when he died. Since he didn’t change his life insurance policy beneficiaries, his ex received the proceeds. Be sure to name new beneficiaries on your life insurance and retirement accounts so your ex doesn’t inherit your assets.
Tip #3: Do not wait until the divorce is final.
Contrary to popular belief, you do not have to wait until your divorce is final to update your estate planning documents. If your divorce is likely to drag on for months or even years, you can still protect your assets from your ex by updating your estate plan.
Tip #4: Revisit your choice of executor and trustee.
While your ex may become the legal guardian of any minor children if you die, he or she should not necessarily be named as executor of your will or the trustee of your children’s inheritance.
Tip #5: Update your Durable Power of Attorney for Health Care.
If you do not want your ex making decisions about your health care, you should update your durable power of attorney for health care as well as your living will. This also applies to any other advance directives that name your ex as a decision maker.
If you’d like to learn more about estate planning and asset protection and how it affects you in a divorce case in Georgia, call our office today to schedule a time for us to sit down and talk. We normally charge $750 for a Georgia Family Treasures Planning Session, but because this planning is so important, I’ve made space for the next five people who mention this article to have a complete planning session at no charge. Call us at 770.425.6060 today and mention this article.
It is clear to estates attorneys in Atlanta that the most valuable asset for many local residents is their homes. First of all, there is no way to put a price on the emotional, historical, and personal value of your home. From house shopping to paying the mortgage every month to having a safe place to live during your retirement, no dollar amount can be added up on a calculator. That said, in these time of uncertainty, it’s more critical than ever to make sure the most valuable asset you own stays protected.
A powerful tool that is commonly used for this purpose is the revocable trust. This is created while you are still living and allows you to make changes. The revocable trust gives you and your home a number of protections during your lifetime but also creates provisions for when you pass away. For example, if you have created a revocable trust, once you die, it becomes unchangeable (“irrevocable”), ensuring that your wishes are carried out. Also significant is the fact that it keeps your house out of the Fulton County or Cobb County probate process, saving money and the risk of the courts choosing to do something other than you would have liked.
Revocable trusts are relatively easy to set up with an estate attorney in Atlanta. The cost varies, of course, but putting together all of the legal documentation usually costs less than a few thousand dollars and saves many times that much for the estate. They are also very flexible, which means that you can have a lot of say in what becomes of the home you’ve treasured.
For example, you may wish to leave the property directly to a certain heir or group of heirs who will then be responsible for the costs associated with keeping and running the home. On the other hand, you may choose to incorporate funding for the upkeep of the home. Some people even choose to leave their home as a legacy to a certain organization for various purposes or to a group of family members to use as a vacation residence.
Options Provision for Your Revocable Trust
Another option that Atlanta estate attorneys see in practice is when a specific person is given the option to buy the home. If this person declines, then the next potential family member is given the option. The grantor can name as many people as he or she likes or can choose to have the home sold and the proceeds given to the charity of his or her choice. When a family member exercises this option, however, it is typical for the home to be purchased at fair market value.
A good estate attorney in Atlanta will be able to help you create a revocable trust that gives you access to your home throughout your lifetime while setting up what will happen to it after your death. By doing so, you may be able to avoid certain taxes which would apply, not to mention avoiding the significant costs associated with probate in Georgia.
Every parent wants to make sure their children are provided for in the event something happens to them while the children are still minors. Grandparents, aunts, uncles and other relatives often want to leave some of their assets to young children, too. But good intentions and poor planning often have unintended results.
For example, many parents think if they name a guardian for their minor children in their wills and something happens to them, the named person will automatically be able to use the inheritance to take care of the children. But that’s not what happens. When the will is probated, the court will appoint a guardian to raise the child; usually this is the person named by the parents. But the court, not the guardian, will control the inheritance until the child reaches legal age (18 or 21). At that time, the child will receive the entire inheritance. Most parents would prefer that their children inherit at a later age, but with a simple will, you have no choice; once the child attains the age of majority the court must distribute the entire inheritance in one lump sum.
A court guardianship for a minor child is very similar to one for an incompetent adult. Things move slowly and can become very expensive. Every expense must be documented, audited and approved by the court, and an attorney will need to represent the child. All of these expenses are paid from the inheritance, and because the court must do its best to treat everyone equally under the law, it is difficult to make exceptions for each child’s unique needs.
Quite often children inherit money, real estate, stocks, CDs and other investments from grandparents and other relatives. If the child is still a minor when this person dies, the court will usually get involved, especially if the inheritance is significant. That’s because minor children can be on a title, but they cannot conduct business in their own names. So as soon as the owner’s signature is required to sell, refinance or transact other business, the court will have to get involved to protect the child’s interests.
Sometimes a custodial account is established for a minor child under the Uniform Transfer to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). These are usually established through a bank and a custodian is named to manage the funds. But if the amount is significant (say, $10,000 or more), court approval may be required. In any event, the child will still receive the full amount at legal age.
A better option is to set up a children’s trust in your will and name someone to manage the inheritance instead of the court. You can also decide when the children will inherit. But the trust cannot be funded until the will has been probated, and that can take precious time and could reduce the assets. If you become incapacitated, this trust does not go into effect…because a will cannot go into effect until after you die.
Another option is a revocable living trust, the preferred option for many parents and grandparents. The person(s) you select, not the court, will be able to manage the inheritance for your minor children or grandchildren until they reach the age(s) you want them to inherit—even if you become incapacitated. Each child’s needs and circumstances can be accommodated, just as you would do. And assets that remain in the trust are protected from the courts, irresponsible spending and creditors (even divorce proceedings).
If you’d like to learn more about estate planning for your family, call our Atlanta estate planning lawyers at our Marietta wills and trusts law office today to schedule a time for us to sit down and talk. Call us today at 770-425-6060.