Sioux Falls law firm for Estate Planning

Many people believe that estate planning is only for people who are particularly wealthy, have elaborate schemes in mind for passing their money to their heirs, or for people who are acutely ill and contemplating their death. This could not be farther from the truth!

Estate planning is for every husband, wife, mother, father, grandparent, business owner, professional, or anyone else who has someone they care about, are concerned about providing responsibly for their own well being and for the well being of those they love, and for anyone who seeks to make a difference in the lives of others after they’re gone. Estate planning is not ‘death planning’; it’s ‘life planning’, and an essential and rewarding process for individuals and families who engage in it.

When done properly, estate planning requires that a highly trained individual lead you through one or more in-depth meetings to uncover your hopes, fears, and expectations for yourself and for those who are most important to you. This process almost always requires the preparation of several sophisticated legal documents, but those documents themselves are not ‘estate planning.’ Planning is a process, represented by a complete strategy that is properly documented and maintained by a professional who has taken the time to get to know you, and who is committed to continuing to serve you.

Common estate plans include:

Asset Protection

A revocable trust provides no asset protection for the trust maker during his or her life. Upon the death of the trust maker, however, or upon the death of the first spouse to die if it is a joint trust, the trust becomes irrevocable as to the deceased trust maker’s property and can provide asset protection for the beneficiaries, with two important caveats. First, the assets must remain in the trust to provide ongoing asset protection. In other words, once the trustee distributes the assets to a beneficiary, those assets are no longer protected and can be attached by that beneficiary’s creditors. If the beneficiary is married, the distributed assets may also be subject to the spouse’s creditor(s), or they may be available to the former spouse upon divorce.

Trusts for the lifetime of the beneficiaries provide prolonged asset protection for the trust assets. Lifetime trusts also permit your financial advisor to continue to invest the trust assets as you instruct, which can help ensure that trust returns are sufficient to meet your planning objectives. The second caveat follows logically from the first: the more rights the beneficiary has with respect to compelling trust distributions, the less asset protection the trust provides. Generally, a creditor ‘steps into the shoes’ of the debtor and can exercise any rights of the debtor. Thus, if a beneficiary has the right to compel a distribution from a trust, so too can a creditor compel a distribution from that trust.

Call Rick Mickelson: 605-334-9448
Email: rick@sfsdlaw.com
Office Hours: Monday through Friday 8:00 a.m. to 5:00 p.m. (closed over the noon hour)
Office location: 300 N. Dakota Ave, Ste 603, Sioux Falls, South Dakota

Disability Planning

Living Will

A living will or directive to physicians directly informs your doctors that you do not want extraordinary medical measures taken, especially those that would cause you pain or discomfort, if those measures would only prolong the dying process. This document backs up your health care power of attorney. Anyone can deliver this document to your doctors if your agent under your health care power of attorney is unavailable to make health care decisions for you.

Disability

Your Estate Planning Should Thoroughly Address Disability Planning. When a person becomes disabled, he or she is often unable to make personal and/or financial decisions. If you cannot make these decisions, someone must have the legal authority to do so for you. Otherwise, your family must apply to the court for appointment of a guardian for either your person or your property, or both. At a minimum, you need broad powers of attorney that will allow agents to handle all of your property if you become disabled, as well as the appointment of a decision-maker for health care decisions. Alternatively, a fully funded revocable trust can ensure that you and your property will be cared for as you desire, pursuant to the highest duty under the law — that of a trustee.No one ever plans to become disabled. Although everyone realizes that life will end someday, few of us consider the possibility that we will spend a significant portion of our lives unable to fully care for ourselves. Very often, life gets in the way and bad things happen to ordinary people. Disability doesn’t just happen to the elderly or those who pursue risky and dangerous hobbies. Motor vehicle accidents, work-related injuries, and otherwise common illnesses render many individuals disabled or ‘incapacitated’ every year.

Incapacity

Incapacity planning must be a part of every comprehensive estate plan. Proper planning will allow you to legally designate individuals who can make decisions for your care and empower them to manage your property if you are unable to do so for yourself. As a part of estate planning, there will be sophisticated legal documents involved, but dedicated and experienced legal counsel will help you understand your options and prepare a plan that is tailored to your needs.

Pet Trusts

For many pet owners, pets are members of the family. There are important issues surrounding caring for pets after the disability or death of the pet’s owner. Given the feelings of many individuals towards their pets, and the costs of care and longevity of some types of pets, planning in this area can be of critical importance.

With proper planning pet owners can plan for the health and well-being of their pets. In 2006 South Dakota enacted a pet trust law to allow individuals to consider many pet care options, including:

Creating a pet panel to offer guidance to the trustee and caregiver; and,
Giving the power to remove and replace the trustee and caregiver if necessary.
Consider including a veterinarian in the pet care panel to make the final decision regarding euthanasia for medical reasons, and to ensure that the pet is not euthanized prematurely by the caregiver.
Paying the caregiver a monthly fee for caring for the pet or allowing the caregiver to live in the pet owner’s home, rent free.
Awarding a bonus to the caregiver at the end of the pet’s life as a “thank you” for taking care of the pet.
Provide instructions regarding burial, any headstone or other memorial.
And finally determine how the trustee is to distribute the remaining trust funds after the last pet passes away.

For many people we find that this is provides comfort knowing our fur coated children will be lovingly cared for in the event we predecease them. This also offers an additional way to memorialize the pet by making a final gift in the pet’s name to our favorite pet related charity.

Physicians Planning

As a physician you have special talents and responsibilities. Those responsibilities often carry added liability. Many doctors even feel like they’re walking around with a target on their back.

Planning for physicians contemplates not only helping you properly structure your own incapacity and estate planning, but it also contemplates strategies to streamline your income tax profile, coordinate various business aspects of your professional practice, and provide a measure of protection from lawsuits.

As a physician you may want to consider a South Dakota Domestic Asset Protection Trust, South Dakota has very favorable asset protection laws to maximize your asset protection, minimize your assets subject to lawsuits, and preserve your privacy.

Revocable Living Trusts

Perhaps the most common type of trust is the revocable living trust. As the name implies, revocable trusts are fully revocable at the request of the trust maker. Thus, assets transferred (or ‘funded’) to a revocable trust remain within the control of the trust maker; the trust maker (or trust makers if it is a joint revocable trust) can simply revoke the trust and have the assets returned. Revocable trusts can be excellent vehicles for disability planning, privacy, and probate avoidance.

Here is a little more about revocable living trusts.

Any trust is really just an agreement. It is also a relationship. There are always three persons involved in the trust. First there is the trust maker, also referred to as the grantor. Second, there is the Trustee. The trustee becomes the legal owner of the property in the trust. Third there is the beneficiary. The beneficiary as the name implies gets the benefits of the trust.

Why is this an estate planning tool?

Here is where the revocable living trusts is used as one of the big estate planning tools. One person can be all three grantor, trustee and beneficiary. The grantor can put property in trust, name herself as the trustee, and be the beneficiary at the same time. The grantor retains the power to amend or completely revoke the trust. There is the revocable living trust in a nutshell.

So how does this work as an estate planning tool?

When the person who makes the trust, the grantor or the trust maker, for any stated reason in the trust agreement, no longer wants to manage the property the successor trustee takes over. So you put property in a trust. You then define the times when the next person in line is to take over your duties as trustee. You say “If I become disabled for any reason, my son takes over management of the property in the trust” if you become disabled as defined in the agreement, your son takes over. He has agreed to manage your property and he is required by the agreement to serve you with the highest duty of care the law allows.

What happens when you die with a trust?

In most cases the trust is no longer revocable (we can build in ways to preserve flexibility) and the property is managed by the pre-selected trustee in any way defined by the agreement. You are the one who decides what goes in the agreement.

Why would you want to do this?

There is no court involvement for any of the property put in the trust before you die. You avoid probate. Everything stays private. No one but the beneficiary and the trustee is entitled to know your plans. You decide how to preserve your legacy, encourage and support your loved ones, offer your advice and financial support. Your lasting legacy, your loving instructions and your privacy as well as the privacy of your family is preserved because the is not public probate.

Is this expensive?

No. A revocable living trust will really have the same provisions your will would have. The big difference is making sure all the property is properly titled in to the trust. A revocable living trust based estate plan should cost about the same as a properly drawn will.

Wills

Call today for your free consultation to talk about your will!

I prepare wills for many of my clients. In fact one of the most common telephone calls we get is people calling to ask for simple wills. The other question people ask all the time is “how much is just a simple will?” I don’t sell you forms or commodities. I draft wills for my clients based on their individual needs. Your will is always based on your and what you tell me you want and need. As a result, I never charge for the initial consultation for a will. The only way to determine a fair price is to give you a free initial consultation for your will.

Usually there is a reason a person calls about a will. Something happened in their life or with someone close to them. When you call me about a will it is important to remember my job is to get to know you and the reasons for your call. My mother always told me I have two ears and one mouth for a reason.

When you call about a will you probably have some notion of what needs to be done. When you come in to talk to me I take the time to listen to your ideas, concerns, worries and fears. You may have some ideas of what you want your will to do. You may want: to give to charity; provide for a special needs child or grandchild; provide that inheritance only be used for specific purposes; or, provide money be set aside for the care of a pet. You may wish that a specific item of property go to a specific person, say a wedding ring to your daughter; you may want to be buried with a particular object. I encourage you to share the things you want in your will. After all, it is your will we are talking about. I will help you make sure that your will is known and carried out.

There is really an unlimited number of things that people are concerned about in making a will. Just a few things I have come across over the years are: making sure wishes are carried out, family fighting, will contests and trials, an ex-spouse getting your assets. You may be worried that a creditor will take the inheritance you leave for a child or beneficiary. You may be concerned that your adult child’s spouse will have access to what you leave for your beneficiary. I listen to your concerns, worries and fears and create solutions that provide the comfort and peace of mind of knowing that your wishes will be carried out. The will is in place and there is nothing to worry about as far as your final instruction are known.

Call today for your free consultation to talk about your will!

Special Needs Planning

A Special Needs Trust is a trust that can supplement the needs of a special needs beneficiary while allowing the beneficiary to maintain his or her governmental benefits, including Supplemental Security Income (SSI), Social Security and Medicaid. With medical advancements, persons with disabilities are living longer and public benefits are often necessary, yet there is no guarantee that public benefits will provide adequate resources over the disabled person’s lifetime, or that existing public agencies will continue to provide acceptable services and advocacy over a disabled person’s lifetime.

If the special needs trust is established by you or someone other than the disabled person and the disabled person does not have the legal right to demand trust assets, the trust is not considered a ‘countable resource’ for purposes of government benefits. Therefore, the special needs trust beneficiary can continue to receive benefits even though he or she is a trust beneficiary. The trust will give the trustee the discretion to make distributions to the beneficiary to the extent possible without reducing benefits, and trust assets are available if the beneficiary no longer qualifies for governmental assistance or that assistance is no longer available.

If the trust is established on the beneficiary’s behalf pursuant to court order, for example as part of a personal injury settlement, the trust will not impact the beneficiary’s eligibility, but it may need to include a ‘payback’ provision that reimburses the state for its assistance before trust assets pass to the trust’s other beneficiaries.

Common savings vehicles for children, like Uniform Transfer to Minor Acts (UTMA) accounts, typical trusts, or designating a retirement plan, insurance policy or annuity directly to an SSI or Medicaid recipient will cause a reduction or elimination of public benefits. Recognizing this, some parents make the difficult decision to disinherit their special needs children, but this severe action is unnecessary.

Retirement Planning

Now, more than ever, incorporating retirement planning into your estate plan is essential. The United States Supreme Court has made that very clear. The court decided that after you die the retirement plan benefits that pass to a loved one, any creditor of that beneficiary can get at the funds.
This is important. You have worked hard to build up your retirement nest egg. You probably have someone named as a beneficiary after you die. The retirement plan money in the hands of the beneficiary is subject to creditors, predators, lawsuits, divorces and bankruptcies.
Assume your children own and operate a business. If the business has a reversal that retirement money could be subject to the debts of his business. If one of your children has a car accident and their insurance is not sufficient to cover the damages the retirement money could be subject to lawsuits brought by plaintiffs’ attorneys. If your son or daughter were to be the beneficiary of a substantial retirement plan they could fall victim to a gold digging spouse. The retirement money could be divided in a divorce settlement.
There is a way to protect from all of this. It is a special trust designed specifically to receive retirement money. There are two advantages to using a retirement trust. The first advantage is the protection from creditors and predators as described above. The second advantage is if you create a separate trust for each of the beneficiaries, assume your children, then you can stretch out the distribution of the retirement money over the lifespan of each individual beneficiary. You probably know you take required minimum distributions based on your life expectancy. Imagine giving the money to your child and they only have to take it out based on their life expectancy. This is called maximizing the stretch. It is powerful.
The advantage is the money can be drawn out slowly (maximum stretch) the child takes advantage of the power of compound interest over time. In addition to taking advantage of the compound interest over time the income tax due upon distribution can be deferred for a longer time. Again, the interest grows and no taxes are paid until there’s a distribution so there’s more money to distribute. All this while maximizing creditor protection.
We often refer to this kind of a trust as a standalone retirement trust. We use this trust to provide asset protection and maximized tax-deferred growth for your spouse, children and other loved ones. This means more assets go to the people for whom you care.
Your loved ones probably do need asset protection. In the United States there’s a new lawsuit filed every couple of seconds. There are more plaintiffs’ attorneys graduating from law school every year. As a result, anyone with assets is the target for these hungry young plaintiff lawyers. You have seen them advertising for your business everywhere you look.
Most children probably tell their parents to go ahead and spend their retirement assets on themselves. Most children probably aren’t terribly concerned about their parent’s retirement money. Certainly it’s your money and you should go ahead and use it as you see fit.
When you create this special trust you maintain absolute control over the distributions and you can use your retirement funds in any way you please. As the retiree you have a substantial amount of creditor protection so we are less concerned about putting the money in a domestic asset protection trust. (These are used for larger assets.) If you are like most people, there will probably be a fair amount of money in your retirement plan at the time of your death. That’s when this special kind of a trust will serve to protect your loved ones and maximize the benefits you can leave for them.

Irrevocable Trusts

Domestic Asset Protection
Grantor Retained Annuity Trusts
Dynasty Trust
Family Bank Trust
Minor’s Trust
Qualified Personal Residence Trust
Inheritor’s Trust
Alaska Community Property Trust
Stand Alone Education Trusts