These clients had multiple houses and a restaurant business that they wanted to leave to their adult children. Their primary concern was making the process as simple for their children as possible while also avoiding estate taxes on their over $4M estate. We discussed the usefulness of trusts to resolve both of these concerns.
Based on their needs they chose to do the tax trust package, which includes:
– Credit Shelter Trust;
– Wills;
– Powers of Attorney;
– Medical Powers of Attorney;
– Health Care Directive;
– Disposition Instructions; and
– Quit Claim Deeds moving real estate into the trust
The Credit Shelter Trust is a special type of Revocable Living Trust married couples can use to double their WA state estate tax exemption amount from $2.2m to $4.4m.
The Revocable Living Trust enables the clients to avoid probate, directs their assets in the trust to go where they would like them to go, and appoints a trustee to oversee management and distribution of these assets. When the clients are gone there will also be asset protection elements for the children.
The Will does three things: (1) name long-term guardians for the kids if something happens to both of them; (2) name a personal representative (i.e. executor) of the clients’ estates; and (3) ensure all assets get into the trust, even those the client failed to allocate.
The Power of Attorney names people to manage the clients’ finances if they are ever incapacitated.
The Medical Power of Attorney nominates people to manage the clients’ health care if they are unable to do so themselves.
The Health Care Directive tells the client’s Medical Power of Attorney what to do if they are in a vegetative state (i.e. pull the plug or not).
The Disposition Instructions state what the clients would like to happen to their remains after they are gone.
The Quit Claim Deeds transfer the clients’ interest in real property to their trust, so it will avoid going through probate.
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