Attorney Thomas B. Burton, and Attorney Matthew Underwood discuss "How Do Trusts Protect You While You Are Alive? in the latest Ask the Attorneys series. Many people do not realize that trusts can protect you while you are alive and not just after death. Attorney Burton and Attorney Underwood discuss the many benefits of trusts during life and after death in this latest episode.
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Thomas: Welcome back to 'Ask the Attorneys', today's topic is 'How do trust protect you while you're alive?' and once again, I'm joined by Attorney Matthew Underwood to discuss this topic and Matt, I think a lot of times, I know I'm guilty of this in my own practice but many clients when they come in, they've heard somewhere that a trust is a good idea to avoid probate upon death, right and I skip over or they skip over or we both skip over thinking about the other benefits of a trust which is how it can protect you during your life. So today I thought we'd talk about that and I wanted to hear some of your thoughts on this aspect of trust planning.
Matthew: Yeah, that's a great point Tom, because you when we think about estate planning whether it's you know a lot of attorneys or even clients, you think about death and really that's what the, what we're planning for but it is lifetime planning as well and we want your estate plan to protect you while you're alive and well and if you were to pass away. So we don't want to leave any stone unturned there but I would say just to kind of give an example you know let's say somebody, they don't have an estate plan in place, they don't have a trust set up and you know they get into a car accident and now they're in the hospital and you know they're kind of out and they can't really manage anything anymore. They're recovering in the hospital, so what happens now? Well if you don't have planning in place, those bills still have to get paid, you know, whether it's the mortgage or you know, you got other obligations out there, those don't stop. Those still need to be taken care of. The house still needs to be maintained, you know, whatever it might be. You know maybe even you have younger kids at home and they need to be taken care of. So you know with planning for example, we can avoid that uncertainty and in specifically we can avoid having to go through guardianship. So guardianship is a court process where if somebody doesn't have their own estate plan in place, family has to go to court and basically ask a judge for permission to handle issues for that person who's incapacitated. So by setting up a trust, the person can specify a successor trustee and the successor trustee would step in whenever that primary person is incapacitated and then the successor trustee can step into that person's shoes and pay the bills or you know do whatever sort of management things that person would do normally. So you know whether we're choosing to do no planning and saying we're going to go the guardianship route, that typically means more uncertainty, more costs involved, you know, greater time involved before we can get that judge's order versus doing a trust where we know as soon as we sign that trust and it's notarized, now that person's protected and if anything happens that successor trustee can step in and handle things. So I think you know avoiding those court processes, avoiding court cases, we want to do that through trust planning and make sure that we're picking people to handle things without having to go to a judge and get extra permission. Would you say that's, you know, one of the things that you have seen in your practice Tom, when we're talking about trust, people see that as an advantage?
Thomas: yes, well I think it's part of the education we need to do about, really what advantage they provide during life because people are living longer and I'm seeing more and more clients fall into this area where they're alive but may have incapacity issues. They're not dead because when you're dead you're, clearly that part is over and then the trust takes over the distribution of assets but the part while you're alive, you need to look out for your own health and welfare and that's where you need someone using your own assets on your behalf as a fiduciary and we are even seeing where people can go you know, you can have a period of incapacity that you recover from, like a serious illness, then you get better and live a lot more years after that. So you still need those assets for your own care. It's not like when you're gone and you don't need them at all but what I see is, if people don't do the pre-planning, unfortunately some people think they'll have time, you know, whatever that is in the future, to do it but I had a case this spring where the family came in, husband and wife, unfortunately the wife got a cancer diagnosis and by the time they scheduled the meeting but by the time they got into the office, she had already declined and was in the hospital and they were talking about a guardianship for her because I had to have a discussion with them about whether she, we talked about drafting some documents but the question was would she even have capacity to sign the document at that point because due to the cancer treatment, she was on heavy medications and which caused you know, when you're alive and healthy outside the hospital, it's a lot better time to be executing legal documents because unfortunately, her diagnosis came and it progressed so fast that it seemed unlikely she would have the mental, the requisite legal capacity to even execute documents at that point of time even if we could get them done that quickly. So I recall they were sitting in the conference room and talking about a guardianship because the hospital had brought up the need for a guardianship because she didn't even have a healthcare power of attorney in place either, to make medical decisions. So no documents at all but what I'm getting to hear is the talk about the guardianship, I don't think people quite understand how involved a process that is, like you said it's a court process and you have to think of it similar to going to court about anything else. It isn't a simple submit a form to the medical provider and you get awarded a guardianship. You have to have a hearing and the judge has to go through the factors under the law to decide if they even should award this guardianship to the person petitioning. So what I'm trying to say is the reason why Matt pointed out, it can get expensive fast, is because all that involves paying attorneys to bill hourly to go to court and get the guardianship awarded and then the person who's the subject of the guardianship proceeding, they're entitled to be represented by their own attorney. So and that's to protect their constitutional rights, right but I just think what I see in my practice is the term guardianship is sometimes thrown around but people don't really understand that it's not something you can just get done overnight, generally. Would you agree with that Matt?
Matthew: Yeah, that's a great point and even, you know what you said about delaying planning, I think you know, if we had a, that proverbial nickel every time somebody said that, you know, "I'm going to, I'll get to that later", you know, "I'll, next year, I'll do my estate planning", you know, the fact is, we don't know when things are going to happen and you know I think it's more likely that somebody will be faced with a situation where they're incapacitated before they, you know, are faced with death, I mean, it's more likely that the family's going to have to deal with the incapacity situation. So we need to do a really good job about planning for that because again, we don't know when things are going to happen and you know a lot of times people delay things so long that now we're at the point like in your example, Tom, where well maybe we're too late to do that planning and now we are, we're forced to use the court system to get things done. So, so getting people to do the planning and actually invest the time and do it now rather than delaying it, I think is really valuable but it's sometimes hard to convince people to do that when you know you think of incapacity or you think of passing away as something you know way off in the future and they're not the most pleasant conversations to have, I mean it's something that we have to do, we don't like talking about, you know, being incapacitated or passing away but it's so important, it's such an important thing that you can do it for your family and to make things easy for them, to make sure that we're avoiding disagreements and make sure that people know what the plan is and then who's implementing that plan. So I'd say that's a big benefit and you know the other one that we didn't talk about yet is just getting things organized. You know, a trust is one way where we can pull assets together. So for example, we can set up a trust, we can put the house in the trust, you know, real estate, vacation property, we can put the bank accounts in the trust, we can name trust as beneficiary at life insurance. So the trust really becomes a centerpiece for that plan and it now becomes our one-stop shop, where if we need to deal with assets, they're in the trust, they're consolidated, they're organized and so, that's a really nice thing we can do for our clients and when we set up a trust and when we fund that trust or if we get those assets into the trust, you know, it's great seeing that sigh of relief over our clients, knowing you know, with them knowing that they're set up and they're protected. So yeah, for those reasons, I think you know, for setting, putting a will plan and a trust plan side by side, I think you know if those two plans cost this thing, you know, everyone's going to do a trust but the fact is trusts tend to cost more, so that you know costs might be a factor in this but, but again, to get the best planning, you know it, in oftentimes that means we're looking at trust-based planning for people.
Thomas: yeah the one vehicle concept, everything flowing through that one trust, is really key and something I find really appeals to clients because with modern life, where many of us, you can have multiple brokerage accounts, bank accounts, the house, real estate, a cabin, cars you know, having one vehicle that can handle it all and you can give your family the one document that is the plan for everything, is very beneficial because even if there's other ways to do it, piece by piece, I see a lot of confusion when people come in with plans like that and I had a client this summer who they said, I just want everything to be laid out, you know through this one document for my family and I think that's another big benefit. You can go to the trust document. Now Matt and I know we can't usually make a trust two pages right because I like to say, the trust is flexible. We try to make them flexible, to accommodate all these different assets and scenarios. So it's generally going to be a little longer than a simple will for example but then the beauty of it is we can use it for all of those assets and build in some of that flexibility for planning over your lifetime and I think like I said just making it less complex and confusing for your family or who, whoever's left, the surviving spouse, the family, is another big benefit to your family and to the way a trust can protect you during life and after death.
Matthew: Yeah exactly Tom, I would say, you know the people that we've helped in our office and I'm guessing you would say this too, I mean, there's a certain amount of pride that you feel when you know, you put a lot of thought and effort into doing your own estate planning and now you get it set up. All your wishes are in there, it's properly signed and executed and now your assets are in that trust. I think that's a good source of pride, to know that you did everything that you need to do, to protect yourself and your family and so I think you know, that's one of the best parts of my job is when we get a completed plan and having that sense of pride and relief to our clients knowing that everything's set up and taken care of, it's one of the nice parts about our job in the planning that we do for people.
Thomas: totally agree, well, thank you Matt for joining us.
Matthew: yup, thank you Tom. It's always a pleasure to talk about these topics and they're really important. So I'm glad that you're another expert in estate planning that we can discuss these issues with.
Thomas: and thanks to everyone for tuning in to 'Ask the Attorneys', we'll see you on the next episode.
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