Estate Planning Documents Explained

The world nowadays seems controlled by documents; leases, licenses, contracts, waivers, disclaimers, assumptions, warnings, and wills.  The day of the friendly “handshake” is over. We at Carmichael Clark confidently operate in this world and make it our goal that are clients do the same.

In that effort, Carmichael Clark several important documents in our tool kit. These forms come with the re-introduction of the firms Estate Planning Practice and are available upon consultation. I’d like to introduce them to you and encourage you to contact Carmichael Clark for individual advice concerning their appropriate use.

A Will transfers your property to people and charities of your choice after death. The Will names someone to be your Personal Representative and can name a Guardian for your minor children.  Wills can be basic or complex and have considerable power and formality requirements. Appropriate drafting and review essential.     

A Revocable Living Trust is a presently popular and useful document for those that want their estates to pass to their families without the formalities of probate administration.  In the trust document, you select the person you want – usually yourself—to be the Trustee to manage your assets while you are alive, and a Successor Trustee to step in when you are no longer able.  The Trust becomes effective upon funding, continues in force during your lifetime, and remains in effect after your death.  Prior to death or incompetency, a Revocable Living Trust can be changed at any time.

A Power of Attorney names someone to make financial and/or medical decisions (including end-of-life considerations) for you if you are no longer able.  This document is important if one wishes to ease the burden on family members and reduce the potential for conflict.  Absent this document, and in the event of serious disability or incapacity, someone would have to go to Court to be granted the authority to make decisions and manage your affairs.   

A Crummey Trust (named after a court case) is frequently established for minor children and is funded with the annual federal gift tax exclusion (currently $13,000/year per beneficiary). The trust is irrevocable and transfers assets tax-free.  This document is often used as a method of reducing the value of one’s taxable estate.

A Supplemental Needs Trust is for disabled children or adults.  It protects the money in the trust for the benefit of the beneficiary in a manner that will not interfere with that person’s ability to qualify for needs based government benefit programs like Medicaid.

A Grantor Retained Interest Trust (“GRAT”) can be a powerful tool for investors who wish to transfer wealth, particularly assets that may appreciate rapidly, to family members or others at a reduced gift tax value. The IRS values a gift contributed to a GRAT using an interest rate that is keyed to prevailing interest rates at the time the trust is funded.  If, when the trust ends, the trust has outperformed the IRS rates, the excess value will pass to the trust beneficiaries completely tax-free. When interest rates are low, appreciating assets in a GRAT are more likely to produce an excess return. This is an excellent estate planning tool for an investor with assets that are likely to outperform the market.

All of these documents can be extremely useful given the right situation.  Please call and make an appointment if you would like to discuss any of them with one of our lawyers.

-Evan Jones, Attorney