Memphis and Shelby County Probate Court

January 3, 2008 | Leave a Comment

While doing some research on locations in Memphis and Shelby County where you can apply for passports I came across what I assume to be a little known fact regarding the shelby county probate court. You can actually apply for a passport at the downtown location of the probate court on Adams. As far as I can tell it is the only location outside of the post office here in Shelby County.

So if you’re going to be traveling out of country anytime soon and live downtown or are there often feel free to stop by the probate court and apply for your passport. For those of you who are familiar with the location it is located on the east side in the bottom floor of the shelby county courthouse on Adams, adjacent between second and third street.

Posted by James Ferrell | Filed Under blog 

Vital “Step 2″ of the Living Trust Process

November 12, 2007 | Leave a Comment

I’ve published posts on the overall scheme in regards to revocable living trusts (Part I and Part II), but the issue of funding your living trust is so important that it warrants a post of it’s own.

J04018321It’s essential to remember that setting up your living trust is a two-step process. Step #1 is having the document prepared and formally executing it.  Step #2 is funding it.  Too many clients complete Step #1 and think that the process is over when they are really only halfway done.  If you do not complete Step #2 then your estate will have to go through probate, which would obviously be a shame since the main reason for setting up a living trust is to avoid probate.

In regards to your real estate, your attorney should prepare a “quitclaim deed to trust” for you to sign which will transfer ownership of your real estate to your living trust, thereby funding the trust with your real estate.  This normally takes place at the same time that you execute the trust itself.

As far a bank and investments accounts go, you will usually just need to fill out and sign a one-page document.  Again, just like with the real estate, you are changing the title to the account so that the records of the financial institution indicate that your trust is now, technically, the owner of the account.

Please note that anything that has a designated beneficiary (life insurance, qualified retirement accounts, annuities, etc.) are already set up to avoid probate, regardless of whether you have a living trust.  But it is generally a good idea to name your trust as the beneficiary of these assets, especially if you are a married couple and your attorney has set up credit shelter planning in your trusts to address estate tax concerns or if you have set up trusts for children in your living trust.  Be sure to check with your attorney.  Again, remember that this would be a change of beneficiary, not a change of ownership.  Closing one of these accounts out and opening a new one in the name of your trust might trigger unnecessary penalties and taxes.

Posted by James Ferrell | Filed Under James K. Ferrell, Living Trust, blog, probate, trusts 

A Look at Living Trusts vs. a Power of Attorney

November 8, 2007 | Leave a Comment

Germantown, Tennessee

I recently read an article on the Aspen Daily News’ website which was really a cut above most “you need to have an estate plan” articles — good use of detail and examples.

Unfortunately I can’t hyperlink to the original article but here is an excerpt that I copied that I want to focus on:

In event of your disability, give someone you trust the power to manage your property. It’s called a power of attorney (although the person doesn’t have to be an attorney).
But there’s a problem: Some financial institutions won’t accept powers of attorney created more than six months before. You’re unlikely to renew a power of attorney this frequently. For a better solution, ask an estate planning attorney to draft a living trust for you. (The cost is probably $1,500 to $3,000.) The ownership of all your property is changed from your name to the trust’s name. As the sole trustee, you can do anything you like with the property.

But if you become disabled, a person named in your trust steps in as successor trustee to manage the property on your behalf and for your benefit. All financial institutions accept this, no matter when the trust was written.

I haven’t had a problem getting “old” powers of attorney (any POA created by someone in the last 5 years) accepted by financial institutions, but a living trust really works better than a property power of attorney in the case of disability. Or, rather, I should say that a fully funded living trust works better. If you transfer ownership and change beneficiary designations to your living trust and then become disabled, your successor trustee really can step right in and handle your property for your benefit. If you set up a living trust but don’t fund it, and then become disabled, your property power of attorney can (hopefully) be used to fund your living trust at that time. I always include specific language allowing an agent, under a property power of attorney, to take care of this funding.

And, of course, a health care power of attorney is very important as well.

Let me put it simply: If you become disabled, having a fully funded living trust and powers of attorney will save you and your family a lot of time and money.

Posted by James Ferrell | Filed Under James K. Ferrell, Living Trust, Power of Attorney, blog 

Do You Really Need a Living Trust? (Step 1 - Part II)

November 7, 2007 | Leave a Comment

Now that we have a general idea of what a living trust is…do you really need one?

J03959541Many estate planning lawyers will tell you that essentially everyone would be better off with a trust instead of a will, but I disagree.  You need to remember that there are some downsides to having a living trust.  First, your legal fee will be higher.  Even for simple trusts you’re probably looking at a four-figure fee instead of a three-figure fee for a will.  Then there is some legwork involved in regards to “funding” the trust (or re-titling your assets), which is a step that you do not need to take with a will.  This can be a significant time commitment if you have a bunch of accounts spread out among many different financial institutions.

So when is the higher cost and extra work warranted? 

First, I would say that if you own real estate in another state (many of my clients have a condo in Florida or a cottage on the Cape) then the need for a living trust is nearly a given.  The reason is that if you die without a trust then your family will have a “double probate” situation…a full-blown probate process in Connecticut and the other state.  This is an administrative headache that you should try to avoid at all costs.

Second, if keeing your estate planning private is a priority then a living trust is the best way to go.  Marilyn Monroe’s Will is all over the Internet for everyone to see because a will is a public document after you die.  Literally, anyone can walk in off the street, go to the probate court and ask to see a copy of your will without giving a reason why.  Trusts are private documents.

Finally, if you have a relatively small and straightforward estate then going through probate shouldn’t be a big deal, regardless of the bad press that the Connecticut probate court system has received over the last few years.  If you have a large and complicated estate then you should at least consider setting up a living trust.

Please remember the following important facts about trusts: (1) even if you have a fully-funded trust, upon your death your successor trustee will still need to file a few documents with the probate court, including an estate tax return even if no tax is due, (2) a simple living trust, with no credit shelter planning, does not avoid estate tax, and (3) even if you have a trust the probate court will still be entitled to charge a probate fee based on your gross taxable estate, which most of my clients are unpleasantly surprised to hear.  In other words, living trusts do not avoid probate court fees.

Hopefully this post and the previous one has given you a better idea of what trusts are and how they work.  But you should not determine whether you need one or not until you sit down and discuss them with an estate planning attorney.

Posted by James Ferrell | Filed Under James K. Ferrell, Living Trust, blog, wills 

Do You Really Need a Living Trust (Step 1 -Part I)

November 6, 2007 | Leave a Comment

Based on a lot of e-mail messages I have been receiving recently, this is the post that a lot of readers have been looking forward to…some honest commentary on how vital it is for one to own a “Revocable Living Trust” (RLT).  Public interest in RLT’s has been running high for the last several years.  This interest has been fueled a great deal by some attorneys who convince every client that they absolutely have to own one.  They create this concept of RLT’s as documents that can do accomplish everything for you short of slicing vegetables.  This isn’t the case because every client is different and RLT’s simply are not for everyone.

Bldjg01107081First, we should start with a quick sketch of how RLT’s work.  When you sign an RLT you essentially create a legal entity that is separate and apart from yourself, and it is a document that directs how and where the trust assets are distributed when you die, just like a will does.  You then transfer ownership of your assets (bank accounts, investments, real estate, etc.) into the name of your RLT.  So when you die and the Probate Court wants to know what you owned when you passed away so that it can go through the probate process, the answer is that, technically, you owned nothing…your RLT owned eveything.  Therefore, no probate. 

Here is a message well worth repeating:  Planning with living trusts does not end when the trust documents are signed (which is the case with wills).  Please notice that a vital step in this process is actually putting assets into your trust, which essentially means re-titling certain assets so that they are legally owned by your trust.  Otherwise, you’ll end up going through probate and defeating the primary purpose of having a trust.  In other words, there are two very important steps to this process.  Skipping step #2 (funding the trust) is, hands down, the most common mistake made with living trusts…and it’s a big one!

Please note that it is extremely important to sign a “pour-over” will along with your trust.  It is a very short and simple will which simply says that upon your death, anything that is not already owned by your trust is poured over into your trust.  This ensures that all of your assets are distributed in accordance with the instructions in your trust.  Ideally, everything will already be owned by your trust when you die.  But just in case you forgot to re-title a particular asset or just didn’t get around to it, then the pour-over will finishes the job and gets that asset into your trust.  The considerable downside is that the asset now must go through the probate process, which is precisely what you were trying to avoid when you set up the trust in the first place!

Posted by James Ferrell | Filed Under James K. Ferrell, Living Trust, blog, trusts 

Should you include funeral instructions in your will?

November 5, 2007 | Leave a Comment

Planning for a funeral definitely seems like a morbid task.  But the truth of the matter is that the act of planning out your funeral, whether it’s done by you or someone else, is a task that has to be done eventually (in light of the fact that death is one of the two things in life that are guaranteed!).  So planning for their funeral is one of the things that many of my forward-thinking cilents do.  And inevitably the question of whether the funeral instructions should be included within the body of the will often comes up.As with almost all legal questions, the answer to this one is “yes, but…”.  I usually encourage my clients to go ahead and talk about their funeral plans in their wills, assuming they have strong feelings on that topic, but you need to go beyond that. 

The biggest problem with including the funeral instructions in the will is that when someone dies the will is often not even opened until sometime after the funeral.  You can imagine a family members awkwardness when they discover that the funeral instructions in the will do not match up with what actually happened at the funeral. 

My advice is this; go ahead and include your funeral plans in your will, but you need to verbally indicate your wishes to your family as well.  You can even give them a document, separate and apart from the will, which spells out all of the funeral plans for them.  Setting up your funeral plans with the funeral home of your choice ahead of time also makes sense.  In other words, you should not rely on your will as being the sole source of funeral plan information for your family.

I will also mention that making funeral plans ahead of time, as morbid as that process may be, is almost always deeply appreciated by loved ones.  Having funeral plans in place removes a challenging administrative burden from your family as they go through an emotionally difficult time.

Posted by James Ferrell | Filed Under James K. Ferrell, blog 

What exactly is a trust?

November 5, 2007 | Leave a Comment

Here in the Memphis and Northern Mississippi area many people come to my offices wanting to create a trust account for their childen or loved ones but initially have little knowledge of what a trust actually is.  A trust is a separate legal entity from yourself that you allow to hold onto an asset for you before the trust one day distributes to the people that you have elected to benefit from the trust. Think of it much like you would a safe that you place assets in to one day be opened up and the contents distributed to your designated beneficiaries.  

A basic trust always has these four components: 

  • The Grantor – This is the person who creates the trust.
  • The Beneficiary(s) – Person who receives the benefits (income and/or principal) of the trust. The grantor can also be the beneficiary.
  • The Assets – These are the items, properties or policies transferred into the trust.
  • The Trustee – This is the person who manages the assets of the trust and distributes proceeds according to the guidelines set forth in the trust. The grantor can also serve as the trustee while he/she is alive. A trust can established while you are still living (the legal term for this is inter vivos) or it can be established upon your death by specific instructions made in your will (this is called a testamentary trust).

 A revocable trust is a trust that can be changed or revoked during by the grantor during his lifetime.  An irrevocable trust is a trust that cannot be changed or revoked after they are created.

Posted by James Ferrell | Filed Under James K. Ferrell, blog, trusts 

Why Does Everyone Put Off Their Estate Planning

October 30, 2007 | Leave a Comment

Now, I’m going to go out on a limb here and state that roughly 9 out of 10 clients who finally sign their estate planning documents put their pens down and proclaim to their attorney, “We feel wonderful! You’re not going to believe this, but we have been putting this off for years!!”  I’ll bet you that every estate planning attorney in Mississippi and Tennessee and beyond will back me up on this one.  Estate planning is just one of those things that clients love to put on the back burner, and it doesn’t matter what the size of their estate is, how old they are, or how many children they have running around the house.  Pursuading my clients to get the ball rolling on their estate planning has always been one of my biggest challenges as an attorney.  And it’s an even bigger challenge to get clients to start Medicaid planning!  But that’s a whole other issue for another post.

J04118181_2 So…what exactly is the cause of this strange phenomenon?  I actually think that it can be best explained by Stephen Covey’s “7 Habits of Highly Effective People” and that famous quadrant theory of his.  To paraphrase the theory, everyone has a long list of tasks, each of which fall into one of four quadrants.  One of those quadrants is for tasks that are “important”, but not “urgent”.  Estate planning falls squarely into this quadrant.

I think it’s safe to say that there is universal agreement in our society that getting your estate planning in order (or keeping it updated) is vitally important.  All parents of young children know it’s important to have guardians appointed in case something unexpected happens.  Everyone with very large estates know that they are walking tax liabilities.  And just about everyone knows that if they die without proper estate planning in place then they will leave their loved ones with administrative chaos of epic proportions and enormous, long-lasting headaches.  There are very few people who would argue with any of these statements.

So why don’t most people get their estate planning in order?  Because we all know it’s “important”, but we don’t think it’s “urgent“.  In other words, there’s no known deadline (a very appropriate term).  When I meet with new clients to discuss estate planning and they say that they have had genuine intentions to do this for quite some time, I happily inform them that they have beaten the deadline.  I usually get quizzical looks, so I explain that it’s not too late because they haven’t died yet.  This comment usually produces some laughs, but it’s true.  Technically speaking, the deadline for completing your estate planning is the day you die.  The problem is that we just don’t know when that deadline is!  The actuaries can make a very educated guess, but no one knows for sure.  One of the reasons that there was such a big surge in estate planning after September 11th is that people realized that there was a possibility that they might not live quite as long as they thought they would.

So here’s the message for the day: stop procrastinating with your estate planning and sit down with an attorney, whether it’s me or someone else, and get it done now in order to ensure that you beat the “deadline”.

Posted by James Ferrell | Filed Under James K. Ferrell, blog