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Estate Planning Instruments

Revocable Living Trust
How a Revocable Living Trust Works

A revocable living trust (also known as a living trust or family trust) is a legal entity that is established by an individual (grantor), while living, to hold property and assets. The trust holds the individual’s assets, dictates how the assets are to be managed during the grantor’s life, including during periods of incapacity, and how the assets should be distributed at the grantor’s death. While the grantor is living, he or she may change the trust or revoke it completely, hence the designation “revocable.” Upon the grantor’s death, the trust may not be altered, and it becomes irrevocable. For married couples, a joint revocable living trust (JRLT) can be created; when one spouse dies, his or her half of the trust becomes irrevocable, while the surviving spouse can continue to make changes to the other half (survivor’s trust) until his or her death.

When a trust is established, a trustee is appointed to manage the assets of the trust. The grantor is able to serve as the trustee, and thus retains full control over the assets. However, simply establishing the trust is not sufficient. In order for this type of trust to be effective, once created, the trust must be funded. This means that assets formerly owned by the grantor must be retitled in the name of the trust (e.g. homes, investment and cash accounts, real estate, etc.) and certain types of assets (e.g. life insurance policies), must list the trust as the primary beneficiary.

At Ortiz & Gosalia, we walk clients through the process of funding the trust and assisting them in transferring real property to the trust, so they can have peace of mind that funding has been addressed fully and correctly.

The core elements of a trust-based estate plan include:

  • the revocable living trust
  • the pour-over will
  • the health care directive, or living will
  • the health care power of attorney
  • the financial power of attorney
  • the health insurance portability and accountability act (HIPAA) release
Benefits of a Washington Revocable Living Trust

A trust-based plan offers several advantages over a will-based plan. Generally speaking, such plans offer individuals with taxable estates, or estates that may be approaching taxable levels, additional options with respect to financial and succession planning. In addition, trust-based plans do not go through probate, so the contents of the estate and how they are distributed will never become public information.

In addition to preserving privacy, properly prepared trusts allow assets to bypass probate court altogether. If a Washington resident dies without a living trust, then the individual’s estate must go through probate either to validate a will (if the individual has a will), or to determine how assets will be distributed if there is no valid will. Probate involves fees and can involve significant expense and delay, particularly if there is a will contest and minor or incapacitated beneficiaries. Estate assets may also be frozen pending the outcome of a will contest, which could be a great hardship on estate beneficiaries. When they occur, trust assets can still be distributed pending the outcome of the case.

Parents of minor children often prefer an estate plan constructed around a living trust to a will-based plan. A living trust affords better protection for minor beneficiaries because the trust can hold the assets until the beneficiaries are mature enough to handle the assets responsibly. By contrast, if minor children are beneficiaries under a will, the probate court would need to appoint someone to manage the children’s assets. This will increase the cost of probate. In Washington, the court will appoint a guardian ad litem for each minor, which involves a fee.  In addition, if the Court-mandated instruments are not properly drafted and executed, the beneficiaries may receive unrestricted access to their share of the assets before they are ready to handle the responsibility.

Another advantage of a revocable living trust is that it allows for efficient estate tax planning. A revocable living trust allows a married couple to maximize both federal and state exemptions. Under current federal law, each person may exempt over $5 million from federal estate taxes; however, under Washington State law, each individual is only entitled to exempt $2 million for the purposes of state estate taxes. Thus, a married couple may exempt $4 million in combined assets for state estate tax purposes and $10 million in combined assets for federal estate tax purposes. While any unused federal exemption may transfer from one spouse to the other, this is not the case with the Washington state exemption. In order to maximize this exemption, deliberate action must be taken; it is best to have a living trust or similar trust in place. Otherwise, half of the exemption at the state level could be lost.

Estate plans are intended to provide peace of mind; revocable living trusts are ideally positioned to accomplish this goal for both grantors and beneficiaries. Living trusts offer certainty, because the mechanism for transferring assets is in place during the grantor’s life. There is no need for a probate court to interpret a will and direct the will’s provisions to be implemented. Because of this, assets are not tied up in probate, and the transfer of property is much more seamless.

Redmond Revocable Living Trust Attorneys

We invite you to contact Ortiz & Gosalia for more information regarding our comprehensive estate planning services, including revocable living trusts. Call us at (425) 633-2004, send an email to info@ortizgosalia.com, or use our online form. With Seattle-area offices in Redmond, Bellevue and Kirkland, our estate planning attorneys serve clients throughout Washington State as well as those in other U.S. states and internationally.

Last Will and Testament
What a Will Is and What it Does

Some estate plans are constructed around a Last Will and Testament, commonly referred to as a will. A will is a legal document that dictates how your property is to be disposed of after you die, and names the person you wish to serve as the executor of  your estate. The executor has a duty to administer your estate according to the terms of your will. A will may also name a guardian for your minor children. In the absence of a will or other estate planning instrument, your assets will pass according to Washington state law, and may not be distributed as you would wish.

The core elements of a will-based plan include:

  • the last will and testament
  • the living will
  • the health care power of attorney
  • the financial power of attorney
  • the health insurance portability and accountability act (HIPAA) release

A will-based plan is generally used for individuals with simple estates and who do not require specialized or complex succession planning. In addition, once a person passes away, the probate court will administer the will.

Evaluating Whether a Last Will and Testament is Right for You

People may assume that they need a will-based estate plan simply because a will is the estate planning instrument with which they are most familiar. They are often surprised to learn that the contents of a will become public information once the probate case is opened. If privacy is a concern, then a trust-based plan is the better planning tool. One of the main goals in establishing a trust-based plan is to avoid probate; this can be accomplished by bringing assets inside the trust. The contents of a trust remain private, and to the extent that probate is needed in estates with a trust-based plan, the probate process is much more streamlined if non-trust assets are less than $100,000.

Other situations in which a will-based plan may not be the right choice are if you own real estate and other probate property outside the state of Washington, or if you want to be able to easily designate someone else to manage your assets during periods of incapacity and after death. A will-based plan may not be the best choice for parents of minor children, because the children will need someone to manage inherited assets for them until they become legal adults. If proper protective provisions are not in place, the beneficiaries’ assets may be improperly depleted, subject to creditors’ claims, or misused. Needless to say, this could be a recipe for financial disaster.

At Ortiz & Gosalia, we spend time analyzing the financial and personal circumstances of our clients, as well as their estate planning goals, so that we can help them select the proper instruments to achieve their aims. Once the estate plan documents are prepared, we work with our clients to make sure that every detail is in place so that their estate plan will function exactly as it is designed to do.

We invite you to contact Ortiz & Gosalia for more information regarding our comprehensive estate planning services. Call us at (425) 633-2004, send an email to info@ortizgosalia.com, or use our online form. With Seattle-area offices in Redmond, Bellevue and Kirkland, our estate planning attorneys serve clients throughout Washington State as well as those in other U.S. states and internationally.

Pour-Over Will

Ortiz & Gosalia, PLLC’s Bellevue, Washington, estate planning attorneys guide individuals throughout the Seattle area and Western Washington through the estate planning process, including the creation of a trust-based plan that involves the use of a pour-over will. Our offices are conveniently located in Redmond, Bellevue and Kirkland, Washington. Learn more here about estate planning or contact us today for a consultation.

The Role of a Pour-Over Will in a Washington Trust-Based Estate Plan

A pour-over will is used in conjunction with a revocable living trust. With a living trust, all assets must be re-titled in the name of the trust in order for the property to pass to your beneficiaries according to the terms of the trust at death. This process is known as funding the trust, and Ortiz & Gosalia works with clients to make sure this process is completed thoroughly and correctly. Any property not transferred to the trust will be distributed according to Washington state law, also known as “intestate succession.”

If this happens, then your property may be distributed to people who you did not intend to receive it. To prevent this from happening, the pour-over will serves to capture any property that is not included in the trust, and explicitly directs that it be transferred to the trust at your death. This property will still have to go through probate; however, it will be distributed according to your wishes under the terms of the trust rather than according to state law.

A pour-over will simply adds another layer of security to your estate plan, eliminating the risk that after-acquired assets will not be distributed as your living trust directs. With a pour-over will, you have the peace of mind that comes with knowing all of your assets will be distributed as you intend.

Contact a Seattle Estate Planning Attorney

We invite you to contact Ortiz & Gosalia for more information regarding our comprehensive estate planning services, including pour-over wills and revocable living trusts. Call us at (425) 633-2004, send an email to info@ortizgosalia.com, or use our online form. With Seattle-area offices in Redmond, Bellevue and Kirkland, our estate planning attorneys serve clients throughout Washington State as well as those in other U.S. states and internationally.

Financial Power of Attorney

Ortiz & Gosalia, PLLC’s Bellevue, Washington, estate planning attorneys work with individuals throughout the Seattle area and Western Washington to create customized estate plans, including will-based and trust-based plans that include a financial power of attorney. Our offices are conveniently located in Redmond, Kirkland and Bellevue, Washington. Learn more here about estate planning or contact us today for a consultation.

What is a Washington Financial Power of Attorney?

A financial power of attorney (POA) is a document in which a person (often called the “principal”) authorizes another individual or entity (often known as an “agent” or “attorney-in-fact”) to act on behalf of the principal. A power of attorney may be either “durable” or “springing” in nature. If the financial power of attorney is “durable,” it takes effect as soon as it is signed; if it is “springing,” it goes into effect only in the event that the principal is declared mentally incapacitated.

A financial power of attorney appoints another person to make financial decisions on your behalf if you are unable to. The agent appointed should be competent to handle financial decisions and to manage your assets on your behalf, but need not be a financial professional. The agent would handle the management of retirement plans, savings and checking accounts, insurance policies, stock accounts and real estate. Obviously, this is a significant amount of power, so your choice of agent, and whether the power of attorney should be “durable” or “springing” is very important and should be discussed with your attorney.

Comparing Durable and Springing Financial Powers of Attorney

The primary benefit of a durable power of attorney, as apposed to a springing power of attorney, is that you do not need to be declared mentally incapacitated for it to apply.

For example, if you become incapacitated in an accident, the springing power of attorney would not automatically apply, and your family would have to go to court to have a guardian or conservator appointed. With a durable power of attorney, this is avoided: your agent would be able to step in immediately and seamlessly if you were incapacitated and unable to manage your assets.

A further benefit of a durable financial power of attorney is that it allows your agent to step into your shoes if you are unavailable to conduct an important transaction, such as the sale of a home. Durable financial powers of attorney are also frequently used to assist family members who have difficulty with routine financial tasks such as paying bills or banking due to physical handicaps or limitations.

Redmond, WA Financial Power of Attorney Preparation

We invite you to contact Ortiz & Gosalia for more information regarding our comprehensive estate planning services, including the preparation of both financial powers of attorney and health care powers of attorney. Call us at (425) 633-2004, send an email to info@ortizgosalia.com, or use our online form. With Seattle-area offices in Redmond, Bellevue and Kirkland, our estate planning attorneys serve clients throughout Washington State as well as those in other U.S. states and internationally.

Health Care Power of Attorney

Ortiz & Gosalia, PLLC’s Redmond, Washington, estate planning attorneys help individuals throughout the Seattle area and Western Washington to create customized estate plans, including will-based and trust-based plans that include a health care power of attorney. Our offices are conveniently located in Redmond, Bellevue, and Kirkland, Washington. Learn more here about estate planning or contact us today for a consultation.

The Role of the Health Care Power of Attorney in a Washington Estate Plan

A power of attorney (POA) is a document in which a person (often called the “principal”) authorizes another individual or entity (often known as an “agent” or “attorney-in-fact”) to act on the principal’s behalf. A power of attorney can either be “durable” or “springing” in nature. If the document is “durable,” then it means that the document is effective as soon as it is signed; if it is “springing,” it goes into effect if if the principal is declared mentally incompetent by a court.

A health care power of attorney appoints another person you have selected, typically a family member or close friend, to make decisions about your medical care should you be unable to communicate with your physician or health care providers. This is different from a living will because a health care power of attorney can be used even if your medical condition is not terminal in nature.

For example, if you were in a car accident, rendered unconscious, and unable to communicate with your physician, your agent would be able to make treatment decisions on your behalf. While it’s impossible to predict every possible scenario, it’s wise to discuss your wishes in advance with your agent. The decision of who should serve as your health care power of attorney is obviously a significant one, as you are placing your health care decisions in that person’s hands; therefore, your choice should be discussed with your attorney. The person you choose as your agent for a financial power of attorney may be different from the agent you choose for a health care power of attorney.

Redmond, WA Financial Power of Attorney Preparation

We invite you to contact Ortiz & Gosalia for more information regarding our comprehensive estate planning services, including the preparation of both financial powers of attorney and health care powers of attorney. Call us at (425) 633-2004, send an email to info@ortizgosalia.com, or use our online form. With Seattle-area offices in Redmond, Bellevue and Kirkland, our estate planning attorneys serve clients throughout Washington State as well as those in other U.S. states and internationally.

HIPPA Documents
ESTATE PLANNING AND THE HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT (HIPAA)

Ortiz & Gosalia, PLLC’s Redmond, Washington, estate planning attorneys help individuals throughout the Seattle area and Western Washington to create customized estate plans, including will-based and trust-based plans that include a health care power of attorney and living will.

Our offices are conveniently located in Redmond, Bellevue, and Kirkland, Washington. Learn more here about estate planning or contact us today for a consultation. The firm’s comprehensive estate planning services include not only drafting documents, but making sure that they provide for the release of your medical information to the people you want to have it.

How HIPAA Affects Your Washington Estate Plan

Congress enacted the Health Insurance Portability and Accountability Act, more commonly known as HIPAA,  in 1996 to protect patient privacy rights. The legislation calls for fines and possible imprisonment for medical providers if they release medical information pertaining to a patient without the proper authorization. The protection of patients is an important goal, but the law has had some unintended adverse consequences on agents named in Washington health care powers of attorney.

As a result of the law, a HIPAA release authorizing medical providers to release information to an individual’s designated agent must be included in any estate plan. Without such a release, a person’s agent designated by either a financial or health care power of attorney could not obtain medical information from the principal’s health care providers in order to make appropriate decisions on the principal’s behalf.

This is especially true for springing powers of attorney. Because those powers don’t take effect until a person is declared mentally incapacitated by a court, a designated agent lacks authority under the POA until that time. Because of HIPAA, the designated agent would not have access to the medical records needed to prove the principal’s lack of capacity.

To avoid this conundrum, Ortiz & Gosalia will make sure your powers of attorney contain a HIPAA clause specifying that your designated agent is also your personal representative for the purpose of receiving health care disclosures pursuant to HIPAA. We will also prepare separate HIPAA release forms for your signature; these forms will specify what medical information can be disclosed, and the persons to whom disclosures are authorized to be made.

Redmond, WA, Estate Planning & HIPAA Attorney

HIPAA is designed to help you, but without the proper documents in your estate plan, its provisions can frustrate your intentions. We welcome you to contact Ortiz & Gosalia for more information regarding our estate planning services, including HIPAA releases. Call us at (425) 633-2004, send an email to info@ortizgosalia.com, or use our online form. With Seattle area offices in Redmond, Bellevue and Kirkland, our estate planning attorneys serve clients throughout Washington State as well as those located internationally or in other U.S. states.

Irrevocable Trusts (Life Insurance, Qualified Residence, Retirement, Grantor, and other specialized trusts)

Ortiz & Gosalia, PLLC’s Bellevue, Washington, estate planning attorneys work with individuals throughout Seattle and Western Washington through the estate planning process, including the creation of revocable and irrevocable trusts. Our offices are conveniently located in Redmond, Bellevue and Kirkland, Washington. Learn more here about estate planning or contact us today for a consultation.

Advantages of Washington Irrevocable Trusts

As the name suggests, an irrevocable trust is one that, once created, cannot be revoked. When you place assets in an irrevocable trust, therefore, you are permanently removing them from your ownership. If, at your death, you own assets that exceed a certain value, your estate must pay both Washington and federal estate taxes. By placing assets in an irrevocable trust and removing them from your estate, you reduce the size of your taxable estate, resulting in a significant tax savings.

In addition to minimizing estate taxes, a primary advantage of irrevocable trusts is asset protection. An irrevocable trust may include a so-called “spendthrift clause.” This provision prevents beneficiaries from irresponsibly spending and dissipating trust assets. Assets contained in an irrevocable trust, and the income those assets generate, are not the beneficiaries’ property until a disbursement is made to them. As such, the beneficiaries’ creditors cannot seize those assets. A spendthrift provision also prevents beneficiaries from using their interest in the trust as collateral for a loan.

Yet another benefit of irrevocable trusts is their suitability for Medicaid planning. Older adults often need costly long-term nursing care. Medicaid will cover much of this expense, but in order to qualify for Medicaid, you must have minimal income and must “spend down” most of your assets. Until assets are depleted, Medicaid requires that nursing care be paid for privately. An irrevocable trust can remove assets from your estate, preserving them for your loved ones and eliminating the need to “spend down.”

Types of Irrevocable Trusts

Different types of irrevocable trusts may be appropriate for incorporating into your estate plan, depending on your needs and goals. These include:

Irrevocable Life Insurance Trusts

These trusts are designed to protect the proceeds of life insurance from estate taxes.

Qualified Personal Residence Trusts (QPRT)

Qualified personal residence trusts hold one’s primary or secondary residence, removing the value of the residence from the taxable estate.

Annuity Trusts

Often useful in Medicaid planning, annuity trusts remove assets from grantor ownership and pay an annuity to the grantor and/or the grantor’s spouse. These trusts may also be known as Grantor-Retained Annuity Trusts (GRATs).

Retirement Trusts

An irrevocable retirement trust may be put in place to keep retirement benefits out of your spouse’s estate at your death. It also allows beneficiaries to withdraw benefits over many years rather than all at once, keeping them in a lower tax bracket.

Charitable Lead Trusts and Charitable Remainder Trusts

A grantor may transfer assets into a charitable trust, choosing to receive income from the trust during life and making the charity the beneficiary at the grantor’s death, or allowing the charity to receive income for a period of time with the remainder reverting to beneficiaries of the grantor’s choice.

The attorneys of Ortiz & Gosalia can help you identify your estate planning goals, select the irrevocable trust that best meets those needs, and help you make sure the trust is properly established and funded.

Contact a Seattle Irrevocable Trust Attorney

We invite you to contact Ortiz & Gosalia for more information regarding our comprehensive estate planning services, including irrevocable trusts. Call us at (425) 633-2004, send an email to info@ortizgosalia.com, or use our online form. With Seattle-area offices in Redmond, Bellevue and Kirkland, our estate planning attorneys serve clients throughout Washington State as well as those in other U.S. states and internationally.

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