By Attorney Curtis Edwards, J.D.

A trust is a written agreement formed by the grantor(s) and a trustee(s) that creates a separate entity (trust) to hold assets such as real estate, bank accounts, life insurance, etc., subject to an obligation to keep or use those assets for the beneficiaries named in the trust. The obligation to carry out the specific terms of the trust are the duty of the trustee(s) named by the grantor(s) of the trust.

Trusts come in many different forms such as a revocable living trust, irrevocable trust, testamentary trust, marital trust, or insurance trust, just to name a few. Each type of trust serves a different purpose, but most commonly trusts are used as a vehicle to avoid probate, to preserve and transfer wealth responsibly, and legacy planning.

Trusts often provide a seamless way to transfer wealth from one generation to the next and allow the grantor(s) of the trust to put controls in place regarding how assets will be used and distributed, both during and after their lifetime.

For example, a grandparent (grantor) might create a trust for their grandchildren (beneficiaries) during their lifetime, specifically for the purpose of funding the college education of the grandchildren. The trust would layout specific instructions (provisions) for how those funds should be distributed, such as the maximum allowable distribution to each grandchild, whether the funds can be used for tuition or other things like room and board, and whether or not the grandchild must use their benefit by a certain age.

In some cases, such as with a revocable living trust, the grantor will also be the initial trustee charged with carrying out the terms of the trust. However, after the original grantor/trustee passes away or is no longer able to serve, a successor trustee will take over and continue those duties. The original or successor trustee can also be a trusted friend or family member, or it can be an institution, such as a bank. In either case, the trustee will ensure that the trust assets are maintained and distributed per the terms of the trust established by the original grantor(s).

If you have any questions or are interested in learning more about this topic, please contact Lin Law LLC at (920) 393-1190.

We at Lin Law LLC are wishing you a safe and spooky Halloween.

It’s that time of year when many high school graduates are preparing to leave home, whether it be to attend college or join the workforce.  While families prepare for this change in their child’s lives, many parents forget that they no longer possess the legal authority to make health care and financial decisions on behalf of their child once he or she turns 18.  Without the proper advanced planning documents in place, parents would need to obtain a court order to exercise this authority on behalf of their adult child, even if the child becomes incapacitated.  For this reason, we recommend that all parents encourage their children to implement a Durable Power of Attorney, Power of Attorney for Health Care, and HIPAA Authorization for Release of Protected Health Information upon attaining age 18.  In doing so, it may be helpful to more fully understand what these documents do.

Durable Powers of Attorney: Authorizes the designated attorney-in-fact to act on behalf of the adult child with respect to most financial matters.  This could include managing bank accounts, paying bills, signing tax returns, applying for government benefits, applying for a lease, forwarding mail, etc.  Durable Powers of Attorney can be either immediate or “springing”.  To activate a springing Durable Power of Attorney, the adult child must be deemed incapacitated by two different physicians (or pursuant to recent legislation, one physician and one psychologist, physician’s assistant, or nurse practitioner).

Power of Attorney for Health Care: Authorizes the designated health care agent to make medical decisions on behalf of the adult child if he or she is incapacitated.  Like a springing (as opposed to immediate) Durable Power of Attorney, a Power of Attorney for Health Care must be activated upon the adult child’s incapacitation.

HIPAA Authorization for Release of Protected Health Information: Authorizes an adult child’s health care providers to release information to and discuss the child’s medical care with the designated individuals.  Without this authorization, health care providers are legally prohibited from discussing the adult child’s care with third-parties, even if those third-parties are the child’s parents.  The HIPAA Authorizations is also effective even if the adult child’s Power of Attorney for Health Care has not yet been activated.

Most of the time, a parent will never need to utilize these documents (at least they hope not to) on behalf of their child.  However, it is better to hope for the best and plan for the worst.

If you should have questions regarding these issues, please contact Lin Law LLC at (920) 393-1190.

On March 29, 2022, the U.S. House of Representatives voted in favor of the Securing a Strong Retirement Act of 2022 (the “SECURE Act 2.0”).  If this retirement savings legislation is passed by the U.S. Senate and signed into law by President Biden, SECURE Act 2.0 could represent an economic policy shift regarding retirement savings and investment.

SECURE Act 2.0 expands on the original SECURE Act and includes provisions to raise the required minimum distribution (RMD) age from 72 to 75 over time, broaden automatic enrollment in retirement plans and enhance 403(b) plans.

The original SECURE Act was passed into law by former President Trump in December of 2019.  The original SECURE Act modified the existing retirement savings plan system regarding RMD, contributions to traditional IRAs, 529 plan uses for student loans, and making annuities easier for 401(k) plan administrators to offer.  SECURE Act 2.0 expands on all of the foregoing provisions, including increasing the RMD age to 73 in 2022, to 74 in 2029, and to 75 in 2032.

SECURE Act 2.0 requires 401(k) and 403(b) plans to automatically enroll participants when they become eligible, though employees can opt out of this coverage.  The automatic enrollment amount starts at a minimum 3% of salary and can reach up to 10% of salary, followed by a 1% increase each year until it reaches the maximum 10% threshold.  There are exceptions to these SECURE Act 2.0 requirements regarding small businesses with 10 or fewer employees, new business (those less than 3 years old), church plans and governmental plans.

SECURE Act 2.0 also includes a proposal to increase catch-up contributions for eligible workers.  Currently, those aged 50 and older contributing to a 401(k) or 403(b) plan are allowed to contribute $6,500 in addition to their standard maximum contribution of $20,500.  Under SECURE Act 2.0, up to $10,000 in catch-up contributions may be allowed for workers aged 62-64.  This could possibly raise the maximum 401(k) contribution to over $30,000.  Workers contributing to an IRA would not receive a similar benefit from this proposed boost in catch-up contributions.  However, the current IRA catch-up provision of $1,000 per year upon reaching age 50 would be indexed for inflation.

Currently, if employers match employee contributions in plans like a 401(k), those contributions are made with pre-tax dollars, to be taxable when a worker withdraws them in retirement.  SECURE Act 2.0 allows employees to choose to receive after-tax Roth matching contributions instead.  These contributions would not be excluded from a worker’s taxable income.