Archive for the ‘Probate’ tag
Estate Planning for the Middle Class no comments
Posted at 8:29 pm in Writing a Will
Anthony R. Caruso
The Do’s and Don’ts for the Middle Class in Estate Planning:
Families should always consult with trusted legal advisors. It’s no secret that many unscrupulous people are out there, waiting to prey on concerned Baby Boomers and seniors. Use your best judgment and NEVER allow someone to pressure you into buying anything (be it insurance, legal assistance or management services). You are well-advised to get a second opinion when making your estate plan. A few hours with another lawyer (helping you understand some documents or legal issues) may cost a few hundred dollars, but when you are dealing with tens or hundreds of thousands of dollars, that will be money well spent.
Trusts
A trust is a legal device that gives a person (or group of people) the right to hold and manage specific financial assets. This is a very simple definition that avoids a lot of legal language. Be aware that trusts are usually quite complicated. Some trusts can be thought of as a new legal entity (much like a corporation or another person) that is required to spend its assets for specific purposes that the creator spells out ahead of time. People often establish trusts to avoid the costs and delays that can be associated with probate, to minimize or avoid taxation, to provide resources for individuals determined to be incompetent, to control how and when assets are distributed, as well as many other uses.
There are several different types of trusts that people use for estate planning. While most fall into specific categories, it is important to understand that trusts are highly individual creations – one size does not fit all. Be wary of firms who offer a cookie cutter approach or a “kit” to create your own. Any trust (indeed all estate planning activities) should be designed with careful consideration and thoughtful legal consultation. Be aware that when establishing some trusts, you may limit your options in the future.
A “revocable trust” may be established to set aside certain assets in the event that the individual becomes incapacitated. These assets never technically leave the person’s ownership, so the assets are still considered part of one’s estate when one applies to Medicaid for benefits. The value of a revocable trust is that you can designate a professional to manage your finances, receive income from the trust, and potentially reduce expenses associated with settling your estate at death. With a revocable trust the individual can change the terms of the trust at any time.
An “irrevocable trust” is also referred to as a “Medicaid Trust.” Assets are transferred into a new legal entity that then owns those assets. These assets are then no longer considered part of your taxable estate. By shifting assets into the trust, you may now be eligible for Medicaid benefits, but subject to the specific “look-back” rules of your county (see below). When setting up the trust, you determine who will receive the assets, regular payments, and income from the assets. Irrevocable trusts may also be used as an entity to own one’s life insurance policy.
This is a simplification of the process, so keep in mind that estate planning involves a lot of “moving parts” that should all be considered. Some types of transfers may result in tax liabilities and future financial limitations. Irrevocable trusts require that the individual give up some degree of flexibility with the assets and may be expensive to prepare. Once the trust is established, the individual gives up all rights to the assets that are included in the trust. You can not change the terms once it is finalized.
A “credit shelter trust” is used to help an individual and her spouse maximize the federal tax credits they have when they die. This type of trust is also called a “bypass trust,” “A-B trust,” or “credit shelter trust plan.” Each individual is permitted to transfer a large (but limited) amount of assets to his/her heirs free of taxation. For a married couple, the tax credit is essentially doubled (since it is the credits of two people). When the first spouse dies, the estate passes to the other, but when the second spouse dies, only one credit is remaining. This trust allows the two tax credits to be used instead of just one. Be aware that the U.S. Congress may make changes to the estate tax laws, raising the credit, or eliminating it all together. You should consult with legal and financial advisors who have up-to-date knowledge of federal and state tax laws.
The Do’s and Don’ts for the Middle Class in Estate Planning:
Families should always consult with trusted legal advisors. It’s no secret that many unscrupulous people are out there, waiting to prey on concerned Baby Boomers and seniors. Use your best judgment and NEVER allow someone to pressure you into buying anything (be it insurance, legal assistance or management services). You are well-advised to get a second opinion when making your estate plan. A few hours with another lawyer (helping you understand some documents or legal issues) may cost a few hundred dollars, but when you are dealing with tens or hundreds of thousands of dollars, that will be money well spent.
Trusts
A trust is a legal device that gives a person (or group of people) the right to hold and manage specific financial assets. This is a very simple definition that avoids a lot of legal language. Be aware that trusts are usually quite complicated. Some trusts can be thought of as a new legal entity (much like a corporation or another person) that is required to spend its assets for specific purposes that the creator spells out ahead of time. People often establish trusts to avoid the costs and delays that can be associated with probate, to minimize or avoid taxation, to provide resources for individuals determined to be incompetent, to control how and when assets are distributed, as well as many other uses.
There are several different types of trusts that people use for estate planning. While most fall into specific categories, it is important to understand that trusts are highly individual creations – one size does not fit all. Be wary of firms who offer a cookie cutter approach or a “kit” to create your own. Any trust (indeed all estate planning activities) should be designed with careful consideration and thoughtful legal consultation. Be aware that when establishing some trusts, you may limit your options in the future.
A “revocable trust” may be established to set aside certain assets in the event that the individual becomes incapacitated. These assets never technically leave the person’s ownership, so the assets are still considered part of one’s estate when one applies to Medicaid for benefits. The value of a revocable trust is that you can designate a professional to manage your finances, receive income from the trust, and potentially reduce expenses associated with settling your estate at death. With a revocable trust the individual can change the terms of the trust at any time.
An “irrevocable trust” is also referred to as a “Medicaid Trust.” Assets are transferred into a new legal entity that then owns those assets. These assets are then no longer considered part of your taxable estate. By shifting assets into the trust, you may now be eligible for Medicaid benefits, but subject to the specific “look-back” rules of your county (see below). When setting up the trust, you determine who will receive the assets, regular payments, and income from the assets. Irrevocable trusts may also be used as an entity to own one’s life insurance policy.
This is a simplification of the process, so keep in mind that estate planning involves a lot of “moving parts” that should all be considered. Some types of transfers may result in tax liabilities and future financial limitations. Irrevocable trusts require that the individual give up some degree of flexibility with the assets and may be expensive to prepare. Once the trust is established, the individual gives up all rights to the assets that are included in the trust. You can not change the terms once it is finalized.
A “credit shelter trust” is used to help an individual and her spouse maximize the federal tax credits they have when they die. This type of trust is also called a “bypass trust,” “A-B trust,” or “credit shelter trust plan.” Each individual is permitted to transfer a large (but limited) amount of assets to his/her heirs free of taxation. For a married couple, the tax credit is essentially doubled (since it is the credits of two people). When the first spouse dies, the estate passes to the other, but when the second spouse dies, only one credit is remaining. This trust allows the two tax credits to be used instead of just one. Be aware that the U.S. Congress may make changes to the estate tax laws, raising the credit, or eliminating it all together. You should consult with legal and financial advisors who have up-to-date knowledge of federal and state tax laws.
Why You Need an Estate Plan no comments
Posted at 12:35 pm in Writing a Will
Steven W Allen
Estate planning sounds like it should be done only by the very wealthy. However, it is a very necessary financial step that most people need to take. You don’t need to consider estate planning if:
-You have no assets at all or
-You don’t care who receives your assets
For most people, these guidelines mean that you need to put your estate planning in place today. The only question is what form that will or living trust should take.
Your Will: Courtesy of the State
In reality, neglecting to prepare an estate plan just means that you are deferring to the intestate (dying without a legal will) laws that have been set in your state by lawmakers. Typically your estate will be divided as follows, in order of priority:
1. Spouse
2. Children
3. Parents
4. Brothers and Sisters
5. Cousins, Nieces, Nephews, other distant relatives
Laws differ from place to place, but are set by family relationships. In some cases, all assets will be passed along to only the survivors on the first level of priority. For example, if you have children and no spouse, your children will receive everything; however, if you have a spouse then he or she will receive everything and your children nothing. In other places, it is divided amongst the survivors on more than one level, like between children and parents.
Estate Planning for the Good of All
If you care about who receives your assets, then estate planning is necessary. A revocable living trust is an efficient tool, which will make it possible for you to take care of several things at once.
Your will won’t be subjected to court-supervised probate over the distribution of assets. Your assets will go to your chosen heirs. Your assets will be distributed in the manner you have chosen. You will save your heirs from a lot of unnecessary headaches at an already difficult time.
Living trusts allow you to dictate the conditions under which your heirs receive their inheritance and when (as long as the living trust is properly worded). This will ensure that a child does not spend all the inheritance they receive and prevents a favorite grandchild from missing out on assets meant for them. You can also state who is to run any businesses you own, upon your death, and the distribution of assets from it. This will help to avoid conflict with such issues.
By putting a living trust in place, you safeguard the future of your heirs for more than just one generation and have the peace of mind that wills simply can not provide. Careful consideration of estate planning benefits everyone you love and the businesses and assets that you have worked a lifetime to build.
Estate planning sounds like it should be done only by the very wealthy. However, it is a very necessary financial step that most people need to take. You don’t need to consider estate planning if:
-You have no assets at all or
-You don’t care who receives your assets
For most people, these guidelines mean that you need to put your estate planning in place today. The only question is what form that will or living trust should take.
Your Will: Courtesy of the State
In reality, neglecting to prepare an estate plan just means that you are deferring to the intestate (dying without a legal will) laws that have been set in your state by lawmakers. Typically your estate will be divided as follows, in order of priority:
1. Spouse
2. Children
3. Parents
4. Brothers and Sisters
5. Cousins, Nieces, Nephews, other distant relatives
Laws differ from place to place, but are set by family relationships. In some cases, all assets will be passed along to only the survivors on the first level of priority. For example, if you have children and no spouse, your children will receive everything; however, if you have a spouse then he or she will receive everything and your children nothing. In other places, it is divided amongst the survivors on more than one level, like between children and parents.
Estate Planning for the Good of All
If you care about who receives your assets, then estate planning is necessary. A revocable living trust is an efficient tool, which will make it possible for you to take care of several things at once.
Your will won’t be subjected to court-supervised probate over the distribution of assets. Your assets will go to your chosen heirs. Your assets will be distributed in the manner you have chosen. You will save your heirs from a lot of unnecessary headaches at an already difficult time.
Living trusts allow you to dictate the conditions under which your heirs receive their inheritance and when (as long as the living trust is properly worded). This will ensure that a child does not spend all the inheritance they receive and prevents a favorite grandchild from missing out on assets meant for them. You can also state who is to run any businesses you own, upon your death, and the distribution of assets from it. This will help to avoid conflict with such issues.
By putting a living trust in place, you safeguard the future of your heirs for more than just one generation and have the peace of mind that wills simply can not provide. Careful consideration of estate planning benefits everyone you love and the businesses and assets that you have worked a lifetime to build.