Why You Need It And Where To Find It - Estate Planning Tax Advice
Your estate consists of the assets that you will pass on to your beneficiaries when you pass away. Estate planning means deciding where your assets will go when you die. It takes time, thought, and the knowledgeable assistance of a qualified attorney. Even if you diligently plan your estate on your own, it is easy to make mistakes. Mistakes can result in portions of your estate being unnecessarily taxed and assets going to the wrong beneficiaries. We have compiled a list of some of the most common mistakes individuals make in estate planning. Please review the list, but also plan to meet with a qualified attorney to review your unique estate.
Avoiding Probate - This seems to be the relevant factor cited most frequently, although I disagree that it is the most important reason to plan. Probate in Arizona is not the costly, burdensome procedure that it is in some states like California or New York. Yes, it does cost some money, but in most cases the cost is only a few thousand dollars. The severity of probate depends largely on the make-up of the assets. The more "complicated assets" you have (ie Oil Leases, closely held family businesses, Partnerships, fractional interests in Real Estate, etc.) and the more estates in which you own real estate, then you drive up the "Probate Meter" very quickly. If you own real property in more than one state, you will have to have a probate proceeding in each state, which means you will probably need an attorney in each state. But, if your assets are "simple", (a house, a car, some CDs) and primarily located in Arizona, then the "Probate Meter" is very low.
If you are concerned about whether or not you will need some estate planning tax help, but are not interested in paying an attorney until you are sure you will, your best option would be to find a good estate planning guide and study its it to determine if the total assets in your estate are likely to put it in the taxable category. If you find that they are, it will be worth your while to discuss with an expert the estate planning tax strategies which will let you preserve as much of your assets as possible for your heirs. These strategies can include things placing your assets into a living so that you can control them during your lifetime, and prevent them from being included in your taxable estate when you die. Having a living trust will also benefit your heirs, because it will exempt you assets from being tied up in the expensive and lengthy probate process.
Central to estate planning is choosing people to make decisions for you both during incapacity and after your death. These people include trustees, guardians, agents, and beneficiaries. Make sure that you select an agent who knows you and your wishes well. He or she will speak for you when you cannot, so it is vitally important that he or she knows you well. Make sure you and the agent have a clear understanding of his or her role in your estate and that you have clearly communicated your desires.
If you do follow the advice of an estate planning tax professional, make sure that you keep copies of all the estate planning documents. They will be essential in case you have the bad luck to deal with an unqualified party, and your heirs need to prove a claim of negligence.
Asset Protection - For example, having an A/B Trust as described above, can make sure that the assets of a deceased spouse are not subject to the creditor claims of the surviving spouse. As a firm, we are recommending A/B trusts for this reason more than the reason discussed above where an A/B trust can provide two estate tax exemptions. In variably, the surviving spouse ends up in a nursing home that chews up the net worth very quickly. So, having half of the estate in a "B" trust, protected from the creditors (ie nursing home costs) of the surviving spouse makes a lot of sense. Also, a good estate planning attorney can structure the inheritance for the children, to remain in trust for their lifetime. This will protect the inheritance from the potential creditors of the child such as divorce, bankruptcy, lawsuits, etc. My estate plan is structured that upon the deaths of my wife and I, our estate will be divided out into separate trusts to provide one trust for each of our children. We have an independent trustee and some incentives in each trust. At age 35, the child has the right to become his or her own trustee. So, in essence, the child can now take from the trust whatever the child wants for his "health, education, support and maintenance". The child is also free, as the trustee, to invest the trust assets into a beach house, a cabin, or any investment that he or she chooses. Meanwhile, if that child divorces, his or her spouse cannot touch that trust. Also, if that child files bankruptcy, then the creditors cannot reach the assets in this trust. I call this a "wrapper of protection" that we can place around the assets which gives the trust "bullet proof" creditor protection to our children. It is also important to remember that a child cannot create his own trust to provide this kind of protection. The law in most states is such that a trust provides creditor protection only in cases where it was created by one person for the benefit of another person. In other words, the grantor or creator of the trust, cannot also be a beneficiary of the trust and achieve creditor protection. So, as long as the trust is created by a parent, for the benefit of a child or grandchild, it can have the creditor protection described above.
Avoiding Probate - This seems to be the relevant factor cited most frequently, although I disagree that it is the most important reason to plan. Probate in Arizona is not the costly, burdensome procedure that it is in some states like California or New York. Yes, it does cost some money, but in most cases the cost is only a few thousand dollars. The severity of probate depends largely on the make-up of the assets. The more "complicated assets" you have (ie Oil Leases, closely held family businesses, Partnerships, fractional interests in Real Estate, etc.) and the more estates in which you own real estate, then you drive up the "Probate Meter" very quickly. If you own real property in more than one state, you will have to have a probate proceeding in each state, which means you will probably need an attorney in each state. But, if your assets are "simple", (a house, a car, some CDs) and primarily located in Arizona, then the "Probate Meter" is very low.
If you are concerned about whether or not you will need some estate planning tax help, but are not interested in paying an attorney until you are sure you will, your best option would be to find a good estate planning guide and study its it to determine if the total assets in your estate are likely to put it in the taxable category. If you find that they are, it will be worth your while to discuss with an expert the estate planning tax strategies which will let you preserve as much of your assets as possible for your heirs. These strategies can include things placing your assets into a living so that you can control them during your lifetime, and prevent them from being included in your taxable estate when you die. Having a living trust will also benefit your heirs, because it will exempt you assets from being tied up in the expensive and lengthy probate process.
Central to estate planning is choosing people to make decisions for you both during incapacity and after your death. These people include trustees, guardians, agents, and beneficiaries. Make sure that you select an agent who knows you and your wishes well. He or she will speak for you when you cannot, so it is vitally important that he or she knows you well. Make sure you and the agent have a clear understanding of his or her role in your estate and that you have clearly communicated your desires.
If you do follow the advice of an estate planning tax professional, make sure that you keep copies of all the estate planning documents. They will be essential in case you have the bad luck to deal with an unqualified party, and your heirs need to prove a claim of negligence.
Asset Protection - For example, having an A/B Trust as described above, can make sure that the assets of a deceased spouse are not subject to the creditor claims of the surviving spouse. As a firm, we are recommending A/B trusts for this reason more than the reason discussed above where an A/B trust can provide two estate tax exemptions. In variably, the surviving spouse ends up in a nursing home that chews up the net worth very quickly. So, having half of the estate in a "B" trust, protected from the creditors (ie nursing home costs) of the surviving spouse makes a lot of sense. Also, a good estate planning attorney can structure the inheritance for the children, to remain in trust for their lifetime. This will protect the inheritance from the potential creditors of the child such as divorce, bankruptcy, lawsuits, etc. My estate plan is structured that upon the deaths of my wife and I, our estate will be divided out into separate trusts to provide one trust for each of our children. We have an independent trustee and some incentives in each trust. At age 35, the child has the right to become his or her own trustee. So, in essence, the child can now take from the trust whatever the child wants for his "health, education, support and maintenance". The child is also free, as the trustee, to invest the trust assets into a beach house, a cabin, or any investment that he or she chooses. Meanwhile, if that child divorces, his or her spouse cannot touch that trust. Also, if that child files bankruptcy, then the creditors cannot reach the assets in this trust. I call this a "wrapper of protection" that we can place around the assets which gives the trust "bullet proof" creditor protection to our children. It is also important to remember that a child cannot create his own trust to provide this kind of protection. The law in most states is such that a trust provides creditor protection only in cases where it was created by one person for the benefit of another person. In other words, the grantor or creator of the trust, cannot also be a beneficiary of the trust and achieve creditor protection. So, as long as the trust is created by a parent, for the benefit of a child or grandchild, it can have the creditor protection described above.
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Frank Miller has a Debt Consolidation Blog & Finance, these are some of the articles: What Can You Get From Accounting Services You have full permission to reprint this article provided this box is kept unchanged.
posted by Vittoria @ December 04, 2013
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