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There are many reasons to have a Trust.  Some people want to avoid probate, while others want to provide for their children or family members who are unable to care for themselves.  Some want to avoid estate taxes, or to contribute to a charitable organization, church or synagogue.  Some set up trusts to ensure their own care is provided for, in the event they become incapacitated.  Finally, some people want to minimize the possibility of a legal challenge to the distribution of their assets.   If you fit into any of these categories, then you might want to consider adding a trust to your estate planning procedure.

Probate is the legal process that occurs when the court is in charge of payment of a person’s debts and asset distribution per the terms of his will.  The problem with probate is that it can take a long time and cost a lot of money, so it should be avoided.  If you transfer your assets to a trust when you are alive, then those assets technically belong to the trust, not to you, which means they will no longer be included as a part of probate.  They can then be distributed per the terms of the trust documents.  

Minor children cannot legally inherit property, so many parents name a guardian for the child in their will; however, the probate court will have the final say over this matter.  If you transfer your assets into a trust for your children before you die, you can name someone to control that trust after you die (the Trustee), and this person will be in charge of distributing the trust monies to your children, per the terms of the trust.  

When you leave assets for children in a will, they will receive control of those assets when they reach legal age; however, a trust allows you to have greater control over exactly when this occurs.  It is also possible to set up a trust that will control the assets of the child for the remainder of his life.  This can be useful in cases where a child is disabled or lacks the skills to manage finances well.

If your estate is over a certain amount, usually about 2 million dollars, a trust can be helpful in exempting your assets from estate tax, which can be hefty.  Additionally, if you set up a trust to donate part of your assets to charity each year during your lifetime, then you can receive tax benefits during your lifetime, retaining income for your own use while you’re living.

Probate laws vary from state to state; however, if your assets are placed in a trust while you’re alive, the trust will continue to manage those assets after your death, and there should be no cause for probate to become involved in the distribution of property.  Also, if there is more than one beneficiary named in a will, property will typically be sold and the assets divided amongst them.  If you want to ensure this doesn’t happen to a particular piece of property, you can set up separate trusts for each heir and specify which assets go into which trust.  This way the courts cannot come in later and determine which pieces of property are to be sold and divided.

If something happens to you during your life that prevents you from taking care of your own financial affairs, you can set up a trust and name another person to control it for you, should you be unable to do so.  This will prevent the courts from naming a Conservator for you.  This gives you the power to determine who will manage your affairs for you.  Additionally, it keeps your private affairs private.

Finally, if you think someone could challenge your will, you can greatly diminish the odds of a challenge being successful if you place your assets in a trust, as opposed to a will.  In order for a trust to be declared invalid, the challenger will have to prove that you were incapacitated when you set up the trust, as well as at the time of every transaction you made regarding the trust during your lifetime.

Uncategorized estate distribution, estate planning, probate

 

We all need to have to have a plan for our estate, because this is the only way to protect our assets and our beneficiaries from creditors and the IRS.  Women in particular, though, need to have a strong knowledge of estate planning and all that it involves.  Studies have shown that it is women who are most often left to care for their elderly parents, and women typically outlive their spouses.  If your parents or other relatives have not properly planned their estates, an already difficult time can become positively unbearable.  

 Over the next fifty-five years, it has been estimated that wealth transfers in the United States will total between $41 trillion and $130 trillion.  Having a plan for your estate can ensure this money goes to your loved ones, as opposed to the government or the probate court.  No one wants to think about dying, but clarifying your goals and using basic estate planning techniques can give you the peace of mind that your family will be protected when you’re gone.  And if it is likely that you’ll be caring for elderly parents, helping them plan their estate will give you both the comfort that the difficult time of their passing will be made just a little bit easier because you’ve pre-planned their estate.

Many people think that estate planning is only for the wealthy, but that isn’t the case.  When you really consider the value of your assets, it’s likely they amount to more than you may realize.  Your loved ones could certainly benefit from having those funds.  Estate planning is your way of having control over the distribution of your assets. 

Estate planning is more than just making a will.  That’s part of it, but it also involves these items:

 

• Determining a strategy to “gift” assets to family, friends, and charities
• Appointing an executor for your estate
• Appointing a guardian for your children
• Establishing trusts and naming a trustee
• Protecting your assets from creditors

No one has an estate that is too small for estate planning.  Here are the basic tools necessary for an effective estate strategy:

 

• Wills and testimonial letters
• Trusts
• Gifts
• Retirement plans
• Insurance contracts
• Bank statements
• Car notes
• Personal information (such as social security numbers, driver’s licenses, and military papers)

 

You should plan your estate if for no other reason than avoiding estate taxes.  Here are several ways you can avoid taxes and increase the amount you’re able to leave to your loved ones:

Unified exemption credit. This is the amount of assets you can transfer from your estate to another entity without having to pay taxes on it,a nd the current maximum is $1,500,000. This amount is likely to increase to $3,500,000 in 2009.

Marital transfer. If you and your spouse are both U.S. citizens, then you can transfer an unlimited amount from one spouse to the other tax-free.   

Gifting: You can “gift” $11,000 annually to each beneficiary, without having to pay taxes.  As a couple, you can give $22,000 to each beneficiary or $44,000 for each married beneficiary, without having to pay taxes.

Charitable deductions: You can significantly decrease your taxable estate by donating money to charity through your will.  This is a way for you to provide more for your family while providing for the organizations that are most meaningful to you.

Estate planning isn’t fun for anyone, but it’s important women know how estate planning works, because they are likely to be left holding the reigns.  It’s a time consuming process, but it’s not necessarily difficult.  Depending upon the conditions of your particular estate, or the estate of your parents, you may be best served by consulting an attorney.  A lot of people are able to take care of estate planning on their own, though.  There are a lot of online sites that have useful information about estate planning, as well as documents.  You can also find help with estate distribution by visiting sites such as www.edivvyup.com.  Being prepared is what’s important.  

Uncategorized estate planning, executor, retirement planning

Estate planning isn’t always an easy discussion to have.  When families do go through estate planning, they’re often in a hurry to get it done and move on to happier thoughts.  In their haste, though, some important areas may be overlooked.  Families tend to focus on financial assets, such as stocks, bonds, and real estate. It’s also important to plan for the distribution of personal possessions, though.  In fact, these items are the most sentimental and thus can cause the most conflict, when thorough planning has not been done in advance.  In comparison to a plot of land, your mother’s bone china or your father’s gun collection can be priceless.  When you mix these types of possessions with the raw emotions of the circumstances and old sibling rivalry, you can be left with a huge mess.

Many people will make verbal promises regarding certain items or leave general instructions for distribution in a will; however, experts are now advising people that this is not sufficient.  There are modern, less conventional methods available for the distribution of personal property now, and many are turning to the internet to facilitate family auctions when other provisions have not been made.  Web sites such as www.edivvyup.com are taking the conflict out of estate distribution. 

Whether it’s done online or by traditional means, there are advantages to allotting personal property while you’re alive.  You have the assurance that your heirs will be able to enjoy their bequests, and you can realize tax savings in the meantime.  The IRS regulates that you can give away up to $12,000 a year per person without having to pay the 45% gift tax.  If you give property away while you’re alive, it will no longer be a part of your estate, which makes sense, because as of 2009 any amount above $3.5 million will be subject to estate tax.  

 

This means it might even make sense to pay the gift tax today to avoid the estate tax tomorrow, especially if you expect your property to appreciate.  It’s a sad irony that your loved ones could even have to pay taxes on the dollars they use to pay the tax itself.  Before you decide, ask an expert to determine the best option for you and your estate.

Once you decide to divvy up the family heirlooms, you must understand going in that it’s not always possible to distribute equally.  The best you can do is to try to be fair.  For example, if it is important to you to distribute certain items to certain heirs, consider allocating a greater monetary gift to others.  

Your property is yours to do with as you wish; however, you should be aware you’re your gift may not necessarily be well received.  You might want to consult with your heirs, tell them your plans, and ask their desires.  In the end the decision is up to you alone, but it may help to avoid conflict later if you discuss it with your family now.

Leaving a list that details what goes to whom is the most obvious and simplest approach, but you should check with an expert to make sure your wishes are drawn up in a method that will be legally binding, even in instances of a challenge or law suit.  You may need to take extra steps to ensure this will be the case for you.

Some people want to put a more personal touch on the assigning of gifts.  If this appeals to you, you can consider leaving a note for each beneficiary, explaining what the gift means to you and why you’ve given it to that particular heir.  You can also make a video to document a particular memory or sentiment.  The key to avoid hurt feelings is to explain the rationale for your decisions.  You won’t be there for your loved ones to ask later.  A video can be a powerful tool at this emotional time.

How ever you decide to divvy up your assets between your loved ones, make sure you include personal possessions.  This will give you peace of mind and provide less opportunity for conflict down the road.  

Uncategorized estate distribution, estate planning, estate taxes

When going through the estate planning process, one of the most important and difficult decisions to make is who to assign as trustee.  A trust is, by nature, designed to be a long-term situation.  Because of this, laws can change during the duration of the trust.  It makes sense, then, to select a trustee who will care for your trust in the manner you would do yourself, no matter how long the trust exists.
The main responsibility of a trustee is to interpret and carry out the trust maker’s wishes.  It is important that the trustee be able to perform this task in an impartial method.  Thus, there should be no conflict of interest between the trustee and the trust itself.

Here are some other responsibilities of a trustee:

• Caring for the needs of the beneficiaries
• Keeping the assets of the trust secure
• Providing accounting for the trust
• Maintaining detailed trust records
• Complying with all tax laws and filing returns on the trust

As you can see, a great deal of responsibility is involved in the job of trustee.  It makes sense, then that you should select someone in whom you have complete confidence to manage and maintain your trust.
In addition to selecting someone who is responsible, you should consider the time commitment that will be involved in managing a trust.  It takes a great deal of time to manage a trust properly, and not everyone has that kind of time to spare.  Another option is to hire a professional.  The downside to this, though, is the lack of personal interest, as well as the fee for services that will be involved.  You want someone who knows you and your family and is committed to following through with your desires.
Whether you choose an individual or a professional to serve as trustee, there will be positives and negatives.  The single most important question to ask when selecting a trustee is “Who will best follow through with my wishes?”
Here are a few qualities that are important in a trustee, and the best trustee will satisfy as many of them as possible:
Competence: A trustee should clearly understand his duties, options for acting on behalf of the trust, and the limits of his knowledge or expertise.
Loyalty: A trustee should make no decisions that are not in the best interest of the beneficiaries.  A trustees job will not always be easy, and he needs to be able to make the tough decisions, as well as the popular ones.
Knowledge of You: Whether he is a friend or a professional, your trustee must know you well.  He needs to understand your priorities, as well as your character.  He’ll be acting on behalf of you for your beneficiaries, so he needs to know you well enough to know what you’d do if you were here.
Knowledge of the Trust:  Your trust could consist of mutual funds, securities, real estate, etc.  It is important that the trustee be familiar with the details of managing the items incorporated into your specific trust.
Experience: The job of a trustee is complex and demanding.  It is difficult on you and your beneficiaries if your trustee doesn’t have the experience necessary to handle the job.
Desire: A trustee’s job is not only difficult, but it can also last a long period of time.  This is a huge obligation on your trustee.  Make sure the person you appoint has the desire to deal with the conditions of trust management for as long as it takes.
Physical Proximity: Trust management is a hands-on job.  Your best friend in Florida might be an excellent candidate; however, if you live in Ohio, it might make more sense to appoint someone who is physically close to your beneficiaries.  This way he will be able to see to the needs of your loved ones in a timely fashion.

Uncategorized estate trustee, executor