Estate Planning

Estate planning involves setting up a plan that establishes who will eventually receive your assets after your passing. 

It also establishes how you want your affairs to be handled in the event you are unable to handle them for any reason. 

It’s a complicated process, and it can feel overwhelming.  There are many components to Estate Planning, and while there is a common misconception that it’s just about your finances, the truth is there is a lot more involved. The following are some of the circumstances in which estate planning can assist you:

1.      If you would like your assets passed to family members and loved ones without going through probate court and incurring probate fees.

2.      If you would like to create a plan for managing your assets in the event that you ever become incapacitated.

3.      If you have family members with special needs and would like to set money aside for them for their care and support.

4.      If you would like to set inheritance requirements for beneficiaries.  For example, the beneficiary must reach the age of 25 before receiving their inheritance, providing money for college or down payment on a house.

5.      Maintain assets and support to care for minor children when you pass away.

6.      Designating a guardian for your minor children should you pass before they are adults.

7.      Creating a plan to reduce estate taxes.

Overall, a Trust allows you to prepare for your life and your loved one’s future.

SPECIAL TYPES OF
ESTATE PLANNING TRUSTS

Beyond Revocable and Irrevocable Trusts, there are various other types of Estate Planning Trusts you may wish to consider:

The Asset Protection Trust:

This type of Trust is used to protect your assets from any creditor claims that may arise in the future.  It is usually set up while you are still living to protect your existing assets when you suspect that creditors may try to make claims to those assets against your debts.  Once the risk of creditors taking your assets has passed, the assets are then taken out of trust and control of them is restored to you. 

This is generally not the type of estate planning that is part of the average person’s plan.

The Charitable Trust:

There are different types of charitable trusts.

The most common type of charitable trust is called a “remainder charitable trust”.  A remainder charitable trust is where you set up a trust and transfer the property that you want to donate to charity in the trust.  Your charity of choice is then named as the trustee of the trust. The charity you choose must be and IRS recognized charity.  The charity then invests or manages the property in the trust.

The type of Trust you may need depends on your situation and what you are looking for the Trust to do.

Marital Trust:

A Marital Trust is typically created by one spouse and benefits the other if one spouse passes away.  After the first spouse dies, any assets in the Trust are passed to the surviving spouse.  Using the Trust to give the assets avoids paying estate taxes for the surviving spouse’s lifetime.  However, when the surviving spouse passes, the heirs may have to pay estate taxes. 

Special Needs Trusts:

A Special Needs Trust can be beneficial if you have a family member with special needs that you need to care for financially.  The Trust can assist financially without compromising your loved one’s government benefits.  The money in the Estate Planning Trust can be used for daily needs, medical care, and more. 

SUMMARY OF ESTATE
PLANNING TRUSTS

Having an Estate Plan makes sure your money and property are managed during your life and after you pass away. 
The following are components of a complete estate plan.

Pour-Over Will:

A pour over will is a part of your overall estate plan. It transfers and non-titled assets into your trust upon your death. This allows your successor trustee to distribute your person property pursuant to the terms of your trust.

Trust:

The declaration of trust and trust document establish your successor trustees, beneficiaries and the legal rights, obligations, and powers delegated to the trustee and successor trustee.

Guardianship Nomination:

States what you want to have happen and who you want to care for your children or any other dependent you’re responsible for after your death or in the event you’re no longer able to care for them.  Most often, instructions for guardianship will be included in a section of your Will.

Durable Power of Attorney:

A durable power of attorney grants a person you choose to handle your financial affairs for you should you become incapacitated and unable to handle them on your own. You may also delegate those powers prior to incapacity by consent at any time.

Advance Health Care Directive (AHCD):

Also sometimes referred to as a Living Will or a Medical Power of Attorney.  An Advance Healthcare Directive directly states what, if any, medical actions should be taken if you become incapacitated and unable to make your own decisions.

Note: it’s important to understand that while the terms “Living Will,” “Medical Power of Attorney” and “AHCD” are commonly used interchangeably, there are legal distinctions between them.

A Living Will lets you specify your medical preferences (typically for end-of-life decisions, like life support).

HIPPA Authorization:

Consent you give that allows your medical records or information to be shared with a party.

Burial Planning:

In a complete estate plan, you can plan for your burial including the time, place and manner of this important matter.

Estate Planning and Taxes:

Much of your Estate Planning is done with taxes in mind.  The ultimate goal is to leave the absolute most you can to your heirs. Strategizing by taking action to minimize assets lost to taxes is an effective way to achieve your goal.  There are some tools you can use within your Estate Plan, including ways to avoid probate and pass assets while avoiding hefty taxes.  Understanding potential types of taxes is important.         

-Estate tax: A tax imposed on estates worth more than a set value.  The tax is only assessed on the amount that exceeds the maximum, not the entire value of the estate.

-Inheritance tax: A tax paid by someone who inherits either property or money from someone who has died.

-Gift tax: A tax that’s applied on gifts exceeding a certain dollar amount.  Note the giver, not the receiver, is responsible for any tax.

DIFFERENCE BETWEEN AN ESTATE
PLAN AND A SIMPLE WILL

While many people think simply having a Will is sufficient, the fact is you need more.  If you have a Will, you’re off to a great start. But a Will by itself is just a small piece of the Estate Planning puzzle.  In order to fully protect your loved ones after you pass, you must incorporate all the documents, nominations and appointments to ensure you’ve done everything you can to make the process easier on them when the time comes.  In short, a will requires that the executor go to probate court to change the title to your assets and transfer those assets to the people you have left them to. Fees for probate can be high depending on the state. A simple will does not cover all of the planning needed to handle those delicate matters as set forth above.