Boulder Garfield County UT estate planning young adults

Estate Planning Issues During and After Divorce

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A CONTRACT is defined from the Latin word contractus. An agreement between two or more parties, especially one that is written and enforceable by “law.” To enter into by contract; establish or settle by formal agreement. An agreement between two or more parties which creates obligations to do or not do the specific things that is the subject of that agreement.

OWNERSHIP from the word possessore, is defined as someone who has the legal right to possession with the legal right to transfer possession to others.

ESTATE, (inheritance) patrimonio (possession) a term used in common “law” used to denote the sum total of all possessions by a person at the time of his/hers death.

A TRUST is a CONTRACT. A legal arrangement between two or more persons defining the ownership and distribution of his/hers possessions, under the “law.”

ESTATE PLANNING AND TRUSTS therefore is the written legal agreement (contract) outlining a contractual obligation between the parties.

WHAT IS AN ESTATE TAX?

An ESTATE TAX is a tax on your possessions on the date of your death, up to 55%. Take inventory of what you own: Cash, Savings and checking accounts, CDs, Stocks, Mutual Funds, Bonds, Treasuries, Exempts, Jewelry, Cars, Stamps, Boats, Paintings, and other collectibles, Real Estate ... main home, vacation spot, investment realty, your Business, Interests in other businesses, Limited Partnerships, Partnerships, Mortgages and notes receivable you hold, Retirement plan benefits, IRAs, Amounts that you expect to inherit from others.

Your federal death (estate) tax, up to 55%, is based on the "fair cash value" of your property on the date of your death, not what you originally paid. State probate and death taxes are based on the "location" of your property. Thus, if you own property in different states, each state has to be probated and each will want their fair share.

The only real alternative to a will arrangement is to set up a trust structure during lifetime which, with careful planning, can operate to eradicate these delays, administration costs and taxes as well as giving a large number of additional benefits. For these reasons the use of TRUSTS is increasing dramatically.

The problem is: Many Americans have no plan. They incorrectly assume joint ownership takes care of things, or they believe that their property is not worth enough to be concerned.

Such practices can be shortsighted, cost money, and raise unnecessary and unexpected problems, long time delays, and high administration costs. For one thing, most people have a larger estate than they may realize. For another, joint ownership will not necessarily beat probate hungry lawyers or the estate tax man and will often mean that considerable sums become payable in inheritance tax or estate duty.

A will is not a substitute for a trust. A will does not avoid probate. Many individuals seek to put order to their affairs by making a comprehensive will. Under this arrangement the Executors named in the will would apply for a grant of probate, take possession of the assets of the deceased and then distribute those assets according to the terms of the will.

ITEMS INCLUDED IN YOUR TAXABLE ESTATE:

For example, many people believe the higher exemption amounts that can pass tax free eliminate any need for estate planning. This type of thinking is fundamentally flawed, for example:

1) Certain Types of Property have special rules for estate taxes. Property that spouses jointly own, half the value is included in the estate of the first spouse to die, no matter whose funds bought it or that survivor automatically inherits it. And the full value is counted in survivor's estate could result in a bigger estate tax at that time.

Example: H + W own a private home, fair market value at time of H death is $750,000. 1/2 of $750,000 is included in H's estate; therefore W now owns 100%. On the death of W the full $750,000 would be in her taxable estate; thus, a larger estate tax on the death of W.

2) What the Insurance Man Won't Tell You - Life insurance is taxed in your estate "if" you had any incidental ownership at death. This occurs if you can name new beneficiaries or borrow against policies or take out the cash value. Even insurance you give away, can come back to taxable in your estate if the donor dies and leaves it to you. Group insurance may be included too.

3) Pensions & IRAs - are taxable, except for pensions fixed before 1985.
Then there are several items the law also adds to your estate: Large gifts, non-charitable gifts that exceed $12,000 beginning in 2006 and property partly given away, where you retain the right to use it.

Example: A house that you give to your children but still use rent-free. (Incidentally giving your house to your children creates a problem for them, and for you, if they get sued, or they die before you.)

And stock you give away, but keep voting rights, if in a company that you control. Or the property of others over which you have certain rights such as the power under another's will to name who will get part of that estate. If you could name yourself, your estate or creditors, it's taxable in your estate. Including assets you give a child and keep the right to control.

ESTATE TAX LAWS CAN CHANGE:

Finally, estate tax laws can change. Thirteen times in 25 years, overhauls, tightenings for some, headaches for all. Congress is always tinkering with the idea that they know better than you, where your money should go.

Planning your estate is not an easy task. It takes time and effort. The place to begin is with yourself, your own goals and consideration of your heirs, their ages, abilities, needs and so on at a time when there's no pressure to implement.

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Boulder Utah 9 estate planning pitfalls to avoid

Estate Planning and Trusts

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An estate plan is a document consisting of multiple trivial elements such as the living will or healthcare proxy or also known as medical power of attorney and assignment of power of attorney. Some people also include trust into their wills. Once you merge all these things together, you have to get it certified under the legal laws of both the federal and state governments. Basically everyone needs to have a will, to inform the world where you wish to allocate your assets to after you leave the world. In fact, it is the best way to consign guardians for your children.

Those dying without a proper estate planning, having no will to display upon their deaths are known to be dying intestate. However, this implies that your heirs need to struggle through several legal procedures in order to take over the assets. Having a trust does not guarantee the ownership transfer; it is insufficient because you still need a will to be in charge of your trust to inherit them to your beneficiaries. In addition, it is advisable that you discuss the plan with your children to avoid future discord, especially if you know your heirs may come in strong disagreement with one another.

To begin with your estate plan, you have to garner all appropriate information such as insurance policies, investments, real estate or business interests, financial condition, and any retirement savings. Then ponder to yourself several questions like who you wish to assign to the job of handling your financial affairs if you happen to be incapacitated. Then consider whom you intend to inherit your assets to and give thoughts into plotting the responsibility of your medical decisions should you be bedridden and unconscious.

Some people think that having infinite amount of money indicates a good estate planning but this is not always the case. Leaving all your properties and cash to your spouse does not imply it will be exempted from estate tax because you will instead increase his or her taxable estate. Subsequently, if your spouse leaves the money to your children upon his or her death, they will end up paying higher estate taxes. At all cases, having a will is the best item to solve all hassles.

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Bluffdale Utah County UT estate planning 5 year lookback

Estate Planning - Major Aspects of Personal Finance Management

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I had a potential client call me earlier in the week asking me if he needed a will. The caller wasn't married and had no children or grandchildren. He didn't own any real property. All of his bank accounts had payable on death beneficiaries and he owned minimal personal property. He had the perfect plan; nothing was going to pass through probate so he didn't think he needed a will.

Maybe he doesn't need a will. I didn't know exactly since self-help estate planning frequently leads to mistakes or property that doesn't have the proper designations. In this situation a will is prophylactic. It ensures that if a mistake is made or a beneficiary designation fails, that property passes to the intended recipient.

I turned the discussion from planning for death to what type of planning he had for his life. I asked if he had a power of attorney for finances. His answer was no. "Do you have an advanced health care directive (aka health care power of attorney)?" "No."

The lack of such planning concerned me since I knew he didn't have a significant other or children to care for him if he were unable to care for himself. What would happen to him if he had a stroke or suffered from dementia or Alzheimer's? Perhaps his siblings would step in to care for him - but how? They would have to spend his money to set up a conservatorship and guardianship or other court proceedings. These processes take time and money to set up and are expensive to administer.

To help deal with his finances he could execute a springing power of attorney for finances that would give a sibling or trusted relative the ability to manage his finances if he became incapacitated and unable to do so. It's called a springing power of attorney because it only becomes effective upon incapacity. The power of attorney can provide broad powers and sets forth detailed instructions concerning what the designated agent can and cannot do on the individual's behalf. More importantly, it would allow the caller to designate who he wanted to manage his finances - not a judge. Drafting and executing a power of attorney in this situation is relatively inexpensive when compared to the cost of setting up and maintaining a conservatorship.

In Oregon, an advance health care directive would assist the caller by designating a health care agent to make health care decisions on his behalf when he's unable to. It would potentially eliminate the need for guardianship proceedings. The representative can make decisions based on directions that are left in the directive. Among the decisions the representative can make is whether to withhold or remove life support, food or hydration. The advance heath care directive does not authorize euthanasia, assisted suicide or any overt action to end the person's life.

This example is a part of the problem with self-help planning. Although the caller was very thorough with his death planning he didn't give any thought to his life. In this caller's case, life planning was much more important than death planning, but he hadn't given it any thought.

Give us a call if you need additional information or to prepare your estate plan.

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Bluffdale Utah estate planning lawyer

Estate Planning: Fun For The Entire Family

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Estate Planning is not something that everyone wants to think about.  But it's an important thing to consider if you have a significant amount of property or wealth.  Even if you only have a small amount of wealth, you want to make sure that if you pass on, your property goes to the right people in your life.

Without the proper planning this may not happen.  Let's say for example you have no children and have yet to be married.  Let's say also that you spend all of your time working with a children's charity, and that if you did pass on you would want your money to go to this group. 

Without the proper planning, your money could go to your closest surviving family member.  This could be a sister that you don't get along with or a cousin you never knew.  If you know where you want your money to go, then estate planning should be a top priority. 

Nobody likes to think about death.  When you start to think about estate planning, you start to think about how you might die.  It's a sad thing to think about for many people.  But you should try your best to stay strong so that those that you love can get what you would've wanted them to have.

Another way to approach the issue is to do it with an experienced company.  Estate planning companies with experience dealing with this sort of thing can make the process much easier.  They know it's hard to think about these matters, so they make the questioning process as brief as possible for you.  Working with a professional in the field will make the whole process much easier.

You can do some shopping around to find the right company.  Your estate planning choices are some of the most important choices you will have to make in your lifetime.  You want to make sure that you choose the right company to handle them.

It is important to note that the estate planning process doesn't have to take a long time.  You generally know how you would like things to be worked out before you begin the process.  Your estate planner will just help to make your words legally binding, and remind you of issues you might have forgotten.

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Bluffdale Salt Lake County UT subchapter s estate planning

Estate Planning - How to Preserve Your Wealth

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I have been doing estate planning for over two decades. Yet, last week a questioned posed by a young couple seemed to resonate in my mind like never before. "What is the number one benefit of doing a trust?" My mind quickly raced to the 1980's movie "City Slickers" when the old crusty cowboy said to Billy Crystal, the city slicker, that he must find "just one thing" that is important to him in life and use that as a motivation to have a happy and successful life. This line made me realize that the "just one thing" in estate planning, like the movie, is different for each person. The true answer is the quintessential cliché, "it depends". The purpose of this article will list some of the most important factors that people should consider. In the end, whatever your "just one thing" is should motivate you to take action and provide "Peace of Mind" for your loved ones.

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 states 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.

Saving Taxes - People have heard this phrase over and over again in newspaper ads inviting people to public seminars put on by a "national expert" that nobody has ever really heard of. But, how does a Trust really help to save taxes? Under today's tax laws, a common Revocable Trust does not save taxes for most people. First, a Trust doesn't save any income taxes. The Trust is ignored for income tax purposes and all of the income generated by the Trust is taxed to the individual Grantors of the Trust as usual. Also, for a single person, a Trust does not save any estate taxes. But, for a married couple, a Trust can save estate taxes. Most married couples have a Revocable Trust, that splits into an "A" and a "B" trust at the death of the first spouse. The primary reason for this split is that it guarantees that the couple will get two exemptions to apply against the estate tax. One exemption for the "B" trust when the first spouse dies, and then a second exemption against the "A" trust when the surviving spouse passes. Without an A/B trust, it is possible that the exemption of the first spouse could be wasted. But, since the federal estate tax exemption is now set at $5 million, most couples only need one exemption anyway. So, in the end, for probably 95% of married couples, having a trust will not save any estate taxes. Now, this is true as to the Revocable living trust. Don't confuse this with the 4 or 5 other "specialty trusts" that have the specific purpose of saving estate taxes. Examples of a "specialty trust" would be an Irrevocable Life Insurance Trust (designed to keep life insurance out of the estate tax system) and a Qualified Personal Residence Trust (designed to keep the primary and vacation residences out of the estate tax system).
Restrictions and Incentives for Spouse - A well drafted Trust should contain provisions as to what happens to the assets of the first spouse to die, if the surviving spouse remarries. Most clients want to adequately provide for their spouse, but they don't want to provide for their spouse's new husband or wife. Also, to what extent can the surviving spouse change the estate plan, after the death of the first spouse, to disinherit the children. My experience is that most spouses tend to remarry, and most of the time, that new spouse will also have children. Now, we end up with a "blended family". Over time, the surviving spouse feels love and loyalty to the new spouse, and perhaps the new stepchildren. We probably all agree that the surviving spouse should be able to do what they wish with respect to their community property half interest in the asses. The more difficult question is whether the surviving spouse can also control the ultimate disposition of the deceased spouse's community property half of the trust and make provisions for the new spouse or the new stepchildren out of the deceased spouses's half of the trust.

Restrictions and Incentives for Children - The key question here relates to the timing in which a child should gain unrestricted access, an outright distribution, to the assets after the death of both parents. We would all agree that if a child is a minor, then the assets should be controlled and restricted by an independent trustee for a period of time. What we may disagree on, is the appropriate age in which all restrictions and the independent trustee should be removed. Some clients say age 25, some say 30, and I have had many that say 50 or 60. My experience is that the older my clients are, the higher they will set the ages for their children to gain control. For example, if the kids are minors, then most couples will set the restriction to be lifted at age 30. However, if the couple is much older, and the kids are already over age 30, then these couples may set the restrictions to age 40 or 45. We may also want to build certain "incentives" into the estate plan. A common incentive is "if you earn a buck, then the trust will pay you another buck". So, you create an incentive for a child to go out and earn a living. Over the years, I have seen the destruction that is brought to a "trust fund baby". Money and inheritances can ruin a child and ruin a life. That is why many wealthy people will leave large portions of their wealth to charities, instead of their children (and yes, there are income tax advantages and estate tax advantages of doing this, but the primary reason would be to encourage the child to have a productive life). You may also want to provide incentives depending on if a child graduates from college or achieves some other educational benchmark. I do see the risk of using the trust as a "carrot" that is dangled in front of a child to be manipulative. But, some well thought out incentives can really go a long way to help a son or a daughter cope with the vicissitudes of life and be blessing to them, and not a curse.

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.

Providing a Plan for Incompetency - As all of us age, we can see that our minds and our memories start to diminish. Most of the estate litigation that comes into our firm relates one way or another to the incapacity of one or both of the parents. When this happens we see many children turn against each other and a fight ensues as to what is in the best interests of mom and dad. Unfortunately, the children seldom agree as to what is best. So, a legal battle is waged to determine who has the control of the assets and who has the ability to make medical and financial decisions. Yes, some of these problems should be addressed in a Power of Attorney. But, Powers of Attorney were meant to deal with short term situations, not permanent solutions. It is much better to have a plan, drafted inside of the Trust, as to who will become in charge ("successor trustee") when mom and dad are no longer capable. Also, to what extent will the Successor Trustee have a duty to give an accounting to all of the kids and keep them informed? Under what circumstances can mom and dad be moved out of state? What is the plan when the assets run out? Will mom and dad live in a nursing home? Keep in mind that someone over 75 is much more likely to become disabled and incompetent in the next 5 years then they are to die in the next 5 years. Then, couple this with the fact that the children are more likely to fight over issues as to what happens to mom and dad, then they are to fight over the inheritance if mom and dad die. Clients are much more likely to avoid all of these fights if there is a well drafted estate plan in place.

Privacy - Many clients like the fact that an estate administered under a Trust is more likely to be kept private then an estate administered by the Probate Court. So, some of our clients will create a Trust for that simple fact. We have all seen the ads on TV where someone is talking about the real estate strategy of buying property from an estate. How do these professionals find the property and know what is in probate and what isn't? The answer is simple, in many probate proceedings, an inventory is filed with the Court and this inventory is a public record. So, all that needs to happen is that you have a person sitting in an office, searching the probate records to find real estate. Then, it is also easy to find the names and addresses of the heirs. Now, if most of the heirs are out of state, and there is local real estate, then the magic is in the fact that these heirs are now "motivated sellers" and you can make a low ball offer. The bottom line is that the financial affairs of the decedent are now public records that can be easily searched from any computer. The creation of a Trust provides privacy and avoids this issue of privacy altogether.

In conclusion, there are many benefits to estate planning. It is also true that there are many risks and problems that are created by not having an estate plan in place. The reason and benefit that is important to you will depend on your situation. In fact, I have listed the reasons that are least important to me first, and the reasons that are most important to me last. That is me, but is based upon many years of experience. You must decide what is important to you. But, in the end at least focus on the issues and plan for the inevitable. Early in my career I developed a "line" that I used in my public seminars. When the client said, "oh, I really don't think estate planning will benefit me at all." My response was "okay, put my business card on your refrigerator". I said this tongue in cheek knowing that the few dollars the client should have spent on the creation of an estate plan would multiply into huge legal fees when the children would begin to fight trying to unravel the many problems caused by lack of planning, or poor planning. There is a reason that our estate litigation department is the fasting growing practice area of our firm. Hopefully, your family will not fall into this trap. Whatever your reason, or "just one thing" may be, use that as your motivation to create a quality estate plan. This will ensure invaluable peace of mind for you and also for your loved ones.

When you need your estate done right, please give us a call.

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Blanding San Juan County UT estate planning 2nd marriage

Estate Planning Issues During and After Divorce

estate planning elder law

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I have been doing estate planning for over two decades. Yet, last week a questioned posed by a young couple seemed to resonate in my mind like never before. "What is the number one benefit of doing a trust?" My mind quickly raced to the 1980's movie "City Slickers" when the old crusty cowboy said to Billy Crystal, the city slicker, that he must find "just one thing" that is important to him in life and use that as a motivation to have a happy and successful life. This line made me realize that the "just one thing" in estate planning, like the movie, is different for each person. The true answer is the quintessential cliché, "it depends". The purpose of this article will list some of the most important factors that people should consider. In the end, whatever your "just one thing" is should motivate you to take action and provide "Peace of Mind" for your loved ones.

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 states 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.

Saving Taxes - People have heard this phrase over and over again in newspaper ads inviting people to public seminars put on by a "national expert" that nobody has ever really heard of. But, how does a Trust really help to save taxes? Under today's tax laws, a common Revocable Trust does not save taxes for most people. First, a Trust doesn't save any income taxes. The Trust is ignored for income tax purposes and all of the income generated by the Trust is taxed to the individual Grantors of the Trust as usual. Also, for a single person, a Trust does not save any estate taxes. But, for a married couple, a Trust can save estate taxes. Most married couples have a Revocable Trust, that splits into an "A" and a "B" trust at the death of the first spouse. The primary reason for this split is that it guarantees that the couple will get two exemptions to apply against the estate tax. One exemption for the "B" trust when the first spouse dies, and then a second exemption against the "A" trust when the surviving spouse passes. Without an A/B trust, it is possible that the exemption of the first spouse could be wasted. But, since the federal estate tax exemption is now set at $5 million, most couples only need one exemption anyway. So, in the end, for probably 95% of married couples, having a trust will not save any estate taxes. Now, this is true as to the Revocable living trust. Don't confuse this with the 4 or 5 other "specialty trusts" that have the specific purpose of saving estate taxes. Examples of a "specialty trust" would be an Irrevocable Life Insurance Trust (designed to keep life insurance out of the estate tax system) and a Qualified Personal Residence Trust (designed to keep the primary and vacation residences out of the estate tax system).
Restrictions and Incentives for Spouse - A well drafted Trust should contain provisions as to what happens to the assets of the first spouse to die, if the surviving spouse remarries. Most clients want to adequately provide for their spouse, but they don't want to provide for their spouse's new husband or wife. Also, to what extent can the surviving spouse change the estate plan, after the death of the first spouse, to disinherit the children. My experience is that most spouses tend to remarry, and most of the time, that new spouse will also have children. Now, we end up with a "blended family". Over time, the surviving spouse feels love and loyalty to the new spouse, and perhaps the new stepchildren. We probably all agree that the surviving spouse should be able to do what they wish with respect to their community property half interest in the asses. The more difficult question is whether the surviving spouse can also control the ultimate disposition of the deceased spouse's community property half of the trust and make provisions for the new spouse or the new stepchildren out of the deceased spouses's half of the trust.

Restrictions and Incentives for Children - The key question here relates to the timing in which a child should gain unrestricted access, an outright distribution, to the assets after the death of both parents. We would all agree that if a child is a minor, then the assets should be controlled and restricted by an independent trustee for a period of time. What we may disagree on, is the appropriate age in which all restrictions and the independent trustee should be removed. Some clients say age 25, some say 30, and I have had many that say 50 or 60. My experience is that the older my clients are, the higher they will set the ages for their children to gain control. For example, if the kids are minors, then most couples will set the restriction to be lifted at age 30. However, if the couple is much older, and the kids are already over age 30, then these couples may set the restrictions to age 40 or 45. We may also want to build certain "incentives" into the estate plan. A common incentive is "if you earn a buck, then the trust will pay you another buck". So, you create an incentive for a child to go out and earn a living. Over the years, I have seen the destruction that is brought to a "trust fund baby". Money and inheritances can ruin a child and ruin a life. That is why many wealthy people will leave large portions of their wealth to charities, instead of their children (and yes, there are income tax advantages and estate tax advantages of doing this, but the primary reason would be to encourage the child to have a productive life). You may also want to provide incentives depending on if a child graduates from college or achieves some other educational benchmark. I do see the risk of using the trust as a "carrot" that is dangled in front of a child to be manipulative. But, some well thought out incentives can really go a long way to help a son or a daughter cope with the vicissitudes of life and be blessing to them, and not a curse.

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.

Providing a Plan for Incompetency - As all of us age, we can see that our minds and our memories start to diminish. Most of the estate litigation that comes into our firm relates one way or another to the incapacity of one or both of the parents. When this happens we see many children turn against each other and a fight ensues as to what is in the best interests of mom and dad. Unfortunately, the children seldom agree as to what is best. So, a legal battle is waged to determine who has the control of the assets and who has the ability to make medical and financial decisions. Yes, some of these problems should be addressed in a Power of Attorney. But, Powers of Attorney were meant to deal with short term situations, not permanent solutions. It is much better to have a plan, drafted inside of the Trust, as to who will become in charge ("successor trustee") when mom and dad are no longer capable. Also, to what extent will the Successor Trustee have a duty to give an accounting to all of the kids and keep them informed? Under what circumstances can mom and dad be moved out of state? What is the plan when the assets run out? Will mom and dad live in a nursing home? Keep in mind that someone over 75 is much more likely to become disabled and incompetent in the next 5 years then they are to die in the next 5 years. Then, couple this with the fact that the children are more likely to fight over issues as to what happens to mom and dad, then they are to fight over the inheritance if mom and dad die. Clients are much more likely to avoid all of these fights if there is a well drafted estate plan in place.

Privacy - Many clients like the fact that an estate administered under a Trust is more likely to be kept private then an estate administered by the Probate Court. So, some of our clients will create a Trust for that simple fact. We have all seen the ads on TV where someone is talking about the real estate strategy of buying property from an estate. How do these professionals find the property and know what is in probate and what isn't? The answer is simple, in many probate proceedings, an inventory is filed with the Court and this inventory is a public record. So, all that needs to happen is that you have a person sitting in an office, searching the probate records to find real estate. Then, it is also easy to find the names and addresses of the heirs. Now, if most of the heirs are out of state, and there is local real estate, then the magic is in the fact that these heirs are now "motivated sellers" and you can make a low ball offer. The bottom line is that the financial affairs of the decedent are now public records that can be easily searched from any computer. The creation of a Trust provides privacy and avoids this issue of privacy altogether.

In conclusion, there are many benefits to estate planning. It is also true that there are many risks and problems that are created by not having an estate plan in place. The reason and benefit that is important to you will depend on your situation. In fact, I have listed the reasons that are least important to me first, and the reasons that are most important to me last. That is me, but is based upon many years of experience. You must decide what is important to you. But, in the end at least focus on the issues and plan for the inevitable. Early in my career I developed a "line" that I used in my public seminars. When the client said, "oh, I really don't think estate planning will benefit me at all." My response was "okay, put my business card on your refrigerator". I said this tongue in cheek knowing that the few dollars the client should have spent on the creation of an estate plan would multiply into huge legal fees when the children would begin to fight trying to unravel the many problems caused by lack of planning, or poor planning. There is a reason that our estate litigation department is the fasting growing practice area of our firm. Hopefully, your family will not fall into this trap. Whatever your reason, or "just one thing" may be, use that as your motivation to create a quality estate plan. This will ensure invaluable peace of mind for you and also for your loved ones.

When you need your estate done right, please give us a call.

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Blanding Utah estate planning expert

Estate Planning - The Benefits of Peace of Mind

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Appropriate estate planning can only be possible with proper appreciation of the major aspects involved in personal finance management process. Efficient estate planning attorney makes it a point realizing these aspects perfectly while making the plan.

Appropriate estate planning involves understanding various aspects of personal finance management well. Multiple aspects of such financial management are involved in the estate planning process. An efficient attorney therefore will always look at these aspects before preparing the estate management. People who are looking for inheritance, insurance and property transfer managements with efficiency will find understanding these aspects extremely useful for the purpose of preparing an all comprehensive estate planning.

Setting goals is extremely essential for preparing the perfect plan. Without the goals clearly determined it may not be possible to prepare plan that would meet all the requirements of the client. Retirement plans are examples of such goal setting. One could plan buying a house for residence after retirement at 25% of the gross income while keeping the residual portion of the income away for future investments, maintenance of the family, and other pursuits. People who are concerned with setting up multiple goals at one time may obtain the assistance of professional expert trust planning attorney that would balance the financial planning with goals set by the client for benefit optimization.

Goals that the client set up for achievement could either be long or short term. In any case setting such financial goals help direct planning. Processes like these involve adequate assessment of the financial and all other aspects of the estate and resources of the estate owner. Experienced and professional estate planning attorney would take care to prepare simplified versions of all the financial statements and legal documents so that there is no room for any confusion in the minds of the clients involved. Ordinarily balance sheets and income statements would be a couple of financial documents that helps the proper assessment of the estate to be planned.

Despite best goal setting and near perfect assessments by the estate lawyer proficient in these deals, best results could only accrue with perfect execution of the plans. One has to be careful about it.

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Big Water Kane County Utah power estate planning

Estate Planning - How to Preserve Your Wealth

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Here are four key elements of estate planning that can not only help to preserve the value of your estate but also to ensure the efficient administration and disposition of your estate assets.

1. A will is the cornerstone for an estate plan and deals with all matters regarding the final distribution of your estate assets. A will is a legal document that speaks on your behalf upon your demise. If you do not have a will, then the courts will decide the manner in which your estate assets will be distributed - and this may not be in accordance with your wishes.

2. A trust is a legal document that can be designed to address any unique situation that you may have in regard to the distribution of your estate assets. For example, a spendthrift trust can be set up to protect the interests of a beneficiary who is not good at handling money. A trust can be set up for the protection and administration of assets for minor children, a spouse or for any other beneficiary.

Creative use of wills and trusts can not only protect the interests of your heirs, but also can help reduce the impact of taxes and probate fees. An estate planning attorney can help with the proper legal drafting of wills and trusts. But before you engage the services of an attorney, it is highly recommended that you should do the essential ground work first - this will save you hundreds if not thousands of dollars in legal and accounting fees.

3. Your estate executor will need to know the location of your assets and vital documents. If you do not have a proper record of your assets and vital documents, valuable assets can be "lost" during the estate settlement process. For example, there are billions of dollars in unclaimed money currently held by the government waiting to be claimed by the beneficiaries of deceased relatives.

4. It is vitally important to understand that most estates usually comprise of assets that are not readily convertible into cash. For example, real estate, long term financial investments, business interests, rental properties and other assets. In other words, most estate assets are generally illiquid.

Without proper funding arrangements it is highly probable that valuable estate assets may have to be liquidated at fire sale prices in order to pay taxes and other estate settlement expenses. These expenses can easily amount to thousands and even millions of dollars in the case of larger estates. There is a smart way to fund estate settlement expenses without having to liquidate valuable estate assets by the creative use of life insurance.

By implementing the above estate planning strategies you can ensure that all your affairs are properly organized and depending on the size of your estate, you could potentially save thousands if not millions of dollars. Your heirs will be proud and glad that you made all the proper arrangements and that all your affairs were left in excellent order. To learn more on estate planning please check the resource box below.

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Big Water Utah estate planning in your 30s

Estate Planning - Major Aspects of Personal Finance Management

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The five levels of estate planning is a systematic approach for explaining estate planning in a way that you can easily follow. Which of the five levels you need to complete is based on your particular objectives and circumstances.

Level One: The Basic Plan

The situation for level one planning is that you have no will or living trust in place, or your existing will or living trust is outdated or inadequate. The objectives for this type of planning are to:

reduce or eliminate estate taxes;
avoid the cost, delays and publicity associated with probate in the event of death or incapacity; and
protect heirs from their inability, their disability, their creditors and their predators, including ex-spouses.

To accomplish these objectives, you would use a pour-over will, a revocable living trust that allocates a married person's estate between a credit shelter trust and a marital trust, general powers of attorney for financial matters and durable powers of attorney for health care and living wills.

Level Two: The Irrevocable Life Insurance Trust (ILIT)

The situation for level two planning is that your estate is projected to be greater than the estate-tax exemption. In any event, you can make cash gifts to an ILIT using your $13,000/$26,000 annual gift-tax exclusion per beneficiary.

Level Three: Family Limited Partnerships

The situation for level three planning is that you have a projected estate-tax liability that exceeds the life insurance purchased in level two. If your $1 million gift-tax exemption ($2 million for married couples) is used to make lifetime gifts, the gifted property and all future appreciation and income on that property are removed from your estate.

More people would be willing to make gifts to their children if they could continue to manage the gifted property. A family limited partnership (FLP) or a family limited liability company (FLLC) can play a valuable role in this situation. You would typically be the general partner or manager and in that capacity, continue to manage the FLP or FLLC's assets. You can even take a reasonable management fee for your services as the general partner or manager. Moreover, by gifting FLP or FLLC interests to an ILIT, the FLP or FLLC's income can be used to pay premiums, thereby freeing up your $13,000 / $26,000 annual gift-tax exclusion for other types of gifts.

Level Four: Qualified Personal Residence Trusts and Grantor Retained Annuity Trusts

The situation for level four planning is the additional need to reduce your estate after your $1 million/$2 million gift-tax exemption has been used. Although paying gift taxes is less expensive than paying estate taxes, most people do not want to pay gift taxes. There are several techniques to make substantial gifts to children and grandchildren without paying significant gift taxes.

One technique is a qualified personal residence trust (QPRT). A QPRT allows you to transfer a residence or vacation home to a trust for the benefit of your children, while retaining the right to use the residence for a term of years. By retaining the right to occupy the residence, the value of the remainder interest is reduced, along with the taxable gift.

Another technique is a grantor retained annuity (GRAT). A GRAT is similar to a QPRT. The typical GRAT is funded with income-producing property such as subchapter S stock or FLP or FLLC interests. The GRAT pays you a fixed annuity for a specified term of years. Because of the retained annuity, the gift to the remaindermen (your children) is substantially less than the current value of the property.

Both QPRTs and GRATs can be designed with terms long enough to reduce the value of the remainder interest passing to your children to a nominal amount or even to zero. However, if you do not survive the stated term, the property is included in your estate. Therefore, it is recommended that an ILIT be funded as a "hedge" against your death prior to the end of the stated term.

Level Five: The Zero Estate-Tax Plan

Level five planning is a desire to "disinherit" the IRS. The strategy combines gifts of life insurance with gifts to charity. For example, take a married couple, both age 55, with a $20 million estate. Assume that there is neither growth nor depletion of the assets and that both spouses die in a year when the estate-tax exemption is $3.5 million, and the top estate-tax rate is 45%.

With the typical marital credit shelter trust, when the first spouse dies, $3.5 million is allocated to the credit shelter trust and $16.5 million to the marital trust. No federal estate tax is due. However, at the surviving spouse's death, the estate tax due is $5.85 million. The net result is that the children inherit only $14.15 million.

With the zero estate-tax plan, the ILIT (with generation-skipping provisions) is funded with a $13 million second-to-die life insurance policy. These gifts reduce the estate value to $18 million. In addition, the couple's living trusts each leave $3.5 million (the amount exempt from estate taxes) to their children upon the surviving spouse's death. The balance of their estate ($11 million) passes to a public charity or private foundation-estate-tax free. To summarize, the zero estate-tax plan delivers $20 million (i.e., $13 million from the ILIT and $7 million from the living trusts) to the children instead of $14.15 million; the charity receives $11 million instead of nothing; and the IRS receives nothing, instead of $5.85 million.

In summary, with some advanced planning, it is possible to reduce estate taxes, avoid probate, set forth your wishes, and protect your heirs from creditors, ex-spouses and estate taxes. Remember, every year taxes change so if you need estate tax help, call us today to speak with an estate attorney.

TO THE EXTENT THIS WEBSITE CONTAINS TAX MATTERS, IT IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER, ACCORDING TO CIRCULAR 230.

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Bicknell Wayne County Utah estate planning tax deductible

Estate Planning: Fun For The Entire Family

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In my estate planning practice, it is not uncommon to meet with a new client who wants an estate plan prepared, but is a bit vague as to what should be included in that plan. Quite frequently, the initial conversation begins with the client saying something like, "I would like a will... or should I have a trust? Do I need anything else?" Actually, those are good questions to begin a discussion.

Most folks recognize that their estate plan should provide for the distribution of their assets upon their death. That, of course, is an essential element of an estate plan, but there is more to consider in a well-designed plan. Prior to meeting with your attorney for the first time you should also be thinking about such things as who you want to handle your affairs should you become incapacitated; whether you would want your doctor to keep you alive should you be near the point of death with little chance of recovery; who you want to have the authority to sign important legal papers for you if you are unavailable; and, who you would want to raise your children if you suddenly die. There is a wide variety of personal circumstances which impact estate planning, but let me offer the following as items you should consider even before you meet with a lawyer to discuss your own estate plan.

Should I have a will or a trust?

This is typically among the first questions posed by clients during an initial meeting. Many are aware that a trust will avoid probate, but that is true only if the trust is properly funded, meaning that all of their assets are transferred into the trust. Not every estate plan needs a trust, however, and it may not be necessary for you to incur the additional cost of having your lawyer prepare a trust, when a will is suitable for your needs. And, contrary to what some folks think, having a trust does not avoid estate taxes.

A trust may be the right choice for you, if it is unlikely that you will acquire more assets in the years ahead. What can often happen, however, is that folks will have a trust established and thereafter acquire new assets that they neglect to place in the trust. Then when they die the assets outside of the trust have to go through probate which defeats the intent of establishing a trust in the first place. So, before deciding upon a trust as the main element of your own estate plan, take some time to consider your future investment plans and major acquisitions.

There are some other advantages to a trust, which might make it the right choice for you. For example, should you become incapacitated, your trustee will be able to step in and manage your assets without having to seek a court appointed conservator. In that sense, a trust document is more all-encompassing and flexible than an ordinary will.

What else should I consider in my estate plan?

Estate planning isn't just about deciding who gets your wealth when you die. It is also about making decisions as to what you want to happen should you become seriously ill or incapacitated.

Every estate plan should include an advance directive, which used to be called a living will. This document allows you to appoint a health care representative to make health care decisions for you, including end of life decisions, when you are unable to do so.

Similarly, we recommend that you give a durable power of attorney to a family member or trusted friend in order to allow your appointed agent to manage your financial and business affairs when you are unavailable or otherwise incapacitated. A durable power of attorney remains in effect so long as you are alive and should provide that it will be effective even in the event of your incapacity.

What about my bank accounts, life insurance and investment accounts?

Careful estate planning should include a review of all of your assets, including checking the beneficiary designations you have listed in your retirement plan and in regard to your investment and bank accounts. With such beneficiary designations, these assets will be transferred outside of the probate process to those persons you have previously designated as beneficiaries on these accounts. It is important that you review your beneficiary designations to ensure that your choice of beneficiaries is in accordance with your current intentions as to disposition of your estate.

A thorough review of your portfolio and consideration of the issues described above before meeting with your estate planning attorney will allow you to realize the maximum benefit from your meeting. It will also help your attorney to focus his or her discussion with you on aspects of the process that are most relevant to your goals and needs.

© Call today for your free initial consultation.

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