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Estate Planning - Consider Your Options Before it is Too Late

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Why Plan Your Estate?

The knowledge that we will eventually die is one of the things that seem to distinguish humans from other living beings. At the same time, no one likes to dwell on the prospect of his or her own death. But if you postpone planning for your passing until it is too late, you run the risk that your intended beneficiaries - those you love the most - may not receive what you would want them to receive either because of extra administration costs, unnecessary taxes or squabbling among your heirs.

This is why estate planning is so important, no matter how small your estate may be. It allows you, to ensure that your assets and other possessions will go to the people you want, in the way you want, and when you want. It permits you to save as much as possible on taxes, court costs and attorneys' fees; and it affords the comfort that your loved ones can mourn your loss without being simultaneously burdened with unnecessary red tape and financial confusion.

All estate plans should include, at minimum, two important estate-planning instruments: a durable power of attorney and a will. The first is for managing your property during your life, in case you are ever unable to do so yourself. The second is for the management and distribution of your property after death. In addition, more and more, Americans also are using revocable (or "living") trusts to avoid probate and to manage their estates both during their lives and after they're gone.

Your Will

Your will is a legally binding statement directing who will receive your property at your death. It also appoints a legal representative to carry out your wishes. However, the will covers only probate property. Many types of property or forms of ownership pass outside of probate. Jointly owned property, property in trust, life insurance proceeds and property with a named beneficiary, such as IRAs, insurance policies or 401(k) plans, can all pass outside of probate.

Why should you have a will?

Here are some reasons.

First, with a will you can direct where and to whom your assets (what you own) will go after your death. If you died instate (without a will), your estate would be distributed according to state law. Such distribution may or may not accord with your wishes.

Many people try to avoid probate and the need for a will by holding all of their assets jointly with their children. This can work, but often people spend unnecessary effort trying to make sure all the joint accounts remain equally distributed among their children. These efforts can
be defeated by a long-term illness of the parent or the death of a child. A will can be a much simpler means of affecting one's wishes about how assets should be distributed.

The second reason to have a will is to make the administration of your estate run smoothly. Often the probate process can be completed more quickly and at less expense to your estate if there is a will. With a clear expression of your wishes, there are unlikely to be any costly, time-consuming disputes over who gets what.

Third, only with a will can you choose the person to administer your estate and distribute it according to your instructions. In Illinois this person is called your "personal representative". If you do not have a will naming him or her, the court will make the choice for you. Usually the court appoints the first person to ask for the post, which is most closely related to you at the time of death.

Fourth, for larger estates, a well planned will can help reduce estate taxes.

Fifth, and most important, through a will you can appoint who will take your place, as guardian of your minor children should both you and their other parent both pass away.

Filling out the worksheet that our office provides will help you make decisions about what to put in your will. Bring it and any additional notes to our office and our estate planning professionals will be able to efficiently prepare a will that meets your needs and desires.

Estate Administration- Probate Procedure

Probate is the process by which a deceased person's property, known as the "estate", is passed to his or her heirs and legatees (people named in the will), the entire process, supervised by the probate court, usually takes about one year. However, substantial distributions from the estate can be made in the interim.

The emotional trauma brought on by the death of a close family member is often accompanied by bewilderment about the financial and legal steps the survivors must take. The spouse who passed away may have handled all of the couple's finances. Or perhaps a child must begin taking care of probating an estate about which he or she knows little about. And this task may come on top of commitments to family and work that can't be set aside. Finally, the estate itself may be in disarray or scattered amount many accounts, which is not unusual with a generation that saw banks collapse during the Depression.

Here we set out the steps the surviving family members should take. These responsibilities ultimately fall on whoever was appointed executor or personal representative in the deceased
family member's will. Matters can be a bit more complicated in the absence of a will, because it may not be clear who has the responsibility of carrying out these steps.

First, secure the tangible property. This means anything you can touch, such as silverware, dishes, furniture, or artwork. You will need to determine accurate values of each piece of property, which may require appraisals, and then distribute the property as the deceased directed. If property is passed around to family members before you have the opportunity to
take an inventory; this will become a difficult, if not impossible, task. Of course, this does not apply to gifts the deceased may have made during life, which will not be part of his or her estate.

Second, take your time. You do not need to take any other steps immediately. When bills do need to be paid, they can wait a month or two without adverse repercussions. It's more important that you and your family have time to grieve. Financial matters can wait. When you're ready but not a day sooner, meet with one of our attorneys to review the steps necessary to administer the deceased's estate. Bring as much information as possible about finances, taxes and debts. Don't worry about putting the papers in order first; our attorney will have experience in organizing and understanding confusing financial statements.

In general rules of estate administration include the following steps:

1. Filing the will and petition at the probate court in order to be appointed executor or personal representative. In the absence of a will, heirs must petition the court to be appointed "administrator" of the estate.

2. Marshalling, or collecting the assets. This means that you have to find out everything the deceased owned. You need to file a list, known as an "inventory", with the probate court. It's generally best to consolidate all of the estate funds to the extent possible. Bills and bequests should be paid from a single checking account, either one you establish or one set by our firm on your behalf, so that you can keep track of all expenditures.

3. Paying bills and taxes. If an estate tax return is needed--generally if the estate exceeds $5,200,000 in value as of 2016 -- the estate must be filed within nine months of the date of death. If you miss this deadline and the estate is taxable, severe penalties and interest may apply. If you do not have all of the information available in time, you can file for an extension and pay your best estimate of the tax due.

4. Filing tax returns. You must also file a final income tax return for the decedent and, if the estate holds any assets and earns interest or dividends, an income tax return for the estate. If the estate does earn income during the administration process, it will have to obtain its own tax identification number "TIN" in order to keep track of such earnings and file an estate income tax

notion in addition to the decedent's final income tax return.

5. Distributing property to the heirs and legatees. Generally, executors do not pay out all of the estate assets until the period runs out for creditors to make claims, which in Illinois is 6 months from the date the estate, notice of death in the newspaper. But once the executor understands the estate and the likely claims, he or she can distribute most of the assets, retaining a reserve for unanticipated claims and costs of closing out the estate.

6. Filing a final account. The executor must file an account with the probate court listing any income to the estate since the date of death and all expenses and estate distributions. Once the court approves this final account, the executor can distribute whatever is left in the closing reserve, and finish his or her work

Avoiding probate through joint ownership or trusts can eliminate some of these steps. But whoever is left in charge still has to pay all debts, file tax returns, and distribute the property to the rightful heirs. You can make it easier for your heirs by keeping good records of your assets and liabilities. This will shorten the process and reduce the legal bill.

Guardianship and Conservatorship

Every adult is assumed to be capable of making his or her own decisions unless a court determines otherwise. If an adult becomes incapable of making responsible decisions due to a mental disability, the court will appoint a substitute decision maker, called a "guardian". Guardianship is a legal relationship between a competent adult (the "guardian") and a person who because of incapacity is no longer able to take care of his or her own affairs (the "ward"). The guardian is authorized to make legal, financial, and health care decisions for the ward. Depending on the terms of the guardianship, the guardian may or may not have to seek court approval for various decisions, but generally the guardian acts without being required to incur the expense of court approval.

Some incapacitated individuals can make responsible decisions in some areas of their lives but not others. In such cases, the court may give the guardian decision-making power over only those areas in which the incapacitated person is unable to make responsible decisions (a so-called "limited guardianship"). In other words, the guardian may exercise only those rights that have been removed from the ward and delegated to the guardian. Guardianships are consuming and expensive. Prefer planning with Power of Attorneys for health care and financial matters will significantly reduce cost and time in the event you became incapacitated. (See Page for detailed discussion of Power of Attorney).

Incapacity

Generally a person is judged to be in need of guardianship when he or she shows a lack of capacity to make responsible decisions. A person cannot be declared incompetent simply because he or she makes irresponsible or foolish decisions, but only if the person is shown to lack the capacity to make sound decisions. For example, a person may not be declared incompetent simply because he or she spends money in ways that seem odd to someone else. Also, a developmental disability or mental illness is not, by itself, enough to declare a person incompetent.

Process

Anyone interested in the proposed ward's well being can request a guardianship. An attorney is usually retained to file a petition for a hearing in the probate court in the proposed ward's county of residence. The proposed ward is entitled to legal representation at the hearing, and the court will appoint an attorney if the allegedly incapacitated person cannot afford lawyer.

At the hearing, the court with the help of the Guardian ad Litem attempts to determine if the proposed ward is incapacitated and, if so, to what extent the individual requires assistance. If the court determines that the proposed ward is indeed incapacitated, the court then decides if the person seeking the role of guardian will be responsible.

Guardian

A guardian can be any competent adult-the ward's spouse, another family member, a friend, a neighbor, or a professional guardian (an unrelated person who has received
special training). A competent individual may nominate a proposed guardian through a durable power of attorney in case she ever needs a guardian.

The guardian need not be a person at all--it can be a non-profit agency or a public or private corporation. If a person is found to be incapacitated and a suitable guardian cannot be found, courts in many states can appoint a public guardian, a publicly financed agency that serves this purpose. In naming someone to serve as a guardian, courts give first consideration to those who play a significant role in the ward's life - people who are both aware of and sensitive to the ward's needs and preferences. If two individuals wish to share guardianship duties, courts can name co-guardians.

Reporting Requirements

Court often give guardians broad authority to manage the ward's affairs. In addition to lacking the power to decide how money is spent or managed, where to live and what medical care he or she should receive, wards also may not have the right to vote, marry or divorce, or carry a driver's license. Guardians are expected to act in the best interests of the ward, but give the guardian's often-broad authority; there is the potential for abuse. For this reason, courts hold guardians accountable for their actions to ensure that they don't take advantage of or neglect the ward.

The guardian of the property inventories the ward's property, invests the ward's funds so that they can be used for the ward's support, and files regular, detailed reports with the court. A guardian of the property also must obtain court approval for certain financial transactions. Guardians must file an annual account of how they have handled the ward's finances. Guardians must offer proof that they made adequate residential arrangements for the ward, that they provided sufficient health care and treatment services, and that they made available educational and training programs, as needed. Guardians who cannot prove that they have adequately cared for the ward may be removed and replaced by another guardian.

For more information, please see Part II of this article

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Estate Planning and Trusts

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To many, estate planning may seem like a process that only the rich have to deal with. You may believe that unless you have a large amount of money, property, or land, you do not have an "estate". In fact, anyone who has anything to his or her name, whether it is a car, a house, land, bank account, or merely a few heirloom possessions, has an estate. Estate planning is designed to give you the chance to have your property and possessions passed on to the people that you wish to have them, instead of leaving the decision up to the state. Without planning, your property could possibly be passed on to certain people or in a certain way that you do not approve of.

Don't Let the Courts Control Your Estate

Creating a will through estate planning allows you to communicate your wishes to your family even after you are gone. A will is a legal document that specifies who you would like to leave your property to. These people are your beneficiaries. It also allows you to specify how you would like your property to be passed on. Perhaps you always expected that you would give your house to your daughter, who lives close by. Or maybe you intend to pass on your treasured tools and garage equipment to your nephew who is a mechanic. You may have already made promises to loved ones to pass on some of your treasured belongings once you pass away.

While you may have made promises to relatives or communicated all of your intentions to your spouse or children, without a will your words of intent will not carry any weight. When you pass away with no will, the court will divide your property according to state intestacy laws. This means that your property may be divided among your spouse, children, and other family members without any regard for your specific wishes, because there was no written proof of what you wanted. It may just be a major misunderstanding on your part, but to the loved ones to whom you made promises, it may seem like scorn and betrayal. They may be left behind thinking that you didn't care enough about them to take the time to write a will.

How a Probate Lawyer Can Help

Don't let your promises and intentions to your family go unfulfilled. Consider talking to a probate lawyer about how you can draft a valid will and protect your estate and personal wishes. A probate lawyer can walk you through the process of drafting a will, creating trusts, taking care of outstanding debts, dealing with greedy or disagreeable relatives, and more. An experienced probate lawyer can serve as your legal advisor to ensure that your intentions are communicated properly and that your property is passed on according to your wishes.

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To learn more about estate planning and protecting your property from state intestacy, please visit us or give us a call today.

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Levels of Estate Planning

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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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Estate Planning - The Benefits of Peace of Mind

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There are numerous estate planning issues that arise during a separation or divorce. If you're considering divorce, make sure you've adequately addressed these issues and avoid significant consequences.

The first issue is to immediately revoke any powers of attorney that grant your spouse powers over your health care or financial decisions. If you do not revoke these powers of attorney, your ex-spouse will remain your agent despite your divorce. Just imagine your ex-spouse making your health care decisions or continuing to have access to your financial accounts even after your divorce.

If you do not have a health care power of attorney or financial power of attorney, or after you revoke your existing power of attorney, you should create a new one. You may do this before, during, or after your divorce. If your divorce is pending, you probably do not want your soon to be ex-spouse having any type of decision making power over you or your assets. However, if you do not appoint someone else, your spouse will likely serve as the "default" agent if one is needed.

The next thing to consider is your Will. If you already have a Will, revise it. Chances are that your current Will provides for everything to go to your spouse. Once your divorce is final, any bequests to your spouse are nullified. Still, if you do not change your Will, such bequests will be granted if you die before your divorce is final. You cannot completely disinherit your spouse through a Will because State law provides for minimum amounts to a spouse, which is called "taking against the Will". Still you can limit what your spouse receives to the statutory amounts.

Also, there is a good chance that your spouse is named as your Personal Representative (or Executor). Even after your divorce is final, this designation will remain valid. Finally, any bequests made to in-laws will remain valid despite your divorce. Often there is a provision in Wills that provides that in the event your spouse does not survive you and there are no other beneficiaries under your Will, your assets are divided evenly between your heirs at law and your spouse's heirs at law. So, you may have a bequest to your in-laws and not even realize it.

You may also want to consider appointing a guardian for any minor children. In almost all cases, your spouse will continue to have parental rights and will receive full custody of your children upon your death. However, if there is a valid reason, such as abuse or drug addiction, why your spouse should not receive custody you should identify those reasons in your Will and name the person(s) you wish to have custody. Also, if your ex-spouse predeceases you, your Will should control who receives custody.

Also, you should establish a trust through your Will (called a testamentary trust) to control assets left to minor or disabled children. That way, you can decide who makes the decisions over those assets until your children are old enough to receive them outright. If you do not establish a trust and appoint a trustee, your ex-spouse will likely have control over any assets left to your children. And, although the assets are supposed to be used for the children's benefit, there is no practical way of controlling or checking that that is what really happens.

You should also consider a Revocable Trust. If you have one already, revise it to remove powers and gifts given to ex-spouse. Unlike a Will, any gifts given to an ex-spouse through a trust remain valid despite your divorce. Likewise, if your spouse is named as your successor trustee, that appointment remains valid despite your divorce.

There is also a benefit to having a Revocable Trust rather than a Will. In some states, you can completely disinherit a spouse through a revocable trust. The reasoning is that the statutes that grant your spouse a minimum amount of your assets only apply to your probate estate. However, any assets that are placed in trust during your lifetime are not subject to probate. Therefore, if you title all of your individual assets in your trust, you can keep your spouse from receiving anything of yours even if you die before your divorce is final. It can also serve as an ongoing trust after your death to hold assets for your children without your spouse having control or decision making ability.

Additionally, you should review and update any beneficiary designations on life insurance policies, retirement plans, etc. You may not be able to make some of these changes until your divorce is final. For most retirement accounts, your spouse has to sign an authorization for you to appoint someone else as your beneficiary. You may also be prohibited by the court from making changes while your divorce is pending. Just don't forget to make the changes once your divorce is final.

Finally, you should re-title any assets held jointly with your spouse. For many assets (such as house, car, joint investments, etc.), this may need to be done after your divorce is final. However, you can open your own bank and investment accounts at any time.

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Estate Planning Overview, 101

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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 advice

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There are numerous estate planning issues that arise during a separation or divorce. If you're considering divorce, make sure you've adequately addressed these issues and avoid significant consequences.

The first issue is to immediately revoke any powers of attorney that grant your spouse powers over your health care or financial decisions. If you do not revoke these powers of attorney, your ex-spouse will remain your agent despite your divorce. Just imagine your ex-spouse making your health care decisions or continuing to have access to your financial accounts even after your divorce.

If you do not have a health care power of attorney or financial power of attorney, or after you revoke your existing power of attorney, you should create a new one. You may do this before, during, or after your divorce. If your divorce is pending, you probably do not want your soon to be ex-spouse having any type of decision making power over you or your assets. However, if you do not appoint someone else, your spouse will likely serve as the "default" agent if one is needed.

The next thing to consider is your Will. If you already have a Will, revise it. Chances are that your current Will provides for everything to go to your spouse. Once your divorce is final, any bequests to your spouse are nullified. Still, if you do not change your Will, such bequests will be granted if you die before your divorce is final. You cannot completely disinherit your spouse through a Will because State law provides for minimum amounts to a spouse, which is called "taking against the Will". Still you can limit what your spouse receives to the statutory amounts.

Also, there is a good chance that your spouse is named as your Personal Representative (or Executor). Even after your divorce is final, this designation will remain valid. Finally, any bequests made to in-laws will remain valid despite your divorce. Often there is a provision in Wills that provides that in the event your spouse does not survive you and there are no other beneficiaries under your Will, your assets are divided evenly between your heirs at law and your spouse's heirs at law. So, you may have a bequest to your in-laws and not even realize it.

You may also want to consider appointing a guardian for any minor children. In almost all cases, your spouse will continue to have parental rights and will receive full custody of your children upon your death. However, if there is a valid reason, such as abuse or drug addiction, why your spouse should not receive custody you should identify those reasons in your Will and name the person(s) you wish to have custody. Also, if your ex-spouse predeceases you, your Will should control who receives custody.

Also, you should establish a trust through your Will (called a testamentary trust) to control assets left to minor or disabled children. That way, you can decide who makes the decisions over those assets until your children are old enough to receive them outright. If you do not establish a trust and appoint a trustee, your ex-spouse will likely have control over any assets left to your children. And, although the assets are supposed to be used for the children's benefit, there is no practical way of controlling or checking that that is what really happens.

You should also consider a Revocable Trust. If you have one already, revise it to remove powers and gifts given to ex-spouse. Unlike a Will, any gifts given to an ex-spouse through a trust remain valid despite your divorce. Likewise, if your spouse is named as your successor trustee, that appointment remains valid despite your divorce.

There is also a benefit to having a Revocable Trust rather than a Will. In some states, you can completely disinherit a spouse through a revocable trust. The reasoning is that the statutes that grant your spouse a minimum amount of your assets only apply to your probate estate. However, any assets that are placed in trust during your lifetime are not subject to probate. Therefore, if you title all of your individual assets in your trust, you can keep your spouse from receiving anything of yours even if you die before your divorce is final. It can also serve as an ongoing trust after your death to hold assets for your children without your spouse having control or decision making ability.

Additionally, you should review and update any beneficiary designations on life insurance policies, retirement plans, etc. You may not be able to make some of these changes until your divorce is final. For most retirement accounts, your spouse has to sign an authorization for you to appoint someone else as your beneficiary. You may also be prohibited by the court from making changes while your divorce is pending. Just don't forget to make the changes once your divorce is final.

Finally, you should re-title any assets held jointly with your spouse. For many assets (such as house, car, joint investments, etc.), this may need to be done after your divorce is final. However, you can open your own bank and investment accounts at any time.

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Blanding Utah estate planning expert

Estate Planning - How to Preserve Your Wealth

estate planning strategies for high net worth

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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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Do you want a Free Initial Consultation with an Estate Planning Lawyer?

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Big Water Kane County Utah power estate planning

Estate Planning - Major Aspects of Personal Finance Management

estate planning for business owners

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Estate planning is not solely about planning for your death. It also involves planning for your life in the event you're mentally incapacitated. Having an estate plan in place is very important because it reflects your wishes for your children, family, property and assets.

Is Estate Planning Often Overlooked?

Despite its extreme importance, estate planning is often overlooked and neglected. Many people work hard throughout their lives to provide for their families and build their estates, only to have the very things they've worked for and people to protect in disarray because they didn't invest time in a comprehensive plan that reflects their wishes.

Statistics show that more than 50% Americans do not have an estate plan in place at the time of their death. This is likely due to the average person's unfamiliarity with the estate planning process itself. Because they do not understand its importance and how it works, many Americans forego wills, trusts and other estate documents.

Why do you Need an Estate Plan?

Without the proper documentation in place at the time of your death or incapacity, you are leaving it up to a judge you don't know to decide how to distribute your assets throughout your family, who will care for your minor children, and who will care for you if you're ever unable to care for yourself.

Five Questions to Answer in your Plan

In your plan, you want to proactively answer questions that may arise in the event of your death or incapacity. Generally, these questions will involve your assets, minor children, inheritances, health care directives and sometimes more.

Here are 5 questions you should answer in your plan:

  • Who do you want to care for your minor children?
  • Who will be responsible for managing your estates?
  • How will your assets and property be distributed?
  • Who will care for you if you're unable to care for yourself?
  • How will inheritances be distributed to beneficiaries?
Five Documents to Include in your Plan

A comprehensive estate plan is not a mere document. It's actually a combination of several documents that reflect your wishes regarding your minor children, your health care, and distribution of your assets, property and inheritances in the event of your death. It also covers your health care wishes if you're ever incapacitated and unable to make your own decisions.

Here are the minimum five (5) documents you should include in your estate plan:

  • Will
  • Power of Attorney
  • Trust
  • Living Will and Advantage Directives
  • Guardianship Plans for Minor Children

Many of us get uncomfortable when we think about dying and our family's life without us. It's not a topic anyone wants to consider more than once. However, it is critical that you take time now, while you're healthy and in a good state of mind, to invest time in getting your estate, health and other affairs in order, and create an estate plan that reflects your wishes upon your death or incapacitation.

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Big Water Utah estate planning in your 30s

Estate Planning: What to Think About Before Meeting Your Lawyer

4 estate planning documents

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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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Bicknell Wayne County Utah estate planning tax deductible

Estate Planning Overview, 101

estate planning gifting

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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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