ILIT Trusts – Do I give the Policy Proceeds Outright, or in Trust?

 

So doesn’t a life insurance policy usually just pay a lump sum to the beneficiary?  The answer is yes unless the beneficiary is a minor.  If that is the case, the UTMA (Uniform Transfer to Minors Act) or a guardian will need to be appointed which costs time and money.  The guardian will have to control the assets and administer the proceeds until the minor reaches the age of majority.  A lump sum can also be thought of as an outright gift because there is no control or restrictions.

 

Outright, or in Trust?

Outright gifts can present a variety of problems such as:

  • If the beneficiary receives means tested public benefits such as Medicaid or SSI (Supplemental Security Income), the outright gift may put the receiving of these benefits in jeopardy.
  • If the beneficiary of an outright gift is a minor, a guardian will have to be appointed (if one is not already in place) by a court which takes time and costs money.
  • An outright gift can be dangerous if the beneficiary has a substance abuse problem.
  • A lump sum gift may not be the best to protect the beneficiary from a bad marriage, creditors, or predators.
  • Even one that is good with money may experience problems if given a large sum of money all at once.

 

For these reasons alone a gift given in a Trust is preferable.  A Trust (a Revocable Trust or an Irrevocable Trust) can control or guide the proceeds and provide very little control, to a high level of control. 

 

An ILIT (Irrevocable Life Insurance Trust) can be structured just like a Revocable Living Trust in how the proceeds are to be given to the beneficiaries.  The Trust can provide no guidance or control, or the Trust can provide a lot of guidance and control over the distribution of the proceeds. 

 

Please see my Blog for continued discussion of various aspects of ILIT Trusts.

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

Please feel free to give me a call and we can establish your Living Revocable Trust, ILIT, or other Estate Planning goals today.  If you have specific estate planning objectives, I can help create solutions to achieve your specific purpose. 

 

Thanks for reading my blog.

 

 

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

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ILIT Trusts – Keeping the Proceeds out of the Insured Estate for Federal Estate Tax Purposes

 

 

Do Life Insurance Proceeds get Included in my Estate for Death Taxes?

 

What are Death Taxes?  For the purpose of federal tax, the is something called federal estate tax exclusion and it is adjusted, or indexed, for inflation.  In 2016 the federal estate tax exclusion is $5.45 million dollars for an individual, and $10.9 million dollars for a couple.  That means that an individual dying in 2016 with an estate valued at less than $5,450,000 dollars will not owe any federal estate tax.

 

So how do we determine what is includable in the decedents estate for federal estate tax?  Let’s leave that for another discussion.  Suffice it to say that generally life insurance IS includible in the insured’s estate for death tax purposes.  Even an Irrevocable Life Insurance Trust (ILIT) may be included in the insured’s estate.  An ILIT is used expressly TO keep the proceeds out of the insured’s estate, so what gives?  Well, if the Irrevocable Trust is poorly drafted or managed, the proceeds may be included.  Also, if the insured gratuitously transfers all the rights in the policy within three years of his or her death, the Internal Revenue Service code section 2035(a) makes the proceeds includible in the decedent’s estate for federal estate tax purposes.   The reason is the way the IRS sees it is that the gift was made “in contemplation of death”, and therefore is disallowed. 

 

 

Does an ILIT’s proceeds get included in my Estate for Death Taxes?

 

The purpose of an Irrevocable Life Insurance Trust is to keep the proceeds out of the insured’s estate for federal estate tax.  This is achievable if the above criterion is met (policy not transferred within three years of the insured death), and certain other criteria is also met.  One of these is that the insured must not require that the beneficiary use the proceeds to pay obligations of the estate such as taxes.  Another is that the insured must not possess “incidents of ownership”.

 

 

What are Incidents of Ownership?

 

Incidents of ownership means the power of the insured or his or her estate to control the proceeds of the policy, the power to change beneficiaries, to assign the policy, to borrow or loan from the policy, and others. 

 

So, as you can see there are many restrictions and requirements in how the Trust is drafted, and how it is maintained in order for this ILIT Irrevocable Trust to function as intended.   Consult an attorney like me for your Estate Planning needs to help insure a proper outcome. 

 

 

Please see my Blog for continued discussion of various aspects of ILIT Trusts.

 

 

Please feel free to give me a call and we can establish your Living Revocable Trust, ILIT, or other Estate Planning goals today.  If you have specific estate planning objectives, I can help create solutions to achieve your specific purpose. 

 

See lots of estate planning information on my website at: www.myestate-plan.com 

 

Thanks for reading my blog.

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

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Advanced Estate Planning – An Overview to ILIT Trusts

 

What is a Trust?

As discussed in my other Blog posts, a Trust is a means of passing property to other persons.  A Trust is an advantageous method of passing property for several reasons.  With a Trust, you can help yourself in planning for your potential incapacity.  Also, with a Trust, you can better control how your beneficiaries receive what you leave them and can help protect those you choose as beneficiaries from bad marriages, predators, and the like.  Trusts don’t need to go through Probate and therefore save time and money.  A Trust – be it a Revocable Living Trust, or Irrevocable Trust – is a private document where a Will becomes public record when Probate is opened. 

 

 

What is an ILIT?

 

ILIT stands for Irrevocable Life Insurance Trust.  An Irrevocable Trust is just that – Irrevocable and thus not able to be changed like a Living Revocable Trust can be.  Sounds kind of scary and final doesn’t it?  Well, there are great reasons to use an Irrevocable Trust.  One reason to use an Irrevocable Trust is to create a Special Needs Trust to protect means tested public benefits like Supplemental Security Income (or SSI), or Medicaid and others.  Another great use of an Irrevocable Trust is to create an ILIT or Irrevocable Life Insurance Trust – the subject of this blog. 

 

An ILIT is typically used as an advanced estate planning technique.  When a person wishes to leave money to a person, but is either over the federal estate tax exemption amount (in 2016 it is $5.45 million for an individual, and $10.9 million for a couple), or close to reaching the federal estate tax exemption amount, the use of an ILIT is a great option.  The reason it is a great option is because properly structured, an Irrevocable Life Insurance Trust means that the proceeds of the life insurance are not includable in the insured’s estate for federal estate tax purposes.  Therefore, tax savings are realized.

 

 

How does an ILIT (Irrevocable Life Insurance Trust) work?

 

For the rest of the explanation of ILIT Trusts and how they work, please see Part 2 of this Blog.  Thank you.

 

See lots of estate planning information on my website at: www.myestate-plan.com 

Please feel free to give me a call and we can establish your Living Revocable Trust, ILIT, or other Estate Planning goals today.  If you have specific estate planning objectives, I can help create solutions to achieve your specific purpose. 

 

Thanks for reading my blog.

 

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

****************

Wednesday, 04 May 2016 23:35

Advanced Estate Planning Overview

Advanced Estate Planning – An Overview

 

What Do You Think of When I Say Advanced Estate Planning?

 

Some people think advanced estate planning is just for the rich or wealthy.  Well, it’s not quite that easy.  Certainly there are advanced wealth transfer techniques that are available to high net-worth persons.  One of the easiest estate plan situations is a single person, never married, one or two beneficiaries, and a relatively small estate (under the federal estate tax exemption).  Things tend to get a bit more advanced as situations and goals get more complicated.  Planning can get a bit more complicated when a people with children from prior relationships marry and create the so-called “blended family”.  Often in these circumstances, each partner wants to make sure that their kids don’t get cut out of the estate should they be the first to pass away.  Another way things can get complicated is with an intricate and detailed distribution structure.

 

 

Life Insurance for Advanced Estate Planning

 

A wonderful technique for estate planning is the use of life insurance.  On one extreme, life insurance can be used in high net-worth estates to pay estate taxes.  On the other side, life insurance can be used to create the estate itself.  For a young parent or young family, life insurance may be the best way to make sure the kids or family is taken care of in the event that the primary money earner passes away or becomes incapacitated.  In most families today, both spouses work and may be equal money earners.  Even in this situation, the use of life insurance is advisable because maintaining the lifestyle on only one salary can be difficult or impossible.  Aside from lifestyle, there are other expenses life insurance can provide for such as college expenses, weddings, and the like.

 

Advanced techniques will be discussed here in my blog.  These techniques include:

  • The use of life insurance in Estate Planning
  • A/B Trust or Bypass Trust
  • Trusts for couples where one spouse is not a U.S. citizen
  • Using the Unlimited Marital Deduction
  • Using the Federal Estate Tax Exemption
  • Utilizing the yearly gift exclusion amount
  • Plus more

 

Please feel free to give me a call and we can establish your Living Revocable Trust or other estate planning objectives today.  If you have specific estate planning goals, I can help create solutions you may not be aware of. 

 

See lots of estate planning information on my website at: www.myestate-plan.com 

 

Thanks for reading my blog.

 

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

****************

What is The Marital Deduction in Federal Estate Taxes?

 

 

Unlimited Marital Deduction

 

What is the Unlimited Marital Deduction? The Unlimited Marital Deduction allows the first spouse to die to transfer an unlimited amount of property to the surviving spouse free of Federal Estate Tax.  This does not mean that the second spouse to die will not have any Federal Tax liability.  Whether the second spouse to die will owe federal estate tax depends on the size of the estate when the second spouse passes.  In 2016, if the estate is less than $10,900,000, the spouses can pass all of their estate to their heir’s federal estate tax free (as long as it is properly passed).

 

 

Estate and Gift Tax Exclusion

 

In 2016, the IRS has set the Estate and Gift Tax Exemption amount at $5.45 million dollars for an individual.  Thus, a married couple can leave $10,900,000 to their heirs free of Federal Estate Tax.  This Estate Tax Exclusion amount is indexed and adjusted for inflation and was increased from $5.43 million in 2015.

 

 

Portability

 

Now what is Portability? Portability is the ability of the second spouse to use the unused estate tax exclusion amount of the first spouse to die.  If the first spouse to die does not use all of their estate tax exclusion, this is called the Deceased Spousal Unused Exclusion Amount or DSUE.  This unused portion used to be lost, but now portability can save this unused amount for the benefit of the second spouse upon their passing.  Upon the second spouses passing, their applicable Estate Tax Exclusion (in 2016 it is $5,450,000) is their own Estate Tax Exclusion amount plus their deceased spouses DSUE amount. 

 

 

How much of the Marital Deduction Should be used?

 

While an unlimited amount can be passed estate tax free from the first spouse to the second when the first spouse dies, care must be taken because this can increase the taxable estate of the second spouse.  Where spouses own significant assets, advanced planning can be used to reduce the federal estate tax liability.  This is the case when an individual or couple owns more than the applicable Estate Tax Exclusion amount.

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

Please see my blog for more on Federal Estate Tax and advanced planning techniques.  Call me today and let’s get your Estate Plan together.

 

Thanks for reading my blog.

 

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

****************

Saturday, 23 April 2016 00:37

Same-Sex Couples and Estate Planning

U.S. v Windsor

 

U.S. v Windsor was an estate tax case.  A same-sex couple were married in Canada and lived in New York.  One of the parties died in 2009 and gave her entire estate to the other named Edith Windsor.   She tried to claim the federal estate tax marital deduction and was denied by the IRS on the grounds of the DOMA provisions.  DOMA is the Defense of Marriage Act and stated that the definition of “marriage” and “spouse” for the purposes of federal law only included persons of the opposite sex.  Mrs. Windsor took the case to the Supreme Court of the United States and DOMA was held unconstitutional. 

 

After the U.S. Supreme Court decision, the IRS announced it would recognize for federal tax purposes the validity of a same-sex marriage that was valid in the state in which it was entered into, and it was not important where the couple is domiciled.  There has also been an expansion to include qualified retirement plans.  The decision in this case was on June 26, 2013.  A lot has transpired since this decision and on June 26, 2015 in Obergefell v. Hodges, the United States Supreme Court has declared that same-sex marriage is legal in all 50 states. 

 

 

The Effects of Windsor and Obergefell

Prior to the decisions in these two cases, a same-sex couple could not take advantage of the federal estate tax marital deduction, portability, and other deductions.  Post Windsor, estate planning for same-sex couples was complicated in that the couple could take advantage of federal level deductions, but perhaps encounter state level tax implications.  Since Obergefell, estate planning has become less complicated for same-sex couples. 

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

I would love to help you create your estate plan and help you provide the kind of gift that you want to give to your beneficiaries.  Call me today and we can get it done!

 

Thanks for reading my blog.

 

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Further, please remember that I speak in generalities in my blog (and on my website). There are so many different factors that can contribute and completely change the outcome that it would not be practical to discuss all of them here.

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Monday, 18 April 2016 19:44

Tax Day 2016

Well folks, it is Tax Day 2016.  It was extended to the 18th this year because of Emancipation Day.  This is a holiday that is usually only observed in Washington D.C.  Man, I wish I had all the holidays that the government gets!  Sometimes when Tax Day falls on the weekend, the date for filing gets moved back, but this year it was due to Emancipation Day which fell on Friday April 15.

 

Perhaps it is fitting that we file taxes in April.  Did you ever stop to think about how long you have to work before you are “working for yourself”?  For example, if you pay 25% in taxes, then you work from January 1st to March 31st just to pay taxes.  On April 1st you start working for yourself.  Wow, that’s a long time!

 

Will my Beneficiaries have to Pay Taxes?

The answer to this question is “it depends”.  Some gifts will trigger a taxable event, and other gifts given in a particular manner will do the same.  Taxes are usually a big concern for someone that wants to plan their estate.  Fortunately for most of us, federal estate tax is not usually an issue that we need to concern ourselves with.  Depending, however, on the size of your estate some specific planning may be in order.  Also, for many of us our IRA or retirement plan is a substantial asset, and may represent a large percentage of our estate.  Care must be taken with such assets to prevent a “taxable event”.  Keep in mind that it is almost always better to give something in Trust than it is to give it outright.  Providing a gift in Trust helps provide some layer of protection to the beneficiary from creditors, predators, bad marriages, and sometimes from the beneficiary him or herself. 

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

I would love to help you create your estate plan and help you provide the kind of gift that you want to give to your beneficiaries.  Call me today and we can get it done!

 

Thanks for reading my blog.

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

 

****Reminder****

Just like my website, nothing in this blog is intended as legal advice. If you need legal advice, contact an attorney licensed to practice in your jurisdiction. I am licensed to practice law in California.  Further, please remember that I speak in generalities in my blog (and on my website). There are so many different factors that can contribute and completely change the outcome that it would not be practical to discuss all of them here. This is why I speak in generalities. Thanks again for reading.

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.

Published in Recent Events
Friday, 08 April 2016 00:39

Recent Changes to Federal Estate Tax Law

Changes to Federal Estate Tax, Gift Tax, and Generation-Skipping Transfer Tax

 

How Changes to the Law Affect Tax Liabilities – Some History

 

Economic Growth and Tax Relief Reconciliation Act of 2001 (or EGTRRA)

 

There have been a number of changes to the federal law regarding estate, gift, and generation-skipping transfer tax since the early 2000’s.  These changes affect how, when, and how much federal tax is imposed on a person’s estate.  Estate planning attorneys have had to keep up with the changes in order to help their clients effectively manage estate taxes.

 

 

In 2001 President Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001 (or EGTRRA).  The effect of this law meant that for persons dying after 2001, EGTRRA gradually reduced the maximum federal estate, gift and generation-skipping transfer tax from 55 percent to 45 percent in 2007 to 2009.  For those dying after 2009, EGTRRA eliminated the Federal Estate Tax and Generation-Skipping Transfer Tax, but not the Federal Gift Tax.  By the way, a Generation-Skipping Transfer Tax is one imposed on gifts that skip a generation such as where a grandparent gives an inheritance directly to a grandchild.  In 2010, the Gift Tax was to be set to the highest federal income tax rate.  These provisions were set to “sunset” or expire December 31, 2010.  This means that people dying after December 31, 2010 were subject to – or more accurately their estate was subject to the pre-EGTRRA rules and amounts.

 

Along Comes the “2010 Tax Act”

 

The president signed the so-called “2010 Tax Act” (or sometimes “2010” Act) – not surprisingly – in 2010.  This was set to expire December 31, 2012.  These guys always seem to kick the can down the road!  Oh well.  What this legislation did was that it increased the exemption amount to five million, reunited the lifetime gift with the estate tax exemption and was also set at five million.  Moreover, it also set the generation-skipping transfer tax to five million.  The estate, gift and generation-skipping transfer tax rate was set to 35 percent.  The 2010 Tax Act also introduced portability of unused estate tax and gift tax between spouses where previously if it were unused by the spouse it was lost.  What this means is that with the estate tax exemption set to 5 million, a spouse could give the other spouse up to 5 million on their passing free of any federal estate tax.  When the second spouse died, they could give up to 10 million dollars to an heir free of any federal estate tax.  Under the old rule, if the first spouse only gave the second spouse 1 million, the second spouse could only give 6 million to the heirs free of any federal estate tax.  Portability means that this 4 million that was unused by spouse one can be utilized by spouse two.  This portability didn’t apply to the generation-skipping transfer tax like it did to the estate tax and gift tax. 

 

 

Now ATRA is Signed

 

This new legislation was signed in 2013 and “solidified” a few things.  The law increased the top marginal tax rate for estate tax, gift tax, and generation-skipping transfer tax from 35 percent to 40 percent. It reaffirmed portability as well as the 5 million exemption for estate, gift, and generation-skipping transfer tax and is indexed for inflation.  The new law also included a deduction for any state death taxes, and increased the top marginal income tax rates for individuals and Trusts and Estates from 35% to 39.6%.  It was also not set to sunset.  But who knows what the politicians will do.  Candidate Bernie Sanders has indicated he wants to lower the exemption amount and increase the top rate to somewhere around 65%.  I don’t know how you feel about it, but this is money that an individual earned, paid taxes on, had the discipline to save and the want to take care of loved ones with, and now the government wants to take more than half!  Wow, what did they do to have the right to take that money?  Well, they work for us… we have to fire them!

 

Please see the rest of my Blog for more on Federal and California Estate Tax

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

My most important job is to listen to you and your goals, then create the best estate planning documents to achieve these results.  Call me today and let’s start planning!

 

Thank you for reading!

 

William Daniel Powell

1-619-980-2297

 

****Reminder****

Just like my website, nothing in this blog is intended as legal advice. If you need legal advice, contact an attorney licensed to practice in your jurisdiction. I am licensed to practice law in California.  Further, please remember that I speak in generalities in my blog (and on my website). There are so many different factors that can contribute and completely change the outcome that it would not be practical to discuss all of them here. This is why I speak in generalities. Thanks again for reading.

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.

 

 

Asset Protection Planning for your Beneficiaries Part 1

 

Why Does Someone Create an Estate Plan?

 

As discussed elsewhere on my website and in my Blog, I have mentioned why people create Estate Plans.  They do so for the benefits that Estate Planning provides.  There are many benefits to creating a Revocable Living Trust, but we can condense them to four reasons or categories.  These reasons are:

 

  • To control your Estate while you are alive.
  • To provide for yourself and the loved ones who depend on you.
  • To give the property you wish to give to those beneficiaries you select.
  • To minimize professional fees, court costs, taxes, and other costs.

It is the third reason that we will be focusing on in this Blog.  We will discuss methods of distributing your Estate and how you may protect the beneficiary’s inheritance from such things as creditors, divorce, and even from himself or herself.

 

 

We Want to Enhance Our Kids Lives

 

When we give a gift of our property to a beneficiary, usually our children, we want to enhance their life, and maintain harmony.  The same is true even if the beneficiary is not our child. 

 

The ultimate question that the Settlor (the person that creates the Trust) must answer is – do you want to, in some way, protect or control how your child receives his or her inheritance?  Allow me to guide you to the answer to that question.  First, consider what your child would receive if you were to die today.  Next, tell me what it is that you’d like them to do with that inheritance.  Is it that you would like them to pay bills, take a family vacation, or educate their children?  So if you were to give them the inheritance outright, what do you think they would actually do with the money?  Do you think they would be responsible, or do you think they may squander it in some way or buy an unnecessarily big car or big house?  Lastly, ask yourself how you feel about your answers.  Some people will want to protect their kid’s inheritance in some way, and others may not.  The fact is some people are always responsible with money, some are not, and some land in the middle. 

 

Another thing to consider is that an outright gift does not necessarily mean “I love you”.  A mentor and colleague of mine tells a story of how he received an inheritance from his mother.  He put the money in the bank and over time he thought how it would have been nice to have used the money in remembrance of his mother, instead of just commingling the money with his own. He was rather emotional in relaying the story and I could tell he wishes he or his mother had thought it through enough to put language in the Trust instrument indicating his mother’s wishes for such a use.  This man is an accomplished Estate Planning attorney, so it can happen to anybody.

 

There are methods and degrees with which to control or recommend how the gift of an inheritance is to be used.  To do so is not to say “I don’t trust you”, but it is a way of saying “I love you, and because I love you I am always going to try to protect you”. 

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

 

Please see Part 2 of this blog for the remainder of this discussion on Asset Protection.

 

My most important job is to listen to your wishes first, then suggest solutions.  Call me today and let’s start planning!

 

Thanks for reading!

Dan Powell

1-619-980-2297

 

 

****Reminder****

Just like my website, nothing in this blog is intended as legal advice. If you need legal advice, contact an attorney licensed to practice in your jurisdiction. I am licensed to practice law in California.  Further, please remember that I speak in generalities in my blog (and on my website). There are so many different factors that can contribute and completely change the outcome that it would not be practical to discuss all of them here. This is why I speak in generalities. Thanks again for reading.

****************

 

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.

 

Thursday, 03 December 2015 04:05

Probate Avoidance - Methods and Problems

Are There Various Alternative Methods to Achieve Probate Avoidance Goals Besides a Revocable Living Trust?

Most of us have heard about the need to avoid probate.  How is this done?  There are various methods.  For example, life insurance passes to the named beneficiary and outside of probate.  Likewise most retirement accounts pass in the same manner.  Another item that can pass outside of probate are bank accounts that utilize whatever form of co-account, or Pay-On-Death (POD) beneficiary.  Motor vehicles can also be titled in the name of two persons.  Moreover, your homes deed can be held in a manner that passes outside of probate.  As with most things in life, there may be consequences to holding various property in different manners, so please consult an attorney licensed in your jurisdiction.

The most important item that passes outside of probate is a Trust.  This is important because the use of a Trust helps you and I to achieve your goals most effectively.  A well designed estate plan not only distributes your property in the method you desire, but it also created to provide:

  • Privacy (a Trust is private whereas a Will is public record)
  • A Plan for incapacity
  • Probate avoidance
  • Better tax and gift tax planning
  • The naming of a guardian for your children
  • Protection of the beneficiaries inheritance (from drug or alcohol problems, or future ex’s, or potentially from means tested public benefits such as Medi-Cal.),

So the simple answer is yes, there are various methods to avoid probate, but no single method can achieve all of these goals, and no combination is likely to achieve these goals as efficiently as a Revocable Living trust Centered Estate Plan.

 

Can’t I Just Put my Child on the Deed to my Home to Avoid Probate?

There are some great reasons why you should avoid putting your child or children on the deed to your home as a method of avoiding probate.

  • Doing so will likely trigger a gift tax
  • Doing so could also trigger Capital Gains Tax
  • Putting your child on the deed makes them a co-owner, and now you must have their consent to do anything with the home including selling or re-financing your own home.
  • It also creates exposure to your child’s creditors, which means if the child get sued, or has tax problems, etc., the home may be used to satisfy the obligation.
  • Inheritance by your child’s heirs is also a possibility which means that if your child dies before you do, you may co-own the home with someone you never considered.

There are some other drawbacks, but suffice it to say that for the reasons given above, there is likely enough weight on the “don’t do it” side of the scale to guide you.

So you see that an average cost of $1,000 to $3,500 for a Revocable Living trust Centered Estate Plan  (plus whatever cost of Trust Administration after the death(s) of the Trustor(s) – the cost will vary depending on complexity) is far more affordable, and a superior method to effectuate your wishes.

See lots of estate planning information on my website at: www.myestate-plan.com

Feel free to call me today, and let's start planning!

Dan Powell

1-619-980-2297

 

****Reminder****

Just like my website, nothing in this blog is intended as legal advice. If you need legal advice, contact an attorney licensed to practice in your jurisdiction. I am licensed to practice law in California.  Further, please remember that I speak in generalities in my blog (and on my website). There are so many different factors that can contribute and completely change the outcome that it would not be practical to discuss all of them here. This is why I speak in generalities. Thanks again for reading.

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This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.

 

 

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