Secure the Future of Your Assets
Protect your assets with legally binding documents
Everyone has assets that are worth protecting, whether you’ve started your own business or want to set up plans for your financial accounts. With estate planning services, you can…
- Divide up your assets in a will or trust
- Create a succession plan for your business
- Select an administrator for your estate
Working with a qualified estate planning attorney is the best way to make sure that all of your plans are legally sound. Contact us to arrange for estate planning services with attorney Chen today.
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How to Plan Ahead for the Future
What Does Estate Planning Cover?
Estate planning is a process involving the counsel of professional advisors who are familiar with your goals and concerns, your assets and how they are owned, and your family structure. It can involve the services of a variety of professionals, including your lawyer, accountant, financial planner, life insurance advisor, banker and broker.
Estate planning covers the transfer of property at death as well as a variety of other personal matters and may or may not involve tax planning. The core document most often associated with this process is your will.
A will provides for the distribution of certain property owned by you at the time of your death, and generally you may dispose of such property in any manner you choose. Your right to dispose of property as you choose, however, may be subject to forced heirship laws of most states that prevent you from disinheriting a spouse and, in some cases, children. Your will does not govern the disposition of your property that is controlled by beneficiary designations or by titling and so passes outside your probate estate. Such assets include property titled in joint names with rights of survivorship, payable on death accounts, life insurance, retirement plans and accounts, and employee death benefits. These assets pass automatically at death to another person, and your Will is not applicable to them unless they are payable to your estate by the terms of the beneficiary designations for them. Your probate estate consists only of the assets subject to your will, or to a state’s intestacy laws if you have no will, and over which the probate court (in some jurisdictions referred to as surrogate’s or orphan’s court) may have authority. Therefore, reviewing beneficiary designations, in addition to preparing a will, is a critical part of the estate planning process. It is important to note that whether property is part of your probate estate has nothing to do with whether property is part of your taxable estate for estate tax purposes.
Wills can be of various degrees of complexity and can be utilized to achieve a wide range of family and tax objectives. If a will provides for the outright distribution of assets, it is sometimes characterized as a simple will. If the will creates one or more trusts upon your death, the will is often called a testamentary trust will. Alternatively, the will may leave probate assets to a preexisting inter vivos trust (created during your lifetime), in which case the will is called a pour over will. Such preexisting inter vivos trusts are often referred to as revocable living trusts. The use of such trusts or those created by a will generally is to ensure continued property management, divorce and creditor protection for the surviving family members, protection of an heir from his or her own irresponsibility, provisions for charities, or minimization of taxes.
Aside from providing for the intended disposition of your property upon your death, many other important objectives may be accomplished in your will.
You may designate a guardian for your minor child or children if you are the surviving parent and thereby minimize court involvement in the care of your child. Also, by the judicious use of a trust and the appointment of a trustee to manage property funding that trust for the support of your children, you may eliminate the need for bonds (money posted to secure a trustee’s properly carrying out the trustee’s responsibilities) as well as avoid supervision by the court of the minor children’s inherited assets.
You may designate an executor (personal representative) of your estate in your will, and eliminate their need for a bond. In some states, the designation of an independent executor, or the waiver of otherwise applicable state statutes, will eliminate the need for court supervision of the settlement of your estate.
You may choose to provide for persons whom the state’s intestacy laws would not otherwise benefit, such as stepchildren, godchildren, friends or charities.
If you are acting as the custodian of assets of a child or grandchild under the Uniform Gift (or Transfers) to Minors Act (often referred to by their acronyms, UGMA or UTMA), you may designate your successor custodian and avoid the expense of a court appointment.
Much has been written regarding the use of “living trusts” (also known as a “revocable trust,” “inter vivos trust,” or “loving trust”) as a solution for a wide variety of problems associated with estate planning that wills cannot address. Some attorneys regularly recommend the use of such trusts, while others believe that their value has been somewhat overstated. The choice of a living trust should be made after consideration of a number of factors.
The term “living trust” is generally used to describe a trust that you create during your lifetime. A living trust can help you manage your assets or protect you should you become ill, disabled or simply challenged by the symptoms of aging. Most living trusts are written to permit you to revoke or amend them whenever you wish to do so. These trusts do not help you avoid estate tax because your power to revoke or amend them causes them to continue to be includable in your estate. These trusts do help you avoid probate, which may not always be necessary depending on the cost and complexity of probate in your estate.
A “living trust” is legally in existence during your lifetime, has a trustee who currently serves, and owns property which (generally) you have transferred to it during your lifetime. While you are living, the trustee (who may be you, although a co-trustee might also be named along with you) is generally responsible for managing the property as you direct for your benefit. Upon your death, the trustee is generally directed to either distribute the trust property to your beneficiaries, or to continue to hold it and manage it for the benefit of your beneficiaries. Like a will, a living trust can provide for the distribution of property upon your death. Unlike a will, it can also (a) provide you with a vehicle for managing your property during your lifetime, and (b) authorize the trustee to manage the property and use it for your benefit (and your family) if you should become incapacitated, thereby avoiding the appointment of a guardian for that purpose.
Seven Steps to Basic Estate Planning
1. Inventory Your Stuff
You may think you don’t have enough to justify estate planning. But once you start looking around, you might be surprised by all the tangible and intangible assets you have. The tangible assets in an estate may include:
- Homes, land or other real estate
- Vehicles including cars, motorcycles or boats
- Collectibles such as coins, art, antiques or trading cards
- Other personal possessions
- The intangible assets in an estate may include:
- Checking and savings accounts and certificates of deposit
- Stocks, bonds and mutual funds
- Life insurance policies
- Retirement plans such as workplace 401(k) plans and individual retirement accounts
- Health savings accounts
- Ownership in a business
2. Account For Your Family’s Needs
Once you have a sense of what’s in your estate, think about how to protect the assets and your family after you’re gone.
- Ensure you have enough life insurance
- Name a guardian for your children, and a backup guardian, just in case
- Document your wishes for your children’s care
3. Establish Your Directives
A complete estate plan includes important legal directives.
- A trust might be appropriate. With a revocable living trust, you can designate portions of your estate to go toward certain things while you’re alive. If you become ill or incapacitated, your selected trustee can take over. Upon your death, the trust assets transfer to your designated beneficiaries, bypassing probate, which is the court process that may otherwise distribute your property. There’s also the option to set up an irrevocable trust, which can’t be changed or revoked by the creator.
- A medical care directive, also known as a living will, spells out your wishes for medical care if you become unable to make those decisions yourself. You can also give a trusted person medical power of attorney for your health care, giving that person the authority to make decisions if you can’t. These two documents are sometimes combined into one, known as an advance health care directive.
- A durable financial power of attorney allows someone else to manage your financial affairs if you’re medically unable to do so. Your designated agent, as directed in the document, can act on your behalf in legal and financial situations when you can’t. This includes paying your bills and taxes, as well as accessing and managing your assets.
- A limited power of attorney can be useful if the idea of turning over everything to someone else concerns you. This legal document does just what its name says: It imposes limits on the powers of your named representative. For example, you could grant the person the power to sign the documents on your behalf at the closing of a home sale or to sell a specific stock.
- Be careful about who you give power of attorney. They may literally have your financial well-being — and even your life — in their hands. You might want to assign the medical and financial representation to different people, as well as a backup for each in case your primary choice is unavailable when needed.
4. Review Your Beneficiaries
Your will and other documents may spell out your wishes, they may not be all-inclusive.
- Check your retirement and insurance accounts. Retirement plans and insurance products usually have beneficiary designations that you need to keep track of and update as needed.
- Make sure the right people get your stuff. People sometimes forget the beneficiaries they named on policies or accounts established many years ago.
- Don’t leave any beneficiary sections blank. In that case, when an account goes through probate, it may be distributed based on the state’s rules for who gets the property.
- Name contingent beneficiaries.
5. Note Your State’s Estate Tax Laws
Estate planning is often a way to minimize estate and inheritance taxes. But most people won’t pay those taxes.
- At the federal level, only very large estates are subject to estate taxes.
- Some states have estate taxes. They may levy estate tax on estates valued below the federal government’s exemption amount.
- Some states have inheritance taxes. This means that the people who inherit your money may need to tax on it.
6. Weigh The Value of Professional Help
Whether you should hire an attorney or estate tax professional to help create your estate plan generally depends on your situation.
- If you have doubts about the process, it might be worthwhile to consult an estate attorney and possibly a tax advisor. They can help you determine if you’re on the proper estate planning path, especially if you live in a state with its own estate or inheritance taxes.
- For large and complex estate — think special child care concerns, business issues or non-familial heirs — an estate attorney and/or tax professional can help maneuver the sometimes-complicated implications.
7. Plan to Reassess
Life changes, so should your estate plan.
- Revisit your estate plan when your circumstances change, for better or for worse. This may include a marriage or divorce, birth of a child, loss of a loved one, getting a new job or being terminated.
- Revisit your estate plan periodically even if your circumstances don’t change. Although your situation may be the same, laws may have changed.
- It will take some effort to revise your plan, but take heart. The need to revise means you’ve already avoided the biggest estate planning mistake: never drafting a plan at all.