Estate Planning

Estate and Trust Resources

Estate Planning

Estate Planning: If you successfully implement wealth management strategies, you are likely to have assets left over at the end of your lifetime and will need a proper plan for how your accumulated wealth is to be distributed. Estate planning is nothing but a detail plan to distribute all your personal assets to the beneficiaries of your choice. Remember, anyone receiving your assets will also be responsible for most if not all of your liabilities as well. Estate planning is a process. It involves people—your family, other individuals and, in many cases, charitable organizations of your choice. It also involves your assets (your property) and the various forms of ownership and title that those assets may take. And it addresses your future needs in case you ever become unable to care for yourself. If you own substantial assets, you may be thinking how does estate planning work and what you need to do to get one done for you? this article is simple approach to help you understand the process and steps that you need to take for a successful estate planning.

First of all, you need to have a clear understanding of your assets. If you haven't done it yet, you need to sit down and make a list of everything you own. Idea is to create a inventory that you can include in your will. A simple can do the trick as far as transferring your assets but it will be a very expensive and inefficient way of transferring your assets. Remember, you have worked hard all your life and there is no reason to throw away half of your wealth in taxes just because you didn't plan. Since tax is one of the main concerns, often a trust is established with all your assets to minimize the tax implications. Preparing a proper estate plan with the help of your financial advisor will ensure that your loved ones don't face a huge tax burden and have a smooth transition of your assets. Death in a family is a traumatic experience and you don't want to create more emotional trauma and distress for your loved ones by not doing proper estate planning.

Estate planning can help you determine following:

How and by whom your assets will be managed for your benefit during your lifetime if you ever become unable to manage them yourself. This is a very important responsibility and you need to make sure you pick someone who is reliable and trustworthy.
When and under what circumstances it makes sense to distribute your assets during your lifetime. It may not make any sense to some people but if you ever become disable and unable to manage your day-to-day business, you can elect to distribute your asset.
How and to whom your assets will be distributed after your death. This is obviously your beneficiary information. It should include people who you want to distribute your assets.
How and by whom your personal care will be managed and how health care decisions will be made during your lifetime if you become unable to care for yourself. This is not something most people take seriously but with some of the recent cases of patient in vegetated state and family fighting for right to decide whether to take a person off the life support or not, this may be the best option.

Many people mistakenly think that estate planning only involves the writing of a will. Estate planning, however, can also involve financial, tax, medical and business planning. A will is part of the planning process, but you will need other documents as well to fully address your estate planning needs.

Who needs estate planning?

You do—whether your estate is large or small. Either way, you should designate someone to manage your assets and make health care and personal care decisions for you if you ever become unable to do so for yourself. If your estate is small, you may simply focus on who will receive your assets after your death, and who should manage your estate, pay your last debts and handle the distribution of your assets. If your estate is large, your lawyer will also discuss various ways of preserving your assets for your beneficiaries and of reducing or postponing the amount of estate tax which otherwise might be payable after your death.

If you fail to plan ahead, a judge will simply appoint someone to handle your assets and personal care. And your assets will be distributed to your heirs according to a set of rules known as in testate succession. One of the important thing to remember is that if you designate someone to receive your estate, they are held responsible for some of your debts and liabilities. However, certain assets are excluded from debt collection such as IRA or 401(k) distribution, pension payment, and life insurance policy. Also, contrary to popular myth, everything does not automatically go to the state if you die without a will. Your relatives, no matter how remote, and, in some cases, the relatives of your spouse will have priority in inheritance ahead of the state. Still, they may not be your choice of heirs; an estate plan gives you much greater control over who will inherit your assets after your death.

What is a Will?: We have talked about a will numerous time in this article so it make sense to clarify what constitute a will. A will is a traditional legal document that names individuals (or charitable organizations) who will receive your assets after your death, either by outright gift or in a trust. It also nominates an executor who will be appointed and supervised by the probate court to manage your estate; pay your debts, expenses and taxes; and distribute your estate according to the instructions in your will. A will can also be used to appoint a guardians for your minor children.

Most assets in your name alone at your death will be subject to your will. Some exceptions include securities accounts and bank accounts that have designated beneficiaries, life insurance policies, IRAs and other tax-deferred retirement plans, and some annuities. Such assets would pass directly to the beneficiaries and would not be included in your will. State and not federal government has final control over the laws that govern will and various rules and regulations related to wills. you should consult your financial advisor or contact your state to find out exact laws pertaining to a will.

Revocable Living Trust: A revocable living trust on the other hand is a legal document that can, in some cases, partially substitute for a will. With a revocable living trust (also known as a revocable inter vivos trust or grantor trust), your assets are put into the trust, administered for your benefit during your lifetime and transferred to your beneficiaries when you die—all without the need for court involvement. Most people name themselves as the trustee in charge of managing their living trust’s assets. By naming yourself as trustee, you can remain in control of the assets during your lifetime. In addition, you can revoke or change any terms of the trust at any time as long as you are still competent. (The terms of the trust become irrevocable when you die.)

In your trust agreement, you will also name a successor trustee (a person or institution) who will take over as the trustee and manage the trust’s assets if you should ever become unable to do so. Your successor trustee would also take over the management and distribution of your assets when you die. A living trust does not, however, remove all need for a will. Generally, you would still need a will—known as a pour over will—to cover any assets that have not been transferred to the trust. You should consult with a qualified estate planning lawyer to assist you in the preparation of a living trust, your will and other estate planning documents. Also, keep in mind that your choice of trustees is extremely important. That trustee’s management of your living trust assets will not be automatically subject to direct court supervision.

Estate planning and Tax Implications

Estate taxes are imposed upon estates that have a net value of $2 million or more. That amount will increase to $3.5 million in 2009. In 2010, the estate tax will disappear completely. Then, unless Congress passes an extension, the exemption will revert back to $1 million in 2011. For estates that approach or exceed these amounts, significant estate taxes can be saved by proper estate planning, usually before your death or, for couples, before one of you dies.

Keep in mind that tax laws often change. And estate planning for tax purposes must take into account not only estate taxes, but also income, capital gains, gift, property and generation-skipping taxes as well. Qualified legal advice about taxes and current tax law should be obtained from a competent lawyer during the estate planning process. Also, you need to keep in mind that your tax situation can change numerous time during your life time and tax planning must be an ongoing process to save significant money in long run.