Revocable trusts have their own distinct advantages for protecting real estate. As we noted, the terms of the trust can be changed at any time. They also allow assets to avoid probate, which can be a costly and cumbersome process in many states. Irrevocable trusts also protect the privacy of property and beneficiaries, since they are not on public record as wills are in the probate process.
]]> Revocable trusts are very flexible, and may be very beneficial for those who own property in multiple states and who want to avoid probate in each of those states. When a revocable trust is established, it will be specifically tailored to each family situation and the goals of the one planning the estate. One option with these trusts is to establish a trust that spans multiple generations. These so-called "dynasty" trusts, when properly structured, allow families to pass on wealth to successive generations without incurring estate taxes.Setting up a limited liability company is yet another option, particularly for those who own income-producing property. Because LLC's deflect liability away from the owner's personal assets and to the LLC itself, they reduce a property owner's personal liability in the event of a lawsuit. In addition, LLC allow for greater privacy since only the company name is listed in public databases.
Regardless of which of these options one chooses to go with in one's estate plan, it is important to ensure that the estate plan itself fits one's family and personal goals. Working with a qualified estate planning attorney is the best way to do this.
Source: Reuters, "Weighing the what-ifs of trusts and LLCs," Beth Pinsker Gladstone, May 3, 2012
]]>Among the tools at one's disposal are LLCs and trusts. Trusts, in particular, are quite versatile and useful for a variety of estate planning arrangements. Here we'll take a look at some of the common ways these tools are used in estate planning.
]]> Trusts, as we noted already, are very flexible instruments when it comes to disposing of assets. Trusts can be either revocable or irrevocable, depending on one's goals and family situation. The basic difference is that a revocable trust can be changed at any time after it is established, while an irrevocable trust cannot. There are various advantages to giving up one's ability to change a trust one has established, such as estate tax reduction, asset protection and charitable giving.One common type of irrevocable trust used in estate planning is the Qualified Personal Residence Trust (QPRT). These trusts allow an owner of real estate to live in the property for a period of time and then pass it on to their heirs. The beneficiaries in these arrangements pay some kind of rent. QPRTs have the advantage of locking in the value of decreased property values so that when the property is sold down the road, there are capital gains tax savings.
Owners of high value real estate could benefit from setting up a QPRT, particularly because of the currently high gift tax exemption, which is $5 million per taxpayer.
There are other ways to use irrevocable trusts for real estate, but we'll take a look at revocable trusts in our next post, as well as LLCs.
Source: Reuters, "Weighing the what-ifs of trusts and LLCs," Beth Pinsker Gladstone, May 3, 2012
]]>An important point to make about this case is that estate plans should be updated at major points in one's life. Divorce, marriage, birth, remarriage and other such events are all good times to update one's will. Any life event which changes the circumstances impacting one's estate is a good time to review one's estate plan.
]]> In terms of how to change one's will, it is important that one clearly revoke one's old will. This is typically done by writing a statement in the new will stating that one revokes all previous wills and codicils, and by destroying any previous wills to avoid confusion and challenges down the road. One may also simply add a codicil, or amendment to one's old will, which will revoke part of the old one or add a new provision. Codicils must be dated, signed and witnessed in the same way a will must be. While valid, codicils are less preferable than new wills, since they can cause confusion, be lost and be used to initiate will contests.
Another point to make is that under New Jersey law, a holographic will like the one authored by Coleman-one that is entirely handwritten and signed by the "testator"-is considered valid, even if it is not signed by witnesses, provided the signature and the material provisions are in the handwriting of the testator. Still, holographic wills are not to be preferred to wills which have been formally written up, witnessed and signed, since this will prevent the possibility of an estate challenge down the road.
Source: ABC News, "2 Women Battle Over Gary Coleman Estate," May 7, 2012.
]]>The latest estate challenge has to do with Gary Coleman's estate. Coleman, of course, became famous for his role in the television sitcom Diff'rent Strokes and for his short stature as an adult. Coleman, as is well known, struggled financially as an adult, eventually declaring bankruptcy. Coleman died at the age of 42 in May 2010 from complications arising from a fall down the stairs in his home which caused him to strike his head.
]]> On Monday, trial began over the issue of whether Coleman's ex-wife Shannon Price or ex-girlfriend and former manager Anna Gray should receive his estate. Coleman and Price apparently married in 2007 and divorced in 2008, though their relationship continued after that. His parents have apparently asserted no claim.Coleman drafted wills in both 1999 and 2005. According to Gray, Coleman named her a beneficiary and executor of his estate in his 2005 will. But a hand-written amendment names Price as the sole heir and states that all previous wills would be superseded. The outcome of the case reportedly depends on whether Coleman's continued relationship with his ex-wife after their divorce constituted common-law marriage. If so, she would be entitled to his estate.
Price says that she and Coleman eventually decided that they had made a mistake in getting divorced and that they continued to live together as a married couple until his death, sharing living expenses, filing joint tax returns and doing everything else a married couple does. They apparently avoided remarrying in order to stay out of the public light. Gray, of course, disputes these facts, alleging that Price has financial incentives that throw her account into question.
In our next post, we'll continue will this topic.
Source: ABC News, "2 Women Battle Over Gary Coleman Estate," May 7, 2012
]]>As a recent USA Today article points out, around 71 percent of adults under the age of 34 do not have a will. And 41 percent of Baby Boomers do not have one. Those numbers, based on a recent online survey by Rocket Lawyer, may or may not be completely accurate. What is not in question is the importance of putting a will together sooner rather than later.
]]> There is any number of reasons why folks put off drafting a will, including the belief that it is too expensive or that they don't have enough assets to protect. What many people do not sufficiently consider, though, is that a will ensures that one's assets go to the right people. As part of a balanced estate planning diet, it can deliver overall financial health at one's passing. And that is no small accomplishment.Several areas where this is particularly evident are domestic partners, digital assets and pets. In each of these areas, lack of existing protections put children, assets, and men's--and women's-- best friends at risk.
Estate planning is important for domestic partners because it can define relationships and clarify wishes. Digital assets, which are accumulating more and more every year, are often unprotected, with as many as one-third of consumers going without protection. As far as pets go, every family will have a slightly different approach and concern for the protection of pets. Those who wish to fit their pets into their estate plan can do so quite easily. It just takes a bit of discussion and planning.
Setting up a will is an important task, and one that is best done in consultation with an attorney. One can attempt to do the job on one's own, but the possibility of error, incompleteness, and failing to achieve one's estate planning goals is more likely.
Source: USA Today, "Times change wills, yet many Americans don't have one," Christine Dugas, April 30, 2012.
]]>The issue of religious faith--which can affect a number of areas of estate planning--is one that can be polarizing and can cause significant rifts in families and complications later on down the road. While planning ahead can help calm the possibility of future disputes, it is also important also to think carefully about how one wants to fit religious convictions into one's plan.
]]> As a recent Wall Street Journal article points out, problems often occur when parents with strong religious convictions base their children's inheritance on their marrying within their faith tradition. Such provisions are sometimes upheld by courts, but not without first sparking a number of legal battles among competing heirs.Some estate planners advise their clients to avoid restrictive faith-based estate planning of this kind. One alternative to this approach is to leave money for children in trust and provide instructions for the trustee to make faith part of the distribution plan. In this approach, it may be best if the trustee share's the same religious faith.
Other areas where religious convictions can impact estate planning are end-of-life health care, organ donations, funeral, burial/cremation arrangements, and charitable bequests. Planning in these areas should emphasize spelling out one's wishes very specifically, and perhaps discussing one's decisions with family members. All of this will contribute toward making one's estate plan more successful.
Source: Wall Street Journal, "Joining Church and Estate," Rachel Emma Silverman, April 30, 2012.
]]>Once one gets over the initially lack of eagerness for estate planning, there are a variety of issues one needs to address. Some of these will be things everybody needs to consider, and others will be more specifically based on one's family situation. Here we'll take a look at several basic areas that will need to be discussed in the estate planning process.
]]> One of the more important tasks in estate planning is to establish a will. These documents are important, because they address the goals one has for one's material possessions. This covers a variety of scenarios and issues. One should also consider whether any trusts may fit into one's estate plan. Trusts are useful vehicles for a variety of estate planning techniques.Beyond one's house and financial assets, there is tangible personal property. An estate plan should also address these items, which may have significant monetary and/or sentimental value.
One particular concern that should not go unaddressed by one's estate plan is long-term care. The operative term in this area, for many people, is Medicaid planning. Medicaid covers most nursing home costs after one has spent down all one's resources. State laws vary on exemptions, but in most of them one's principal residence and a total of $14,250 is exempted from one's assets. Medicaid planning often makes use of trusts to remove assets from one's estate while putting them to a purpose that fits within one's overall estate plan.
Another issue that should be addressed is uncomfortable family situations or faults of family members, as these issues often impact how one decides to set up one's estate plan. Those with blended families have additional concerns to address.
Everybody engaging in estate planning should be sure to consult a knowledgeable attorney. There is no substitute for obtaining professional advice. That said, one should also be sure to be actively engaged in the estate planning process. Knowing the relevant laws and useful techniques is only one half of the picture. The other half is ensuring that the plan one establishes will achieve one's unique goals.
Source: Huffington Post, "Estate Planning: What You Don't Say Can Hurt You," Ann Brenoff, April 23, 2012.
]]>Take for example, a little blue bowl left behind by a grandmother who originally got the item from a store-bought package of Christmas pudding back in the 1950s. To resolve the dispute that arose among her grandchildren over who would take possession of the item, their mother took possession of it and essentially hid it.
]]> Such items, typically referred to as tangible personal property, are unique in that they can carry value in a way that financial assets cannot. The little blue bowl referred to above obviously had great sentimental value, even if it wasn't worth much monetarily.There are a number of ways to dispose of tangible personal property, but it is well worth the time to do so in a way that addresses the possibility of family fights over such items. One can address issue in one's estate plan by including a tangible personal property list in one's estate planning documents. One can also give away the items over time as one downsizes one's property, or consult one's children about their preferences and make any necessary adjustments to their inheritance based on those preferences.
A number of approaches are possible. Most of the time, though, coming up with a plan well in advance and informing family members of it is a good way to go. While that may cause some family friction initially, in most cases there will be less to deal with than if family members have to make those decisions after their loved one's death.
Source: Forbes, "Little Things Can Cause Big Fights When A Relative Dies," Deborah L. Jacobs, October 24, 2011.
]]>A recent Forbes article took a look at five different reasons one should think about revisiting their estate plan. We'll take a brief look at them.
]]> The first point the author makes is that relationships can change over time. This could mean to money, assets, or responsibilities given to one person or another may no longer be appropriate. There are a number of reasons these relationships could change-and it isn't always negative-so it is good to make sure things still make sense.Another thing to consider is that kids eventually grow up, and it may be wise to look at whether any protective measure set in place still make sense.
A third reason to take another look at your estate plan, especially for older folks, is that you may know more about your health now than you did when you first set up your estate plan. Not only that, but medical science has a better ability to predict nowadays, and it is worth considering whether anything may need to reflect what you now know.
One's personal property profile can change as well, so it is good to make sure everything is in order. Doing so can help prevent family fights and confusion.
Finally, it is good to continue updating one's estate plan because one's focus will change over time. Folks in their 70s, for instance, are beginning to think about what they want to leave behind. Their children are already grown, and no longer have the same needs they used to.
These are just some of the reasons that can come up in an estate plan review. Each person's situation is different, though, and various other issues can arise.
Source: Forbes, "Five Reasons Baby Boomer Need To Review Estate Plans (And It's Not About Taxes)," Deborah Jacobs, March 29, 2012.
]]>As recent articles in both the Star Ledger and Forbes point out, many people are concerned about running out of money in their retirement. As folks age, many like to spend their retirement doing things they never had the chance to do during their working years, like travelling to other parts of the world. And as we all know, increasing longevity and healthcare costs, as well as a poorly performing economy, have been sapping savings set aside for retirement. So what is a person to do to ensure they have enough resources for retirement?
]]> One way to approach the problem is to ask how much money one can safely withdraw on a yearly basis from one's investments upon retirement. While that answer will vary between individuals, it is important to remember that one cannot control how markets perform, and may not be able to begin retirement with the amount they would like to. It is important to work with a financial planner or investment specialist to come up with an appropriate portfolio.Financial planners have a number of different strategies for the purpose of financially planning one's retirement. Among other things, financial planners will help determine the right withdrawal rate, or the amount one can tap from one's investment assets without running out of them before dying.
Part of having a successful estate plan is ensuring one's own financial stability in one's final years. Without a proper financial plan, one not be able to carry out different aspects of one's estate plan. So it is important to do both.
Sources:
Forbes, "Tips To Avoid Coming Up Short In Retirement," Eve Kaplan, November 28, 2012.
Tips: financial planning, estate planning retirement
nj.com, "Get with the Plan: Retired couple rooted in New Jersey," Karin Price Mueller, April 8, 2012.
]]>Couples that do choose to do their estate planning together should consider the risks carefully, because the way they set up their plan can affect family relationships greatly, particularly in blended families and other complicated family situations. Two big risk factors are communication breakdown and inability to agree on a plan. Then there is just the fact that whenever two people try to agree on a plan, there can be insurmountable disagreements that make a common plan impossible.
]]> Another thing our readers should be aware of is that joint representation can present the possibility of conflicts of interest, even if it doesn't necessarily represent a conflict of interest in itself. Attorneys have special duties toward their clients, such as confidentiality and loyalty, and must be mindful of those duties.An attorney who jointly represents a couple will need to be able to openly discuss the estate plan with both parties, and closely guarded secrets may not always be able to be kept hidden, depending on the goals of the parties. Every situation is different, but certain couples are simply better off securing separate attorneys.
Having one's own attorney can afford one more freedom to speak about one's concerns and desires, and one's personal interests will be the focus of the attorney. These are some of the benefits of seeking separate representation.
Source: Forbes, "Estate Planning For Couples: Should It Be A Solo Or A Duet?," L. Paul Hood, Jr., April 10, 2012.
]]>The question that every couple engaging in estate planning will need to answer for themselves is whether they will be represented by the same attorney. Joint representation is often more cost-effective, and can improve marital communications and other family members. But there are certain risks that go with it as well. In what situations would joint representation maybe not be the best idea?
]]> In cases where only one spouse has children, it may be worth thinking about securing separate representation. If the parent of the children dies first, there is the risk that the step parent may honor their deceased partner's wishes.In some cases, one spouse is wealthier than another or has a greater income than another. In such situations, the poorer spouse may be adversely affected by joint representation. Also, when one spouse is economically dependent on the other, it may decrease that spouse's bargaining power in estate planning.
Having separate attorneys may be a good idea when one spouse tends to be domineering and the other unable to make their own decisions freely. Another factor in determining whether to be jointly represented by the same attorney is the length of the relationship. The shorter the relationship is, the better the reason to get separate attorneys. If there is a big age difference or a great number of past relationships, these are further reasons to consider seeking out a separate attorney.
Spouse's who have secrets from the past they don't wish the spouse to find out, such as a secret lover or a child, may wish to seek out separate representation.
In our next post, we'll continue with the topic of joint representation in estate planning.
Source: Forbes, "Estate Planning For Couples: Should It Be A Solo Or A Duet?," L. Paul Hood, Jr., April 10, 2012.
]]>The dispute reportedly centers on 51 songs written or co-written by the singer, some of which boosted Charles to the top of the charts early on in his career. According to the foundation, the adult children have sent copyright termination notices to music publishers claiming they own the songs, the same ones the foundations claims to own.
]]> The foundation-which supports research and education programs for the hearing impaired and youth education programs-claims that the wrongful claims have created confusion over ownership of the songs, and have likely damaged the permanent value of the copyrighted assets.The children, according to the suit, are attempting to make use of a particular provision in the 1976 federal copyright act which permits copyright holders a one-time chance to renegotiate older copyrights. The foundation, though, claims that Charles renegotiated the copyrights in 1980.
Since his death, Ray Charles' estate has gone through a fair number of difficulties in its attempt to settle. Such travails in estate administration are not uncommon for the rich and famous, who often have complicated lives and relationships that increase the chances of difficulty.
One of the tasks of estate planning is to minimize the possibilities of family disputes after one's death. There are a number of techniques one can pursue toward this end, but those that are chosen should serve the specific needs of each individual.
Source : CNN, "Ray Charles' foundation sues his children ," Alan Duke, April 1, 2012
]]>As a recent article in the Star-Ledger points out, though, the unlimited marital deduction is not available to all couples. When property is transferred to a surviving non-U.S. citizen spouse, an estate tax will be owed on the amount that exceeds the deceased spouse's estate tax exemption amount.
]]> Through the end of 2012, the federal exemption amount is $5.12 million, and is $675,000 in New Jersey. So a non-citizen spouse inheriting over that amount will have to pay estate taxes on the excess amount. In addition, there are limits to how much a citizen can leave to a non-citizen spouse. These rules may be subject to modifications by tax treaties in place between the U.S. and the non-citizen spouse's country of citizenship.These limitations can be bypassed, though, by means of a qualified domestic trust. Such a trust must, however, be set up properly. Included in the requirements are that no distribution can be made from the trust, except for income, unless the trustee, who is a U.S. citizen or a corporation, has the right to hold back estate taxes from the distribution.
The trust must meet Treasury regulations concerning the collection of taxes. In addition, the executor must elect on the deceased spouse's estate tax return to the trust as a qualified domestic trust.
Couples who feel they could benefit from a qualified domestic trust should consult an estate planning attorney.
Source : nj.com, "Ask the Biz Brain: What's the tax impact to immigrant whose spouse, a U.S. citizen, dies? ," Karin Price Mueller, April 3, 2012
]]>Among the various techniques sometimes used in asset protection is the domestic asset protection trust (DAPTs). These trusts are intended to protect one's assets from creditors.
DAPTs shorten the time during which a creditor may challenge a transfer to the trust and it is more difficult for creditors to prove that the transfer was fraudulent. It is questionable, though, at least according to many estate planners, whether DAPTs are a favorable technique in asset protection planning. Here we'll take a brief look at a number of potential problems with these trusts.
]]> Firstly, a DAPT may encounter conflict of laws problems, since each state has its own unique law. Most states prohibit a person from establishing a trust for his or her own benefit to protect against creditors, though a handful of states do allow this. In cases where the parties, the conduct or the assets are from different states, the person who set up a DAPT may end up losing out in the end, as judges in states disallowing such trusts are unlikely to permit their enforcement. There are further complications when a non-DAPT states strikes down the trust. Is it still valid in a state that allows such trusts? The answer is currently unclear.In some cases, DAPT statues themselves are sources of uncertainty, because of exception to the normal statutory protections. These can end up making the protections useless in many cases. Such exceptions sometimes allow creditors to access the trust money in tort, child support, alimony, tax evasion, and other such claims.
In our next post, we'll continue looking at the topic of Domestic Asset Protection Trusts, particularly why they are limited in their usefulness as vehicles for asset protection.
Source: AdvisorOne, "5 Problems With Domestic Asset Protection Trusts," Michael S. Fischer, March 29, 2012.
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