Estate Planning is Life Planning that will help you to legally manage your personal, family and business affairs in the event of your death or disability. Your first step in the Estate Planning process will be to decide exactly what you would like to accomplish through Estate Planning,
Typical Estate Planning Goals:
Your personal goals will generally dictate what techniques you should use and how you should structure the intricacies of your Life Plan. This brochure has been developed to introduce you to basic Estate Planning devices and highlight important Life Planning issues. A basic understanding will help you coordinate with financial and legal professionals in developing your Life Plan that will provide your family with the maximum benefit and protection that is consistent with your personal goals.
YOUR WILL
Without a valid Will in place, your estate will be placed under the control of the Probate Court to be settled under the State laws of Intestate Succession. Your family may be exposed to needless hardship and have less control over how your personal and business affairs are managed. However, with a valid Will coordinated as an integral part of your Life Plan, you can appoint an Executor, Trustee and Guardian to manage your personal and financial affairs in a manner consistent with your beliefs and desires.
General Functions of a Will
Executor. Appoint a trusted individual to act as Executor to supervise the settlement of your estate and the distribution of your legacy to your named heirs.
Succession. Your Will is a document that will provide your Executor with instructions on the distribution of your legacy to your named heirs.
Guardian. Your Will is the best method of informing the Probate Court who you would like to be appointed the guardian of your minor children and why (see section on Planning Strategies for Parents with Minor Children).
DURABLE POWER OF ATTORNEY
An important aspect of a well-coordinated Life Plan involves preparing for unanticipated disability. Although your Trustee can manage assets held in your Trust, the Trustee has no authority to manage your personal or financial affairs that are not related to trust assets. One practical legal device that can be used to maintain continuity in your business, financial and personal affairs is a well-drafted Durable Power of Attorney. A Durable Power of Attorney for Asset Management will give a trusted individual or Professional Trustee the authority to manage your financial and business affairs during a disability. A Durable Power of Attorney for Medical Care, commonly referred to as a Living Will, will give a trusted individual the authority to assert your wishes with respect to life-sustaining healthcare decisions.
TRUSTS
In addition to the control provided by your Will and the security provided by your Durable Power of Attorney, a Trust is a powerful Life Planning tool. The law of Trusts is complex and far ranging in scope. Conceptually however, a Trust is a legal device that separates legal title to property from the beneficial use and enjoyment of the property. A Trustee (who is responsible for the management of the property held in the Trust) legally owns the property while a Beneficiary is entitled to beneficial use and enjoyment of the property as provided by the terms of the Trust. Essentially, a Trust can provide you control without ownership. Additionally, certain Specialized Trusts can be particularly useful in accomplishing a wide variety of Estate Planning Goals.
SPECIALIZED TRUSTS
Creating a Trust in your Will
Testamentary Trust. A Testamentary Trust is created under your Will and does not go into effect until your death. Testamentary Trusts allow you to stipulate not only how your assets are divided among heirs, but also under what circumstances your heirs may access those assets.
Removing Assets from your Probate Estate
Revocable Living Trust. A Living Trust takes effect during your lifetime and allows you to earmark assets for heirs while still maintaining management and control over the beneficial use and enjoyment of your assets. When used as an integral part of your Life Plan, this durable but flexible legal device can provide maximum control and benefit while removing assets from your Probate Estate (see section on Avoiding Probate).
Removing Assets from your Taxable Estate
Irrevocable Trust. An Irrevocable Trust by definition, is a Trust that cannot be revoked or amended by the person who created it. For purposes of taxation, an Irrevocable Trust is treated as a separate taxable entity. By naming yourself as beneficiary of assets transferred to an Irrevocable Trust, you can reduce the size of your Taxable Estate while you maintain the full beneficial use and enjoyment of your assets. When used as an integral part of your Life Plan, an Irrevocable Trust can effectively minimize Federal Gift and Estate Tax Liability (see section on Minimizing Federal Gift and Estate Tax).
Providing for Family and Children
Sprinkling Support Trust. A Sprinkling Trust is created to provide financial support for your survivors. The Trustee of a Sprinkling Trust is given broad discretion to distribute Trust assets as he or she sees fit, in light of your wishes expressed in the Trust document and the needs of your children. This broad discretion provides a Trustee with flexibility to respond to the changing financial needs of your family (see section on Planning Strategies for Parents with Minor Children).
Providing for Children from Prior Marriage
Qualified Terminable Interest Property Trust (QTIP). A QTIP Trust is a type of Trust often used as a wealth-transfer vehicle by individuals who have been married more than once. The testamentary QTIP Trust becomes irrevocable at death. After your death, the QTIP provides lifetime income to your spouse. Upon your spouse's death, remaining QTIP Trust assets are transferred to your chosen heirs, i.e., children from a previous marriage (see section on Planning Strategies for Parents with Minor Children).
Charitable Transfers
Charitable Remainder Trusts (CRT). A CRT removes assets from your Taxable Estate, while giving you the option of income equivalent to a fixed value or a fixed percentage of the Trust assets' fair market value. You can benefit the charity of your choice in the future but still receive a current-year charitable deduction from income taxes. The CRT is a powerful Estate Planning tool that offers a way to convert highly appreciated assets (e.g., real estate or stock) into lifetime income without having to pay capital gains tax on the sale of the property or estate taxes at death (see section on Minimizing Federal Gift & Estate Tax).
|
LIFE PLANNING Estate Planning is Life Planning that will help you to legally manage your personal, family and business affairs in the event of your death or disability. Your first step in the Estate Planning process will be to decide exactly what you would like to accomplish through Estate Planning, Typical Estate Planning Goals:
Your personal goals will generally dictate what techniques you should use and how you should structure the intricacies of your Life Plan. This brochure has been developed to introduce you to basic Estate Planning devices and highlight important Life Planning issues. A basic understanding will help you coordinate with financial and legal professionals in developing your Life Plan that will provide your family with the maximum benefit and protection that is consistent with your personal goals. YOUR WILL Without a valid Will in place, your estate will be placed under the control of the Probate Court to be settled under the State laws of Intestate Succession. Your family may be exposed to needless hardship and have less control over how your personal and business affairs are managed. However, with a valid Will coordinated as an integral part of your Life Plan, you can appoint an Executor, Trustee and Guardian to manage your personal and financial affairs in a manner consistent with your beliefs and desires. General Functions of a Will Executor. Appoint a trusted individual to act as Executor to supervise the settlement of your estate and the distribution of your legacy to your named heirs. Succession. Your Will is a document that will provide your Executor with instructions on the distribution of your legacy to your named heirs. Guardian. Your Will is the best method of informing the Probate Court who you would like to be appointed the guardian of your minor children and why (see section on Planning Strategies for Parents with Minor Children). DURABLE POWER OF ATTORNEY An important aspect of a well-coordinated Life Plan involves preparing for unanticipated disability. Although your Trustee can manage assets held in your Trust, the Trustee has no authority to manage your personal or financial affairs that are not related to trust assets. One practical legal device that can be used to maintain continuity in your business, financial and personal affairs is a well-drafted Durable Power of Attorney. A Durable Power of Attorney for Asset Management will give a trusted individual or Professional Trustee the authority to manage your financial and business affairs during a disability. A Durable Power of Attorney for Medical Care, commonly referred to as a Living Will, will give a trusted individual the authority to assert your wishes with respect to life-sustaining healthcare decisions. TRUSTS In addition to the control provided by your Will and the security provided by your Durable Power of Attorney, a Trust is a powerful Life Planning tool. The law of Trusts is complex and far ranging in scope. Conceptually however, a Trust is a legal device that separates legal title to property from the beneficial use and enjoyment of the property. A Trustee (who is responsible for the management of the property held in the Trust) legally owns the property while a Beneficiary is entitled to beneficial use and enjoyment of the property as provided by the terms of the Trust. Essentially, a Trust can provide you control without ownership. Additionally, certain Specialized Trusts can be particularly useful in accomplishing a wide variety of Estate Planning Goals. SPECIALIZED TRUSTS Creating a Trust in your Will Testamentary Trust. A Testamentary Trust is created under your Will and does not go into effect until your death. Testamentary Trusts allow you to stipulate not only how your assets are divided among heirs, but also under what circumstances your heirs may access those assets. Removing Assets from your Probate Estate Revocable Living Trust. A Living Trust takes effect during your lifetime and allows you to earmark assets for heirs while still maintaining management and control over the beneficial use and enjoyment of your assets. When used as an integral part of your Life Plan, this durable but flexible legal device can provide maximum control and benefit while removing assets from your Probate Estate (see section on Avoiding Probate). Removing Assets from your Taxable Estate Irrevocable Trust. An Irrevocable Trust by definition, is a Trust that cannot be revoked or amended by the person who created it. For purposes of taxation, an Irrevocable Trust is treated as a separate taxable entity. By naming yourself as beneficiary of assets transferred to an Irrevocable Trust, you can reduce the size of your Taxable Estate while you maintain the full beneficial use and enjoyment of your assets. When used as an integral part of your Life Plan, an Irrevocable Trust can effectively minimize Federal Gift and Estate Tax Liability (see section on Minimizing Federal Gift and Estate Tax). Providing for Family and Children Sprinkling Support Trust. A Sprinkling Trust is created to provide financial support for your survivors. The Trustee of a Sprinkling Trust is given broad discretion to distribute Trust assets as he or she sees fit, in light of your wishes expressed in the Trust document and the needs of your children. This broad discretion provides a Trustee with flexibility to respond to the changing financial needs of your family (see section on Planning Strategies for Parents with Minor Children). Providing for Children from Prior Marriage Qualified Terminable Interest Property Trust (QTIP). A QTIP Trust is a type of Trust often used as a wealth-transfer vehicle by individuals who have been married more than once. The testamentary QTIP Trust becomes irrevocable at death. After your death, the QTIP provides lifetime income to your spouse. Upon your spouse's death, remaining QTIP Trust assets are transferred to your chosen heirs, i.e., children from a previous marriage (see section on Planning Strategies for Parents with Minor Children). Charitable Transfers Charitable Remainder Trusts (CRT). A CRT removes assets from your Taxable Estate, while giving you the option of income equivalent to a fixed value or a fixed percentage of the Trust assets' fair market value. You can benefit the charity of your choice in the future but still receive a current-year charitable deduction from income taxes. The CRT is a powerful Estate Planning tool that offers a way to convert highly appreciated assets (e.g., real estate or stock) into lifetime income without having to pay capital gains tax on the sale of the property or estate taxes at death (see section on Minimizing Federal Gift & Estate Tax). |