Estate Planning

What is Estate Planning?

Estate planning is organizing your assets to ensure that transitions proceed smoothly, while minimizing transfer taxes and fees, to you and your loved ones during your lifetime and after death. It ensures that if you are incapacitated that you will have someone to make sound health care decisions for you and to manage your finances and pay your bills. Also, it allows you to ensure that your loved ones receive your assets that is best for your loved by reducing or eliminating tax burdens and ensuring that the transition of assets is done in the smoothest possible way with the least amount of government involvement and expenses and in such a way that your beneficiary’s assets will be protected, if necessary.

What is in your estate?

  1. Your home and all other real estate you own
  2. Your business interests include LLCs, C corporations, partnerships, and sole proprietorship.
  3. Your share of any joint accounts
  4. The full value of your retirement accounts
  5. Any life insurance policies that you own directly
  6. Any property owned by a trust where you have control
  7. Your tangible personal property

What tools are used in a well-planned estate?

  1. A will and/or trust(s)
  2. Durable Power of Attorney
  3. HIPAA Authorization
  4. Medical Power of Attorney
  5. Living Will
  6. Some ancillary documents
  7. If a trust is used, then there should be assignments of assets, properly worded beneficiary forms, and some transfers of ownership to the trust
  8. Final instructions of your preference.

 

These tools allow you to ensure that your minor children will have a temporary guardian when you and your spouse are incapacitated (so the children do not go to social services) and a permanent guardian when you and your spouse are deceased. They ensure that you have people who will make health care decisions for you when you cannot do so for yourself, and that people will be there to pay your bills and manage your finances. They also ensure that once you and your spouse are deceased, your hard-earned assets will be managed and distributed properly, and maybe even protected (from your children’s potential divorce, creditor issues, and lawsuits).

What is a trust?

A trust is an agreement between three people: Settlor/Grantor, the trustee, and the beneficiary.

The Settlor is the creator of the arrangement and appoints a Trustee to hold the legal title to the subject assets for the benefit of the Beneficiary.

Although there are certain legal limitations, it is possible for the Trustor and beneficiary to be the same person, and it is even possible for the trustor to serve as his own trustee. In some situations, Trustors may wish for a bank or other entity to serve as the trustee.

 

Benefits of a trust

The benefits of a trust include:

a. avoiding probate;
b. capital gain tax savings;
c. privacy of family assets and finances;
d. avoidance of conservatorship;
e. creditor protection and protection of inherited assets from divorce for your beneficiaries;
f.  control of distribution and management of assets during life and after death;
g. death tax avoidance or reduction.

What are the duties of a trustee?

  • Your trustee manages the assets in your trust, properly accounts for trust transactions, follows all terms of the trust document, and manages your trust to comply with all federal and state law requirements. Managing your trust typically involves evaluating and managing the trust assets to ensure that they are meeting the needs of the trust beneficiaries and are appropriate based upon the terms of the trust and the governing law of the trust.
  • Proper accounting requires the trustee to follow the terms of the trust document to ensure that the principal and income of a trust are generally must be handled and accounted for separately. Both receipts and distributions should be accounted for in this manner.
  • One of the primary responsibilities of a trustee is to follow the terms of the trust document and carry out the settler's or grantor’s wishes.
  • In addition, the trustee may have reporting requirements to the trust beneficiaries or the court, as well as federal and state tax-filing responsibilities.

Who benefits from a trust?

  • In larger estates where tax savings are an important consideration, the use of trusts may play a paramount role.
  • Even relatively small estates can usually benefit from the probate avoidance offered by a trust.
  • Generally speaking, many individuals do not realize how large their estate is. This is especially true since all assets owned or in which one has an interest are included.

What happens if you do not have a will or a trust?

If you do not have a will or a trust and have not used other probate-avoiding methods, upon your death, your assets will pass according to the laws of the Commonwealth of Virginia or the state where you die. The "state plan" may not provide for those you desire to obtain your assets, and if it does, often presents problems. Furthermore, you do not choose who will represent you in probate – in fact, theoretically, a credit card company may even serve as the administrator of your estate.