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Estate planning is the process of anticipating and arranging for the disposal of an estate. Estate planning typically attempts to eliminate uncertainties over the administration of a probate and maximize the value of the estate by reducing taxes and other expenses. To learn more about various estate planning topics, just click on the below topic(s) that interests you:
A Trust is a trust established while you are living (sometimes referred to as a "Living Trust"). It is revocable, so you are able to make changes whenever you want, as well as reclaim the property transferred into it. It describes how your property should be managed while you are alive, and how it should be distributed upon your death. A Living Trust (also known as a Family Trust or Revocable Living Trust) is used primarily to avoid probate, reduce estate taxes, preserve your privacy, and manage your financial affairs.
There are many options when creating a Trust. Here are just a few:
A full assessment of your situation is needed to decide which option is best for you and your family.
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If your assets are greater than $150,000 and you want the peace of mind that your assets will be transferred to your heirs without court involvement, then a basic estate plan is for you. A basic estate plan typically includes the following (see Terminology for a more complete description of various terms associated with an estate plan):
A Revocable Living Trust is a trust established while you are living. It is changeable until your death or incapacity. It is used primarily to avoid probate, reduce estate taxes, preserve your privacy, and manage your financial affairs.
A Pour Over Will is a Will that you would make at the same time as your Revocable Living Trust. A Pour Over Will is a safety measure designed to protect any of your assets which somehow were not included in your trust and transfer them to your trust upon your death.
You may nominate a guardian (of the person and/or estate) for your children in the event of your death or incapacity. The guardian of the person would have custody of your children while the guardian of the estate would have the power to manage your children's property.
You may nominate a conservator (of the person and/or estate) for your benefit in the event of your incapacity or inability to handle your own finances.
A financial power of attorney gives your designee (called an agent) the ability to sign legal documents and manage your finances if you become incapacitated.
A Health Care Directive is a written statement in which you may name another person to make health care decisions for you.
A living will is a written statement to your doctors describing the kind of health care you want or don't want if you are ever in a "terminal condition."
A HIPAA Authorization requires your health care providers to release or disclose your protected medical information to the person that you have designated in such Authorization.
The purpose of the Community Property Agreement is to confirm that all of your existing property is community property and that all property acquired by either or both spouses during the marriage is community property.
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As long as you are able, you have the right to make and communicate your own health care decisions. You decide what health care, if any, you will or will not accept.
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When leaving property to your loved ones, you can choose exactly how you want it to go to them. Instead of leaving (a) property outright, (b) property in trust until the beneficiary reaches a certain age or achieves a certain goal or (c) property in trust for the life of the beneficiary controlled by a third party, you also have the option of (d) creating a "Lifetime Protective Trust" for each of your loved ones.
A Lifetime Protective Trust is a trust you create today to take effect either upon your death or during your life. This Trust is for clients who want a balance between asset protection and a desire that their beneficiaries be in control of the trust property. These trusts, if properly drafted, can give the beneficiary significant control over the trust, but not so much control that the beneficiary loses the trust benefits, as follows:
For the benefit of our children,
we have created a Lifetime
Protective Trust. Now, we can
rest assured knowing that our
family's assets will be well protected
if the unthinkable
happens to us.
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ESTATE PLANNING WORKSHEET
Rowe Mullen LLP
Tax Planning
USING THIS ORGANIZER WILL ASSIST US IN DESIGNING AN ESTATE PLAN THAT MEETS YOUR GOALS. ALL INFORMATION PROVIDED IS STRICTLY CONFIDENTIAL.
PLEASE RETURN THE COMPLETED WORKSHEET TO OUR OFFICE PRIOR TO YOUR APPOINTMENT VIA MAIL OR FAX.
There are several terms used in describing various aspects of an estate plan. Here are just a few:
An A-B trust is a trust which divides into Trust A and Trust B upon the death of the first settlor. "Trust A" remains revocable and contains the survivor's property. "Trust B" is irrevocable and contains the deceased settlor's assets. The estate tax is calculated to the extent it exceeds the estate tax exemption amount in the year of the settlor's death.
An A-B-C trust is a trust which divides into Trust A, Trust B and Trust C upon the death of the first settlor. "Trust A" remains revocable and contains the survivor's property. "Trust B" and "Trust C" are irrevocable and contain the deceased settlor's assets. "Trust B" is typically funded with the estate tax exemption amount. "Trust C" is funded with property for the benefit of the surviving spouse that exceeds the estate tax exemption amount. With the use of an A-B-C trust, there should be no Federal estate tax due on the death of the first spouse.
The "beneficiary" is the person (or persons) for whose benefit the trustee holds the trust property. The existence of an identifiable beneficiary is essential to the creation of every trust (other than a charitable trust). Beneficiaries are sometimes classified as "income" beneficiaries and "remainder" beneficiaries, according to their rights in the trust property. An "income beneficiary" is a person to whom net income of a trust is or may be payable.
The purpose of the Community Property Agreement is to confirm that all of your existing property is community property and that all property acquired by either or both spouses during the marriage is community property.
A discretionary distribution is a power granted to a trustee to make a distribution in its absolute and uncontrolled discretion. For example, "the trustees shall pay only such proportion of the trust principal to the beneficiary as the trustees feel is appropriate under the circumstances." There is no measurable standard for making the distribution, and the beneficiary has no authority to require the trustee to make the distribution.
"Disinheritance" is an act by which the owner of an estate deprives a person who would otherwise be the owner's heir of the right to inherit it.
A trust that directs that the trustee shall pay or apply only so much of the income and principal as is necessary for the education of the beneficiary. Such trust would terminate when the beneficiary's education is completed or at a stated age, whichever is sooner.
A financial power of attorney is the legal transfer of the authority to act on behalf of another person. That is, a durable power of attorney gives the person that you choose (called an agent) the ability to sign legal documents and manage your finances if you become incapacitated.
A trust is created only if there is trust property to fund it. As such, assets need to be transferred to the trust. Generally, to transfer assets to a trust, the trust creator must execute new documents of title, deeds to real property, signature cards for bank accounts, or change of beneficiary forms for pension plans, individual retirement plans and life insurance.
You may nominate a guardian (of the person and/or estate) for your children in the event of your death or incapacity. In the event that something happens to you, your chosen guardian would file a petition with the Probate Court to seek approval of such appointment whereby giving the guardian custody of your child, and/or the power to manage your child's property.
A Health Care Directive (or Health Care Power of Attorney) is a written statement in which you may name another person to make health care decisions for you.
A HIPAA Authorization requires your health care providers to release or disclose your protected medical information to the person that you have designated in such Authorization. This allows such person to facilitate decisions regarding your health care when you may not be able to do so.
An "irrevocable trust" is a trust in which the trust creator retains no power to alter, amend or revoke. Irrevocable inter vivos (living) trusts avoid probate, but are usually created for other purposes, such as the achievement of income, gift and estate tax advantages.
A Living Trust is a trust established while you are living. It is revocable, so you are able to make changes whenever you want, as well as reclaim the property transferred into it. It describes how your property should be managed while you are alive, and how it should be distributed upon your death. A Living Trust (also known as a Family Trust or Revocable Living Trust) is used primarily to avoid probate, reduce estate taxes, preserve your privacy, and manage your financial affairs.
A living will is a written statement to your doctors describing the kind of health care you want or don't want if you are ever in a "terminal condition." You are considered in a "terminal condition" if your condition cannot be cured and you will die without life-sustaining procedures.
A no-contest clause attempts to protect the trust assets from attack by anyone who contests it. It accomplishes this result by providing that the contesting party will automatically forfeit any benefits provided under the trust. A no-contest clause will not affect omitted heirs unless it is coupled with a disinheritance clause.
You may nominate a conservator (of the person and/or estate) for your benefit in the event of your incapacity or inability to handle your own finances. Your chosen conservator would file a petition with the Probate Court to seek approval of such appointment.
A pet trust is a trust established for the care and maintenance of your animals if the event of your death or incapacity.
A pour over will is a will that you would make in conjunction with your trust in which all of your property is designated to be distributed or managed upon your death to the person handling your trust. A pour over will is a safety measure designed to protect any of your assets which somehow were not included in your trust and make them assets of your trust upon your death.
A power of appointment is a power that an owner of property grants to another person (called "donee") to designate the persons (called "appointees") who will receive the property at some time in the future. All powers of appointment are either "general" or "special." A power of appointment is "general" if the grant allows the donee to designate himself, his estate, his creditors or the creditors of his estate, whether or not it is exercisable in favor of others. All other powers are "special." If a person is granted a general power of appointment over specified assets, then those assets will be included in that person's estate for federal estate tax purposes whether or not that person received any benefit from those assets.
If the surviving spouse is not a citizen of the United States, in most cases no marital deduction will be allowed for property passing to the surviving spouse unless it passes in the form of a "qualified domestic trust" (QDOT), or is transferred or assigned by the surviving spouse to such a trust before the date for payment of the estate tax. A QDOT is a special type of marital deduction trust that is designed to make sure that when principal is distributed from the trust, any tax due on the principal will be withheld and paid, even if the surviving spouse lives outside the United States.
A Qualified Subchapter S Trust is a trust that is funded with stock in an S corporation. If your trust owns or will own stock in an S corporation, then your trust must contain specific provisions applying to S corporations. Most form trusts do not contain S corporation provisions.
A "revocable trust" is a trust that is changeable by the creator of the trust (i.e., the trust creator retains a power to revoke, alter or amend the trust). A trust is revocable by the trust creator unless the trust instrument expressly states that it is irrevocable (i.e., non-changeable).
The purpose of the Separate Property Agreement is typically to confirm (a) that specific property was acquired by one spouse before marriage, by inheritance or gift and any earnings from that separate property will remain the sole and separate property of such spouse and/or (b) an agreement between spouses that specific property is the separate property of one pouse.
The creators of the trust may wish to make a specific gift of money or property out of the trust assets to specified individuals (i.e., grandchildren, more remote relatives, friends, etc.) or charities prior to distribution of the remaining trust assets.
A "special needs" trust is a specialized kind of spendthrift trust designed to provide benefits to an elderly or disabled beneficiary without impairing the beneficiary's eligibility for public benefits, such as Medi-Cal and Supplemental Security Income.
A spendthrift provision is a provision in a trust that prohibits a beneficiary from transferring his or her interest in the trust before actual distributions of income or principal are made. Because of this prohibition, the trust property may be shielded from the creditors of the beneficiary.
Trust administration refers to the management of assets within the trust pursuant to the terms of the trust. The trustee is responsible for trust administration and has a duty to act in the best interests of the beneficiaries. The trustee must protect the assets of the trust, and ensure they are used according to the terms of the trust. The duties of trust administration will vary according to the nature of the trust.
The "trustee" is the person who holds the trust property on behalf and for the benefit of the beneficiaries. If the trust property is held by several persons, then the trustees are commonly called "co-trustees."
A "trust instrument" is a formal document that creates a trust and sets forth the powers of the trustee and the rights of the beneficiaries.
The "trust property" is the property that is governed under the terms of the trust. Property subject to a trust has traditionally been referred to as the trust "res" or "corpus."
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