Reviewing your Insurance

Tuesday, October 6th, 2009

Some people don’t have the habit of reviewing their life insurance policies.  But bear in mind that an insurance could be a vital part of your financial strategy or estate plan.

You can buy a life insurance policy and make your spouse or children as beneficiaries.  Business owners can also use a buy-sell agreement funded with an attached life insurance so that surviving owners may buy the company’s interest in case of a deceased partner.  In the same token, key-person insurance assures business aid when one of the core employees passes away.

However, there is a downside to this.  Life insurance proceeds form part of your taxable estate and your beneficiaries may be heavily taxed when you pass away.  One alternative around this law would be to allow your children or other beneficiaries to own your policy.  You can give gifts to your kids for the acquisition of the insurance - it’s like pooling their money and buying the policy for you.  Another way you can remove the proceeds of your life insurance from your taxable estate is to get irrevocable life insurance trust.

Life insurance can help you build wealth.  It can also be useful for employee benefits, business continuation, education planning, retirement planning, and estate planning.

Tags: beneficiary, business, estate, estate plan, Estate Planning, law, life insurance, policy, tax, trust, wealth
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Change of Estate Tax Law

Wednesday, August 19th, 2009

Wealthy residents from Connecticut usually flee to Florida in avoiding the estate tax in the state.  But now, they don’t need to do that because there’s a new law (House Bill 6802) enacted on Sept. 8.  The law states that deaths occurring from January 1, 2010 onwards, as much as $3.5 million worth of estates and gifts will be exempt from tax.  This raised the threshold for taxable gifts and estates from the existing $2 million level.

In Connecticut today, when the estate is exactly $2 million, there will be no estate taxes paid.  However, an estate of $2,000,001 pays Connecticut $101,700 in taxes.  Fortunately, this will change beginning 2010.  The new legislation will not only increase the threshold exemption, it will also reduce the rates by 25%.  For instance, a $5.1 million estate which currently pays Connecticut $402,800 will only pay the state $130,200 if the death occurred after year-end. 

This means that you can now stop avoiding Connecticut in planning and establishing your residence.  State Rep. (R-149^th Dist.) Livvy Floren said, “These changes may be considered good step toward the right direction.”  So if you’re a resident of Connecticut or you have real property there, you might want to revisit and make current your estate plan with an attorney soon.  

Tags: attorney, Connecticut, estate plan, estate tax, Florida, gifts, law, Livvy Floren, state, wealthy
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Future of Estate Taxes

Saturday, August 15th, 2009

Legislative gurus, estate attorneys, and financial planners are bustling about the estate tax’s future.  A lot of people already know that under the 2001 EGTRRA (Economic Growth and Tax Relief Reconciliation Act), federal estate tax changed almost annually for the past few years.  In fact, it’s most likely to phase out entirely next year but will come back in 2011 if things don’t change in Washington. 

Currently, estate tax exclusion rests at $3.5 million (for married couples, $7 million) and top tax rate is at 45%.  When federal estate tax goes back in 2011, the exclusion would drop back - $1 million for individuals and $2 million for married couples, with top tax rate rising to 55%.

Today, most experts would agree that estate taxes are here to stay considering that budgetary challenges occupy congress and the current administration.  Also, economic crisis is still underway.  Legislation has been introduced to keep exclusion at current levels and marry this exclusion to lifetime gift tax exemption. 

At this point, it’s still too early to tell the ultimate fate of the current proposal and all others that are bound to be proposed during the coming months.  In the meantime, those in the know solidly believe that it’s important to revisit your current estate plan as well as undertake proactive tax planning.

Tags: attorneys, EGTRRA, estate attorneys, estate plan, estate tax, federal, financial planners, legislation, legislative gurus, proposal, tax planning, Washington
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Guide to Estate Planning

Monday, August 10th, 2009

Many would just watch their bills add up and portfolios dwindle.  Because of this, it’s very tempting to put off future planning.  However, experts caution that everybody needs to sit down in planning their estate.

According to the co-owner of a Seattle-based financial services practice called Sound Financial Partners, Debbie Whitlock, “Whether you’re debt-laden or wealthy, you should not just tell your loved ones how you want to handle your estate, you should put it into writing.”  Also, estate planning is not just about distributing cash.  It’s also making sure that your heirs don’t end up liable for all your debts.  In addition, you would prevent your loved ones from being saddled with funeral costs without hope of reimbursement, or sometimes it could take years of lengthy court process before they are reimbursed.

Planning for your estate could also be a way for you to determine what your life needs and goals are.  Do you want to ensure that your niece’s college education is paid for?  Or do you dream of giving a trust fund to your favorite charity?  Are you sure that you can still stay in your current house when your partner dies?  These are questions that can be answered with estate planning.

Tags: Debbie Whitlock, estate, estate plan, Estate Planning, goals, needs, planning, Sound Financial Partners, trust
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Never Ignore Estate Tax Planning

Monday, August 10th, 2009

At this point, a high percentage of Americans don’t need to worry about federal death tax.  Federal government allows tax-free exemption up to $3.5 million net worth for individuals and $7 million combined for married couples if they do some basic planning.  When they don’t have a basic estate plan, they could miss this full exemption and actually pay a seven-figure tax bill.

Currently, the federal law is hoping that in 2010, all states would pass this estate-tax-free.  However, off-the-record word from Congress says that there’s no way this law will survive 2009.  The states are re-evaluating their existing death tax rule.  There are some states that have no death tax, such as Florida.  While others, like Massachusetts or Connecticut have death taxes as high as 10% for a one million estate.

Therefore, it’s foolish to ignore the issue of estate tax.  Imagine people evading the local sales tax in their state, purchasing in another state, moaning about their annual income tax, yet doing nothing to plan for the largest tax they’ll ever pay?  It sounds ridiculous but it’s so common.

Ben Franklin may be right when he said “There are only two guarantees we have in life - death and taxes.”  And when death comes, taxes are voluntary.  Therefore, plan your estate wisely.

Tags: Americans, Ben Franklin, death, death tax, estate plan, Estate Planning, estate tax, federal, law, tax
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Retirement and Tax Law Changes in 2010

Saturday, August 8th, 2009

This fall, advisers of people who are planning for retirement will hear changes in federal law which can have a huge impact when it comes to their financial plans.  According to a taxation and estate planning professor emeritus at Northwestern University Law School, Roy Adams, “Things that will happen in the succeeding months could cause the biggest changes in the estates and trusts fields.”  From estate tax to Roth IRA conversions, there’s a lot to consider on the horizon for individuals who will leave inheritance to their heirs or to charity, ensure continuation of their family business, and have enough retirement money.

Adams will explain these changes in his presentation at Minneapolis Convention Center on September 14.  At the heart of these changes is estate tax.  In one year, it’s scheduled to be repealed and in 2011, its 2000 version will be followed.  There will also be changes in gift tax and estate rules.  Therefore, these changes could have a huge impact on heirs and family-owned businesses as well as affect gift taxes and charitable contributions.

Furthermore, income limitation to convert 401(k) accounts, 403(b) accounts, and regular IRAs to Roth IRAs shall be removed in 2010 and will be opened up to wealthy individuals.  It is expected that many would want to capitalize on an opportunity like this.   

Tags: charitable, estate plan, estate tax, federal law, gift taxes, income, law, Minneapolis Convention Center, Northwestern University, retirement, Roy Adams, taxation, trusts
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What Do You Need?

Friday, August 7th, 2009

A Harris Interactive poll (2008) found that 55% of adults don’t have wills.  Maybe some don’t want to think about dying, but the truth is: majority doesn’t know how to start one or who to talk to.

An estate plan may be as simple as creating a will or it could also be as complex as building up a living will or trust.  You can talk with a qualified attorney to be enlightened on this but remember that it’s important to create one because you want to ensure the destiny of your assets as well as your children.  When you don’t have any of these, the state will have a free hand on where to take your money and your children along with it when you pass away.

Choose what you need.  A will is an instruction document that states your assets and the individuals or institutions where you want to give it to.  Most wills go to probate after your death.  A probate court will oversee inheritance distribution and debt payment.  A living trust sets up conditions on when and how to distribute your assets.  This will help reduce the taxes paid and avoid probate.  Finally, a living will provides an assignment of medical power of attorney given to a person you trust.

Tags: assets, attorney, death, estate plan, Harris Interactive poll, living will, probate, state, trust, Wills
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Taking Family Trusts to the Next Level

Sunday, August 2nd, 2009

Beneficiaries of family trusts (oftentimes referred to as discretionary trusts), typically have no entitlement to assets held in trust, not until the trustee would exercise his or her discretion and distribute capital or income in their favor.  For example, when a father passed away, his wife may inherit the house or other assets that form part of his estate.  Then, the children (if they’re not minors) would usually take control of the trust and business.  However, trusts commonly have beneficiaries who are creditors too - this part is most often overlooked.

The reason that family trusts (especially those that carry business) tend to have creditors as beneficiaries is because the trustee would be taxed on the debts with a 46.5% flat rate unless he or she distributes all profits, earnings, and realized capital gains in a financial year.  This is one of family trusts’ benefits - the ability to stream the various classes of income and give it to most appropriate beneficiaries so that in the end, a lower tax amount is paid generally compared to business structures where the owners have fixed settlement.

Ideally, a succession plan requires a solicitor, accountant, lawyer, and financial adviser working together.  This will encourage a smooth facilitation so that the estate plan is complied with in a timely manner.

Tags: accountant, beneficiaries, capital, creditors, discretionary trusts, estate plan, family trusts, financial advisor, income, lawyer, solicitor, sucession plan, trust, trustee
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Understand Estate Planning

Sunday, August 2nd, 2009

In spite of recent financial setbacks, a lot of people are claiming to be better off financially compared to five years ago.  That’s why when a group of financial expert asked novices in the investment arena what estate planning they have done in the past, they were surprised that there was no affirmative answer.  Most people looked perplexed and raised their eyebrows.  It seems that they’re confused whether the expert mean setting up a trust or drawing up a will.

The expert asked not to be named but he said “It’s very interesting to find out that most people have never heard of the estate planning concept.  And even those aware of it have not taken it seriously.  However, it’s going to be a very serious issue when people get richer.” 

Moreover, the director of Transcend Consulting, Kartik Jhaveri pointed out that “We’ve been trying to spread the concept so that a lot of people are aware of it, but we don’t get a lot of queries.”  Therefore, a wealth manager concluded that “People usually find estate planning difficult to grasp.  So it’s much better for us to talk about different concepts of financial planning (such as retirement planning) to explain things to people.”

Tags: estate plan, Estate Planning, financial, Kartik Jhaveri, Transcend Consulting, trust, wealth manager, will
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Transferring Real Estate Title

Saturday, August 1st, 2009

When you own property in another state, the only way that you can avoid probate proceedings is to prepare and record a new deed that will transfer the title to include joint owners.  These owners may be your beneficiaries such as your spouse and children.  You can also transfer the title to a revocable trust or to entities like partnerships, limited liability companies, and corporations.

When out-of-state real estate’s title is transferred to a trust, the title will not be held by an individual but by a trustee.  So even when the individual dies, the trust will still continue.  Same thing for transferring to an entity - it’s the entity that holds the real estate title and not the decedent.

While these are simple procedures, there are a few downsides to a joint ownership.  Any lease, mortgage, sale, or other transactions that involve the property require unanimous consent of every owner.  Another disadvantage is this: the interest of any joint tenant is exposed to creditors’ claims.

And if your property is a pied-a-terr in Paris or an island villa in Antigua, you need to consider estate tax systems and probate in foreign countries.  Therefore, your attorney needs to work with a lawyer in a foreign jurisdiction for proper coordination and inclusion of the property in your estate plan.   

Tags: attorney, estate plan, joint owners, lawyer, probate, property, revocable trust, tax systems, transfer title, trust, trustee
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Five Key Estate Planning Documents

Saturday, July 25th, 2009

Avoiding the creation of an estate plan may be due to dismissal of subjects such as taxes, incapacity, and death.  However, the fact still remains that you need to protect your wealth and your loved ones when you’re gone.  So here are five documents that you need to have while you’re still active:

*Will - these are simple instructions to distribute your assets to the beneficiaries after death.  You need to appoint an executor who will designate your assets, while you need to designate a guardian for minor children.

*Durable Power of Attorney (POA) - power of attorney is simply a legal document that will name another person who will act legally on your behalf.  A regular POA terminates upon a person’s disability or death.  However a durable POA will continue beyond disability and will only terminate upon death.

*Health Care POA - same as durable POA but it will authorize someone to decide for you in medical situations in case you’re unable to do so.

*Living Will - expresses your intentions for use of life-sustaining measures in a terminal illness.

*Revocable Living Trust - a type of trust that is often used in estate plans.  When you transfer assets to a revocable trust, your beneficiaries will receive the income or principal according to the terms of the trust.

Creating an estate plan will not be an overwhelming task if you work with experienced professionals such as a CPA, financial advisor, and an attorney,

Tags: attorney, death, estate plan, legal, power of attorney, revocable living trust, wealth, will
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Create your Estate Plan Today

Saturday, July 25th, 2009

Better Business Bureau reminds people that estate planning is not just for the wealthy.  They advise consumers to create an estate plan if they have something of value to pass on to their loved ones after death.  According to surveys, 55% of adults don’t want to set up an estate plan because either they don’t want to think of dying or they believe that they don’t have any assets to pass on.

However, if you don’t give your final instructions, nobody would know where your money should go or how will your children be taken cared of.  Do you want to leave these important decisions to the state?  If not, it’s important to create an estate plan and ensure that your wishes will be followed.

Creating an estate plan may be simple if you just draft a will.  But it can also be complex when you’re trying to set up a trust or a living will.  A will is something that you create to allocate your assets and establish guardianship of your children.  On the other hand, a living trust could set up conditions to distribute your assets while reducing inheritance taxes and avoiding probate.  Finally, a living will communicates a person’s desire for lifesaving measures in case there’s mental incapacity to decide on an emergency medical situation.  To help you draft these important documents, make sure that you consult an estate planning attorney.

Tags: attorney, Better Business Bureau, estate plan, estate planning attorney, living trust, living will, wealthy, will
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Draft an Advance Directive to be Prepared

Saturday, July 18th, 2009

Nobody would like to spend time mulling over their death.  However, it’s important to create an advance estate plan that will give you control over any situation when the time comes that you can’t voice your opinion anymore.  Estate planning attorneys’ advice: “You can’t change the fact that you will die.  And if you have the legal paperwork properly filed, you’re just showing that you respect the people you are leaving behind - you’re not putting them through stress and emotional turmoil than necessary.”

Fortunately today, anyone can draft an advance estate plan, which is a legal document specifying the things you want to happen when you’re no longer able to provide consent.  Aside from the distribution of your assets to beneficiaries, these advance directives would typically cover the situations you want when medical staff would attempt to revive you or the kind of life support you prefer to be put on.

At age 25, maybe you would want them to revive you at full blast (even hit you with lightning if possible) but at age 95, you may have a different perspective since you would not want to reach 100 years old hooked to these machines.  Therefore, advanced directives such as these would legally allow you to specify these things before the actual emergency situation when you’ll be unable to give directions yourself.  

Tags: assets, attorney, attorneys, beneficiaries, death, directives, emergency, estate plan, Estate Planning, legal, legal paperwork
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Attorney-Client Relationship in Estate Planning

Sunday, July 12th, 2009

Sometimes, elderly clients would come to attorneys to draft an estate plan.  But these clients often had their caregivers or children with them.  It may be reasonable because these clients rely on their companions to express what they want and to make sure that the attorney is somebody they can trust.

However, some attorneys would want to meet the client alone to discuss major decisions.  These are the reasons why:

• -An estate planning attorney is required to confidentially and faithfully serve the client’s interest only.  Because of this, the attorney must meet the client alone to ensure that confidential information will not be known to anyone else (unless the client gives permission).
• .
• -When the meeting is held in confidence, the attorney would more likely get personal with the client to understand their desires and circumstances.  If anyone is in the room (say the children), other people might be the one to take charge of succeeding discussions and it might prevent the client from saying something confidential.  Therefore, a confidential meeting would definitely protect the client and enable the attorney to uncover the true wishes.
• .
• -Finally, the attorney should be satisfied of the mental capacity of the client.  The elderly should still have the ability to understand and communicate the instructions clearly.  Also, clients need to act out of free will without any “undue influence.”

Tags: attorney-client relationship, attorneys, confidential, elderly clients, estate plan, estate planning attorney, free will
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Lessons from Michael Jackson

Thursday, July 9th, 2009

Before he died, it’s a good thing that Michael Jackson made a smart estate plan.  He provided and cared for his loved ones because a separate document gathered his assets (estimated to be over $500 million, which exceeds his debt by $200 million).  It’s called a family trust - this ensures that his affairs would stay out of court and out of the eyes of the public.

He established this trust along with his will, and it’s also called a “living or revocable trust.”  The goal of this estate-planning tool would be to transfer all the property - including real estate, bank accounts, and cars - into a separate owned entity while maintaining the control as a trustee.  In Jackson’s case, he established a “Michael Jackson Family Trust.”

At his death, the control will be transferred to his successor trustee or co-trustee.  Most people (Jackson included) will set it up to “pour over” - this means that whatever assets remain outside of the trust would be eventually be added to the estate at their death.

The beauty of this trust is: people can avoid a public process called probate.  Aside from celebrities, this process would also make sense for people with significant assets because it would spare their heirs from a prolonged legal process.

Tags: assets, co-trustee, estate plan, Family Trust, legal, living trust, Michael Jackson, probate, revocable trust, successor trustee, trust, trustee, will
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Your Final Arrangements

Wednesday, July 8th, 2009

Recently, Indiana took another stab to address uncertainty in the final arrangements of a person.  It was mandated that starting July 1, any person may execute an FPD (Funeral Planning Declaration).  When you execute an FPD, you can nominate anyone to be a “designee” - this person will carry out your final instructions.

The form is so easy and simple to understand.  In your FPD, you can leave instructions regarding grave memorial, ceremonial services, funeral, entombment, cremation, and burial.

The traditional way that you can plan final arrangements is through a will.  Unfortunately, some beneficiaries don’t know where the will is; and in some case, the deceased was already buried when they’ve found it. 

Another common way is to preplan by going to a funeral home.  This means that you make decisions based on a field expert’s guidance.  But who wants to go to a funeral home to begin planning?  The reality is that people think it’s creepy to discuss an estate plan in a funeral home.

Truly, one of the most difficult parts of estate planning would involve final arrangements.  These issues could also become complicated if there are mixed families, second spouses, or the members of the family just won’t get along.

Tags: estate plan, Estate Planning, final arrangements, FPD, funeral home, Indiana, instructions, preplan, will
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Celebrity Estate Planning

Wednesday, July 1st, 2009

With so many celebrities passing away recently - Karl Malden, David Carradine, Farrah Fawcett, and Michael Jackson - there’s been a lot of talk about lack of proper estate planning.  Some celebrities who passed away without even planning their estate are Elvis, Anna Nicole Smith, Jerry Garcia, and Heath Ledger.

Apparently, Michael Jackson did some planning; however, his documents were not updated for more than 7 (seven) years.  So it goes to show that when celebrities neglect this very important step, then there are dreadful consequences.

You might be thinking that you don’t have an estate to protect like them and you probably don’t need estate planning.  But be informed that whatever size your estate is, it does not excuse you from executing an estate plan.  Simply put, it’s a plan that will ensure your family’s financial needs are met after you die.

So if you own a home (whether mortgaged or not), a business, or any other asset (such as insurance policies), you need an estate plan.  Certainly if you have children, you would want to ensure a bright future for them even after you’re gone.  The only way to do this is to dust off your documents and review them to see and decide on the beneficiaries of your assets.  It would be better if you speak to an estate planning attorney to seek help in taking care of this.

Tags: beneficiaries, celebrities, estate, estate plan, Estate Planning, estate planning attorney, Michael Jackson
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60% of Canadians Don’t Have Wills

Saturday, June 27th, 2009

The chance of catching a fire in your house is only one-in-230; but people are lining up to get property insurance, just to be sure.  Meanwhile, the odds of death are one-in-one; despite this, over 60% of Canadians do not have a will or even a comprehensive estate plan.  This is according to Society of Trust & Estate Practitioners.

Maybe it’s an issue of facing mortality or not wanting to place a burden to the family.  Most of the time, people don’t see any immediate benefit of planning for the estate, or sometimes, they just don’t know where to start.

Everyone should make a will, regardless of your wealth.  An estate is everything you own - this includes property, investments, and real estate.  At the same time, it also includes all the debts you owe.

The objective of most people is to make sure that their family is financially secure when they die (though in some cases, beneficiaries may also include charities or non-family members).  So an effective “will” does not only make sure that it states clearly who should get what, but rather, distributes the assets tax-effectively and efficiently.  It’s also critical that your assets are managed before you are incapacitated or ill.

The first step would be to pull together a team of experts to guide you.  It’s recommended that you include a financial adviser, tax professional, and a lawyer, who can be your overall coordinator.

Tags: debts, estate, estate plan, experts, financial adviser, investment, lawyer, property, real estate, tax professional, wealth, will
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Make Sure You Have the Right Estate Plan

Monday, June 22nd, 2009

There was once a lady who recently lost her husband.  She is in the midst of settling his affairs but the problem is that she’s having trouble cashing a check from the insurance company because it’s payable to a trust.  However, she claims that they don’t have a trust in place.

After reviewing the check and a pile of papers, the Indiana Bar member, senior trust officer and vice president of First National Bank, Christopher W. Yugo, indeed found a joint trust amendment which changed the trustees.  The amendment was signed by the lady and her husband but she swore that she never met an attorney.

As Yugo probed deeper, he realized that the couple sought the assistance of a financial planner for their estate plan.  Then, the planner took the information to one attorney who prepared the necessary documents.  In the end, the documents were returned to the planner who probably did his best to execute the plan while ignoring the implications of unauthorized law practice.

You can learn two things from this story.  First, be careful who you approach for estate planning advice.  It’s always critical for you to meet with an attorney before executing an estate plan.  Second, it’s important to have a basic knowledge of estate planning.  Furthermore, don’t hesitate to ask a lot of questions to your attorney so that you’ll understand every detail of your estate plan.

Tags: attorney, Christopher W. Yugo, estate plan, Estate Planning, financial planner, trust, trust amendment, trustees
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What is Estate Planning?

Thursday, June 18th, 2009

It’s important to have an “estate plan” in place no matter how much your net worth is.  Such plan will ensure that your financial goals are met and your family gets your assets after you pass away.

Several elements of an estate plan include: a will, living will or a health-care proxy (sometimes called medical power of attorney), and power of attorney assignment.  For some people, it would also make sense to have a “trust.”  However, you have to be mindful of both state and federal laws governing estates.  That is why it’s important to consult an attorney for your estate planning.

A good place to start is to take inventory of your assets.  These consist of your business interests, real estate properties, insurance policies, retirement savings, and other investments.  Answer these three questions?

1. 1. Who will inherit your assets?
2. 2. If ever you’re incapacitated, who do you want to handle your financial affairs?
3. 3. If you’re unable to make decisions yourself, who do you want to make medical decisions for you?

Remember that everybody needs an estate plan and it’s not just for the wealthy.  Inheritance can sometimes be a loaded issue.  So by being clear on your intentions, you can help dispel potential conflicts when you’re gone.

Tags: assets, attorney, estate plan, health-care proxy, inheritance, laws, living will, power of attorney, trust, will
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