Estates and Trusts
Asset Protection in Estate Planning
Description: You're beginning to accumulate substantial wealth, but you worry about protecting it from future potential creditors. Whether your concern is for your personal assets or your business, various tools exist to keep your property safe from tax collectors, accident victims, health-care providers, credit card issuers, business creditors, and creditors of others.
Charitable Giving
Description: When developing your estate plan, you can do well by doing good. Leaving money to charity rewards you in many ways. It gives you a sense of personal satisfaction, and it can save you money in estate taxes.
Life Insurance and Estate Planning
Description: Life insurance has come a long way since the days when it was known as burial insurance and used mainly to pay for funeral expenses. Today, life insurance is a crucial part of many estate plans.
The Best Property to Give to Charity
Description: Giving to charity is not only personally satisfying, the IRS (and possibly your state) also rewards you with generous tax breaks.
How an Irrevocable Life Insurance Trust (ILIT) Works
Description: An ILIT is a trust that is funded by a life insurance policy or life insurance proceeds. If properly structured, an ILIT can help minimize gift and estate taxes.
How can I minimize taxes on my estate?
Description: This question may seem simple, but the answer is not so easy. In fact, there are experts who make their living answering just this question.
Will my beneficiaries have to pay taxes on the proceeds of my life insurance policy?
Description: If you mean the death benefits of the insurance policy, then these funds are generally free from income tax to your named beneficiary or beneficiaries.
What is a Crummey power?
Description: A Crummey power is a provision contained in certain irrevocable trusts that permits specified trust beneficiaries to withdraw gifts you make to the trust for a limited period of time.
I want my son to have my valuable collection of baseball cards when I die. How do I make sure he gets it?
Description: The only way you can be absolutely certain that a specific individual gets a specific asset is to give it them before you die.
Estate Planning and 529 Plans
Description: When you contribute to a 529 plan, you'll not only help your child, grandchild, or other loved one pay for college, but you'll also remove money from your taxable estate. This will help you minimize your tax liability and preserve more of your estate for your loved ones after you die. So, if you're thinking about contributing money to a 529 plan, it pays to understand the gift and estate tax rules.
Transferring Your Family Business
Description: As a business owner, you're going to have to decide when will be the right time to step out of the family business and how you'll do it. There are many estate planning tools you can use to transfer your business. Selecting the right one will depend on whether you plan to retire from the business or keep it until you die.
Choosing a Beneficiary for Your IRA or 401(k)
Description: Selecting beneficiaries for retirement benefits is different from choosing beneficiaries for other assets such as life insurance. With retirement benefits, you need to know the impact of income tax and estate tax laws in order to select the right beneficiaries. Although taxes shouldn't be the sole determining factor in naming your beneficiaries, ignoring the impact of taxes could lead you to make an incorrect choice.
Designating a Beneficiary for Life Insurance
Description: A beneficiary is the person or entity you name (i.e., designate) to receive the death benefits of a life insurance policy. Some states require that your beneficiary have an insurable interest in your life or be related to you (at least at the time the contract is initiated), while others have no such restriction.
Life Insurance and Charitable Giving
Description: Life insurance can be an excellent tool for charitable giving. Not only does life insurance allow you to make a substantial gift to charity at relatively little cost to you, but you may also benefit from tax rules that apply to gifts of life insurance.
Estate Planning: An Introduction
Description: By definition, estate planning is a process designed to help you manage and preserve your assets while you are alive, and to conserve and control their distribution after your death according to your goals and objectives.
Facing the Possibility of Incapacity
Description: Incapacity means that you are either mentally or physically unable to take care of yourself or your day-to-day affairs. Incapacity can result from serious physical injury, mental or physical illness, mental retardation, advancing age, and alcohol or drug abuse.
Trust Basics
Description: Whether you're seeking to manage your own assets, control how your assets are distributed after your death, or plan for incapacity, trusts can help you accomplish your estate planning goals. Their power is in their versatility--many types of trusts exist, each designed for a specific purpose. Although trust law is complex and establishing a trust requires the services of an experienced attorney, mastering the basics isn't hard.
Wills--The Cornerstone of Your Estate Plan
Description: If you care about what happens to your money, home, and other property after you die, you need to do some estate planning. There are many tools you can use to achieve your estate planning goals, but a will is probably the most vital.
Life Insurance and Terminal Illness
Description: If you are terminally ill, your life insurance policy is a valuable resource. Not only can you use life insurance to provide adequate income to your survivors for their short- and long-term needs, but you also may be able to receive a portion of the death proceeds from your life insurance before you die in order to pay necessary expenses or to fulfill a dream.
Life Insurance: Do You Need It?
Description: At some point in your life, you'll probably be faced with the question of whether you need life insurance. Life insurance is a way to protect your loved ones financially after you die and your income stops. The answer to whether you need life insurance depends on your personal and financial circumstances.
Planning Ahead for Life Insurance Proceeds
Description: Why did you purchase life insurance? If you're like most people who buy life insurance, you're looking to provide a source of income for someone (e.g., a spouse, parent, or child) after you die. Buying the policy was the first step. Now you'll need to do a little more work to ensure that the money you leave behind lasts.
The Ins and Outs of Policy Ownership
Description: The way that you structure the ownership of your life insurance policy can have possible estate tax consequences. Without proper planning, the beneficiaries of your life insurance policy might not receive the maximum benefit you intended. So it's important to understand what it means to be a policyowner and the various forms of policy ownership.
Medicaid and Nursing Home Care
Description: As you enter your 60s and 70s, health may become more of an issue than it once was, and your thoughts may turn to the future. Who will take care of you when you can no longer care for yourself? If you must enter a nursing home, how will you pay for it? By learning as much as you can about Medicaid right now and planning appropriately, you may be able to resolve these issues and create a more secure future.
Medicaid and the Principal Residence
Description: Although your stay can be paid for by your personal savings or by your long-term care insurance policy (if you have one), many nursing home residents end up using Medicaid (a joint federal-state program for low-income individuals) to pay for their care.
Medicaid Planning Basics
Description: Unfortunately, many nursing home residents end up exhausting their assets on long-term care. But it doesn't have to be that way. The best time to plan for the possibility of nursing home care is when you're still healthy. By doing so, you may be able to pay for your long-term care and protect assets for your loved ones.
Bypassing Probate
Description: You may have heard about the horrors of probate, but in truth, probate has gotten an undeservedly bad reputation, especially in recent years. If you bypass probate, your estate will go to your beneficiaries without any court proceeding, and you may save a certain amount of time and expenses. However, there is usually little reason for most people to avoid probate today.
Understanding Probate
Description: When you die, you leave behind your estate. Your estate consists of your assets--all of your money, real estate, and worldly belongings. Your estate also includes your debts, expenses, and unpaid taxes. After you die, somebody must take charge of your estate and settle your affairs. This person will take your estate through probate, a court-supervised process that winds up your financial affairs after your death.
Workshop: Business life insurance needs
Description: As a small-business owner, you're working hard to make your business successful. Life insurance can help by providing the cash needed to sustain your business, your family, or your employees when tragedy strikes. It can also be used to fund incentive plans and buy-sell agreements.
Workshop: Number of policies needed with a cross purchase plan
Description: When using life insurance with a buy-sell agreement, either the company or the individual co-owners (shareholders or partners) buy life insurance policies on the life of each co-owner. In an entity purchase (or stock redemption) buy-sell agreement, the business itself buys separate life insurance policies on the lives of each of the co-owners.
Table of Federal Estate Tax Brackets and Exemption Limits
Description: Current federal estate tax law (1) increases the estate tax exemption from $2 million in 2008 to $3.5 million in 2009, (2) imposes a top estate tax rate of 45 percent, (3) repeals the estate tax for 2010 only, and (4) reinstates the estate tax in 2011, with an exemption amount of $1 million and a top tax rate of 55 percent.
How can I determine what my business is worth for estate and gift tax purposes?
Description: Determining the value of your business is something you should not attempt to do on your own, especially because the IRS could challenge your valuation. Even the IRS acknowledges that no one true fair market value (FMV) exists for a closely held business. There are appraisers who specialize in determining the value of businesses. Your CPA may be one of these specialists or know someone who is.
How will estate taxes be paid if I leave no provision in my will?
Description: The IRS places an automatic lien against your estate for any estate taxes that may be due. If your will leaves no specific provision about how these taxes are to be paid, state law generally controls how the burden of paying the taxes will be distributed among your beneficiaries. As a result, your beneficiaries may end up paying taxes out of their own pockets or selling some of the property that you left to them to meet this obligation.
I intend to make tuition payments directly to my grandchild\'s college, and I know this will reduce my estate. But would it be better to contribute to a 529 plan instead?
Description: Direct payment of tuition to an educational institution is not considered a taxable gift. Therefore, you're able to "give away" more than $13,000 per year (the amount of the annual federal gift tax exclusion) for your grandchild's college education and not worry about gift taxes. The money used to pay the tuition also will not be part of your estate.
If I am the account owner when I die, will the value of my 529 account be included in my estate?
Description: Probably not. Generally, the value of a 529 plan is included in the estate of the designated beneficiary. All contributions to 529 plans are considered present interest gifts to the beneficiary.
The death benefit from insurance on my life will be paid to an irrevocable life insurance trust (ILIT). What if those funds are needed to pay my estate taxes?
Description: Life insurance death proceeds paid to a valid ILIT may escape estate taxation in your estate as long as the trust owns the policy and you haven't retained any incidents of ownership in the policy, such as the right to change the beneficiary. Typically, the terms of the ILIT provide that the insurance proceeds be distributed from the trust to your beneficiaries in accordance with your wishes, which are spelled out in the trust document.
What is the applicable exclusion amount?
Description: The applicable exclusion amount (formerly known as the unified credit) exempts a certain amount of gifts made during your life from federal gift tax and exempts a certain amount of your estate from federal estate tax. In other words, if you are a U.S. citizen or resident, you will be able to leave a certain amount of your property free from gift tax or estate tax. The gift tax applicable exclusion amount is $1 million.
Will the value of my 529 account be included in my estate or my beneficiary\'s estate?
Description: All contributions to 529 plans are considered present interest gifts. So, in general, the value of a 529 plan is included in the estate of the designated beneficiary.
How often do I need to review my estate plan?
Description: Although there's no hard-and-fast rule about when you should review your estate plan, the following suggestions may be of some help: You should review your estate plan immediately after a major life event You'll probably want to do a quick review each year because changes in the economy and in the tax code often occur on a yearly basis You'll want to do a more thorough review every five years
Isn\'t estate planning only for the rich?
Description: In a word, no. Estate planning allows you or anyone to implement certain tools now to ensure that your concerns and goals are fulfilled after you die. Your objective may be to simply make sure that your loved ones are provided for. Or you may have more complex goals, such as avoiding probate or reducing those dreaded estate taxes.
Are life insurance proceeds income taxable?
Description: In general, life insurance proceeds paid to you because of the death of the insured are not subject to federal income tax. To qualify for such favorable tax treatment, the life insurance contract must meet certain IRS requirements.
When I die, is my beneficiary required to take a lump-sum payment of my life insurance death benefit?
Description: It isn't necessary for your beneficiary to take a lump sum, although many people prefer that option. Many settlement options for life insurance proceeds exist.
What is the difference between a power of attorney and a durable power of attorney?
Description: A power of attorney is a legal document that authorizes someone to act for you. You name someone known as an agent or attorney-in-fact (though the person need not be an attorney) who steps into your shoes, legally speaking. You can authorize your agent to do such things as sign checks and tax returns, enter into contracts, buy or sell real estate, deposit or withdraw funds, run a business, or anything else you do for yourself.
Does property owned jointly avoid probate?
Description: It depends. Generally, there are four forms of joint ownership. In legal terms, they are known as (1) joint tenancy with rights of survivorship, (2) tenancy in common, (3) tenancy by the entirety, and (4) community property. Ordinarily, interests in property held as joint tenancy with rights of survivorship, tenancy by the entirety, and community property held under joint tenancy avoid probate. An interest in property held as tenancy in common passes by will and thus does not avoid probate.
Can an UGMA/UTMA account reduce my child\'s financial aid for college?
Description: It can, but in the same way that any other asset held by your child can. An UGMA/UTMA account is a custodial account established at a financial institution for a minor child and managed by a parent or other designated custodian. It is established under either a state's Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA).
Should I establish a trust for my child\'s college education fund?
Description: The answer depends first on your financial objectives and then on other factors that will influence those objectives. Trusts are frequently used to minimize estate taxes, get professional management of assets, and control funds while providing for minor children. If these features correspond with your overall financial strategy, a trust can be an efficient way to fund a college education.
What is a life insurance trust and why should I consider establishing one?
Description: A life insurance trust is a trust that has the power to purchase life insurance policies on the person who establishes the trust (the grantor), the grantor's spouse, or the trust beneficiaries.
What is a living trust?
Description: A living trust is a popular estate planning tool that lets you (1) retain control over the trust property while you are alive, (2) avoid guardianship in case you become incapacitated and can no longer handle your own financial affairs, and (3) pass trust property outside of probate when you die.
Can I transfer my business through my will?
Description: Yes, you can use your will to transfer your business interest after your death. You can also use your will to specify a long-term succession plan for your business if, for instance, you want one of your children (who may be currently active in the business) to take over and run it when you're gone. Without such a clause in your will, your interest could possibly be distributed equally to all of your children, even though you did not intend that result.
Do I have to accept a bequest I don\'t want?
Description: No, you don't. A bequest is a gift left to you in a decedent's will. You may not want the gift for a variety of reasons. For example, it may be a burden on you, or it may result in adverse tax consequences for you. Whatever your reason for not wanting the bequest, you can refuse it by disclaiming it.
Do I need an attorney to prepare my will?
Description: Legally, no. Practically speaking, yes. A will does not need to be prepared by an attorney for it to be legally effective. A will that you draft yourself, or even a preprinted will form purchased in an office supply store, will be legally effective if you are of legal age in your state (i.e., 18), are mentally competent, and execute the will properly. This means the will must be acknowledged and signed by you in front of witnesses.
What is the difference between a living will and a living trust?
Description: These two very important estate planning devices are quite different from each other but serve similar purposes. A living will lets you manage your health-care decisions in case you become incapacitated. A living trust lets you manage your property in case you become incapacitated.
Who should I name as guardian of my children in case my spouse and I should die at the same time?
Description: This is an extremely important question. After all, what can be more important than choosing a surrogate parent for your minor children? This process takes careful consideration and may be emotionally difficult, so you'll want to take your time. The best guardian may not be the obvious choice.
Who should I name as trustee?
Description: A trustee is an institution or person who is the legal owner of the property held by the trust and who is responsible for using the trust property for the benefit of the trust beneficiaries according to the terms of the trust document. The trustee can be held personally liable if those duties are breached.

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