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As a society we are confronted with tax reporting season. While
you are in the process of addressing tax related
issues, now is the time to take concrete steps
to establish or review an estate plan. It's
also a good idea to think about what could
happen before your death, if you become seriously
ill and unable to handle your own affairs.
First, the basics: Consider a probate-avoidance living trust
and, if you're concerned about estate taxes,
a tax-saving trust. Have a will, or update
an old one. Lots of Americans haven't made
even a simple will, to say nothing of a more
comprehensive plan to avoid probate or save
on estate taxes. Estate planning is simply
the process of arranging for what will happen
to your property (estate) if you pass away.
Depending on your age, lifestyle, health, wealth, marital
or family status, you may not need to do much
at all in the way of estate planning. If you're
young and single, there's not much point in
putting a lot of energy into estate planning.
Unless your lifestyle is unusually risky or
you have a serious illness, you're very unlikely
to die for a long, long time. If you're
an uncommonly rich 25-year-old, at least have
a will. That way you can leave your possessions
to any recipient you choose. If you've got
a life partner but no marriage certificate,
a will is almost a must-have document.
Without
a will, state law will dictate where your
property goes. If you and your partner have made
joint purchases, say a home, make sure HOW
you hold title protects the interests pf the
other party. Leaving this issue for a court
to decide the distribution of your assets,
they may end up in the hands of someone non-deserving.
Having children complicates life. Here’s
what to think about. First, minimum,
have a will. If you don't have a will
and you pass away, some of your property may
go not to your spouse, but directly to your
children. When given a choice, most people
prefer that the money go to their spouse, who
will use it for the kids. The problem with
the children inheriting directly is that the
surviving parent may need to get court permission
to handle the money, a waste of time and money
in most families.
If you've made it to a comfortable time in life -- you've
accumulated some material wealth, you will
probably want to take some time to reflect
on what you will eventually leave behind. To
save your family the cost and hassle of probate
court proceedings after your death, think about
creating a revocable living trust. It's hardly
more trouble than writing a will, and lets
everything go directly to your heirs after
your death, without taking an expensive detour
through probate court.
While you're alive, the trust has no effect, and you can revoke
it or change its terms at any time. But after
your death, the person you chose to be your "successor
trustee" takes control of trust property
and transfers it according to the directions
you left in the trust document. It's quick
and simple.
Another way to cut taxes is to create certain kinds of trusts.
The AB trust, is one that couples use. By 2006,
an AB trust will shield up to $2 million from
estate tax.
Charitable trusts, which involve making a gift to a charity
and getting some payments back, can also save
on both estate and income tax. There are many
other varieties of trusts; learn about them
on your own, and then have an experienced estate
planning lawyer draw up the documents you want.
Then, although no one wants to do it, take
a minute to think about the possibility that
at some time, you might become incapacitated
and unable to handle day-to-day financial matters
or make healthcare decisions. If you don't
do anything to prepare for this unpleasant
possibility, a judge may have to appoint someone
to make these decisions for you.
You
can choose that person yourself, and give
him or her legal authority to act for you,
by creating
documents called durable powers of attorney. These
are very complicated issues, many of which
can be simplified by working with a qualified
professional.
The purpose of this newsletter is not to give legal or taxation
advice. The
loan professional that has made this information
available to you specializes in assisting those
individuals with obtaining a loan whether for
purchase or refinance. The purpose is to stimulate thought for our clients
and those professionals we network with. One
should consult with a qualified professional
prior to implementing any taxation or estate
planning strategies. If
you are an estate planning professional receiving
this newsletter, please call our office and
introduce yourself to us. We are always
seeking to grow our referral network and expose
more service professionals to our client base. |
