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Primary
Estate Planning
Most
of our clients come to us seeking to avoid probate and estate taxes and to
protect their heirs from the risks of divorce, remarriage, poor
spending habits or risks of lawsuits and bankruptcy. A brief
description of two planning tools often used in primary estate planning is
provided below.
Revocable
Living Trusts
Prospective
clients almost universally seek to avoid probate in their estate planning,
along with accomplishing other objectives. Although there are several ways
to avoid probate, revocable living trusts are usually the most effective
and safest way to do so. A revocable living trust, combined with a durable
power of attorney, is also the most effective way to eliminate a financial
conservatorship. A revocable living trust is sometimes referred to as
simply a “revocable trust” or a “living trust.” A revocable living
trust serves as a will substitute, is effective when signed, and:
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Allows
the person creating the trust (the “trustmaker”) to retain
absolute and full control of the trust and the property in it;
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Distributes
property after the death of the trustmaker upon the terms established
by the trustmaker;
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Creates
one unified and easy to understand plan for all the trustmaker’s
property;
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Protects
the trustmaker and his or her named beneficiaries if the trustmaker
becomes incapacitated;
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Offers
privacy for the trustmaker and his or her loved ones;
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Is
easy to create and maintain when professional advisors are used, and
can be easily changed as long as the trustmaker is alive and
competent;
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Has
no adverse lifetime gift or income tax consequences;
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Does,
in fact, avoid probate to the extent that the trustmaker’s assets
are either owned in the name of the trust or pass to the trust upon
the trustmaker’s death;
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Offers
continuity in the trustmaker’s affairs upon disability or death;
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Is
valid in every state; and
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Is
difficult for disgruntled heirs to attack.
For
more detailed information about Revocable Living Trusts, please click
here.
Irrevocable
Life Insurance Trusts
Life
insurance is a very useful tool in estate tax planning. Life insurance
proceeds create needed liquidity to pay taxes and expenses, as well as
providing cash dollars for beneficiaries. Yet, if life insurance is not
owned correctly and the premiums are not paid in the most effective
manner, its benefits are greatly reduced.
The
Irrevocable Life Insurance Trust (“ILIT”):
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Avoids
the federal tax on life insurance proceeds on the death of insured –
and can shelter those proceeds from federal estate tax for a number of
generations;
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Allows
premium payments to qualify for the $11,000 annual gift tax exclusion;
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Shelters
the life insurance proceeds from the claims of the beneficiaries’
creditors; and
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Can
be designed to provide lifetime benefits to the clients from the cash
value build-up in the policies held by the trust.
For
more detailed information about Irrevocable Life Insurance Trusts, please click
here.
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