Estate Planning

Wills are commonplace enough that most people are familiar with the basic reason they’re used – in a nutshell, to determine who receives a deceased individual’s assets. Wills are capable of much more than just defining who inherits the family silver, however. The following are some of the useful things that can be done with a will:

List who gets what

As mentioned, when someone passes away, wills are typically used to determine to which person or persons the decedent’s property will be given.

Establish trusts at your death

There are often instances in which a person may not want a child or loved one to receive all of his or her inheritance at once. Or perhaps a person wishes that the beneficiary is able to use the property for a given amount of time or for a specific purpose, and then require that it be inherited by someone else. In situations like these, a trust can be useful, because a trust holds property on someone else’s behalf. When included in a will, trusts are frequently established for minor children with the purpose of appointing another person, a trustee, who can manage the children’s finances until they reach a given age or are mature enough to manage them on their own. Another common situation where a trust may be used is a second marriage – ultimately, a person may want his or her children to inherit the decedent’s property, but allow the surviving spouse to retain access to certain property in the meantime. Trusts can help achieve all of these goals.

Name guardians for your children

A will is also often used to designate who the decedent wants to raise his or her children if the surviving parent is unable to raise them.  The will typically includes at least one alternate should the first choice not be able to serve.

Naming executors and trustees

Wills are also used to name other important individuals involved in carrying out a deceased individual’s affairs: executors and trustees. The executor of the estate carries out the wishes of the decedent listed in the will, and if any trusts are created, instructions for those trusts are seen to by the trustee.

As you can see, wills can be very useful estate planning tools, but they are only effective if they are drafted correctly to meet the specific needs of each individual. Reviewing all of your options with an estate planning attorney can help you establish a will that guarantees your wishes will be honored.

List your funeral wishes

Though this information is often included in other documents, a will may also declare what should be done with an individual’s remains: whether to be buried or cremated, and where to be buried or the ashes spread.  More specific funeral instructions may also be listed, such as where and when the service should occur, what music should be played, and even which readings should be recited and by whom.

Tax planning

If you want to avoid estate or inheritance taxes, wills can be a useful tool. This approach to tax planning is sometimes achievable by including instructions to set up different types of trusts.

Do all my assets pass according to my Will?

Not all of your assets pass under the terms of your Will. You can and should designate some assets, such as life insurance, retirement accounts, assets in a trust, bank accounts, and other accounts, to pass to a specific designated beneficiary upon the occurrence of specific events, such as your death.

When should I update my Will?

If you already have a Will, you should review your Will periodically to make sure it your wishes have not changed. Some common situation that occur and lead to your desiring to change your Will are:

• If you marry or divorce;
• If you give birth to or adopt a child; when a family member or other beneficiary of your estate dies;
• When there are changes in the federal estate tax laws or state tax laws that might impact your estate;
• When someone you’ve named as an executor, trustee or guardian is no longer able to fulfill that role;
• When you decide to change an executor, trustee or guardian;
• When you want to change the way your property will be distributed;
• When you move to another state;
• When your net worth increases or decreases dramatically;
• When your children are no longer minors, or are old enough to handle financial matters on their own; or
• You wish to eliminate bequests to beneficiaries.

You should never try to change your will by marking on a previous will, i.e., writing notations in the margins, or crossing out words. This only risks the possibility of ambiguity and a potential will contest.

It’s easy to associate trusts with multi-millionaires who create large trust funds for their children, but trusts are hardly the exclusive province of the very wealthy. In fact, trusts are simple and beneficial tools that can be used in estate planning and are available to individuals from all walks of life.

Quite simply, a trust is an arrangement in which one party holds and manages property on behalf of another party. When it comes to creating a trust in regard to estate planning, you, as the estate planner (also known as the settlor, grantor, or trustor), transfer assets to the trust and authorize another person (the trustee) to manage those assets to the benefit of a third party (the beneficiaries). Protection from taxes or providing for the needs of underage children are examples of the many purposes trusts can serve.

The following types of trusts may be useful in estate planning:

Irrevocable Life Insurance Trusts

Irrevocable life insurance trusts. Irrevocable life insurance trusts (or ILIT’s) are typically used to transfer the proceeds of a person’s life insurance policy beyond his or her estate for the purpose of minimizing estate taxes

Revocable Living Trusts

Revocable living trusts often accompany wills to help accomplish the wishes of the deceased individual.  These trusts will ordinarily be used in states where the probate process is especially tedious, allowing the assets in the trust to avoid probate altogether. A revocable living trust may also be helpful when an individual owns real estate across several states.

If you are interested see our Living Trusts frequently asked questions page.

Trusts for Minors

A fairly common use for trusts in an overall estate plan is to leave money to one’s children or grandchildren. Usually, this helps to ensure that the children receive financial support for specific purposes, such as education, medical expenses, a general allowance, etc. Then, after meeting a given age or accomplishment (such as graduating from college), the restrictions on the trust are lifted and the children may use the assets they receive to do as they wish.

Special Needs Trusts

Specific trusts can also be set up to aid a person who has special needs. Individuals with special needs often receive benefits from the government, but will typically see those benefits suspended should they suddenly receive an inheritance. Only after exhausting the inheritance will those benefits transfers resume. While providing supplemental funds for an individual’s secondary requests, special needs trusts ensure that those government benefits continue to be available to meet the individual’s primary needs.

Spendthrift Trusts

Spendthrift trusts are specially designed to maintain close protection of assets from both the beneficiaries and creditors.  An independent trustee is typically appointed, and he or she has final say over the distribution of assets of the trust.

As you can see, there are a variety of trusts to serve a variety of purposes, and each trust can be tailored to meet your specific gift-making or estate planning needs.  With so many vehicles to choose from, an experienced estate planning attorney is a valuable resource to help you assess your finances and goals to determine which trust is best-suited to preserve your wealth and your legacy.

If you are the parent or caretaker of a child or loved one with special needs (such as mental or physical disabilities), you must have faced a particularly challenging and worrying question when planning for their future: what will happen to them once you become unable to provide for their care?

Unfortunately, money and assets left for them in a typical will or trust may not be ideal. This is because receiving a sudden inheritance may count against the financial conditions that allow them to qualify for benefits under the Supplemental Security Income (SSI) and Medicaid programs. In effect, they will have too much money to receive their benefits. Thankfully, for those receiving SSI and Medicaid, the government does allow assets to be held in a specialized trust, called a “Special Needs” or “Supplemental Needs” Trust, so long as particular qualifications are met. Allocating assets to this type of trust will help ensure that your loved one continues to receive his or her public monetary benefits to provide for life’s basic necessities (food, housing, clothing, health care). The assets assigned to the Special Needs Trust can then be used to provide your loved one with the resources that would allow them to enjoy a richer quality of life.

Our firm’s attorneys can help you organize a Special Needs Trust to provide the funds to meet the supplemental needs of your loved one, all while maintaining his or her eligibility for government benefits. It is important to make clear that the Special Needs Trust can only supplement those basic public benefits; it cannot replace them. Furthermore, the trust does not provide the disabled beneficiary with its funds. Rather, it pays third parties who provide the goods and services to be used and enjoyed by your loved one.

The Special Needs Trust can be used for a variety of life-enriching purchases, such as:

• Annual check-ups at an independent medical facility
• Attendance of religious services
• Supplemental education and tutoring
• Out-of-pocket medical and dental expenses
• Transportation (including purchase of a vehicle)
• Maintenance of vehicles
• Purchase of materials for a hobby or recreation activity
• Funds for trips or vacations
• Funds for entertainment such as movies, concerts, or sporting events.
• Purchase of goods and services that add enjoyment and quality to life, including computers, videos, furniture, or electronics.
• Athletic training or competitions
• Special dietary needs
• A personal care attendant or escort

If you are concerned about providing for your disabled beneficiaries after your passing, a Special Needs Trust will be a vital component of your estate planning. Special Needs Trusts are independent trusts that can be funded during your life with an investment or at your death with a life insurance policy, or can be included as a sub-trust within your existing living trust.

You’ve worked hard throughout your life to provide for your family, helping to ensure their financial security.  However, the important assets you have gained may be subject to taxation by the IRS and state taxing authorities as your estate is being distributed.  Advanced estate planning strategies can help you avoid this.

Our firm frequently assists affluent families by employing sophisticated legal tools, including Family Limited Partnerships or Limited Liability Companies, Personal Residence Trusts, Irrevocable Life Insurance Trusts, and a variety of charitable gifting strategies to reduce Federal Estate Taxes, Gift Taxes, and Generation Skipping Transfer Taxes.

Using Family Limited Partnerships in Your Estate Plan

A Family Limited Partnership (FLP) is a type of limited partnership formed among members of a family. The primary benefits received from an FLP include savings on estate and gift taxes, as well as asset protection. At the same time, while enjoying these benefits you can also maintain control of the assets transferred into the partnership.

Upon establishing the FLP and transferring assets to it, you can grant limited partnership interests to your children or other beneficiaries. This achieves several different estate planning goals at the same time.

First, since the value of your taxable estate decreases with the gift of each limited partnership interest, any tax your beneficiaries might have to pay after your passing also decreases. Furthermore, because the gifts are made using the annual gift tax exclusion, you won’t be liable for any gift tax on the transfer.

Second, you can maintain greater value in the assets in the partnership relative to the value of the limited partnership interests. By definition, limited partners are not allowed to direct or control the routine operations of the partnership, which means a minority discount can be applied to reduce the value of any limited partnership interests you choose to transfer. In addition, because the partnership is a closely-held entity, a similar discount can be applied because the limited partnership interest cannot be sold publicly. Therefore, while you remain in control of the assets of the entire partnership, you are also able to leverage the FLP as an instrument to grant more wealth to your beneficiaries. Finally, a well-constructed FLP may provide protection from creditors, since the general partners are not required to distribute the partnership’s earnings.

Using Qualified Personal Residence Trusts in Your Estate Plan

Our homes frequently hold great value for us, both sentimental and material; as they are often among the largest parts of our estate, they can also hold great value to federal and state tax agencies.  One way to reduce the tax burden generated by a home is to establish a Qualified Personal Residence Trust or QPRT (pronounced “cue-pert”).  With this type of trust, you can still live in your home or vacation house, but transfer ownership for a substantial discount and freeze its value when it comes to estate taxes.  It works like this: You grant the title to your house to the QPRT (often to benefit your family members), but specify that you can continue to live in the house for a certain length of time, usually years. After that period has passed, the property passes to your beneficiaries without any additional estate or gift taxes, despite any appreciation in value the house may have accrued.  Once that happens, you are allowed to continue living in the home but must pay rent to your family or beneficiary so that the property is not included in your estate.  This can be advantageous, serving to further decrease the value of your taxable estate, although the rent income will be taxable as income for your family.  On the other hand, should you die before the end of the period, inclusion of the total value of the house in your estate is unavoidable, but in the majority of cases you are no worse off than you would have been had you not established a QPRT.  A QPRT also provides great protection from creditors: once the QPRT is created and your residence is transferred to it, the property is technically owned by the trust, rather than you.

Using Irrevocable Life Insurance Trusts to Lower Estate Taxes

It is commonly understood that the proceeds of a life insurance policy paid to your beneficiaries are not subject to income taxes. Unfortunately, this does not hold true for Federal Estate Taxes.  In fact, since life a insurance pay-out is considered part of your taxable estate, your family or beneficiaries could stand to lose up to half of its value to estate taxes.

To avoid this scenario, our attorneys can help you create an Irrevocable Life Insurance Trust. The goal of an ILIT is to own your life insurance policy, keep the policy outside of your estate, and prevent the proceeds from being taxable as part of the estate. Those untouched proceeds can then be used as your beneficiaries see fit, from paying estate taxes, debts, and final expenses to providing income to your survivors.  The ILIT serves as both the owner of the policy and the beneficiary.  Once created, you can then provide cash gifts to your trust by making use of an annual gift tax exclusion. The trustee uses these gifts to pay the life insurance premium, and the proceeds are made available to your beneficiaries upon your death.

There are a number of ways to set up an ILIT.  As one option, ILITs can be built to provide income to a surviving spouse while granting the rest to your children from a previous marriage.  And in the case of a child who is not financially responsible, you can arrange for distribution of a restricted amount of the insurance proceeds over a given length of time.

Our firm is dedicated to helping clients make educated, informed decisions about their assets and will work with you and your team of financial advisors and CPAs to implement a highly sophisticated and effective estate plan that allows for the maximum transfer of assets to your loved ones

An increasing number of gun owners, with help from their attorneys, are creating legal trusts to buy silencers, fully-automatic machine guns, or any other items or weapon whose sale is restricted by federal gun law, otherwise known as the National Firearms Act “NFA.” These gun trusts subvert the requirement to obtain local law enforcement approval or even undergo criminal background checks. This trust goes around much of the red tape and problems associated with personal ownership of NFA weapons.

These gun trusts allow the owners of the regulated firearms to use and share them legally with family members and to pass them down through the generations. These trusts are gaining in popularity because they offer legal protection from possible future laws that may ban the possession or sale of the firearms.

Benefits of a Gun Trust

Using a gun trust to transfer ownership of your weapons can avoid some of the federal transfer requirements and accomplish the following goals as well:

Gun trusts avoid probate. The firearms are held by a trust, therefore, they do not need to go through probate at your death.

Gun trust may avoid possible future restrictions on gun transfers. Although no such legislation has been proposed, some gun advocates fear that someday it will be illegal to leave certain firearms to inheritors or transfer them during life. The hope is holding the guns in a gun trust will let help them get around any limitations if those limitations are enacted.

Gun trusts allow more than one person to possess and use the weapons held in trust. You may want to name more than one person as trustee because each trustee will have the right to possess or use the trust’s firearms. If you do not, only the registered owner can possess or use NFA weapons.

Gun Trusts keep the gun in the trust even after the current owner’s death, avoiding the usual transfer requirements. Once the trust is created and funded – the transfer firearms to it – you can arrange for the trust to stay in existence even after your death. The trustees and beneficiaries of the trust would have whatever rights you grant them in the terms of the trust. Because the firearm stays in the trust at your death, the transfer procedure is avoided. That means your inheritors don’t have to pay $200 transfer tax, file an ATF transfer form, receive permission from the local chief law enforcement officer (CLEO), and get fingerprinted and photographed.

Gun trusts help the executor. The executor or administrator of your estate – the person who is responsible for gathering your assets, paying your debts, and distributing what’s left – may not know about or understand with the rules about ownership and possession of NFA and other weapons. An executor could violate criminal laws by transferring a weapon without going through the proper procedure, taking or sending it to a state where it is prohibited, or giving it to a person who is legally prohibited from owning it. When firearms are in a trust, the executor is not involved; the trustee is in charge. You can name a trustee who is well-versed in state and federal gun laws.