Definition: Estate Planning is essentially the process of preserving and protecting your assets and property and then anticipating and arranging for them to be passed on to next generation in the most orderly manner possible.

Estate Planning is meant to:

• Preserve and grow your assets during life
• Eliminate uncertainties with respect to the disposition of assets at death.
• Maximize the value of your estate by reducing taxes and other expenses. Estate Planning involves:
• Wills
• Trusts
• Beneficiary Designations
• Powers of Attorney
• Property Ownership
• Gifting
• Special provisions for minor children and loved ones with special needs. There are many other strategies and vehicles that are utilized for more sophisticated and high net worth estates.

Wills and Powers of Attorneys

Wills

A Will is utilized to provide for the distribution of assets at death. One of the most important parts of a Will is to name an executor who has the responsibility to collect and distribute assets and to administer your estate. Another important appointment of the Will is for the guardian of minor children. If you have a Living Trust, a Pour Over Will is utilized which incorporates the Trust by reference so that the assets can be distributed according to the provisions of the Trust. It is absolutely necessary for everyone to have a Will in order to name an executor and to provide for the orderly disposition of assets at death.

Powers of Attorney

A Power of Attorney is an authorization to act on someone else’s behalf in a legal or business matter. A Durable Power of Attorney continues in place even if the Grantor becomes incapacitated. The Power of Attorney expires at death. When an estate plan is formulated most people choose to have a Durable Power of Attorney that is broad enough to invest a loved one or trusted friend with all the legal rights that the individual himself/herself has. In this way, if the person becomes mentally incapacitated, the loved one or trusted friend can take care of all of the legal and financial matters on behalf of the incapacitated grantor.

Healthcare Directives or Medical Powers of Attorney

A Healthcare Directive or Medical Power of Attorney is utilized to enable the appointed agent to make medical decisions on behalf of the Grantor. Most of the time, when an individual is injured or suffers some sickness that requires hospitalization or medical care, a Medical Power of Attorney or a Medical Directive will be required by the medical provider. This is a necessity because the patient may become incapable of making decisions himself/herself and the agent then can step into the shoes of the patient and give authority to the medical provider to provide the medical treatment necessary. The Medical Directive is especially important in the event the Grantor becomes in a vegetated state or irreversible coma.

Living Trust

A Living Trust is a legal document drafted by a qualified attorney that contains the Maker’s (the maker of the Trust is called the “Trustor”) instructions for disposing of his/her assets at death. Unlike a will, a Living Trust avoids probate, making the administration of an estate at death much simpler and uncomplicated for the heirs. A Living Trust is just like setting up your own family company that you control and that continues on past your death to carry out your dispositive wishes. The concept is very simple and avoids the expense and delay of court proceedings. You retain your control of the assets in the Trust because you are the manager or trustee of the Trust and you can do everything you could do before you placed the assets in the Trust (such as buy and sell assets, change or even cancel your Trust and you even file the same tax returns). Nothing changes with respect to the assets in the Trust but the names on the title.

Briefly, the benefits of a Living Trust are:

• It avoids probate at death
• It prevents court control of assets in case of incapacity
• It provides maximum privacy
• It can reduce or eliminate estate taxes
• It can be changed or canceled at any time
• It can protect dependents with special needs
• It brings all of your assets together under one plan for a more orderly disposition.

A Living Trust, however, does not provide protection against creditors of the Trustor of the Trust. But it can provide protection against creditors of your heirs.

Re-Titling Assets into Trust

Most of our clients choose to set up a Revocable Living Trust (“RLT”) as part of their basic estate plan. The RLT avoids the costs and time delays of probate, affords opportunities for estate tax savings and still gives the Trustors control over their assets.

However, setting up the RLT is not enough. In order for the Living Trust to be effective and carry out the instructions of the Trustors, it is important that the Trustor’s assets be re-titled into the name of the Trust. This means you need to change titles from your name into the name of the Trust on real estate (by Deed recorded with the County Recorder’s Office) and other titled assets such as stocks, bank accounts, business interest and other investments. No one should have a Trust prepared without having their assets properly re-titled into the name of the Trust.

You need to also change most beneficiary designations to your Trustee. Re-titling assets into a Trust is commonly known as “Funding” a Trust.

In most instances, the same person or couple who make the Trust as Trustors also serve as Trustees. Therefore, the Trustors in their capacity as Trustees continue to control the assets in the Trust.

The reason why you need to properly fund the Trust is that if your assets are not held in the name of the Trust, you will not avoid probate in spite of the fact that you have set up the Trust. Think of the Trust as a basket. You need to place your assets inside the basket so that upon death the assets in the basket can be distributed according to the instructions of the Trust. Since the assets will be inside the basket, they do not have to be probated and your heirs will know what assets you own because they will be set forth on a schedule attached to the Trust. Almost all of your assets except your personal property like clothes, furniture and automobiles should be put inside your Trust.

We have a brochure entitled “Funding Your Living Trust, Why and How to Transfer Your Assets to Your Revocable Living Trust”, which goes into more detail and is available upon request. If you would be interested in this brochure, then fill out the following form and indicate the name of the brochure desired.

Estate Planning Strategies

Estate Planning Strategies and techniques include the following:

• Revocable Living Trusts, Pour Over Wills, Powers of Attorney and Advanced Healthcare Directives.
  1. Charitable Remainder Trusts (CRTs) to secure a planned income stream, structure tax savings, pass significant wealth to your loved ones and benefit the charities of your choice.
  2. Grantor Retained Annuity Trusts (GRATs) to establish a specific personal revenue stream while creating a vehicle to transfer wealth during your lifetime (using leverage available under the Internal Revenue Code).
  3. Family Limited Liability Companies to hold various assets and devise discounted gifting plans while retaining influence and management over those assets.
  4. Irrevocable Life Insurance Trusts (ILIT) which provide for insurance proceeds to be received by your heirs, estate and income tax free so as to provide liquidity to pay for death expenses and estate tax.