Experience peace of mind with professional estate planning.
Getting your estate plan in order leads to security for your beneficiaries—and peace of mind for you. It’s something you should think about, regardless of your age or the size of your estate. The estate planning professionals at JAK can help.
What Is Estate Planning?
Estate planning is one of the most important things you can do for yourself and your loved ones. Generally speaking, it’s the process of determining what will happen to your estate after you pass away. Your estate is defined as all of the property you own at the time of your death, including real estate, personal assets and belongings, bank accounts, stocks and other securities, and life insurance policies.
In the context of estate planning, a beneficiary is a person or entity who has been designated by a benefactor as eligible to receive money and other benefits from the benefactor’s estate. It is important to list a beneficiary or beneficiaries on all of your assets, such as retirement accounts, life insurance contracts, annuities, and payment/transfer on death accounts or deeds. A will or living trust cannot override the beneficiary designation.
You can designate multiple beneficiaries (primary and secondary) on an account and even within the account. Primary and secondary beneficiaries can include a person, trust, or charity. The primary beneficiary will receive the asset at the time of your death; however, you can name more than one primary beneficiary. If you name multiple primary beneficiaries you will have to specify a percentage to each primary beneficiary.
Naming a secondary beneficiary is also prudent. In the circumstance that your primary cannot receive the transfer of the asset, generally due to the primary’s death, the transfer will go to the secondary beneficiary. Because it cannot be overridden by a will or living trust, a designated beneficiary is critical for ensuring your heirs will not have to go through probate or end up with a less favorable distribution.
Estate planning is more than writing a will and setting up a power of attorney. A comprehensive estate plan ensures your wishes about your property will be honored. By spelling out exactly how your property will be transferred, it gives you peace of mind that your loved ones will be provided for in the years to come. If you own a business, your estate plan should also include any business succession plans you have created.
How to Minimize Your Estate Taxes
An estate plan is also critical for minimizing both federal and state estate taxes, as well as legal hurdles that could impact your beneficiaries. That’s because an estate plan includes strategies for transferring assets in the most tax-efficient way possible. Your estate plan should consider estate and inheritance tax exemption limits (i.e., the amount you can give without incurring tax) to maximize the amounts your beneficiaries will receive.
Probate fees and other expenses can also detract from the benefits you intended for your beneficiaries. Planning ahead with an attorney or tax advisor may allow you to reduce these burdens and achieve significant savings.
Estate Planning Questions to Ask Yourself
During the estate planning process, you may also want to consider your health care wishes. This may include identifying the types of life-prolonging care you wish to receive if you are unable to make the election on your own.
Review your assets and beneficiary designations if you have experienced a life change such as a marriage, divorce, death of a spouse, or birth of a child.
How you title your assets can significantly impact what happens to them at your death. Ownership options include joint, sole, contractual, or in trust. In community property states, married couples may also have a community property option. Understanding the ramifications of each option—as well as your intentions for a transfer—is critical before titling any asset.
It’s good practice to review your will and trusts at least once every five years. You should also review these estate planning documents as soon as possible following any key life event, such as a birth, death, or divorce.
As you might imagine, estate planning involves highly personal decisions and, at times, tough conversations. If you have children, it’s important to make sure they (or, if minors, their guardians) understand your plans and wishes. By the same token, adult children should make sure their parents have an estate plan in place. Having these types of conversations may be difficult, but they can go a long way toward preventing conflict or misunderstandings in the future.
If you’re a business owner, communicating your plans and wishes to the future generation and key employees is critical to a successful transition. Depending on your business, this may also involve conversations with your clients, too.
A trust is a legal entity that holds assets for the benefit of another. You can put practically any kind of asset into a trust, including cash, stocks, bonds, insurance policies, real estate, and artwork. Living (revocable) trusts can be used to help you protect and manage your assets if you become incapacitated. If you can no longer handle your own affairs, your trustee (or a successor trustee) steps in to manage your property. Your trustee has a duty to adhere to the terms of the trust, and must always act with your best interests in mind.
Generally speaking, a will is a legal document that outlines your wishes regarding the distribution of your assets, your health care, and, if applicable, the care of your minor children.
One of the most significant differences between a living trust and a will is the level of privacy each offers. That’s because a will requires probate, which is the legal process by which an estate passes from a decedent to heirs and beneficiaries. When a will is submitted to the court to open probate, it becomes public record. A living trust, on the other hand, is a private contract between you, the grantor, and the trust entity. It is never part of the public record.
Another advantage of a living trust is that it can include a comprehensive disability plan, which can allow for the management of your estate if you become mentally incapacitated, not just when you die.
Sometimes, however, a trust alone may not be sufficient for your estate planning needs. If this is the case, a pour-over will may be necessary to capture any assets that aren’t covered by your trust. Determining whether a living trust or will is right for you will depend on your estate planning goals. Your JAK estate planning professional can help you weigh the pros and cons of each.
Your JAK estate planning professionals and estate trust accountants can guide you through the entire process. Benefit from trusted estate planning advice for matters such as revocable living trusts, lifetime gifts, trust or gift return preparation, and more. We’re here to make estate planning as stress-free as possible while preserving your legacy for generations to come.
Professional trust planning for your family’s future.
The financial impact of the death of a family member can be significant for any family. That’s why professional trust planning is so important. A trust, if established correctly, can be a way to pass on your financial legacy while providing for your loved ones. JAK’s trust planning professionals and trust accountants work closely with your attorney to design a trust plan that makes sense for you and your family.
What Is a Trust?
A trust is a legal entity that holds assets for the benefit of another. You can place almost any kind of asset into a trust, including cash, stocks, bonds, insurance policies, real estate, and artwork.
The person who creates and funds a trust is called a grantor (sometimes a settlor or trustor). The individuals or organizations (e.g., charities) that receive income from the trust or have access to its principal, either during or after the grantor’s lifetime, are called beneficiaries. The person responsible for administering the trust, managing its assets, and distributing its income and/or principal in accordance with its terms is called the trustee. The trustee has a duty to adhere to the terms of the trust, and must always act with the grantor’s best interest in mind.
Many types of trusts exist, and each has a specific purpose. The type you choose—as well as how it’s created—will depend on what you’re trying to accomplish. The two basic types of trusts are revocable and irrevocable.
Professional trust planning is a critical component of estate planning. At JAK, we work closely with your attorney to provide you with a trust plan that makes sense for you and your family. JAK’s trust planning professionals and estate trust accountants can also help you evaluate the pros and cons of each type of trust, as well as provide trust tax preparation, tax compliance, and trustee consulting services.
Different types of trusts provide different benefits. Like its name suggests, you can change or even dissolve a revocable trust for as long as you live. Revocable trusts can also be used to help you protect and manage your assets if you become incapacitated. If you can no longer handle your own affairs, your trustee (or a successor trustee) steps in to manage your property.
On the other hand, an irrevocable trust can’t be changed or dissolved once it has been created. But because you only transfer assets into it that you don’t mind losing control over, an irrevocable trust is a valuable estate planning tool.
Although you may have to pay gift taxes on the value of the property upon the initial transfer, all of the property in an irrevocable trust, as well as its future appreciation, is not included in your taxable estate. In other words, an irrevocable trust can help to lower your ultimate estate tax liability, which is advantageous for your beneficiaries.
Establishing a trust requires the services of an experienced attorney. Depending on an attorney’s hourly fees, the cost of establishing a living trust can range from $1,000 to $1,500 for individuals to $1,200 to $2,500 for married couples.
Proper trust planning can go a long way toward maximizing the value your beneficiaries receive from your estate. The taxes owed by your estate could depend on the type of trust you establish, as well as, in some cases, how to designate your beneficiaries. For this reason, it’s important to evaluate potential tax ramifications before establishing a trust. If you’re looking for a way to pass on your financial legacy, JAK can help you take the first step. Contact our trust planning professionals today >
Take control of your future.
Call our estate planning and tax experts today: 651-641-1099
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