Estate Planning

Estate planning is the process of anticipating and arranging for the disposal of an estate. Estate planning typically attempts to eliminate uncertainties over the administration of a probate and maximize the value of the estate by reducing taxes and other expenses. Guardians are often designated for minor children and beneficiaries in incapacity.

Devices

Estate planning involves the will, trusts, beneficiary designations, powers of appointment, property ownership (joint tenancy with rights of survivorship, tenancy in common, tenancy by the entirety), gift, and powers of attorney, specifically the durable financial power of attorney and the durable medical power of attorney. After widespread litigation and media coverage surrounding the Terri Schiavo case, many estate planning attorneys[weasel words] now advise clients to also create a living will. Specific final arrangements, such as whether to be buried or cremated, are also often part of the documents. More sophisticated estate plans may even cover deferring or decreasing estate taxes or winding up a business.

Remainder

The tax code allows people to set up charitable remainder trusts and set up qualified personal residence trusts to own their personal residence yet leave it to their children without estate tax.

Tax

Because the United States tax code does not tax life insurance proceeds as income, a life insurance trust could be used to pay estate taxes. However, if the decedent holds any incidents of ownership like the ability to remove or change beneficiary, the proceeds will remain in his estate. For this reason, the trust vehicle is used to own the life insurance policy and it must be irrevocable to avoid inclusion in the estate.

Mediation

Mediation serves as an alternative to a full-scale litigation to settle disputes. At a mediation, family members and beneficiaries discuss plans on transfer of assets. Because of the potential conflicts associated with blended families, step siblings, and multiple marriages, creating an estate plan through mediation allows people to confront the issues head-on and design a plan that will minimize the chance of future family conflict and meet their financial goals.

Estate planner

Estate planning is usually a legal and tax specialty for an attorney or an accountant. Many estate planners earn credentials such as Trust and Estate Practitioner, Chartered Financial Analyst, Certified Financial Planner and Chartered Trust and Estate Planner.

Designation of an IRA beneficiary

Without a beneficiary statement, the default provision in the custodian-agreement will apply, which may be the estate of the owner resulting in higher taxes and extra fees.

Identity

A specific, identifiable individual must be designated as beneficiary.

Contingent beneficiary

If the primary beneficiary predeceases the IRA owner, the contingent beneficiary becomes the designated beneficiary. If a contingent beneficiary is not named, the default provision in the custodian-agreement applies.

Death

At the IRA owner’s death, the primary beneficiary may select his or her own beneficiaries. There is no obligation to retain the contingent beneficiary designated by the IRA owner.

Multiple accounts

An IRA owner can split an IRA into several IRA’s each with different beneficiaries, assets and value.

 

Asset Protection

Asset protection consists of methods available to protect assets from liabilities arising elsewhere. It should not be confused with limiting liability, which concerns the ability to stop or constrain liability to the asset or activity from which it arises.[2] Assets that are shielded from creditors by law are few (common examples include some home equity, certain retirement plans and interests in LLCs and limited partnerships (and even these are not always unreachable)). Assets that are almost always unreachable are those to which one does not hold legal title. In many cases it is possible to vest legal title to personal assets in a trust, an agent or a nominee, while retaining all the control of the assets. The goal of asset protection is similar to bankruptcy, and the two practice areas go hand-in-hand. When a debtor has none to few assets, the bankruptcy route is preferable. When the debtor has significant assets, asset protection may be the solution.[3]

The four threshold factors that are either expressly or implicitly analyzed in each asset protection case are:[4]

  • The identity of the person engaging in asset protection planning

– If the debtor is an individual, does he or she have a spouse, and is the spouse also liable? If the spouse is not liable, is it possible to enter into a transmutation agreement? Are the spouses engaged in activities that are equally likely to result in lawsuits or is one spouse more likely to be sued than the other?

– If the debtor is an entity, did an individual guarantee the entity’s debt? How likely is it that the creditior will be able to pierce the corporate veil or otherwise get the assets of the individual owners? Is there a statute that renders the individual personally liable for the obligations of the entity?

  • The nature of the claim

– Are there specific claims or the asset protection is taken as a result of a desire to insulate from lawsuits?

– If the claim has been reduced to a judgement, what assets does the judgement encumber?

– Is the claim dischargeable?

– What is the statute of limitations for bringing the claim?

  • The identity of the creditor

– How aggressive is the creditor?

– Is the creditor a government agency? Taxing authority? Some government agencies possess powers of seizure that other government agencies do not.

  • The nature of the assets

– To what extent are the assets exempt from the claims of the creditors? For example, the degree of protection offered by the homestead exemption, the exemption of the assets in a qualified plan, i.e. assets in a plan under the Employee Retirement Income Security Act (ERISA) etc.