Tax Law Advisors~ Estate Planning: Articles, Tools & Resources You Can't Afford To Miss! ~Tax Law Advisors

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A will is a legal document that transfers what you own to your beneficiaries upon your death. It also names an executor to carry out the terms of your will and a guardian for your minor children, if you have any.

Your signature and those of two witnesses make your will authentic. Witnesses don't have to know what the will says, but they must watch you sign it and you must watch them witness it.

Hand-written wills -- called holographs -- are legal in about half the states, but most wills are typed and follow a standard format.

Who Needs a Will?

The short answer is everyone! However, it's imperative to make a will as soon as you have any real assets, or get married, and certainly by the time you have children.

What If You Don't Have a Will?

Without a will, you die intestate. The law of your state then determines what happens to your estate and your minor children. This process, called administration, is governed by the probate court and is notoriously slow, often expensive, and subject to some surprising state laws. It's estimated than more than two-thirds of Americans die intestate. Do you really want a court deciding vital family matters such as how to divide your estate and custody of your children?

What Should Your Will Include?

Your will should contain several key points in order to be valid. The following list is a start; check with a local estate attorney for a more comprehensive list:

Your name and address.

A statement that you intend the document to serve as your will.

The names of the people and organizations -- your beneficiaries -- who will share in your estate.

The amounts of your estate to go to each beneficiary (usually in percentages rather than dollar amounts.)

An executor to oversee the disposition of your estate and trustee(s) to manage any trust(s) you establish.

Alternates to provide both executor responsibilities and trustee(s).

A guardian to take responsibility for your minor children and possibly a trustee to manage the children's assets in cooperation with the guardian.

Which assets should be used to pay estate taxes, probate fees and final expenses.

What Is A Living Will?

A living will expresses your wishes about being kept alive if you're terminally ill or seriously injured.

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. Source: Financial Visions, Inc.

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~Tax Law Advisors provides customized pre-tax planning today, so Corporations and their Owners can enjoy a better tomorrow.~

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Many people assume estate planning is all about reducing taxes. But it's also about making sure your assets are distributed according to your wishes both now and after you're gone. Here are three questions to consider before you begin your estate planning.

1. Who Should Inherit Your Assets?

If you are married, you must consider marital rights before deciding who should inherit your assets. States have different laws designed to protect surviving spouses. If you die without a will or living trust, state law dictates how much passes to your spouse. Even with a will or living trust, if you provide less for your spouse than state law deems appropriate, the law will allow the survivor to receive the greater amount.

Once you've considered your spouse's rights, ask yourself these questions:

Should your children share equally in your estate?

Do you wish to include grandchildren or others as beneficiaries?

Would you like to leave any assets to charity?

2. Which Assets Should Your Survivors Inherit?

You may want to consider special questions when transferring certain types of assets. For example:

If you own a business, should the stock pass only to your children who are active in the business?

Should you compensate the others with assets of comparable value?

If you own rental properties, should all beneficiaries inherit them?

Do they all have the ability to manage property?

What are each beneficiary's cash needs?

3. When and How Should They Inherit the Assets?

To determine when and how your beneficiaries should inherit your assets, you need to focus on three factors:

The potential age and maturity of the beneficiaries,

The size of your estate versus your and your spouse's need for income during your lifetimes, and

The tax implications of your estate plan.

Outright bequests offer simplicity, flexibility and some tax advantages, but you have no control over what the recipient does with the assets once they are transferred. Trusts can be useful when the beneficiaries are young or immature, when your estate is large, and for tax planning reasons. They also can provide the professional asset management capabilities an individual beneficiary lacks.

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. Source: Financial Visions, Inc.

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~Tax Law Advisors provides customized pre-tax planning today, so Corporations and their Owners can enjoy a better tomorrow.~

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Here's a look at some of the most important estate planning tools and how you can use them to minimize taxes and maximize your estate's value as the tax rules change over the decade. You'll learn how these estate planning techniques can help you achieve specific financial goals. You will also see why it will be helpful to seek professional financial, tax and legal advice about ways to use these techniques effectively. Please let us know if you have any questions about how they might apply to your situation.

The Marital Deduction

The marital deduction is one of the most powerful estate planning tools available to you. Any assets passing to a surviving spouse pass tax-free at the time the first spouse dies, as long as the surviving spouse is a U.S. citizen. Therefore, if you and your spouse are willing to pass all your assets to the survivor, no federal estate tax will be due on the first spouse's death - even before the estate tax is scheduled to be repealed completely in 2010.

This doesn't solve your estate tax problem, however. First, if the surviving spouse does not remarry, that spouse will not be able to take advantage of the marital deduction when he or she dies. Thus, the assets transferred from the first spouse could be subject to tax in the survivor's estate, depending on when the surviving spouse dies. Second, from a personal perspective, you may not want your spouse to pass all assets to a second spouse even if it would save estate taxes.

How to Preserve Both Exemptions

Since assets in an estate equal to the exemption amount are exempt from estate taxes, a married couple can use their exemptions to avoid tax on up to double the exemption amount. And this amount will gradually increase until it reaches $7 million in 2009 -- the year before the estate tax repeal. An effective way to maximize the advantages of the exemption is to use a credit shelter trust, sometimes referred to as a bypass trust.

Let's look at an example: Mr. and Mrs. Jones have a combined estate of $4 million. At Mr. Jones' death in 2006, all of his assets pass to Mrs. Jones tax-free because of the marital deduction. Mr. Jones' taxable estate is zero. Shortly thereafter, and still in 2006, Mrs. Jones dies, leaving a $4 million estate. The first $2 million is exempt from estate tax (in 2006), but the remaining $2 million is subject to taxation, leaving the Jones' survivors with far less.

The problem? Mr. and Mrs. Jones took advantage of the exemption in only one estate.

Let's look at an alternative: Mr. Jones' will provides that assets equal to the exemption go into a separate trust on his death. This "credit shelter trust" provides income to Mrs. Jones during her lifetime. She also can receive principal payments if she needs them to maintain her lifestyle. Because of the trust language, Mr. Jones may allocate his $1.5 million exemption amount to the trust to protect it from estate taxes. If there were remaining assets (assets over $2 million), they would pass directly to Mrs. Jones.

Because the $2 million trust is not included in Mrs. Jones' estate, her estate drops from $4 million to $2 million. Thus, no tax is due on her estate because it does not exceed the exemption amount. By using the credit shelter trust in Mr. Jones' estate, the Joneses save hundreds of thousands of dollars in federal estate taxes.

The Joneses do give up something for this tax advantage. Mrs. Jones doesn't have unlimited access to the funds in the credit shelter trust because if she did, the trust would be includable in her estate. Still, Mr. Jones can give her all of the trust income and any principal she needs to maintain her lifestyle. However, the outcome would be quite different if both spouses didn't hold enough assets in their own names.

Control Assets with a QTIP Trust

A common estate planning concern is that assets left to a spouse will eventually be distributed in a manner against the original owner's wishes. For instance, you may want stock in your business to pass only to the child active in the business, but your spouse may feel it should be distributed to all the children. Or you may want to ensure that after your spouse's death the assets will go to your children from a prior marriage.

You can avoid such concerns by structuring your estate plan so your assets pass into a qualified terminable interest property (QTIP) trust. The QTIP trust allows you to provide your surviving spouse with income from the trust for the remainder of his or her lifetime. You also can provide your spouse with as little or as much access to the trust's principal as you choose. On your spouse's death, the remaining QTIP trust assets pass as the trust indicates.

Thus, you can provide support for your spouse during his or her lifetime but retain control of the estate after your spouse's death. Because of the marital deduction, no estate taxes are paid on your death. But if your spouse dies while the estate tax is in effect, the entire value of the QTIP trust will be subject to estate tax

Of course, as with all estate planning strategies, these trusts are complex. Consider enlisting the advice of a qualified estate planning professional before proceeding further.

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. Source: Financial Visions, Inc.

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