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Estate Planning

You spend your entire life creating wealth. The more wealth you create the more unhappy the people you leave behind will be without the proper estate planning. Estate planning allows you to decide while you are alive how your assets will be distributed. It also allows you to protect your heirs from unanticipated devastating expenses ranging from debts to taxes to administrative fees. In many instances, estates do not have the necessary cash to pay for these expenses. Heirs are forced to quickly liquidate assets such as homes and businesses to pay these expenses, often at a fraction of their real value. If people didn't care about taking care of loved ones after they're gone, no one would bother completing an estate plan.

Our discussion will explore:


Trusts

A trust is the holding of property and the equitable management of that property by one person (a trustee) for another person (a beneficiary). The person who transfers property into a trust is called a grantor. A Living Trust is called a Living Trust simply because it is created while you are alive. In most Living Trusts the grantors (Husband and Wife) are also the trustees.

One type of trust called Charitable Remainder Trust (CRT) is established with irrevocable contributions of cash, marketable securities, closely held stock or real estate. The parties to the trust are the Donor, the Trustee, the Beneficiaries (also called the Recipients, and the Charitable Remainder Beneficiaries (Charity or Charities). The Donor contributes assets to the trust. The assets are typically sold and the proceeds reinvested by the Trustee. The Trustee makes payments for life or for a term (not exceeding 20 years) to the Beneficiaries according to the terms of the trust. At the termination of the lifetime interest (death of all primary beneficiaries) or the designated term the Trustee distributes the remaining trust assets to the Charitable Remainder Beneficiaries.


Life Insurance in Estate Planning

Life Insurance can provide much needed cash to pay for fees and taxes and also allow for an easier distribution of all assets.

Life insurance proceeds at death add to the value of the estate and therefore are subject to estate taxes. This can be avoided by having someone other than the insured own the insurance policy. This can be accomplished in two ways:

  1. The children of the insured can own the policy.

  2. An irrevocable life insurance trust can be created and funded by life insurance. The trust is irrevocable because the insured (Grantor) cannot have any rights or powers over the trust and no incidence of ownership over the life insurance policy.

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