continued from Inheritancenow.com
The only real alternative to a will arrangement is to set up a trust structure during lifetime which, with careful planning, can operate to eradicate these delays, administration costs and taxes as well as giving a large number of additional benefits. For these reasons the use of TRUSTS is increasing dramatically.
The problem is: Many Americans have no plan. They incorrectly assume joint ownership takes care of things, or they believe that their property is not worth enough to be concerned.
Such practices can be shortsighted, cost money, and raise unnecessary and unexpected problems, long time delays, and high administration costs.
For one thing, most people have a larger estate than they may realize. For another, joint ownership will not necessarily beat probate hungry lawyers or the estate tax man and will often mean that considerable sums become payable in inheritance tax or estate duty.
A will is not a substitute for a trust. A will does not avoid probate. Many individuals seek to put order to their affairs by making a comprehensive will. Under this arrangement the Executors named in the will would apply for a grant of probate, take possession of the assets of the deceased and then distribute those assets according to the terms of the will.
Items included in your taxable estate: For example, many people believe the higher exemption amounts that can pass tax free eliminate any need for estate planning. This type of thinking is fundamentally flawed, for example:
- Certain types of property have special rules for estate taxes. Property that spouses jointly own, half the value is included in the estate of the first spouse to die, no matter whose funds bought it or that survivor automatically inherits it. And the full value is counted in survivor’s estate could result in a bigger estate tax at that time.
Example: H + W own a private home, fair market value at time of H death is $750,000. 1/2 of $750,000 is included in H’s estate; therefore W now owns 100%. On the death of W the full $750,000 would be in her taxable estate. Thus, a larger estate tax on the death of W. - What your insurance person won’t tell you: Life insurance is taxed in your estate “if” you had any incidental ownership at death. This occurs if you can name new beneficiaries or borrow against policies or take out the cash value. Even insurance you give away, can come back to taxable in your estate if the donor dies and leaves it to you. Group insurance may be included too.
- Pensions and IRAs are taxable, except for pensions fixed before 1985.Then there are several items the law also adds to your estate: Large gifts, non-charitable gifts that exceed $12,000 beginning in 2006 and property partly given away, where you retain the right to use it.
Example: A house that you give to your children but still use rent-free. (Incidentally giving your house to your children creates a problem for them, and for you, if they get sued, or they die before you.)And stock you give away, but keep voting rights, if in a company that you control. Or the property of others over which you have certain rights such as the power under another’s will to name who will get part of that estate. If you could name yourself, your estate or creditors, it’s taxable in your estate. Including assets you give a child and keep the right to control.
Finally, estate tax laws can change. Thirteen times in 25 years, overhauls, tightenings for some, headaches for all. Congress is always tinkering with the idea that they know better than you, where your money should go.
Planning your estate is not an easy task. It takes time and effort. The place to begin is with yourself, your own goals and consideration of your heirs, their ages, abilities, needs and so on at a time when there’s no pressure to implement.
To learn more about how estate planning & trust planning are affected by asset protection strategies visit:
To be fully informed before applying for an inheritance cash advance, inheritance loan, or probate loan we encourage you to review all the information and links provided herein.
The above information is provided by Estate Street Partners. Estate Street Partners provides advanced financial planning and asset protection strategies to help eliminate probate and estate taxes, and protect assets from lawsuits, divorce and Medicaid. Get back your peace of mind by educating yourself – sign up for a free newsletter to learn how you can save time, legally reduce your taxes, protect your assets, and secure your privacy to keep your family safe. Click here to learn more: Irrevocable Trust