Salt Lake City Estate Planning: 2017

There are numerous estate planning issues that arise during a separation or divorce. If you're considering divorce, make sure you've adequately addressed these issues and avoid significant consequences.

The first issue is to immediately revoke any powers of attorney that grant your spouse powers over your health care or financial decisions. If you do not revoke these powers of attorney, your ex-spouse will remain your agent despite your divorce. Just imagine your ex-spouse making your health care decisions or continuing to have access to your financial accounts even after your divorce.

If you do not have a health care power of attorney or financial power of attorney, or after you revoke your existing power of attorney, you should create a new one. You may do this before, during, or after your divorce. If your divorce is pending, you probably do not want your soon to be ex-spouse having any type of decision making power over you or your assets. However, if you do not appoint someone else, your spouse will likely serve as the "default" agent if one is needed.

The next thing to consider is your Will. If you already have a Will, revise it. Chances are that your current Will provides for everything to go to your spouse. Once your divorce is final, any bequests to your spouse are nullified. Still, if you do not change your Will, such bequests will be granted if you die before your divorce is final. You cannot completely disinherit your spouse through a Will because State law provides for minimum amounts to a spouse, which is called "taking against the Will". Still you can limit what your spouse receives to the statutory amounts.

Also, there is a good chance that your spouse is named as your Personal Representative (or Executor). Even after your divorce is final, this designation will remain valid. Finally, any bequests made to in-laws will remain valid despite your divorce. Often there is a provision in Wills that provides that in the event your spouse does not survive you and there are no other beneficiaries under your Will, your assets are divided evenly between your heirs at law and your spouse's heirs at law. So, you may have a bequest to your in-laws and not even realize it.

You may also want to consider appointing a guardian for any minor children. In almost all cases, your spouse will continue to have parental rights and will receive full custody of your children upon your death. However, if there is a valid reason, such as abuse or drug addiction, why your spouse should not receive custody you should identify those reasons in your Will and name the person(s) you wish to have custody. Also, if your ex-spouse predeceases you, your Will should control who receives custody.

Also, you should establish a trust through your Will (called a testamentary trust) to control assets left to minor or disabled children. That way, you can decide who makes the decisions over those assets until your children are old enough to receive them outright. If you do not establish a trust and appoint a trustee, your ex-spouse will likely have control over any assets left to your children. And, although the assets are supposed to be used for the children's benefit, there is no practical way of controlling or checking that that is what really happens.

You should also consider a Revocable Trust. If you have one already, revise it to remove powers and gifts given to ex-spouse. Unlike a Will, any gifts given to an ex-spouse through a trust remain valid despite your divorce. Likewise, if your spouse is named as your successor trustee, that appointment remains valid despite your divorce.

There is also a benefit to having a Revocable Trust rather than a Will. In some states, you can completely disinherit a spouse through a revocable trust. The reasoning is that the statutes that grant your spouse a minimum amount of your assets only apply to your probate estate. However, any assets that are placed in trust during your lifetime are not subject to probate. Therefore, if you title all of your individual assets in your trust, you can keep your spouse from receiving anything of yours even if you die before your divorce is final. It can also serve as an ongoing trust after your death to hold assets for your children without your spouse having control or decision making ability.

Additionally, you should review and update any beneficiary designations on life insurance policies, retirement plans, etc. You may not be able to make some of these changes until your divorce is final. For most retirement accounts, your spouse has to sign an authorization for you to appoint someone else as your beneficiary. You may also be prohibited by the court from making changes while your divorce is pending. Just don't forget to make the changes once your divorce is final.

Finally, you should re-title any assets held jointly with your spouse. For many assets (such as house, car, joint investments, etc.), this may need to be done after your divorce is final. However, you can open your own bank and investment accounts at any time.

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Boulder Utah 9 estate planning pitfalls to avoid

Estate Planning - How to Preserve Your Wealth

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If you're reading this article, it's probably not for entertainment value. And if you're reading for entertainment, then you're either a masochist or you're actually interested in what I have to say. It could be both, I guess. Whatever the reason, estate planning is an important topic, regardless of your station in life.

So what does it mean to have an estate plan? The better question is: why does it matter? This is not easy stuff. It deals with death and dying and the future. Of course, nobody wants to think about this stuff. But unfortunately, it's the pink elephant in the room. And it's not all that bad, actually.

Generally, an estate plan is a set of instructions that spell out how your property should be managed and distributed during your life and after death. The attorney (yours truly) is basically a conduit that channels your wishes onto paper in a way that make sense and have the most effect. Okay, maybe it's not that simple, but this should give you some idea. The estate plan should be a reflection of your life and vision. And don't confuse the word "estate" with a gated 8000 square foot villa with your initials on the entry gate. Your estate is all that you own in real estate and other assets.

At one point or another, most of us who own property think about what will happen to our property when we die. We think about stuff like, "Who will get my 1984 Honda Civic?" That's a legitimate concern. Nobody is going to want it, but the concern is no less legitimate. But what if you become disabled? And what happens when you get old and feeble minded? There may come a time where we will live out our lives without sufficient mental and/or physical capacity to manage our own affairs. Look, we all know or knew someone who started to "lose it." We can all remember thinking this or saying something like, "hey, is it me, or is Uncle Joe beginning to lose it?"

Enter the estate plan. The estate plan deals with the management of your property and financial affairs. There are two main types of estate plans: one is built around a Will and the other around a Revocable Living Trust. Each has it pros and cons. But as long as you have your wits about you, you can always make changes to the plan along the way. That being said, it's important to have an estate plan in place now because you don't know when you might become the "Uncle Joe."

THE WILL

A Will is the most common document used to specify how an estate should be handled after death. The person or entity designated to receive your property under the Will is called a Beneficiary. The person whose property is to be disposed by the Will is the Testator or Testatrix.

Like a Trust, the Will can set out different instructions, such as who gets certain property or who will be the guardian of Testator's minor child in the event that no parent is alive. It can be used to disinherit someone. It can set conditions on inheritance, such as the requirement that the Beneficiary first reach the age or 25 or graduate from college.

And then there's the dreaded P word - PROBATE. There's no getting around it. When a person dies and leaves property in a Will, probate is the legal proceeding that is used to wind up his or her legal and financial affairs. It's best described as a court-supervised process by where assets are gathered, valued, and distributed according to the Testator's last wishes as stated in the Will.

Probate proceedings are held in Superior Court for the county in which the Testator lived. The Executor (the person who administers the estate) is responsible for protecting a deceased person's property until all debts and taxes have been paid, and seeing that what's left is transferred to those who are entitled to it. Their job includes making an inventory of the estate's assets, locating creditors, paying bills, filing tax returns, and managing the estate assets. Finally, when this is all done, a petition is filed with the court requesting a distribution to the Beneficiaries. The whole process can take many months and sometimes years to complete.

As you can imagine, probate can also be very expensive. The Probate Code sets the maximum amount that attorneys and personal representatives (i.e. executors, administrators, etc.) can charge. As of 2016, the fees are four percent of the first $100,000 of the estate, three percent of the next $100,000, two percent of the next $800,000, one percent of the next $9,000,000, and one-half percent of the next $15,000,000. On top of that, a probate referee is appointed to appraise all of the non-cash items. This person usually takes one percent of the total assets appraised. All of this can add up very quickly. Although it's safe to say that most of us will probably not die with an estate valued at $15 million, the probate process can easily reduce the size of the estate by tens of thousands of dollars.

And of course there's the privacy issue, or lack thereof. When a Will is admitted to probate it becomes a matter of public record, including the details of what your assets are and who's in line to get them. Some may have legitimate reasons for following the probate matter, like a beneficiary's creditor who's looking to collect. Other unscrupulous types may want to know who to bamboozle.

THE REVOCABLE LIVING TRUST

A Living Trust is established with a document, usually a Declaration of Trust or a Trust Agreement. It's basically a relationship whereby property (real or personal, tangible or intangible) is held by one party for the benefit of another. A Living Trust conventionally arises when property is transferred to a separate Trustee to hold for the Beneficiary. However, that's not always necessary.

The person creating the Living Trust is called the Settlor or Trustor (these are synonymous). The Settlor appoints a Trustee to manage the Trust assets. The Trusee holds legal title to property for the benefit of another, also known as the Beneficiary. Although the Beneficiary does not own legal title to the property, he or she is said to own beneficial title. So you can imagine that the Trustee cannot do anything with the property that does not benefit the Beneficiary, like sell some off and pocket the money. It may be easier to think about a Trust like a Corporation. The Trustee is the CEO and the Beneficiaries are the shareholders. And it's not uncommon for Trustee to also be a Beneficiary, although it's advisable that a Co-Trustee be named as well.

A Living Trust should usually be accompanied by a Last Will and Testament, also known as a "pour-over will." The Will should say that property that is outside of the Trust is to be distributed to the Trustee of the Trust when the Testator dies. As long as the property outside of the Trust is valued at less than $100,000, probate can be avoided. The benefit is that property not previously placed in the Trust will get "poured" into it. Even if the property exceeds $100,000 and has to go through probate, it will eventually be distributed according to the instructions of the deceased instead of being distributed according to California law. It may also be a good idea to name the same person to be both the Executor of the Will and the Trustee of the Trust, since he or she will dealing with the same property.

WHAT DOES THIS ALL MEAN?

So what's the point of all of this mumbo jumbo? Well, just that it's easy to overlook the necessity of a proper estate plan. A Living Trust helps to protect you, your assets, and those people and/or entities who you want to leave your assets to when you're gone.

A good reason to create a Living Trust is to keep your estate plan private. Unlike a Will and probate, the Living Trust is a private contract between you (the Settlor) and the Trustee. It does not need to be filed with the county. The only way it can become public is if a dispute arises and someone files a lawsuit, which is possible.

Another major benefit of a Living Trust is that it has the ability to protect you in the event that you become disabled. The Trust can specify how your incapacity should be determined, how you should be taken care of if you're deemed disabled, and who will be able to manage your property if you can't. A Living Trust is written so that your Trustee can automatically jump into the driver's seat if you become ill or incapacitated. This will keep you and your property outside of court-supervised guardianship or conservatorship. The more you can keep the court out of your life and affairs, the better.

A Living Trust also allows you to dispense with your property in the manner that you choose. For example, many families have a child who has or had some problems in life. This may range from physical challenges to addiction to partying in Las Vegas with prostitutes every weekend. A Living Trust can provide for financial support to others without giving them direct control of the trust property.

Finally, a Living Trust makes it possible to avoid having to go through probate. How? It's simple - the property is titled in the name of the Trust when you die. Your Trust does not check out just because you do. Only those assets that are titled in your name at the time of death go through probate.

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Bluffdale Utah County UT estate planning 5 year lookback

Estate Planning Overview, 101

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THE WILL

THE REVOCABLE LIVING TRUST

WHAT DOES THIS ALL MEAN?

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Bluffdale Utah estate planning lawyer

Estate Planning: What to Think About Before Meeting Your Lawyer

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The five levels of estate planning is a systematic approach for explaining estate planning in a way that you can easily follow. Which of the five levels you need to complete is based on your particular objectives and circumstances.

Level One: The Basic Plan

The situation for level one planning is that you have no will or living trust in place, or your existing will or living trust is outdated or inadequate. The objectives for this type of planning are to:

reduce or eliminate estate taxes;
avoid the cost, delays and publicity associated with probate in the event of death or incapacity; and
protect heirs from their inability, their disability, their creditors and their predators, including ex-spouses.

To accomplish these objectives, you would use a pour-over will, a revocable living trust that allocates a married person's estate between a credit shelter trust and a marital trust, general powers of attorney for financial matters and durable powers of attorney for health care and living wills.

Level Two: The Irrevocable Life Insurance Trust (ILIT)

The situation for level two planning is that your estate is projected to be greater than the estate-tax exemption. In any event, you can make cash gifts to an ILIT using your $13,000/$26,000 annual gift-tax exclusion per beneficiary.

Level Three: Family Limited Partnerships

The situation for level three planning is that you have a projected estate-tax liability that exceeds the life insurance purchased in level two. If your $1 million gift-tax exemption ($2 million for married couples) is used to make lifetime gifts, the gifted property and all future appreciation and income on that property are removed from your estate.

More people would be willing to make gifts to their children if they could continue to manage the gifted property. A family limited partnership (FLP) or a family limited liability company (FLLC) can play a valuable role in this situation. You would typically be the general partner or manager and in that capacity, continue to manage the FLP or FLLC's assets. You can even take a reasonable management fee for your services as the general partner or manager. Moreover, by gifting FLP or FLLC interests to an ILIT, the FLP or FLLC's income can be used to pay premiums, thereby freeing up your $13,000 / $26,000 annual gift-tax exclusion for other types of gifts.

Level Four: Qualified Personal Residence Trusts and Grantor Retained Annuity Trusts

The situation for level four planning is the additional need to reduce your estate after your $1 million/$2 million gift-tax exemption has been used. Although paying gift taxes is less expensive than paying estate taxes, most people do not want to pay gift taxes. There are several techniques to make substantial gifts to children and grandchildren without paying significant gift taxes.

One technique is a qualified personal residence trust (QPRT). A QPRT allows you to transfer a residence or vacation home to a trust for the benefit of your children, while retaining the right to use the residence for a term of years. By retaining the right to occupy the residence, the value of the remainder interest is reduced, along with the taxable gift.

Another technique is a grantor retained annuity (GRAT). A GRAT is similar to a QPRT. The typical GRAT is funded with income-producing property such as subchapter S stock or FLP or FLLC interests. The GRAT pays you a fixed annuity for a specified term of years. Because of the retained annuity, the gift to the remaindermen (your children) is substantially less than the current value of the property.

Both QPRTs and GRATs can be designed with terms long enough to reduce the value of the remainder interest passing to your children to a nominal amount or even to zero. However, if you do not survive the stated term, the property is included in your estate. Therefore, it is recommended that an ILIT be funded as a "hedge" against your death prior to the end of the stated term.

Level Five: The Zero Estate-Tax Plan

Level five planning is a desire to "disinherit" the IRS. The strategy combines gifts of life insurance with gifts to charity. For example, take a married couple, both age 55, with a $20 million estate. Assume that there is neither growth nor depletion of the assets and that both spouses die in a year when the estate-tax exemption is $3.5 million, and the top estate-tax rate is 45%.

With the typical marital credit shelter trust, when the first spouse dies, $3.5 million is allocated to the credit shelter trust and $16.5 million to the marital trust. No federal estate tax is due. However, at the surviving spouse's death, the estate tax due is $5.85 million. The net result is that the children inherit only $14.15 million.

With the zero estate-tax plan, the ILIT (with generation-skipping provisions) is funded with a $13 million second-to-die life insurance policy. These gifts reduce the estate value to $18 million. In addition, the couple's living trusts each leave $3.5 million (the amount exempt from estate taxes) to their children upon the surviving spouse's death. The balance of their estate ($11 million) passes to a public charity or private foundation-estate-tax free. To summarize, the zero estate-tax plan delivers $20 million (i.e., $13 million from the ILIT and $7 million from the living trusts) to the children instead of $14.15 million; the charity receives $11 million instead of nothing; and the IRS receives nothing, instead of $5.85 million.

In summary, with some advanced planning, it is possible to reduce estate taxes, avoid probate, set forth your wishes, and protect your heirs from creditors, ex-spouses and estate taxes. Remember, every year taxes change so if you need estate tax help, call us today to speak with an estate attorney.

TO THE EXTENT THIS WEBSITE CONTAINS TAX MATTERS, IT IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER, ACCORDING TO CIRCULAR 230.

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Bluffdale Salt Lake County UT subchapter s estate planning

Estate Planning: What to Think About Before Meeting Your Lawyer

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Level One: The Basic Plan

Level Two: The Irrevocable Life Insurance Trust (ILIT)

Level Three: Family Limited Partnerships

Level Four: Qualified Personal Residence Trusts and Grantor Retained Annuity Trusts

Level Five: The Zero Estate-Tax Plan

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Blanding San Juan County UT estate planning 2nd marriage

Levels of Estate Planning

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Estate Planning - How to Preserve Your Wealth

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An estate plan is a document consisting of multiple trivial elements such as the living will or healthcare proxy or also known as medical power of attorney and assignment of power of attorney. Some people also include trust into their wills. Once you merge all these things together, you have to get it certified under the legal laws of both the federal and state governments. Basically everyone needs to have a will, to inform the world where you wish to allocate your assets to after you leave the world. In fact, it is the best way to consign guardians for your children.

Those dying without a proper estate planning, having no will to display upon their deaths are known to be dying intestate. However, this implies that your heirs need to struggle through several legal procedures in order to take over the assets. Having a trust does not guarantee the ownership transfer; it is insufficient because you still need a will to be in charge of your trust to inherit them to your beneficiaries. In addition, it is advisable that you discuss the plan with your children to avoid future discord, especially if you know your heirs may come in strong disagreement with one another.

To begin with your estate plan, you have to garner all appropriate information such as insurance policies, investments, real estate or business interests, financial condition, and any retirement savings. Then ponder to yourself several questions like who you wish to assign to the job of handling your financial affairs if you happen to be incapacitated. Then consider whom you intend to inherit your assets to and give thoughts into plotting the responsibility of your medical decisions should you be bedridden and unconscious.

Some people think that having infinite amount of money indicates a good estate planning but this is not always the case. Leaving all your properties and cash to your spouse does not imply it will be exempted from estate tax because you will instead increase his or her taxable estate. Subsequently, if your spouse leaves the money to your children upon his or her death, they will end up paying higher estate taxes. At all cases, having a will is the best item to solve all hassles.

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Big Water Kane County Utah power estate planning

Estate Planning: What to Think About Before Meeting Your Lawyer

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I had a potential client call me earlier in the week asking me if he needed a will. The caller wasn't married and had no children or grandchildren. He didn't own any real property. All of his bank accounts had payable on death beneficiaries and he owned minimal personal property. He had the perfect plan; nothing was going to pass through probate so he didn't think he needed a will.

Maybe he doesn't need a will. I didn't know exactly since self-help estate planning frequently leads to mistakes or property that doesn't have the proper designations. In this situation a will is prophylactic. It ensures that if a mistake is made or a beneficiary designation fails, that property passes to the intended recipient.

I turned the discussion from planning for death to what type of planning he had for his life. I asked if he had a power of attorney for finances. His answer was no. "Do you have an advanced health care directive (aka health care power of attorney)?" "No."

The lack of such planning concerned me since I knew he didn't have a significant other or children to care for him if he were unable to care for himself. What would happen to him if he had a stroke or suffered from dementia or Alzheimer's? Perhaps his siblings would step in to care for him - but how? They would have to spend his money to set up a conservatorship and guardianship or other court proceedings. These processes take time and money to set up and are expensive to administer.

To help deal with his finances he could execute a springing power of attorney for finances that would give a sibling or trusted relative the ability to manage his finances if he became incapacitated and unable to do so. It's called a springing power of attorney because it only becomes effective upon incapacity. The power of attorney can provide broad powers and sets forth detailed instructions concerning what the designated agent can and cannot do on the individual's behalf. More importantly, it would allow the caller to designate who he wanted to manage his finances - not a judge. Drafting and executing a power of attorney in this situation is relatively inexpensive when compared to the cost of setting up and maintaining a conservatorship.

In Oregon, an advance health care directive would assist the caller by designating a health care agent to make health care decisions on his behalf when he's unable to. It would potentially eliminate the need for guardianship proceedings. The representative can make decisions based on directions that are left in the directive. Among the decisions the representative can make is whether to withhold or remove life support, food or hydration. The advance heath care directive does not authorize euthanasia, assisted suicide or any overt action to end the person's life.

This example is a part of the problem with self-help planning. Although the caller was very thorough with his death planning he didn't give any thought to his life. In this caller's case, life planning was much more important than death planning, but he hadn't given it any thought.

Give us a call if you need additional information or to prepare your estate plan.

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