estate planning documents

Family Estate Planning & Trusts

Suppose you wish to leave behind a lasting legacy, whether it's for family and loved ones or a charitable institution. In that case, you need to put a well-thought-out Estate Plan in place so your legacy is established in accordance with your wishes. Without such a Plan, strangers (the State, Lawyers, or individuals that don't have your interests in mind) could determine what happens to your Estate.

If you wish to ensure that you are in control of what happens to your Estate, and if you want to guarantee that your Estate is handled in accordance with your directives, then having an Estate Plan is paramount.

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Our estate planning service includes:

Helping you understand the importance of a will

Your will should be the corner stone of your Estate Plan. We can help you understand why and how you should structure this document so your legal team can create a will that reflects how you want your Estate disposed. From a simple will to a Testamentary Will, or Joint Wills and Living Wills – our experts will help you navigate through the complexities so you won’t need to stress over what’s what!

Creating Powers of Attorney (POA)

Whether it’s to manage specific assets, like your investments, bank accounts or real estate holdings after your gone; or whether it’s meant to help others make health-care decisions in your best interest in case you are ill or incapacitated, you need to have a POA in place to ensure your wishes are followed. A well-crafted POA will also smoothen how decisions about your final arrangements, and those related to your estate, are taken care of once you pass.

Choosing Executors

The Executors of your Estate wield strong powers that determine how your Estate is finally dealt with upon your passing. We’ll help you understand the importance of choosing an executor (s) for your Estate, and what criteria you should consider when appointing someone to discharge this all-important role – especially if minor children/guardians are involved.

Designating Beneficiaries

If you don’t choose beneficiaries for your assets carefully (or not at all!), your estate assets might well end up in the hands of individuals that you never intended should benefit from them.

Considerations for dependents needs

A well-thought-out Estate Plan will ensure that all of the needs of your dependents (be they minors, adult children, siblings, persons with special needs or aging parents) are taken care of in accordance with your desires.

Tax planning considerations (minimizing Estate taxes and reducing probate fees)

Without a well-thought-out Estate Plan, a considerable part of your estate could erode through taxes, fees and other levy’s, even before your designated beneficiaries see a cent!

Protecting your estate

Though you might no longer be here, many of your assets – like your long-term investments, property and other tangible assets – will likely need care, protection and management until they are finally disposed off, and the proceeds distributed to your designated beneficiaries. In the absence of an Estate Plan, your assets will likely not receive the type and level of protection those assets require.

Health and welfare considerations

A comprehensive Estate Plan contains several components, including directives to your Executors and POA-holders about what to do in case your health (mental or physical) deteriorates. In the absence of those components of your Estate Plan, decisions impacting your health and welfare might be made by others (likely medical professionals or state-appointed representatives) whom you do not trust.

Distributing your assets/legacy

Without a proper Estate planning, your assets might not be distributed in line with your final wishes. And because creating legally-binding wills and ensuring the Estate Plan are in sync with the Will is essential to ensure proper distribution of your estate, our professionals can support you in this endeavor.

What is maximizing the estate planning value of life insurance?

Simply put, maximizing the estate planning value of life insurance means getting the most bang for your buck. That is, it involves keeping as much of the proceeds as possible away from the IRS and in the hands of your beneficiaries. When you die, all your worldly goods (e.g., your money, house, car, stocks, bonds, as well as your life insurance proceeds) become a pie. The pie is then cut into slices and served. One slice goes to your heirs and beneficiaries, one slice to the federal government, one slice to your creditors, and so on. The size of the slice that goes to the federal government can be as big as 40 percent (the rate for the estates of persons who die in 2013 and later years), and what goes to the federal government does not go to your heirs and beneficiaries. You need to plan now to make sure that the slice that goes to the federal government is as small as possible, leaving a bigger slice for your loved ones.

Understand how life insurance is taxed

If you want to reduce estate taxes, a good first step is to understand how the estate tax system works. Although this is a technical area best left to the experts, the basics can be grasped fairly easily and will give you some direction regarding how to make the wisest arrangements.

Arrange proper ownership of the policy

Who owns the policy and for how long can affect how life insurance is taxed for estate tax purposes. If you own a life insurance policy on your own life when you die, the proceeds of the policy are includable in your gross estate for estate tax purposes, regardless of who your designated beneficiaries are. If you own a policy and transfer it to another owner within three years of your death, the transfer is not recognized for estate tax purposes and the proceeds are therefore includable in your gross estate. However, if you transfer ownership of the policy to someone else more than three years before your death, the transfer is recognized for estate tax purposes and the proceeds will therefore not be included in your estate. Since insurance that you own on your death (or within three years of your death) is included in your estate and therefore may be subject to estate tax, someone other than yourself (or your spouse in a community property state) should own the policy if you wish to avoid subjecting the proceeds to estate tax. The owner of the policy can be another individual or a trust such as an irrevocable life insurance trust (ILIT).

Designate the right beneficiary

Who your beneficiaries are can also affect how life insurance is taxed for estate tax purposes. For example, if the designated beneficiary of a policy on your life is your estate, the proceeds are generally includable in your gross estate for estate tax purposes even if you do not own the policy on your death (or did not own it within three years of your death). If the designated beneficiary is your executor or your estate, the proceeds may be includable in your gross estate.

The primary reason for not naming your estate or your executors as beneficiaries of policies on your life is that doing so subjects the proceeds to the expense of probate and claims of creditors. If you own the policy and name a third party as a beneficiary, the proceeds will be included in your estate for estate tax purposes but they will pass by operation of law outside of the probate process and will not be subject to the claims of creditors of your estate. Proceeds payable to your children are not subject to estate tax unless you own the policy on your death or within three years of your death. If you own the policy, the proceeds are includable in your estate (and therefore subject to the estate tax) regardless of who your beneficiaries are.

However, as noted above, if you name your children as beneficiaries they will receive a greater benefit from the policy than if you named your estate as the beneficiary and then directed that the proceeds be distributed from your estate to your children, because proceeds paid to your estate will be reduced by probate expenses and claims of creditors while proceeds paid directly to your children will not.

Although there's no hard-and-fast rule about when you should review your estate plan, the following suggestions may be of some help:

  • You should review your estate plan immediately after a major life event
  • You'll probably want to do a quick review each year because changes in the economy and in the tax code often occur on a yearly basis
  • You'll want to do a more thorough review every five years Reviewing your estate plan will not only give you peace of mind, but will also alert you to any other changes that need to be addressed.

There will be times when you'll need to make changes to your plan to ensure that it still meets all of your goals. For example, an executor, trustee, or guardian may change his or her mind about serving in that capacity, and you'll need to name someone else.

Other reasons you should do a periodic review include:

  • There has been a change in your marital status (many states have laws that revoke part or all of your will if you marry or get divorced) or that of your children or grandchildren
  • There has been an addition to your family through birth, adoption, or marriage (stepchildren)
  • Your spouse or a family member has died, has become ill, or is incapacitated
  • Your spouse, your parents, or other family member has become dependent on you
  • There has been a substantial change in the value of your assets or in your plans for their use
  • You have received a sizable inheritance or gift
  • Your income level or requirements have changed
  • You are retiring
  • You have made a change in your estate plan (e.g., you created a trust or executed a codicil to your will)

While trusts offer numerous advantages, they incur up-front costs and often have ongoing administrative fees. The use of trusts involves a complex web of tax rules and regulations. You should consider the counsel of an experienced estate planning professional and your legal and tax advisers before implementing such strategies.

At the end of 2019, President Trump signed a federal spending package that included the Setting Every Community Up for Retirement Enhancement (SECURE) Act. A provision in this legislation effectively eliminated the "stretch IRA," an estate-planning strategy that allowed an IRA to continue benefitting from tax-deferred growth, potentially for decades. Individuals who plan to leave IRA and retirement plan assets to heirs — and individuals who stand to inherit retirement assets — should understand the new rules.

The old "stretch" rules

For retirement assets inherited before 2020, a nonspouse beneficiary had to begin required minimum distributions (RMDs) within a certain time frame after inheriting the account. However, annual distributions could be calculated based on the beneficiary's life expectancy. This ability to stretch taxable distributions over a lifetime helped reduce the beneficiary's annual tax burden and allowed large IRAs to continue benefitting from potential tax-deferred growth.

The new rules

As of January 2020, most no spouse beneficiaries are required to liquidate inherited accounts within 10 years of the owner's death. This shorter distribution period could result in unanticipated and potentially large tax bills for non-spouse beneficiaries who inherit high-value IRAs. Any funds not liquidated by the 10-year deadline will be subject to a 50% penalty tax.

Under the new rules, Margaret would have to empty the account within 10 years of her father's death. Since she stands to earn her highest-ever salaries during that time frame, the distributions could push her into the highest tax bracket at both the federal and state levels. Not only would the inherited IRA be depleted after 10 years, but Margaret’s tax obligations in the decade also leading up to her retirement would be much higher than she anticipated.

The beneficiary of a traditional IRA might want to spread the distributions equally over the 10 years, if possible, in order to manage the annual tax liability. By contrast, the beneficiary of a Roth IRA — which generally provides tax-free distributions — might want to leave the account intact for up to 10 years, if possible, allowing it to potentially benefit from tax-free growth for as long as possible. See Caution note below for more information.

The new rules specifically affect most non spouse designated beneficiaries who are more than 10 years younger than the original account owner. However, key exceptions apply to those who are known as eligible designated beneficiaries (EDBs) — a spouse or minor child of the account owner; those who are not more than 10 years younger than the account owner (such as a close-in-age sibling); and disabled or chronically ill individuals, as defined by the IRS. (Note that the 10-year distribution rule will apply once a child beneficiary reaches age 21 and when a successor beneficiary inherits account funds from an initial eligible designated beneficiary.)

Eligible designated beneficiaries may use the old stretch IRA rules and take RMDs based on their own life expectancies.3 In these cases, RMDs must begin no later than December 31 of the year after the original account owner's death. However, if the original owner was of RMD age and failed to take the required amount in the year of death, the beneficiary must take the RMD by December 31 of that year.4 Failure to take the appropriate amount can result in a penalty equal to 25% of the amount that should have been withdrawn. (The penalty may be reduced to 10% if the error is corrected in a timely manner.)

In early 2022, the IRS issued proposed regulations clarifying the 10-year rule. The proposal states that if an account owner dies on or after the date that he or she is required to begin RMDs (the required beginning date or RBD), a non-EDB will be required to take RMDs in years one through nine, then liquidate the account in year 10. If the account owner dies before his or her RBD, a non-EDB would not be required to take any distributions until year 10, at which point the account would need to be liquidated. Until the final rules are issued, it is unclear whether any penalties will apply for missed distributions; however, beneficiaries may want to rely on the proposed rules in the interim. In October 2022, the IRS issued Notice 2022-53, which said the final regulations, which had yet to be issued, would not apply until 2023 at the earliest.

Spousal beneficiaries can roll over the IRA assets to their own IRAs, or elect to treat a deceased account owner's IRA as their own (presuming the spouse is the sole beneficiary and the IRA trustee allows it). By becoming the account owner, the surviving spouse can make additional contributions, name new beneficiaries, and wait until age 73 (for those who reach age 72 after December 31, 2022) to start taking RMDs. (A surviving spouse who becomes the account owner of a Roth IRA is not required to take distributions.) Beginning in 2024, a surviving spouse who is the sole beneficiary of an employee who is a participant in a qualified work-based plan will be treated as the employee for the purposes of RMD rules.

A beneficiary may also disclaim an inherited retirement account. This may be appropriate if the initial beneficiary does not need the funds and/or want the tax liability. In this case, the assets may pass to a contingent beneficiary who has greater financial need or may be in a lower tax bracket. A qualified disclaimer statement must be completed within nine months of the date of death.

Prior to 2020, individuals with high-value IRAs often used conduit — or "pass-through" — trusts to manage the distribution of inherited IRA assets. The trusts helped protect the assets from creditors and helped ensure that beneficiaries didn't spend down their inheritances too quickly. However, conduit trusts are now subject to the same 10-year liquidation requirements, so the new rules may render null and void some of the original reasons the trusts were established.

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