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Tuesday, November 24, 2015

Legacy Assurance Plan Article: Using Life Insurance as Part of Your Estate Plan, And Getting the Most from It

Summary: For many, life insurance can be an essential ingredient of a well-thought-out estate plan. Using life insurance may help achieve many of your key estate planning goals, like the continuity of your small business or allowing a child to continue their college education. Just like the rest of your estate plan, your life insurance policy can benefit from periodic "check-ups" to make sure that no updates, such as beneficiary changes, are needed to make certain that your plan will accomplish what you want.  

Life insurance policies can serve a wide array of benefits. Life insurance can be an invaluable component of your estate plan, allowing your loved ones or other beneficiaries to accomplish many of your estate planning desires. Life insurance can help pay taxes or other bills, keep your small business continuing after your death, keep a child in college or achieve any of a number of other objectives.

Generally, the proceeds from a life insurance policy pass directly to the people or entities you name in your policy's documents, without requiring a probate process. There are a few situations, though, where the death benefit from your policy could end up in your probate estate, and require administration to distribute. If you expressly name your estate as the beneficiary of your policy, then your life insurance would go through probate. Also, if you name only one person as your policy's primary death beneficiary, you risk having your policy proceeds end up in probate if that person you named dies before you do. That's why it is almost always a good idea to name several contingent (or back-up) beneficiaries who you would want to receive that money if your primary beneficiary dies before you do.

This is also why it is a good idea to perform an estate plan "check-up" routinely to make sure that none the pieces of your estate plan require updating. An estate plan check-up involves everything in your plan, whether it is your will, trusts, powers of attorney, life insurance, pay-on-death or transfer-on-death accounts or other assets. Your check-up may help you identify potential risks and make the necessary changes to address them, such as adding additional or different beneficiaries to your life insurance or other accounts.

Depending on the size of your estate, it may also make sense to place your life insurance policy in what's called an "irrevocable life insurance trust," or ILIT. If your estate is large enough that you are facing a potential estate tax obligation, you'll want to take the necessary steps to ensure that your life insurance is not including in your estate. Your ILIT is special type of trust specifically dedicated to holding and owning your life insurance. Your ILIT is managed by the person you name to be the trustee of that trust. You cannot be the trustee of your own ILIT, because serving in that capacity means that you would hold what the IRS calls "incidents of ownership" of the policy, which defeats the tax advantages of the ILIT. You are, however, generally free to name anyone else, including your spouse or a child, to be the trustee of your ILIT.

This article is published by the Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services-company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at http://www.legacyassuranceplan.com 


This article written and published by:
8039 Cooper Creek Blvd
University Park, Florida 34201
844.306.5272 (Phone)





Tuesday, November 3, 2015

Legacy Assurance Plan Article: Making Sure That All the Pieces of Your Estate Planning Puzzle Fit Together


Summary: The dispute and litigation surrounding Blechman's estate serves as a potent lesson that estate plans can be contained in many different types of documents, not just wills and trusts. If you have an estate plan that includes many different documents and multiple non-probate transfers, it is important to make sure that all of the pieces to your plan are "in synch" with each other so that your true estate planning goals are clear to those whom you leave behind.

The dispute over the estate of Bertram Blechman in the Florida courts recently offers a clear illustration about the importance of understanding how broad your total estate plan can be, and the vital need to make certain that each part of your plan meshes with all of the others so that your objectives are clear and can be fulfilled.

In 2009, Blechman and his sister formed an LLC named Laura Investments LLC. The LLC's operating agreement, which is the document that controls the entity, gave each of Blechman and his sister 50% ownership of the company. The agreement stated that, unless an owner's will said differently, his or her shares immediately passed to (and vested in) that owner's living children in equal shares upon the owner's death. 

Blechman also had an estate plan that included a will and a trust. The will stated that "the residue" of his estate was to go into the trust and named the man's son as executor of the estate. A 2010 amendment to the trust stated that Blachman's long-term girlfriend was to receive his house and certain amount of distributions from the LLC assets, which were to be used to pay for the maintenance of the house. Blechman's will, however, will did not expressly make any provisions for the ownership interest in the LLC.

When Blechman died in 2011, he was survived by the girlfriend, the son and a daughter. The girlfriend sued to receive the money set aside for her in the trust document. Blechman's children, however, contended that the LLC operating agreement took precedence and, under it terms, the 50% ownership of the LLC was a non-probate asset that transferred directly to them.

The trial originally ruled that the LLC interest was a probate asset. That outcome would have benefited the girlfriend, as the LLC assets would have gone into the probate estate and then would have poured over into the trust, meaning that the girlfriend would have been eligible to receive the payments as dictated by the trust. That ruling was overturned by the appeals court, which ruled that the transfer provisions contained in the LLC operating agreement were a non-probate transfer.

While many people may think only of death beneficiary designations (like pay-on-death or transfer-on-death) or living trusts when it comes to estate planning transfers that avoid probate, the reality is that estate plans can be contained in a variety of documents and probate avoidance "can be accomplished in a myriad of ways," as the court in Blechman's case wrote. The LLC operating agreement created just such a probate-avoiding transfer. The moment Blechman died, the LLC ownership immediately passed outside probate to the children. Because this asset did so, it never became a probate estate and therefore never became owned by the trust.

Clearly, all the pieces of Blechman's estate plan did not seem to be "in synch." Assuming that Blechman was sincere in his interesting paying for the girlfriend's housing expenses, his plan needed to function differently to ensure that eligible assets were funded into the trust to make that happen. As it ended, the family was faced with a lack of clarity that ultimately required the courts to sort out.
   

This article is published by the Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services-company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at www.legacyassuranceplan.com


This article written and published by:
8039 Cooper Creek Blvd
University Park, Florida 34201
844.306.5272 (Phone)






Saturday, October 24, 2015

Legacy Assurance Plan Article: Creating An Estate Plan to Reflect Your Moral and Ethical Values


Summary: For many, our moral and ethical views are some of the strongest perspectives we hold. Your estate plan is one method for living your faith and/or values. Trusts can possibly provide significant benefits as you use your estate plan to aid a person or entity in the furtherance of a religious or charitable mission. You can ensure that your end of life decisions reflect your values by careful planning with regard to your living will and healthcare power of attorney.

The decisions you make in your estate plan are a part of the reflection of who you are. One way to demonstrate your values is through estate planning. These decisions can go well beyond just remembering a values-based charity in the distribution of your assets, but can impact a wide range of elements of your plan.

One straightforward way to bestow this benefit is through including a distribution in your will or living trust that goes directly to the cause of your choice. You might choose to help a church, a church-connected charitable organization or a religious educational institution. Others might prefer to demonstrate their values by benefiting a philanthropic entity that is not tied to any religious organization.

However, you also have other options available, as well. Special trusts, called charitable remainder trusts and charitable lead trusts, may allow you to further the cause of your favorite religious or secular charity while also reducing your tax obligations. Charitable lead trusts can lower your current taxable income, while charitable remainder trusts can lower your potential capital gains tax obligations. For this reason, a charitable remainder trust may be especially useful if you have a charity you wish to aid and you have assets that have appreciated substantially since you bought them (such as real estate or stocks.) It is important that the IRS recognize the charity your wish to benefit, otherwise you may lose the tax-related benefits of your trust.

There are other ways to reflect your values in your plan. You can make some (or all) of the distributions from your living trust or will conditional on the beneficiary making certain choices or acting in a way consistent with your values. For example, you could make a cash distribution to a loved one conditional or his/her pursuing a religious education or you could distribute a piece of real estate to a beneficiary on the condition that the property be used only for the furtherance of a religious mission. You can also instruct that beneficiaries not use the assets they receive from you for anything that contradicts your values. Utilization of an incentive trust (or trusts) may be helpful if you want to incorporate such goals into your plan. 

Finally, if you have strong views, based in your religious or ethical foundations, regarding end of life decisions, it is important to plan for those positions to be followed. You should communicate your preferences to your estate planning attorney and your loved ones, and when choosing an agent to act on your behalf under the power of your living will or healthcare power of attorney, you should strongly consider selecting someone who shares your perspectives and values regarding end of life decisions.

This article is published by the Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services-company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at www.legacyassuranceplan.com

This article written and published by:
8039 Cooper Creek Blvd
University Park, Florida 34201
844.306.5272 (Phone)