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Tuesday, January 26, 2016

Legacy Assurance Plan Article: What President Obama's State of the Union Proposals Mean for Your Estate Plan


Summary: The president's proposed overhaul to the tax code could have dramatic impact on many people's estate plans. Even if the changes become law, there are still estate planning tools available to you to help you minimize the tax impact your death has on your beneficiaries. Putting your estate plan through a regular "check-up" will help give you the peace of mind that comes from knowing that your plan is always optimized to achieve your goals in accordance with the current law and your current life situation. 

Earlier in January, President Obama delivered his State of the Union address. The president's 2015 address included a number of policy proposals related to the tax code. These changes could have a substantial impact on many estate plans if they become law. As with any changes to state or federal laws, it is important to understand the potential impact on you and consider what steps are most appropriate to ensure you get the most out of your wealth.

One component of the president's tax plan would change both capital gains tax rates and the triggers that cause a capital gains tax to be imposed. Currently, the top rate is 23.8%; under the president's plan it would rise to 28%. Arguably more importantly, however, the president's plan would change how death affects the capital gains tax, essentially making your death a "taxable event" for your beneficiaries. For example, say you bought $20,000 of Google stock in 2010 and your estate plan leaves it to your children. Now assume that, when you die, the stock is worth $60,000. Under the current law, your children receive that stock with a "tax basis" of $60,000, so if they sold it the very next day for $60,000, they would owe $0 in capital gains taxes. Under the president's plan, your children would owe capital gains taxes on the $40,000 increase, and that obligation would hit as soon as they received the stock (in order words, upon your death.)

If the proposal were to become law, there are still some methods for engaging in estate planning to minimize the tax obligations for yourself and your beneficiaries. One option is purchasing cash value life insurance, which would offer you both favorable tax treatment of the policy's accumulation, along with tax-free withdrawals.

Also, a charitable remainder trust may also help further your estate planning goals. These irrevocable trusts come in two sub-types: charitable remainder annuity trusts and charitable remainder unitrusts. With a charitable remainder trust, you make a donation of property to your charity (such as, say, a quantity of stock) to your trust. The trust pays you (or a person you name) either a fixed or variable income (depending on whether you created a CRAT or a CRUT,) and then, when you die, transfers the remainder of the asset to your charity that you named. These trusts can offer significant tax benefits with assets that you might expect to appreciate rapidly (like some stocks or certain real estate.)

Another estate planning tool that might help is what's called a "dynasty trust." A dynasty trust is a type of irrevocable trust that you can create for your children, grandchildren and even beyond. You can name the trustee who will manage the trust and stipulate the conditions for which payments are made to your beneficiaries. By remaining in a dynasty trust, an appreciated asset would avoid the capital gains tax "hit" that comes with a full distribution to beneficiaries. As an example, you could establish a dynasty trust designed to help fund the college educations of your grandchildren, great-grandchildren and even subsequent generations.

Certainly, all of this varies depending on whether the president's proposals become law. But regardless, the proposed changes illustrate how readily -- and dramatically -- the laws impacting your plan can change in a brief period of time. That's why it is important to ensure that you and your estate planning team put your plan through a routine "check-up" to make certain your plan best meets your stated objectives.
   
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, January 9, 2016

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 www.legacyassuranceplan.com

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




Tuesday, January 5, 2016

Legacy Assurance Plan Article: A New Year... Time for New Estate Planning Resolutions

Summary: The new year often brings with it new resolutions. If you have an estate plan, resolve to have your plan undergo a checkup and ensure that all of the pieces that work together to comprise your total estate plan are up-to-date and consistent with your current wishes. Whether you've experienced deaths, births, divorces, marriages or other events, a life event can change your circumstances and may mean making alterations to your plan is in order. Simply checking up on your will and trust is not enough; you should also make sure that your powers of attorney, living will and non-probate accounts are also current with your existing estate planning goals.

As December draws to close, and the calendar turns to January, many people starting looking forward to the start of a new year. With the start of the new year will come new resolutions for many. If you haven't created an estate plan, you should resolve to do so. If you have, make getting an estate plan review one of your resolutions.

Making sure that the plan you have in place is completely up-to-date entails many things. One place to start is to ask yourself if you've experienced any important life events in the past year (or whatever length of time since your plan last underwent a checkup.) Have there been any deaths among your loved ones? New births? What about marriages... or divorces? Depending on how you've structured you plan, any of these events could impact you. Perhaps a new birth means making a change to ensure that your newest loved one is included in your plan, or a death means making alterations to your plan to redirect that deceased loved one's distribution.

One of the more common triggers is a divorce. A divorce has the potential to require a plan change for various reasons. The most obvious, of course, is if you desire to amend your plan to ensure that this person, post-divorce, receives nothing from your assets. However, in some situations, a former spouse (of yours or of a loved one) may remain an important and cherished part of your life even after the divorce. Should you still intend to include this person in your plan, a plan review is appropriate in this case, as well. This person likely has no legal relationship to you now, and it is important to make certain that your plan spells out your intentions and objectives regarding this person clearly and expressly.

Making sure that your plan is up to date involves more than just checking your will or living trust. A death may impact the your powers of attorney if the departed was one the agents you named under those documents. Altering or replacing these documents to ensure that you still have an ample number of agents and backup agents can ensure that these powers will work the way you want should they be needed.

Furthermore, remember that your estate plan extends beyond just your will, trusts, powers of attorney and living will. If you have assets that are transfer-on-death, pay-on-death or any kind of structure that has a death beneficiary designation, these assets need a checkup, too. Regardless of how your will or living trust is designed, or how up-to-date those documents are, accounts like your retirement accounts or your insurance policies will generally be distributed according to their own beneficiary designation forms, not your will or trust. Checking up on these accounts is particularly important if you've experienced a divorce (to make sure you're not unintentionally leaving assets to your "ex".) It is also vital if you've experienced a death among your loved ones. If your death beneficiary predeceases you, and you do not fill out a new beneficiary designation form, that asset will likely end up in your probate estate, and could be distributed in a way far from what you intended.

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)