Showing posts with label avoid probate. Show all posts
Showing posts with label avoid probate. Show all posts

Monday, January 1, 2018

Adding Someone to an Asset to Avoid Probate Can Do More Harm than Good

Summary: Avoiding probate can offer the person who plans many possible rewards. They can include savings of time and money and stress. There are, as with many things in estate planning, multiple ways to achieve a particular objective. Some ways of avoiding probate may accomplish the goal, but may do so by creating potential pitfalls in terms of negative tax implications or exposure from civil lawsuits. By planning properly and carefully, you can effectively avoid probate and do so with opening yourself up to unnecessary risks.

At its most fundamental level, avoiding probate involves making sure that you do not have assets in your probate estate when you die or, if you do, they are small enough to be distributed using one of your state’s highly simplistic and abbreviated procedures for very small estates. One of the many relatively simple ways to make sure an asset isn’t in your probate estate is to make sure that you aren’t the last living co-owner left. If your asset is co-owned and one or more co-owners (often called “joint tenants” in technical legal verbiage) survive you, then the asset goes to that person or people without requiring probate administration.

To achieve that end, some people take the step of “adding” someone to an asset (or assets) to create this sort of joint tenancy and method for avoiding probate. While this technique may well avoid probate, it carries with it a series of potential problems that can befall you or your loved ones. For one thing, “adding” someone as a co-owner (joint tenant) of an asset that you currently own by yourself is that, in the eyes of the IRS, you have made a gift unless your new co-owner paid you. By just “adding” someone with no money changing hands, the tax authorities consider what you did as giving 50% of that asset to that other person. This could potentially create gift tax issues for you and income tax issues for the other person (among other things.)

Another potential issue is that the person you’re adding as a co-owner immediately takes full rights to one-half of the property. That means that, after you add him/her, he/she has all the same power and authority over the asset that you do. Want to sell the asset? He/she has to approve it. Want to refinance that asset? He/she has to sign off.

An additional thing to keep in mind is that adding someone means additional exposure from potential legal judgments. Perhaps you trust your daughter implicitly and think that she is a safe person to add to the title on your home. But even the most upright and trustworthy of people can find themselves facing civil lawsuits related to their business ventures, a divorce or an auto accident. If your child is a defendant in any such case and the court enters a judgment against her, that asset that you and she now co-own could potentially be used to satisfy that legal obligation of hers.  

Other methods of avoiding probate may be much safer. For example, avoiding probate with a revocable living trust allows you to reap all the same benefits of probate avoidance as adding someone to your asset(s), but will allow you (if you choose) to maintain sole and complete control over that asset(s) during your lifetime, and will not subject your wealth to civil lawsuit exposure the same way that adding someone to a deed/title would. To be sure, avoiding probate with a living trust is not as simple as avoiding probate by adding a co-owner to your assets, but it is safer. And anything worth doing is worth doing well.  


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)
@assuranceplan
#legacyassuranceplan


   



   
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Thursday, November 16, 2017

4 Estate Planning Mistakes made by People seeking to avoid probate. And How to Avoid Them!

Summary: Many people seek to avoid probate, and with good reason. Depending on where you live, probate can be expensive, time-consuming and stressful. However, as with the pursuit of almost any goal, it is important, not just to plan to achieve the goal, but to go about it the right way. There are many risks that exist for unwary people who go about avoiding probate the wrong way. By engaging in proper planning, you can achieve your goals and avoid these harmful potential traps.  

In the pursuit of any goal, there are risks. Engaging in estate planning to avoid probate is no different. The fact that potential harms exist doesn’t mean that you shouldn’t plan to avoid probate; it just means that you should make absolutely certain you are planning properly to avoid harmful mistakes. Here’s is a list of four such mistakes: 

(1)  Not engaging in proper plan updating. When it comes to estate planning, and to planning to avoid probate, getting a great plan put into place isn’t enough. You can have a plan that is comprehensive, well-thought out and exquisitely tailored to meet all your goals.. However, if it just sits for decades without ever receiving a “check-up,” it still may fail to do what it was intended to do. In the years since you began your planning, many things could have changed, and these changes could negatively impact your plan’s ability to achieve your probate-avoidance goals. For example, if you’ve failed to review your plans, you may miss the fact that all of the named beneficiaries on your life insurance have predeceased you. When that happens, do you know what happens to the death benefit on that policy? It gets paid to your estate. That means that, in order to be distributed to a person or entity that you want, it has to go through probate administration. This can be avoided through proper plan reviews and updates, like executing a new death beneficiary form.
(2)  Using the wrong methods to accomplish their probate-avoidance goals. There are actually a lot of different ways to avoid probate. These different methods are not all created equally, however. For example, creating a joint ownership arrangement with an asset (or assets) can potentially meet the goal of avoiding probate. But is also comes with many serious risks. If the person you name as your co-owner becomes involved in a bankruptcy or a civil litigation case (meaning anything from a business dispute to a divorce to an auto accident,) that legal action could result in you losing that asset completely. Other avenues for avoiding probate, such as living trusts or transfer-on-death/pay-on-death designations, can give you the advantages of avoiding probate without these risks.
(3)  Mishandling your transfer-on-death/pay-on-death assets. Transfer-on-death and pay-on-death designations can be a useful part of some estate plans designed to avoid probate. They can also, however, be extremely problematic if not used properly. If you make the mistake of not naming contingent (a/k/a alternate) beneficiaries, or not naming enough of them, then you could have a problem. If your beneficiary (or beneficiaries) all die before you do, then the asset with that transfer-on-death or pay-on-death designation will go, upon your death, to your probate estate, which will likely mean going through probate before that asset can be distributed to your loved ones.    
(4)  Misusing gifting as a means of avoiding probate. Some people decide that they will attempt to avoid probate simply by giving their assets to their loved ones before they die. This strategy is filled with a variety of serious potential risks. Two of the biggest potential risks are: taxes and impoverishment. As far as taxes are concerned, any gift above a certain dollar amount is considered to be a “taxable event” by the government’s taxation authorities. That means that it may have to be reported on tax return forms and, depending on your circumstances, it may trigger tax problems for your beneficiaries. Depending on what type of asset it is, gifting it to your intended beneficiary could create negative capital gains tax consequences for your beneficiary should he/she decide to sell that asset later. As far as impoverishment, life is full of unanticipated twists and turns. You may think that you have enough wealth to give away certain assets (and live the rest of your years on what’s left,) but unexpected changes (such as unforeseen medical problems) could mean that you find yourself without enough left to meet all of your own needs.  



The key to almost any type of planning is ensuring that you’re engaging in proper planning. With an estate planning team that includes an experienced attorney supporting you, you can make certain that you can avoid probate and also avoid the pitfalls that are out there.

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)
@assuranceplan
#legacyassuranceplan






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Thursday, October 12, 2017

Avoiding Probate | It Isn’t All Black or White

Summary: Very few things in life, or the law, are completely black and white. Most things are shades of gray. The correct answer to great many legal questions is, “It depends.” This also holds true when it comes to avoiding probate. Not everyone needs to plan to avoid probate as part of their estate planning (although a great many can potentially benefit from such probate-avoidance planning.) Which group you belong in is something you must decide, ideally in conjunction with the advice and counsel of an experienced estate planning attorney. 

In the third “Episode” of the famed “Star Wars” movie series, one of the movie’s protagonists, Obi-Wan Kenobi, instructs that, “Only a Sith deals in absolutes.” (The Siths are the movie’s evil antagonists.) The point of this statement is that almost all of the world is a series of shades of gray; very little is black or white. Anyone who speaks only in terms of absolute black-or-white either is being disingenuous, at the very least, is misinformed.

Estate planning can be like this. If you research estate planning, you’ll come across a lot about avoiding probate. Some of that information will try to tell you that everyone is better off avoiding probate. While an awful lot of people can, indeed, benefit from the costs and delays that can be associated with certain types of probate administration procedures, that is not an absolute black-or-white thing. There are some situations where having your estate go through probate is better for you than avoiding it. Here’s a list of a few examples:

(1)  You have minor children. In many states, the only way you can name a guardian to care for your minor children or other legal dependents is through a valid will. In a lot of places, the courts will presume that the appointment of this person as guardian is the best interest of your children. The only way to bring that appointment to life, and the only way that a will can have legal effect, is if the will is duly probated. So, even if all of your assets were structured to avoid probate, your will would still need to have a will and for it to be probated by the court in order for your naming of that guardian to be legally recognized.  
(2)   You have “problem” people in your life. Maybe it’s a creditor. Maybe it’s a relative. Whomever they have to deal with, there are some people who have people or entities in their lives whose presence could cause problems with the execution of your estate planning goals. It could be a contentious and uncooperative child, or it could be an unscrupulous creditor. Either way, situations like this are among the group of scenarios where the much larger degree of court oversight you get in a probate administration (as opposed to, say, the resolution of a living trust,) can actually be a benefit, not a hindrance. The judge’s greater involvement in your case could keep these “problem” people from derailing or complicating your estate plan and thwarting your goals.
(3)  You have certain types of debts/creditors. The law in most all states creates a limited period of time for a creditor to demand payment of a debt from the assets of a deceased debtor. If the creditor waits too long, then the creditor loses the right to demand payment. One way to shorten this period is by opening a probate case. By starting a probate administration, you may be able to cap this “limitations period” for pursuing debts to periods as short as 6 or 12 months. Without it, the period may run for many years, even more than a decade. (For example, in Maryland, filing a probate administration case can shorten the period from 12 years to 6 months.
(4)  You have only a very small amount of probatable assets. Some people may have very small amounts of assets. Others may have small amounts of assets subject to probate. Maybe you don’t own much at all, or maybe you own a used car, a house titled under a transfer-on-death deed, a life insurance policy, a retirement account with a beneficiary designation, your pre-paid burial plan and a bank account with a pay-on-death designation on it. In either of these situations, your collection of assets subject to probate may be small enough that you qualify for your state’s most simplified variants of probate. In those situations, as opposed to those who have to go through the full probate administration, completing the process can be very brief, quick and inexpensive.    

As you can tell from these descriptions, these are all relatively specific situations. A great many people are outside all of these groups and can potentially benefit from avoiding probate with estate plans that include living trusts. The key thing to remember is that none of this is black-or-white. That is why you need an experienced estate planning attorney, who can put his/her knowledge and skill to use for you and advise on what path makes the most sense for your circumstances.

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)
@assuranceplan
#legacyassuranceplan





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Tuesday, May 9, 2017

Living Trusts | A Look at the Positives and Negatives

Summary: Any estate planning tool available carries with it certain benefits and certain drawbacks. Living trusts have some very substantial potential benefits and also, as do all estate planning tools, carry some disadvantages in some situations, too. The key to choosing the right tools to include in your plan is looking at what plusses and minuses each option offers and the comparing them to your needs and goals. The same plan that might be right for one person might be very wrong for another. With the help of your knowledgeable estate planning attorney, you can put together a plan that makes the most sense for you. 

In any decision in life, each option carries with it certain benefits and certain disadvantages.
Estate planning works like this. There several options for planning your estate. One avenue – the use of a revocable living trust – has some clear potential benefits. It also, like anything else, has possible drawbacks.

The key to making a wise decision is looking at those “plusses” and “minuses” and matching them to your needs. Find a choice that contains the largest number of the things you greatly desire or demand, while also containing the fewest negatives that are “dealbreakers” for you and you have likely found a good option.

A properly drafted, executed and funded living trust will allow you to avoid probate administration. This can be a big benefit to you and your family because probate administration can be costly, stressful and time-consuming. If helping your family to avoid these costs and delays after your death is important to you, then a living trust may help.

Another potential advantage is privacy. Probate administration is, in most situations, a matter of public record. Settling a trust upon the creator’s death generally is not a process that is public record. If you go through probate, the contents of your estate are generally available to be viewed by anyone who goes to the court clerk and requests your file. For some people, this may not be important to them. If you are a widower, who was married once, has three living children of that marriage and owns only a $90,000 house, a $3,000 car and a couple thousand dollars in checking and saving, you sincerely may not care who sees your probate paperwork after you’re gone. However, for a lot of people, whether it’s personal details or it’s financial information, there are very important reasons for keeping information shielded from the public. If you fit that description, a living truest may provide essential value to you.     

A living trust can be helpful to you if become mentally incapacitated. If that happens and you have a properly established and funded living trust, the management of your wealth generally will transition seamlessly from you to the successor trustee your named in the trust document. If you don’t care about who manages your wealth when you cannot (and do not care if your family has to go to court to get a court-appointed conservator to manage your assets,) then this may not be a big benefit. If these are concerns and addressing them are among your planning goals, then a living trust may be worthwhile for you.

As with anything, there are possible drawbacks. A living trust often costs more to set up initially. A living trust can also take more time to set up when you factor in trust funding. For a few people, this greater up-front expense or time commitment potentially could make this option impossible, However, for a lot people, this investment of time and up-front money has the potential to save them and their loved ones much greater amounts of time and money down the road.


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)
@assuranceplan
#legacyassuranceplan



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