Preserving Your Estate For Financial Peace of Mind
Estate planning is the process of anticipating and arranging for the disposal of an estate. Estate planning typically attempts to eliminate uncertainties over the administration of a probate and maximize the value of the estate by reducing taxes and other expenses. Guardians are often designated for minor children and beneficiaries in incapacity.
Devices Estate planning involves the will, trusts, beneficiary designations, powers of appointment, property ownership (joint tenancy with rights of survivorship, tenancy in common, tenancy by the entirety), gift, and powers of attorney, specifically the durable financial power of attorney and the durable medical power of attorney. After widespread litigation and media coverage surrounding the Terri Schiavo case, many estate planning attorneys now advise clients to also create a living will. Specific final arrangements, such as whether to be buried or cremated, are also often part of the documents. More sophisticated estate plans may even cover deferring or decreasing estate taxes or winding up a business.
Because the United States tax code does not tax life insurance proceeds as income, a life insurance trust could be used to pay estate taxes. However, if the decedent holds any incidents of ownership like the ability to remove or change beneficiary, the proceeds will remain in his estate. For this reason, the trust vehicle is used to own the life insurance policy and it must be irrevocable to avoid inclusion in the estate.
Devices Estate planning involves the will, trusts, beneficiary designations, powers of appointment, property ownership (joint tenancy with rights of survivorship, tenancy in common, tenancy by the entirety), gift, and powers of attorney, specifically the durable financial power of attorney and the durable medical power of attorney. After widespread litigation and media coverage surrounding the Terri Schiavo case, many estate planning attorneys now advise clients to also create a living will. Specific final arrangements, such as whether to be buried or cremated, are also often part of the documents. More sophisticated estate plans may even cover deferring or decreasing estate taxes or winding up a business.
Because the United States tax code does not tax life insurance proceeds as income, a life insurance trust could be used to pay estate taxes. However, if the decedent holds any incidents of ownership like the ability to remove or change beneficiary, the proceeds will remain in his estate. For this reason, the trust vehicle is used to own the life insurance policy and it must be irrevocable to avoid inclusion in the estate.
More information about estate planning
Tax planning usually plays a considerable role in relating to the use of trusts.
Historically, whilst the courts have been fairly amenable to the use of trusts in tax planning, as tax planning schemes have become more aggressive, so the courts have increasingly taken a restrictive view of the tax treatment of trusts.
Although individual countries tend to have very detailed rules about the taxation of trusts, the three mechanisms whereby taxation is usually assessed is by either treating (i) the trust as a separately taxable entity in its own right, (ii) treating the trust property as still the property of the settlor, and (iii) treating the trust property as belonging absolutely to the beneficiaries. Some jurisdictions apply different combinations of the rules in income tax, capital gains tax and inheritance tax.
Generally speaking, there are no strictures as to who may be a beneficiary of a trust; a beneficiary can be a minor, or under a mental disability (in fact many trusts are created specifically for persons with those legal disadvantages). It is also possible to have trusts for unborn children, although the trusts must vest within the applicable perpetuity period.
In trust law, a beneficiary is the person or persons who are entitled to the benefit of any trust arrangement. A beneficiary will normally be a natural person, but it is perfectly possible to have a company as the beneficiary of a trust, and this often happens in sophisticated commercial transaction structures. With the exception of charitable trusts, and some specific anomalous non-charitable purpose trusts, all trusts are required to have ascertainable beneficiaries.
Remainder The tax code allows people to set up charitable remainder trusts and set up qualified personal residence trusts to own their personal residence yet leave it to their children without estate tax.
Inheritance is the practice of passing on property, titles, debts, rights and obligations upon the death of an individual. It has long played an important role in human societies. The rules of inheritance differ between societies and have changed over time.
Terminology In law, an heir is a person who is entitled to receive a share of the decedent's (the person who died) property, subject to the rules of inheritance in the jurisdiction where the decedent died or owned property at the time of death. In politics members of ruling noble houses may be heirs of a living person, called heirs apparent. In law, however, a person does not become an heir before the death of the decedent, since the exact identity of the persons entitled to inherit is determined only then. There is a further concept of jointly inheriting, pending renunciation by all but one, which is called coparceny.
In modern law, the terms inheritance and heir refer exclusively to the succession of property from a deceased decedent intestate. Future recipients of property through a will are termed beneficiaries, devisees, or legatees.
Should you have any questions or concerns about whether Estate Planning is right for you, please take a moment and contact us on the Home Page or under the More/Contact drop down menu.
Historically, whilst the courts have been fairly amenable to the use of trusts in tax planning, as tax planning schemes have become more aggressive, so the courts have increasingly taken a restrictive view of the tax treatment of trusts.
Although individual countries tend to have very detailed rules about the taxation of trusts, the three mechanisms whereby taxation is usually assessed is by either treating (i) the trust as a separately taxable entity in its own right, (ii) treating the trust property as still the property of the settlor, and (iii) treating the trust property as belonging absolutely to the beneficiaries. Some jurisdictions apply different combinations of the rules in income tax, capital gains tax and inheritance tax.
Generally speaking, there are no strictures as to who may be a beneficiary of a trust; a beneficiary can be a minor, or under a mental disability (in fact many trusts are created specifically for persons with those legal disadvantages). It is also possible to have trusts for unborn children, although the trusts must vest within the applicable perpetuity period.
In trust law, a beneficiary is the person or persons who are entitled to the benefit of any trust arrangement. A beneficiary will normally be a natural person, but it is perfectly possible to have a company as the beneficiary of a trust, and this often happens in sophisticated commercial transaction structures. With the exception of charitable trusts, and some specific anomalous non-charitable purpose trusts, all trusts are required to have ascertainable beneficiaries.
Remainder The tax code allows people to set up charitable remainder trusts and set up qualified personal residence trusts to own their personal residence yet leave it to their children without estate tax.
Inheritance is the practice of passing on property, titles, debts, rights and obligations upon the death of an individual. It has long played an important role in human societies. The rules of inheritance differ between societies and have changed over time.
Terminology In law, an heir is a person who is entitled to receive a share of the decedent's (the person who died) property, subject to the rules of inheritance in the jurisdiction where the decedent died or owned property at the time of death. In politics members of ruling noble houses may be heirs of a living person, called heirs apparent. In law, however, a person does not become an heir before the death of the decedent, since the exact identity of the persons entitled to inherit is determined only then. There is a further concept of jointly inheriting, pending renunciation by all but one, which is called coparceny.
In modern law, the terms inheritance and heir refer exclusively to the succession of property from a deceased decedent intestate. Future recipients of property through a will are termed beneficiaries, devisees, or legatees.
Should you have any questions or concerns about whether Estate Planning is right for you, please take a moment and contact us on the Home Page or under the More/Contact drop down menu.
