estate-planning

How Often Do I Need an Estate Plan Checkup?

By Estate Planning, Resource

The When, Why, and How of Estate Planning Checkups

Keeping your estate plan up-to-date is an important consideration and responsibility. While lots of people make an effort to create an estate plan, failing to make updates is all-too-common. There’s only so much you can do to ensure the longevity and relevance of your original plan at the time of its creation. Regardless of how meticulous or diligent you were, situations change with the times and few plans stay relevant as the years progress.

There are many situations where reviewing and updating your estate plan makes good sense. While the time to revise may vary widely according to individual circumstances, you should always review your estate plan every few years. Along with reviewing the details of the plan yourself, a professional estate planning lawyer can help to put things into perspective and create a plan that is flexible, robust, and designed to last.

Regardless of how meticulous or diligent you were, situations change with the times and few plans stay relevant as the years progress.

OVERVIEW

Here's everything you need to know.

Estate planning lawyers try their very best to create precise documentation in order to account for future events. However, a compromise or trade-off is often needed between robust and flexible documentation. This is especially true for large and complex estates that involve multiple parties and significant assets. Regardless of experience or expertise, there is only so much that can be done to extend the life of an estate plan. Time itself is a significant factor that needs to be considered.

The older the documents are when they are executed or used, the greater the risk of a successful challenge to them. While creating a robust estate plan is not all about risk management, it should always be an important objective. As the chief measure of change, time involves constant flux and uncertainty. Your personal situation can change, the people around you can vary in significance, and the laws and regulations that define your estate can change considerably between governments and jurisdictions.

How often you need to update your estate plan depends on many variables. While most well-drafted estate plans do not need to be updated every three years, they certainly should be reviewed within that period. If and when your circumstances change, it’s important to carry out a review and conduct a detailed editing process. If you have a proven track record of reviewing, confirming, and possibly amending your estate planning documents, you have a greatly reduced risk of interference.

Let’s look at some common factors that are likely to change over time and may affect your estate plan.

Changes to Relevant Laws

Along with conducting reviews based on time itself, you should also review your plan if there’s a change in taxation laws or other relevant laws that govern your estate. Relevant laws may include changes to powers of attorney or advance medical directives, among others. While legal compliance is fundamental to every estate plan, changes to relevant laws are often omitted or misunderstood when documentation is reviewed. Along with laws, there may be changes regarding the defined roles and responsibilities of yourself and your estate planning lawyer.

Moving to a New Jurisdiction

Moving house can involve significant changes, with the details of your estate plan often needing to be adjusted along with your everyday life. Whether you have moved to a new country or a new state, it’s important to make changes based on the laws of your new jurisdiction. Estate planning laws aren’t national. Each state has its own laws, from trivial differences regarding witnesses through to significant differences surrounding marriage and inheritance.

If you’re living in or moving to California, it’s important to speak with a local lawyer with experience in Californian law. You should work with your estate planner to establish proof whenever you have changed residence. This is particularly important if you have a substantial estate based on real estate assets, or you have moved from a state with differing inheritance or estate taxes.

Changes to Assets or Liabilities

Ownership of new property or assets is significant for your estate planning purposes. Along with the value of new assets, it’s also important to consider how they were acquired and titled. Whether your assets grow or diminish over time, you will need to review how your property is divided and decide if your old estate plan is still relevant. Liabilities are just as important, with few real estate or business assets owned outright during the early days. Overall, a significant change in the composition of your estate always merits a review.

Changes to Your Qualified Retirement Plan

Qualified retirement plans are an important part of the estate planning process, but they’re often forgotten about or incomplete. The beneficiary of these accounts is determined by the plan itself, not by your will or trust. Updating beneficiary designations is crucial, especially if you haven’t done it for a while or the value of your account has grown substantially over time. In addition, beneficiary designations also control who receives life insurance, annuities, and some financial accounts.

Changes to Life Events

In addition to the events listed above, an estate plan should always be reviewed when specific events take place in your life. Certain defined events, including births, deaths, and marriages, can change your personal circumstances and create a desire to alter the details of your estate plan. Despite their importance, personal changes are often overlooked when it comes to estate planning, either due to ignorance, misunderstanding, or forgetfulness.

While most well-drafted estate plans are designed to deal with specific defined events, such as the death of a child or spouse, they may not be flexible enough to accomplish your wishes when other life events take place. It’s impossible for an estate plan to deal with all eventualities, and once again, there is often a trade-off between what is robust and what is flexible regarding documentation.

The following life events should be caused to review and potentially update your estate plan:

  • Children growing up – If your kids have grown up and left the nest, you may want to make them responsible for their own health, trust, and will affairs.
  • Marriage or divorce – As soon as a marriage or divorce is finalized, it’s important to update your estate plan. This is also the case if your children or other beneficiaries have become married or divorced.
  • Births or deaths – The birth of a new child or grandchild requires amending your estate plan, as does the sad case of a family member passing.
  • Affections changing – The personal objects of your affection can and do change over time. If you experience significant changes in your relationships, you may want to change the details of your estate.

Other Changes

You should consider making changes to your estate plan whenever you need to change the name of beneficiaries, successors, agents, or trustees. By creating alternate options inside the plan, you have a contingency in place if a death takes place. It’s especially important to consider what could happen if the death of a beneficiary proceeded your own, including alternate financial arrangements and beneficiaries. If executors or trustees become inappropriate due to mismanagement or legal problems, it’s important to find new people who can implement your plan according to your wishes.

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How do you actually plan an estate?

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Although every estate is unique, there are a few things you should always have.

The Estate Planning Review Process

Reviewing an estate plan involves a considered step-by-step process to identify and document any changes that have occurred. While simple estates and regular reviews are not particularly complex, large estates and lengthy-time periods between reviews can be challenging. Changes to significant assets, moving to a new jurisdiction, and complicated tax issues can also make this process more complicated. Along with checking the accuracy and relevance of trusts, deeds, family assets, and property agreements, certain questions should be asked regarding the following documents:

  • Power of Attorney for Health Care – This document should be reviewed to see if it still reflects your values. Are changes needed regarding end-of-life and artificial life support directives? Do you need to remove or add the people selected to be in charge of your health care decisions?
  • Durable Power of Attorney – Also called attorney-in-fact, this document selects the person who will be in charge of your finances. Do you want a spouse or child added or removed? Perhaps you want to select different agents to help manage your affairs?
  • Last Will and Testament – Do you want to change the personal representatives or trustees selected to manage your assets upon death? Do you want to change any of the beneficiaries of the will? Are there any relevant revisions to make due to births, deaths, marriages, or changes of affection?
  • Family Asset Management – Do you want to make changes to beneficiary designations due to life events? Should certain assets be placed in trust to avoid probate? Should a revocable or irrevocable trust be created? Are you happy with the current relationship set up between assets and beneficiaries?

Creating an estate plan is an essential part of maintaining and ensuring your legacy. Along with crafting a robust and flexible plan according to your wishes, it’s important to review and update this plan on a regular basis. Life is nothing but a series of changing events and evolving relationships, with a regular checkup needed to align the details of your estate with the people and legacy that define your life.

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OUR APPROACH

We believe that every client is unique.

We understand how tough these types of decisions can be and we will guide your estate planning with empathy, respect, patience and a commitment to ensuring your every wish is protected by law.

Disclaimer: The information in this article is for general purposes only, and it is not intended as a substitute for legal advice. 

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The Complete Guide to Grantor Retained Annuity Trusts

By Estate Planning, Resource, White Paper

Sophisticated Estate Planning with GRATs

Grantor retained annuity trusts (GRATs) provide a solid foundation for long-term estate and legacy planning. This financial instrument is a great way to minimize wealth transfer taxes and maximize the efficiency of your estate planning model. GRATs present a real and robust opportunity to freeze value and transfer appreciating assets to the next generation while minimizing the consequences of gift and estate taxes.

A GRAT is a type of irrevocable trust created for a set time period, with taxes paid upon the creation of the trust in order to avoid future costs. An annuity is paid out every year, with this fixed income stream often used to fund retirement. When the trust expires, the beneficiary receives the assets of the trust on a tax-free basis.

Synopsis

In this white paper, you will gain knowledge on the wide range of benefits that GRATs have to offer with little downside in most situations. Individuals and families often use these instruments to freeze and transfer value, with GRATs enabling the provision of large financial gifts within the family structure. Common GRAT types include fixed-term GRATs, ramp-up GRATs, zeroed-out GRATs, rolling GRATs, and Walton GRATs.

1 - How is a GRAT defined?

A GRAT is created when a grantor contributes and transfers assets to an irrevocable trust on a fixed-term basis. This type of trust cannot be modified, amended, or terminated without the permission of the grantor’s named beneficiaries or court approval. GRATs offer dual benefits in most situations, with long-term asset appreciation and distribution combined with the right to receive an annuity stream over the term of the trust.

In a typical situation, all assets included in the trust are distributed to family members, with other non-charitable and charitable beneficiaries also defined in some situations. Assets are contributed to the trust, with the original value of the assets earning a rate of return for the grantor, and leftover assets given to the grantor’s beneficiaries upon expiry of the trust. A GRAT enables multi-generational wealth transfer for a set amount of time with little or no gift taxes.

In order to understand how a GRAT functions, it's important to understand the following terms:

A GRAT enables multi-generational wealth transfer for a set amount of time with little or no gift taxes.

Annuity

A financial product that pays out a fixed stream of payments over a set time period. In a GRAT, annuity payments come from interest earned or as a percentage of the total value of the assets.

Appreciating Assets

Property or other valuable assets that are likely to appreciate in value between family generations.

Taxable Gifts

A sum calculated by subtracting the value of the grantor’s retained interest from the fair market value of the appreciated asset transferred into the trust.

2 - Implementing a GRAT in 5 simple steps

STEP 1

An irrevocable grantor trust is created.

The purpose of this trust is to exclude particular assets from estate and gift taxes, while including them for income tax purposes. Assets have been removed from the estate, and the grantor can buy and sell from the trust without incurring income taxes.

STEP 2

Assets are transferred to the trust in exchange for an annuity.

The annuity must be for a fixed term or for the entire lifetime of the grantor. Assets inside the trust are… download the white paper to continue reading.

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OUR APPROACH

We believe that every client is unique.

There’s no such thing as a one-size-fits-all approach to estate planning, and we’re not satisfied until we find the perfect solution. To find out more about our estate planning attorney costs, contact us now to arrange an initial assessment.

Disclaimer: The information in this article is for general purposes only, and it is not intended as a substitute for legal advice. 

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What Every Family Needs To Know About Estate Planning

By Estate Planning, Resource

Does Your Family Need an Estate Plan?

When you’re young and healthy, death is not something most people think about. In fact, many avoid thinking about it at all. That’s one of the reasons why estate planning doesn’t even cross their minds. Or if it does, they think they have plenty of time and will get to it when they’re older, when they have a family, when they’re ready.

Unfortunately, death doesn’t wait until you’re ready and anyone can die at any moment. So the answer to the question about whether your family needs an estate plan is always yes. Because of estate taxes and the cost of probate, trust us when we say the cost of an estate planning attorney is worth it in the long run.

Because we never know what our future holds, the responsible thing to do is to consult with a lawyer about what estate planning you need depending on your age and personal circumstances. For some, this will mean no more than a living will for the moment, for others it will include everything from a last will and testament to living trusts and a Power of Attorney.

OVERVIEW

Here's everything you need to know.

Here’s an overview of what you need to know when planning an estate.

 

What is a Will?

Most people know that a Last Will & Testament is a legal document that lays out your wishes regarding the distribution of your assets and the care of any minor children after you die. There are certain criteria a Will must meet for it to be considered a binding legal document. In California, these requirements are that it must be in writing, signed (witnessed) by at least two witnesses, and signed by the testator (you).

California also recognizes what is known as a Holographic (Handwritten) Will. In this case, as long as the will is in your handwriting and you have signed it then it is considered valid, even if there are no witnesses.

A will only takes effect after you have died and in California is not officially recognized until the court has issued an order finding the will valid. This step is known as Probate and can take anywhere from 9 months to 2 years to complete. Estate planning attorneys aim to keep your costs as low as possible so they’ll often advise that you have a living trust instead.

How do you actually plan an estate?

Let's take a look.

Although every estate is unique, there are a few things you should always have.

What is a Living Trust?

Just like a will, a Living Trust allows you to distribute your assets (which include money and property) according to your personal wishes after you pass away. This is where the similarity ends though. First, a living trust cannot name a guardian for your minor children. Second, a living trust takes effect from the moment it is created.

This means that as soon as you transfer any assets into that trust, how they are managed will be determined by the terms of the trust. Living trusts are more complicated to create than a will, but unlike a will, they can usually operate without any court supervision. Because Probate isn’t a necessary step, a living trust is often the more cost-effective solution in estate planning.

Living trusts can be irrevocable but are usually revocable. This means that you can change the terms and conditions of the trust at any time. With a living trust, the settlor (person who creates the trust – you) is the initial trustee (person who manages the trust). You have full control of all your assets. When you pass away, a successor trustee will take over managing your trust according to your wishes.

To handle the distribution of any assets that aren’t already in the trust, guardianship for your minor children and things that cannot be determined by a living trust (such as funeral arrangements) after you pass away, a living trust includes what is known as a Pour-Over Will.

A living trust will also include a Living Will and/or Advance Medical Directive, and a Financial Power of Attorney if you become medically incapable of making your own decisions.

 

What is a Living Will?

A Living Will describes your wishes concerning your healthcare for your loved ones, your medical team, and legal authorities. Unlike a last will & testament, it takes effect if you are medically incapable of making your own decisions – so before you have passed away. Every person should have a living will regardless of wealth or family status, and every living trust should include one.

Most people create a living will because devastating accidents can happen and they want to be sure their loved ones know exactly what their wishes regarding their medical care are, and ensure that those wishes are followed even if their loved ones don’t agree with those decisions.

However, their purpose is usually to prevent loved ones from having to make tough decisions regarding life support, resuscitation and more in the event of a life-threatening emergency. A living will alone doesn’t give anyone else the authority to make health care decisions on your behalf though. If you want your Advance Health Care Directive to give someone permission to make medical decisions for you then your living will needs to be combined with a Power of Attorney for Healthcare.

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OUR APPROACH

We believe that every client is unique.

We understand how tough these types of decisions can be and we will guide your estate planning with empathy, respect, patience and a commitment to ensuring your every wish is protected by law.

Disclaimer: The information in this article is for general purposes only, and it is not intended as a substitute for legal advice. 

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How Much You Can Expect to Pay for Estate Planning

By Estate Planning, Resource

No matter how complex your estate is, or how much you own, it’s important that you manage it all properly.

This is where estate planning comes in. Estate planning gives you complete control over what happens to your assets when you pass away, and it can prevent unnecessary stress for your family down the line.

Let’s be honest, though. For most people, one question springs to mind – how much does it cost? Well, although it’s impossible to give you an exact figure without finding out more about your estate, here’s an estate planning guide that’ll help you understand what to expect.

OVERVIEW

Here's everything you need to know.

Here’s an overview of the steps involved in planning an estate, and a look at how to estimate your estate planning attorney costs.

 

How Estate Planning Works

There are three main components of estate planning. In short, the process involves:

  • Understanding your specific needs and goals
  • Assessing your estate’s total value
  • Ensuring we have the right documents in place, such as wills and powers of attorney, to administer your estate in line with your wishes

You can think of estate planning as a long-term investment in your family’s future and your personal goals. Once you’ve planned your estate and put the right procedures in place, you can relax knowing that your personal and professional interests are protected. And remember, if your estate changes, we can always revise your plan so it serves your new goals.

How do you actually plan an estate?

Let's take a look.

Although every estate is unique, there are a few things you should always have.

Estate Planning Attorney Costs: What to Expect

When you’re planning an estate, the costs can vary considerably. There are a few reasons for this, but generally, costs vary due to:

  • The size of the estate
  • The estate’s complexity
  • The specific services you require
  • Taxation issues

At Business Estate & Tax Attorneys, P.C., we always aim to design comprehensive, cost-effective estate plans for our clients that optimize taxes and reduce the likelihood of probate problems. Typically, we find that a retainer model works best. Retainers cover ongoing estate administration work, such as managing trusts. Once you retain us, we then bill against these funds as we complete other essential work. For most clients, retainers are a convenient way to take some of the stress out of managing an estate.

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OUR APPROACH

We believe that every client is unique.

There’s no such thing as a one-size-fits-all approach to estate planning, and we’re not satisfied until we find the perfect solution. To find out more about our estate planning attorney costs, contact us now to arrange an initial assessment.

ESTATE PLANNING

Here are the steps for planning an estate.

A will is a legal document that sets out how your estate should be divided upon your death.

If you don’t have a will, your estate will be divided according to the laws of intestacy in California, and you may not be happy with the results. One of the main costs associated with wills in California is probate. Probate is the legal process whereby your estate is settled, your debts are paid, and your estate is formally administered.

The problem with probate is that it costs money, and these costs are often entirely avoidable. Our goal is to reduce probate costs and avoid them wherever possible, which is why we sometimes recommend drafting not only a simple will but also a living trust.

The cost varies depending on:

  • How complex the will is
  • The amount of ongoing estate administrative work that will be required

A note on complex estates.

If you own a business or you have a large estate, you’ll probably need additional plans setting out how to:

  • Dispose of your assets in a tax-efficient way
  • Sell, dispose of, or distribute your business
  • Manage trusts for children or others lacking capacity

We can advise you on the costs of these extra services once we know more about you.

What’s the difference between a Living Trust v. Living Will in California?

Everyone should have a will, but we don’t all need living trusts. Why? Because the main goal of a living trust is to distribute assets quickly and cost-effectively, without going through probate. This has obvious advantages for large estates with complex tax considerations, but it’s less important for smaller, simple estates.

In short, it’s not so much a contest of living trust v. living will in California. It’s simply that some estates need both. We can advise which option is right for you.

Who will care for you during an emergency?

With an advance health care directive, you can tell your family, and healthcare providers, how you wish to be cared for if you’re incapacitated.

You must select someone to act as your agent and communicate your requests – pick someone reliable.

Who will manage your finances?

A durable power of attorney lets you appoint an individual to manage your financial affairs if you can’t look after them yourself anymore.

As with the advance health care directive, you should always pick someone trustworthy.

What assets are within the estate?

By setting out an inventory of the estate, you reduce the likelihood of disputes arising between family members at a later date.

You can always revise this list as assets move in and out of your estate.

Disclaimer: The information in this article is for general purposes only, and it is not intended as a substitute for legal advice.