Main Threats To Your Estate Can Easily Be Avoided

What are the principal threats to your estate that we can easily avoid with some planning?

     1.  Taxation
     2.  Court costs
     3.  Lawyer costs
     4.  Family disputes
     5.  Loss to creditors
     6.  Loss to in-laws in a divorce.

TAXATION: Here, we want to avoid estate taxation on your assets and defer income taxes due on retirement accounts. We avoid estate taxation by leaving assets to loved ones in a tax sheltered trust, often called a “Family Trust”.

COURT COSTS, LEGAL FEES AND FAMILY DISPUTES: Here, we want to avoid court costs, legal fees and family disputes. With a well-drawn plan that uses revocable trusts, we can provide clear instructions and dispel any confusion that may occur. We can substantially reduce court costs, lawyer costs, and make it so there will be no family disputes. We reduce court costs and lawyer costs by converting all your probate property so it is non-probate property. Most of the time, we use revocable trusts for this purpose. Assets owned in a trust do not go through probate. So, application of that rule to your situation would be as follows: If you have a revocable trust and you/we retitle your probate property so it is owned in this trust (by you, as trustee of your revocable trust), then unnecessary fees and costs related to probate are minimized.

LOSS TO CREDITORS AND IN-LAWS: Here, we want to use trust law as a shield to protect assets left to loved ones. By leaving assets to loved ones “in trust”, we can insulate those assets from loss to creditors’ claims and loss in divorce. Let’s say Jack and Jill, collectively leave one million to their son, Jack, Jr. If they leave it to him free of trust which is common, then he will own that one million completely. Will it be included in his estate for estate tax purposes? Yes. Will it be subject to the claims of his creditors if he gets sued? Yes. Will it be subject to equitable distribution if he gets divorced? Yes. Now, if Jack and Jill wish to help keep their property in the family and want to use the law to protect their property from Jack, Jr’s creditors or potential divorce, then they will be well advised to leave their estate to Jack, Jr., as trustee of a trust which is for the benefit of Jack, Jr., with a remainder to Jack, Jr.’s children. This is not difficult to do. We usually incorporate the terms of the trust for the children within the client’s revocable trust. If your child is not able to handle money, then you can name a sibling or an institution to serve as trustee for that child’s benefit. There are a million ways to plan an estate. The question is how is it best to plan yours so as to avoid the known problems your family can encounter. Every situation is unique. Consult with a professional when you engage in these matters.

Contributed by:
Mark F. Winn, J.D., Master of Laws, LL.M. in Estate Planning, is a local tax, asset protection and estate planning attorney.