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If you read yesterday’s post, you’ll know that wills and living trusts each accomplish three goals, but they are not one and the same. Neither document is likely to be a comprehensive solution for all your needs, so you’ll need to consider what time period you are planning for. If you are looking simply to plan for what happens after you pass away, both a will or a living trust can be a good option. If incapacity, however, is your primary concern, a living trust is far and away the more superior tool. Many people focus on what happens after they pass away when it comes to estate planning, but disability and incapacity are increasingly important concerns...
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Anytime you hit the Internet to do some kind of research, you’re likely involved in thinking about the situation at hand, how a product or service will fit into your own life, and any unintended consequences that might pop up during the way. Just as choosing a new car or new home involves the careful weighing of options for your unique needs, estate planning involves the selection of tools that are most appropriate for you and your situation. Each person’s estate planning goals are different, meaning that these goals need separate documents and strategies. Even if the overarching goal is the same- like helping family members to avoid the probate process,...
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It’s very popular for business owners to operate under the structure of an S corporation. This allows business owners to generally avoid “double taxation” that could impact owners of C corporations. Operating as an S corp may help a business owner avoid self-employment taxes typically affecting LLCs that choose to be taxed as partnerships. Even though dividends from S corps are not calculated in terms of self-employment taxes and provide more income tax benefits for this reason, they don’t provide the kind of asset protection that a business owner might prefer. Stock linked to C corps and S corps can be exposed to risk in the form of judgment creditors....
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With increasing longevity and awareness surrounding elder care issues, more people are seeking out options to plan for long-term care. In the event that you or a loved one needs long term care assistance, there are four primary ways for which that case can be paid for: Self-pay. This involves the spending of personal assets to cover rehabilitation, nursing home, or at-home care. In many places, the annual cost of care is exorbitant, forcing an individual to spend through his or her assets in a few months to a year. Medicare. There are a lot of misconceptions about what Medicare will and won’t cover, but you should know that Medicare only...
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Self-settled asset protection trusts get more buzz these days, but they weren’t even recognized in the United States until the latter part of the 1990s. Before this time, putting together a self-settled trust required establishment outside U.S. borders. In 1997, though, Alaska recognized self-settled trusts and Delaware followed. Currently, self-settled trusts are not a nationwide trend as only fifteen states recognize them. These include Alaska, Delaware, Hawaii, Mississippi, Missouri, Nevada, New Hampshire, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Virginia, and Wyoming. Put together appropriately, a self-settled trust allows...
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One of the most popular approaches to estate planning has to do with safeguarding assets against possible losses. Asset protection trusts are one common way to protect property for you and your beneficiaries. Asset protection trusts refer to irrevocable trust structures in which a trustee holds property and distributes it out under his or her discretion. The trust protects the assets from being exposed to risk through divorce, a beneficiary’s creditors, or other predators in the future. There are two primary categories for asset protection trusts: third party trusts and self-settled trusts . As the name suggests, a third party trust involves a trust...
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A fair amount of taxpayers are familiar with at least the basics behind gifts and taxes, but it’s important to understand your obligations when making taxable gifts to others to ensure your compliance with the Internal Revenue Code. If you make a taxable gift to someone else, a gift tax return needs to be filed. If you fail to do this, penalties may apply. If you don’t file the gift tax return as you should, you could be responsible for the amount of gift tax due as well as 5% of the amount of that gift for every month that the return is past due. If you fail to pay the penalty, you could be responsible for the amount of the gift tax due and .5% of the...
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One of the most important parts of your lifetime estate planning has to do with a power of attorney. This document gives one or more individuals the authority to act on your behalf as your official “agent”. You can give this individual narrow power s or you can give them broad discretion over acting in your capacity. If you wanted to limit their powers, for example, you could stipulate that this person only has the authority to act to help close the sale of your home. This power, too, can be temporary or permanent, based on your needs. Many people choose to have the power of attorney be “triggered” by a certain type of event, such as your incapacity....
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Elder law refers to a practice that is devoted to the needs of older clients. Elder law attorneys have specialized knowledge about long-term care planning, advance health care directives, powers of attorney, probate and trusts, guardianships, and asset protection. While many elder law clients turn to an attorney in the midst of an elder care planning crisis, you might also reach out to an attorney with experience in this field so that you can plan ahead. There are many reasons that you might need an elder law attorney. If you or a loved one has concerns over the cost of long-term care and how you will be able to pay for it, then it’s pertinent that...
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If you die without a will, the laws of the state in which you lived will determine what happens to the assets inside your estate. Typically, the distribution will be passed along to your spouse and any children, although this can vary based on your location. One of the downsides of not having a will is that you give up control over what can happen to your estate assets. The state’s plan for the management of your estate is simply their best guess about what most people would elect to do with their estates. There are some built-in protections for special beneficiaries, like children. Unfortunately, there is no guarantee that what they choose to do will...
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Before determining that a revocable living trust is the right fit for you, you should evaluate several factors. The term “living trust” may be exchanged with “revocable trust”. This means that you create it during your lifetime and that you can change it during your lifetime as well. The living trust, when used properly, can help you manage assets or protect you in the event that you become ill or disabled. Since you have the power to revoke or change them, you should be aware that the tax advantages available with some trusts are not the same in this scenario. These trusts, however, can help you avoid probate. The use of irrevocable living trusts,...
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If you feel overwhelmed or confused by the process of business succession planning, you’re not alone. In fact, this is a common challenge facing many of America’s business owners. To further complicate matters, many business owners are not informed about the possible tax implications of a succession plan they choose. This is why it’s so important to choose a business succession advisor who is familiar with the implications for both your business and your tax situation. One common mistake made in the process of business succession planning is to sell all or a portion of the stock to your children. This can have negative tax consequences that you didn’t...
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Most people would consider these items, also referenced as “belongings” to be important or of sentimental value, but they often get overlooked in the estate planning process. These items can be furniture, clothing, jewelry, silverware, cars, boats, pieces of art, or household furnishings. Even those these items tend to be left out of estate planning, it’s also quite common for heirs to fight over them. The cost of these items in comparison with the legal costs to fight over them is often not equal, meaning that heirs might be filling to fight for it but at great expense. Each family member might have a different perception on what is “fair” regarding...
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It’s important to recognize that after a loved one passes away, no more estate planning can be done, even if you believe that the current plan is flawed. If you’re a party to administering the estate, you have to get to work pretty quickly to accomplish the tasks likely in front of you. Depending on your location, you may need to follow a series of steps to actually administer the estate: Filing the appropriate paperwork regarding probate Initiate the probate process, which is ruled by state laws and court supervision Get approval for estate expenses, if necessary Publish a death or custodianship notice in the newspaper ...
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These days, physicians have a lot to worry about as they grow their assets. Many, after years of residency, are plunged into a higher income bracket, but this can come with risks. Litigation, for example, can expose all those new assets of a physician to serious risk. That’s why it’s so important to take steps early to protect your assets and engage in regular review as your wealth grows. There are a few basic steps you can take to safeguard yourself, but there are many options when it comes to asset protection planning as well as your estate. As your situation changes, of course, it’s important to reconsider what you Step 1: Update Your Will...
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Lance Armstrong has done it- insulated his assets from being totally exposed to creditors. But there are reasons that other people outside of public figures should considering doing the same. While it’s very difficult to imagine all of your money being entirely protected from creditors, there are steps you can take to protect yourself with business planning and estate planning. One of the approaches to doing this is setting up “hurdles” for creditors. While technically this allows the creditors to still gain access to your assets, the structure of the hurdle is such that they will be unable to do so without having to “pay to play.” For some creditors,...
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Trust planning can be complex, which is why it should always be handled by an experienced estate lawyer. Depending on the type of trust you choose, there are many benefits you can reap from choosing this kind of tool. More and more, however, individuals are considering putting verbiage inside their trusts to have a spouse removed in the event of a divorce. Like most aspects of putting together such critical documents, there are pros and cons to this approach. While safeguarding a trust by including such a provision might work out in the long run, not every divorce tears the couple apart entirely. Sometimes the couples part ways but are able to remain close...
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Putting your estate plan together and getting important questions answered is not something that should be underestimated. Selecting the professional that is right for your needs is important because you’re likely to form a long-term relationship with such an individual. Whether it’s simply good planning sense or the rash of celebrity estate planning faux pas stories in the news, more people are thinking about their estates. Planning ahead goes far beyond putting together a will for most because it involves strategies designed to maximize the value of assets while minimizing the impact of taxes. You should have a level of comfort with your estate...
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Most people recognize the value of doing it, but it’s either so difficult to work into their frame of mind or it’s something that seems so far off that estate planning tends to get skipped over. As a bottom line, most people don’t want to think about dying. It’s a sobering topic, and it’s also one that generates a lot of questions you may not be sure you know how to answer. There are four primary reasons that people avoid estate planning: They don’t want to think about death. Although most people want to avoid the topic of death, wouldn’t you rather address it while you’re healthy and competent? It’s much easier to plan ahead this way. ...
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There’s no doubt that it can be a real challenge for business owners to talk about succession planning. For some, it’s because their drive and entrepreneurial vision contributed so much to the success of the enterprise. For others, it’s because they can’t imagine taking a step back from the business. And for others, it has to do with not being sure what the future holds in terms of the business. All of these are understandable reasons for putting off the succession planning conversation, but they don’t diminish the true value of thinking ahead. Succession planning is not just answering the “who” question- it’s about answering the “how”, too. There are...
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