An Overview of Estate Planning
Competent and well thought out estate planning isn't just for the wealthy. You don't need to own a massive estate to benefit from creating a sound financial plan or to realize some of the advantages that were once reserved for the richest Americans.
Whether or not you realize it, you already have an estate, which is merely a way of describing your total assets. The wealth you've accumulated so far, and that which will be added in the future, can be subject to a wide array of forces and laws. While careful investing and money management can help you attain wealth, changes in the tax laws can expose your assets to many vulnerabilities that a qualified estate planning attorney can anticipate and help you avoid.
California estate planning attorney Christopher S. Hammatt will guide you through the maze of available plans and options available, no matter your wealth level. With the price of homes and other assets near their highest levels, you possibly have more wealth than you ever dreamed possible. Securing your family's future by protecting those assets should be a high priority.
A sound estate plan will take into consideration both your desire to protect your assets and your plans for their inheritance. You don't need to be listed in Fortune Magazine to be concerned about making sure that your assets are distributed according to your wishes.
The perfect estate plan, above all else, is personal. An experienced estate planning attorney can do more than list your options. Knowing which plans and methods can best help you achieve your personal objectives and how to implement them separates excellent plans from merely functional ones. You may already be familiar with Living Trusts, Wills, and the Federal Gift Tax laws, but knitting them all together in a plan that meets your needs is best handled by competent legal counsel.
What is a Living Trust?
Simply put, a living trust is a written agreement between two parties. The trustor or grantor establishes the trust and the bank, person, or persons who manage it, is the trustee or trustees
The trust agreement details how the trust operates during the grantor's life and what happens to the assets following his or her death. Extreme care must be taken when considering the elements of the trust, and the written agreement that describes its operation will specify in detail who receives the assets when the trust terminates, any payments that can be made from the trust, and who will serve as trustee and successor trustee.
Features of a Revocable Living Trust
As long as the grantor survives, the trust is a revocable trust. During this period, the grantor may amend the trust in any way he or she wants, can add or subtract to existing assets, buy and sell any of the assets held by the trust, or even revoke it. A trust amendment, signed by the grantor, will indicate any changes made to the original trust.
Keeping Tax and Asset Records
There is no legal requirement to keep any records of the trust while the grantor is alive and the trust is revocable. While the trust typically will include a list of assets originally placed in the trust, any additions or subtractions should be included because when the grantor dies, the successor trustee needs to know exactly what the trust contains.
Income Tax Effects and Returns
No separate tax return is required for the trust as long as the grantor serves as its trustee or co-trustee and the trust is revocable.
The trust will carry the Social Security Number of the trust's creator, who will continue to report all taxable income and deductions on his or her personal tax return, including all dividends, capital gains, interest, and other taxable income. No reference to the trust is required on the personal tax return, and none should be made.
Titling Trust Assets
Assets need to be placed in the trust for it to function or serve any practical effect. To do this, the assets must be registered in the name of the trustee. As an example, the title or registration of an asset would be changed to "Ann B. Smith, trustee of the Ann B. Smith Trust, dated September 1, 2003."
If real property is included in the trust, any deeds that are assigned to the trust need to have their title recorded, a process that does not trigger a real estate tax reassessment. Stock certificates need to be re-recorded and mailed to transfer agents, and a similar process is required for any bonds. Banks, credit unions, and saving and loan associations need to have their accounts changed, and stock brokerage accounts must be transferred to the trustee, in his or her name for those assets to be included in trust.
To make the trust the beneficiary of any existing life insurance policy, the policy needs to be changed to name the trustee as beneficiary. Doing so will place the proceeds of the policy into the trust at the time of the insured's death.
Withdrawals or Payments from the Trust
Since the trust is revocable during the grantor's life, he or she may withdraw whatever amount is wanted at any time, without limit. There is no legal need to keep records of any interest, dividends, or principal taken, or for any amounts withdrawn from bank, credit union, or savings and loan accounts.
Learn more more on Revocable Living Trusts
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