Revocable Living Trusts

Monday, November 07, 2011

Advantages of Living Trusts

Although Living Trusts aren’t a necessity for most people in Pennsylvania, they can still make sense for many, depending on your estate planning goals and concerns.

Here are a few reasons that a living trust might make sense:

1. Easier transition: Unlike a Will that controls only after you die, a living trust allows you to create an instrument that controls your assets if you became disabled, and after you pass on. In other words, 2-in-1. Yes, you could (and should) have Powers of Attorney in case you become disabled. But for assets in a living trust, the Powers of Attorney won’t be necessary and will therefore be easier on your loved ones.
    
2. Privacy concerns: A Will, once probated, is public knowledge and can be reviewed by anyone. If you’re concerned about a Will challenge or contest, a living trust might make sense to look into. The living trust and assets held in it never get probated.
    
3. Avoid Probate: By avoiding probate, your family can save on probate fees and some of the annoyances that come along with probate. Pennsylvania probate isn’t too difficult, but avoiding it will make things easier.
    
4. Asset Protection for Heirs: A living trust can provide asset protection for your children and grandchildren by protecting your heirs from themselves and others, including creditors, divorcing spouses, etc.

You should determine with an attorney whether a living trust makes sense for you. There are a number of factors that could weigh in favor or against a living trust. The reasons above are just scratching the surface.

A living trust will likely cost more than a Will up front, but could save time and money later on.

Monday, October 24, 2011

Did Steve Jobs Have An Estate Plan?

Even several weeks after his death, people are still talking about Steve Jobs and his contributions to the technological advances we've made in the last 30 years. Just last week, there was a memorial for Apple employees, shutting down every Apple store for a couple of hours, to celebrate the life of Steve Jobs. I remember using the Mac Classic, a black and white Apple computer from the 1980’s, and being fascinated by what was then advanced technology (no WiFi, no Facebook, no internet but still great!). People are going to be talking about Steve Jobs for a long time.

As your estate planning attorney, I was intensely curious about what type of estate plan Jobs created. We have plenty of wealthy individuals who have not engaged in estate planning, and their affairs are simply a mess.  People like Elvis Presley, Sammy Davis Jr. and others lost a huge amount of their estate to unnecessary taxes because they didn’t plan properly. We can learn a lot from their mistakes. But we can also learn from those who actually did take the time to plan, like Steve Jobs. To be honest, the less we can learn about their estate plan, the better their estate plan probably was!

To read more about what Steve Jobs did and didn’t do, check out the Forbes article on his estate plan here.

Every estate plan is different. Most people don’t have the wealth that Steve Jobs had. Nonetheless, everyone needs a plan that works for them and avoids disputes, excessive taxes, and unhappy heirs. If Steve Jobs didn’t put the proper plan in place, we will surely find out sooner or later.

Have a great week!

Monday, October 10, 2011

7 Estate Planning Questions

Top 7 Estate Planning Questions That Clients Ask

1. What if I don’t have a Power of Attorney, what happens?

You need to make sure you have a Power of Attorney, no matter what age you are. If something happens to you and you can’t make decisions for yourself, you need to make sure someone is appointed to handle your affairs. If you don’t, a guardian may need to be appointed for you. That means going through the courts, something that no one wants to be bothered with.

2. Is probate a big deal in Pennsylvania? Do I need a living trust?

Probate is not the scary process that it used to be, at least in Pennsylvania. Most people in Pennsylvania opt to have a will over a living trust because probate is rather straightforward. Sometimes, an attorney may need to be retained to help with probate affairs, but many times, a family can do it themselves.

3. Why do I need a will if most of my assets are joint or have beneficiaries?

Regardless of if your assets are jointly titled and have beneficiary designations, it still makes a lot of sense to have a will.

First, you may acquire new assets or move assets around during the course of your life. You may forget to re-title beneficiaries, or you may not title the asset jointly.

Second, there are bound to be assets that WILL pass through the will! It always happens. Plus, even if that doesn’t happen, a will is important for other reasons, such as making sure you have an Executor appointed.

Finally, if you are married, a will may not be as important upon the first-to-die, but upon the second-to-die, a will becomes essential because it’s likely that many of those joint assets are no longer jointly held, and will pass through the will.

4. Where do I store my documents, and should an attorney keep a copy?

We generally recommend you purchase a fire-proof records safe for your home and store your original estate planning documents there. They will be safe, but more accessible than a bank safe deposit box. As your estate planning law firm, we keep a copy of your documents on our secure LegalVault service, which also provides you and your health care providers access to your documents.

5. Can I write my plan myself or with a LegalZoom type of service?

Of course you can, but it’s probably not a good idea. Would you skip the doctor’s office and diagnose yourself if you’re feeling sick? Estate planning is best done with an attorney who understands how all of the pieces of the puzzle fit together. Estate planning includes wills, powers of attorneys, and trusts, but it also includes strategies while you’re alive, and strategies for the next generation. Even a “simple” plan is best done with an attorney, because as of our experiences show, even the simple plans require customizations.

6. How often should I update my plan?

Check your documents at least every three years to make sure they still seem current. We recommend that you update the plan when you see a need for a change, and update your powers of attorney every five years.

7. What are the taxes at death and how do I avoid them?

There are both federal estate and state inheritance taxes. Most people today don’t worry about federal estate taxes today, because only folks with more than $5 Million of assets are affected. 

Pennsylvania has a state inheritance tax, and any asset transferred upon death in Pennsylvania is possibly subject to inheritance tax, with very few exceptions. The tax rates are relatively small (4.5% to kids and grandkids), so most of the time, planning to avoid PA inheritance taxes is not worth it. However, every case is different and we can discuss estate and inheritance tax planning strategies with you that may make sense.

Monday, September 26, 2011

Estate Planning Tips

This week, I reached into my grab bag for a few best practices in estate planning. Everyone must have an estate plan because without one, you risk leaving your affairs a mess for others. Here are a few tips and ideas:

1. KEEP IT CURRENT:
   Keep your Powers of Attorney up-to-date. In the event of a disability, you want to ensure financial institutions and medical providers will accept these documents without reservation. Update them every 3-5 years.
    
2. DON’T LET PROBATE SCARE YOU:
   In Pennsylvania, don’t let the probate process scare you into writing big expensive estate plans to avoid probate. Probate is a relatively easy process in Pennsylvania compared to other states.
    
3. FOLLOW THE THREE C’S:
   In your estate plan, be CLEAR, be CONSISTENT, and be CAREFUL. Make sure you’re working with an attorney who only practices estate planning so you can rest assured knowing your plan meets this criteria. Make sure the language is clear, that nothing in the plan conflicts, and that you think through what you want your plan to say.
    
4. HOPE FOR THE BEST, PLAN FOR THE WORST:
   Estate planning is about as exciting as going to a dentist for many people. No one wants to do it, but it must be done. While you’re planning, make sure you plan for the worst-case scenario. For example, leaving your son a large inheritance and the chance that he could have creditor problems or he gets divorced and his ex-wife wants half of the estate. Yes, there are strategies we can put in place to protect an inheritance from these types of situations.
    
5. GIFT PROPERLY:
   Want to downsize, help your kids while you’re still living, or take care of the grandkids? Writing a check may make them smile, but there are other ways to make gifts, such as setting up life insurance policies inside trusts (great for asset protection) and creating a pension for life for your kids. If you want to gift, make sure you explore your options with qualified professionals. Doing so may provide multiple benefits to you and your heirs.

Monday, September 19, 2011

Five Myths About "Living Trusts"

Is the Revocable Living Trust, sometimes just called a Living Trust, the ultimate estate planning tool? It depends who you ask, and what state you’re in.

In Pennsylvania, Living Trusts aren’t used commonly as an estate planning tool. Instead, practitioners in Pennsylvania, as well as clients, tend to favor Wills as the fundamental estate planning tool.

Here are five myths about Living Trusts in Pennsylvania:

Myth #1: Living Trusts save, reduce or avoid taxes:
A Living Trust is NOT a tax reduction or avoidance strategy. You simply cannot avoid estate or inheritance taxes by using a living trust. It used to be that more people were effected by the federal estate tax, and that married couples could reduce their estate tax by using credit shelter trusts. But you could do the same thing in a Will!

Myth #2: They prevent estate challenges:
A Will is easier to challenge than a Living Trust, because a Will is probated and is public. However, just because a Living Trust isn’t probated, doesn’t mean it can’t be challenged in court. It just takes a little more time, effort and money to do so.

Myth #3: They avoid probate because probate should be avoided:
Pennsylvania probate is pretty simple, and a run-of-the-mill estate can be probated by the Executor him or herself without the help of an attorney. So probate shouldn't necessarily be avoided at all costs and you shouldn't be scared of probate in PA. Yes, living trusts avoid probate, but your living trust must be 100% funded with ALL of your stuff to do that! Even missing ONE small bank account means your loved ones will have to go through probate. Anyway, probate is not a big deal in Pennsylvania, unlike in other states such as California (yes, living trusts are popular there because probate is a COURT supervised process!).

Myth #4: A Living Trust will make things easier at the end of my life:
Not really… It is probably takes just as much work to probate the will, settle the estate, etc., as it does to manage an ongoing trust. Trusts need to comply with many rules, tax returns must be filed annually for trusts, and more. A living trust will usually require the help and services of a professional.

Myth #5: I need a living trust to shelter assets from nursing home costs:
A living trust would NOT be a good tool to use if you want to shelter some of your assets from being spent down by nursing homes. You need to use a Medicaid Asset Protection Trust, which is IRREVOCABLE, and establish and fund this trust when you’re still healthy. A living trust used in a situation like this would be a disservice to you and your family.

LIVING TRUSTS MAKE SENSE IN SOME SITUATIONS, BUT NOT ALL SITUATIONS.  Estate planning is an individual process that's unique for everyone. A qualified attorney can help guide you to what estate planning tools you need.

Want more information on what estate planning tools make sense for you? Call us today at (215) 706-0200 to schedule your complimentary visit.

Monday, June 20, 2011

Asset Protection For Your Heirs

The question is, when you engage in estate planning, are you thinking carefully enough about protecting the inheritance you'll be leaving to your heirs?

If you leave your assets outright in a will to a beneficiary, the asset is owned by the beneficiary upon death. That means that the beneficiary can spend the asset however he or she would like. It also means that if the beneficiary is in debt, or suddenly becomes mired in debt, the creditor can come after that asset. 

How about if your beneficiary is married? 50% of marriages in the U.S. still end in divorce. You better believe your son or daughter in law will be pushing for equitable division of that inheritance.

No one wants to be involved in a law suit, but accidents happen, and we live in a litigious society. Insurance may cover up to a certain amount, but what happens after that? You can be sure that if there is a large inheritance available, an attorney will find it and come after it.

Bankruptcy, high risk professions, and other risk factors are always present as well.

You can protect against these predators and creditors for your heirs if you plan properly. Using trusts, for both non-IRA assets and IRA assets, we can potentially protect your heirs from themselves and others. 

Have you considered how to ensure your heirs don't squander their inheritance? 

If we can be of assistance, call our firm today at (215) 706-0200.

Monday, June 06, 2011

Three BIG Estate Planning Mistakes

Monday, May 09, 2011

Inheritance Protection

Make sure your inheritance isn’t squandered!

Before we can help you write your will, trust, and power of attorney, we must understand your concerns and goals for estate planning. Many people have an overarching goal—that is, they want to be assured that the inheritance they are leaving to someone isn’t squandered.

Protecting an inheritance is a crucial goal, and one that we specialize in helping people deal with every day. But protected from whom and what, exactly? Here are a few answers, and they depend on who the person is:

• If the beneficiary is a minor, obviously we want to ensure the inheritance is used for their benefit and their benefit only.
• If the beneficiary has a spending problem, substance abuse problem, etc., our goal would be to limit how the inheritance can be spent.
• Is the beneficiary in a relationship with a daughter-in-law or son-in-law that you don’t care for or have a concern about? Worried that the inheritance would go to your beneficiary’s spouse upon divorce? We devise solutions to deal with these problems on a regular basis.
• What about beneficiaries in high risk professions, such as lawyers or doctors, where lawsuits are prevalent and where the inheritance could be attached to a lawsuit?
• Special needs beneficiaries, of which 15-20% of people are, must have their inheritance put into a special needs trust if you don’t want the inheritance to be squandered to cover costs that public benefits, such as SSI or Medicaid, would otherwise cover.

These are a few of many reasons why people are coming to us every day to make sure the inheritance they leave to someone else isn’t squandered. Remember, sometimes we know of these types of issues now or ahead of time. But more often, we cannot predict what will happen in the future. Do you want to risk your inheritance being used the wrong way? We can help craft a flexible plan that ensures your inheritance will go where you want it to go.

Let us know if we can help you protect your legacy. Call today for a complementary appointment, (215) 706-0200.

Monday, April 18, 2011

What is a Testamentary Trust?

In Pennsylvania, many clients opt to use a Will rather than a Revocable Living Trust for their estate plan. Living Trusts can be beneficial in certain situations. Your attorney can speak to you about when a living trust may be appropriate. In Pennsylvania, living trusts are not appropriate simply to avoid probate, since the Pennsylvania probate process is not burdensome.

Although a living trust may not be advisable for your family, many people still want to control the inheritance they leave to their children or grandchildren, ensuring it gets to the right person and is used for the right purposes. In other words, give what you want, to whom you want, when you want.

Unfortunately, we livein a litigious society – assets held in certain trusts can be better protected for your heirs. Also, beneficiaries that are spendthrifts, in high risk professions, too young, have spouses that you can’t trust, etc. all are good reasons to think about trusts. 

For clients with these concerns, we can use testamentary trusts, or trusts within a will. The trust is not actually established until death, when your will is executed. The instructions for the trust are written into your will, and once your will is probated, the specified assets and amounts will be used to fund a new trust. At that point, your options are unlimited – perhaps you want to give a yearly percentage of assets to a child, or maybe provide only for their education and health. At our firm, we can help you customize your trust based on your needs and concerns.

You may already have a testamentary trust in your will, but it may not do what you really want it to do. Let us know if we can help you review your current estate plan.

To determine what type of trust is right for you, give us a call now at (215) 706-0200 or email info@jawatlaw.com. We can schedule your complementary consultation right now.

Monday, February 28, 2011

No Plan? Big Problems.

Don't have an estate plan? No one can force you to engage in estate planning, but without a proper estate plan, you are putting yourself and loved ones at more risk than necessary. Here are some complications that can arise when you don’t have a plan. For our readers that have not engaged in estate planning or haven’t reviewed their plan for over 3 years, now is the time to get your affairs in order.

1. Intestate Laws: Pennsylvania has an intestate law that dictates how your property and assets are divided upon death if you do not have a will or other estate planning tool such as a living trust. Dying without a will can be costly, both in potential higher taxes and family grief/conflict due to a lack of knowledge about your wishes.
    
2. Dependents: If you have minors or care for dependents or pets, you want to ensure you appoint someone in writing to be in charge of your dependents, kids or pets. You also want to make sure you leave assets, preferably in trust, to care for your dependents. If you have kids and no estate plan and they inherit assets, a custodian account will be established. Once a child turns 18, however, they are free to do what they want with those assets. Typically, an 18 year old does not have the maturity to handle their own assets.
    
3. Spendthrifts and Special Needs: If you have a spendthrift child, or a spouse or child with special needs, there are steps you must take to ensure assets don’t end up in the wrong hands (creditors, government, bankruptcy court, etc.).
    
4. Family Battles: Don’t assume your family will just sort out your affairs without any conflicts or commotion. From our law firm’s vantage point, we often hear of cases that go to court that pit family member against family member. We also know that conflicts can largely be avoided by putting together a proper estate plan. It’s just not worth the risk, or your legacy.
    
5. Incapacity or Disability: You must ensure you have a power of attorney for your finances and health care. That way, if something happens to you and you cannot make decisions for yourself, someone you trust can immediately carry on your important affairs. Without a power of attorney, sometimes a guardian will have to be appointed in court, and the guardian must continue to be supervised by the Orphan's Court. This means legal bills can pile up quickly and unnecessarily.

If you, a friend, a neighbor or relative need estate planning assistance, we welcome you to contact our firm at your convenience. You can use our convenient online contact form or call us at anytime at (215) 706-0200. We are pleased to offer a complementary initial consultation.

Monday, February 21, 2011

Is Probate a Concern in Pennsylvania?

Should you worry about whether your estate will need to go through probate or not in Pennsylvania? For the majority of Pennsylvania residents, probate is not a concern for them or a burden on their family. However, there are times when probate should be avoided. A good estate planning attorney will analyze your situation and determine the appropriate planning strategies.

In general, probate is the process of your executor formally registering your will, hence the office that they go to is named the “Register of Wills.”

Pennsylvania is ahead of the curve in having streamlined the probate process years ago. Other states, notably California and Florida, still require court supervision, thus ratcheting up the costs of probate in those states. In Pennsylvania, the probate fees are reasonable. Yes, an attorney should still be retained by the Executor to ensure the process is handled absolutely correctly. But the cost of probate generally speaking is still far less than it would be in several other states.

Therefore, Pennsylvania is not a “living trust” state where the majority of residents have a revocable living trust rather than a will. Instead, many PA residents use will-based estate plans. That doesn’t mean a living trust never makes sense for PA residents. Sometimes, people who believe they need a “simple will” actually need much more strategic and careful planning. The best advice is to arrange for a consultation with a qualified estate planning attorney.

At our firm, we offer a complementary 60-minute consultation for estate planning matters. If you wish to have your plan reviewed, or need a plan crafted for your family, we invite you to call our office at (215) 706-0200.

Monday, January 17, 2011

Does a Living Trust Make Sense in 2011?

Does a living trust make sense?

The term ‘living trust’ is tossed around a lot in the estate planning world and means different things to different people.

Clients and prospective clients sometimes believe that a living trust is necessary to ‘avoid probate’ and to ‘avoid estate taxes’.

Some attorneys believe everyone needs a living trust, no matter what the circumstance.

Both of these assertions are incorrect.

Living trusts ARE a will substitute that allows you, a trustee, to place your assets in a trust, and remain in control of those assets while you are living. The living trust allows you to provide detailed instructions upon how the assets will be distributed upon your death. The living trust can last for years and allows you to give what you want, to whom you want, when you want. For instance, once you pass away, you could instruct the person who takes over as trustee for you to pay your daughter a small sum annually and provide for your daughter for her health care or education needs at anytime.

Living trusts do NOT help a family avoid estate taxes or inheritance taxes. Actually, living trusts can help reduce federal estate taxes if you are affected by the tax (which most people aren’t today), but a Will can do the exact same thing. Therefore, if using a living trust only to save taxes, this is simply an incorrect reason to use a trust. Living trusts today provide a great mechanism for planning through generations… tax saving is not a consideration for most clients.

Regarding probate… Any asset placed within a living trust avoids the probate process. But to completely avoid probate, you must re-title all of your assets into the name of the living trust, and must do so anytime you acquire new assets.

Does it make sense to avoid the probate process? If you own property only in Pennsylvania, you might be better off allowing your estate to be probated. Probate in Pennsylvania is relatively straightforward, although there are several considerations and reasons that you may wish to avoid probate even in Pennsylvania. Sometimes, administration of your estate can occur more smoothly if you have a fully funded living trust. Some people like the idea that they will never need to publicize their will, or deny the government even a small fee. Call it the American spirit!

Another consideration in avoiding probate is that for many clients, at least half of their assets have already avoided probate because the asset, perhaps an IRA or an annuity or a life insurance policy have beneficiary designations. That means those assets go directly to those beneficiaries without probate. Same goes for any jointly held asset (joint with the right of survivorship).

Does a living trust make sense for you? Make sure when you are doing your estate plan that a living trust is at least discussed. It may or may not make sense for you depending on the circumstances.

Call for your complementary consultation today at (215) 706-0200 to find out if a living trust makes sense for you.

Monday, December 13, 2010

Do I Need A Revocable Living Trust?

Revocable Living Trusts are a substitute to a Last Will & Testament, but for many Pennsylvanian’s, living trusts aren’t necessary for an effective estate plan.

Historically, many people have planned with a living trust to (a) avoid probate and (b) save on federal estate taxes.

Pennsylvania is one of a number of states that has simplified their probate process over the years. Probate in Pennsylvania is mostly handled by your executor and attorney outside of court, unless someone challenges your will or the distribution of your assets. Other states, like Florida and California, still have more burdensome probate processes that require court supervision.

Federal estate taxes fluctuate, but the rates that Congress is discussing for 2011 and 2012 mean that far less than 1% of people will ever be affected by such a tax. The White House and Congress are proposing an estate tax exemption of $5 Million. That means you will not be affected by the tax until you have over $5 Million in assets. Regardless of whether you are affected or not, a living trust does no better than a will with a testamentary trust in saving on tax dollars.

Because probate is simpler in Pennsylvania and living trusts are not tax avoidance tools, many people in Pennsylvania have wills as their fundamental estate planning tool. However, a living trust does have benefits for certain cases. You should seek an estate planning attorney to help educate you about what tools you need for your estate plan. Estate planning is a very individualized field of law, and the tools you need depends on your family, your circumstances and your goals.

Let our firm assist you: Our firm offers a complementary estate plan review and consultation. Please call us today at (215) 706-0200 or email us.

Pass the word on: If you know someone who can benefit by reading this blog, please forward it on to them, or subscribe your friend or family member through this link.

Monday, November 15, 2010

Leaving Your Stuff To The Kids & Grandkids

Leaving your estate to your kids and/or grandkids is often a prime objective of many clients we meet with.

Every family situation is different, but in many cases, it often does not make sense that a child or grandchild receives a check from your estate, to do whatever they want with.

Why not? Quite simply, once they receive that check, they have full control over it. That means their their spouse, any creditors that come after them also have potential control over it. What if your child is involved in a lawsuit? What if he or she is in a high risk profession? Bankruptcy proceeding? All of these issues present a critical threat to preserving the inheritance you have left your child or grandchild.

When I help people with their estate plan, I will often hear things like, “my children would never get into trouble.” But the fact is, we just don’t know. One of the most valuable aspects of planning is taking into account a range of possibilities, and then planning for all of them.

At our firm, we can create an asset protection trust for you within your Will that allows your child or grandchild the flexibility to take from the trust when they need it, for things like education, and maintaining their general lifestyle. This mechanism ensures the trust is used for valid purposes only, and isn’t raided by creditors, ex-spouses, the IRS, and litigation.

Most important to you is we can make this planning tool affordable for you, and easy to understand. Let us know if we can assist you or someone you know in this type of planning. Call us today for a complementary consultation at (215) 706-0200.

Monday, October 18, 2010

Top 10 Signs It's Time To Review Your Plan

Your estate plan should be reviewed on a regular basis. Here are ten signs that it is time to review it. If you are not sure whether your plan needs to be altered, get in touch with our office at anytime.

1. Your plan was crafted over five years ago.
    
2. You moved to a different state.
    
3. You got re-married, or got divorced.
    
4. You’ve been blessed with grandchildren.
    
5. You no longer talk to one of your kids, or you have reconnected with your child.
    
6. You are now widowed.
    
7. You have acquired significant assets, or lost substantial assets.
    
8. You don’t feel that your plan really meets the test for a good estate plan: “Give what you want, to whom you want, when you want and how you want.”
    
9. You have over $1 million in assets, or you and your spouse together have over $2 million in assets, which means there may be pending estate tax implications for you.
    
10. You’re worried about your kids, either because they spend too much, they are in a high risk profession, they may get divorced, etc.

In general, any time that an event occurs that changes your life or your family should prompt you to review your plan. We are pleased to provide a complementary consultation to you if you wish for our office to review your plan.

Let our firm assist you: Our firm offers a complementary estate plan review and consultation. Please call us today at (215) 706-0200 or email us.

Pass the word on: If you know someone who can benefit by reading this blog, please forward it on to them, or subscribe your friend or family member through this link.

Monday, September 20, 2010

Living Trust?

Do you really need a living trust? Living trusts, also known as Revocable Living Trusts (RLT's) have been an on and off fad in Pennsylvania for at least the last fifteen years.

There appears to be a resurgence in the discussion about living trusts. Think Suze Orman, or the mailers you probably get emphasizing the absolute necessity of a living trust.

A living trust is not a silver bullet, and they are not for everyone, particularly in Pennsylvania. Certain states, like California or Florida, have a probate process that is much more burdensome than the one in Pennsylvania. Pennsylvania's probate process is much simpler, and is not court supervised.

In other words, if you are only interested in having a living trust to avoid probate, and you live in Pennsylvania, you may be spending a lot of money on something you really do not need.

Another misconception is that a living trust will allow a person to avoid taxes. This is categorically untrue. Any tax saving or tax reduction strategies can be carried out and executed with a will just as easily as with a living trust.

Because probate is simpler in Pennsylvania and living trusts are not tax avoidance tools, many people in Pennsylvania have wills as their fundamental estate planning tool.

A living trust does have benefits for certain cases. You should seek an estate planning attorney to help educate you about what tools you need for your estate plan. Estate planning is a very individualized field of law, and the tools you need depends on your family, your circumstances and your goals.

Let our firm assist you: Our firm offers a complementary estate plan review and consultation. Please call us today at (215) 706-0200 or email us.

Pass the word on: If you know someone who can benefit by reading this blog, please forward it on to them, or subscribe your friend or family member through this link.

Wednesday, August 25, 2010

Testamentary Trusts

Since probate avoidance is typically not a concern if you are a Pennsylvania resident and only have Pennsylvania property, a living trust is usually not recommended. Revocable living trusts are more expensive than a will, and are usually more complicated.

Revocable living trusts are useful in some situations, but they are not recommended simply to avoid probate, which is not burdensome in Pennsylvania.

Trusts can provide a controlled inheritance – give what you want, to whom you want, when you want – and protect your beneficiaries from themselves and others (think creditors, divorce, bankruptcy, high risk professions, spendthrift kids, etc.).

If our clients are interested in controlled inheritances, we can often write a trust in the will. This is called a testamentary trust. The trust is not actually established until you die. The instructions for the trust are written into your will, and once your will is probated, the assets that you direct go into the trust. At that point, your options are unlimited – perhaps you want to give a yearly percentage of assets to a child, or maybe provide only for their education and health.

Testamentary trusts are more economical than a living trust, and they often make sense for many clients.

To determine what type of trust is right for you, give us a call now at (215) 706-0200 or email info@jawatlaw.com. We can schedule your complementary consultation right now.

Thursday, August 05, 2010

What's up with the Federal Estate Tax?

2010 has been quite a year already... The U.S. Congress has failed miserably at giving us direction on what the tax landscape will look like come 2011. Folks, we're only five months away from 2011, believe it or not. And in 2011, the federal estate tax comes back with a roar. If Congress does nothing, many more people will potentially be effected by the tax. For married couples, you will be able to pass on about $2 Million to your heirs, estate tax free. If your estate is worth more than $2 Million, every dollar past the $2 Million mark will be taxed at a 55% rate. $2.5 million estate? Count on your heirs paying Uncle Sam $275,000.

Congress has not stepped up to the plate at this point, and there have been no meaningful committee votes or full member votes on any estate tax fix. A couple of senators and house members have spoken up, but that's not enough when you have 535 such members. Therefore, I am not optimstic right now that there will be a fix come 2011. If you think your estate is worth around $1 million or more if you're single, or $2 million or more if you're married, you need to start thinking about planning now. There are things we can do to minimize the estate tax if you were effected by it.

Here are a couple of great articles I've found this morning on the federal estate tax.

• What's next for the federal estate tax? Pittsburgh Post-Gazette. This article is great for Pennsylvanian's to read.

• Ways to shelter your money should the estate tax return. NJ Star Ledger. Provides a couple of ideas for reducing the estate tax if you're effected.

The best time to plan is now. Please do not hesitate to reach out to my firm to get started on planning. Call us at (215) 706-0200.

Wednesday, June 23, 2010

Do I Need a Living Trust?

What are living trusts?

A living trust is a valid will substitute in the Commonwealth of Pennsylvania. During your lifetime, you have the ability to place your assets in a trust, designate a trustee (usually yourself while you’re living), a successor trustee (someone to take the job after you pass away), and beneficiaries. A living trust can be superior to a will, depending on the needs, goals and size/complexity of the estate of a particular client. However, living trusts are not for everyone, particularly in Pennsylvania.

Why do people create living trusts?

1. Avoid Probate: Many people create living trusts to avoid probate, the process of proving your will. However, Pennsylvania’s probate process is much simpler compared to other states. Pennsylvania probate is not a court-supervised process, and only takes a relatively short amount of time to become appointed executor. Yes, there are probate fees for the County (probably in the range of $300-$1,000, depending on the size of the estate) but they are relatively modest. Therefore, avoiding probate (assuming you only own property in Pennsylvania) is not a good reason, by itself, to create a living trust.
    
2. Asset Protection: You can’t protect yourself from creditors, spouses, etc. by creating a living trust. But you can potentially protect your children, heirs and other beneficiaries from themselves and from others. A living trust can never guarantee asset protection, but can help fend off predators and creditors, depending on the situation. In addition, the living trust must be set up in a particular way, with limitations on your beneficiaries, in order to effectively protect the assets.
    
3. Seamless Transition: A living trust, if funded during your lifetime, can provide a smoother transition from one generation to the next. With a living trust, you have the potential to carefully lay out a distribution scheme in which the assets can flow to beneficiaries quicker.
    
4. Privacy/Avoid Potential Estate Challenges: A living trust set up properly and funded with all of your probate assets can avoid probate completely, and therefore, is subject to privacy from the public. A potential beneficiary or anyone for that matter can challenge the validity of a trust, but it is much more difficult to do so since they don’t have easy access to the document.
    
5. Control From The Grave: A living trust allows a grantor to control an inheritance long after they pass away. For instance, you can spread out an inheritance over 20 years, or only for certain needs, such as education or health. However, we can do the same thing in a will with a testamentary trust.
    
6. Reduce/Avoid Taxes: Actually, this is a myth. A living trust does not do a better job than a will or any other testamentary device in avoiding death taxes, estate taxes or inheritance taxes. You can take advantage of the marital deduction and unified credit through a will with a testamentary trust and it will have the same effect. Don’t get sold on creating a living trust solely for tax benefits.

Do you recommend a living trust?

Living trusts are expensive to create, and we do not recommend creating one unless you have legitimate concerns about:

• Privacy
• Estate challenges
• Asset protection
• Assets in more than one state

Those concerns, coupled with the desire to avoid probate are good reasons to create a living trust.

If you want to know more about what tools make sense for your estate, whether it is large or small, contact our office today at (215)706-0200 or info@jawatlaw.com. We offer complementary initial consultations to determine if we’re a good fit.

Friday, June 11, 2010

Kids Inheritance: Freedom vs. Control

When we are concerned about the well-being of our children, estate planning quickly becomes complex.

Why?

Because if we have concerns about our children but love them unconditionally, we want to make sure they spend their inheritance wisely. Yet, we often hesitate about limiting their ability to control their inheritance.

Clearly, we must find a compromise – we can’t discount our concerns and fears, and we also can’t discount the fact that we feel we should completely trust our children.

When we create a trust for our children, we’re setting rules. Rules are found everywhere, from home, to the work place, and our society at large. Why shouldn't we have rules for a trust? When we give our children money to spend, sometimes we give it to them unconditionally as a gift. But more often, we give them money for specific things—a new down payment on a home, a new car, education, money towards a marriage, etc. If we gave our children money towards a masters degree, and they ended up going to the casino and spending it all, would we be very happy?

Having an independent co-trustee coupled with rules on trust distributions protects your children from themselves and others. It says to your children, I love you very much, and I want the best for you for the rest of your life and even perhaps your own children’s lives. Of course, others will look at the same plan and shrug their heads, saying they can’t fathom telling their kids how to spend their money.

You have to decide which camp you fit into – the freedom camp or the control camp. There is a compromise. But you cannot have absolutely freedom and absolute control.

Wednesday, May 26, 2010

Talking To Your Agents About Their Role

One of the more challenging aspects of estate planning can sometimes be choosing our agents—who will manage our affairs when we become sick (power of attorney), and who will manage them when we die (executor of a will or trustee of a trust). Not only do we need to choose agents, but we always need to choose at least two backup agents just in case the initial agent can’t or won’t take on the role.

For some of our clients, it is easy to choose agents – maybe a husband or wife, an only child, and another close relative. For others, they just aren’t sure who to choose!

While contemplating who to select as your agent, you should really consider talking to them about the roles they will fill and also make sure they are willing to accept the role.

For your initial agent, let them know that they will be the first person to be in charge if something were to happen to you. Let them know where you have kept your original estate planning documents, and let them know if you have any copies of the documents and where they are as well. Also, let them know where they can find a list of your assets, including bank accounts, securities, investments, IRA’s, etc. They will need this information!

You should tell your agents that by agreeing to the role, they will be accepting a major responsibility, one that must be taken seriously. You must let them know that they must act in your best interests, and that you’ve put safeguards into place to make sure that occurs.

You should explain your health care preferences and end of life preferences to your agent. Even though you’ve written down your preferences on your living will and health care power of attorney, it’s still important to verbally communicate your wishes so that your agent is clear about your instructions. You should let your agent know that if you were at an end-of-life situation and you asked for “the plug to be pulled”, your agent would still have to confirm those instructions with the doctor in charge, which could be a painful decision for the agent to make.

In summary, your agent should know as much as possible now about your plan. There should be no surprises as to who the agents are, what you expect from them, and what your medical preferences are. Your agents should always be people you trust without a doubt.

Remember, make sure you review your plan every few years to make sure that the agents you selected then are the agents you would like to have listed now.

Our firm has the expertise necessary to help you choose agents, and make sure you have a well-crafted legacy plan. Please contact us today at info@jawatlaw.com or by calling (215) 706-0200 for your complementary consultation.

Thursday, May 20, 2010

Estate Planning in Uncertain Times

When I assist people in estate planning, we look at many scenarios.  We plan for the “god forbids” and hope they never happen, but if they do, that they happen far down the road. Who wants to plan 20, 30 or 40 years out when their true concern is how bad or good their portfolio will look tomorrow?

I understand. In these uncertain times (and yes, we see a recovery happening, but who knows how much or how fast?), many people are afraid to engage in estate planning. Forget uncertain times… even in good times, 60% or more of adults in this country don’t plan! It’s no wonder I get calls daily to help clean up messes on estates where the deceased person left no will.

For those that don’t plan during uncertain times, they likely believe that whatever they put on paper today, will change tomorrow. Very true. However, I approach estate planning as a lifelong process, one that doesn’t stop after the first time you create a plan. Just as our lives change on a regular basis, so to should our estate plan. If we thought about estate planning as a one-time process, we would all be in a stalemate.

Remember, what you put on paper today is not written in stone. You can always change it tomorrow. In fact, I encourage my clients to continue to update their plan (with the assistance of an attorney) whenever something significant in their lives change, and to at least review their plan every few years.

For our readers that do have plans, have you thought about your plan, and has it been reviewed and updated in the last few years? For those that don’t have plans, is it because it just hasn’t been the “right time” yet? Even in the most uncertain of times, having a plan will only benefit your heirs and loved ones. Now is the right time to update your plan, and to create one if you don’t yet have one.

Thursday, April 22, 2010

Appointing Agents -- An Important Estate Planning Component

One of the most difficult tasks in any estate plan is choosing who will manage your affairs while you’re alive and after you pass away. In addition, if you have children under eighteen, you also must consider who will step in as guardians if need be. An agent is a broad term, and emcompasses several roles, depending on what components of an estate plan you put into place. Agents include powers of attorney, personal representatives of the estate, trustees and fiduciaries.

Below are some ideas to start with on how you might go about filling these important roles. After reading this article and gathering some ideas, you should seek the assistance of a qualified estate planning attorney to help you make these decisions.

• Who do you trust? Trust is key in appointing anyone to serve in these important roles. When I think of trust, I think of a gut feeling that I have about a person. I ask, will that person have my best interests at heart when they are acting on my behalf? Finding someone you can place your trust in for these roles is easier said than done. Whatever you do, don’t simple choose someone because of convenience.
   
• Who is capable? Assuming most people are good-natured, the next question becomes, who can actually manage your affairs, your estate and your children? Sometimes, managing the affairs of someone else can be extremely complex, depending on the assets that the person has. Consider whether that person will have to hire an attorney to help him/her manage your affairs. That can get costly.
   
• Who would agree to the role? Just because you have decided to appoint someone does not mean they will agree to serve. In fact, a person filling a role can resign at anytime. Make sure the person you appoint is on board to serve.
   
• Who will the backups be? In the event that your first choice cannot serve in the role, you must make sure you have at least one, if not two trusted backups. You must make sure the backups are trustworthy, capable and willing to serve as well.
   
• When does it make sense to appoint two or more people to fill one role? Typically, I do not recommend setting up your appointments like this. Consider this: You really want to have whoever is dealing with your affairs to speak with one voice. There is much potential for disagreement and discord if two or more people are filling one role. Remember, your goal is to create a smooth transition, not hamper it even more.

In general, you should review your choices for these roles at least every five years, if not sooner. You don’t want to have outdated documents with people filling roles you no longer want them to fill, or roles they can no longer fill.

We offer complementary 90 minute consultations for estate planning issues. Call our office today (215) 706-0200 or email us at info@jawatlaw.com to set up your appointment today. Our team would be pleased to assist you in all of your estate planning needs.

Wednesday, April 07, 2010

Vital Estate Planning Documents

Only 35% of Americans have their estate plan completed, either with a will or trust. Therefore, over 6 out of every 10 people reading this have not done any planning! Instead, they have decided to let the government do their planning. Not a good idea.

For those putting off planning, you've likely been talking about planning for a while now and keep pushing it off. Being in this profession, I see way too many unfortunate circumstances where planning was not done before time was up. It is vital to put at least a basic plan in place today. Here is what you need to at least get started:

1. Last Will & Testament: The will is the document that lists your wishes after you pass. You will names your executor, the person who handles your estate, lists who the beneficiaries are (a beneficiary is the person who receives property from you), and lists any immediate family members that you have disinherited. It can also name a guardian for minor children, and list your wishes on whether you want cremation or not. Wills can be more advanced, and can include provisions such as setting up testamentary trusts so that all assets are not immediately distributed. You must have a will. If you don't, the government has what's called an intestate/intestacy statute that lists in detail who in your family will take property. You will have no control, and neither will your heirs!
    
2. Financial Power of Attorney: This document controls all of your non-medical affairs when you become disabled or incapacitated. Sometimes it is more important than having a will. These must be updated every few years or so because some institutions, such as banks, investment houses, etc, will say they are "stale" if more than 5-10 years old. This is a powerful document, giving your agent (the person who acts on behalf of you) the power to manage your assets, property, businesses, accounts, etc. It also may give your agent the ability to handle your retirement accounts (be careful with this) and to make gifts (also another one to be careful about). You can also use this document to appoint a guardian for yourself or for your children during your incapacity.
    
3. Medical Power of Attorney / Living Will: In Pennsylvania, the medical/health care power of attorney and living will can be combined into one document. The power of attorney controls while you are alive but disabled. The living will controls at the end of life phase when there is no realistic hope of recovery. This document gives the person acting on behalf of you to speak with your doctors, hire and fire your doctors, tell the doctors what to do based on your wishes, etc.

These documents are only a start to a solid estate plan. Estate planning requires a lot of thought and analysis, and takes into consideration you, your family, the legacy you want to leave and the assets that you currently own. More advanced estate planning can often be necessary to save taxes, probate fees and provide asset protection.

Finally, if you already have a basic estate plan, make sure to update it at least every five years, if not sooner.

Please contact our firm today if we may be of assistance. We can provide an economical basic estate plan that will be the foundation of a sound estate plan. Inquire about our outstanding services today.

Sunday, March 14, 2010

When To Update Your Estate Plan

Thursday, January 28, 2010

How Often To Update Your Estate Plan

People always ask us how often they should review their estate plan, whether it be a Will or Revocable Living Trust. Just as your family changes, your estate plan should reflect those changes. Good estate planning attorneys try to plan ahead for as many contingencies as possible in each estate plan. However, even the best estate planning attorney cannot plan for every change down the road.

Therefore, we recommend that you have your estate plan reviewed every 3-5 years, or sooner if there is a major change in your family, or you change your mind about something in your plan.

An estate plan is not a static document, and must be updated throughout the course of your life.

Our firm offers different maintenence programs, and we even offer a secure online service to store and access your important documents. If you are interested in having our firm review your estate plan--whether it be your will, trust, powers of attorney, or living wills, please do not hesitate to contact us by email (info@jawatlaw.com) or telephone (215-706-0200).

Saturday, January 16, 2010

Wills vs. Trusts

People always ask, what is the difference between these two documents? Will or trust, I'm still leaving my assets to the people I care most about, right? Sure, that is true, but there are several key differences between the two.

Trusts are usually pieces of a larger puzzle. For instance, you may have sizeable assets that you want to protect. Revocable living trusts (this is your standard trust), along with other asset protection tools, can offer greater protection when you pass assets onto your kids, grandkids and spouse. For instance, you have a son who is married. You are weary of your daughter-in-law, and worried that if they ever got divorced, she would make out like a bandit with all of your assets. Set up correctly, trusts can minimize this concern. With a will, you are passing on your assets outright, meaning that upon your passing, your assets simply become part of your son's estate, therefore greatly increasing the chances that your daughter-in-law could take the assets.

Wills are not private. When you write a will, you have to realize that upon your passing, the will is probated and becomes public. Why does this matter? First, if someone wants to challenge your will, the fact that it is a public document makes it much easier for anyone to browse your will and find ways to challenge it. Trusts that are funded do not go through the probate process, and therefore they are not public.

The Tax Issue. Neither a will nor a trust can avoid Pennsylvania inheritance tax or federal estate taxes (that is, when there is in fact a federal estate tax). However, trusts, set up correctly between spouses, can minimize and delay federal estate taxes. Remember that in Pennsylvania, property transferred between spouses is taxed at a 0% rate.

Trusts Offer Greater Control. If you are worried about your 25 year old son inheriting $200,000 and spending it down in two months, you're not alone. A will, leaving that money outright to your son, will attach no conditions to how or when he can spend the money. With a trust, the options are limitless as to what conditions you want to attach to those assets and when your son receives it. For instance, you might want to distribute certain assets for education, a wedding, health and maintenence, when a child is born, etc. Again, it is up to the imagination. The great thing about trusts is that they survive after you pass, allowing you to have potentially eternal control.

Prices. Wills are cheaper than trusts. However, with a will, your heirs will pay later in probate and administration fees. For instance, a $1,000,000 estate going through probate could cost as much as $20,000-$30,000 in attorney fees and state/county fees, and that doesn't even include taxes. Trusts do cost at least several thousand dollars to build, but if built properly, avoids those huge fees at the end of your life.

If you want to review your estate plan, and you're not sure if you need a will or trust, please contact our firm today and set up a complimentary consultation.

Wednesday, January 06, 2010

Great Planning Tips

CBS News MoneyWatch came out with a great article today entitled "Estate Tax: What You Need to Know for 2010." The article is full of great information... Here is one essential point:

* Most estate planning attorneys, including myself, agree that it is more likely than not that Congress will retroactively apply a federal estate tax effective 1/1/2010. The exemption would likely be at the 2009 rates of $3.5/7 Million. Therefore, in 2010, the estate tax would again affect relatively few estates.

Link: http://moneywatch.bnet.com/retirement-planning/article/estate-tax-what-you-need-to-know-for-2010/378294/

Saturday, December 19, 2009

What happens if you don't have a will or living trust?

Monday, December 14, 2009

Wills Are Public Documents

A lot of people ask our office what the difference is between Wills and Trusts. There are several key advantages to trusts, depending on your estate planning needs. One advantage to our readers who value privacy is that a well-crafted Revocable Living Trust, if properly written AND funded, can avoid the probate process. By avoiding the probate process, your written instructions, hopes, wishes and legacy have a better chance at being kept private. In contrast, a Will always enters the probate process, and thus, becomes a public document. All you have to do is google "Jackie Kennedy Will" to see what I mean. Anyone can access the former First Lady's Will! Sure, the chances of your Will leaking all over the internet are slim, but the point remains--your Will is available to all those that want to see it, whether or not you want them to see it. Living Trusts can never guarantee complete privacy. However, qualified attorneys can craft Living Trusts to better protect against intrusions. Remember that if you currently have a Will as the foundation of your estate plan, you CAN "upgrade" to a Trust.

Thursday, December 10, 2009

Trust Planning and 2011

Here is some food for thought: If Congress doesn't pass a permanent federal estate tax fix soon, we are looking at perhaps 2010 staying at the $3.5 Million exemption, as it is more likely that they'll pass a one year fix. That's already passed the House and I think the Senate will probably pass it too. But I get the feeling we're going to be back to a $1 Million exemption in 2011, because quite simply, the federal government needs revenue. They cannot sustain a $12 Trillion and growing deficit by lowering or eliminating taxes.

What does this mean for you? If you are worth at least $.5 Million or more, you must seriously consider trust-based planning. Proper planning with trusts, particularly for married couples, can reduce and (sometimes permanently) delay estate taxes, depending on how the trust is designed.

The key takeaway is that trust-based planning is something you ought to be considering now, even if you don't consider your estate to be valuable. Depending on your estate, your $.5 Million could easily grow during your lifetime and pass the taxable threshold. You should know that living trusts are not away to avoid income taxes or estate taxes. But, with proper planning, it is possible that we can make sure you don't pay more estate taxes than you have to, and we can use sophisticated tools to delay the payment of those taxes. The bottom line is, these are times of uncertainty. A will-based plan for any estate cannot account for the uncertainty as well as a proper trust-based plan can.

Wednesday, December 02, 2009

Considering A Living Trust...