Estate Planning is a necessary legal process that assists an individual or family in transferring assets after death. Estate plans ensure that the maximum amount of wealth is transferred to the intended beneficiaries. Documents in estate plans may include wills, trusts, powers of attorney, and various other documents depending on the specific needs of the individual or family.
Having an estate plan in place is important, in order to avoid having your estate go through probate, which could cost thousands of dollars and potentially take years to complete. A will, trust, or other instrument can ensure that your assets go to whom you wish, your health care decisions are known in case you are incapacitated, your minor children are cared for by the person(s) you choose, making sure that your estate is distributed to whom you want, and that taxes are minimized as much as possible.
Below are a variety of estate planning documents that Darling & Wilson, PC can assist you in, by making sure that your wishes are met after you pass away:
Revocable Trust is a common form of a trust. Also referred to as a living trust, it is a legal instrument created to hold and manage assets during your lifetime. A benefit of this instrument, like all other trusts, is that it bypasses the probate process. A revocable trust can be revoked or amended as desired by the trustee.
Special Needs Trust
Special Needs Trust can be very beneficial if you have a child or grandchild with special needs. Some of the potential benefits of a special needs trust for the person with special needs include: preserving public benefits to provide for lifetime financial support and medical care; providing supplemental lifetime financial support; providing a system of advocacy to preserve rights; providing a safe and clean living arrangement; aiding in finding appropriate employment; and providing avenues for social and recreational activities.
Intentionally Defective Grantor Irrevocable Trust (IDGIT)
Intentionally Defective Grantor Irrevocable Trust (IDGIT) can be created to freeze certain assets while passing on the market growth to beneficiaries, gift and estate tax free. This is accomplished by setting up an IDGIT for the benefit of your chosen heirs and then selling, without capital gains tax, an appreciated growing asset to the IDGIT in exchange for a note for the value of the asset. The benefits of an IDGIT are no capital gains taxes on the assets you sell to the trust, no income taxes due on the note from the IDGIT to you, and no gift or estate tax on the value created inside the IDGIT from the sale.
Grantor Retained Annuity Trust (GRAT)
Grantor Retained Annuity Trust (GRAT) is a financial instrument whereby a donor makes a donation into a trust, which is set up as an annuity. After the donor receives the annual payments for the predetermined period of time, the remaining value is passed onto the beneficiaries. The benefit is that remaining value is taxed at the initial rate of when it was donated to the trust, which potentially could be zero thereby avoiding the gift tax. The drawback is if the grantor (i.e. the person who made the donation and is receiving the annual payments for the pre-determined time) dies prior to the predetermined time. In this situation the potential tax benefit will not be realized.
Qualified Personal Residence Trusts (QPRT)
Qualified Personal Residence Trusts (QPRT) are useful to remove the value of a home from an individual’s taxable estate. In order to do this, an individual would transfer title to the QPRT and the individual would retain the right to live in the home for a predetermined length of time. During this time the grantor would not have to pay rent, but would be responsible for real estate taxes, maintenance costs and the cost of ordinary repairs. After the predetermined period of time, assuming the grantor is still alive, the home would pass to the beneficiaries free of estate tax and the grantor may remain in the home if s/he agrees to pay rent to the beneficiaries. There are several tax advantages to creating a QPRT, mainly that the gift of the house is not taxed at the rate of its value but rather at the actuarial value as determined by using tables published by the IRS.
Wills are documents that prescribe how your property is to be distributed upon your death. It is important to have legal assistance when creating a will to avoid ambiguity. The problem with a will is that if it is defective, you will not know about it but those that you leave behind will.
Pour Over Will
Pour Over Will is a necessary document even if you have a trust. Even though a trust is already created, there might be more assets that are acquired after the creation of the trust and the decedent’s demise. A pour over can make sure that all remaining assets at death will “pour over” into the trust.
The team at Darling & Wilson, PC has extensive probate, trust administration and estate planning experience. Darling & Wilson, PC has probated numerous complex matters ranging in the several millions of dollars.