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What Everyone Needs to Know About Estate Planning

Curious about estate planning but don't know where to start?

Then check out the slideshow below to learn the basics about estate planning. (Click the bottom right corner for full-screen).

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5 Reasons Why You Should Do Your Estate Plan This Year

If you're like most people, you understand that estate planning is a good idea. You know that an estate plan ensures that your property goes to the right people and ensures your children are properly taken care of. Although you probably understand the importance of estate planning, you know it's all too easy to put off actually sitting down and making your plan.

If you can relate, then what better time then the New Year to resolve to actually finish your estate plan? While you may already have several New Year's resolutions swirling around in your head (or better yet already written down), a resolution to prepare your estate plan is a realistic goal that can be achieved by anyone.

New-Year-Goal-Estate-Planning

So to further encourage you to make finishing your estate plan a goal for the New Year, let us offer five reasons why your estate plan should be done this year:

1. Your Property Will Go To The People You Want

Without an estate plan you do NOT get to decide where your property goes when you die. Instead, state law determines who gets what. This may be the number one reason to do your estate plan. Even if you are not wealthy, you can still prepare a simple will or living trust to ensure your property is transferred to the people you want.

2. Your Children Will Be Taken Care Of According To Your Wishes

If you have young children and die without an estate plan then state law also determines who is the personal guardian of your minor children and who is the financial manager of their inheritance. This is why you'll want to ensure that your children are taken care of according to your wishes. In your will, you can name guardians to raise your children and managers to look after their inheritance. 

3. Your Medical And Financial Decisions Will Be Made By People You Trust

If you ever become incapacitated you will want to ensure the people you trust make important decisions for you instead of a court order or court appointed receiver. Part of estate planning is preparing for what would happen if you ever become unable to make medical and financial decisions for yourself. This can be done through a health care directive and a durable power of attorney. These documents can save your family much heartache.

4. You Will Save Time And Money By Avoiding Probate

Probate is the court process for wrapping up an estate. It's often time-consuming and expensive and rarely provides any benefit to the beneficiaries. With a little estate planning you can keep most or all of your estate out of probate, saving your loved ones time and money.

5. You May Reduce Your Estate Taxes

For the year 2017, if you pass away and your estate is worth more than $5,490,000 then your estate will be subject to federal estate taxes. If you already own this amount, or plan to eventually, then you will want to use your estate plan to reduce the tax that your estate could owe after your death. 

 

Hopefully these five reasons encourage you to make estate planning part of your goals for the New Year. Estate planning may seem overwhelming and time-consuming but it does not have to be. Keep in mind that many people need only a simple estate plan. You may even be able to prepare all your documents yourself. Or you might discover that having a lawyer do all the work for you is easier. Either way, planning your estate is a worthwhile goal that you can achieve this year. To start, get a free consultation to discuss what is best for you.

 

 

Do I need a living trust?

For those wishing to avoid probate, a living trust is often the most common avoidance tool. This is especially true for people that have major assets like a home, investment property, stocks, bonds, and other big ticket items.

Given the advantages of avoiding probate, it may seem like a living trust is something that everyone needs no matter their situation. However, while some lawyers make such a claim, a living trust may actually not be necessary for everyone. 

There are two reasons for that; first, there are other probate-avoidance tools that may be more appropriate, especially for certain types of property; and second, some people don't really need to avoid probate.

For example, you may not need a living trust if:

You can more easily transfer your assets by another probate-avoidance device

Other easy ways to avoid probate include pay-on-death bank accounts, joint tenancy, life insurance, gifts, and in Utah, transfer-on-death deeds for real estate. There are also other devices that you can learn about or ask an estate planning attorney about. Each of these devices can be just as effective at avoiding probate as a living trust.

You are young and healthy

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It is not very common when a healthy, younger person dies without warning. Because of this, a Will may be all that you need. While a Will does go through probate, probate only occurs after you die. Thus, as long as your living, probate-avoidance is of no benefit.

Likewise, when you are young it is likely that your primary estate planning goals are simply to ensure your property goes to the people you want and that you name someone to take care of your children (if you have any). If this is true, a will often achieves these goals more easily than a living trust.

Some attorneys may recommend a living trust to young people in case they become incapacitated and can no longer manage their estate. However, most young people don't own substantial assets or estates that need to be managed. More importantly, an easier way for young people to manage their assets should they become incapacitated is to sign a power of attorney.

Overall, if you are young and healthy, a living trust may be more appropriate later in life when the prospect of death is more imminent and you have accumulated more property.

You don't own much property

If you don't own a lot of property than there isn't any real benefit to avoiding probate since probate likely won't cost that much anyway. In fact, in Utah, if your total estate is less than $100,000 than you all of your assets can be transferred by way of a beneficiary affidavit rather than probate.

However, if you don't have much property but you do have a life insurance policy, and your young children are named as beneficiaries, than it may helpful to have a trust set up so that any life insurance proceeds are managed by the trustee instead of a court appointed conservator. This is especially recommended if you do not want your children receiving the insurance proceeds as soon as they turn 18.

You have complex debt problems

If you have a lot of creditors, then going through probate may actually be helpful. The reason for this is that probate provides an absolute cutoff time for creditors to file claims.

For instance, in Utah, creditors have one year to make a claim against your estate as soon as you file in probate court. That time period shortens to three months if you provide public notice of your probate proceeding. In contrast, a trust may be subject to creditors' claims much longer than a year.

So, a living trust?

To sum it all up, a living trust is a great tool to avoid probate and will likely be just what you need at some point in your life, if not already. However, a living trust is not always the answer to your estate planning issues and there other steps you can take to protect your assets and provide for those you care about. A good estate planning attorney can help you decide what is best for you.

 

What is the best way to provide for my children upon my death?

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If you're like most couples, you want to leave all or most of your assets to your children upon the death of both spouses. Your property can be transferred to your children through your will or through probate (if you don't have a will). However, where children are of an age where they would not be able to handle money or may be subject to influence by others, we suggest that their interests be placed into a trust for their benefit until each child reaches a certain age.

A trust is simply a vehicle in which the assets are held, managed and distributed by an independent person or entity known as the “trustee”. The property held in the trust is available for the child to assist in needs associated with health, education and general support. The property is generally not available to the child “on demand”, although he or she can make a request for funds which would be considered by the trustee and an analysis made to assure that the funds are used for prudent purposes and not recklessly wasted.       

There are two commonly used types of trust for children: a simple child's trust and a family protection trust.

Child's Trust

An example of a simple child's trust would be assets held in a single trust until the child reaches a certain age, and then those assets are partially distributed out based on certain ages. Two common sets of age distributions for this type of simple trust would be: half at age 25 and the balance at age 30; or one-third at age 25, one-third of the balance at age 30 and the remaining balance at age 35.

Family Protection Trust

An example of a family protection trust would be assets held in a single trust until the child reaches a certain age, but then instead of making distributions to the child, the child may elect to be appointed trustee or co-trustee, and may manage the trust property according to the trust instructions.

This protects the assets in each child's separate trust from claims made by his or her spouse (including claims from a divorce), from bankruptcy, and from any other creditors. This trust would ensure that any assets remaining at the child's death would pass free of probate, state inheritance taxes, and federal estate taxes.

The protection from creditors and taxes is the major benefit of this type of trust. However, it is more expensive and time consuming to manage a lifetime family protection trust, e.g, tax returns would need to be filed each year for each child's separate trust. 

If the benefits of a family protection trust are outweighed by the management costs, or if you'd simply prefer to give your property outright to your children, then a simple child's trust is a good choice for you. 

Either way, it helps to sit down with an experienced estate planning attorney to determine what is the best way to provide for you children; whether by a child's trust, a family protection trust, or one of the many other types of estate planning instruments.