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Distinguishing Non-probate and Probate Assets

September 23, 2014

Filed under: Asset Protection — Tags: , , — Neel Shah @ 2:08 pm

Ensuring that your will is properly written and structured is critical for the will’s terms to be carried out in the manner you wish. Failing to properly distinguish probate from non-probate assets is a big mistake that could lead to your dispositive provisions being named ineffective.

Distinguishing Non-probate and Probate Assets

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Probate property can be defined as items that are directly owned by you without a legally recognized designated beneficiary. Jewelry, family heirlooms, artwork, or bank accounts without a designated beneficiary to be paid on death are examples of probate property.

On the other hand, non-probate property is those assets which include a legally recognized beneficiary to be paid on your death. Property held in joint tenancy or bank accounts with a designated beneficiary are examples.

Why does this matter? Non-probate assets will not pass through the terms of the will. This means that if you outline wishes in your will for one person to receive all the assets, but your non-probate assets state another beneficiary, the terms of your will “surrender” to those beneficiary designations. This could have the unintended consequence of your planning falling through.

To learn more about the differences with assets, and how you can properly outline your wishes or create trusts to detail how these items are passed on, contact our offices today for a consultation. Call us at 732-521-9455 or through email at info@lawesq.net to begin.

Do I Need a Trust?

August 5, 2014

Filed under: Estate Planning,Estate Taxes,Income Tax Planning,Probate,Trusts — Tags: , , , , — Neel Shah @ 3:32 am

As trusts have gotten more popular and evolved in type to appeal to a lot of people, so now you might be under the impression that you must have a trust. While it’s not for everyone, there are so many trusts out there that it’s very likely you could find one that will help you to meet your goals, including to protect your assets and minimize taxes.

Do I Need a Trust?

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Major liquid assets, setting up care for a child with special needs, and a variety of real estate ownership are a few of the reasons that people might initially turn to trusts. If you’re a resident of a state with a high state estate tax, income tax or probate costs, you’re likely to be concerned about the hit of taxes, too. This refers to situations where a federal estate tax is factored into your asset value, but an additional taxable event occurs at the state level. Without proper planning, you could find that the value of the assets you have worked so hard to build is extremely vulnerable to these taxes and costs.

Contact our offices today to learn more about how these trusts can help you. Send us a message at info@lawesq.net or call us 732-521-9455.

Thanks, But No Thanks. State Estate Taxes & Disclaimer-Based Approach

May 5, 2014

Filed under: Estate Taxes,Probate — Tags: , , , — Neel Shah @ 3:37 am

Twenty-one states have their own estate taxes, including New York and New Jersey. Many of these states have exemption amounts beneath the federal exemption, so it’s worth factoring in state estate taxes in your overall estate planning process.

Thanks But No Thanks State Estate Taxes & Disclaimer-Based Approach
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One way for married couples domiciled in those states with it’s own estate taxes to plan is to use the disclaimer-based approach. A disclaimer refers to a refusal by a beneficiary of a gift transferred to that beneficiary during life or at the time of death through a will, trust, or another mechanism.
The government makes a distinction between “nonqualified” and “qualified” disclaimers.

Using a disclaimer-based approach, the residuary estate passes on to the surviving spouse in a plan that provide that if the surviving spouse disclaims the interest, those assets will pass to a disclaimer credit shelter trust. This approach can add an element of flexibility to planning by empowering the spouse to make any needed changes. The surviving spouse will need to execute a disclaimed within nine months of the date of death. In order to ensure that you are prepared to use this disclaimer, work with an estate planning attorney to learn more. For all your complex estate planning, contact us at info@lawesq.net or via phone at 732-521-9455 to get started.

Showdown: Wills vs Trusts

April 15, 2014

Filed under: Trusts,Wills — Tags: , , , , , , , , , , , , , , , , — Neel Shah @ 4:13 pm

Depending on who you talk to, your estate planning specialist might recommend wills over trusts or trusts over wills. Let’s walk through some of the differences between these two planning tools to see if one might be a better fit for your needs.

Showdown Wills vs Trusts
(Photo Credit: blogs.dallasobserver.com)

If you are planning to use a will as your primary tool, bear in mind that your assets must first go through the probate process in order to be eventually received by your beneficiaries. Some states have lengthy and cumbersome probate processes, meaning that it could take your beneficiaries a while to actually receive the assets. Probate is also very public, meaning that details about your financial situation will be shared in a less-private forum. If you’re concerned about this, a trust might be a better option.

In comparison, trusts tend to pass by the court system for the majority of the administrative process. Since these are privacy documents, there’s less public scrutiny into your finances or your plans, and some clients prefer this confidential approach. Unlike wills, which become active on your death, a trust can be rendered effective immediately. Additionally, trusts can also be used for incapacity planning, adding another layer to their usefulness.

Both wills and trusts can do tax planning for credit shelter trusts. The bottom line is that it depends on your needs. If you are not concerned about the red tape of the probate process, there are still advantages (especially regarding privacy) for the establishment of a trust. We work with clients to create a customized plan for you since we recognize that each client is unique. To talk more about the kinds of trusts we can help you establish or to begin generation of your will, contact us today at 732-521-9455 or through e-mail at info@lawesq.net

Risky Do-It-Yourself: Wills

April 9, 2014

Filed under: Wills — Tags: , , , , , , , , , , , , , — Neel Shah @ 2:39 pm

Software or online programs to help you plan your estate are popping up everywhere, but that doesn’t mean they are the best choice for your needs. Many of these programs lead you to believe that generating your will is easier than it truly is. Heirs might find out too late that your self-created will doesn’t really match up with your state laws or even your own intent.

rightscale.com
  (Photo Credit: rightscale.com)

When it comes to estate planning, intent is everything. Too often, the wishes of an individual don’t come across clearly in self-generated wills. Many modern court cases have focused on the determination of the testator’s intent, but judges are hesitant to cross certain lines to clear up confusion. As a result, your heirs may discover that your wishes aren’t carried out as you planned at all. Simply put, doing your will on your own can have big consequences.

Consider the Estate of George Zeevering. Last fall, a Pennsylvania appellate court was evaluating an unclear DIY will. Since the testator had not worked with a lawyer to generate the document, which was incomplete, it was difficult to determine the true intentions of Mr. Zeevering. In one aspect of the case, property had already been titled in the names of a son and a decedent as joint tenants. Mr. Zeevering stated that “the failure of this will to provide any distribution” to his daughters was done on purpose.

The case got sticky when the residuary and residuary estate totaled over $200,000 after debt payments were made. There was no provision within the DIY will for what should happen to those assets. In the end, the court determined that when a will doesn’t provide for the disposal of an entire estate and fails to include a residuary clause, the residuary estate must be divided under intestacy laws.

This case is but one example of where estate planning on your own can go wrong. Although it may not have been Mr. Zeevering’s intention to distribute the remainder of his estate under intestacy laws, that’s what happened. Despite his wishes, the law overrides an incomplete or improper will. While online and computer programs argue that wills and estate planning documents are easily done on your own, that minimizes the true complexity of document generation and estate laws.

Estate planning can be very complicated for an individual but it’s easily done under the guidance of an estate planning attorney. An added benefit of using a legal professional “in the know” is that he or she is clued into state and federal laws about estate planning, which always have the potential to change. An estate planning attorney is an excellent resource for all your questions as well as giving you the peace of mind that your estate will be carried out in the manner you wish. Cutting corners with a do it yourself tool is your choice, but do so at your own risk. If you want the assurance of totality and legality, contact an estate planning professional today.