Wills, Trusts, Estates & Tax
Wills, trusts, estates, inheritance tax, estate tax, advance directive for health care, and even power of attorney can be daunting terms. With our busy lives, it’s easy to put these considerations aside. But, in this case, out of sight- out of mind can hurt you and your family. Why do lawyers and financial planners claim nearly everyone should have these instruments and what’s the harm if you don’t?
Without a will your estate will cost more to settle and may not pass as you would wish. Also, you may be giving up opportunities to save tax and protect loved ones with disabilities if you die without a will.
While nearly everyone needs a will, only some people need trusts. In some situations, trusts can be a great way to protect loved ones and minimize estate and inheritance tax. For instance, trusts are key tools to manage inheritances for beneficiaries who are young, intellectually challenged, developmentally disabled, or have marital or creditor issues. However, they also can be overkill and add unnecessary cost.
Unfortunately, it can be difficult for a lay person to tell whether a trust is recommended to meet important aims or primarily to make money for a promoter. This opens the door to hucksters with over the top claims that only a so-called revocable living trust can provide tax savings and other benefits that you easily could obtain with a comprehensive will instead of a living trust. It’s a safe guess that someone who rents out a restaurant and provides free meals to promote revocable living trusts, probably expects to make a lot of money selling the trusts.
Advance directives for healthcare and powers of attorney allow you to name surrogates who can manage your care and affairs if you become impaired and even state whether you would want treatment in end of life situations.
Wills, Trusts, Tax and Estate Planning
Perhaps because estate planning brings up unpleasant subjects, many people put it off. So long as you get to estate planning eventually, what’s the harm in waiting? Here’s the thing. Nobody needs a will until he/she dies but then it’s too late to do one. Well, similar reasoning applies to wills, trusts, advance directives, and powers of attorney. You don’t need them until you do need them, but if you wait until the need arises, you may miss your chance to direct future affairs, protect your family, and save tax.
Do I need a will?
How about a living trust to avoid probate?
Will my beneficiaries face estate or inheritance tax?
How can I protect my family if I become incapacitated?
How can my estate plan provide for both my spouse and children from a prior marriage?
How can I use SNTs (supplemental needs trusts or special needs trusts) to protect government benefits for my disabled child?
What are my responsibilities if I’m appointed as a Trustee or Guardian?
I’m the Executor to an estate; what should I do?
Planning your Will
A will may be the most basic estate planning document, but it also is very important because it is the foundation on which an estate plan rests. Your will determines how your property is distributed when you die. With a well-drafted will, you can minimize estate and inheritance tax, safeguard children from a prior marriage against disinheritance by a later spouse, protect minor children and beneficiaries with disabilities, and ensure your assets go where you want.
Healthcare Directive and Power of Attorney
Along with a will, an advance directive for healthcare and power of attorney are basic components of estate planning that everyone should consider. These documents set forth your wishes and help your loved ones take care of you if you lose capacity. If you don’t execute comprehensive advance directive for healthcare and power of attorney while you retain capacity an expensive and intrusive guardianship proceeding may be the only option if you become impaired. You also may forego opportunities to save tax and reduce the cost of long term care.
Estate and Inheritance Taxes
When you pass away your estate may be subject to New Jersey inheritance tax and/or state and federal estate tax. We can apply a variety of techniques to help minimize taxed so more of your estate can pass to your loved ones.
Probate, Estate Administration and Will Contests
When someone dies, the will must be probated and the estate administered. The probate process appoints a personal representative (executor or administrator) to manage the estate. The personal representative can have various duties including filing for probate, preparing tax returns, obtaining an estate taxpayer identification number, opening an estate account, obtaining tax waivers, transferring property, obtaining release and refunding bonds from beneficiaries, preparing an accounting, and more. Beneficiaries also may have questions about IRA distribution requirements. We can walk you through the process from start to finish. And if disputes or litigation arise, we can assist.
A Word on Revocable Living Trusts
Some attorneys promote revocable living trusts (RLT’s) as an alternative to wills, saying they help you avoid probate, maintain privacy and save tax. In reality, probate in New Jersey is simple; most people other than celebrities don’t need privacy protection; and any taxes that can be saved through an RLT also can be saved with a will, probably for less in legal fees. While RLTs aren’t inherently bad, RLT’s can be expensive and unnecessary to meet the estate planning goals of most families. We encourage you to thoroughly explore options and costs before purchasing a revocable living trust.
How Friedman Law Can Help
As with most legal instruments, estate planning documents like wills, trusts, advance directives, and powers of attorney can be created only while you are able to understand their nature and effect. This means that once your capacity become seriously impaired it is too late to put in place important estate planning instruments leaving default rules, which may not be to your liking, and a judge who never laid eyes on you in control of your care and affairs. Therefore, putting off estate planning can lead to unpleasant results.
Some estate planners use rigid forms to do estate planning by rote. If you work with FriedmanLaw, we will discuss your circumstances and aims with you and seek to prepare documents that address your concerns both tax and non-tax.
Will to help provide for your loved ones when you're gone, appoint an executor and more.
Advance directive for healthcare so your loved ones can make medical decisions if you lose capacity.
Power of attorney so that someone you trust can manage your financial affairs.
Create trusts and plan for taxes and long term care when needed.
Probate will, deal with estate and inheritance tax and administer estate when a loved one passes away.
We’re Here to Help
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