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Terms Explained
LIVING TRUSTS
All of our Estate Plans include
a Living Trust, sometimes called
a Revocable Trust. We provide several types of Living Trusts all
of which are customized to satisfy your needs. The type of Living
Trust that your Estate Plan will include depends upon your marital
status and your net worth.
1. Living Trusts for Single Persons
If
you are single, legally separated, going through a divorce or
otherwise
planning for only
yourself, your Estate Plan will include our Single Trust. If
your net worth
exceeds $1,000,000 you will require Advanced Estate Tax
Planning if you
desire to minimize your estate taxes.
2. Living
Trusts for Married Persons
If you are married,
the type of living trust that your Estate Plan will include
depends upon the net
worth of you and your spouse:
If your net worth is expected to be less than $1,000,000
at the end of
your
life, your Estate Plan will include a Simple Trust.
If your net worth is expected to be more than $1,000,000
but less than
$2,000,000 at the end of your life, your Estate Plan will include
a
Disclaimer Trust, sometimes called an "A-B Trust".
If your net worth is expected to be more than $2,000,000
at the end of
your life, your Estate Plan will include a Complex Trust and you
will require
Advanced Estate Tax Planning if you desire to minimize your estate
taxes.
POUROVER WILL
If you forget or fail to transfer
certain assets into your Living Trust during your lifetime, upon
your death those assets will be tranferred into your Living Trust
by your Pourover Will. In this respect, your Pourover Will is
like a safety net to protect you from failing to transfer an asset
into your trust.
FINANCIAL MATTERS POWER OF ATTORNEY
This type of power of attorney is
used to designate an agent to make financial decisions for you
in the event you are unable to make them for yourself.
HEALTH CARE POWER OF ATTORNEY
This type of power of attorney is
used to designate an agent to make health care decisions for you
in the event you are unable to make them for yourself.
COMMUNITY PROPERTY AGREEMENT
Only married persons require a community
property agreement. The purpose of the agreement is to identify
which assets are community property and which are the separate
property of either spouse. This agreement is often used to when
there are children by a prior marriage and the couple wants to
make clear what property will belong to a surviving spouse and
what property will be immediately passed to the children.
SPECIAL NEEDS TRUST
Because a disabled person generally
cannot receive government benefits if they have personal assets
that could be used for their support, an inheritance or gift may
halt their benefits or prevent them from obtaining the benefits
in the first place. A Special Needs Trust permits a disabled individual
to receive gifts and inheritances without being disqualified from
receiving government benefits. A special needs trust is managed
by a third party trustee for the benefit of the disabled person.
ADVANCED ESTATE TAX PLANNING
There are several tools available
to minimize or eliminate estate taxes. If you are in an estate
tax situation and you desire to reduce your estate taxes, you
will require an Advanced Estate Tax Plan.
FAMILY LIMITED PARTNERSHIPS
A Family Limited Partnership is
an effective method for a person to make gifts to their heirs
and other beneficiaries if they are in an estate tax situation.
A FLP has general partners (the grantors) and limited partners
(the beneficiaries). Because the limited partner's interest is
subject to restrictions the IRS allows the amount of the interest
to be discounted for estate tax purposes. FLP's are effective
tools for transferring interests in real estate, businesses and
other appreciated assets.
GRANTOR RETAINED ANNUITY TRUST
A Grantor Retained Annuity Trust
is an irrevocable trust that allows the grantor to transfer property
to the trust and retain an income interest for a period of years
before passing the property to the heirs at the end of that period.
The property is subject to gift tax, not estate tax (unless the
grantor dies in which case it would be included in their estate).
The amount of the gift and the associated tax is discounted because
of the grantor's retained interest.
CHARITABLE REMAINDER TRUST
Charitable Remainder Trusts combine
an opportunity for tax-free accumulation of income by the trust
with a current income tax deduction for the grantor for the value
of the remainder interest which will eventually transfer to the
charity. The grantor can be included as a beneficiary and receive
distributions from the trust, subject to certain limitations.
QUALIFIED PERSONAL RESIDENCE TRUST
A Qualified Personal Residence Trust
is an irrevocable trust which the grantor transfers their residence
to while retaining the right to use the property for a period
of years. The transfer is subject to gift tax and not estate tax,
unless the grantor dies during the period of years, and the amount
of the gift is discounted to reflect the grantor's retained interest.
ASSET PROTECTION STRATEGY
Many of the advanced estate planning
techniques also offer Asset Protection from third party creditors
as assets are transferred to irrevocable trusts and not subject
to execution by creditors.
LIFE INSURANCE
Life Insurance is used in estate
planning to finance anticipated estate taxes. It serves as a good
investment vehicle during your lifetime and can satisfy estate
taxes for pennies on the dollar on your passing.
IRREVOCABLE LIFE INSURANCE TRUST
An Irrevocable Life Insurance Trust
is an excellent vehicle for transferring wealth to your heirs
and for financing anticipated death taxes.
GIFTING PLAN
Each individual is permitted to
transfer by gift up to $10,000 annually to any other individual
without gift tax consequences. The gift can be in the form of
cash, real estate, business interest or other assets. A properly
prepared and executed Gifting Plan will permit you to transfer
assets to your heirs without incurring a gift tax or a reduction
of your unified credit.
TRUST ADMINISTRATION
Upon the death of the trustors of
a trust, the trust must be administered. Trust Administration
includes collecting an inventory of the assets of the trust, satisfying
debts and creditors of the trust and trustors (including tax liabilities),
and distributing the remaining assets to the designated beneficiaries.
How to Contact Us
For more information or an appointment, please call
San Diego Law Firm 619-794-0243,
or, if you prefer, send us an e-mail at
and an attorney from our office will contact you. Please note
that making a phone call or sending an e-mail does not create
an attorney-client relationship; this requires a written agreement.
Please do not e-mail any confidential information to us until
an agreement is signed; at that point, we can exchange confidential
information freely.
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