EASY EFFECTIVE ESTATE PLANNING
"'In this world nothing can be said to be certain, except death and taxes."
Benjamin Franklin
Estate planning is a lot more than disposing of your assets upon your death. In my mind, estate planning is all about conserving your estate, avoiding taxes, legal fees and bureaucratic costs so that you can take care of yourself and your family during and after your life. For example, disability is a strong probability during your lifetime. So are medical complications. Without planning, a person sentences his family to expensive and frustrating wasted time and money – bureaucracy bookkeeping, paperwork, taxes, legal fees, court costs, and more. So what can you do? I offer the Two E’s: ease and effectiveness. As an Accredited Estate Planner and former IRS attorney, I can help you achieve your goals more easily and with consideration for your family.
The information below shows you how you can use my Revocable Living Trust Package to manage your estate more easily and less expensive, from now on. I attach an Excel Questionnaire to help you put together information and make decisions needed to obtain a superior estate plan. Please enter information directly onto the Questionnaire if you can. Otherwise, print the Questionnaire at the end of this and fill it in by hand.
Sincerely,
Harry W. (Wis) Laughlin, III
Attorney at Law
Estate Planning is one of the most complex areas of the law, since it deals with state and federal taxes and state property laws. I can help you through the maze.
What Are You Up Against?
During your life
If you require significant medical care, your care giver will ask for a living will. If you have specified serious medical conditions, a living will authorizes your care giver to withhold certain kinds of medical care, like artificial feeding or breathing equipment. Tennessee provides an Advance Care Plan that serves the purpose of a Living Will and names persons who can make medical decisions for you if you cannot. During your life if you lose the capacity to function and have not named someone to act in your stead, your family must go to Court and obtain a Conservator, an embarrassing and expensive arrangement.
After your death
After you die, you property will pass according to your will, or if not, according to state law. If you have a will, you must prove its validity in Probate Court and then your Executor must run the gauntlet of Probate requirements designed to protect everybody else – the State, the Department of Revenue, Tenncare, your creditors, your heirs and so on, and so on. Managing your estate in Probate requires lots of time, money, paperwork and bookkeeping. According to the Probate Court Rules, the attorney fee for a $500,000 estate is $16-22,000. This does not even count possible Executor fees. If you die without a Will, it’s even worse! So what do you do? Normally prescribe a revocable living trust (“RLT”) package, described below.
In my time I have spent too many hours in Probate matters, and I don’t like it, even though I have taught this subject to other lawyers. An executor faces hiring a lawyer, a number of Probate Court appearances, making a bond, frozen cash flow, frozen property sales, written settlements with creditors, beneficiaries, Tenncare and the Tennessee Department of Revenue, your Will is public, interruption of your business and filing petitions, inventories, accountings, affidavits and more. Probate does cut off creditors claims after a waiting period, so if creditors are an overriding concern, you may still need it.
THE SOLUTION: an RLT PACKAGE
A. A RLT Package is:
1. a revocable living trust,
2. backup will,
3. durable general power of attorney
4. advance care plan.
5. documents to control retirement plan assets, if needed
A. During your life, an RLT package
1. lets you organize and control your property and affairs in one place
2. handles your property and affairs if you cannot, avoiding a court appointed conservator
3. handles your medical affairs
4. names successor Trustees and others
5. gives your instructions on how to handle it all
B. After you die, the RLT
1. is not publicly filed like a will, because it is a private contract. It
2. instructs your successor Trust how to continue the above plan
3. manages, protects and distributes your property to benefit your beneficiaries
4. avoids Probate, even “ancillary probate” of properties in other states.
5. serves all the other functions of a Will,
WHAT IS A REVOCABLE LIVING TRUST?
A “trust,” is a legal relationship created by a trust agreement, under which you, as Grantor, gives to a Trustee, who manages the trust property on behalf of Beneficiaries. With an RLT, typically, you are the Grantor and Trustee and Beneficiary while you are able to control it. So, during your life you control the RLT and use it to benefit yourself. I have found that it is most effective to use one RLT for each spouse.
I help you create the RLT by drafting a Trust agreement, which controls the Trust's operation. You place all your property in the trust or make it transfer to the trust upon your death, where it will escape the Probate process.
An RLT is “revocable,” one that you can change or cancel. An RLT is a “living” Trust, one that exists during your life. A typical RLT agreement names you as Trustee as long as you are able. You can name a successor Trustee. Your Trustee may be a person or a corporation. I can discuss the pros and cons of corporate versus family trustees.
During your life, as Trustee, you can use Trust property and income just as you always have. Your successor trustee handles your property and affairs if you cannot, avoiding a court appointed conservator
After your death, your successor Trustee can use the trust just like a will. The Trustee can manage and protect your property for your beneficiaries. It can manage retirement and life insurance benefits made payable to the Trust. You can name anyone as beneficiaries, typically your spouse, followed by your kids. The trust can distribute right away or manage the property for beneficiaries such as the young the old or others needing financial protection or management. You can tell the Trustee in the trust agreement when to distribute Trust income or property and when to end the Trust.
You pick the best successor trustee. You can specify an investment advisor. A "spendthrift provision," protects the trust property from a beneficiary’s creditors, even from a divorcing spouse. You can tell the Trustee if you prefer certain investments. and whether and when to distribute income or spend it on the beneficiaries...
Tax Consequences
During your lifetime, the Trust does not file a tax return or get a separate tax identification number. You pay taxes on Trust income. At your death, the Trust property is part of your estate. See Death Taxes, below. Without planning, retirement benefits paid into trust can generate excess income taxes.
BACKUP WILL
If any property remains in your name alone at your death, it will bypass the RLT and Probate will be necessary. This is why I make a Backup Will, which transfers all such stray property to the RLT.
DURABLE POWER OF ATTORNEY
The durable general power of attorney (DPOA) authorizes an "attorney in fact," to take any legal action on your behalf, such as signing contracts for you. There is always a risk that you will one day lose your ability to handle your affairs, through sickness, accident or old age. Without planning, you will need a court appointed guardian, a costly and embarrassing experience. Together, an RLT and DPOA handle incapacity and avoid guardianships. Your attorney in fact can transfer any stray property into the RLT. The DPOA works even if you lose mental capacity, but does not work after you die.
ADVANCE CARE PLAN
An “Advance Care Plan” lets you name people to make medical decisions for you. It also allows you to tell your doctor to withhold selected treatments if you end up with specified medical conditions.
Death taxes
Clients trying to do estate planning this year need more professional help than ever before. The value of your entire estate is subject to death tax, including the face value of life insurance on you, that you control. The Federal estate tax exempts slightly more than $5,430,000 (the exemption). The gift tax is handled similarly. Tennessee has repealed the Tennessee gift tax and is phasing out the Tennessee inheritance tax by exempting $5,000,000 in 2015, with no tax thereafter.
If you have a taxable estate, I can explain how to avoid death taxes. Using your RLT, I can divide spouse’s estates so that neither is large enough to be taxable. You may reduce your estate by each giving $14,000 per recipient per year to kids and others without gift tax. In addition, you may pay their tuition, gift tax-free at most schools. I have specially drafted trusts that can get insurance out of your estate. I suggest that we get together every two years or so to adjust your plan to current conditions. I have specially drafted trusts that can take your group insurance out of your estate within 3 years of transfer into the trust.
THE COST OF A RLT
The cost of an RLT package cost? Every plan includes a Will, Power of Attorney and Advance Care Plan. Minimum charges are:
Simple will $600.00
Will with minor kids $900.00
Revocable living trust $1,800.00
Tax planning adds $500-$1,000 to the cost. Probate savings, alone, justify the cost of this RLT package.
Wis Laughlin is an Accredited Estate Planner (NAEPC.org) and has practiced law for over 30 years. He worked five years as an attorney in the IRS National Office. Wis spent six years as Chief Counsel and CFO of a national software company. He has business and law degrees from the University of Tennessee and attended the Masters of Laws program at Georgetown University.
YOUR ESTATE PLANNING QUESTIONNAIRE
Please fill in the attached Excel file and email it back to me. If you can’t, you can print this questionnaire and bring it to your appointment.
By giving me this completed questionnaire to me, you retain me to prepare the work chosen. See agreement* below.
Signature ______Date ______
payment is due when we provide your documents. at the end of your appoint, you may ask for estimated Fees:
General information
1. Your name to use in documents:
Birthday:
Social security no:
2. Your address & phone numbers:
3. Name of your spouse, if any?
Birthday:
Social security no:
4. Names of your kids (if any)?
5. What is the approximate value of your estate, including life insurance?
6. On a separate sheet, please list all your assets & liabilities, who owns each (husband, wife, joint) cost and market value. Include investments, real estate, savings and checking accounts, businesses, collectibles, face value of life insurance, IRA’s, & retirement plans 401(k)’s, etc.
Warning: Certain items bypass your Will and Trusts unless made payable to your estate or trust. These include property owned jointly with right of survivorship and items that is payable on death (POD) to other persons, such as life insurance, bank or brokerage accounts.
Power of attorney
7. As part of your estate plan, we advise you to use, a power of attorney, which authorizes a person you select to handle your legal affairs, usually your spouse or relative.
[ ] I want a POA.
[ ] I authorize my spouse:
[ ] I instead authorize:
[ ] I next authorize:
advance care plan
8. An ACP allows you to name someone to make your health care decisions & and to tell your care giver to withhold specified health care if your health is seriously impaired.
[ ] I want an ACP.
[ ] I authorize my spouse:
[ ] I instead authorize:
[ ] I next authorize:
Wills?
[ ] I want a Will.
9. If you have minor children, who would you name as guardian(s)?
10. Most persons give their tangible, personal property (property you can touch, other than real estate) to a spouse, if living, and if not equally to living children.
[ ] O.K. [ ] other preferences:
11. Do you wish to dispose of your remaining property (real estate, securities, bank accounts), in a similar way?
[ ] O.K. [ ] other preferences;
12. Name any charities you'd like to help.
13. Executor: I suggest your spouse:
[ ] I name my spouse as Executor:
[ ] I instead name as Executor:
[ ] I name a successor Executor:
[ ] If your Executor is a nonresident, name a resident Co-Executor:
Trusts
[ ] I want a Revocable Living Trust (RLT). Ask about revocable living trusts, if you don’t have materials on this subject.
14. We normally suggest that a Trust benefit your surviving spouse while alive, then your children:
[ ] O.K. [ ] Other:
15. If no living spouse remains, we normally suggest equally dividing a Trust among kids.
[ ] O.K. [ ] Other:
16. If a beneficiary dies before you or before receiving his final distribution from the Trust, write "1," "2" and "3" in brackets below, to indicate order of preference, or describe preferred distribution: