Gifts offer a valuable tool in estate planning, but if not used carefully they can cause as many problems as they solve. The primary use of gifts is to manage the value of your estate to avoid estate taxes. Although there is no federal estate tax right now for 2010 it may be implemented before the years end and it is scheduled to return in 2011. So it is important to understand how you can use gifts to avoid what may be as high as a 55% tax rate.
Your estate is only subject to estate taxes if its value is above the minimum amount set for the year. In 2009 this amount was 3.5 million dollars and if nothing changes the amount will be 1 million dollars for 2011. You may use gifts to ensure the value of your estate is below the set amount. It is important to make sure your estate plan has taken into account the current exemption amount and any appreciation gained by your property.
Even though gifts may be beneficial it is important to understand the potential pitfalls. A few possible issues to watch for may include:
Gift may triggering other taxes
Gift may alter recipient's status for current support
Loss of property to you
Using gifts to avoid estate taxes may have other tax implications. It is important to make sure your gift falls within one of the exceptions to the federal gift tax. Also it is important to understand giving a gift that has appreciated in value may leave the recipient paying capital gains taxes. If the purpose of your gift is to avoid taxes then it is important to look at the big picture.
Another concern to understand how a gift can affect the recipients eligibility for financial and medical assistance. A gift may cause a students to lose financial aid, a person with special needs to lose financial and medical assistance, or a person classified as low income to lose benefits such as Medicare. A gift may be given with the best intentions, but without proper planning it may actually cause more harm than help.
Lastly I would urge you to understand the affect giving a gift may have on you. You may be giving away property that ensures your financial security. In addition you will surrender control of property that may have sentimental value. A gift to a child may seem natural way top honor the sentimental value, but there is no guarantee the property will not be sold or re-gifted later. It is important to understand when you give a gift you are giving up control of the property.
Tuesday, March 30, 2010
Wednesday, March 24, 2010
How Often Should I Check my Trust
Having a living trust in place may give you peace of mind, but does it ever need to be updated? The honest answer is nothing is built to last forever and your living trust needs to be maintained just like anything else. Your trust is a reflection of (1) your (2) wishes about your (3) property conveyed in a (4) legal manner. Many things might have changed to affect this.
(1) Who "you" are might have changed.
You might have been through a divorce
You may have gotten married
Your spouse may have passed
Your health or your spouse's health may be declining
If you chose another person as trustee their situation may change
(2) Your Wishes may have changed.
It may be as simple as you feel differently now
may have been children born
financial changes
minor becomes an adult
(3) Your property may have changed.
May have changed up or down
(4) Laws may have changed
New taxes law changes
You may have moved to a new state with different laws
A living trust is a great tool to manage your assets, but as time goes on many things can change and it is important to make sure it is up to date.
(1) Who "you" are might have changed.
You might have been through a divorce
You may have gotten married
Your spouse may have passed
Your health or your spouse's health may be declining
If you chose another person as trustee their situation may change
(2) Your Wishes may have changed.
It may be as simple as you feel differently now
may have been children born
financial changes
minor becomes an adult
(3) Your property may have changed.
May have changed up or down
(4) Laws may have changed
New taxes law changes
You may have moved to a new state with different laws
A living trust is a great tool to manage your assets, but as time goes on many things can change and it is important to make sure it is up to date.
A Few Common Reasons You Need Estate Planning
This is just a brief article going over some common reasons people need to take care of estate planning. Estate Planning is a generic term to describe the ways your property can be distrubuted after your death. Probate is the default statutory scheme if you do not make legally make you wishes known. Wills are a simple instrument that can distribute your property and Trusts are a more flexible tool that can be used to control, manage and distribute your assets after your death.
Once you understand what exactly is available it becomes important to think about how you want your assets handled after your death. The tools available can be very simple or very complicated based on your desires. Here are a few reasons it may be important to make plans for the future.
1. You have children. In the event you die while your children are still young the court will decide who raises yor children unless you do so.
2. Choice. Probate is a statutory scheme that will distribute your assets to you spouse, children and blood relatives. A will or trust allows you the freedom to distribute your assets the way you choose.
3. Costs: probate and contested issues will drain money from your estate to pay for court and attorney's fees. In CA probate is very costly. Proper use of a will can make sure you the maximum amount of your assets reach the people you care for.
4. Power of Attorney. This comes in two types. Financial and medical and can be be extended to a person if you become incapacitated. Having orders regarding medical care and regarding your property ensures your wishes are followed. Family member's judgment may be clouded with their own emotions and your wishes should be respected during these times.
5. Your legacy. A trust is so flexible you can make sure your property reaches loved ones into the future. Giving support or specific property down the road can ensure you have a long lasting effect on your family even after you have passed.
This are just a few examples of benefits available. IT is an uncomortable subject to cover but it is important to make sure your family and you are cared for the way they deserve.
Once you understand what exactly is available it becomes important to think about how you want your assets handled after your death. The tools available can be very simple or very complicated based on your desires. Here are a few reasons it may be important to make plans for the future.
1. You have children. In the event you die while your children are still young the court will decide who raises yor children unless you do so.
2. Choice. Probate is a statutory scheme that will distribute your assets to you spouse, children and blood relatives. A will or trust allows you the freedom to distribute your assets the way you choose.
3. Costs: probate and contested issues will drain money from your estate to pay for court and attorney's fees. In CA probate is very costly. Proper use of a will can make sure you the maximum amount of your assets reach the people you care for.
4. Power of Attorney. This comes in two types. Financial and medical and can be be extended to a person if you become incapacitated. Having orders regarding medical care and regarding your property ensures your wishes are followed. Family member's judgment may be clouded with their own emotions and your wishes should be respected during these times.
5. Your legacy. A trust is so flexible you can make sure your property reaches loved ones into the future. Giving support or specific property down the road can ensure you have a long lasting effect on your family even after you have passed.
This are just a few examples of benefits available. IT is an uncomortable subject to cover but it is important to make sure your family and you are cared for the way they deserve.
Subscribe to:
Posts (Atom)
