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Message #664 Estate planning (Pt. 3)?

mp3 #664 Do You Need Estate Planning? Part 3 (mp3 file)

What other kinds of trusts are used in estate planning?

Can the way in which you hold title make a difference?

What are other methods of leaving property?

What if you become unable to care for yourself?


 What other kinds of trusts are used in estate planning?


Trusts serve a wide variety of needs in estate planning; they may be established for the benefit of a child, a disabled or incapacitated individual, or a charity. In addition to the popular Revocable Inter Vivos Trust, one other common type of trust is a life insurance trust. The trustee of a life insurance trust holds title to a life insurance policy, and on the death of the insured, the trustee receives, manages and distributes the proceeds of the life insurance policy.

A life insurance trust allows for the organized management of the proceeds of a life insurance policy on the death of the insured. In addition, if a life insurance trust is properly created and operated, the proceeds of a life insurance policy held in the trust will not be subject to any federal estate taxes. To avoid federal estate taxes, an insurance trust must be irrevocable; that is, once the trust is signed, it cannot later be amended or revoked.


Does the way in which you hold title make a difference?


Estate planning should involve an examination of the manner in which you currently hold title to your assets, because the form of ownership of your assets can affect your estate planning goals. For example, a change in the manner in which you hold title to assets, may avoid a probate, or may result in lower income taxes. Before you change title to an asset, you should understand the tax and other consequences of any proposed change. Your estate planning attorney will be able to advise you.

If you are married, you and your spouse most likely hold title to your assets in either joint tenancy or community property form. (persons other than husband and wife also may hold title to property as joint tenants). The distinguishing characteristics of a joint tenancy is that title to the property automatically passes to the surviving joint tenant, upon the death of the other joint tenant, and therefore is not subject to any post-death administration. The surviving joint tenant has the immediate use and enjoyment of the joint tenancy property.

If a husband and wife hold title to their property as community property, then each spouse has an equal, present and existing interest in all such property, and each spouse is free to dispose of his or her one-half interest. When a husband and wife acquire property in California during their marriage, it is presumed to be community property.

A husband and wife may want to change the character of their marital property. However, any such change must be expressly consented to in writing by both parties. For example, a husband and wife may hold title to their home in joint tenancy. If they want to change the ownership form to community property, they should sign a new deed, that recharacterizes their home as their community property. It may be important that each spouse be advised by his or her separate attorney before agreeing to such change of ownership.

A married individual may own separate property as a result of owning property prior to marriage, by receiving property by gift or inheritance, or by a division of community property. When a married person owns separate property, additional estate planning issues must be considered. For example, one such issue may be how to maintain the separate property character of the property.

Regardless of whether you are married or whether you have separate or community property, it is important to seek competent legal advice when determining how title to your property should be held.


What are other methods of leaving property?


Your estate may include life insurance or qualified or non- qualified retirement benefits. A beneficiary designation is used to identify who should receive life insurance, or qualified retirement plan proceeds upon your death. A beneficiary designation is usually a document other than a will or a trust. You should coordinate your beneficiary designation (s) for such asset (s) with your entire estate plan.


What if you become unable to care for yourself?


If you become incapable of managing your estate or incapable of providing for your own care, you should determine, in advance of any such incapacity, who you want to care for you and your estate.

Conservatorships are court-supervised proceedings, which allow the court to appoint who is to care for you and your estate if you are incapacitated.

Alternatives to a conservatorship are a durable power of attorney for property, and a durable power of attorney for health care. A durable power of attorney does not involve a court proceeding, and may be effective immediately or upon the occurrence of some future event. In a durable power of attorney, you (the "principal") appoint another individual (the "attorney-in-fact") to make health care or property management decisions on your behalf. Under a durable power of attorney for property, the attorney-in-fact manages your assets and functions much as a conservator, but without court supervision. Under a durable power of attorney for health care, the attorney-in-fact makes health care decisions, when you can no longer make such decisions yourself. SmartLaw message 668 provides more information about durable powers of attorney for asset management. Message 643 provides information about durable powers of attorney for healthcare.

The purpose of this message is to provide general information on the law, which is subject to change. If you have a specific legal problem, you may want to consult a lawyer.

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