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Entries in Irrevocable Life Insurance Trust (5)

Sunday
May282017

Life Insurance and Estate Planning: Protecting Your Beneficiaries’ Interests

One misconception people have about life insurance is that naming beneficiaries is all you should do to ensure the benefits of life insurance will be available for a surviving spouse, children, or other intended beneficiary. Life insurance is an important estate planning tool, but without certain protections in place, there's no guarantee that your spouse or children will receive the benefit of your purchase of life insurance. Consider the following examples:

Example 1: David identifies his wife Betsy as the beneficiary on a life insurance policy. Betsy does receive the death benefit from the insurance policy, but when Betsy remarries, she adds her new husband’s name to the bank account where she deposited the death benefit. In so doing, she leaves the death benefit from David’s life insurance to her new husband, rather than to her children as she and David discussed before his death and which is what she indicates in her will.

Example 2: Dawn, a single mother, names her 10-year-old son Mark as a beneficiary on her life insurance. She passes away when he is twelve. The court names a relative as a guardian or conservator for Mark until he is of age. When Mark reaches his 18th birthday, his inheritance has been partially spent down on court costs, attorney’s fees, and guardian or conservator fees. Additionally, it hasn’t kept pace with inflation because of the restrictive investment options available to guardians or conservators. Dawn hoped the life insurance proceeds would be there for Mark’s college, but the costs and lack of investment flexibility mean there may not be as much as Dawn hoped.

Solution: Use a Trust as the Beneficiary on Your Life Insurance:

When estate planning, a common method for passing assets is by placing them in a trust, with a spouse or children as beneficiaries. The same approach may also be used for life insurance policy proceeds. You can designate the trust as the life insurance policy's beneficiary, so the death benefits flow directly into the trust. Two popular ways to accomplish this:

  1. Revocable Living Trust (RLT) Is the named beneficiary:

This option works well for those who have a modest-sized estate or who have already set up a trust. Naming your RLT as a life insurance beneficiary simply adds those death benefits to what you already have in trust, payable only to beneficiaries of the trust itself. The benefit of this approach is that it instantly coordinates your life insurance proceeds with the rest of your estate plan.

       2. Set up an Irrevocable Life Insurance Trust (ILIT):

For an added layer of protection, an ILIT can both own the life insurance policy and be named as the beneficiary. As The Balance explains, this not only protects the death benefits from potential creditors and predators, but from estate taxes as well.

With the estate tax exemption at $5.49 million per person in 2017, and a potential repeal on the legislative agenda of President Trump and the Republican Congress, you may not need estate tax planning. But everyone who’s purchased life insurance needs to take an extra step to ensure your loved ones' financial future. To discuss your best options for structuring your life insurance estate plan, schedule your complimentary Estate Planning Strategy Session with our office.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Tuesday
Feb072017

Trump’s Presidency—Synopsis of Impacts On Estate Planning

It's official—the Electoral College voted on December 19, 2016, essentially completing the 2016 presidential election cycle. With that bit of uncertainty behind us and a fresh year starting out, here's what you need to know about planning your estate under the incoming Trump administration and Republican-controlled Congress. Regardless of how you feel about the election results, it is now the reality in which we currently live.

President Trump’s Tax Plan:

A new president usually means major shakeups in fiscal and tax policy, and Trump’s tax plan is no exception. Here are several of the proposed changes we will potentially see rolling out during his administration.

  1. The repeal of the estate tax;
  2.  Lower income tax rates;
  3. The introduction of a tax deduction for childcare costs;
  4. Dependent care savings accounts (DCSAs) with conditional matching;
  5. The switch from seven to three tax brackets;
  6. Increased standard joint deduction from $12,600 to $30,000;
  7. Increased itemized deductions cap from $100,000 to $200,000; and
  8. Decrease in business tax from 35 percent to 15 percent.

Of these proposed changes, the repeal of the estate tax, also known as the “death tax,” means your assets would not be taxed by the government upon your death and would transfer in full to your beneficiaries. It is also predicted that the gift and generation-skipping taxes may be repealed as well. These actions could result in a greater ability to keep wealth within your family, but we must wait until we see the final legislation to know the exact mechanics. Additionally, the proposed changes would also negatively impact taxation on charitable gifts and other philanthropic gestures contained in your estate plan.

Estate taxes differ from state to state, so the wisest move in your playbook is to go over your estate plan with an experienced estate planning attorney to discover how these changes may impact its other components.

Of course, proposed policy changes must go through Congress, which has its own agendas and ideas about fiscal and tax policy. So, staying on top of new developments and in close contact with your team means you’ll be prepared for whatever unfolds over the coming years.

More Benefits to Revocable Trust-based Planning:

There are also many non-tax-related benefits to trust-based planning that you can take advantage of regardless of which proposed changes take place under the new administration and Congress. Just a few key benefits of trust-based planning include:

  1. Greater privacy for your family and avoidance of probate;
  2. Incapacity protection and avoidance of conservatorship or guardianship;
  3. The creation of lifetime beneficiary directed trusts providing long-term asset protection benefits to your heirs;
  4. Ensuring the protection of your asserts during your lifetime; and
  5. Ensuring that your desires for taking care of your loved one’s after you pass away are effectuated.

Schedule a Call with Us:

Not even the nation’s top financial experts know exactly how Trump’s presidency and the Republican-run Congress will impact estate planning best practices for every citizen, but a skilled estate planning attorney can guide your estate planning in a smart, careful, and decisive manner.

We’re here to help you navigate policy changes to ensure your estate is managed as beneficially as possible for you and your family for generations to come. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.


 

Friday
Apr222016

Revocable Trust v. Irrevocable Trust: Which Is Best for You?

Trusts allow you to avoid probate, minimize taxes, provide organization, maintain control, and provide for yourself and your heirs. In its most simple terms, a trust is a book of instructions wherein you tell your people what to do, when.

While there are many types of trusts, the major distinction between trusts is whether they are revocable or irrevocable. Let’s take a look at both so you’ll have the information you need:

Revocable Trusts. Revocable trusts are also known as “living trusts” because they benefit you during your lifetime and you can alter, change, modify, or revoke them if your circumstances or goals change.

1. You stay in control of your revocable trust. You can transfer property into a trust and take it out, serve as the trustee, and be the beneficiary. You have full control. Most of our clients like that.

2. You select successor trustees to manage the trust if you become incapacitated and when you die.   Most of our clients like that they, not the courts, select who’s in charge when they need help.

3. Your trust assets avoid probate. This makes it difficult for creditors to access assets since they must petition a court for an order to enable the creditor to get to the assets held in the trust. Most of our clients want to protect their beneficiaries’ inheritances.

Irrevocable Trusts: When irrevocable trusts are used, assets are transferred out of the Grantor’s estate into the name of the trust.  You, as the Grantor, cannot alter, change, modify, or revoke this trust after execution. It’s irrevocable and you usually can’t be in control.

1. Irrevocable trust assets have increased asset protection and are kept out of the reach of creditors.

2. Taxes are often reduced because, in most cases, irrevocable trust assets are no longer part of your estate.

3. Trust protectors can modify your trust if your goals become frustrated.

As experienced estate planning attorneys, we can help you figure out whether a revocable or irrevocable trust is a good fit for you and your loved ones. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Sunday
Apr052015

Is a Payable on Death Account Right for You and Your Family?

Payable on death accounts, or “POD accounts” for short, have become popular for avoiding probate in the last decade or so. These accounts include life insurance policies, certain retirement accounts, and cash accounts with designated beneficiaries. While the idea of these accounts is to avoid probate and simplify distributions, POD accounts can have unintended negative results, which are contrary to the account owner’s wishes.

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Sunday
Dec152013

The Many Needs for Life Insurance in Our Lives

While many people are hesitant when it comes to life insurance, the potential benefits are so great, that we recommend that you place your reservations on hold—if only momentarily—to consider the benefits, before writing off the idea completely.

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