Estate Planning Methods

Estate Planning Methods - Underlying Principles of Estate...

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ESTATE PLANNING VEHICLES Underlying Principles of Estate Planning - The cardinal principle of estate planning – - Effectuate the clients Intention o Tax savings are important but Intent of the client comes first - Sound estate planning has the achievement of completeness of disposition of the property, o Gaps leads to ramifications Court Interpretations may fail to address Testators Intent I. WILLS a. Disadvantage: i. Major disadvantage is a disruption of interests and a delay b/c of probate and until the executor is appointed ii. The process stops when the person dies iii. Many formalities to create, change and modify iv. Property disposed of is subject to estate tax v. Must pay income taxes on anything remaining vi. Presumption of Revocation 1. With a Will if they cant find at death then it is presumed revoked a. Difficult to make multiple originals 2. With a trust you can execute 5 original cheap and quick vii. But there is No gift tax b. Uses: i. To nominate guardian for minor children (technically is appointed by the court, but the court will defer to the expression of wishes in the will ii. A residue within a residue is permissible the kids bear all the taxes not the T 1. Results in savings to the estate c. Your Still going to have a Will i. Clients forget to transfer things in trust, thus a Client needs a 1. Pour Over Clause in the Residue Clause of the will a. Everything not named in the will be poured over to my RIVT b. However you will still need to go through probate initially but. . c. Benefit is that once it is poured over it is no longer subject to probate i. IE never need court approval for changes of trustees, ect. . 1. If you don’t have a pour over clause goes by intestate HYPO: Testator leaves a will saying I give my W all of my income in trust, the problem is that they inject flexibility into the trust, and gave the Trustees to pay principle to the children - This power to divert principle causes it to fail for the martial exception - 2 steps to fix this o NY's statue says in order to qualify you are authorized to divert principle in a trust, you can diverge the two trust So you have trust 1 that is a mirror of trust two (they don’t have to be equal in size) They must have the same provisions Within 9 months of death the Trustees must disclaim the power to pay principle to the children, thus the only person they can pay principle to is the W thus you have some amount that can qualify for the marital exception And the children are happy with the second trust II. LIFE INSURANCE 1
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III. LIFE INSURANCE TRUST IV. CONTRACTS V. TOTTEN TRUST (SEE WILL SUBSTITUTES) a. A goes to bank, asks the bank to pay the balance of the account at his death to person B. i.
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Estate Planning Methods - Underlying Principles of Estate...

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