While you are alive, you have the option to create an individualized estate plan that reflects how you want your estate handled upon your death. If you fail to create an estate plan, then you have effectively acquiesced to the “government estate plan“. By not executing a Last Will and Testament prior to your death, your estate becomes an intestate estate. An intestate estate is handled according to the intestate laws of the state where the decedent was a resident at the time of death. So what does the government estate plan include?

For starters, the government estate plan typically requires your entire estate to be handled through the legal process known as probate. This can tie up your estate assets for months, leaving then inaccessible to loved ones.

Part of the intestate process requires the court to determine who the legal heirs to your estate are. Your legal heirs may not be the same people that you wanted to leave your assets to. For example, your girlfriend of 20 years is not a legal heir in most cases.

The government estate plan also requires an inventory and valuation of your estate assets. It could also include selling estate assets, even if they had sentimental value to you. Other decisions the court may make for you include who administers your estate (for a fee)and who is appointed as guardian of minor children.

Finally, the government plan will often cost more in administrative,  legal fees and often bonding fees  than you would have spent creating your own plan that could have avoided this entire process.

Your Estate Plan guarantees your choices.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

If you were rich and famous you would guard your money closely right? One of the first things you would do is create a comprehensive estate plan to ensure that your money would go to the people you want it to go to in the event of your death right? Most of us like to think so, but a shocking number of the rich and famous die intestate, without leaving behind even a simple Last Will and Testament to indicate how they want their estate assets handled after death. For example:

Bob Marley: The man who put reggae music on the map died after an eight month long bout with cancer, yet did not see fit to create a Will prior to his death. After his death, alleged children, mothers of those children and various relatives filed claims to his estate estimated to be worth $30 million at the time.

Michael Jackson: Although a Will was eventually located, it initially appeared as though the King of Pop died intestate. Jackson’s mother even filed probate documents claiming that her son died intestate (without a Will).

Howard Hughes: The eccentric billionaire who was worth in the neighborhood of $2.5 billion when he died in 1976 failed to leave behind a Will. Although one was produced after his death, it was later determined to be a forgery. Eventually, 22 cousins inherited Hughes’s fortune.

Pablo Picasso: The famous artist died at the age of 91 leaving behind homes, cash and artwork valued in the millions, but did not leave behind a Will. Six years later, at an estimated cost of $30 million, his estate was settled.

Certainly none of us would like to leave our families in this disarray.  That’s why it’s important consult with a qualified Estate Planning Attorney.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

A revocable living trust, is an inter-vivos trust, meaningit is created and takes effect while you are still alive. It has benefits and drawbacks. Although a revocable living trust does not offer the same estate tax avoidance and assets protection benefits that an irrevocable trust offers, it can be an excellent way to plan for your incapacity.

Creating a revocable trust requires you to appoint a trustee, name at least one beneficiary and allocate assets to fund the trust. A revocable trust allows you to appoint yourself as the trustee and beneficiary. In addition, you will need to nominate at least one successor trustee. This should be a spouse, child, parent or other loved one whom you wish to take over in the event of your incapacity.

After establishing the basic framework for the trust, you must decide on the trust terms. This is where you get to define what your own “incapacity” means. You could, for example, require a specific number of doctors to declare you incapacitated. You could also call for a panel of experts to make the decision or simply designate a family member or loved one to decide — it is your decision how you define the term.

Once you have been declared incapacitated, your successor trustee will take over control of the trust. The benefit to this arrangement is that there is no need to seek court approval. Your successor trustee has immediate access to the trust funds to be used for your care or the care of your family.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

If philanthropy is an important part of your life, then you should consider making it an important part of your estate plan as well. Your estate plan allows you to provide for your family and loved ones in the event of your death. That same plan can allow you to provide for the causes that are important to you long after your death as well. Only a lengthy consultation with your estate planning attorney can determine how best to incorporate your charities into your estate plan; however, there are some universal key points about charitable giving that are important to understand.

You may choose to provide a direct gift through your Last Will and Testament to the charity of your choice; however, a trust frequently offers probate and tax advantages that a direct bequest does not as well as more flexibility than a direct gift.

A charitable trust can be either a living trust or a testamentary trust.

If you establish a living trust, and distributions are to be made while you are still alive, then the trust will typically need to be an irrevocable trust.

The most common charitable trusts fall into one of two main categories — lead and remainder trusts

A Charitable lead trust provides income to a trust for a specific period of time and then gives the remainder to non-charitable beneficiaries, such as family members.

A charitable remainder trust provides income to non-charitable beneficiaries, such as family members, for a specific period of time, or life, and then gives the remainder to a charity.

A portion of the value of assets used to fund the trust may qualify as a current deduction for income tax purposes.

The amount that passes to a charity may qualify for an estate tax deduction upon your death, decreasing estate tax exposure.

You may be able to avoid paying capital gains taxes on assets that are used to fund a charitable trust.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

The world suffered the loss of singer, actress and producer Whitney Houston at the age of 48 last month when she was found dead of unknown caused in her Beverly Hills hotel room. While fans responded by rushing to buy her work, her family braced itself for the possibility of a battle over control of Houston’s estate. Some of the fear of an impending battle over control of Houston’s fortune were quelled this week when it was revealed that Houston left behind a trust naming 18 year old daughter Bobbi Kristina as beneficiary.

Bobbi Kristina is the child of Houston and her former husband, singer Bobby Brown, and is Houston’s only child. Bobbi was expected to inherit most, if not all, of Houston’s estate. Leaving a fortune to any 18 year old is generally not a good idea; however, it was of particular concern in this case as rumors are that Bobbi Kristina suffers from some of the same drug and alcohol problems that plagued her mother for the last half of her life. Adding to that, Houston and Brown had a tumultuous relationship that ended in divorce in 2007. Houston’s family was reportedly concerned that Brown would attempt to gain control over Houston’s fortune by seeking conservatorship over their daughter.

With the news that Houston left behind a trust, concerns over who will control her fortune can be largely put to rest. Houston did, indeed, leave her entire estate to Bobbi Kristina; however, by creating a trust, Houston was able to appoint someone she trusted as the trustee who will manage the trust assets until Bobbi Kristina is older and better able to handle them herself.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

When people start looking for information about making their own will, they are often bombarded by internet offers that claim you can make your own will cheaply, easily and quickly. While some of these offers are legitimate, they are no substitute for the expertise and experience of a qualified attorney.  Though an online will may be legally valid, that doesn’t mean it is the best document suited to your needs and your particular situation.

All states have very specific laws that govern what has to be included in your last will and testament for it to be legally valid. Most of these laws are quite simple and only require you to meet a few basic hurdles, such as being of age, mentally competent and having your will witnessed by two adults. However, there are many other factors that go into creating a will that, even though not required by law, will ensure that you are able to pass on as much property to your heirs as possible.

When considering an online legal document company or will provider, it’s important to note that these companies may not be reliable or completely up-to-date with changes in the law. Also, online document preparers cannot give you legal advice about what decisions to make when creating your will or whether doing so is in your best interests. You may, for example, be much better off by first creating a trust to which you can transfer ownership of all of your property.

Online will preparation services or will creation software may seem like it is a great idea because it offers a cheap and easy solution, but it will never be able to take the place of a skilled attorney who can carefully evaluate your estate planning situation. Even if you do choose to go with an online option, always have an attorney review the document. You may be surprised at what you missed.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

When you are planning your estate you need to identify an attorney who is focused on this particular area of specialization because of the fact that there are so many financial instruments involved. It takes time and dedication to this aspect of the law to fully understand all that is available to you and when you should implement one strategy rather than another.

With this in mind we would like to take a look at a very effective device that can achieve multiple estate planning goals simultaneously: the charitable remainder trust. Through the creation of such a trust you can gain tax efficiency, provide yourself with a source of income for life, and satisfy your philanthropic urges all in one fell swoop.

The way that these instruments work is that you fund the trust and name yourself as the beneficiary (if you want to receive the income rather than naming a different beneficiary). You can also serve as the trustee if you so desire, but many people engage a bank or trust company to serve this function. If you fund the trust with appreciated securities they will not be subject to capital gains tax and this is one of the primary appeals of the charitable remainder trust.

You as the beneficiary have to receive at least 5% of the fair market value of the trust annually, but your distribution may not exceed 50%. The charity that you choose must wind up with a remainder of at least 10% of the original value of the contribution into the trust at the end of its term. Your are entitled to a charitable deduction on your income tax return for the year in which you fund the trust, but IRS tables will determine the amount you may deduct.

In addition to the charitable deduction and the capital gains break, when you create a charitable remainder trust you also remove the value of the contribution from your estate for estate tax purposes.

At the end of the trust term, which can be for the life of the donor or for a specified period of time not to exceed 20 years, the remainder is passed on to the charitable or tax exempt organization named in the trust agreement.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

When you are planning your estate you want to be cognizant of all of your options. There are many different estate planning vehicles that can be utilized to address certain situations, and this is why it is advisable to work with a professional. When an experienced estate planning attorney absorbs what you are trying to accomplish and then examines your holdings a strategy will immediately start to coalesce in his or her mind. And since we are talking about advanced tax savings strategies involving specific legal instruments, this strategy is invariably going to include a healthy dose of acronyms. One of them is the GRAT.

GRAT stands for “grantor retained annuity trust.” This vehicle is useful when you would like to derive income from assets that you expect to appreciate and then pass that appreciation on to an heir in a tax-free manner. This is done through what is called the “zeroed out” GRAT strategy. The first thing that you do is fund the trust with volatile assets that you would expect to appreciate significantly. Of course you name a trustee and a beneficiary. When you are drawing up the trust agreement you set a term during which you will be receiving annuity payments out of the trust and the amount of these payments. It should be noted that if you die before the term has ended the strategy fails and the assets are returned to your estate.

When you funded the trust you removed those assets from your estate for estate tax purposes, but that donation is subject to the gift tax. The IRS calculates the taxable value of the gift. You “zero out” the trust by setting your annuity payments to equal this taxable value, so no gift tax is levied. But if the actual appreciation exceeds the original IRS valuation (something you anticipate), your beneficiary receives that remainder free of taxation at the completion of the trust term.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

One of the primary reasons why some estate planning attorneys have traditionally recommended revocable living trusts would be to enable probate avoidance. However, there are many other reasons that people choose this method of estate planning.

For example, one reason why a revocable living trust may be used as an alternative to a will is to ensure the privacy of the parties involved in the transfer. When you use these trusts only the beneficiary of the trust and the trustee are aware of the details. When you use a will to express your wishes the details of your estate can be made public, and there are those who would prefer to keep these details confidential.

The operative word here is control. When you create the revocable living trust you can name yourself as both the trustee and the beneficiary, so you retain complete control of the assets in the trust throughout your life. But when you are drawing up the trust agreement you name a beneficiary who will receive distributions from the trust after your death, and you will also name a successor trustee to take over for you upon your death or disability. Both of these concepts ensure that you are in control during your life including any time you may be incapacitated and even after your death.

Many people will choose a loved one to serve as successor trustee and in the right circumstances, people may engage the services of a bank or trust company to serve as the successor trustee. In either case, the funds in the trust are being managed and distributed with professional due diligence so, where a loved one is chosen, he or she may engage the services of a bank or trust company to manage the investments but retain the right to be involved in the personal touches regarding your beneficiaries. No matter who you choose the trustee will distribute the funds in accordance with your wishes as stated in the agreement. So if you want to make sure that your beneficiary exhibits an appropriate amount of thrift you can limit the distributions as you see fit when you draw up the trust. But remember, things change; so giving your trustee discretion is unsually a wise choice.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.

Since the 2009 exemption was $3.5 million, the return of the estate tax with an exclusion amount of just $1 million in 2011 is leaving a lot more people vulnerable. For many, the value of their homes is what is going to drive the total worth of their estate over that figure, so this is the area that they need to focus on.

An estate planning tool that can be used to reduce the value of your house from your estate for tax purposes is the QPRT, or qualified personal residence trust. Let’s assume you have always planned to leave the home to your children after you pass away. You place the residence into the trust and name your children as the beneficiaries, but your life doesn’t change at all. You can live in the house rent free during the term of the trust for as long as you stipulate in the trust agreement, but you are liable for the cost of upkeep and property taxes as they become due. After the term of the trust, you can still live in the home but must pay rent (this also reduces your taxable estate).

At the end of the trust term if you are then surviving, the value of the house is no longer a part of your estate for estate tax purposes, since it was considered to be a gift to the trust and it was subject to the gift tax. However, the true market value at the time of the transfer was not used by the IRS to calculate your gift tax liability, but rather a discounted value .

The taxable value of the gift is reduced by your retained interest in the house, your use of your house during the trust term. So the longer the term of the trust, the larger your retained interest will be, and the lower the taxable gift value will be. When your beneficiaries assume ownership of the home at the end of your prescribed term, the home is no longer part of your taxable estate. However, if you do not survive the term of the trust the entire value of the house at your death is included in your estate. If you survived the term of the trust, you transferred this property to your heirs and either reduced or eliminated any estate or gift tax liability.

Levine & Furman, LLC is a member of the American Academy of Estate Planning Attorneys.