Creating your will can seem like a matter that is largely between you and your family. And though it is an emotional exercise it could appear on the surface as though there isn’t anything particularly complicated about it. There are websites glory that fan the flame of this misconception, claiming that all you have to do is purchase their handy-dandy do-it-yourself will kit, fill in the blanks, and you are then good to go. As convenient and inexpensive as this may sound to some people, the reality is that the matter isn’t quite as simple as that.

The thing about a will is that it is not going to administer itself, and it does not exist in a vacuum. Your will must pass through the process of probate, and though probate is smooth and hassle-free in the state of New Jersey the surrogate court follows certain guidelines that must be considered when your will is being created. This is one of the things about do-it-yourself will creation software that you need to beware of because there really is no single document that is appropriate for every jurisdiction in all 50 states and the District of Columbia. The appropriate document for a resident of New Jerseywill probably be quite different than a will that is intended to pass through the probate process in South Dakota.

New Jersey probate attorneys are familiar with the procedures of the surrogate court and they know exactly how to prepare a will that will be legally binding in the Garden State. When you engage the services of a probate lawyer to help you draw up your will you are not only making sure that your wishes are carried out, but you may also gain insights that enable a smoother transition than you would have thought possible before speaking with an attorney.

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

The majority of people here in the United States feel a sense of patriotism and there has always been a strong underpinning of common sense grounding the populace. Everyone knows that roads don’t fix themselves, bridges aren’t built for free, and policemen, firefighters, and teachers need to get paid. So we pay our taxes quite willingly as long as the rate seems fair and we can see the ways that we benefit from our contributions. But one thing people don’t want to do is pay their taxes more than once.

This is what makes the estate tax so hard to swallow. We have all heard about the reduction in the estate tax rate down to 35% from the 55% that had been anticipated. Any reduction is great, but how in the world was the tax set at 55%? How can you justify a tax that takes more than it leaves? Since it was so high, 35% seems almost reasonable, but it really is not. If it took you your entire life to accumulate the assets in your estate, how disappointing is it for your heirs to watch more than a third of its taxable portion disappear instantly upon your death?

Plus, the resources that comprise your estate were all acquired with money that you had left over after you paid income and payroll taxes. So the estate tax is inherently an instance of double taxation. But after your children pay the estate tax, when they ultimately leave the remainder of what they inherited from you to their children, the estate tax will be levied yet again!

One response to this double and triple taxation is the legacy trust, which is also called a generation skipping trust. With these vehicles you name your grandchildren as beneficiaries rather than your children. Your children can benefit from the trust and receive cash distributions but claimants against them can’t target the trust’s assets and no estate or gift tax is due. When they die, your grandchildren assume ownership of the assets and the estate tax is levied just once though the resources were used by two generations.

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.

The estate tax was repealed in 2010 due to a provision in the Economic Growth and Tax Relief Reconciliation Act of 2001, a body of legislation that is commonly referred to as the “Bush tax cuts.” However, under the existing laws the estate tax was set to return in 2011 with some very harsh parameters. The exclusion was to be just $1 million, and when we last saw the tax in 2009 it stood at $3.5 million. So estates valued at more than one million dollars but less than $3.5 million were going to be exposed to the tax in 2011 when they were safe from it in 2009 and 2010. What’s more, the rate of taxation in 2011 was scheduled to be a very hard to justify 55%; it was 45% in 2009.

There had been a lot of talk about the possibility of changes in the laws surrounding the estate tax being enacted in the eleventh hour, and this has in fact taken place. A new tax bill has passed through Congress extending the tax cuts of 2001, and one of the provisions in the bill is an alteration of the estate tax exclusion amount and rate of taxation. The new exclusion is going to be $5 million per person so that a married couple will have a $10 million exclusion. Any portion of your estate that exceeds that amount will be subject to the estate tax. But rather than the 55% we were anticipating, the top rate has been reduced to 35%.

Of all the provisions in the bill, the changes in the estate tax parameters were the sticking point that disturbed many lawmakers the most. It is not hard to understand their logic since Americans with estates values at between $1 million and $5 million ( $10 million per couple) have already assumed an enormous tax burden throughout their lives while helping to stimulate the economy with robust participation. Many Americans can rest easier due to the passage of the new tax bill. But beware, this new law expires at the end of 2012.

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.

You will hear mention of the senior population explosion often when you are seeking information about elder law and estate planning. The baby boomers are today’s seniors, and this is the fastest growing group of American citizens. Furthermore, people 85 years of age and older are the fastest growing subset of the senior demographic. This has some very profound implications when you are trying to prepare for all of the eventualities of aging.

Nobody is anxious to think about scenarios that aren’t especially pleasant, but a challenging situation is only compounded by a lack of preparation. The above mentioned statistics would indicate that it is very possible that you will live beyond the age of 85. More than half of people over this age suffer from some form of dementia, and physical incapacity is not uncommon at this age either. This is something that is very important to consider and it takes some mental discipline to do so.

To prepare for the possibility of future incapacitation you can reduce the matter to a simple question: who would you like to empower to make medical and financial decisions in your behalf? You can have a different representative for each type of decision, and this is often recommended in many cases. The person that you know who is the best financial mind may not necessarily be the individual that you would want communicating with your doctors about medical matters.

To appoint someone to act as your medical representative you would execute both a durable medical power of attorney (Living Will), and a durable financial power of attorney to name your financial representative. When you have these documents in place you can rest easy with the knowledge that your own trusted representative will be acting in your best interests should you be unable to make sound decisions for yourself at some point in time.

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

When you are evaluating all of the loved ones that you would like to provide for upon your passing and exactly how you would like to do so you have a lot to consider. The assets that you will bequeath to your family will usually take the form of stocks and other securities, cash, valuables, and perhaps real property and/or business interests. All of these resources will undoubtedly be well received by your heirs in spite of the unfortunate occurance that led to the distribution. But you may have one or two “family members” that need to be provided for in different ways.

Our pets bring us a lot of joy and they really become members of the family. Pet ownership can be especially enriching for senior citizens, providing love, companionship, protection, and that indescribable but satisfying feeling that you get when you know you are needed. When you are planning your estate you have to keep your pets in mind and try to make the best possible arrangements for the animal or animals that you have.

The simplest and most direct way to handle the matter is to identify a friend or relative who would seem to be a likely candidate and ask this individual if he or she would be willing to care for your pet upon your passing. You can name this person as the “pet guardian” in your will and leave a bequest to pay for the expenses associated with caring for your furry friend.

An alternative is to set up a pet trust and name a caretaker to tend to the pet’s needs and a trustee to oversee the treatment that the pet is getting and administer the funds. Another choice would be to develop a relationship with an animal placement charity and see if you can arrange for them to find your pet a home in the event of your passing in return for a donation.

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.

There is an old saying that goes something like “Give a man a fish, he eats for a day; teach a man to fish, he eats for a lifetime.” (Okay, they were sexist in those days, but you get the idea.) When you are engaged in inheritance planning this message is highly relevant. On the one hand planning your estate is all about “giving a person a fish.” On the other hand, when you give the people that you love things that they didn’t have to work for they may never learn now to take care of themselves.

Many people who are interested in estate planning are looking for ways to reduce the taxable value of their estates. Tax-free gift giving is a way to do this, and as we have stated here previously there are exemptions that make this possible. There is the $1 million lifetime gift tax exclusion, but since it is unified with the estate tax exclusion using it is of little value. But there is the $13,000 per person annual gift tax exemption, and there is also an educational gift exemption. You can pay the tuition of as many students as you want to as a gift, equaling any amount of money, totally free of the gift tax. This gift must be made directly to the school and not the student.

So as you can see it would be possible to provide an education for your loved ones before you pass away and “teach them to fish.” It should be noted that the educational gift exemption does not extend to books, fees, and expenses. But you could use your $13,000 per person annual exemption to cover those in part, and if you are married your spouse could do the same. People talk about “family dynasties,” and they come in multiple forms. Providing an open pathway to unlimited higher education for your family and perhaps your extended family is certainly an honorable way to spread the wealth.

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

When you are in business you recognize the need to react to ever-changing circumstances even though you have a business plan in place. The same thing is true of your investments; you have to constantly respond to changing market conditions to ensure the strength of your position. Both of the above activities are actually kind of fun, like playing chess, so most people embrace these ongoing challenges. But for many, estate planning doesn’t fit into the same category. And it’s true that estate planning involves some matters that are not the most pleasant things to think about, so it can be easy to push these matters to the back burner.

Because it is easy to understand why you may not prioritize reviewing your estate plan doesn’t make it right. Estate planning fits right alongside long term financial and retirement planning, and the relevant conditions that impact your estate plan are dynamic just like those that affect your business and investments. Some of them are external and out of your control, like the changing estate tax exclusion. If your estate was valued at $3 million and you had passed away in 2009 or 2010 your heirs would owe no estate tax. But if you were to die in 2011 $1.1 million would be due. These are some pretty significant changes and this wide variance in potential tax responsibility underscores the need for consistent estate plan reviews.

When you are planning anything you do a cost analysis. But this is an imperfect science because you don’t know with certainty what something will cost in the future, and this is very relevant to long term planning. For example, long term care costs rose about 5% from 2009 to 2010; the cost of a year in an assisted living facility was nearly $40,000 on average. If you made plans years ago using the numbers as they existed in 1995 for example, unless you had a very accurate crystal ball you probably didn’t plan for an expense of this magnitude.

Things are always changing, so if you want to be prepared for all of the eventualities of aging is it important to revisit your estate plan regularly and be ready to make adjustments.

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