4. Living Trust—A revocable trust is a legal contract with yourself to create an entity to hold your assets. You can change the trust at any time and you can set it up to outlive you. If you become incapacitated or are unable to manage your estate, your living trust avoids the need for probating your estate. You appoint a successor trustee who steps in and manages your affairs without the involvement of the court, avoiding the extra time and money associated with probate. A trust also affords you privacy surrounding the details of your estate since it avoids the need for probate, which is a public process.
Considerations As You Review Your Estate Plans
Additionally, the current low interest rate environment and market volatility provides increased opportunities to shift wealth to children and other beneficiaries. Clients may therefore find this an opportune time to review and make updates to their estate planning documents and to implement new estate planning strategies. The following is an overview of some of the questions and considerations clients may wish to keep in mind as they review their estate plans:
• In light of the historically low interest rates, should you be refinancing loans to family members and other beneficiaries?
• Should you consider lending funds to children or other beneficiaries or to trusts for their benefit, selling assets to a grantor trust in exchange for a note and establishing one or more Grantor Retained Annuity Trusts (GRATs)?
• Are the dispositive provisions in accordance with current wishes?
• Should any specific bequests be reduced in light of current or potential future market declines in order to increase the amounts passing to residuary beneficiaries?
• For a married couple, is the maximum use being made of the federal and (if applicable) state estate tax exemptions and the exemption from the federal generation skipping (GST) tax?
• Should the appointment of executors, trustees and guardians for minor children be updated?
• Who is named as the beneficiary and the secondary beneficiary on IRAs, 401(k)s and similar plans and payable upon death accounts?
• Who is the owner of life insurance policies and who is the named beneficiary?
• Clients owning life insurance in their name may wish to consider transferring the policies (through gift or sale) to a life insurance trust to remove the proceeds of the life insurance from their estate for estate tax purposes.
• Review health-care proxies, living wills and power of attorney.
• Are the appointments of health-care agents and attorneys in fact still appropriate?
Please contact your accountant to work through all of these important issues.
Sara Rabi, CPA, TEP, is a partner at Marks Paneth LLP. She specializes in individual and fiduciary tax preparation and advisory services.