A Bypass Trust is a long-term planning device that is usually set up by married couples with large estates. By leaving property to each other, they guarantee that the property will only be taxed once between the two of them.
The trust is set up to go around payment of estates taxes upon the death of either of the spouses; however, it must follow certain rules laid out by the IRS. One rule states that the beneficiary will have limited access to the trust fund while alive.
Although a Bypass Trust can be flexible, it also must be precise in order to be legal. If you are considering a Bypass Trust, contact a Riverside Estate Planning attorney who is knowledgeable about Federal tax law.
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A Disclaimer Trust helps to minimize or even eliminate Federal estate taxes for a married couple.
When a spouse dies, the surviving spouse has the option of disclaiming all or part of the estate of that person. The disclaimed assets are transferred to the Disclaimer Trust.
Therefore, these assets will not be included in the estate of the surviving spouse when he or she dies.
Federal law makes the exclusion amount for estate taxes to be $5 million. That amount is due to expire at the end of 2012. If an extension is not set, the amount will go back to $1 million.
If you are interested in creating a Disclaimer Trust and want to discuss the pros and cons, contact an experienced Riverside Estate Planning attorney to learn more about how it will affect you and your family.
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We work hard all our lives and we pay taxes on all the money earned. So, why do we have to pay taxes again when we die?
President Obama wants to keep the estate tax at 45% for couples with estates above $7 million. With all the laws going into effect or changing, it is critical to create an estate plan and keep it updated.
Did you know that giving away money during your lifetime can reduce the value of your taxable estate? You are allowed to give any number of individuals up to $13,000 every year without any tax consequences. Any amount over $13,000 is subject to the gift tax.
In addition, you can have a tax credit that allows you to give up to $1 million during your lifetime without incurring taxes. Finally, there is no limit on how much you can give tax-free when you pay for someone’s higher education of medical expenses.
If you are in the middle of creating an estate plan and are concerned about estate taxes your family might have to pay after your death, contact an experienced Riverside Estate Planning attorney who will help you come up with a plan that is favorable for you and your family.
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When the owner of a life insurance trust dies, the proceeds of the policy will be administered to the beneficiaries and subject to estate taxes. However, if, he arranges ownership transfer, the proceeds will be exempt from estate taxes, saving the beneficiaries a lot of money.
The insured has the right to change the beneficiary (the trust is the beneficiary). The insured cannot serve as trustee of his or her own life insurance trust and must appoint a trustee.
If the insured individual transfers an existing policy to a life insurance trust and dies within three years after doing do, he will be known as the owner and will be taxed.
A life insurance trust is a complex matter and should be discussed with an experienced Riverside County Estate Planning attorney. There are many drawbacks to creating a life insurance trust, but some believe it is worth the cost and hassle. It ensures that the proceeds will go to your beneficiaries and not the Federal government.
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An AB Trust is the most popular form of trust; it is designed to eliminate or lessen estate taxes. This type of trust is most effective when used by a married couple with assets exceeding the estate tax threshold.
The first step is to create an ongoing trust either in a Will or Living Trust. It will take effect upon your death. Up until that time, you are allowed to amend or revoke it. Your spouse would be named beneficiary and has certain rights to the trust during his or her life. Once you are dead, your spouse is called the “life beneficiary”.
With an AB Trust, no estate tax is due on your property at the time of your death – regardless of the value of your estate. The benefit of this type of trust comes when the life beneficiary dies – because he or she never legally owned the trust property, the property held in it will not be considered part of his or her estate. When he or she dies, the property goes to the final beneficiaries you named (i.e. your children).
To understand how an ongoing trust saves on estate taxes, contact an experienced Riverside County Estate Planning attorney who can discuss the details in a language you can understand.
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An estate tax is a tax imposed by a state or the Federal government on the right to transfer property to an individual’s heirs after he or she dies. California has not collected an estate tax or an inheritance tax since 2005 when the ‘pick-up tax’ was officially phased out due to the provisions of the Economic Growth and Tax Relief Reconciliation Act. Because of this, it is estimated that the State of California will lose over $5 billion in the next few years.
There is speculation that under current Federal law, the ‘pick-up tax’ will be reinstated on January 1, 2011.
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I have been wondering many times how one determines who their beneficiary should be. My response is, “you can name anyone you want – your spouse, children, partner, the church, a charity”. If you name more than one person, each person would be a “co-beneficiary”. The process of determining a beneficiary is known as “designating the beneficiary” on insurance forms.
Your first concern should be the reason for having life insurance. Your reasons may consist of creating financial liquidity, protecting assets from estate taxes or simply providing for your survivors’ needs.
Whatever your reason may be, if you have any questions, it is wise to contact an experienced Estate Planning Attorney who is familiar with all the California laws and is best suited to help you make this most-important decision.
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