A charitable lead trust benefits you, your family, and your favorite charity.  You transfer assets into the trust, the charity receives an income stream for a period of years or your lifetime; then, your family receives a lump sum of the assets that remain in the trust and the trust terminates.

It’s a split interest trust, which simply means that you or your family has an interest and your favorite charity has an interest.  Below, we highlight 5 charitable lead trust benefits for you and your family.

1. You receive an income tax deduction for the present interest of the income stream that goes to the charity.
2. Assets in the trust can be sold without you paying capital gains taxes.
3. You get to benefit the charity of your choice; this can be a public charity such as your library or animal shelter or it can be your own private charity such as a family foundation.  You can get credit for your gift from the charity during your lifetime, even if the income stream to the charity doesn’t begin until your death.
4. Your family gets a lump sum at the end of the trust’s term.  This lump sum is outside your estate for federal estate tax purposes.
5. The lump sum assets can go to your family in an asset protected trust so that they’re protected from bankruptcy, lawsuits, and divorcing spouses.

Ask a qualified estate planning attorney if a charitable lead trust and its benefits may be a good fit in your estate plan.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

Does any of the $1 billion in unclaimed life insurance belong to you?  The Wall Street Journal has reported that state regulators estimate that there is $1 billion owed in death benefits that has not been paid.

It is thought that insurance companies are using the Social Security database to cut off annuity payments, but NOT to determine whether death benefits should be paid.

How to Find Unclaimed Life Insurance Policies

• Comb through all paperwork to locate policies, billings, or dividend statements
• Review checkbook registers, cancelled checks, and online bank accounts to see if any premiums have been paid
• Check the mail carefully for one full year after the death of your loved one to discover premium billings, dividend statements, or messages from life insurance agents or companies
• Look through address books for the contact information for insurance agents
• Review contents of fire boxes, fire safes, and safe deposit boxes
• Contact previous places of employment
• Contact insurers directly.  For example, MetLife’s “Policy Finder” website is at www.metlife.com/policyfinder and Prudential Financial Inc. has a toll free number, 1-800-778-2255.
• Contact your state’s insurance regulator.
• Use www.policylocator.com ($75 fee)

When contacting life insurance agencies or organizations, have as much information on your loved one as possible, including the full name, maiden name, address, date of birth, date of death, and Social Security number.

In addition, avoid having the life insurance on your life lost to the $1 billion unclaimed life insurance pile.  Instead, keep your life insurance policies with your estate planning documents and other important papers.  Let your loved ones know where you keep this information.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

You, likely, wish to pay the minimum amount of taxes possible.  To that end, it’s helpful to understand the annual exclusion versus the lifetime exemption.  After all, while Uncle Sam is often an unintentional heir, not too many folks write him a check intentionally, if they can avoid it.

Annual Gift Tax Exclusion

Each calendar year, you (and everyone else) can give away up to $13,000 to as many people as you would like.  You can write one check on January 1^st (or any other day of the year) or give several gifts throughout the year.

Your gifts fall under the annual exclusion, so long as they don’t exceed $13,000 to any one individual.

In addition, the annual exclusion is doubled, if you’re married.  You and your spouse can, together, give up to $26,000 to as many people as you would like.

Lifetime Gift Tax Exemption

In addition to the annual gift tax exclusion, you also have a lifetime gift tax exemption.  This means, during your lifetime, you can give away assets which are equal or less than the lifetime gift tax exemption.

In 2012, that lifetime gift tax exemption is $5 million; however, the law changes.  In 2012, the lifetime gift tax exemption is set to reduce to $1 million.  If you have significant wealth that you’d like to pass to loved ones, now is the time to do it.

Like the annual exclusion, the gift tax exemption is doubled for married couples.  In 2012, a married couple can give away up to $10 million; in 2013, $2 million.

If you are interested in gifting, consult with a qualified estate planning attorney so you can take advantage of the annual gift tax exclusion and/or the lifetime gift tax exemption and avoid or minimize gift taxes.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

It’s a new year; time for a clean slate and a fresh start.  It’s time to have your estate plan professionally reviewed for potential updates.  This is one New Year’s resolution that you can check off the list right away.  Whew!  In fact, call a qualified estate planning attorney and make an appointment for an estate plan review now.

Why Does My Estate Plan Need to be Reviewed for Updates?

Your estate plan needs to be professionally reviewed for potential required updates because everything changes.  Think back just over the last few years.  The law has changed and your personal life and finances, likely, have changed.

Your estate plan will only work if it reflects the current law as well as your current goals, personal and financial situation.

What Changes Necessitate a Change in My Estate Plan?

The passage of 3 to 5 years will naturally cause your estate plan to go stale.  Your documents may not be honored because they’re “old.”

Other changes that cause an estate plan to fail are a move to a new state, significant change in health, and the death or disability of an executor (or guardian, trustee, or power of attorney agent.)  Think about the changes that a divorce, new relationship, new child, or new business bring to your life.

It is likely in your best interest to have your estate plan professionally reviewed in 2012.  Get it on the calendar now so you can check “estate plan update” off your New Year’s resolution list.  Have a wonderful 2012!!

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

As the New Year starts, it’s a time of new beginnings, a clean slate, fresh start.  Now is the time to prepare your estate plan for the New Year.  Here’s how.

1.  Evaluate your life, finances, and estate plan.  Have things changed?  If so, your estate plan needs a professional review.  Your plan should be reviewed, if it’s been more than 3 to 5 years since updated or if you’ve had a big change in your personal life, finances, or health.

2.  Double check asset ownership and beneficiary designations.  How do you own your stuff?  Are your assets owned so that your estate plan will work?  For example, if you have a living trust, are your assets funded into your trust?  Have you updated beneficiary designations since you got divorced?

3.  Get organized.  Being organized will increase your peace of mind and it will significantly reduce the burden on loved ones’ shoulders, if they need to step into your shoes to assist you.  Gather your estate planning documents, financial papers, and other important certificates and documents.  Put them all in one drawer, a fire safe, or a shelf in your home office.

4.  Make a list of all accounts, usernames, passwords, and PINs.  Even off-line accounts sometimes have telephone PINs.  Keep the list updated throughout the New Year.

5.  Communicate.  Let your loved ones know that you have an estate plan; let them know where to find your estate planning documents and other important papers; provide contact information so they can reach your estate planning attorney for help; and, tell your loved ones that you do indeed love them.

If it’s time for a professional review of your estate plan, or if you have any questions, consult with an estate planning attorney.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

A life insurance trust both owns and is the beneficiary of a life insurance policy.  Why would you need a life insurance trust?  Why, to save gobs and gobs (and more gobs) of money.  The main purpose of life insurance trusts is to avoid paying federal estate taxes and generation skipping taxes on the proceeds.

Here’s how the taxes work:

If you own a life insurance policy at your death, the proceeds are taxed in your estate for federal tax purposes (and for generation skipping tax purposes, if your designated beneficiary is of your grandchildren’s generation or younger.)

If your life insurance proceeds are taxed for federal estate tax purposes, your family could lose up to 60% of the proceeds.  That’s shocking.

What’s even more shocking is that if the life insurance proceeds are also subject to the generation skipping tax, your family could lose up to 90% of the proceeds (federal estate and generation skipping tax combined.)  That’s incredibly shocking.

However, the federal estate tax and generation skipping tax can be avoided:

Have a life insurance trust own (and be the beneficiary of) your life insurance.  If you don’t own it or have any rights to the policy, it can’t be taxed in your estate.

As a “bonus,” the trust shares you create for your beneficiaries in the life insurance trust have asset protection; this means the assets cannot be taken by divorcing spouses, bankruptcy creditors, or in other lawsuits.

Consult with a qualified estate planning attorney about a life insurance trust, as part of your comprehensive estate plan.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

If you don’t immediately qualify for MediCal to pay your nursing home bills, a qualified estate planning – elder law attorney may be able to help you to qualify, so you don’t lose all of your hard earned money and so you receive the care you need.

When Should I Plan?

MediCal pays for nursing home care for those who are both medically and financially needy.  The sooner you do planning, the more options you have and the more money you can protect.  The ideal time to do MediCal planning is at least 5 years before you need it; but it’s never too late.

What are MediCal Plans?

Common MediCal planning strategies include trusts, gifting programs, and transforming non-exempt assets into exempt assets.  These strategies are used to increase your quality of life, increase the quality of life of your spouse, and protect hard earned assets.

How will an Attorney Help Me?

A qualified estate planning – elder law attorney can help you by:

• Design of a MediCal plan, specific to your individual situation.  This includes a plan to avoid MediCal recovery.
• Implementation of your MediCal plan (i.e. getting your plan in place.)
• Preparation of MediCal application.
• Handling all communications with MediCal office, during the application process.
• Preparation of basic estate planning documents.

But, What about the Legal Fees?

If you’re like most people, you are concerned about the legal fees associated with Medi-Cal planning.  Typically, fees are about equal to what it would cost you to pay one month in a nursing home, saving you and your family thousands and thousands of dollars.

Do NOT Try this at Home

Just like you see on television, when it comes to MediCal planning and transfers, do NOT try this at home.   MediCal laws are complicated and they constantly change.

In addition, transfers, if done incorrectly, may disqualify you from receiving MediCal and may have serious tax consequences.

If you want MediCal to pay for your nursing home care, consult with a qualified estate planning – elder law attorney; the sooner, the better.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

There are minimum requirements that each estate plan must contain to cover basic needs.  This is the estate plan bottom line; it may not be all that is recommended in your individual situation, but it is the minimum that each adult needs.

The 3 Essential and Simple Estate Planning Documents

1.  Will

2.  Property/Financial Power of Attorney

3.  Health Care Power of Attorney with HIPAA Release

Your Will

Your Will does three things:  Appoints executors, appoints guardians for minor children, and distributes your assets.  If you die without a Will, the court will intervene and appoint an executor (called an “administrator”) and decide who raises your children.  California state law will dictate who gets your assets.  None of this may be what you want.

Your Property/Financial Power of Attorney

Your Property/Financial Power of Attorney does one thing:  It authorizes agents to step into your shoes to handle day-to-day personal financial affairs.  If you become disabled without a Property/Financial Power of Attorney, the court will intervene and appoint a conservator (i.e. guardian) to take over your finances; the court may appoint an attorney, not a family member.  The court has that power and this may not be what you’d want.

Health Care Power of Attorney with HIPAA Release

Your Health Care Power of Attorney with HIPAA Release appoints an agent to make health care decisions on your behalf (when you cannot) and meets federal privacy standards.  If you don’t have a Health Care Power of Attorney with HIPAA Release and you can’t provide informed consent, you don’t get to pick who makes health care decisions on your behalf.

If you don’t have this bottom line estate plan, you need it.  Consult with a qualified estate planning attorney.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

Marriage has the tax benefit of the unlimited marital deduction, which is a deduction that allows you to give, either during your lifetime or at death, an unlimited amount of assets to your spouse.  A millionaire could give a million dollars to her spouse without being taxed and a zillionaire could give a zillion dollars to her spouse without being taxed.  The marital deduction is, indeed, unlimited.

Why You Should Use the Unlimited Marital Deduction

• Taxes are delayed
• Taxes can be minimized as your spouse can use his or her own unified credit exemption to reduce or eliminate the taxes on the assets you pass to him or her.
• You can pass assets in trust to your spouse and protect them from future creditors

Why You Should NOT Use the Unlimited Marital Deduction

• If portability laws aren’t in effect or the proper steps aren’t followed to take advantage of portability, you could be wasting your unified credit exemption and that means more taxes are paid, overall.
• Instead of using the unlimited marital deduction for all of your assets, this means that your unified credit exemption amount should go either to someone else such as to trusts for your children or to a family trust for your spouse and children.  Then give the excess to your spouse (or a trust for your spouse) to take advantage of the unlimited marital deduction.

Unlimited Marital Deduction Requirements

• Your spouse must have a right to all of the income of the assets.
• Your spouse must be the only beneficiary of the assets during his or her lifetime.
• He or she must have the right to make the assets income producing.
• Your spouse must either be an American citizen or receive the assets in a qualified domestic trust (QDOT.)
• The assets must be taxable in the estate of the surviving spouse (unless that spouse has remarried and passes assets to the new spouse.)

The unlimited marital deduction reduces the estate tax dollar or dollar; it’s an important planning tool.  Consult with a qualified estate planning attorney to determine how to make the unlimited marital deduction work for you and your family.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

We can answer this common question, “Can the nursing home take my living trust assets?” in one word.  “Yes.”  Assets titled in your own living trust (or in your name) can be taken by the nursing home.  They must be spent first, before you can qualify for MediCal to pay for your nursing home care.   This means that the assets must be spent down for living expenses, nursing home care, or exempt assets before MediCal kicks in.

Nursing Home Planning Strategies

However, there are other ways to protect your assets and the sooner you meet with an estate planning –elder law attorney, the more options you have and the more money you can protect.  Common nursing home planning strategies include long term care insurance, income only trusts, gifting programs, annuities, and the purchase of exempt assets such as a new roof for the house, a television for the room, and a lift chair as well as paying off the mortgage or car.

Are You the Beneficiary of Someone Else’s Living Trust?

On the other hand, if you know you’re someone else’s beneficiary, you may want to have a chat with him or her and ask that the assets come to you in an asset protected beneficiary trust.  If you receive assets in trust, they can’t be taken by the nursing home, divorcing spouse, or another creditor.

Conversely, if you receive an inheritance or gift outright, in your individual name, it can be taken by the nursing home, divorcing spouse, car accident creditor, bankruptcy creditor, and the like.

A Loved One Can Give You Protection You Can’t Get for Yourself

While your own revocable living trust cannot protect against your creditors such as the nursing home, someone else’s can.  Consult with a qualified estate planning attorney to determine the best way to own your assets, plan for nursing home care, and give/receive an inheritance or gift.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.