Georgia Wills, Trusts, Probate and Estate Planning Blog

ESTATE PLANNING LAW

Life Advice - Planning Your Estate

A primary purpose of estate planning is to distribute your assets according to your wishes after your death. Successful estate planning transfers your assets to your beneficiaries quickly and usually with minimal tax consequences. The process of estate planning includes inventorying your assets and making a will and/or establishing a trust, often with an emphasis on minimizing taxes. This webpage provides only a general overview of estate planning. You should consult an attorney, or perhaps a CPA or tax advisor for additional guidance.

Do I Need to Worry?

You may think estate planning is only for the wealthy. If your assets are worth $1,000,000 or more, estate planning may benefit your heirs. That’s because generally taxable estates worth in excess of the amounts in the chart below may be subject to federal estate taxes, with rates as high as 45% to 55% of the taxable estate.

Adding up the value of your assets can be an eye-opening experience. By the time you account for your home, investments, retirement savings and life insurance policies you own, you may find your estate in the taxable category.

YEAR	EXCLUSION AMOUNT	HIGHEST ESTATE TAX RATE
2002	$1,000,000	50%
2003	$1,000,000	49%
2004	$1,500,000	48%
2005	$1,500,000	47%
2006	$2,000,000	46%
2007	$2,000,000	45%
2008	$2,000,000	45%
2009	$3,500,000	45%

Even if your estate is not likely to be subject to federal estate taxes, estate planning may be necessary to be sure your intentions for disposition of your assets are carried out.

Taking Stock

The first step in estate planning is to inventory everything you own and assign a value to each asset. Here’s a list to get you started. You may need to delete some categories or add others.

Residence
Other real estate
Savings (bank accounts, CDs, money markets)
Investments (stocks, bonds, mutual funds)
401(k), IRA, pension and other retirement accounts
Life insurance policies and annuities
Ownership interest in a business
Motor vehicles (cars, boats, planes
Jewelry
Other personal property

Once you’ve estimated the value of your estate, you’re ready to do some planning. Keep in mind that estate planning is not a one-time job. There are a number of changes that may call for a review of your plan. Take a fresh look at your estate plan if:

The value of your assets changes significantly.
You marry, divorce or remarry.
You have a child.
You move to a different state.
The executor of your will or the administrator of your trust dies or becomes incapacitated, or your relationship with that person changes significantly.
One of your heirs dies or has a permanent change in health.
The laws affecting your estate change.

How Estates Are Taxed

Federal gift and estate tax law permits each taxpayer to transfer a certain amount of assets free from tax during his or her lifetime or at death. (In addition, as discussed in the next section, certain gifts valued at $10,000 or less can be made that are not counted against this amount.) The amount of money that can be shielded from federal estate or gift taxes is determined by the federal unified tax credit. The credit is used during your lifetime when you make certain taxable gifts, and the balance, if any, can be used by your estate after your death.

Keep in mind that while you can plan to minimize taxes, your estate may still have to pay some federal estate taxes. What’s more, your estate may be subject to state estate or inheritance taxes, which are beyond the scope of this webpage. An estate planning professional can provide more information regarding state taxes.

Minimizing Estate Taxation

There are a number of estate planning methods that can be used to minimize federal taxes on your estate.

Giving away assets during your lifetime. Federal tax law generally allows each individual to give up to $10,000* per year to anyone without paying gift taxes, subject to certain restrictions. That means you can transfer some of your wealth to your children or others during your lifetime to reduce your taxable estate. For example, you could give $10,000 a year to each of your children, and your spouse could do likewise (for a total of $20,000 per year to each child). You may make $10,000 annual gifts to as many people as you wish. You may also give your child or another person more than $10,000 a year without having to pay federal gift taxes, but the excess amount will count against the amount shielded from tax by your unified credit. For example, if you gave your favorite niece $30,000 a year for the last three years, you would have reduced your unified credit by $60,000 (a $20,000 excess gift each year).

* The $10,000 annual gift tax exclusion will be adjusted for inflation, as measured by the Consumer Price Index (CPI) published by the Department of Labor. The increases will be in multiples of $1,000. This exclusion applies only to a gift of a present interest in property. Therefore, gifts made intrust generally will not qualify for this exclusion.

The marital deduction shields property transferred to a spouse from taxes. Federal tax law generally permits you to transfer assets to your spouse without incurring gift or estate taxes, regardless of the amount. This is not, however, without its drawbacks. Marital deductions may increase the total combined federal estate tax liability of the spouses upon the subsequent death of the surviving spouse. To avoid this problem, many couples choose to establish a bypass trust.

Bypass trusts or credit shelter trusts can give a couple the advantages of the marital deduction while utilizing the unified credit to its fullest. Let’s say, for example, that a married couple has a federal taxable estate worth $2 million (or $1,000,000 each). Using the marital deduction, if one spouse dies in 2002 the full $1,000,000 can be left to the other spouse without incurring taxes. However, when the second spouse dies in 2003 and passes his or her $2 million estate on to their children, taxes will be levied on the excess over the amount of assets shielded by the unified credit ($2,000,000–$1,000,000 = $1,000,000 subject to estate tax).

With a bypass or credit shelter trust, the first spouse to die can leave the amount shielded by the unified credit to the trust. The trust can provide income to the surviving spouse for life, then upon the death of the surviving spouse the assets are distributed to beneficiaries, such as children. This permits the spouse who dies first to fully utilize his or her unified credit. If the trust document is drawn properly, the assets in the trust are not included in the surviving spouse’s estate. Thus, the surviving spouse’s estate will be smaller and can also utilize the unified credit. In the example above, the surviving spouse’s estate would not have to pay federal estate taxes. Because both partners have made use of their unified credits, the couple is able to pass on a substantial estate tax free to their beneficiaries.

Charitable gifts are not taxed as long as the contribution is made to an organization that operates for religious, charitable or educational purposes. Check to see if the organization you want to give money to is an eligible charity in the eyes of the Internal Revenue Service. You, or your estate may be entitled to a tax deduction for contributions to a qualifying charity. Consult your tax advisor.

Life insurance trusts can be designed to keep the proceeds of a life insurance policy out of your estate and give your estate the liquidity it needs. Generally, you can fund a life insurance trust either by transferring an existing life insurance policy or by having the trust purchase a new policy.* To avoid inclusion in your estate, such trusts must be irrevocable—meaning that you cannot dissolve the trust or change the terms of the trust if you change your mind later. With proper planning, the proceeds from life insurance held by the trust may pass to trust beneficiaries without income or estate taxes. This gives them cash which may be used to help pay estate taxes or other expenses, such as debts or funeral costs.

* Transferring an existing policy may have gift tax consequences. Consult your tax advisor.

Estate planning is very complex and is subject to changing laws. This webpage by no means covers all estate planning methods. Be sure to seek professional advice from a qualified attorney, and perhaps a CPA or estate planner. The money you spend now to plan your estate can mean more money for your beneficiaries in the long run.

SOURCE: LegalLawHelp.com

Estate Planning in Georgia

You can save a lot of money and potential chaos and hard feelings among those closest to you by preplanning how you want your assets managed when you are incapacitated, and how your property will be divided at your death.

Powers of Attorney

In Georgia, you can sign a durable power of attorney to appoint someone to handle your assets if you become incapacitated. At a minimum, a power of attorney should include the power to:

• Manage and transfer all assets
• Deal with the IRS
• Make gifts on your behalf
• Create and amend any trusts you set up

You don't need to transfer any assets at the time you sign a power of attorney, but it's a good idea to keep the person you've chosen informed about your ongoing financial matters.

You can also appoint a Durable Power of Attorney for Health Care to make health care decisions for you when you're unable to do so yourself. This person can provide informed consent for treatment, or even refuse treatment for you.

Dying Without a Will

If you die without a will (known as dying "intestate") in Georgia, your assets will be divided amongst your immediate family. If you have a spouse but no children or parents, your entire estate will go to your spouse. If you have a spouse and at least one child or grandchild, your spouse shares equally with the children but will receive a minimum of one-third of your estate.

If you have children and no spouse, your entire estate goes to your children. If you have parents and no spouse or children, your entire estate will go to your parents. If your parents are no longer alive, your estate will go to your siblings.

Alternatives to a Will

Wills eventually become public after your death, with the details of what you owned and how much it was worth available to anyone curious enough to read the court file. As a result, many people look for more private ways to transfer their assets.

In Georgia, alternatives to making a will include:

• Life insurance policies or trusts
• Gifting cash or other assets before your death
• "Transfer On Death" ("TOD") or "Payable On Death" ("POD") bank accounts
• Holding assets by joint tenancy with right of survivorship ("JTROS"), with the assets transferring automatically to the other joint tenant at the time of death
• Holding assets through a tenancy in common, with each tenant having a divided interest in the property which can be independently sold
• Retirement plans and Individual Retirement Accounts ("IRAs")
• "Revocable living trusts" (sometimes called "grantor trusts"), giving all your assets to a trustee for management before your death

Making a Will

In Georgia, you can make a valid will if you are at least 14 years old and not under a legal disability. The will must be in writing and signed by you or by another individual in your presence and at your direction. Your will must be signed in front of two competent witnesses that are age 14 or older.

A Georgia lawyer who does a lot of estate planning can explain the consequences of some of the most basic choices you must make, such as whether property you want to leave to your minor children should be put into a trust at your death. For that reason, it makes sense to consult with a Georgia estate planning lawyer and have him or her draft your will, so that you don't make costly mistakes or accidentally not accomplish what you intended.

Providing For Young Children

There are many kinds of trusts, but the most common is one you would set up for your minor children or incapacitated adult relatives for their care after you are gone and until they are old enough or well enough to take care of themselves. A parent can name a trustee to be in control of the finances and decide whether to sell or keep property, and manage assets such as real estate. The trustee, usually a family member or trusted friend, can be paid an hourly rate or a set monthly amount for their services out of the trust assets.

You will probably also want to name a guardian for your children, someone who would have physical custody of and take care of your children on a daily basis should you or your spouse be unable to do so.

Probate

"Probate" is the public process of:

• Filing and validating a will in court
• Paying all the debts and taxes of the deceased person
• Dividing up the assets according to the will or Georgia law

If you have no debts and no "titled property" such as real estate or vehicles to pass along to heirs, there may be no need for probate.

Probate lawyers generally charge by the hour, and they make sure everything gets processed according to the law.

SOURCE: Lawyers.com

Many boomers favor comfortable retirement over leaving wealth to heirs

By MARSHALL ECKBLAD
Dow Jones Newswires
Published on: 12/11/07

New York — The greatest transfer of wealth in history may end up leaving heirs disappointed — and could mean big changes for financial advisers. As "mass-affluent" boomer millionaires, or baby boomers worth around a few million  dollars, start to turn 65, forecasts and patterns in their retirement planning suggest that many may leave little or no substantial wealth to their children.

The affluent boomer crowd typically has plans for a fully funded dream retirement that lasts two decades or more. Having bankrolled kids through years of education and early adulthood, these boomers feel less than obligated to pass along to their children much of their hard-earned wealth.

For those clients who do want to leave a sizable inheritance, financial advisers may need to lay out for them the difficulty of both living an active and exciting retirement, and also leaving wealth to their children.

"Invariably, their reach exceeds their grasp," says Milo Benningfield, founding principal of Benningfield Financial Advisors.

Simply having enough money to make it through retirement can be a challenge. Joe Montgomery, a managing director of investments at Wachovia Securities, a unit of Wachovia Corp., recently had to tell a client that his assets didn't match his dreams of an imminent retirement; as Montgomery phrased it: "I don't think this dog hunts."

Adding to advisers' challenge, converting clients' children into a new-generation clientele may be more about capturing relationships — for when Boomers' children accumulate wealth of their own — than capturing actual assets.

While most of these clients are still years from retiring, by most definitions, the first members of America's enormous postwar population boom are now reaching age 65.

10 Things Estate Planning Can Do for You

What are the advantages to estate planning?

By taking the time and effort necessary to plan your estate, you will be able to:

1. Provide for your immediate family

Couples want to provide enough money for the surviving spouse. Couples with children want to assure their education and upbringing. If you have children under 18, both you and your spouse should have a will nominating personal guardians for the children, in case you both should die before they grow up. Otherwise, a court will decide without your input where your kids will live and who will make important decisions about their money, education, and way of life.
2. 
   Options include insurance paid directly to beneficiaries, joint tenancy, and living trusts, as well as using simplified or expedited probate and taking advantage of laws that provide partial payments to beneficiaries while a will is in probate.
   
   
   During estate planning, you can also plan for possible mental or physical incapacity. Living wills and durable health-care powers of attorney enable you to decide in advance about life support and pick someone to make decisions for you about medical treatment.
   
   
   Good estate planning can keep the cost of transferring property to beneficiaries as low as possible, leaving more money for your beneficiaries.
   
   
   Choosing competent executors/trustees and giving them the necessary authority will save money, reduce the burden on your survivors, and simplify administration of your estate.
   
   
   You can take a burden from your grieving survivors and plan your funeral arrangements when planning your estate. Or you may want to simply limit the expense of your burial or designate its place.
   
   
   Your estate plan can help support religious, educational, and other charitable causes, either during your lifetime or upon your death, and at the same time take advantage of tax laws designed to encourage private philanthropy.
   
   
   Every dollar your estate has to pay in estate or inheritance taxes is a dollar that your beneficiaries won't get. A good estate plan can give the maximum allowed by law to your beneficiaries and the minimum to the government.
   
   
   Do you have an elderly parent or disabled child, or a grandchild whose education you want to assure? You could establish a special trust fund for family members who need support that you won't be there to provide.
   
   
   If you have a small business, you can provide for an orderly succession and continuation of its affairs by spelling out what will happen to your interest in the business.
3. Get your property to beneficiaries quickly
4. Plan for incapacity
5. Minimize expenses
6. Choose executors/trustees for your estate
7. Ease the strain on your family
8. Help a favorite cause
9. Reduce taxes on your estate
10. Provide for people who need help and guidance
11. Make sure your business continues smoothly

SOURCE: American Bar Association

Advantages of Various Estate Planning Tools

There are a lot of estate planning tools available to you. The following table summarizes the benefits provided by some of the more common estate planning techniques. Talk to your estate planning attorney for the details. (Note: For definitions of the estate planning tools compared in this table, i.e. "Pour-Over Will", scroll to the bottom of this page)

 

Benefit of Planning Tool	No Will	Basic Will	Pour- over Will	Living Trust	AB Trust	QTIP Trust
Selectivity
Permits you to select the beneficiaries of your estate	No	Yes	Yes	Yes	Yes	Yes
Permits you to select the executor of your will	No	Yes	Yes	Yes	Yes	Yes
Permits you to select the trustees of your trust	No	No	Yes	Yes	Yes	Yes
Permits you to select the guardians for your children	No	Yes	Yes	Yes	Yes	Yes
Probate
Avoids the time-consuming and expensive probate process	No	No	No	Yes	Yes	Yes
Timing of Distributions
Permits distribution of assets to children other than simply upon reaching the age of majority (Ex. 1/3 at age 25, 1/3 at age 30, 1/3 at age 35)	No	No	Yes	Yes	Yes	Yes
Protection
Prevents conservatorship of estate owner	No	No	No	Yes	Yes	Yes
Protects assets from creditors	No	No	No	Yes	Yes	Yes
Estate Taxes
Assists married couples in reducing estate taxes	No	No	Possibly, if properly designed to save estate taxes	No	Yes	Yes
Allows the first spouse to die to name the ultimate beneficiaries of his/her estate while still permitting the surviving spouse to utilize the assets and while still deferring estate taxes	No	No	Yes	No	No	Yes

No Will means you have no will, and your estate passes to your heirs based on the laws of descent and distribution of your state.

Basic Will means you have a will that distributes everything to your spouse, if living, otherwise to your children when they reach the age of majority.

Pour-over Will means you have a will that distributes everything to a trust.

Living Trust means a trust designed to avoid probate and provide asset management. A basic living trust does not effectively use the $675,000 unified credits of both spouses. Remember, each person is entitled to have the first $675,000 of his or her estate pass to his or her heirs without estate taxes. This is referred to as the "unified credit." Because of this deficiency of a basic living trust, an AB Trust is often recommended instead to married couples with substantial assets.

AB Trust means a trust designed to make sure the $675,000 unified credit of each spouse is used to the full extent possible, while allowing the surviving spouse to have the use of the assets of the deceased spouse during the remainder of the surviving spouse's lifetime.

QTIP Trust means a trust designed to permit a spouse to transfer assets to his/her trust while still maintaining control over the ultimate disposition of those assets at the spouse's death. QTIP Trusts are particularly popular in situations where a person is married for a second time but has children from a first marriage for whom he/she wants to reserve assets.

SOURCE: FindLaw

Cohabitation and Estate Planning

One of the advantages of marriage over a cohabiting relationship is that a spouse in a marriage is a legal heir, and has a legal right in every state of the Union to inherit, with or without a will. The only way cohabitants can inherit is through a will or through a living or testamentary trust.

Trusts are rights and properties held by one party for the benefit of another. There are many reasons for a cohabitant to enter into a trust agreement. These include maintaining control over assets, avoiding probate, and avoiding inheritance taxes. A testamentary trust is a trust created by a will or a living or an inter-vivos trust document. A testamentary trust does not have the tax advantages of a living will, but does allow the beneficiary to use the property during his or her lifetime. The remaining principal or corpus would go to a second person after the beneficiary’s death. A living trust is a written agreement in which a trustee agrees to hold assets contributed by the grantor for the benefit of third parties or beneficiaries. In some states, but not all, the trustee, grantor, and initial beneficiary may all be the same person. A will or a testamentary trust becomes effective only upon the death of the testator. However, a living trust becomes effective immediately. As long as a living trust is not irrevocable, it can be amended or revoked at any time, and the grantor retains absolute control over the assets transferred to the trust, if he is the trustee. At the time of the grantor’s death, the living trust either becomes irrevocable or it terminates with the trust assets going to designated beneficiaries, or it continues to stay in existence, with the trustee continuing to hold assets for the benefit of the remaining beneficiaries. It is one way to avoid the expense of probate.