Attend a FREE Estate Planning Seminar!

The presentation establishes the necessary components of an effective estate plan. Attorney Michael Bonfrisco does an outstanding job in presenting a case study profiling the life of Bill and Mary Jones. Several scenarios are used to relay the impact of estate planning issues relating to probate, disability due to incompetence, protection of government benefits for special needs loved ones, second marriages, unmarried couples, minimization of federal estate tax and preserving the family legacy. Wills, living trusts, powers of attorney and health care directives are all represented in the presentation. At its conclusion, the audience will have a clear understanding of their estate planning options and be equipped to make the choices needed for themselves and their loved ones. You won't want to miss this seminar - it's informative and easy-to-understand!

Tuesday,  March 9th, 2010

2:00pm – 4:00pm

Cherry Hill Public Library

Cherry Hill, NJ

Thursday, March 11th, 2010

2:00pm – 4:00pm

The Mansion on Main Street
Voorhees, NJ

Saturday, March 13th, 2010

10:00am – 12:00pm

The Moorestown Community House

Moorestown, NJ

 

Seats are filling up quickly, so please register today! You can reserve your seat by calling our office, (856) 663-3800 or register online at www.NJTrustLawyer.com

Please feel free to invite a friend or family member!

Today's Probate Answers

Will Versus Living Trust: Which Is Best For You?

Both Wills and Trusts are devices that you can use to provide for the distribution of your estate upon your death. Deciding whether a Will or a Trust best fits your needs depends on your circumstances. A Living Trust is a popular alternative to the traditional Will, but you should weigh the advantages and disadvantages of each before deciding on one form or the other.

Let’s take a look at both the Will and the Living Trust. By looking at what each does, you will be able to determine, with the help of an estate planning attorney, which instrument would be best for you. Keep in mind that often a person has both a Will and a Living Trust.

Probate

Will: 
 • Subject to Probate proceedings.
 • Out-of-state property requires Probate proceedings in that state, as well.
 • Provides court supervision for handling beneficiary challenges and creditor disputes.
 • Becomes public record at the time of your death.

Living Trust:
 • Not subject to Probate proceedings.
 • Avoids the cost of a second-state Probate proceeding where there is out-of-state property.
 • No automatic court supervision to deal with disputes.
 • Remains private.

Tax Savings:

Will:
 • Same tax-saving provisions available as are available in a Trust.

Living Trust:
 • Same tax-saving provisions available as are available in a Will.

Management of Your Assets

Will:
 • In addition to the Will, must use a Power of Attorney or Conservatorship to manage assets during your life.

Living Trust:
 • Allows you as the grantor to manage the Trust assets as long as you are willing and able.
 • Makes provisions for a Successor Trustee to take over in your place.

Costs

Will:
• Many attorneys charge less to prepare a Will than a Trust. But the cost to Probate a Will can be substantial.

Living Trust:
• Many attorneys charge more to prepare, fund, and manage a Trust than to prepare a Will. But avoids Probate costs if all assets were held by the Trust.

Don’t leave matters to chance and fail to draw a Will or create a Trust. If you do, a greater than necessary amount of your assets may go to state and federal governments in taxes, and your remaining assets may go to individuals other than those loved ones whom you would prefer to benefit. Whatever the reason, one thing is certain: not making out a Will or Living Trust can be a big mistake.


Attend a FREE Estate Planning Seminar!  
March 9-13th in the South Jersey area.

Seats are filling up quickly, so please call our office to register, (856) 663-3800.

Please visit our website for more information:
www.NJTrustLawyer.com


        

Today's Probate Answers

Do All Estate Planning Attorneys Offer Wills?

How Would I Know If a Will Is More Appropriate Than a Living Trust? Are There Specific Questions I Should Be Asking?

On the financial side, a good estate plan coordinates what will happen with your home, your investments, your business, your life insurance, your employee benefits (such as a 401(k) plan), and other property in the event you become disabled or die. On the personal side, a good estate plan includes directions to carry out your wishes regarding health care matters. So, if you ever are unable to give the directions yourself, someone you select would do that for you, and know when you would want them to authorize heroic measures and when you would prefer they pull the plug.

Several of the following documents are typically used as part of the estate planning process:

• A Will, sometimes called a Last Will and Testament, to transfer property you hold in your name to the person(s) and/or organization(s) you want to have it. A Will also typically names someone you select to be your Personal Representative (or Executor) to carry out your instructions and names a guardian if you have minor children. A Will only takes effect upon your death.

• A Durable Power of Attorney for Health Care appoints a person you designate to make decisions regarding your health care treatment in the event that you are unable to provide informed consent.

• A Living Will or Directive to Physicians is an advance directive that gives doctors and hospitals your instructions regarding the nature and extent of the care you want should you suffer permanent incapacity, such as an irreversible coma.

• A Durable Power of Attorney appoints a person you designate to act for you and handle financial matters should you be unable or perhaps unavailable to do so.

• A Living Trust can be used to hold legal title to and provide a mechanism to manage your property. You can select the person or persons you want as the Trustee(s) to carry out the instructions you want in the Trust and name one or more Successor Trustees to take over if you cannot. Unlike a Will, a Trust usually becomes effective immediately, continues in force during your lifetime even in the event of your incapacity, and continues after your death. Trusts also help you avoid or minimize the expenses, delays, and publicity of Probate.

• A Family Limited Partnership can be used to own and manage your property, in a similar manner to a Trust, but allowing additional tax planning techniques to be employed.

Since a Will is part of a good estate plan, a qualified estate planning attorney will have the ability to write a Will for you.

For more information, please visit our website:
www.NJTrustLawyer.com

Today's Probate Answers

When it comes to a Trustee, who should you choose?

While it seems natural to choose a family member or close friend to settle your estate, your selection of a Successor Trustee can make a difference in how fast your estate is distributed and can affect family relationships for years to come.

• If your Successor Trustee has no bookkeeping experience and knows nothing about finance, settling your estate can take longer and result in higher attorney’s fees.

• Naming a family member as Successor Trustee can also place him or her in the delicate position of arbitrating disputes between other family members about the distribution of personal property.

Sometimes a family member is not the right choice. For instance, friction can occur if one sibling is serving as a Trustee over another sibling, or a stepparent serving as a Trustee for his or her stepchildren. In cases like these, or where friction already exists, you may want to consider a Corporate Trustee. Since a Corporate Trustee has experience administering Trusts and managing assets, they can be unbiased when friction occurs.

The other possibility is to choose a family member or friend to be a Co-Trustee with a bank or corporate entity. The individual Trustee knows the family dynamics and the beneficiaries on a personal level. The bank is unbiased and is not embroiled in the family politics.

A carefully chosen Trustee is critical to implementing your estate plan. An attorney who specializes in estate planning and who is sensitive to your family’s issues can help you design a plan and select a Trustee to achieve your goals.

For more information, please visit our website:
www.NJTrustLawyer.com

Today's Probate Answers

What Happens to a Revocable Living Trust When One Spouse Dies?
Thinking about a Trust at the death of a spouse can be a very difficult prospect during a very emotional time. Nonetheless, the death of a spouse can bring about complex financial issues that must be addressed. Although administering the Trust may appear daunting, there is a process to follow, as well as resources to help you along the way.

The First Steps After the Death of a Spouse

The first step is to call your estate planning attorney. They have helped you create your Trust and can help you understand your duties as you administer that Trust. If you are no longer in touch with the attorney that planned the Trust, then be sure to find an “experienced” estate planning attorney to help you. Plan a meeting with this attorney two to three weeks after the death of your spouse.

The next thing you will need to do is find the Trust documents. This can result in a frustrating search, especially if your spouse was not organized or did not let you know where he/she kept important papers. This is where pre-planning comes in handy. Knowing beforehand where such important papers are kept will help things run more smoothly.
Once you have located the Trust papers, you will need to gather all the financial information about the assets. This includes:
• Deeds

• Bank Statements

• Brokerage Statements

• Tax Returns for the last three years

• Titles

• Other records of ownership


While gathering this information, be sure that you do not change the title of any assets. This will create undue problems for you.
Finally, you will need to attend the meeting with your estate planning lawyer. During this meeting, the attorney will help you understand the legal and tax requirements and let you know the terms of the Trust that you will need to follow.

If you, as the Trustee, are slow in acting, others may take advantage of the situation. For instance, someone may take possession of items in the deceased’s home or take other actions that make it difficult to carry out the terms of the Trust. Although the death of a loved one is sad, it would be sadder still to know that your loved one’s last requests could not be honored. As a Trustee, it is imperative that you act swiftly.\


Stages of Trust Administration

Once you have met with the attorney, you must then begin your Trust Administration duties. These include:
• Taking an inventory of assets

• Determining estate tax

• Dividing Trust assets

• Filing tax forms

• Distributing assets to beneficiaries


Taking an Inventory of Assets

The very first task as Trustee is to take inventory of the assets of the Trust. This is more than just making a list. It also includes listing the ownership of each asset as well as the date-of-death valuation. Knowing the ownership of each asset will ensure that all assets that are supposed to be in the Trust are indeed owned by the Trust. Knowing the valuation of the assets will have important tax implications. Your estate planning attorney can recommend the right professionals to help you obtain the correct asset valuations.

Determining Estate Tax

There will be no estate tax due after the death of the first spouse due to the unlimited marital deduction. However, after the death of a surviving spouse or a single individual, estate taxes become very important.

Any assets over $3.5 million in 2009 will be taxed at 45 percent and must be paid within nine months of the date of death using IRS Form 706. Once again, a qualified estate planning attorney will help you determine which assets will be subject to the estate tax.

Dividing Trust Assets

It is the job of the Trustee to split the assets from the Joint Trust into two or three different Trusts. These Trusts include the Survivor’s Trust, the Family Trust, and potentially the Marital Trust.

The Survivor’s Trust is exactly what it sounds like – a Trust that holds the surviving spouse’s assets. These are assets that were once held jointly in the Joint Trust.

The deceased spouse’s assets are either put completely into a Family Trust, or split between a Family Trust and a Marital Trust. The Family Trust will no longer be considered part of the surviving spouse’s estate upon death. The purpose of this Trust is to keep assets out of the surviving spouse’s estate while still providing income to the surviving spouse.
It is very important that the Trustee properly fund these Trusts. If assets are not transferred correctly, they will be considered part of the estate and subject to Probate.

Filing Tax Forms

In addition to income tax returns for the deceased for the year of his or her death, it may also be necessary to file IRS Form 706 to declare any estate taxes due. Additionally, Form 1041 is due annually for the Trust in every year after the death of the original Trustor. Not filing these forms on time can result in penalties and interest due.

Distributing Assets to Beneficiaries

As a Trustee, you do not determine how the Trust’s assets will be distributed. Instead, you merely carry out the terms of the Trust. Once bills and taxes are paid and all assets have been accounted for, the Trustee will then pay out any assets due to beneficiaries. This process usually takes four to six weeks – far faster than the nine or more months needed to go through Probate.

Frequently Asked Questions Concerning the Trust Administration Process

Should I expect a cost when one spouse dies?

Whenever a Trust changes, there will be a fee involved. The fee will vary from situation to situation depending upon the type of assets and the complexity of the Trust. Typically, this fee will be significantly less than Probate would have been.


What happens if I am single when I die?

Your Successor Trustee will follow the same steps that would be followed if you had a living spouse at the time of your death. The only difference is that the Trust will not be split into a Survivor’s Trust or a Marital Trust.

The death of a loved one is a trying and emotional time. Yet, it is necessary as the Successor Trustee to administer the Trust the decedent left behind. By following the steps laid out in this chapter and working with an experienced estate planning attorney, you will be able to carry out the wishes of the deceased individual.

For more information, please visit our website:
www.NJTrustLawyer.com

        

Today's Probate Answers

What Is a Special Needs Trust?


It is common knowledge that government programs, in the form of Supplemental Security Income (SSI) and Medicaid, are very important for people with disabilities. These programs provide cash benefits as well as important medical coverage and long-term supports and services. The income level and financial resources of an individual with a disability, or family who is applying on behalf of their child with a disability, must not exceed a certain level in order to qualify for these government benefits. Benefit recipients are allowed to retain only a total of $2,000 in assets, with some exceptions. A person with a disability receiving SSI, who accumulates more than $2,000 in cash resources, may lose SSI and, possibly, Medicaid.

However, government cash benefits provide only for the bare necessities: food, shelter, and clothing. They amount to less than a federal poverty level income. As we all know, there are more things and activities beyond these basics that add quality to life. For a parent planning for the future of their child with special needs, this poses a problem. When parents are able to care for their child, they provide the extras beyond the bare necessities to make their child’s life comfortable. But who will provide those resources when they are not there to do so?

If parents leave any assets to their child who is receiving government benefits, they run the risk of disqualifying the child from receiving government benefits. If they leave assets to another family member or other person for the care of the child, they open other avenues of risk where the child might not get the benefit of those assets, such as divorce, bankruptcy, lawsuits, and financial mismanagement.

Fortunately, the government established rules allowing assets to be held in Trust for a recipient of SSI and Medicaid, as long as certain parameters are met.

How Is a Special Needs Trust Used?

These Trusts, called Supplemental Needs or Special Needs Trusts (SNTs), preserve government benefit eligibility and leave assets that will meet the supplemental needs of the person with a disability. The SNT must be designed specifically to supplement, not supplant, government benefits. Money from the Trust cannot be distributed directly to the person with a disability. Instead, it must be distributed to third-parties to pay for goods and services to be used by the person with a disability.

The SNT can be used for various expenditures such as:

• Out-of-pocket medical and dental expenses

• Eyeglasses

• Annual independent check-ups

• Transportation (including vehicle purchase)

• Maintenance of vehicles

• Insurance (including payment of premiums)

• Rehabilitation

• Essential dietary needs

• Purchase materials for a hobby or recreational activity

• Purchase a computer or electronic equipment

• Pay for trips or vacations, pay for entertainment like going to a movie, a ballgame, concert, etc.

• Purchase of goods and services that add pleasure and quality to life: videos, furniture, or a television

• Athletic training or competitions

• Personal care attendant or escort

• Plus other qualified expenditures

When and How Should an SNT Be Set Up?

Parents may consider setting up an SNT when they begin their future planning activities such as drawing up their Wills. If their child with a disability will likely have long-term medical or support needs, the SNT can be a vehicle to supply the funding to provide lifetime quality care. Even if the child’s future prognosis is unclear, it is never too early to put plans in place for contingencies such as the parents’ sudden death or disability.

The laws governing Trusts are complex and are subject to changes in legislation that may vary by state and which could affect a person’s eligibility for the government benefits upon which they depend. New laws have considerably tightened the eligibility criteria for receiving government benefits and thus have affected many aspects of the way SNTs are drawn up. These regulations are complex and require a strong knowledge of the current legislation and how it impacts people planning for their child with special needs in order to preserve eligibility. Setting up a Special Needs Trust requires coordinated planning with an attorney knowledgeable in special needs planning who can draft a Will and necessary Trust documents.

When a parent or grandparent dies, additional assets can be distributed, under a Will or Trust, to the SNT. A percentage of shares in an estate can be left to a child’s SNT. Funding can come from discretionary contributions while parents are alive, Probate distributions, a Living Trust, life insurance, pension plan, or other sources. Therefore, the individual with a disability does not have to be left out of a Will, but should have their share of inheritance directed to his or her SNT. In the case of a life insurance policy, pension plan, or other source that would go to a beneficiary on death, the child’s SNT should be the beneficiary.

For more information, please visit our website:
www.NJTrustLawyer.com

Today's Probate Answers

What Happens If the Tax Law Changes? Is My Trust Still Valid?

Tax laws come and go. In fact, they seem to be ever-changing. For example, let’s take a quick look at The Economic Growth and Tax Relief Reconciliation Act of 2001. Instead of providing a specific estate tax exemption, it created different exemptions for each year. In 2007 through 2008, this exemption is $2 million. In 2009, it will be $3.5 million. And in 2010, everything you have will be exempt from estate taxes. It also created different estate tax rates each year ranging from 45 to 55 percent. And finally, if the law is not changed before 2010, it will revert back to the old law with an exemption of only $1 million!

What does all this mean? Further changes in the rules are almost a certainty!

Do all of these changes make your Trust invalid? No! However, amendments to the Trust may be needed to comply with the new laws or may be needed to make sure you get the most benefit from the new laws.

Changes You May Need to Make With Changing Tax Laws

Just a few years ago, the estate tax exemption was only $600,000. Since that was the figure for many years, estate plans established Bypass Trusts specifically referring to the $600,000 exemption. In 2009, the exemption will rise to $3.5 million. A typical Living Trust calls for the exemption amount to be placed (at death) into Trust for the surviving spouse and children, with the balance left outright to the spouse or in a separate “Marital Trust.” With the exemption amount rising, your entire estate could end up in the Trust, even if this is not what you intended and even if it does not achieve the intended tax results.

Make sure your Living Trust is flexible on that point, allowing for the annual increases based on a percentage of the estate and not a specified amount. Or the surviving spouse can be given the right to decide how much to place into the Trust using the “disclaimer” technique.

The “Disclaimer Trust” technique allows the surviving spouse to decide how much to place into the Credit Shelter Trust within nine months after the other spouse dies. The decision can be made based on the tax law as it exists at that time.

The “QTIP Trust” offers another potential solution to the changing estate tax laws: it permits the Executor to decide how much of the first decedent’s exemption to apply to the Marital Trust, of which the surviving spouse is sole beneficiary for life.

If you and your spouse have large estates, you could have the opposite problem of a Living Trust document that does not stipulate that the Credit Shelter Trust will be funded with the larger exemption amount that will take effect in 2009. In this case, adjustments would be needed to take full advantage of the increased exemption amount.

Even if you don’t have a Bypass Trust arrangement (for example, because you're unmarried), the larger exemption amount that will take effect in 2009 is a good reason to revisit your estate plan. For instance, an increased exemption means you could leave more directly to loved ones and less to charity without any federal estate tax bill.

 
For more information, please visit our website:
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Today's Probate Answers

Who Is the Trustee of My Living Trust?
Many Trusts written today are “Self Trusteed” meaning the grantor of the Trust acts as Trustee. While you are alive and competent, you can serve as Trustee. If desired, your spouse can serve with you. However, who should serve as Trustee upon your death or incapacity if your spouse is not available?

Choosing a Trustee can be tough. A dependable grown child will see to your welfare, but may not be qualified or have the best business judgment. A business associate might manage your money well, but you may not trust him with family relationships. A bank has investment experience, is dependable, and will handle the paperwork, but it’s not cheap.

What Do Trustees Do?

The Trustee has the responsibility of managing the Trust assets. Ideally, the Trustee should be someone who can keep records and follow the instructions of the Trust document. While the Trustee need not be a financial genius, the Trustee should know his or her own limits and be able to select appropriate advisors.



Here is just a partial list of what a Trustee may need to do when managing your estate:

• Assumes legal responsibility for the proper administration of the Trust

• Investigates claims against the Trust and opposes invalid claims in court

• Seeks legal counsel when needed

• Establishes bookkeeping procedures

• Inventories and changes titles of assets

• Pays bills

• Performs ongoing accounting

• Submits records for independent audit

• Reviews assets regularly for quality and performance

• Makes timely and thoughtful adjustments to the portfolio

• Promptly collects all assets and related income

• Tracks dividend notices, bond calls, and maturities

• Maintains detailed records of all assets and transactions

• Documents asset acquisition dates, cost basis, and adjustments

• Keeps records of taxable income

• Files annual Trust tax returns

• Furnishes information for beneficiary tax returns

• Communicates regularly with beneficiaries

• Distributes principal

• Arranges for the security, insurance, and maintenance of personal residences and other real estate

• Facilitates transfer of property to beneficiaries or new owners

• Makes sure that the requirements of the courts and taxing authorities are met

• Prepares federal estate tax, final income tax, gift tax, and generation skipping tax returns as required

• Investigates and discharges obligations to creditors

• Determines final distributions in keeping with the Trust agreement

• Arranges final transfer of assets




For more information about Estate Planning or Probate, please visit our website:
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Today's Probate Answers

Does a Revocable Living Trust Provide Asset Protection, Creditor Protection, or Divorce Protection?


Asset Protection and the Revocable Living Trust

The objective of asset protection planning is not to avoid paying legitimate creditors. On the contrary, good asset protection planning assumes you, the target of the litigation (referred to as the “debtor”), will pay all just debts and not attempt to use asset protection planning to unfair advantage.


Instead, the object of asset protection planning is lowering your asset profile. This is done to discourage frivolous lawsuits as well as thwart identity theft, phishing (being tricked into giving someone confidential information), pharming (being redirected to a criminal’s website rather than a legitimate one), and similar criminal schemes by keeping the assets out of your own name.

By transferring assets into a Revocable Living Trust, the assets are no longer held or reported in your name and thus it is much more difficult for criminals to find or access either the account information or the assets themselves. Thus, even if your identity is compromised and accounts accessed, the assets held in Trust should be unaffected and thus available for transfer to your new accounts to pay bills, etc., while the identify theft matter is being resolved.

In this way, a Revocable Living Trust can provide you with some degree of privacy and thus keep criminals from stealing your assets via identity theft or other similar schemes. However, a Revocable Living Trust cannot keep a creditor from getting to your assets. It does make it more difficult for creditors to access these assets; before doing so, the creditor must petition a court for a charging order to enable the creditor to get to the assets held in the Trust. But, if you get sued and lose, a court can order you to revoke the Trust and pay the creditor.

The Trust can be created to provide creditor protection to the beneficiaries of your Revocable Living Trust. Since a Revocable Trust becomes irrevocable upon the death of the grantor, an "anti-alienation clause" or “spendthrift clause” protects the assets held in the Trust from being used as collateral by the Trust beneficiaries. While the assets are held in the Trust, the beneficiaries do not have control over the property, and any distributions are subject to the Trustee's discretion. Depending on the terms of the Trust, creditors cannot force a Trustee to make a distribution to the Trust beneficiaries; thus the assets held in a Trust can remain outside the reach of the beneficiaries' creditors (until distributed into the hands of the beneficiary).

For more information please visit our website,

www.NJTrustLawyer.com

  

Today's Probate Answers

Will I Still Have Control Over My Property If I Establish a Revocable Living Trust?


A Revocable Living Trust is one of the most flexible estate planning tools available. It can be the foundation on which an individual's financial and estate plans are built. It offers many benefits and gives you control over the management and distribution of your assets during your lifetime and after your death.

What Is a Revocable Living Trust?

A Trust is a legal entity that owns assets. It involves an agreement between you, as grantor, a Trustee, and beneficiaries. When you set up a Revocable Living Trust, you transfer assets to a Trustee to be held for the benefit of one or more beneficiaries. The Trustee invests, manages, and/or distributes the Trust's assets based on the grantor's instructions as set forth in the Trust document. The Trustee can be an individual or an institution such as a trust company or bank.
Often, you name yourself the beneficiary for your lifetime. By including testamentary provisions, the Trust can continue after your lifetime for the benefit of your spouse and/or children. This also helps to avoid the cost, time, and unwanted publicity of the Probate process.

How Does a Revocable Living Trust Give You Control?

You can be the grantor, trustee, and beneficiary of the Trust during your lifetime. By assuming all three roles, you maintain control over your assets during your lifetime. Not only that, but you, as the grantor, reserve the right in the Trust document to amend or revoke the Trust at any time during your lifetime. This enables you to revise the Trust (or even terminate the Trust) to take into account any change of circumstances such as marriage, divorce, death, disability or even a "change of mind." It also affords you the peace of mind that you can "undo" what you have done.

To fund your Revocable Living Trust, you will need to re-title assets to transfer them into the Trust. You do that by changing the name on assets to the name of the Trustee and re-registering securities into the Trustee's name. All current and future assets, such as bank accounts, titles, deeds, stocks, and mutual funds, should be in the Trustee's name, as Trustee, for the benefit of the Trust. Some assets, such as IRAs and Qualified plans, should not be transferred into the Trust, however, the Trust may be named as a beneficiary of those plans. It is important to speak with your Estate Planning Attorney, and tax advisor regarding re-titling of assets and proper beneficiary designations.

Once this is done, legally, you no longer own any of the assets in your Revocable Living Trust in your individual name. The Trustee, perhaps you, own them in the capacity as Trustee of the Trust. Your Trust now owns your assets. But, as the Trustee, you maintain complete control. While you are alive and mentally competent, you have complete control over your property. You can buy, sell, improve, spend, change investments, or give away property just as you would without a Trust.
Upon your death, the Trust becomes irrevocable so that no one can change your testamentary wishes. For married couples, the surviving spouse still has total control over his or her share of property after its transfer to the survivor’s Trust, and the Trust becomes irrevocable only as to the deceased spouse’s share.

 
For more information regarding Trusts or Probate, please visit our website,
 
www.NJTrustLawyer.com