WILLS, TRUSTS & ESTATES

Wills, trusts and estate law encompasses and involves the following and so much more:

  • ESTATE PLANNING
  • ESTATE TAX PLANNING
  • ESTATE ADMINISTRATION
  • ESTATE LITIGATION
  • TRUST LITIGATION
  • WILL& TRUST PREPARATION
  • IRREVOCABLE LIFE INSURANCE TRUSTS (ILIT)
  • QUALIFED PERSONAL RESIDENCE TRUSTS (QPRT)
  • POWERS OF ATTORNEY
  • LIVING WILLS
  • ESTATE TAX RETURN PREPARATION
  • REAL ESTATE TRANSACTIONS
  • ASSET PROTECTION
  • DISCLAIMERS
  • TRUST MANAGEMENT
  • OWNERSHIP AND TITLE OF ASSETS
  • GIFTS AND GIFT TAX RETURNS
  • COORDINATION WITH INCOME TAX LAWS

ESTATE PLANNING

I focus on you and your family and your objectives for assets preservation, asset transfers and tax savings. If you need estate planning, wills, trusts and estate tax savings, then I can help you and your family. I have been an attorney since 1998 and I have a Graduate Law Degree in Tax Law. I focus on estate planning, estate administration, estate litigation, wills, trusts and related matters. My clients include professionals, employees, small business owners, executives and retired persons. My objective is to work closely with all of my clients, identifying and prioritizing their goals and providing legal solutions uniquely suited to achieving these goals.

Simply, estate planning involves a plan to transfer assets and save taxes. Estate planning primarily benefits your children and your surviving spouse. Estate planning involves an understanding about how assets are legally titled (owned) and how assets are transferred after one dies.

Wills and trusts are typically the cornerstones of a sound estate plan. For each family, estate planning is a unique process because it involves complex legal, tax and financial issues that relate to sensitive and distinct family matters and family structures. Through proper and creative planning, I can save certain families several hundreds of thousands of dollars in taxes and legal costs.

The legal and tax costs of not having, or having a poorly drafted, will or trust can be financially oppressive and emotionally painful. When wills or trusts are not drafted properly, legal fees for probate matters can be several thousands of dollars. Additionally, estate and gift taxes can be several hundred thousands of dollars, most notably when the last spouse to die has a gross estate that exceeds the applicable federal and state tax exclusions. Since the federal estate and gift tax rate is currently almost 50%, significant tax savings can result from proper planning and execution of the appropriate instruments.

Ultimately, each family's estate plan primarily depends upon their net worth and their intentions regarding property disposition. For some clients, simple wills or trusts are desired. For other clients, however, more complicated drafting and planning is necessary in order to save them from exorbitant and unnecessary estate and gift tax liabilities. Although smaller estates require less sophisticated planning, having a sound estate plan can be an ongoing process because each family's plan must be revisited every few years to account for sometimes even marginal increases in net worth or changes in circumstances.

When I meet with clients to discuss their estate plan, I thoroughly educate them about the legal and tax consequences of property ownership and transfer during life and after death. As my clients and I review their answers and items relating to my estate planning questionnaire, we discuss the availability of assorted estate planning techniques, including the applicability and propriety of different types of wills and trusts. I advise my clients as to which of the appropriate estate planning devices are most suitable for their financial and tax situation. When I devise estate plans for my clients, I optimize the utilization of the statutory exclusions and deductions, including the applicable exclusion, marital deduction, and annual gift tax exclusion. I also establish trusts for life insurance policies and minor children to account for custom-tailored needs and to prevent unnecessary tax liability.

TYPES OF LEGAL OWNERSHIP OF ASSETS

100% ownership – owned by one person in its entirety. Upon death, the estate will include any asset owned 100% outright by decedent.

Tenancy in common – ownership by more than one person equally without right of survivorship. Upon death, the estate will include any asset owned up to the amount owned as tenancy in common. For example, if decedent owned one half of real property as tenancy in common at his or her death, then that one-half would be included in his or her estate.

Joint tenancy with the right of survivorship – ownership by more than one person with the right of survivorship. Survivor automatically owns entire property after death of other owner by operation of law. If decedent owned one half of real property as joint tenant with right of survivorship at his or her death, then that one-half would NOT be included in his or her estate. Rather such one half would automatically be transferred to the survivor by operation of law.

Tenancy by entireties – Ownership of property by husband and wife (spouses). The surviving spouse automatically owns the entire property after death of other spouse. Same as joint tenancy with right of survivorship except that creditors cannot have liens of decedent that attach to the property once that property passes to the surviving spouse; such liens would be extinguished automatically by operation of law.

Call 609-799-0090 or email DARREN@DBALDOLAW.COM to schedule an initial consultation and discuss these matters with me.

ESTATE TAXES

An understanding of estate taxes is critical to any estate plan.

Federal estate tax – The United States of America, the federal government, requires all U.S. persons to pay an estate tax at their death if the estate has a high amount of assets. The estate must file an estate tax return - U.S. Form 706 – only if the estate has a gross amount greater than the estate tax exclusion, which is currently over $5 million per person (adjusted for inflation). If a person died while being married, then there is the possibility for the surviving spouse to use the estate tax exclusion at his or her death of the other spouse who died previously. The minimum tax rate is currently 20% and the maximum tax rate is currently 40%. Deductions are available for bequests to spouse, charities and expenses of estate administration and debts of the estate.

New Jersey Estate Tax – The Estate Tax is one of the two death taxes charged by New Jersey (the other is the NJ Inheritance Tax below). The New Jersey Estate Tax is calculated like Federal Estate Tax, except that New Jersey has an estate tax exclusion of only $675,000 per person (without the portability feature available in the Federal Estate Tax described above) and the minimum tax rate is currently about 5% and the maximum tax rate is currently16%. Gifts of only certain assets, like life insurance, made within 3 years of death of the decedent may be taxed.

New Jersey Inheritance Tax – The Inheritance Tax is one of the two death taxes charged by New Jersey (the other is the NJ Estate Tax above). The Inheritance Tax is calculated based upon the amount of the estate that passes to certain beneficiaries. Bequests to parents, children, grandchildren and charities are excluded from the calculation of the NJ Inheritance Tax. Bequests to siblings, cousins and friends are taxable. The minimum tax rate is 11% and the maximum rate is 16%. Gifts of all assets made within 3 years of death of the decedent may be taxed.

Call 609-799-0090 or email DARREN@DBALDOLAW.COM to schedule an initial consultation and discuss these matters with me.

ESTATE PLANNING DOCUMENTS

All families should have the basic estate planning package, which includes:

  1. Will
  2. Powers of Attorney and
  3. Living Will
  4. Life Insurance Trust
  5. Retirement Plan Asset Trust
  6. Qualified Personal Residence Trust
  7. Irrevocable and revocable trusts

WILLS

A will serves three primary purposes:

(1) Dispose of Assets: A Will is the only document that can dispose of all remaining assets in your estate at your death in virtually any manner you choose. Whatever level of your wealth, your Will allows you to direct the distribution of those assets among your heirs or others whom you choose to enjoy your remaining assets.

(2) Name Guardian of Minor Children: In your Will you can nominate and appoint guardians for your minor children. If you are a parent, your Will is the instrument that appoints a guardian for your minor child.

(3) Save Taxes by Using Trusts: In your Will, you can provide tax savings mechanisms through uses of trusts. Through the use of a disclaimer trust or other credit shelter trust, your family can save estate taxes by including those trusts in your Will and then using those trusts after your passing.

When discussing your last will and testament, I will help you evaluate all factors and determine how to proceed.

EXECUTORS, TRUSTEES & GUARDIANS

Who do you trust? That is the question.

Executors:

  1. Responsible for following the Will.
  2. Offers the Will to Surrogate Court to be admitted to probate.
  3. Marshals all assets of decedent.
  4. Pays all debts of estate.
  5. Files tax returns if and as required.
  6. Paid commission to fulfill duties.
  7. Distributes remaining assets to beneficiaries.
Trustees:
  1. Responsible for following the Trust agreement.
  2. Pays income and principal to beneficiaries as provided in Trust agreement.
  3. Files tax returns if and as required.
  4. Invests assets as necessary to prevent waste and preserve capital.
  5. Paid a fee for services.
Guardian:
  1. If approved by court, person becomes guardian of minor child.
  2. Guardian of child’s person means that the guardian is responsible for the child’s person, health, welfare, education and activities.
  3. Guardian of child’s property means that the guardian is responsible for the child’s property.
  4. Guardian has authority to act on behalf of minor child and ratify any acts and contracts made by minor child.

TRUSTS

Trust Basics:

A trust is a document used to manage assets. The creator of the trust (the grantor) puts assets in the hands of a person (the trustee) and places him or her in charge of managing and distributing such assets for the benefit of designated persons (the beneficiaries). The grantor may designate himself or herself as the trustee, or even as a beneficiary. But a grantor cannot be both the sole trustee and sole beneficiary of the trust.

Purposes of Trusts:

Trusts can serve infinite purposes. A grantor can establish a trust to pass assets during his or her life or at death through his or her will. Through a carefully drafted trust document, the grantor can direct the trustee to manage and distribute the assets in any manner desired by the grantor. In common forms, trusts are established to invest a principal sum of money with interest paid to beneficiaries, which may guarantee future streams of income for the support of the beneficiaries. Professional management of the assets is sometimes required, and often times banks or trust companies are named as trustees to do so.

A trust may also be used to avoid having assets as part of the grantor’s estate when he or she dies. Accordingly, the trust assets will not be transferred through the will. For example, trusts can be used for estate tax planning purposes or to simply keep such assets confidential from other beneficiaries of the will.

Trustee’s Duties:

The trustee may have various duties, including the duty to: (1) administer the trust solely in the interest of the beneficiaries; (2) preserve the assets in the trust; (3) make the trust assets productive; (4) pay out income in accordance with the trust document; (5) keep trust assets separate from any other assets; (6) keep a proper accounting of trust assets and income; (7) invest trust assets prudently; and (8) not delegate his or her obligations as the trustee. A trustee is normally compensated for such services. Also, it is sometimes appropriate for more than one person to act as trustee.

Types of Trusts:

Credit-Shelter / Exclusion-Shelter Trust – a trust that provides the mechanism to utilize the estate tax exclusion of a person. Also known or taking the form as AB Trust, Bypass Trust, Credit Formula Trust, Exclusion Formula Trust, or Disclaimer Trust.

Disclaimer Trust – a trust that permits the surviving spouse to disclaim (reject) acceptance of a certain portion or the entirety of the decedent’s estate and instead be transferred to such trust thereby avoiding the application of the marital deduction and consequently utilizing the federal and state estate tax exclusion of the decedent. The disclaimed assets that pass into the Disclaimer Trust permit the decedent’s estate to utilize the decedent’s federal and state estate tax exclusion.

Irrevocable Life Insurance Trusts – a trust that is used to remove and keep insurance policies out of the estate. Life insurance is an asset that is owned by the insured if the insured retains any incidents of ownership of that policy. For example, if the insured has the right to change the beneficiary of the insurance policy, then the insured has incidents of ownership of the policy. As a result of having incidents of ownership of life insurance, the value of the policy at the insured’s death, i.e., the death benefit, is includible in the insured’s estate. With the use of a properly-drafted irrevocable trust, the life insurance would not be includible in the insured’s estate upon the insured’s death.

Retirement Plan Asset Trust – a trust that is used to keep the retirement plan assets out of the estate of the surviving spouse. Without this trust, the surviving spouse usually would roll-over the decedent’s retirement plan assets into the surviving spouse’s Individual Retirement Plan Account (IRA). With a Retirement Plan Asset Trust, the assets would instead be transferred into the trust at the decedent’s death. A properly drafted Retirement Plan Asset Trust would prevent the assets from being part of the surviving spouse’s estate. Yet, the surviving spouse can still have access to the assets in that trust.

Living Trust vs. Testamentary Trust – A living trust simply means that the trust is created and funded during the grantor’s lifetime as compared with a testamentary trust which is written in a will. A living trust is funded during the grantor’s lifetime whereas a testamentary trust only springs into effect after the death of the testator through his or her will. A living trust could be a revocable or irrevocable trust.

Do you need a Trust?

Maybe. Single individuals, married couples, members of domestic partnerships and those who have accumulated even modest estates, including equity in a home, might benefit from establishing trusts. As your attorney, I will help you determine whether a trust is appropriate in your situation, or if a will is sufficient.

POWER OF ATTORNEY

I recommend that each adult have a power of attorney. Generally, a power of attorney permits another person to have the power to act on a client's behalf to handle all legal, business and financial matters. A springing power of attorney is essential when, due to an injury or sickness, a client is incapable of managing his or her own affairs. Durable powers of attorney stay in effect even during incapacity or disability. Powers of attorney are usually required by many financial institutions before anyone is permitted to conduct certain financial transactions on another's behalf. Without a power of attorney, legal and court costs can become expensive and the incapable person's family may experience unanticipated lapses in time before they may use desperately needed funds. Without a power of attorney, an expensive guardianship proceeding may be necessary in order to give another person the authority to act on your behalf.

LIVING WILL

A living will specifies your wishes for medical treatment if you become terminally ill or otherwise unable to communicate with your doctor. It is a written declaration indicating to a physician, hospital, nursing home, etc. the person’s desire for a physician to initiate, continue, withhold or withdraw certain life sustaining medical treatment in the event the person becomes incompetent or terminally ill. The declarant states his or her specific wishes in the living will.

A living will normally contains specific directives about whether to prolong the life of the declarant. The living will would govern actions of the health care provider in the event that the declarant needs artificial life support systems. It may also provide authority to the attending physician to terminate life support treatment in the event that it becomes very traumatic and costly for the declarant’s family.

Although health care providers must comply with and carry out the wishes as stated in the living will, they can be easily disregarded; thus, the declarant should also execute a durable power of attorney for health care. As discussed above, a health care power of attorney names a person as your proxy. Accordingly, your health care power of attorney can make medical decisions on your behalf, including hiring or firing a doctor. Your health care power of attorney can act anytime you’re unconscious, not just when you’re terminally ill.

I offer comprehensive estate planning services focused on meeting our clients' unique individual needs and I strive to provide maximum asset protection and tax savings to help you achieve peace of mind.

If you are ready to put an estate plan together or would like us to review your existing estate documents in light of current laws and changes in your circumstances, please contact my law office today.

I develop practical, custom-tailored and comprehensive estate planning packages to fit your and your family’s needs ranging from simple to complex and involving wills, living trusts, and gifting. Beginning with a free consultation, I will guide you and advise you through even the most complicated estate and tax situations and issues.

Call 609-799-0090 or email DARREN@DBALDOLAW.COM to schedule an initial consultation and discuss these matters with me.