Wills, Trusts, & Estate Planning » Beneficiary Designation

Trends

stevenberger — Wed, 04 Jan 2012 22:49:02 +0000

Our firm increasingly sees clients with large retirement account balances or large life insurance policies without a contingent or secondary beneficiary. These assets will pass according to the beneficiary designation without being part of your probate estate as long as a beneficiary is named. However, these assets are considered part of your total estate and could be subject to Maryland’s 16% estate tax.

Another overlooked detail is the deed to your home. Whether you hold title as husband and wife, joint tenants, tenants in common, or through a trust is critical to your Estate Plan. We can review your deed and ensure that there are no surprises with one of your largest assets.

Our firm can help you with beneficiary designations and advise you on the tax consequences and practical effects of the designations available to you. We write wills for young parents to ensure that a guardian is named for their children; we include education trusts as part of the will for when those children approach college age; and we set up trusts for retiring employees who want to take care of their spouse, but ensure that their wealth eventually passed to their children.

WealthCounsel Training on Retirement Plans

stevenberger — Sun, 06 Mar 2011 20:56:32 +0000

I just returned from three days in Grapevine, Texas getting trained on the latest features of WealthCounsel software and the latest changes in Estate Planning. The change I am bringing back to my practice is the use of Standalone Retirement Trusts to hold retirement assets. WealthCounsel has developed a trust that can hold a retirement asset such as an Individual Retirement Plan or other Qualified Plan. By proper drafting the trust can stretch the distributions over the life of the beneficiary instead of the life of the deceased. If the trust is designed as a conduit trust, all distributions flow directly to the beneficiary. If the trust is designed as an accumulation trust, the trust can hold the distributions for further growth, allow for creditor protection, and allow a minor to reach an age where he or she can receive the funds.

The retirement account can also be used to fund a bypass trust to avoid federal and state estate taxes. The trust can hold assets for a surviving spouse using the deceased spouse’s exemption. The use of this strategy depends on the couples’ estate plan and what other assets are available to utilize the deceased spouse’s estate exemption.

The drafting of a retirement trust depends on the beneficiary’s circumstances, the type of retirement asset, and the other assets available to the beneficiary. I am available to consult with you on whether a retirement trust fits into your estate plan.

Training in Texas.

Write Your Own Will using an On-Line Package

stevenberger — Fri, 01 Oct 2010 18:47:56 +0000

You can easily write your own will, power of attorney, medical power of attorney, and living will using an on-line package. Most of the software packages do a pretty good job for the “I love you wills” giving everything to your spouse, then to your children. The software replicates what most general practice attorneys can provide you. Some of the problems I have seen are improper execution (usually a problem with the witnesses) or failure to include a common clause such as excusing the executor from posting bond. You will never know if you made such a mistake, because a will is not probated until you depart this life.

Rather than spend your money on a software package and a Saturday of your time, you can go to a lawyer who prepares wills as loss leader for $300 to $500. The lawyer is willing to do this work to create a new client. The business model is that you will come back for other legal work. Eventually, the office can probate your estate for a nice fee.

The third alternative is to go to an attorney whose practice centers around estate planning. This attorney will evaluate your entire estate, e.g.; check the title of all your assets, review the beneficiaries of your life insurance policies and retirement plans, account for step children and second marriages. You will have to pay for the time, training, and experience of this attorney which should benefit your heirs in reduced estate taxes and probate costs.

The analogy I use is the maintenance of my automobile. I worked in my Father’s garage in High School and learned to maintain my own car. In the Air Force, I was able to use the lift and tools at the base garage to maintain and repair my car. As the years passed, automobiles became more complicated and my knowledge of mechanics grew rusty, so oil changes and tire rotations were all I could do at home. I found that I could get this work done at a very low price at the big tire shops. However, when it came time to get some other work done on my car the savings of those “inexpensive oil changes” disappeared. I asked around for the recommendation of a good technician and moved my business to “Richard’s Auto Repair”. I spend a little more on routine maintenance, but little problems get solved before they become big problems and I am kept appraised of what costs to expect as my car ages.

The lesson learned. You can write your own will on-line. You should be able to save a few hundred dollars. Beware – the few hundred dollars you save could cost your family thousands.

Life Insurance

stevenberger — Mon, 05 Apr 2010 18:10:55 +0000

I recently spent the afternoon with an elderly woman planning how to distribute her large real estate holdings fairly upon her death. I asked her how she had accumulated all that property. She said that her husband had died at fairly young age leaving her with life insurance proceeds. She used that money to pay off her mortgage and purchase more land. She worked the land and continued to buy more land as she had the resources to do so. In contrast, that evening I visited with a one of the county’s homeless as a volunteer in our church’s outreach to the homeless. I asked her how she ended up in the shelter. She said that her husband died and she lost her house as her income was not enough to cover her house payments. That day made clear to me the lesson of the need for life insurance to protect your family.

Before purchasing a life insurance policy, I would recommend that you contact an attorney to see whether an Irrevocable Life Insurance Trust is right for your situation. Although life insurance proceeds are exempt from income taxes, the amount is included in your total estate. An Irrevocable Life Insurance Trust puts the money outside of your estate and in a trust where you specify how the money is used. As an alternative, your revocable trust or trust setup by a will can be a beneficiary for your life insurance proceeds ensuring that the money is spent according to your wishes. This is especially critical if you have a life insurance policy setup to take care of your children. If you already have life insurance, a quick review of the beneficiaries is a prudent step to ensure that the government is not a beneficiary of your insurance. If your estate is named as the beneficiary of your life insurance policy, as a minimum the cost of probate will be increased by the life insurance amount. Putting that money in the estate will also allow creditors to make a claim on the life insurance proceeds. Mistakes in beneficiary designations are becoming more common as life insurance policies are bought on-line or part of a company compensation plan without an insurance agent to advise the policy owner on proper designations.

Inherited IRAs

stevenberger — Sat, 26 Dec 2009 21:51:08 +0000

I recommend using this format: John Smith IRA/ Deceased 1/1/2009/ FBO (for the benefit of) Mary Smith as beneficiary.

Make sure that the financial institutions gets the titling right not only on the statements it sends to you, but also on the internal records it uses for reports to the IRS, he says. Some large IRA custodians use the beneficiary’s name on the statements sent to him or her, but use the formal titling (as in the “John Smith” example, above) on the information it sends to the IRS to avoid confusing beneficiaries.

After you have retitled the inherited IRA, you can stretch out withdrawals from the account across your lifetime, rather than being forced to withdraw the funds sooner. That action gives you a chance to extend the time that tax-deferred earnings can accrue which should reduce the tax burden on the distributions. Distributions for an inherited IRA generally have to be made every year. The first has to be made by Dec. 31 of the year following the year of the original owner’s death.

If you inherit an IRA along with other heirs, such as siblings, you can split up the account, allowing each heir to spread withdrawals across his or her own life expectancy. Otherwise, you get stuck using the life expectancy of the oldest heir.

One other note: Just because you have to leave the IRA intact doesn’t mean you’re stuck with the original investment or custodian. You can use a trustee-to-trustee transfer to move the account directly to another financial institution.

Beneficiary Designations

stevenberger — Thu, 09 Apr 2009 17:24:39 +0000

Beneficiary designation is critical to your estate plan especially when naming who gets the proceeds of your life insurance proceeds and your retirement plans. These funds are transferred directly to the people you name without going through probate. A spouse has the option of rolling over retirement monies into his or her IRA. Required distributions from an inherited IRA are based on the age of the oldest beneficiary. Charities can be named as beneficiaries and the payment will not be subject to income tax. Life insurance proceeds can be paid to a trust and held for the benefit of minor children. These are just a few of the considerations when designating your beneficiaries. Please consult with an attorney as the beneficiary designation must be part of a complete estate plan.