(*Interview with Attorney KC Marie Knox starts at 9min:50sec)
Estate Planning Attorney KC Marie Knox was invited to “Love That Dog Hollywood” to speak about the importance of protecting your pet and planning in the event of a tragedy.
Our law firm has always been ahead of the curve in terms of coming up with different aspects of your estate that you should be protecting and planning for if you were to become disabled or pass on. (more…)
Larry S. Hymes and Douglas K. Schreiber are pleased to announce that Anker Reed HSC has become Anker, Hymes & Schreiber, LLP and will continue the Anker Reed HSC tradition of serving your legal needs in the areas of:
The law firm’s headquarters will remain at its current location:
21333 Oxnard Street, First Floor
Woodland Hills, CA 91367
Phone: (818) 501-5800
Fax: (818) 501-4019
For more information about Life Insurance Trusts, you can contact our Estate Planning Attorney in Woodland Hills, Los Angeles today.
Trusts are popular estate planning tools to ensure that families and assets are taken care of when someone passes away. Whether it’s providing for children, endowing charities, or managing real estate, those who create trusts have specific wishes that they expect to be followed, and they expect the trustee to carry out their plans.
But, being a trustee can be a thankless job, not to mention one that can thrust a person with good intentions into the cross hairs of litigation. Courts are filling to over-capacity with cases against trustees, and the matters can get quite complex.
If you are asked to be a trustee, first understand that someone held you in very high esteem and had confidence that you could oversee his or her legacy and assets. Second, be sure you know what being a trustee entails. It can get very complex, very fast.
With this in mind, here are a few tips that might help make your trustee-ship progress more smoothly.
1) Read the trust. Seems pretty basic, but you might be surprised at the level of detail and complexity contained within a trust. The trustee is obligated to administer the trust strictly by its terms. Not all trusts are the same; if possible, read the document with an attorney familiar with trust administration.
2) Keep track of your time. Some trusts are specific as to how much the trustee is to be paid (e.g., a fixed fee or percentage of the value of the assets). But some trusts, especially those drafted several years ago, may permit the trustee to receive “reasonable” compensation. What is reasonable? Ask 10 people and you’ll get 10 different answers. To avoid possible confusion or challenges, track your hours spent acting as trustee. If there is a dispute as to the trustee’s compensation, at least you’ll be able to demonstrate the actual time spent on trust matters.
3) Provide annual accountings. Every year, be sure to provide the beneficiaries with clear written accountings, which explain the income and expenses of the trust. Why is this important? First, it is required by statute. Second, once the accounting is served on the beneficiaries, the statute of limitations begins to run on claims challenging the accounting. If you don’t serve the accounting, the statute of limitations to file a challenge doesn’t start and you can be on the hook for a long time.
To continue reading: BEING A TRUSTEE IS A THANKLESS JOB: Six Tips on How to Handle the Responsibility and Potential Liability (Part 2)
For more information speak with our Trust Attorney in Los Angeles today.
Removing assets from your estate is a great way to reduce estate taxes before you die.
So, spend some and enjoy it!
Also, you probably know whom you want to have your assets after you die. If you can afford it, why not give them some assets now and save estate taxes? It can be very satisfying to see the results of your gifts– something you can’t do if you keep everything until you die. Appreciating assets are usually best to give, because the asset and future appreciation will be out of your estate.
Assets you give away keep your cost basis (what you paid), so the recipients may have to pay capital gains tax when they sell. But the top capital gains rate is only 15% (assets held at least 12 months). That’s a lot less than estate taxes (45-46%) if you keep the assets until you die.
Some of the most commonly-used strategies to remove assets from estates are explained below. Note that these are all irrevocable, so you can’t change your mind later.
Detailed explanations of each of these strategies for removing assets from your estate will be explained in the upcoming blog entries. For questions on reducing your estate tax, please contact our experienced Estate Planning Attorney in Woodland Hills.
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To determine the current net value, add your assets, then subtract your debts. Include your home, business interests, bank accounts, investments, personal property, IRAs, retirement plans and death benefits from your life insurance.
In the simplest terms, there are three ways:
1. If you are married, use both estate tax exemptions
2. Remove assets from your estate before you die
3. Buy life insurance to replace assets given to charity and/or pay any remaining estate taxes
If your spouse is a U.S. citizen, you can leave him or her an unlimited amount when you die with no estate tax. But this can be a tax trap, because it wastes an exemption.
Let’s say, for example, that Bob and Sue together have a net estate of $4 million and they both die in 2006. Bob dies first. He leaves everything to Sue, so no estate taxes are due then. When Sue dies, her estate of $4 million uses her $2 million exemption. The tax bill on the remaining $2 million is $920,000! ($900,000 in 2007 and 2008.)
But if, instead, Bob and Sue plan ahead, they can use both their exemptions and pay no estate taxes. A tax planning provision in their living trust splits their $4 million estate into two trusts of $2 million each. When Bob dies, his trust uses his $2 million exemption. When Sue dies, her trust uses her $2 million exemption. This reduces their taxable estate to $0, so the full $4 million can go to their loved ones.
This planning can also be done in a will, but you would not avoid probate or enjoy the other benefits of a living trust. Speak with an experienced Estate Planning Attorney in Los Angeles today to plan for your estate taxes.
Depending on how much you own when you die, your estate may have to pay estate taxes before your assets can be fully distributed. Estate taxes are different from, and in addition to, probate expenses (which can be avoided with a revocable living trust) and final income taxes (on income you receive in the year you die). Some states also have their own death/inheritance taxes.
Federal estate taxes are expensive – the rate is 46% in 2006, 45% in 2007 and 2008 – and they must be paid in cash, usually within nine months after you die. Since few estates have this kind of cash, assets often have to be liquidated. But estate taxes can be substantially reduced or even eliminated – if you plan ahead.
Your estate will have to pay estate taxes if its net value when you die is more than the “exempt” amount set by Congress at that time.
Here is the current schedule:
Year of Death “Exemption” Amount
2006, 2007 & 2008 $2 million
2009 $3.5 million
2010 N/A (repealed)
2011 and thereafter $1 million
For additional questions about estate tax law, speak with our experienced Estate Lawyer in Los Angeles today.
• Avoids probate at death, including multiple probates if you own property in other states
• Prevents court control of assets at incapacity
• Brings all your assets together under one plan
• Provides maximum privacy
• Quicker distribution of assets to beneficiaries
• Assets can remain in trust until you want beneficiaries to inherit
• Can reduce or eliminate estate taxes
• Inexpensive, easy to set up and maintain
• Can be changed or cancelled at any time
• Difficult to contest
• Prevents court control of minors’ inheritances
• Can protect dependents with special needs
• Prevents unintentional disinheriting and other problems of joint ownership
• Professional management with corporate trustee
• Peace of mind
For additional questions about living trust, please review our blog series entitled “Understanding Living Trusts: How you can Avoid Probate, Save Taxes and More FAQ” or speak with our Living Trust Attorney in Los Angeles.
This is part 4 of the blog series entitled “Understanding Living Trusts: How You Can Avoid Probate, Save Taxes and More FAQ” discussing frequently asked questions about living trusts, probate, taxes and more.
If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed, using your assets to pay your expenses. If you recover, you automatically resume control. When you die, your successor trustee pays your debts and distributes your assets. All this is done quickly and privately, according to instructions in your trust, without court interference.
Successor trustees can be individuals (adult children, other relatives, or trusted friends) and/or a corporate trustee. If you choose an individual, you should name more than one in case your first choice is unable to act.
Unlike a will, a trust doesn’t have to die with you. Assets can stay in your trust, managed by the person or corporate trustee you selected, until your beneficiaries reach the age(s) you want them to inherit. Your trust can continue longer to provide for a loved one with special needs, or to protect the assets from beneficiaries’ creditors, ex-spouses and future death taxes.
If you die in 2006 and the net value of your estate (assets minus debts) is more than $2 million, federal estate taxes must be paid on the excess at a rate of 46%. If you are married, your living trust can include a provision that will let you and your spouse leave up to $4 million estate tax-free to your loved ones, saving up to $920,000 in taxes.
Not quite. A will can contain wording to create a testamentary trust to save estate taxes, care for minors, etc. But, because it’s part of your will, this trust cannot go into effect until after you die and the will is probated. So it does not avoid probate and provides no protection at incapacity.
Not when compared to all the costs of court interference at incapacity and death. How much you pay will depend on how complicated your plan is.
It should only take a few weeks to prepare the legal documents after you make the basic decisions.
Yes, but you need the right attorney. A local attorney who has considerable experience in living trusts will be able to give you valuable guidance and peace of mind that your trust is prepared properly. In some states, qualified paralegals can now also prepare trust documents; however, they cannot give you legal advice.
Yes, you need a “pour-over” will that acts as a safety net if you forget to transfer an asset to your trust. When you die, the will “catches” the forgotten asset and sends it into your trust. The asset may have to go through probate first, but it can then be distributed as part of your living trust plan.
No. A living trust is for financial affairs. A living will is for medical affairs; it lets others know how you feel about life support in terminal situations.
No, they’ve been used successfully for hundreds of years.
Age, marital status and wealth don’t really matter. If you own titled assets and want your loved ones (spouse, children or parents) to avoid court interference at your death or incapacity, consider a living trust. You may also want to encourage other family members to have one so you won’t have to deal with the courts at their incapacity or death.
For additional questions about trust law, speak with our experienced Living Trust Lawyer in Los Angeles today.
This is part 2 of the blog series entitled “Understanding Living Trusts: How You Can Avoid Probate, Save Taxes and More FAQ” discussing frequently asked questions about living trusts, probate, taxes and more.
Legally you no longer own anything (don’t panic: everything now belongs to your trust), so there is nothing for the courts to control when you die or become incapacitated. The concept is very simple, but this is what keeps you and your family out of the courts.
For additional questions about trust law, speak with our experienced Estate Planning Lawyer in Los Angeles today.
Continue to: Understanding Living Trusts: How You Can Avoid Probate, Save Taxes and More FAQ (Part 3)
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