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Top Estate Planning Strategies

estate planning strategies

Regardless of the extent of your current financial holdings, most people should consider having in place some important legal documents. So often we receive frantic telephone calls from spouses or from children facing the difficulty of a spouse or parent who has become incapacitated or deceased, wondering what can be done now that the spouse or parent is unable to handle his or her own affairs.

Most of the problems associated with death and incapacity of a close family member are solved with a standard estate planning package, consisting of the following documents:

1. Will

2. Revocable Trust

3. Financial Power of Attorney

4. Health Care Power of Attorney

5. Living Will (in Nevada referred to as the Directive to Physicians)

6. Documentation as needed to transfer assets to trust

1. Will

When a person dies, in order for the proper heirs to receive control of the deceased’s assets, if the assets are titled in the name of the deceased, the probate process, administered through the state courts, is necessary in order to transfer control, and eventually ownership, of the assets of the deceased.

When a person dies, that person, obviously, can no longer sign “on the dotted line” to sell or transfer the asset, such as the home, or to write checks on their accounts; so the probate process is necessary to grant to a person the legal right to take control of the assets of the deceased.

In the case of real estate, the probate court will receive the Will and then approve the appointment of the personal representative of the estate (or executor), and then that personal representative may then sell or otherwise transfer the real estate under the authority granted by the probate court. Without probate court approval, the property cannot be transferred.

2. Revocable Trust

In order to avoid this probate process, most informed people will choose to work with an attorney to create a revocable trust. The trust is much like a Will, but the difference is, since a trust does not die but merely gets a new trustee, the designated trustee may take over the trust and may transfer or sell the property without going through the probate court process. The same rules apply to any other assets such as bank and investment accounts.

A will is a good first step, but is essentially a ticket to the probate court.

If you wish to facilitate the quicker, less expensive transfer of your estate on death, the trust is much more efficient, does not cost all that much more, and saves the estate the very high costs of going through probate.

So in Nevada, as in most states, the Revocable Trust is the single most important estate planning strategy.

In addition, if you have minor children, the trust allows for the estate to be retained for the minor children’s benefit until they become a bit older, such as 21 or 25, and more capable of handling their inheritance.

Most young couples with children may not have much wealth, but may have life insurance which can be directed to the Revocable Trust to ensure that a trusted person can administer those important life insurance proceeds to aid the children as they grow up, get an education and enter the work force.

With life insurance, we normally recommend the spouse as primary beneficiary and the trust as secondary beneficiary of the life insurance proceeds.

In addition to making things easier at a person’s death, the revocable trust also makes it easier for the spouse or children to gain control and access of a person’s estate in the event of incapacity. If a person becomes incapacitated and can no longer handle their affairs, the trust will allow the designated successor trustee to step in and handle the finances to be sure the mortgage is paid, utilities are paid, and so forth.

If a person becomes incapacitated without the trust being in place, it will often be necessary for the family to go to guardianship court, to have a person appointed as guardian so that finances can be handled. The guardianship process is much more expensive than pre-planning with the trust and since it is up to the court in many cases to decide upon the property person to serve as guardian, this process can at times be contentious, leading to more cost, delay and aggravation.

In most cases, the trust, combined with the powers of attorney, will make a guardianship unnecessary, thereby sparing the family heartache and expense.

When we consult with clients, we see there is a lot of misinformation out there. Your next door neighbor may mean well, but you should look elsewhere for estate planning advice.

Many people get good information with diligent internet research; nevertheless, it is one thing to know what to do; but it is another thing to be able to carry out the plan.

By working with a capable and experienced estate planning attorney, you can get the documents put into place which will carry out your wishes. Do-it-yourself trusts and wills look appealing from a cost perspective, but to put a trust in place with an online form can be a daunting task. Just as most of us hire a capable electrician to rewire our overhead lights, we should also hire an attorney to put our estate plans in place.

3. Financial Power of Attorney

As mentioned above, when you create your trust and will, your attorney will normally assist in preparation of a financial and health care power of attorney. The financial power of attorney will authorize your designated power of attorney, such as your spouse or a child, to act in your name for many legal and financial matters.

4. Health Care Power of Attorney & Living Will

The health care power of attorney is vital in the case where a person is incapacitated to such a degree that the person cannot make rational health care decisions. Most people also wish to make it clear that they do not want to be on life support indefinitely in the case of being in a coma or terminal condition.

The health care power of attorney and living will give a trusted person to make important life and death decisions for you if you cannot speak for yourself.

5. Documentation

For most people, the standard estate planning package of documents describe above will be sufficient to have a proper estate plan in place. Following are some other points to consider.

Once the trust is created, be sure your real estate, bank accounts, etc. are titled in the name of the trust. Your attorney and banker can assist and direct in this process. For example, even if you have a trust in place, if you own real estate that is in your name at death and not titled in the trust, the real estate will like have to pass through the costly probate court process.

Life insurance and retirement accounts should name the proper persons as beneficiaries. Normally the spouse is named as the primary beneficiary, and then the trust is often named as secondary beneficiary. With this approach, the life insurance or retirement account will pass to the spouse without probate, or if the spouse is predeceased, then the insurance or retirement account will pass into the trust for the heirs, again without probate.

Parents have legal authority to act for minor children; however, once the child is no longer under age 18, the parent no longer has legal right to act for the child in the event of the child’s incapacity. It is advisable for the child to execute power of attorney documents so the parent can act in the child’s behalf in the event the child should be injured or incapacitated.

6. Asset Protection

Some people are concerned about potential lawsuits. It is obvious that the risks of being sued are great; why do you think there are so many attorneys spending millions of dollars in advertising about suing somebody. It’s everyday people like you and me who are getting sued.

Insurance is vital, but sometimes, people want to not just insure against a risk, but to insure the asset itself, so that if a particular risk is not covered, the asset itself will be protected from that lawsuit.

Nevada has perhaps the best asset protection trust law in the United States; those who are concerned about risk, whether from the business they are involved in or even just from driving the streets of your home town, the Nevada asset protection trust not only does all the good things the Revocable Trust does, as described above, but done properly and properly managed, can protect your assets from loss due to a lawsuit.

7. Estate Tax Strategies

For those fortunate enough to have estates of $5 million or more, there are multiple estate tax strategies to take advantage of. A full description of these strategies is beyond the scope of this blog. Just be aware that if estate taxes are a concern, there are many techniques that a capable estate planning attorney can implement on your behalf to mitigate the impact of the 40% estate tax.

Free Consultation with Estate Planning Attorney

If you would like to discuss these estate planning strategies with our experience attorneys or have any questions on setting up an estate plan, call Grant Morris Dodds today to schedule a free consultation in one of our offices or a virtual meeting.