Trust Centered Estate Planning

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Paul Sundin, CPA

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The estate plan will usually follow the steps below:

Revocable Living Trust contains detailed instructions for the distribution of assets in the manner the client designates. It may be amended or revoked at any time, for any reason. A Trust is a document created and controlled by the client; it owns assets while still allowing the client to retain complete control. It does not limit any power and authority over the assets, require a separate tax return, or offer any creditor protection. Assets that are owned by a trust are protected from Probate.

Pour-Over Will appointments a legal guardian of a minor child. It also instructs that all assets be transferred to the Revocable Living Trust, ensuring that the instructions of the Trust are carried out for all assets.

Durable Power of Attorney for Management of Property and Personal Affairs is a document which we hope to never use but always provide as a part of good planning. This document appoints a representative to handle financial decisions in the event an individual were to become incapacitated and unable to make such financial decisions. This document again avoids interference by the Court in the form of a Conservatorship.

An Advanced Health Care Directive appoints a representative to make health care decisions in the event of incapacity. In this document, a client may specify wishes for life support or termination thereof. Again, we hope to never use this document, but it is included as part of a comprehensive estate plan so as to avoid complications and expense in the future.

Community Property Agreement is a contract between a husband and wife that states that everything they own together (not separate property) is to be held as Community Property. This simple concept can save much in taxes. When title is held in this manner, upon the death of the first spouse, all assets get a complete step-up in income tax basis. If the surviving spouse then sells an appreciated asset, he or she will face little to no capital gains tax.

Transfer Documents are included in a Trust Centered Estate Plan in order to assign and transfer all assets (such as real estate, stock, business shares, cash and investment accounts, IRAs, and retirement account) to the Trust. Once assets are transferred, they will be distributed according to your wishes and given the maximum protection against Probate and Estate Taxes.

Special Needs Trusts are created for beneficiaries who are receiving any type of government benefits, whether due to disability or otherwise. According to state law, when a benefits recipient receives an inheritance, the benefits can cease. The beneficiary will then have to spend down their inheritance until there is only a very small amount remaining, at which time they will again have to reapply for benefits. Special Needs Trusts strike a very delicate balance of making an inheritance available for use without disqualifying the person from government benefits. This is done by leaving assets for your child rather than to your child. The difference is critical. The assets contained within a properly structured Special Needs Trust are not considered “allocable” in the determination of eligibility status for government benefits. Thus, the Special Needs Trust can supplement rather than replace the government benefits, resulting in improved quality of life, options for treatments not covered by Medi-Cal, etcetera.

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Estate CPA

Gilbert, AZ