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Common Estate Planning Mistakes

Courtesy of Armstrong, Fisch, & Tutoli Attorneys at Law · June 23, 2010 ·

Do you monitor your estate plan as often as you should? Much like regular car maintenance, tuning up your estate can help you avoid big problems later.

First and foremost, do you even have a plan? Many people with little or no property assume they do not need a Will or other estate documents. But this is simply not true. Who will care for your children? Do you want your loved ones to put you on life support if needed? Not planning your estate would allow state laws, or a stranger apointed by the Court, to dictate what happens to your children, your life and your property.

Another common estate planning mistake is not considering taxes. Estate tax laws are currently in a state of confusion. Last year the laws affected estates worth more than three and a half million. This year that law has lapsed and next year the amount may revert to a previous figure of one million unless Congress decides otherwise. You must pay close attention to changes in tax laws during estate planning to ensure your estate isn’t eaten up by hefty tax bills. Of course, a good estate planning attorney will be able to advise you of the best avenues to minimize estate taxation.

Do you regularly update beneficiaries for life insurance policies and other financial accounts? Many people forget this very important part of estate planning. They also often forget to update the amount of their life insurance policies to ensure loved ones will have enough money for living expenses.

Another common mistake is not being aware of gifting laws. If you have joint ownership of any property with a person besides your spouse, that person may have to pay taxes when you pass away. You can avoid this by gifting the item to the person before your death. Each year, you can gift a certain amount of your property to loved ones without them having to pay taxes on it.

Did you know that if you and your spouse intend to leave property to your children, you may help your spouse and children avoid large tax bills by leaving this property in a Trust? At your death, the Trust would pass to your spouse who would have full control until his or her death, and then the Trust could pass easily to your children.

The best way to avoid all of these estate oversights is to speak with your attorney and update all Wills, living trusts, life insurance policies and financial accounts. Preparation now will help your family have a smoother transition later.

How to Ensure your Insurance Money goes to the Intended Beneficiary

Courtesy of Armstrong, Fisch, & Tutoli Attorneys at Law · June 21, 2010 ·

Many people assume that the beneficiaries named in their estate planning documents are the same beneficiaries that will automatically receive the assets in their estate. But not all assets are treated equally when the estate is distributed.

Insurance policies for example, as well as annuities or retirement accounts such as a 401k or an IRA, are transferred to a named beneficiary no matter what your Will says. Because of this, the beneficiary named in the policy or retirement plan will be the one to receive the proceeds, regardless of who might be named in your Will or living trust.

How do you make sure that the intended person gets the money they deserve from your insurance policy?

You should coordinate your retirement plans and life insurance policies with your estate plan. If a change is made after your estate plan is drafted, the beneficiary must be changed on a change of beneficiary form too – simply updating your Will is not enough.

You should also note that most of these forms allow you to name Primary and Secondary beneficiaries. The Primary Beneficiary is the person(s) who should receive the proceeds – Secondary Beneficiaries are treated as “backups” in case the primary beneficiaries die before you do. Please be aware that there may be different income tax results depending on whom is named.

To ensure that your life insurance policies and retirement plans are coordinated with your estate plan, consult a qualified estate planning attorney.

Securities offered through 1st Global Capital Corp., Member FINRA /SIPC, 8150 N. Central Expressway., Ste 500, Dallas, TX 75206 (877) 959-8400, Investment advisory services offered through 1st Global Advisors, Inc.

How To Avoid Ancillary Probate

Courtesy of Armstrong, Fisch, & Tutoli Attorneys at Law · June 18, 2010 ·

Probate is a legal process that distributes the estate to the rightful heirs after a person’s death. The primary probate process covers property in the home state of the deceased while an ancillary probate process covers property in other states.

And, because each state has their own set of laws, the ancillary probate process may distribute property much differently than you expected. Needless to say, dealing with two probate proceedings can be time-consuming and cumbersome. A good estate planning attorney can advise you best on how to avoid ancillary probate, but here is a simple guide to help you with the basics.

Since the probate process covers real property, you can re-title the out-of-state property in the name of a Revocable Living Trust. The property held by the Trust is transferred directly to the beneficiaries named in the Trust upon your death.
People who are married can title the property in joint names with their spouse. The spouse would take control of the property through rights of survivorship and avoid the probate process. Keep in mind however, that this is a temporary fix – ancillary probate will still be required when the other spouse dies or in the unfortunate event that the both spouses die at the same time. This is not the best option if the spouses wish to leave their property to different individuals (like their separate children), or worry about a new spouse ultimately getting the property.

If you are not married or wish to give the property to someone other than your spouse after death, you can still title the property jointly and give survivorship rights to the other person. Your attorney will advise you of the tax and other consequences of transferring property during your lifetime.

Understanding Your 401(k): Traditional vs. Roth

Courtesy of Armstrong, Fisch, & Tutoli Attorneys at Law · June 7, 2010 ·

A 401(k) is a retirement savings plan that is usually employer-sponsored. This means you, as an employee, elect to have part of your earnings placed into an individual 401(k) account, which is managed by your employer. Generally, you can select from among a variety of different investment options for your account, usually a mix of different types of mutual funds. Often, you can also use your account to invest in your employer’s stock. Some employers also “match” part or all of their employees’ contributions by putting additional funds into the 401(k) account.

Since 2006, there have been two types of 401(k)s available (although not all companies offer both types) – the traditional 401(k) and the Roth 401(k). With a traditional 401(k), your contributions are tax-deductible , meaning that the 401(k) is funded with pre-tax dollars and tax-deferred, meaning that you don’t pay income tax on the money in the account until you withdraw it. This type of 401(k) is especially attractive to higher income earners who get a significant benefit from the up-front tax break, and who prefer to postpone the income tax until their 401(k) withdrawals.

A Roth 401(k) works in the opposite way – you pay income tax on money contributed to your Roth 401(k) in the year that you put the money into the account. But, the money also grows tax-deferred, and qualified withdrawals from the account – including investment income – are tax-free. This plan is attractive to lower income earners who don’t make enough to miss the tax break during the year of initial contribution but who benefit a great deal from not having to pay taxes during retirement.

If your employer offers both traditional and Roth 401(k)plans, you may want to divide your retirement savings between the two types of plans so that you can take advantage of the benefits of both.

A new law that became effective January 1st, allows the owner of a traditional IRA or 401(k) to convert these accounts to a Roth IRA. Tax is paid on the amount converted, but future qualified withdrawals are tax-free. For this year only, you can choose to pay the tax this year, or defer the income equally to your 2011 and 2012 tax years. For more information, contact a qualified attorney, tax or financila advisor.

Securities offered through 1st Global Capital Corp., Member FINRA /SIPC 8150 N. Central Expressway., Ste 500, Dallas, TX 75206 (877) 959-8400 Investment advisory services offered through 1st Global Advisors, Inc.

Is Your Estate Plan Current???

Courtesy of Armstrong, Fisch, & Tutoli Attorneys at Law · June 7, 2010 ·

Actor Gary Coleman died last week at age 42 after falling at his home. The memorial service that was planned for this past weekend was cancelled and his body remains in a Salt Lake mortuary. His estranged parents and ex-wife all asserted rights to make medical decisions for him, including funeral arrangements.

According to reports, his former agent says Mr. Coleman who was a Utah resident at the time of his death has a CA will from the 1990’s and his former co-star says he has new paperwork. No one has mentioned a Health Care Directive which would have easily named the person he wanted in charge. So the wait begins for the Court proceedings to start…and if for some reason, the Court finds both wills invalid, his estate can pass under the laws of intestacy to his parents from whom he was estranged for over 20 years…

While you wait to hear the latest, call your own estate attorney and make sure your plan is up-to-date!

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