mahoning valley historical society


1920's estate


services: Estate & Gift Planning

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Estate Planning FAQs:

Will avoiding Probate save my estate from paying estate taxes?

No. Probate and Estate Taxes are two very different issues.

Simply stated, probate is a Court supervised estate administration. It is one mechanism by which assets are distributed to a decedent's beneficiaries. Assets that pass to beneficiaries by contract are non-probate assets and are neither part of the probate estate nor governed by one's will. Examples of such contractual arrangements include beneficiary designations, payable or transfer-on-death registrations and joint tenancy ownership. Therefore, probate determines how certain assets pass to beneficiaries.

Estate taxes are determined not by how assets pass to beneficiaries but according to what passes. That is, the tax focuses on assets either owned or controlled by the decedent and the value of such assets at the time of death. Estate planning presents a unique opportunity to utilize techniques designed to accomplish wealth transfer goals while reducing overall tax liability. Depending upon the size and complexity of the assets owned, the techniques may range from gifting programs to an assortment of trusts and other legal entities. Since personal objectives vary from person to person, each estate plan must be custom tailored to fit the individual.

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Do I lose control over my assets when I fund a living trust?


Depending upon the language of the trust agreement, most living or revocable trusts are designed to give the creator maximum flexibility in amending or revoking the trust or controlling investments and/or distributions. The creator retains this power until death or disability. Some living trusts even name the creator as the initial trustee, giving them even more control.

Living trusts are most useful when funded during the creator's lifetime. Funding simply means re-registering assets so that they are owned by the trustee for the benefit of the creator and his or her beneficiaries under the terms of the trust agreement. Care must be used to ensure that re-registration of various assets is in compliance with applicable laws. Tax qualified assets, such as IRAs, retirement plans and annuities, should not be re-registered due to likely adverse tax ramifications. Proper coordination of beneficiary designations for life insurance policies and retirement plans is also important.

Additional advantages of funding a living trust include probate minimization, privacy, enhanced asset management and reduced court costs, legal fees and bureaucracy.

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Is my estate plan complete once I sign my legal documents?

No. A well drafted estate plan can be totally undermined if assets are owned incorrectly.

Although legal documents are effective when signed, one must coordinate lifetime asset ownership with the estate plan enacted. That is, if the estate plan is designed to collect all assets into a trust but those assets are owned in such a way that they automatically pass to an individual, nothing will be collected by the trust.

For example: Assume that you own all of your assets either jointly or payable-on-death or transfer-on-death with your spouse and children. Also assume that your life insurance beneficiary designations name your spouse and children. At your death, none of these assets will pass to your trust. They will pass directly and outright to your spouse and children due to the manner in which they were registered or payable under beneficiary designations.

In order to ensure proper coordination of asset ownership with an estate plan, it is often wise to fund living trusts (see the previous answer) and seek competent advice regarding the allocation of assets between spouses.

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