Everyone knows that an estate plan can ensure your chosen beneficiaries receive the right inheritance. But did you know there are other benefits too? Here’s five things a good estate plan can for you.

1. Protect Against Disability – No, your estate plan can’t prevent disability from striking but it can certainly ensure that you and your estate are protected if it happens. Using an Advanced Health Care Directive and General Durable Power of Attorney can ensure that your medical wishes are followed and that your finances are handled by someone you trust.
2. Provide Incentives to Your Heirs – With the right planning tools, you can do much more than leave your heirs a lump sum estate. Instead, you can create incentives for them to excel and achieve by offering inheritance bonuses for graduating college, getting married or other milestones. You can also set it up so that your heirs’ inheritance matches whatever income they earn each year. If they want a bigger inheritance, they must find a way to earn a better living.
3. Avoid Probate – Yes, with the right tools, your estate plan can help your heirs stay out of probate court. This makes the whole property distribution process much smoother and ensures that the details of your estate remain private.
4. Sponsor A Charity – There are certain types of trusts that allow you to structure assets so that they benefit both your heirs and your favorite charity.  Donating this way also provides significant tax breaks to all parties involved.
5. Protect Dsabled Dependents – A Special Needs Trust can ensure that your disabled loved one continues to qualify for important public benefit programs while still enjoying the benefits of his or her inheritance.

Of course, that’s not all an estate plan can do, but it’s a good start. To learn more about how a good estate plan can make your life easier, contact an experienced and qualified estate planning attorney.

Northern California Estate Planning Counselors, LLP is a member of the American Academy of Estate Planning Attorneys.

The foundation established by the legendary singer Ray Charles recently found itself in the position of having to file a lawsuit against the late singer’s children. The basis of the lawsuit is the allegation that the children have violated an agreement they made with their father shortly before he passed away. The agreements, made two years prior to his death, provided a $500,000 trust for each of his 12 children in exchange for the relinquishment and waiver of any further claims to Ray Charles’ estate.

The lawsuit stems from allegations that the children sent copyright termination notices to various music publishers claiming to be the owners of 51 of Ray Charles‘ most famous songs, including “I Got a Woman“ and “What’d I Say.” The foundation, on the other hand, contends that it is the rightful owner of the songs.

The foundation created by Charles supports research and education programs for the hearing impaired as well as youth education programs. In order to continue to function, the foundation depends on income from the intellectual copyrights in question. The lawsuit contends that Charles’ children have diminished the value of copyrights by creating “an enormous cloud” over the copyrighted material.

Who prevails in the lawsuit remains to be seen; however, it illustrates the need for careful and thorough estate planning. Entering into an agreement with potentially beneficiaries to relinquish claims to your estate can be accomplished, but should be done with the help if an experienced and qualified estate planning attorney to make sure the agreement will withstand a future challenge.

Northern California Estate Planning Counselors, LLP is a member of the American Academy of Estate Planning Attorneys.

A charitable trust is an excellent way to accomplish a number of estate planning goals all at once. If giving to a cause dear to you heart is important to you, then creating a trust allows you to do so even after you are gone. In addition, you can structure a trust to provide for both a charity and non-charitable beneficiaries by creating a lead or a remainder split interest trust. Both lead and remainder trusts may also offer tax and probate avoidance benefits as well. Whether you decide on a lead or a remainder charitable trust depends on a variety of factors; however, understanding how each works is essential to making the choice.

Charitable lead trust: A charitable lead trust provides payments to a charity (or more than one) for a specific period of time after which the assets that remain in the trust pass to a non-charitable beneficiary. Often, the lead interest (portion that is paid out to the charity) will qualify for a charitable tax deduction if the trust is a living trust. An example of a lead trust is as follows: You fund a trust with $100,000. The trust terms call for 10% of the trust assets to be paid out to a charity each year for five years with the remainder interest paid to your children upon termination of the five year term.

Charitable remainder trust: A charitable remainder trust works in reverse of how a charitable lead trust operates. Both a charitable and non-charitable beneficiary are designated. The non-charitable beneficiary receives a portion or percentage of the trust for a specified period of time after which the remainder interest passes to the charity. In the above example, assume that the trust terms call for $1,000 to be paid to your nephew each year for his lifetime. After his death, the remaining trust assets will then pass to the named charity.

If you are interested in exploring tax advantaged strategies for charitable planning, consult with an experienced and qualified estate planning attorney.

Northern California Estate Planning Counselors, LLP is a member of the American Academy of Estate Planning Attorneys.

If you have been fortunate enough to be in a position during your lifetime to donate to charitable causes, then you may wish to continue doing so long after your death. Just as you make plans to provide for your family members and loved ones after your death, you can include charitable giving in your estate plan as well. A thorough consultation with your Sacramento-San Joaquin Valley estate planning attorney is, of course, necessary in order to incorporate your charity into your estate plan; however, there are some key points about charitable giving and estate planning that may be helpful to understand.

A direct gift through your Last Will and Testament or Living Trust are options; however, special types of charitable trusts may offer more flexibility as well as offers probate and tax advantages that a direct bequest does not.

A charitable trust can be either an inter-vivos (lifetime) or a testamentary trust.

If you establish an inter-vivos trust, and distributions are to be made while you are still alive, then the trust will likely need to be an irrevocable trust.

The most common charitable trusts fall into one of two main categories — lead and remainder trusts

A Charitable lead trust provides income to a trust for a specific period of time and then gives the remainder to non-charitable beneficiaries, such as family members.

A charitable remainder trust provides income to non-charitable beneficiaries, such as family members, for a specific period of time, or life, and then gives the remainder to a charity.

A portion of the value of assets used to fund the trust may qualify as a current deduction for income tax purposes.

The amount that passes to a charity may qualify for an estate tax deduction upon your death, decreasing estate tax exposure.

You may be able to reduce capital gains taxes on assets that are used to fund a charitable trust.

If interested in these special types of trusts, the place to start is with a consultation with an experienced and qualified estate planning attorney.

Northern California Estate Planning Counselors, LLP is a member of the American Academy of Estate Planning Attorneys.

Typically, charitable lead trusts and charitable remainder trusts are implemented when your estate exceeds the federal estate tax exemption.  This qualifies both charitable trusts as “advanced” estate planning tools.

Besides lessening or totally avoiding the federal estate tax, there are income tax, capital gains tax, and charitable intent benefits as well.

Simply put, the charitable lead trust provides an income stream to your favorite public charity for a period of years (up to 20) or until the occurrence of a specific event such as your death or the death of the last of you and your spouse to die.

Then, the remaining assets return to your beneficiaries.

The charitable lead trust can be used alone or in conjunction with charitable remainder trusts.

For all intents and purposes, the charitable remainder trust is the opposite of the lead trust.

You receive an income stream for a period of years (up to 20) or until the occurrence of a specific event such as your death or the death of the last of you and your spouse to die.

Then, the remaining assets go to your named charity.

The charitable remainder trust is often used to provide an income stream to pay for life insurance owned by an irrevocable life insurance trust.

There are significant capital gains benefits if highly appreciated assets are used to fund these charitable trusts.  Charities don’t pay income tax so when assets are converted into income producing assets, there is no taxable event.

And, even when you receive your income stream from a charitable remainder trust, it is a 4 tiered interest.  This means that it is not taxed as straight income tax or, even, capital gains tax.

The use of charitable remainder trusts and charitable lead trusts are truly a win – win for everyone. 

Northern California Estate Planning Counselors, LLP is a member of the American Academy of Estate Planning Attorneys.

You may think that charitable planning has sunk into nonexistence.  The current economy and extremely large (i.e. $5 million  in 2011 and $5,120,000 in 2012) lifetime federal estate exemption have made many question the need for charitable planning.

However, charities are pleased to announce that charitable giving remains strong in the United States.

What are the common ways to participate in charitable giving?

• Lifetime gifts
• Private foundations
• Donor advised funds
• Bequests
• Charitable remainder trusts
• Charitable lead trusts
• Charitable gift annuities
• Deferred payment gift annuities
• Life insurance

In this economy, why do people still make gifts to charity?

• To get an income tax deduction for lifetime gifts
• To get their name on the charitable donation list
• To set an example for their children and grandchildren
• To support their favorite charity
• To make their community a better place to raise their children
• Because they are pressured by their work place, church, or friends
• To avoid capital gains taxes when assets are converted into income producing property
• To avoid having their children inherit too much money
• To allow their children to manage their private foundation and to give their children a sense of purpose

How do I make a bequest?

A bequest is made in your will.  Discuss your charitable goals with your estate planning attorney and he will guide you.

How do I know which charitable planning tool is right for me?

Discuss your charitable planning goals with a qualified, experienced estate planning attorney.  Let him or her know your charitable goals, other estate planning goals, questions, and concerns.

For example, if you need more income now and have highly appreciated assets, a charitable remainder trust may be right for you.

Or, if you have a life insurance policy that you don’t need, naming a charity as the beneficiary of your life insurance may make sense as part of your charitable planning.

Northern California Estate Planning Counselors, LLP is a member of the American Academy of Estate Planning Attorneys.