Pasadena Estate Planning Attorney-Matthew Goldsby

The following are the most common estate planning techniques along with a brief description of their objectives:

FUNDAMENTAL ESTATE PLANNING

Last Will and Testament: A will is the simplest way to provide for the distribution of your estate in the event of death. Because of its simplicity, it has the added advantage of being the most cost efficient strategy. However, if at the date of death a decedent owns more than $100,000 in personal property (accounts, stocks, cash, cars, clothing etc) or real property, the decedent's will must be admitted to probate and administered by the designated executor in order for assets to transfer to the beneficiaries. As a result, the cost savings to implement a will may be outweighed by the costs incurred to administer a will after death. Nonetheless, a simple will may be appropriate for clients with moderate wealth, with minor children, or with temporary needs (pending a divorce or relocating to another state or country).

Revocable Living Trust: Similar to a will, a revocable living trust provides for the distribution for your estate in the event of death. The primary distinction, however, is that no probate is necessary because a trust is a separate legal entity that continues to exist after your death. If the trust holds title to your assets during your lifetime, then no assets are subject to a probate proceeding upon your death.

Advanced Health Care Directive: In the event you lose your capacity to make health care decisions for yourself, a directive grants someone else the authority to act on your behalf and expresses your desires for health care. This document is particularly important for empowering someone to withhold life-sustaining treatment if you become comatose and there is no hope of regaining your cognitive functioning. In the absence of evidence to the contrary, you are presumed to want to live as long as possible.

ADVANCED ESTATE PLANNING

For those clients exposed to estate tax liability, any number of advanced planning techniques are available to minimize the assessment of estate taxes. These techniques typically have one or more of the following objectives: (1) Estate Reduction, (2) Freezing or shifting appreciation, and (3) Liquidity.

Annual Exclusion Trust: Also known as a Gift Trust, the objective of this irrevocable trust is to reduce the taxable estate by making lifetime gifts in trust. In turn, future appreciation is shifted to the next generation. Currently, a client may transfer to any number of donees assets with a value of $12,000 without filing a gift tax return. These gifts can be made outright or in trust, but special care is required for gifts in trust to assure that the transfers are fully excluded from the taxable estate.

Grantor Retained Annuity Trust (GRAT): By retaining an annuity for a period of years, a client may remove assets from the taxable estate at substantial discounts based on the time value of money. A GRAT is particularly useful for the client who wants to gift more than the annual exclusion amount. The client establishes an irrevocable trust with terms complying with the IRS regulations and, if the client survives the term of the trust, the assets and all accumulated growth pass to the beneficiaries at substantial tax savings. If the client dies before the annuity term expires, the estate planning benefits may be lost, in whole or in part, so careful planning is required.

Life Insurance Trust: Under this strategy, an irrevocable trust is established to own insurance policies on the life of the creator of the trust. The trust is designed to exclude the death benefit from the grantor's estate for tax purposes. The death benefit, however, provides liquidity that may be necessary to administer the estate of the grantor. The grantor must make contributions to the trust, from which the trustee may pay premiums. Special care is required to assure that the contributions either qualify for the gift tax exclusion or comply with gift tax reporting requirements.

Qualified Personal Residence Trust: This strategy involves the transfer of the grantor's residence to an irrevocable trust retaining the right to use and enjoy the residence for a period of years. If the grantor survives the term, the residence transfers to the beneficiaries. Due to the time value of money, the valuation as reported at the time of the initial transfer qualifies for valuation discounts. As a result, depending on the length of the term and the value of the property, this strategy offers substantial estate tax savings.

Charitable Trusts: There are various forms of charitable trusts. The common element among the various trusts is the eligibility for the charitable deduction for estate, gift, and income taxes. Family members can benefit either from the income of the trust or the remainder. In either case, the tax savings offset the amounts supporting a favorite charity, mitigating the economic cost to the family.

Contact an Experienced Estate Planning Lawyer

I welcome the opportunity to put my dedication and experience to work for you. Please contact me to schedule an appointment to discuss your estate planning needs.

Matthew W. Goldsby
Attorney at Law
909 East Green Street
Pasadena, CA 91106

Telephone (626) 792-3419
Facsimile (626) 792-9728
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