|In planning your estate, you most likely have concerned yourself with “big picture” issues. Who inherits what? Do I need a living trust? However, there are numerous details that are often overlooked, and which can drastically impact the distribution of your estate to your intended beneficiaries. Listed below are some of the most common overlooked estate planning issues.
Liquid Cash: Is there enough available cash to cover the estate’s operating expenses until it is settled? The estate may have to pay attorneys’ fees, court costs, probate expenses, debts of the decedent, or living expenses for a surviving spouse or other dependents. Your estate plan should estimate the cash needs and ensure there are adequate cash resources to cover these expenses.
Tax Planning: Even if your estate is exempt from federal estate tax, there are other possible taxes that should be anticipated by your estate plan. There may be estate or death taxes at the state level. The estate may have to pay income taxes on investment income earned before the estate is settled. Income taxes can be paid out of the liquid assets held in the estate. Death taxes may be paid by the estate from the amount inherited by each beneficiary.
Executor’s Access to Documents: The executor or estate administrator must be able to access the decedent’s important papers in order to locate assets and close up the decedent’s affairs. Also, creditors must be identified and paid before an estate can be settled. It is important to leave a notebook or other instructions listing significant assets, where they are located, identifying information such as serial numbers, account numbers or passwords. If the executor is not left with this information, it may require unnecessary expenditures of time and money to locate all of the assets. This notebook should also include a comprehensive list of creditors, to help the executor verify or refute any creditor claims.
Beneficiary Designations: Many assets can be transferred outside of a will or trust, by simply designating a beneficiary to receive the asset upon your death. Life insurance policies, annuities, retirement accounts, and motor vehicles are some of the assets that can be transferred directly to a beneficiary. To make these arrangements, submit a beneficiary designation form to the financial institution, retirement plan or motor vehicle department. Be sure to keep the beneficiary designations current, and provide instructions to the executor listing which assets are to be transferred in this manner.
Fund the Living Trust: Unfortunately, many people establish living trusts, but fail to fully implement them, thereby reducing or eliminating the trust’s potential benefits. To be subject to the trust, as opposed to the probate court, an asset’s ownership must be legally transferred into the trust. If legal title to homes, vehicles or financial accounts is not transferred into the trust, the trust is of no effect and the assets must be probated.
Incorporating a business in California offers a number of advantages that aid in the protection of both assets and privacy.
A California Corporation will protect the individual from personal liability. A single individual can hold all offices including: Director, Shareholder, President, Secretary, and Treasurer.
Incorporating in California can allow you to take advantage of tax deductible benefits such as health, accident, disability insurance, life insurance, and medical reimbursement plans.
Corporations that have fewer than 75 shareholders can elect S corporation status which allows for the profits to flow through the company and directly to the shareholders of the corporation without being taxed.
Limited Liability Companies are a preferred asset protection vehicle of many business owners as well as real estate owners. The LLC is a non-corporate business entity that is taxed as a partnership rather than a corporation.
As a result of being taxed as a partnership, an LLC is not subject to corporate income tax. Income is only taxed as personal income when you receive income or assets from the LLC. The LLC also protects the personal assets of the members and the officers of the LLC from creditors. The transfer of shares of an LLC can be greatly restricted by the operating agreement of that company.
Even if a creditor obtained a membership interest in the LLC, they would only be entitled to their share of profits and would not become a voting member of the LLC unless the board voted unanimously.
This provides the members greater control over both the present and future management of the LLC. The benefits of forming an LLC begin immediately upon formation and registration with the Secretary of State.
TINATINUM ASSET PROTECTION
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Santa Ana, CA, 92706
Tel: (714) 827-9955
Fax: (714) 827-9966