Planning for Your Unique Family and Financial Goals

Wills can help clarify for your family how things should be handled at a difficult time. They don’t just specify who inherits your estate. They also are a way for you to choose the people you trust to make decisions for you after you’re gone, and for you to express your intentions for your family and your resources when you are not there yourself. We will work with you to create a Will and estate plan that minimizes taxes and expenses, as well as stress to your loved ones. We will also help you evaluate whether your estate plan should include a trust or trusts, whether for tax savings, protecting your children or achieving other goals. We can help you evaluate whether you should have a trust or trusts in your Will, which is called a testamentary trust, or if a Living Trust is more appropriate for your needs. Whether in a Will or a Living Trust, your plan can include marital trusts, such as “QTIP” trusts and credit shelter trusts, as well as trusts for children and Special Needs Trusts. We also consult with our clients regarding ways to avoid probate, such as community property agreements, beneficiary designations, joint accounts and transfer on death deeds, where appropriate. These methods can save expense and stress in some situations, but can also undermine your estate plan, so we advise that they be used with caution.
Do I need a Will?
If you have assets, you should have a Will. It helps your family have clarity at a difficult time. It can also help save on taxes, give gifts to people and charities you care about, and make sure your loved ones are cared for. The process of getting your Will done should also mean you will have your Power of Attorney documents prepared. In these documents you choose who will make financial and health care decisions for you when you can’t, and in some ways they may even be more important than a Will. Your attorney might also suggest other documents to help make your plans effective, such as a Living Trust or a Community Property Agreement.
How can I protect my gift or bequest to my children?
Parents often hesitate to leave assets to a child if they are worried the child may someday lose half those assets in a divorce. A good solution is for parents to give those gifts in a trust that is clearly the separate property of the child. The child can even be trustee of the trust, if the parents believe that he or she understands the importance of keeping separate property separate.
What is a living will?
“Living will” is commonly understood as a person’s instructions for their medical treatment and care if they are no longer to express their intentions themselves. In Washington, such a document is called a Health Care Directive if it is prepared by attorneys. If it is prepared by a medical doctor, it’s called a POLST (Physician’s Orders for Life-Sustaining Treatment).
What should I do after my spouse dies?
After a spouse dies, do not rush to transfer assets into your name, especially if you and your spouse have an estate plan, stepchildren, or assets worth more than about $1 million. First consult with an attorney to ensure the steps you take conform with your estate plan and don’t hurt your ability to make smart financial decisions in future years.
A life insurance trust is a way to provide for eventual estate tax. Here’s how it works. You establish an irrevocable (mostly can’t change it) trust for the benefit of your children, and contribute money to it. The trustee buys life insurance that is outside your taxable estate. So when you die (sorry), the life insurance pays off in the trust and the trustee has money to help pay your estate taxes. Actually such a trust may hold other assets as well, like securities and family LLC interests. This gets those other assets out of your taxable estate as well, and they can provide income in the trust to help pay the insurance premiums.
What is the difference between an irrevocable trust and a life insurance trust?
A life insurance trust is just one type of irrevocable trust.
Is a life insurance trust a type of gift trust?
Yes, a life insurance trust is a type of gift trust.
What can I give to a trust?
You can give almost any kind of asset to a trust. Some assets are better to give than others. For example, you may not want to place an asset that has a low tax basis in the trust. If you do, it won’t obtain a “stepped up” basis at your death which would have allowed your children to avoid capital gains. Consult with an attorney regarding the best types of assets to give to a trust.
Who should be the trustee of my life insurance trust?
Nearly any responsible person or corporate trustee can be the trustee of a life insurance trust. The person who establishes the trust cannot be the trustee.
What is the difference between a revocable and an irrevocable trust?
Trusts are legally enforceable arrangements that detail a property’s ownership and management. The main difference between a revocable and irrevocable trust turns on whether the creator of the trust, also known as the grantor, can change the arrangements detailed in the trust. In an irrevocable trust, the terms cannot be changed by the grantor once it has been created, while in a revocable trust the terms can be changed. Revocable trusts also allow a grantor to recover property back, even after it has been granted to an individual or entity, also known as a beneficiary.
What is an ILIT?
An Irrevocable Life Insurance Trust, also known as an ILIT, is a type of trust set up so that a beneficiary may own a life insurance policy. ILITs are created to create and/or own an insurance policy while the insured individual is alive. An ILIT is a type of irrevocable trust, meaning that once a grantor has placed the policy in ownership of the beneficiary, it cannot be changed nor can it be repossessed by the grantor unless ownership of the trust is relinquished to a trustee. A trustee is an individual given control of a trust with a legal obligation to administer the trust for the purposes specified by a grantor. A spouse or an adult child may still serve as a trustee of an ILIT, and anyone (other than the grantor or the grantor’s estate) can be named a beneficiary of an ILIT. At the time of passing, the insurance proceeds are deposited into the ILIT where they can then be distributed to the trust’s named beneficiaries.
What is the difference between the insured, the owner, and the beneficiary of a policy?
In a life insurance policy, the individual who is covered by the policy’s protections and on whose life it is measured is known as the “insured.” The policy “owner” is the individual who pays the premiums for the policy, who has the right to name the beneficiaries and, in some instances, has the right to make withdrawals or loans against a policy. A “beneficiary” is the individual who will receive the benefits or payments of the policy upon the insured’s passing. Insurance policies may have more than one named beneficiary and proceeds may be divided equally or in specific amounts for each of them depending on the type of policy. Transferring a life insurance policy to an irrevocable trust may help an individual avoid additional estate taxes, so long as the policy is transferred more than three years prior to an insured’s passing.
Is life insurance income? Is life insurance tax free?
Generally, life insurance is not considered income for taxation purposes. In cases where a life insurance policy is surrendered and its value exceeds that of what was paid into it, income taxes may be owed based on the increase in value. Additionally, the sale of certain types of insurance policies is considered taxable income. Depending on the value of an individual’s estate or policy, the income from the sale of the policy may be taxable.
What is the difference between term life insurance and whole life insurance?
There are several differences between term life insurance and whole life insurance. Term life insurance is generally easier and more affordable than whole life insurance, although it does become more expensive as the insured ages. Term insurance provides coverage within specific lengths of time and must be renewed before these are extended. The benefits of a term insurance are only paid when an insured passes away while under coverage. Furthermore, term insurance only provides death benefits.
With whole life insurance, a beneficiary still needs to be within a policy’s coverage to receive a death benefit, but the coverage spans the rest of an insured’s life, not a set term period. Additionally, when the value of the policy reaches a set amount, it can be borrowed or withdrawn. Because of these differences, whole life policies are significantly costlier than term insurance policies.
Our clients commonly use Wills to implement their estate plan. For some, though, a revocable living trust during life might be a good option. Usually, our clients are the trustees of their own trust, and name a successor trustee for later. Assets are held for their benefit for their lifetimes. The trust includes provisions directing where assets pass at death. Estate tax savings tools can be part of the trust agreement. Assets need to be titled in the name of the trust to avoid probate. This may be as simple as changing the name of bank or brokerage accounts. We prepare deeds to transfer real estate to the trust. Revocable trusts also help in the event of illness or incapacity. They do not provide asset protection. Revocable trusts may be a good fit for clients who are retirement age or older or clients who have assets in multiple states, rather than young families just starting out.
What is the difference between a revocable trust and an irrevocable trust?
A revocable trust, as the name suggests, can be amended or revoked entirely during your lifetime. An irrevocable trust is one where you give away the property to a trust that can’t be amended, it can’t benefit you and you can’t get it back. For example, if you wanted to set aside a significant amount of money for your children to get it out of your estate but your children aren’t ready to manage the money themselves, you could set up an irrevocable trust for them.
Why should I avoid probate?
Washington probates aren’t as difficult or expensive as probates in other states. At the same time, some clients prefer to make it easier for their families to settle their affairs without going through probate.
Do I have to get a new tax ID number for a revocable trust?
No, you don’t need a separate tax ID number for your revocable trust during your lifetime. You can just use your own Social Security Number.
Do I have to change my accounts into the name of the revocable trust and change title to my home?
Yes, to avoid probate, you should have your financial accounts changed into the name of the trust. You should also have your attorney prepare a deed to convey title to your home and other real estate to the trust. If you don’t, your heirs can end up having to go through probate even though you drafted a trust.
Do I have to change my IRA or 401(k) into the name of the Trust?
No, IRA’s, 401(k)’s and other retirement assets stay in the name of the employee. But it is important to name the beneficiary on the account. Usually your spouse as primary beneficiary and your adult children as secondary beneficiary is the best fit for income tax purposes. (If there are minor children, you’d want to discuss naming the trust for them created under your Will with your attorney.)
Should I put money into a trust to protect it from my creditors?
A revocable living trust does not protect money from the trustor’s creditors. Creditors still can access funds in a person’s revocable living trust. Even if you call it an irrevocable trust, creditors can reach it if you control it in Washington. This rule is different in some other states. Other strategies may work to protect assets from creditors, depending on the types of creditors you’re concerned about.
Should I put out-of-state property in trust, or in an LLC?
Ideally you should put the out of state real estate into the trust to avoid a second probate in that state. Putting it in an LLC can help avoid probate and can also help with liability. But it can also cause it to be taxed under the Washington Estate tax. It’s important to discuss the pros and cons of this with your attorney.

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GTH attends Goodwill Luncheon

GTH to attend Power Up Goodwill Luncheon
