This overview shows important issues to consider when designing and implementing the best real estate plan. Also, I can not stop signing your real estate plan. Designation of beneficiary, follow-up work of fiduciary memorandum must also be completed. The goal is to avoid the pitfall that the plan is not completed. To avoid disasters when there are ruins and trusts, asset ownership and informative designation give assets to spouses, not trusts.
If you do not do anything after reading this, please write "Memorandum to the Survivor" to confirm ownership of the asset as described at the end of this memo.
Comprehensive real estate planning can accomplish many goals such as providing survivors, care for children, determining the flow of assets at the time of death and reducing taxes paid by real estate during real estate management. The most important goal is to be comfortable in knowing that your property will be managed according to your wishes.
Real estate planning pyramid
Building a pyramid helps you to understand everything that goes into real estate plans like nutrition and investment. Each level of the pyramid corresponds to the complexity of a new level of your family and financial situation. In other words, everyone needs Level 1, but later you do not need a more complex level.
Pyramid: Level 1
The first level of real estate planning provides the most basic protection, so it is best suited for a single individual with few children and less assets. This level of real estate planning usually includes the following form.
Health care proxy: In this document you can appoint people who make decisions about your healthcare and treatment if you can not. Choose a surviving spouse and choose the first and second agents as necessary. Some states call such documents "medical directives" or "medical authority of doctors."
Living Will: I will clarify your wishes as to whether you would like to use heroic means to lengthen your life.
Anatomical Gift Instrument: This makes it possible for hospitals to use organs and other body parts for other people who need transplants.
Pyramid: Level 2
The second level is most suitable for individuals in a committed relationship. This level will include all the forms listed on the first level, but a durable power of attorney will be added. This document gives a power of attorney for managing finances to others when you are absent or when you become incapacitated.
Pyramid: Level 3
When you have children you want to make sure they care for both and are offered as you wish. In order to realize this, it is necessary to appoint a guardian for "consideration" and to create a trust for managing assets for "deployment".
The will will be a formal document specifying your personal representative or executive, agent, agent and guardian for children under the age of 18, your debt to your personal agent Repay,
Trust is the created entity and can be used for many purposes. The trustee acts as the owner of the trust and the beneficiary obtains all the profits from what the trust holds. In real estate planning, trusts are used to reduce real estate taxes in various ways. Trust vehicles can also describe how and when assets are distributed. For example, a transferee of a trust can guarantee that assets will not go to children until age 35. Trust vehicles can also provide places where assets flow when all families died without problems. For example, assets could flow to charities and educational institutions.
Assistance for survivors: We need to clarify what your assets and life insurance flows after death are. With this, people making a living are living. Life insurance is necessary even after your investment is not enough, even after you make liquid a certain kind of personal property (eg second house).
Life insurance: Insurance is lacking for a period of time that provides only death benefits between the assets needed to maintain survivors' lifestyle and the available real assets. If you need permanent insurance, as in maintaining real estate liquidity for the rest of your life, you will need to use whole life insurance, variable insurance or other types of insurance.
Asset flow: After determining the assets necessary to support survivors' lifestyle, we decide the flow of assets. For Level 1 and Level 2, for example, you can trust everything directly to survivors, but you can use trust at levels 3 to 6 and even divide some of the assets at gifts at level 6.
Asset control: At levels 1 and 2, survivors can fully control assets. At higher levels, trusted vehicles are used to save real estate taxes. But you also attract attention on assets. You provided surviving spouses, maintain your lifestyle, and hired trustees who continue to be in the interests of other beneficiaries such as children. In this way, the trustee intends to secure trust assets in the best possible way for the longest possible time. Finally, the trustee must distribute the assets according to your instructions. If the asset goes to the survivor, it may not be able to achieve the goal of the real estate plan because it will not be binding in some way to comply with your wishes.
Trustee: In designing real estate plans, many options are developed around credentials selected for a particular role.
Individual Representative or Executive: This is a person who "marshals" all the assets of real estate together, pays death expenses, and transfers ownership of the assets to the surviving spouse or trust. This is about 9 months work.
Guardian: This is the person who chose to love and care for your child when you were absent. The spouse selects a surviving spouse and selects the second or third choice beyond it. This work lasts until each child reaches the majority (18 years old).
Trustee: This person manages the trust assets and needs to make income and sometimes principal contributions to surviving spouses, children, and even grandchildren, so long-term work There is a possibility of potentially. Depending on the conditions of trust, this work continues until the children become young adults.
Design and ownership of the beneficiary: The following describes the ownership and life insurance revenues and the flow of the retirement pension assets.
Pyramid: Level 4
In this level of planning, state tax is treated. Trusts are usually used when there is other benefit that the husband and wife's potential combined property exceeds $ 1 million and you want to make the most of the property by paying taxes. States such as Massachusetts have imposed real estate taxes in excess of $ 1 million. Other states have similar amounts, but in 2019 many things are increasing, including New York, which is consistent with federal credit. Therefore, if you live in a state with real estate tax, additional planning is necessary.
Pyramid: Level 5
The fifth level includes not only the state but also a trust that handles federal property taxes. Congress is still maintaining a unified gift and real estate tax deduction of approximately $ 534 million (inflation adjusted) and a 40% real estate tax rate (from 35% of last year). Furthermore, the unused part of the real estate tax deduction of the deceased spouse is "portable" and can be handed over to the property of the surviving spouse.
In the trust structure, you can create sub trusts so that both credit and monetary deductions are used. This structure utilizes credits at the first and second deaths. By contrast, the intention to fully deliver all the assets to a surviving spouse will only use trust at the second death. Total tax savings on real estate of more than 10 million dollars is over $ 1.75 million for complex property.
Life insurance trust: You can also have irrevocable trust in the owner of every insurance in your life to avoid all taxes on property and to exclude all income died from both wealth. In other words, revenue is completely exempt from real estate tax. However, this requires an irrevocable relocation to the trust. You can not regain insurance. You can use this trust to receive insurance payments that you can pay real estate taxes and you can further protect your real estate after taxes without increasing taxable property.
Pyramid: Level 6
The final level is for complex real estate plans that minimize federal and state real estate taxes through multiple generations. An example of this is trust to skip generations. These trusts transfer assets from the property of the transferor to the grandchild's grandchild. This makes it possible to exempt taxes applied when assets are transferred directly to their children. The assignee's child can continue to enjoy the monetary benefits of the trust by leaving the assets trusted for the grandson of the assignor and accessing the income generated by the trust.
Other organizations: If you want to secure minimal funds for children, such as guaranteeing compensation for university expenses, it is important to separate assets by gift.
529 Plan: 529 plans and trusts can be used for gifts to cover children's university expenses.
After the plan is executed
Design of ownership and beneficiaries
Once the documents and insurance are in place, please check the following and complete.
Eligible plan (IRA, 401k plan etc):
Primary beneficiary - a living spouse (which allows you to post earnings to the IRA and defer income taxes). And
Secondary beneficiary - Your child (or your own revocable, depending on whether your assets are dominated by children or available).
Life insurance and pension:
First beneficiary - When not owned by an irrevocable trust such as a group period, you can revoke your own revocable trust (for example, receive property tax payments with credit on the first death). And
Secondary beneficiary - a surviving spouse (if trust is designated for some reason).
Other assets
Consider changing ownership of any jointly owned property to ownership. Assets held as cooperative contracts with viable rights are brought to survivors through the operation of the law and will never be accessible to revocable trusts. (In order to realize a complete tax reduction effect, I would like to confirm that sufficient assets are in the trust.)
You may want to transfer investment accounts to your revocable trust and provide funds to the trust. This will not affect your income tax.
You can now also fund your revocable trust. This will save considerable time for executives and lawyers. This is because you have to do after your death.
Memorandum to survivors
Create a reference book or copy important documents to the financial plan, identify the original location, list important contacts, instructions to executives and trustees, important notes for family and friends . Update the new asset statement at least once a year (take this into consideration when gathering information on tax preparation). Specifically, the list (and copy) should include the following:
Place of original will, trust etc.
Position of health care agent and durability of attorney;
List of experts with contacts: doctors, lawyers, CPA and so on.
List of trustees with contact information: medical agents, guardians, executives and trustees, attorneys on durability of attorneys, etc.
Insurance policies such as the original title and the location of valuables.
# 5 or 7 valuables and items safe place.
A list of all bank accounts and investment accounts, the location of share certificates or other documents for investment.
A list of all mortgages, loans, credit card accounts.
Appraising by value or listing of other products;
All automatic debits (stop, change) that need to be addressed. And
A list of all password-protected accounts (email, online banking, credit card etc.), password location, password to access the password
Also, please let us know how to help real estate plans in turn after reviewing this overview.
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