Why Retain An Attorney To Establish A Trust?

You should always work with a lawyer when setting up a trust. A poorly created trust can be confusing, expensive, and/or ineffective. The trouble with do-it-yourself planning is that even if your situation seems simple, you are not aware of and won’t think of the many unusual things that can go wrong, especially with wills and trusts. These mistakes can end up costing you or your heirs a lot more than you saved in legal fees.

If you have a unique situation, need a special needs trust for a disabled beneficiary, or are overwhelmed by a complex or large estate, hiring a trusts and estates lawyer will help you answer any questions and ensure that a legal and effective trust is created.

As both an attorney and a CPA, I am a “one-stop shop” for legal, accounting, tax and financial planning services. I can help people more effectively manage their wealth and establish an estate plan that is coordinated with and fits neatly among all the pieces of their personal lives – household budget, cash flow, investments, education planning, taxes, and retirement planning.

“Why Retain An Attorney To Establish A Trust?” is discussed in more detail in my book “Nothing But The Truth About Estate Planning, Probate And Living Trusts”. Download your copy here: Nothing But The Truth About Estate Planning, Probate And Living Trusts by Larry Israeloff CPA & tax attorney.

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What Assets Can Be Owned By A Trust?

A trust can own almost any kind of asset except for retirement plans. The types of assets that can be retitled in the name of the trust include cash accounts such as checking accounts, savings accounts, money market accounts and CDs; brokerage accounts; non-qualified annuities (and the trust can also be named as the primary or secondary beneficiary); monies owed to you; oil, gas and mineral rights; and royalties, copyrights, trademarks, and patents.
Tangible personal property such as jewelry, clothing, books, household goods, furniture, antiques, collectibles, artwork and pets can also be owned by a trust.

Business interests including shares of stock in a closely held corporation, partnership interests, and membership interests in limited liability companies can also be transferred to a trust, but you should consult any shareholder agreements, partnership agreements, and operating agreements for restrictions on transfers and specific procedures to retitle the shares in the name of the trust.

Finally, real estate can be retitled (or purchased) in the name of the trust, but the transfer requires recording a new deed in the locality where the real property is located.

The Amount of Assets Required To Establish A Trust

There is no minimum amount of money or type of asset required to establish a trust. Although a trust can be funded with a small amount of money, whether or not to create one is a financial decision based on the overall benefits and the estate plan, and not on the amount of the trust itself.

Trusts are discussed in more detail  in my book “Nothing But The Truth About Estate Planning, Probate And Living Trusts”. Download your copy here: Nothing But The Truth About Estate Planning, Probate And Living Trusts by Larry Israeloff CPA & tax attorney.

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Who Are The Parties Involved In A Trust?

estate planning, lawrence israeloff, tax attorney, cpa The person who creates a trust is called the creator, the settlor, or the grantor. The trustee is the person or persons who hold title to the trust property in their name. The trustee has a fiduciary duty to protect and manage the trust property for the benefit of the trust beneficiary. The beneficiary is the person or persons for whose benefit the trust is managed and administered. The creator of a trust can also be the trustee, the beneficiary, or both. A trustee who is not the creator can also be the beneficiary. So although the same person can occupy more than one role in a trust, each of the three roles remain separate and distinct.

The Costs Associated With Setting Up A Trust

A trust is created by signing a trust agreement with the trustee and then transferring property into the name of the trust (which is referred to as funding the trust). A trust does not exist until property is actually transferred into it, even if a trust agreement is signed. It does not take a long time to form a trust – only as long as it takes to draft and sign a trust agreement and then complete the necessary steps (usually the completion of paperwork) to transfer the property into the name of the trust. A trust can cost anywhere from a few hundred dollars to thousands of dollars in legal fees, depending on the complexity of the trust agreement’s terms and the type and amount of property to be transferred into the trust. “The Parties Involved In A Trust” is discussed in more detail  in my book “Nothing But The Truth About Estate Planning, Probate And Living Trusts”. Download your copy here: Nothing But The Truth About Estate Planning, Probate And Living Trusts by Larry Israeloff CPA & tax attorney.

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The Trust As Part Of An Estate Plan

The Trust As Part Of An Estate Plan; LArry Israeloff, CPA & tax attorney, Melville NY 11747

Despite the variety of labels applied to them, all trusts are basically arrangements to hold and control property for the benefit of other people.

To the layperson, trusts can appear complicated. People often think trusts are only for the very wealthy. In reality, trusts can be useful for people of all income levels.

A trust is a legal arrangement under state law governed by a written trust agreement by which property or assets are owned in the name of one or more trustees with a fiduciary responsibility to protect and manage the property for the benefit of another person or persons. A trust divides the ownership of property into two parts: the legal title, which is in the name of trustee, and the beneficial ownership interest, which is managed by the trustee for the benefit of the beneficiaries.

A trust is created by the signing of the trust agreement by the creator (also called the grantor or the settler of the trust) and the trustee. The trust agreement specifies the duties and obligations of the trustee and how the income and principal of the trust will be distributed to the named beneficiaries. Trusts provide considerable flexibility in transferring property from one generation to another.

A trust created during the creator’s lifetime is called an “inter vivos” trust or living trust. A living trust can be either a revocable trust or an irrevocable trust. A revocable trust is a trust that can be changed or revoked by the creator. An irrevocable trust cannot be changed or revoked by the creator (although an irrevocable trust can sometimes be changed or terminated by the trustee under certain circumstances).

A trust created in a will when the creator dies is called a testamentary trust. It is a part of the creator’s estate plan. Testamentary trust is always an irrevocable trust, because the creator is not alive to change or revoke the trust.

Common Types of Trusts

Living trusts (revocable and irrevocable) and testamentary trusts can be created for many different purposes and are referred to using many different names depending on their main purpose, such as asset protection trust, charitable trust, special needs trust, credit shelter trust, bypass trust, dynasty trust, grantor trust, Crummey trust, life insurance trust, personal residence trust, and many others. Despite the variety of labels applied to them, all trusts are basically arrangements to hold and control property for the benefit of other people.

Trust As Part Of An Estate Plan is discussed in more detail  in my book “Nothing But The Truth About Estate Planning, Probate And Living Trusts”. Download your copy here: Nothing But The Truth About Estate Planning, Probate And Living Trusts by Larry Israeloff CPA & tax attorney.

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What Is An Estate Plan?

estate planning, lawrence israeloff, tax attorney, cpaFrom a simple standpoint, many people initially think of an estate plan as having a will. On the more complicated end, some think of an estate plan as an elaborate arrangement only rich people need to plan who gets what out of their millions of dollars. Most people think estate plans only apply to the ultra-wealthy.

But no matter how large or how modest, everyone has an estate. Your estate is comprised of everything you own— your car, home, bank accounts, investments, life insurance, furniture, personal possessions. And just like the wealthy, you probably want to control, with the least expense, how those things are given to the people or organizations you care most about. That is estate planning—making a written plan in advance with instructions stating whom you want to receive the things you own after you die.

 

Estate planning is not just for “the wealthy.” Good estate planning often means more to families with modest assets, because they can afford to lose the least.

Estate planning is discussed in more detail  in my book “Nothing But The Truth About Estate Planning, Probate And Living Trusts”. Download your copy here: Nothing But The Truth About Estate Planning, Probate And Living Trusts by Larry Israeloff CPA & tax attorney.

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What Happens If Someone Dies Without An Estate Plan In Place?

WHAT HAPPENS IF SOMEONE DIES WITHOUT AN ESTATE PLAN IN PLACE? LArry Israeloff CPA & tax attorney

A person who dies is known as the “decedent.” A decedent who dies without a will is known as dying “intestate.”

If a person dies without a will, a court of law must follow state law (instead of the decedent’s desires) to establish who is entitled to receive the decedent’s property. These state laws are called laws of intestate succession. State intestate laws generally direct the distribution of a decedent’s estate based on hereditary succession, i.e., to surviving relatives.

 

The court process that takes place after a person’s death to validate the will or to determine proper intestate succession is known as probate, and is discussed in more detail later in my book “Nothing But The Truth About Estate Planning, Probate And Living Trusts”. Download your copy here: Nothing But The Truth About Estate Planning, Probate And Living Trusts by Larry Israeloff CPA & tax attorney.

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What Is An Estate Plan?

 

WHAT IS AN ESTATE PLAN?, Lawrence Israeloff, Esq., CPA, CFP® The Law Offices of Lawrence Israeloff, PLLC

From a simple standpoint, many people initially think of an estate plan as having a will. On the more complicated end, some think of an estate plan as an elaborate arrangement only rich people need to plan
who gets what out of their millions of dollars. Most people think estate plans only apply to the ultra-wealthy.

But no matter how large or how modest, everyone has an estate. Your estate is comprised of everything you own— your car, home, bank accounts, investments, life insurance, furniture, personal possessions. And just like the wealthy, you probably want to control, with the least expense, how those things are given to the people or organizations you care most about. That is estate planning—making a written plan in advance with instructions stating whom you want to receive the things you own after you die.

 

Estate planning is not just for “the wealthy.” Good estate planning often means more to families with modest assets, because they can afford to lose the least.

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The above is an excerpt from my book “Nothing But The Truth About Estate Planning, Probate, And Living Trusts.

estate planning, living trusts, probate, Lawrence Israeloff, Esq., CPA, CFP® The Law Offices of Lawrence Israeloff, PLLC

 

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Business Entity Formation – What is the Right Strategy for Your New Company?

 

business formation entity; lawrence israeloff tax attorney / cpa; melville nyStarting a new business is exciting, but it requires many important decisions. One of the earliest and most crucial decisions is what type of business entity to form. Your choice of business entity provides structure and a framework for your company. It also influences your company’s relationship and interaction with outside parties. For example, the type of business entity affects its tax treatment with the IRS.

The four main types of business entities to choose from are sole proprietorship, partnership, limited liability company, and corporation. You should consult with a professional to determine which business entity is right for you.

What do you need to consider when choosing a business entity?

Legal Liability

Different businesses tend to have different levels of potential liability. This means the owners might take personal financial and legal risks to operate the company. Personal assets could be seized if legal action is brought against a business. Operating a business through a legal entity will protect personal assets from business-related claims and lawsuits.

Federal and State Taxes

Each business entity has its own unique tax ramifications, and the different entities can each provide different tax savings depending on the type of business involved.

Cost of Formation

There are costs associated with forming and maintaining a business entity. So while each type of entity provides certain benefits, some entities can be expensive to create. If operating a business through an entity provides no protection or benefit in your situation, there is no sense in making the financial investment.

Future Considerations

Each business is different, so it is important to consider the current and future personal and business needs of the owners of a business. Creating a business plan that includes short-term and long-term goals can make it easier to determine the best organization for a business today and into the future.

Forming Your Business Entity

Now that you know what to consider when choosing an entity, what are your choices?

Sole Proprietorship

A sole proprietorship is a business with a single owner operated without forming a separate legal entity. It is the most common and easiest to create. The downside is the single owner is held personally liable for all financial obligations of the business.

Partnership

Partnerships allow two or more people to share the profits and losses of a business. The benefit of this organization is that the entity itself does not pay tax and it can provide liability protection for certain partners. The disadvantage is that at least one partner must be personally liable for the financial obligations of the business.

Corporation

Corporations are legal entities separate from their owners, so none of the owners are personally liable for the financial obligations of the business. Forming a corporation can be expensive, and during the life of the corporation extensive record keeping is required. Certain types of corporations are subject to tax in addition to their owners, so it is important to discuss with an attorney the different types of corporations that are appropriate for your specific situation.

LLC

Limited liability companies (LLC) allow owners to take advantage of the benefits of both corporations and partnerships. This means that all of the owners are protected from personal liability, and the entity itself does not pay tax.

Ultimately, you need to think carefully about which business entity is right for you and your situation. Seek expert advice, consider the unique needs of your business and its owners, and make the most educated decision possible that will benefit the business now and in the future.

 

Source:http://www.irs.gov/uac/Choosing-a-Business-Structure

 

 

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Business Succession – What’s Your Exit Strategy?

Business Succession Exit Strategy; lawrence israeloff cpa & tax attorney, Melville, ny

Business succession planning; what happens to your business once you no longer run it is one of the most important yet often overlooked issues small business owners face.

 

Business succession – what happens to your business once you no longer choose to or are able to run it – is one of the most important and often overlooked issues small business owners face. As you launch your business and get it up and running, your focus is on maintaining and growing that business. Like many issues that involve planning for later in life, it can be unpleasant to think about what will happen when you are no longer able to do what you are doing now.

Unfortunately, a failure to plan can result in the unnecessary end to your business, cost you money and impact the security of future income. Creating your “exit strategy” by establishing a strong plan for succession ensures your business is protected and is one of the most important things you can do as a business owner. A strong exit strategy ensures:

  • Business partners are not left dealing with complicated issues if your exit comes suddenly or prematurely.
  • Insurance benefits are immediately available to pay for your share of the business, so there is no risk of external takeover or a need to force the sale of the business.
  • A timely settlement of your estate, saving your family inconvenience, cost, and further emotional trauma.

Creating Your Business Succession Plan

According to the Family Business Institute, despite the assumption of nearly 90% of current business owners that their family will take over the business, only about 30% of these businesses survive into the second generation. Creating a succession plan ensures your family has the option of taking over the business, but it also allows them the freedom to choose not do so without losing money or forcing the business to fail. How can you create a realistic succession plan?

First, choose a successor. If you want your business to continue on in the hands of a family member, employee, or someone else, put a plan in place now. This gives you an opportunity to discuss succession with the appropriate people and determine if what you envision is also what your successor wants.

Next, choose the legal arrangement for succession. Your options include cross-purchase agreements or entity-purchase agreements. The former is structured so that all of the owners buy and own separate life insurance policies on each of the other owners. Each owner is a policy holder and beneficiary. Should one die, the life insurance proceeds are used to purchase the share of the business that belonged to the deceased. This arrangement only makes sense in businesses where there are few owners.

An entity-purchase agreement is less complicated because it usually involves the purchase of fewer life insurance policies. Such an agreement is structured so that only the business purchases separate life insurance policies on each of the owners. The business acts as both policy holder and beneficiary. If any owner dies, the business uses the proceeds of that owner’s insurance policy to purchase the share of the business that belonged to the deceased.

Your business does not need to end with you, but careful planning on your part is required while you are still here. The sooner you put a plan in place, the better for everyone involved.

 

Sources: http://www.familybusinessinstitute.com/index.php/Succession-Planning/

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Are You Properly Set for Your Retirement? 5 Things You Can Do Now

retirement planning. LAwrence Israeloff, tax attorney, CPAIt is never too early to begin retirement planning. Unfortunately, many people put it off. If you are wondering what you can do now to ensure you are set for retirement – even if it is decades into the future – consider these five tips.

  1. Consider Your Retirement Activity Plans

People dream of their retirement, expecting to be comfortable. But many are unsure how to make the transition to a “life of leisure” once the time arrives. In order to make sure you have enough money to truly have leisure time, you need to determine how that time will be spent.

Are there dreams you have postponed until after you stop working? Do you want to travel? Are you hoping to stay active in your community? Will you be sharing the activities of your retirement with an also-retired spouse? The important thing is to get a handle on your retirement activity plans, so you can do what it takes now to make these dreams a reality.

  1. Create a Savings Goal

Once you know how you intend to spend your retirement years, you can begin planning how much money it will take to live that way without a steady employment income.

Questions to ask yourself:

  • Realistically, how much will it take to maintain your current lifestyle?
  • Do you plan to drastically change that lifestyle once you retire?
  • What will you add and subtract from the way you live now?
  • What does your retirement income future look like, including savings, social security, pensions, etc?

Your goal is to create a ballpark figure you can work toward that will allow you to make your retirement dreams a reality. Once you have a number range in mind, you can better plan to accomplish that savings nest egg goal.

  1. Healthcare

In addition to saving money for healthcare costs as you get older, there are a few specific things you can do now and in the years leading up to retirement that will help you ease the financial burden of your health as you get older. Investing in long-term care insurance is one of the best moves you can make now to protect you in the future. Some say it can be costly, but should you become seriously ill in your senior years long-term care insurance will help protect your savings by paying for a large part of the medical expenses. Plans vary so shop around.

  1. Manage Debt

The sooner you begin to pay down your debts the better your retirement funds will be. Avoid taking on any high-interest debt as you near retirement and focus on paying your higher interest loans as soon as possible. Ideally, you will have no debt by the time you reach retirement, but if this is unreasonable, focus on reducing it as much as possible.

  1. Hire a Financial Advisor

If you are not already working with an expert to help you plan for retirement, now is the time to find someone. Your investment needs are going to change over the years and having a professional in your corner can really make things easier. Discuss the plans you have for retirement with your financial planner and let him or her help you create a plan that will get you to the point you want to be by retirement age.

 

The most important thing to remember about retiring is there are very few rules that are hard and fast that apply to every situation. Some people don’t even want to retire because they enjoy working and fear they will get bored with no job. Others want to retire earlier than usual or are willing to work just a few extra years to build up additional savings. Every individual has his or her own unique situation and should plan accordingly so retirement can be an exciting life transition.

Sources:

http://www.huffingtonpost.com/quora/ten-things-to-do-to-prepa_b_6062612.html

http://www.usatoday.com/story/money/columnist/brooks/2013/02/11/retiree-babyboomer-financial-debt/1891349/

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