A Carefully Structured Estate Plan
- Provides for orderly transfer of your property.
- Provides for effective financial management.
- Ensures care for your children and dependents.
- Provides for proper account structuring.
- Minimizes or defers estate taxes.
- Taxes for your beneficiaries.
- Bypasses probate and its related expense.
- Relieves your family of additional debt and responsibility.
Failure to plan could result in undue financial and emotional strain for your family after you are gone. You can help make the transition to a life without you easier for your family with a well thought out plan.
When and How to Start
It’s important to have an estate planning strategy in place as soon as you have acquired assets or are legally responsible for minor children. Your specific plan may begin with a simple will and develop into a full-fledged strategy that includes joint accounts, beneficiaries, guardians, asset protection, and income tax reduction.
If you are ready to begin your estate planning process, call HVFCU Financial Services at 845.463.3366 or arrange for a complimentary, no-obligation consultation. If leaving a message, please be sure to provide your name, contact information, and whether you prefer to be reached by phone or email.
Don’t let industry jargon prevent you from planning your estate. Our glossary can help acquaint yourself with some basic estate planning terminology.
Estate Planning Tools
Click a topic to learn more about each tool.
A Will is the most critical element of your estate plan. Without a will, a state court will choose an administrator for your estate upon your death. Regardless of any wishes you may have had for your property, it will be distributed according to state laws. Making a will and keeping it up-to-date enables you to:
- Make provisions for family and loved ones
- Name an experienced and trusted executor
- Establish trusts to manage inheritances to minors
These tools may have a place in your estate plan as well:
|Living Wills||Provide for what kind of medical care you do or do not wish to have when you are unable to voice your desires|
|Living Trusts||Allow you to transfer your assets to a non-public-record trust, managed by a trustee|
|Pour Over Provisions||Enable you to direct any assets not held in your living trust to the trust upon your death, unifying your estate’s assets under one manager|
|Joint Ownership of Property Between You and Your Spouse||Passes that property to your spouse outside of probate upon your death|
|Community Property||Does not pass automatically to your spouse upon your death. Without a will, such property would pass according to the Laws of Interstate Succession|
|Beneficiary Designations||Can allow significant assets to pass outside of probate to beneficiaries. Life insurance proceeds, annuities, and IRAs are among the assets that may be passed through beneficiary designation|
Enable you to transfer assets to your heirs free of Federal estate tax, by dividing your estate into two parts upon your death. One part passes directly to your spouse while the other is placed in a trust created by your will.
A Two-Trust Estate Plan, using a credit shelter trust along with one other trust, saves estate tax the way a credit shelter does, but also places the other assets that pass to your spouse under the marital deduction in a trust, rather than passing to your spouse outright. You may give your spouse a lifetime power to distribute trust property, or give your spouse power to distribute property only by will.
QTIP Trusts, or Qualified Terminable Interest Property (QTIP) trust gives your surviving spouse a life income while you are able to choose who will receive property in the trust after your spouse¹s death. Your spouse may have to pay estate tax on QTIP trust assets but the assets themselves must be distributed as you have directed in your trust agreement.
Life Insurance coverage allows your family to maintain their current lifestyle after you are gone. For large estates subject to tax, life insurance can help pay estate taxes without liquidating assets.
Lifetime Gifts to Family, Friends, and Charitable Organizations within your lifetime can save on estate and gift taxes, preserving assets for your heirs.
Charitable Gifts made during your lifetime or upon your death can also help reduce estate taxes. Gifts can be made outright or in a trust. Charitable gifts named in your will may be claimed as an estate tax deduction by your estate.
Gather Information to Start
To aid in planning your estate, it’s helpful to have as much of the following information on hand as possible.
- The names, addresses, and birth dates of your spouse, children, and other relatives whom you might want to include in your will. List any disabilities or other special needs they may have.
- The names, addresses, and phone numbers of possible guardians (if you have young children) and executors or trustees.
- The amount and sources of your income, including interest, dividends, and other household income, such as your spouse’s salary or income your children bring home, if they live with you.
- The amounts and sources of all your debts, including mortgages, installment loans, leases, and business debts.
- The amounts and sources of any retirement benefits, including IRAs, pensions, Keogh accounts, government benefits, and profit sharing plans.
- The amounts, sources, and account numbers of other financial assets, including bank accounts, annuities, outstanding loans, etc.
- A list of life insurance policies, including face amount, cash value, owner, insured, beneficiary, and loans against the policy.
- A list (with approximate values) of valuable property you own, including real estate, jewelry, furniture, jointly owned property (name the co-owner), collections, heirlooms and other assets. This list could be cross-referenced with the names of the people you might want to leave each item to.
- Any documents that might affect your estate plan, including prenuptial agreements, marriage certificates, divorce decrees, recent tax returns, existing wills and trusts, property deeds, and so on.
Resources for Your Benefit
You should always review your particular situation with your attorney or other advisors to see if any of these tools can be of benefit to your situation and added to your overall estate plan. We have a referral list of qualified tax accountants and attorneys in the area to help you in developing your estate plan. Brief overviews of referred affiliates are included in this brochure. These affiliates have gone through an extensive qualifying process to ensure the highest level of quality service.
This material is intended for general information only and is not intended to provide specific advice or recommendations for any individual. Consult a legal or tax advisor regarding your specific situation.
Investments are not deposits, are not obligations of the credit union, are not NCUA insured, have no credit union guarantee, are not guaranteed by any federal government agency, or by any affiliated entity. Investments involve risks, including the possible loss of principal. HVFCU Financial Services Consultants are registered representatives of and securities and insurance products are offered through LPL Financial and its affiliates, Member FINRA /SIPC.
Estate Planning Glossary
A trust designed to make sure the personal estate tax exemption of each spouse (currently $1.5 million) is used to the fullest extent possible, while allowing the surviving spouse to have use of the assets of the deceased spouse during the remainder of the surviving spouse’s lifetime.
The person appointed by the court to supervise your estate if you fail to appoint an executor in your will.
The person appointed in a Durable Power of Attorney who acts to protect the financial interests of the person who is unable to speak for him or herself.
Annual Gift Tax Exclusion
An amount you can give to individual donees, without utilizing any portion of your applicable gift tax credit. Currently, the amount is $12,000, provided the gift is a present interest gift.
An agreement signed before marriage where people can limit their rights to alimony or property in divorce. This is also known as a pre-nuptial agreement. In estate planning, a person can waive his or her right of election.
Applicable Estate Credit
A credit deducted from your federal estate tax. The credit equals $780,800 in 2007 which effectively exempts transfers of assets valued at $2,000,000. Thus if your estate is valued at $1,500,000 or less, there will be no federal estate tax. The amount exempted from tax by the applicable estate credit is set to increase to $3,500,000 on a phased-in schedule through 2009.
Applicable Gift Tax Exclusion
The amount of lifetime transfers that can be made free of gift tax. Under current law, the amount is fixed at $1,000,000.
An individual designated in a power of attorney to act as the agent of the person who executed the document.
A person you have designated to receive benefits when you die.
The amount that is subtracted from sales proceeds to determine gain or loss for income tax purposes.
The property or money you leave someone in your will. Attorneys call a transfer of real estate through a will a “Devise”.
A trust which is set up at your death with an amount up to the applicable estate exclusion amount available at that time. Your spouse receives income and any necessary money (subject to restrictions) for the rest of his or her life, and then your children or other survivors get the remainder. This trust is designed to take advantage of both spouse’s applicable estate credits.
The ability for a person to understand his or her rights. Most legal documents require the person signing to have capacity.
Gain from the sale of a capital asset on which you may have to pay income tax.
Cash Surrender Value
The amount of cash available to take out of a life insurance policy. There is no cash surrender value in term life insurance.
A written instrument which supplements or modifies a will.
Property that is acquired by married couples in community property states and that is treated as owned equally by both husband and wife.
Credit Shelter Trust
See Bypass Trust.
Durable Power of Attorney for Health Care
A written document in which an individual designates another person to make health care and health-related decisions in the event that the individual becomes incapacitated.
Durable Power of Attorney for Property
A written document in which an individual designates another person to make his or her property and property-related decisions in the event that the individual becomes incapacitated and is unable to do so.
The legal entity that succeeds a person at his or her death. The estate stays in existence until all debts and taxes are paid, and remaining assets are distributed to the individuals named in the will.
The collection of steps one takes to provide loved ones with the protection they need after one dies. This involves appointing guardians, executors, and planning for the most equitable and tax efficient distribution of assets.
A tax that is imposed at a person’s death, on the transfers of some types of property from their estate to heirs and beneficiaries.
The person you appoint to supervise your estate after you die.
The legal term for a female executor.
The treatment doctors and hospitals provide incapacitated patients to keep them alive. Such treatment includes artificial respirators and feeding tubes.
A person or institution that is legally responsible for the management, investment, and distribution of funds; i.e. the trustee identified in a trust.
The provision in the gift tax law that allows married individuals to assume that a gift by one spouse was given half by each spouse. This helps larger gifts qualify under the annual gift tax exclusion.
The part of the Transfer Tax system that requires you to pay tax on certain transfers of assets during your life.
The person who creates a trust and contributes the property.
The person you appoint to have custody of your minor child should you die.
Health Care Agent
A person named in a Medical Durable Power of Attorney to make medical decisions for someone else.
A person’s inability to act on his or her own behalf, i.e. the “sound mind” requirement for drafting a valid will. A court makes a finding of incapacity. Intestate – A term used when a person dies without a will.
Irrevocable Life Insurance Trust
A trust where insurance is the main asset. When you die, the beneficiaries of the trust get the assets or the trustee manages the assets to support these individuals. If done correctly, this is an excellent way to prevent the policy from being included in any estate tax calculation, while still benefiting your loved ones.
Joint Tenancy With Right of Survivorship
A title that is often placed on co-owned property. At the death of one owner, the other owner will be legally entitled to sole possession of the property, regardless of what provisions are made in a will. A husband and wife often use this form of ownership.
Laws of Intestacy
The rules of the state that decide how assets are to be distributed when a person dies without a valid will.
Letter of Instruction
A set of directions and important information that assists survivors in locating assets and making decisions on behalf of the deceased.
A revocable trust established during a grantor’s lifetime that is used for the placement of some or all of the grantor’s property. In a situation involving a married couple, a basic living trust does not effectively use the personal estate tax exemption of either spouse (the amount of a deceased person’s estate that may pass to his or her heirs without estate taxes, currently $1.5 million). Because of this deficiency of a basic living trust, an AB Trust is often recommended instead to married couples with substantial assets.
A binding legal document that sets forth a person’s wishes regarding the use of life-sustaining treatment in the event that he or she becomes terminally ill or permanently unconscious.
A federal tax deduction that allows one spouse to pass his or her estate to the other spouse without having to pay estate or gift taxes.
Medical Durable Power of Attorney
A document that allows a person to appoint someone (the Health Care Agent) to make medical decisions for the person during incapacity.
A decedent dies without a valid will, so that his or her estate passes to heirs based on the laws of descent and distribution of his or her state.
An agreement signed after marriage where people can limit their rights to alimony or property in divorce. In estate planning, a person can waive his or her right of election.
Power of Appointment
A legal right given to a person in order to allow him or her to decide how to distribute a deceased person’s property. A “general” power of appointment places no restrictions on the named person, while a “limited” or “special” power of appointment places restrictions on who may receive distributions.
Power of Attorney
A written document that gives one person the legal authority to act on behalf of another person.
See Ante-Nuptial Agreement.
Present Interest Gifts
Gifts that allow the recipient to instantly get access to the property. Most gifts made in trust need to be properly structured to qualify as present-interest gifts. Only present-interest gifts are eligible for the annual gift tax exclusion.
The process whereby the court reviews your estate to make sure that the will is authentic, that all actions against the will are heard, and creditors are paid before the assets are paid out to the beneficiaries in the will.
The assets the court has control over in probate. Assets held in joint accounts or assets that have named beneficiaries on the title are not part of the probate estate.
Qualified Terminable Interest Property Trust (QTIP) – QTIP Trust
A trust designed to permit a spouse to transfer assets to his/her trust while still maintaining control over the ultimate disposition of those assets at the spouse’s death. QTIP Trusts are particularly popular in situations where a person is married for a second time but has children from a first marriage for whom he/she wants to reserve assets.
Right of Election
The legal right of a surviving spouse to elect to take either what the deceased spouse gave under the will or the share the spouse is entitled to under state law.
Simultaneous Death Clause
Clause in a will that specifies that if your spouse dies within a short period of time after you do (within six months), your executor should dispose of your assets as if your spouse died before you (prevents your family from being left out).
The amount you have to pay estate tax on. This is your gross estate less any expenses, debts, taxes, certain deductions, and exemptions.
When two or more people have separate undivided interests in the same property. A tenant-in-common can sell his or her interest in the property without the permission of the other tenant.
The person for whom a will is prepared. You are the testator of your will.
The legal term for a female testator.
The gift, estate, and generation-skipping transfer tax the Federal government assesses when you transfer your assets.
A written document providing that property be held by one (the “trustee”) for the benefit of another (the “beneficiary”). A trust may be created during the grantor’s lifetime or after his or her death.
The legal document that creates a trust and dictates its rules of operation. Trust Terms – The rules that govern how the trust operates.
A person named in a trust document who will manage property owned by the trust, and distribute the trust income or property according to the terms of the trust document. A trustee may be an individual or a business.
Unlimited Marital Deduction
Deduction given to the first spouse to die allowing his or her estate to pass to the surviving spouse free of estate tax.
A document that directs how assets are to be distributed when a person dies, names a person who will supervise the distribution, and can also name guardians for your minor children.