Blog Archives - Page 2 of 3 - Bredemann & Shellander, PLC

About Bredemann and Shellander

August 8, 2016 by mary.r

Richard Bredemann has been a practicing partner of Bredemann and McFarlane PLC since 2004. He has been practicing law and serving the residents of Arizona for over 40 years. Together with Thomas Shellander he has created a new firm, Bredemann and Shellander PLC, located in Scottsdale, Arizona. Thomas Shellander is an experienced estate planning and tax attorney and CPA. The new firm of Bredemann and Shellander bring a combined 65 years of experience and expertise to their clients. Richard and Tom are excited to continue to serve their Arizona and Wisconsin clients and all their estate planning needs.

Learn more about the firm, its philosophy and areas of practice at the new website which is now live: https://estateplanaz.com/.

How to Minimize Tax with a Trust

August 5, 2016 by mary.r

Making long term decisions about what should happen to your assets and money after you are gone can be difficult. But putting these decisions in a legal document is critical to making sure your wishes are followed. You have several options when deciding what legal document to use to communicate your last wishes such as a will or trust. A trust functions differently than a will and has the opportunity to provide you and your heirs with tax savings. Below are examples of how to minimize tax with a trust.

What is a trust? A trust is a private document that provides instructions on how to distribute your assets and wealth after your death. A trust also allows you the opportunity to make your wishes known regarding healthcare decisions and how you would like your remains handled after death. Fidelity investments, a well known asset management company, describes the benefits of trusts stating,

“Control of your wealth. You can specify the terms of a trust precisely, controlling when and to whom distributions may be made. You may also, for example, set up a revocable trust so that the trust assets remain accessible to you during your lifetime while designating to whom the remaining assets will pass thereafter, even when there are complex situations such as children from more than one marriage.

Protection of your legacy. A properly constructed trust can help protect your estate from your heirs’ creditors or from beneficiaries who may not be adept at money management.

Privacy and probate savings. Probate is a matter of public record; a trust may allow assets to pass outside of probate and remain private, in addition to possibly reducing the amount lost to court fees and taxes in the process.”

A trust has many benefits that could make it the best tool for your long term estate planning. You will need to work with an experienced estate attorney such as those at Bredemann & Shellander, PLC to put together all pertinent information for your trust. Your individual circumstances and entire financial picture will determine which financial vehicles and tax savings strategies are best for you. Here are examples of different types of trusts and how they can help you minimize your estate tax burden.

Irrevocable Life Insurance Trust (ILIT): ILIT is a holding vehicle. You can put your life insurance policy in a trust, thereby removing it from your estate. You and your loved ones can still retain the benefits of the insurance policy after you die but you will no longer own the policy and the proceeds are not included in your estate. This an irrevocable trust and once you move the life insurance policy to the trust you cannot put the policy back in your name.

Charitable Remainder Trust (CRT): A charitable remainder trust allows you to donate to your favorite charity and earn some tax breaks for your estate. You can place a piece of property or assets in a trust and identify your qualifying charity as the beneficiary. You will receive income from the trust for a specified duration of time or your entire lifetime, whatever is specified in the trust. At the designated time, usually at your death, the property, or asset, would then transfer to the charity. By donating the asset to a charity you remove it from your estate and it is no longer subject to estate tax. You can also earn income tax deductions and avoid capital gains. A CRUT or CRAT are two common types of charitable remainder trusts. The differences between a CRUT (or charitable remainder unitrust) and CRAT (charitable remainder annuity trust) are described at: http://www.philanthromedia.org/archives/2004/10/crat_versus_crut_choosing_the.html. This site explains that with a CRUT you can receive a fixed annual payout of 5% but that payout will vary based on the market and how your assets are invested. With a CRAT, you would receive a fixed percentage of the asset based on the value at the time of donation. Consult an experienced estate planning attorney at Bredemann & Shellander, PLC to see if a CRT is an appropriate financial vehicle for you.

Tax savings should be just one part of your estate plan. You and your estate planning professional should consider your long term goals for your finances and legacy when deciding if and how to structure your trust. Work with your estate attorney to create the best structure for you and your beneficiaries.

Why Estate Planning is Important if You are Single?

July 7, 2016 by mary.r

Estate planning for singles is as important as for estate planning for couples. Many people think of estate planning and think that is the opportunity to leave your assets to your children or spouse. If you are single you may think that estate planning is not something you need to consider. Single or married, estate planning is something you should do. Below are four reasons why estate planning is important if you are single.

Estate planning gives you the opportunity to decide what happens to your assets when you die. If you do not create and execute an estate plan, including a will or trust, your assets will be distributed as determined by state law. About money describes what can happen to your assets after death if you do not have a will or trust in place. “Here is what will happen under the Arizona intestacy laws if the deceased person is…

Survived by descendants and no spouse – In this case the deceased person’s descendants will inherit the entire probate estate, per stirpes.

Survived by a parent or parents and no spouse or descendants – In this case the parents will inherit the entire estate in equal shares or the surviving parent will inherit the entire estate.

Survived by a sibling or siblings and no parents, spouse or descendants – In this case the siblings will inherit the entire estate, per stirpes.

…In the unlikely circumstance that the deceased person is not survived by any family members as described above, then the entire probate estate will escheat to the State of Arizona.” If you have strained family relationships or would like a distribution different than those listed above you should invest some time in estate planning. State laws are also subject to change. The guidelines given above could be changed and your assets distributed in a way that you do not agree with. If you are single, you can create a will or trust that dictates how to distribute your assets to family members, friends or charitable organizations. Use estate planning to establish who your beneficiaries are and how much of your estate each will receive. Don’t leave this to be determined by the state.

Estate planning allows you to be in control of your healthcare. If you are in a serious accident and need medical care you may not be in a position to communicate your wishes. The official website of the Arizona Medical Board describes advance care directives and why they are important stating, “Advance care directives, like a Living Will and/or a Durable Health Care Power of Attorney, allow others to follow your directions about your health care. They are your “blueprint” for what you do or do not want done in given situations. Advance care directives can provide specific instructions on how to proceed or the information your surrogates need to fulfill your intent. For a directive to be useful and effective, you must discuss your wishes with your primary care physician and close family members, especially the person you want to be in charge of carrying out your wishes.” The site goes on to explain that if you do not have a healthcare directive in place the healthcare provider may contact the following, in this order: your adult children, your parents, your siblings, and then close friends. An advanced care directive, will or healthcare power of attorney is critical to make sure that the person you designate is making vital healthcare decisions for you in the event of your incapacitation. You can also make sure that your wishes after death are carried out such as having a burial or cremation. It can be difficult to think about things like life support, levels of medical care in serious situations and death, but it is important for you to decide how you would like these situations handled. It is also important to make sure you communicate your wishes through your estate plan, especially if you are single, and do not have a spouse to automatically make these decisions for you. After consulting with an estate planning expert and completing your estate plan, you can file your healthcare directives with the state of Arizona at: http://www.azsos.gov/services/advance-directives.

Estate planning may give you the ability to keep your assets and distribution private. When working with an experienced estate planner you will want to communicate your wishes to keep your estate private. If you use a will to designate your beneficiaries and distribution of your estate you will may go to probate which is a public process. However, if you utilize a trust, you may be able to keep the terms of your estate’s distribution and beneficiaries private.

Estate planning can set your heirs up for success. You need to consider that depending on the size of your estate your heirs may face high estate and income tax penalties. Working with an estate planning professional you may strategically distribute your wealth to help your loved ones avoid high tax penalties. Different types of assets can also be taxed differently. It is important to consult with someone who understands the tax implications for each of your assets and can help you determine the best way to distribute them. You can also decide the timetable in which your assets are distributed. If you have two siblings you would like to make your beneficiaries and one is terrible with money while the other is not, you may setup a distribution so that the first sibling receives a portion of your estate every year for 10 years while the other sibling receives a lump sum. You know your loved ones best and how your estate could be structured to best benefit each individual person.

Whether you are married, single or divorced estate planning is a critical tool in executing your wishes for your medical care and asset distribution once you are gone. If you have friends or family that you would like to act for you as a healthcare representative, plan ahead. If you have accumulated wealth you would like to leave to specific people or charities, plan ahead. Your health and wealth decisions are both excellent reasons estate planning is important for single people and married people alike.

Types of Trust & Are They Only for Wealthy People

June 30, 2016 by mary.r

Knowing the types of trust is a must and knowing what is suitable to your current situation is a clever step in planning your affairs. Many people are under the misconception that trusts are only for people who are extremely wealthy. And while there are certain types of trusts, irrevocable trusts most commonly, that are used by individuals who are very wealthy and thus subject to the federal estate tax, revocable living trusts are a valuable estate planning tool that shouldn’t be overlooked.

While you should consider talking with an experienced estate planning attorney about your estate plan, here’s some information about trusts and wills that you may find helpful.

Types of Trust

Irrevocable trusts vs. revocable living trusts

Wealthy individuals often set up an irrevocable trust for estate and tax considerations. The benefit is that an irrevocable trust removes all incidents of ownership, which means that the trust’s assets are removed from the grantor’s taxable estate. It also relieves the grantor of tax liability on the income generated by the trust’s assets.

When a grantor puts assets into an irrevocable trust, he or she removes all rights of ownership to the asset that the trust contains. This type of trust can’t be modified or terminated without the beneficiary’s permission.

Individuals will be subject to the federal estate tax if their estate (cash, real estate, and other assets) is worth $5.43 million or more, $10.86 per married couple.

Here are the main differences between irrevocable trusts and revocable living trusts:

Irrevocable Trust

Removes ownership of trust’s assets
Used for tax purposes, since the value of the assets in the trust aren’t calculated in the total value of the estate at the time of death
Commonly used among people with large estates who are subject to federal estate tax
Cannot be modified or revoked without beneficiary’s consent or special power of appointment
Assets are protected from creditors since they no longer belong to the grantor
Trustee is generally an independent person chosen by the grantor

Revocable Living Trust

Grantor retains ownership of assets in the trust
Assets in the trust are calculated into the total value of the estate at the time of death
Commonly used among individuals who don’t want their estate to go through probate
Can be modified or revoked by the grantor
Assets are not protected from creditors since they still belong to the grantor
Grantor usually also serves as the trustee

Will a revocable living trust work better for me than a will?

This depends on your situation. Certain personal or family situations are better suited for a living trust, like if you have concerns that your beneficiaries might not be able to manage financial affairs or if you have a disabled child for example, but some people are fine with just a will.

Yes, a revocable living trust, if used properly, will keep your estate out of probate court and can ensure that your assets pass to your beneficiaries in a timely manner after your death, but it is also important to keep in mind that although your loved ones may not have to pay probate court fees, trusts aren’t free, and that cost should be taken in to consideration when deciding whether or not a revocable living trust is the right option for you and your family. A living trust costs between $1000-$3000 while a simple will can cost $300 or less. That cost alone is enough to make some people stick to a will alone.

However, you should also take these comparisons into consideration:

Privacy: A revocable living trust also ensures that your family’s business isn’t made public in court and public documents after you die, so if that is important to you, this type of trust might be a good option. Court intervention isn’t necessary with a living trust unless there is an issue due to improper drafting.

Disability: A will itself doesn’t offer any provisions for if you become disabled, while a living trust will continue to manage assets if the grantor becomes disabled. However, if you do have a will, a power of attorney can be used in conjunction in order to provide instruction in case you do become disabled.

Creditor Protection: Neither a will nor a living trust will offer protection from creditors while you are alive. If you have a will, creditors have a specific amount of time that they are allowed to make a claim after you die. If they miss that window of opportunity, they will be barred from making a claim forever. This type of issue doesn’t come up often with living trusts because most people direct in the trust that debts be paid.

Ease of Disposition of Assets: wills normally take longer to settle after death and incur more costs than living trusts.

Cost: Wills don’t usually cost much unless you are doing tax planning. Living trusts tend to cost a little more than wills. There isn’t a big cost difference between wills and living trusts if you are doing tax planning. After death, the amount that it will cost to prove (probate) the will in court varies. If there is a contested probate, ancillary probate or another issue, it can be very expensive. Living trusts don’t usually cost much at all once you die.

Can I have both a living trust and a will?

Yes, estate planning attorneys recommend it. That’s because there are some things that a will can do that a trust simply can’t. For example, most people don’t put everything they own into their living trust. So the items that are left out need to be listed in a will so they can be distributed according to your wishes after your death. A will can be used like a catch all to name someone to get all the rest of the property that you haven’t left to a beneficiary or left to someone in a trust.

If you have questions about estate planning in Arizona, please reach out to an experienced attorney. At Bredemann & Shellander, P.L.C., we specialize in estate planning in Arizona and Pride ourselves on taking the time to understand your unique situation so we can guide you through the estate planning process. We are happy to look over your estate plan for free or help you build your perfect estate plan from start to finish. Give us a call at 800-836-4135 or schedule a free consultation online.

Estate Planning for Childless Couples

June 15, 2016 by mary.r

Does Estate Planning for Childless Couples is still applicable? Many people think of estate planning for people with spouses and children. Estate planning allows you the freedom to structure your wishes for your estate, your health and your death. These issues are important to everyone and don’t depend on the structure of your family. In fact, childless couples tend to have greater financial wealth that needs to be planned for. US News wrote an article titled, “To Retire Early, Don’t Have Kids”, in this article the argument is made that without children a person has far greater financial resources to retire. In order to control what happens to your hard earned wealth and assets start planning now. Estate planning for childless couples is just as important as planning for people with children or dependents.

Estate planning gives you the ability to plan your asset distribution. Working with a skilled estate planning attorney you can create a will or trust to dictate how your assets should be distributed. You may have a beloved niece or nephew or friend from high school that you would like to name as a beneficiary, be sure to include these loved ones in your estate plan. You are able to decide how much to give each beneficiary and the terms of when each person will receive his or her inheritance. It is important to work with a skilled and experienced professional so that there are no errors or gaps in your estate plan. Your estate planning attorney can also help you structure your estate plan so that your beneficiaries are as tax efficient as possible. You don’t want the bulk of your financial gift to be diminished by taxes if it can be helped. You will also want to appoint a trusted executor to help ensure your wishes are carried out when you’re gone. The role of an executor is explained by Bernard A. Krooks in his post “Understanding the Role and Responsibilities of an Executor“, “An executor (also called a “personal representative” in some states) is a person named in a will to carry out the wishes of the deceased person. An executor typically offers the will for probate, takes action to protect the assets of the estate, makes distributions of property to beneficiaries and pays the debts and taxes of the estate.” The executor you appoint will have numerous responsibilities and should be willing and capable of fulfilling these duties. You should discuss your estate plan with your executor and make sure he or she will accept the duties that come with the position.

Charitable causes can be a part of your estate plan. If you have a favorite charity or cause that is near and dear to your heart consider including it in your estate plan. It is important to have the correct information for your charity including the legal name and tax ID number. You also have the ability to make your gift to the charity restricted. This means you can designate how the money is spent by the charity. If you decide to make a limitation on the gift be sure that you do not create an undue hardship on the charity you are trying to benefit. You can also create a charitable remainder trust or CRT for short. This trust can be part of your long term estate planning. It is described at “Charitable Remainder Trusts” as, “ an irrevocable trust that generates a potential income stream for its beneficiaries, with the remainder of the donated assets eventually going to one or more charitable organizations.
Key characteristics

Potential immediate (partial) tax deduction, based on the value of the remainder gift to charity
May eliminate capital gains tax for gifts of long-term appreciated securities
Accepts many types of assets
Income may be for life or for a fixed term of no more than 20 years
Requires setup and ongoing maintenance costs

A charitable remainder trust is one example of a structure that can benefit both you and a charity of your choice if it is appropriate with the rest of your planning strategy. A CRT is not an appropriate financial vehicle for everyone so be sure to discuss this and your entire financial picture with your estate planning professional.

Healthcare decisions need to be made. In addition to your financial planning you also need to work out a healthcare plan. Should you become injured and unable to speak for yourself you should have a person in place that can make those difficult decisions for you. Normally that person would be your spouse but if your spouse predeceases you or is unable to fill this role you should have a contingency plan in place. To properly address these issues you may need to face some difficult questions such as whether you would like to be put on life support and how you feel about organ donation. You should discuss your wishes in detail with the person or persons that you nominate to make these choices and include this information in your estate plan. Your estate planning professional can help you create a durable power of attorney for health care that will include all this information. This power of attorney will allow your designated agent to make healthcare decisions for you per your wishes.

Consider your pets. You can include your pets in your estate plan. If you have a beloved pet, consider what will happen to him or her when you’re gone. If your spouse predeceases you, where will your pet go when you pass? You can include plans for your pet and financial considerations to help pay for care in your estate plan. This may help ensure that your four legged family members are taken care of after you are gone.

Estate planning is important for anyone. Whether you are married, divorced or a childless couple it is important to create a plan. By thinking ahead and putting your wishes down in a formal, legal document you are able to make your wishes known for those left behind. Don’t leave your assets and health to chance or to the state. Have the hard conversations and then work with an experienced estate planning attorney to ensure your wishes are followed.