Black MBA - Summer 2008 - (Page 58)

EDUCATION Estate Planning REMEMBER TO NAME A GUARDIAN Another very important reason to think about and plan for how you want your assets managed is to protect the future of your children. It is likely that you will want to pass your estate to your children. However, if you die while your children are minors, the court will appoint a guardian or conservator to manage the assets for your children until they become adults. (The age at which someone is deemed an adult varies by state.) As a result, it makes a lot of sense to create a revocable living trust. The trust will provide detailed instructions that will be carried out by the trustee about the use of the assets for minor children. In the sad event that both natural parents are deceased and no guardian is named in their will, a guardian for the minor children will be appointed by the court. When it comes to naming a guardian for minor children, this appointment should be made in your will instead of in your trust, because most states require that any document that provides for the appointment of a guardian be filed with the court to obtain judicial approval. If you appoint a guardian in your trust, the trust must be filed with the court, which negates one of the benefits of establishing a trust – not subjecting it to public scrutiny. Barring unusual circumstances, the court will most likely defer to your selection of a guardian. If there is evidence that the person is unfit to serve as guardian, the court may designate someone else who is named in your will. Think hard about who you ask to assume this important role. If there is someone whom you would strongly object to as a guardian for your children, you can indicate in your will that this person is ineligible to serve as guardian. This is another way that estate planning allows you to have some degree of control even after you die. Often, the person named guardian of your minor children may be different from the person named trustee for your assets. This makes sense because each role requires different skills and expertise. IRREVOCABLE TRUSTS A last will and testament, health care and property POA, a living will and a revocable trust are the foundational documents for creating a basic estate plan. Depending on the size of your estate, there are many additional estate planning tools available to you for preserving and planning your assets that a competent estate planner can help you with. There are a variety of irrevocable trusts you can use for more sophisticated estate planning goals. These are often irrevocable instruments, meaning that they cannot be changed or amended after they have been signed. Irrevocable trusts can be used to make gifts of property (i.e., marketable securities, cash or real estate) to others. This is a way to transfer assets out of your estate and reduce your estate taxes, but through an irrevocable trust, you still have a “say” regarding how the assets are used and for whom. These types of trusts take advantage of tax benefits, which allow you to transfer assets to your spouse, children, grandchildren or charity. Remember, you may be required to file a gift tax return if you transfer property to your irrevocable trust that results in the use of your exemption equivalent amount or creates a gift tax liability. ESTATE PLANNING AS A CAREER OPTION Although many estate planners have legal backgrounds, estate planning professionals come from a variety of backgrounds such as accounting, charitable giving expertise, trust administration, insurance and securities investment. The overall objective of the estate planning professional is to assist his or her clients in maximizing and protecting their assets. The skills required for this career span a wide continuum and result in a challenging and fulfilling career. mba Thayer J. Herte works in Private Client Services for JPMorgan Chase. costly, time-consuming and public probate process. A properly drafted and funded trust will give you peace of mind that your assets and heirs will be taken care of. ESTABLISHING A TRUST Many people ask, How much do I really need to own in order to make estate planning worthwhile? While saving estate taxes and taking advantage of the federal estate and gift tax credits are benefits of creating a trust, there are many non-tax reasons for establishing your own revocable trust. A revocable trust is a legal document that provides instructions on how the property that is titled in the name of the trust is to be managed and distributed during your lifetime, during any periods of incapacity and upon your eventual death. These detailed instructions will allow you to leave what you want to others in specific amounts, as if you were still alive and personally giving these instructions. During your lifetime, your trust is revocable, meaning that it can be changed or fully revoked at your discretion. Upon your death, however, the trust becomes irrevocable. Another important benefit of establishing a trust is that trusts are private documents that do not require court approval. Your beneficiaries will not have to go through the court approval process to receive distributions or pay expenses relating to settling your estate. As mentioned earlier, even if you have a properly drafted will, your estate will still be subject to the probate process. Court challenges to wills are successful about 25 percent of the time. In many instances, this process can take years, during which time the heirs’ rights to receive distributions are limited. Trust documents are more difficult to attack. A common misconception about a revocable living trust is that it can be used to avoid personal income taxes. Placing your property in a revocable living trust will not change your personal income tax status. For income tax purposes, the IRS will continue to treat the property as if you still own it. 58 BlackMBA • Summer 2008 • www.nbmbaa.org http://www.nbmbaa.org

Table of Contents Feed for the Digital Edition of Black MBA - Summer 2008

Black MBA- Summer 2008 Contents Mailbag Up Front From the President & CEO Politics of Change Catalyst for Change: Results of our 2008 Political Poll Know Whose Shoulders You Stand On: The Legacy of H. Naylor Fitzhugh Howard University: Changing With the Times Straight Talk: CEO to CEO Creating Your Own Sandbox Dual Threats Avoiding the Faux Pa Invest in Your MBA Everything You Need to Know About...Estate Planning On Campus Plan Ahead The Big Show What's in a Name? On the Move Market Forecast Jeff Friday Keith Wyche Life Lessons On the Ground Real Biz A Golden Opportunity Entrepreneurial Institute Tech Tools Read for Success Stacey Tisdale Advertiser Index

Black MBA - Summer 2008

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