Each state has its own probate laws that govern the disposition of your property. Not only that, but your assets may be subject to federal regulations and taxes as well. With an experienced probate attorney on your side, you can make the most of your assets and ensure that your loved ones receive the property that you have worked to leave for them.

What is Probate Law?

Probate law is the law that governs how your property is distributed among your heirs and beneficiaries. Wills and estates fall under the umbrella of probate law. Some assets may or may not be considered part of your estate, depending on your state’s probate laws.  With all of the laws and regulations and taxes surrounding the probate system, it is no surprise that the whole process can seem daunting. However, if you do not make a plan for the future of your assets through a will, trust, or other testamentary document, then the court will decide who gets your property, without your say in the matter. A probate lawyer knows the ins and outs of estate planning and probate law and can help you make the best decisions for the disposition of your assets.

How is Arkansas Probate Law Different?

The Size of the Estate Determines Probate

In Arkansas, the probate process is mandatory for any contested estate, if there are creditors (including a mortgage) and for any estate larger than $100,000. If a person provides written grounds for contest to the court, the will goes through the probate process. If there are any creditors such as mortgages, credit card bills, or hospital bills, then there must be a probate. Also, if you have an estate that is larger that $100,000, the probate process is inevitable if you have a will in place.

On the other hand, if your estate is small and uncontested, then it is possible for a beneficiary to circumvent the probate process by having an attorney file an affidavit asking to bypass probate. In this affidavit, he or she must certify, among other things, that all debts against the estate have been paid.  He or she must also certify that at least forty-five days have elapsed since the death. If the court approves the affidavit to bypass probate, the affidavit can be submitted to financial institutions, businesses, and other entities to gain access to the property in the estate.

No matter your estate size, it is always better to be prepared, and an experienced attorney can help you make a plan that will make the most of your assets.

Arkansas Taxes Differ from Federal Taxes

Arkansas does not have any estate tax or inheritance tax, which is good news for heirs and beneficiaries in Arkansas. Though your estate will not be subject to Arkansas estate or inheritance tax, it is possible that federal taxes could affect your estate.

Federal gift and estate tax codes change, and a skilled attorney keeps abreast of all the changes in the probate process and laws that could affect the distribution of your estate. Whether your estate is large or small, subject to taxation or not, it is a good idea to have an attorney put your estate plan in place so that your wishes for your assets are honored.

What Happens in the Arkansas Probate Process?

In Arkansas, the probate process begins when a petition for probate is filed and a personal representative is appointed to administer the estate. The personal representative, after being appointed and receiving letters testamentary from the Court, has legal control of all of the decedent’s property. This does not mean that the personal representative has title to the property. It just means that the personal representative can act on the estate’s behalf.

After a personal representative is appointed, he or she must take an inventory of the estate’s property, including real estate, personal property, and financial accounts such as stocks and bonds.

Subsequently, the personal representative, with the help of his or her attorney, gives notice to all parties who may have an interest in the estate. These parties include creditors and any heirs who may have a claim—including both beneficiaries named in the will (if there is one) and persons who would be considered heirs according to Arkansas intestacy laws. Notice is also published in the newspaper, and the notice must run for at least two weeks. Creditors who have a claim against the estate have six months to answer. The personal representative pays any claims against the estate and any taxes owed, and the estate may be required to file a final income tax return.

After filing the tax return, the personal representative files a final account with the court and distributes the remaining property as appropriate.  If the court approves, it will then close the estate. Because the probate process can be involved, it is a good idea to hire a skilled attorney to make sure the process goes smoothly.

Talk to an Attorney

The probate process can be a daunting task to face. The best way to sensibly plan for your future is to discuss your estate planning options with an estate lawyer trained in these matters. Contact Estate Planners of Arkansas today at 1-866-227-8165 for a free consultation.

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What is a living trust?

A living trust is a document that sets out how your assets will be transferred upon your death and designates a trustee (or trustees) to manage your assets while you are alive. As the settlor, also called the grantor, you set up the trust and name a trustee or trustees to manage the trust. You must also transfer title of your assets to the trust; otherwise, your assets will not be transferred as you set out in the trust.

A living trust involves three parties: the grantor, the trustee, and one or more beneficiaries who make use of the assets in the trust. It is typical to designate yourself and your spouse as the trustees of the living trust so that you retain complete control over the assets in your trust during your lifetime. You can also alter the trust to suit your needs as much as you want, or dissolve it altogether. After you pass away, the successor trustee you have named takes control of the trust, managing or distributing the assets in the trust according to your specified instructions.

A living trust versus a will

The traditional and most widely known testamentary document is the will. Wills are easy to create and inexpensive, and they inform both your loved ones and the court of your intentions when it comes to your estate. Wills, however, have one major pitfall: they are subject to the probate process. The probate process can be lengthy, often taking a year or more to complete. Additionally, probate records are public, so the status of your estate and all of your assets is a matter of public record that anyone can view. This is a considerable downside for those who value privacy.

A living trust, on the other hand, is a private document about which only the grantor, the trustee, and the beneficiaries are knowledgeable. Unless a trustee or a beneficiary requires court approval of accounts, or a person contests the living trust, it will stay out of the time-consuming court system and away from the public eye.

Living trusts can be more complicated to set up, and more time-consuming to manage, than wills.  Transferring legal title of your assets to the living trust is crucial, and it will take effort on your part to change the deeds to real estate, change ownership of your financial accounts, and complete any other steps necessary for this process.  The complexity, though, also means that

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Trusts are more flexible than wills. For instance, you can write into your living trust how your assets will be distributed; if you want, you might specify that assets be distributed to a beneficiary over a period of time rather than immediately upon your death. If a will won’t accommodate your particular wishes for the transfer of your assets, a well-written living trust might just be the answer.

Is a living trust right for you?

The biggest advantages of a living trust are avoiding the costs in time and money that come with probate and keeping the details of your estate private, but there are other benefits to consider.  If you have a loved one with special needs, or a child not yet old enough to manage his or her own finances, a trust can enable you to provide them with financial support without giving assets to them directly.  A properly worded living trust can also be used as a substitute for powers of attorney. Remove hightlighed text.  An attorney can help you tailor a living trust so that it meets all of your needs.

A trust is also an excellent choice if you have a large estate that will be subject to federal estate taxes. An estate planning attorney can discuss with you different tax minimization strategies associated with living trusts. Whether your estate is large or not, you should consider the advantages of a trust if you own property in another state, as a trust can enable you to avoid an out-of-state probate process.

Although there are fees associated with creating a living trust, once the trust is formed, there is no minimal dollar amount you have to maintain in the trust for it to stay in effect. A trust can hold anything from one dollar to everything you own.

Because a living trust is often a more involved document than a will, it is a good idea to seek professional advice should you decide to create one. An experienced attorney can explain to you the advantages and disadvantages of creating a living trust and help you decide if setting up a trust is right for you.

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You have the power to provide for your loved ones with a living trust, so plan sensibly for your future by discussing your estate planning needs with a knowledgeable estate attorney. To learn more about setting up a living trust in Arkansas or to make an appointment, contact Estate Planners of Arkansas, P.A. today at 1-866-227-8165 for a free consultation.

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A will is a document that designates who manages your estate after you pass away. In Arkansas wills and probate law, the person who creates the will is called the testator, and the person designated to handle the estate after the testator dies is known as the personal representative.

You tailor the will to what is important to you. Many types of property may be included in your estate, including bank account funds, stocks and bonds, real estate, vehicles and boats, furniture, jewelry, or photographs. With each asset in your estate, you can designate who receives the asset upon your passing.

How is a will executed in Arkansas?

The execution of a will in Arkansas seems relatively simple. However, if you do it incorrectly, then it could affect the validity of your will, and your final wishes may not be honored after your passing.

In order to create a valid will in Arkansas, you should declare to two or more witnesses that the document is indeed your will. You should then sign the will in their presence. They should in turn sign the will to verify that they witnessed its execution and can attest to its validity.

This seems simple, but there are some pitfalls that you want to avoid. For example, the witnesses to your will should be disinterested witnesses, meaning that they are not persons who could potentially benefit from your will. Therefore, a witness should not be a potential heir or beneficiary. In Arkansas, the use of an interested witness will not make your will invalid. However, unless at least two of your other witnesses are disinterested, the interested witness cannot inherit a portion of your estate that exceeds in value what he or she would have been entitled to under Arkansas law if you had died intestate.

An estate planning attorney knows these obstacles, and others, that come with drafting a will. If you decide to hire an attorney to create your will rather than doing it yourself, then you can have peace of mind knowing that your will follows Arkansas probate code standards and will be valid in court.

Is a handwritten will legal in Arkansas?

Yes, a handwritten will may be legal, but it does not come without risk. A handwritten will that is written entirely in the hand of, and signed by, the testator and not witnessed by any other persons is called a holographic will. If you write a holographic will, the court will have to examine your will after your passing to determine its validity. In order to determine the validity of a holographic will, three disinterested witnesses who are familiar with your handwriting must testify that your handwriting and signature are authentic. After the handwriting and signature are deemed real, the will must go through the probate process like any other will. This generally takes nine months to three years or longer.

I have drafted my will. Now what?

Once you and your attorney draft your will and it is properly executed, you can keep that same version of your will for the rest of your life. This, however, might not be wise. After all, many things can happen between creating your will and the will’s admission to probate. You could gain money or property, get married, get divorced, or have a child. These things and more could affect your estate.

When you have a will in place, you never have to change it. However, it is a good idea to review it regularly to see that it still reflects your wishes. Some people only review their wills after a major life event like a marriage, the birth of a child, or the death of a loved one. Others have a standing appointment with their attorney on an annual basis to review and adjust their wills as needed.

Changing your will

There are a couple of ways you can change your will: either create an entirely new will, or add a codicil to your current will. If you choose to execute a new will, then you must revoke the old will. You can usually do this by adding a sentence to your new will saying you revoke all previous wills. It may be a good idea to destroy old versions of your will to avoid future confusion, but consult with your attorney to see how best to handle any previous wills.

If you would like to keep your current will but want to add an amendment, then a codicil is another option. A codicil is an amendment that changes an old provision of your will or adds a new provision. Speak with your attorney to decide if amending an existing will or creating a new one will best serve your purposes.

Speak to an estate planning attorney about your will

Creating a will is a sure way to ensure that your assets are distributed according to your wishes after your passing. Discussing your options with an estate attorney is the best way to sensibly plan for your future. To learn more or to make an appointment, contact Estate Planners of Arkansas, P.A. today at 501-414-8965 for a free consultation.

The post What Does it Take to Execute a Will in Arkansas? appeared first on Estate Planners of Arkansas.

What is a Prenuptial Agreement and Why Should You have One?

Put simply, a prenuptial agreement is a contract between two people who are about to get married detailing what will happen, especially with regard to property, in the event of divorce or death. In certain situations, the value of a prenup may seem obvious.  If you are about to get married and you own a business or possess significant assets, it is understandable that you’d want to protect what you already own. People with significant wealth may often sign prenups before marriage, but it’s a common misconception that these documents are just for people with a lot of money.

On the contrary, anyone can benefit from having a prenup in place. Maybe you or your partner, or both of you, have children from a previous relationship.  In that case, a prenup can help you establish which assets should be preserved for them. Or maybe this isn’t your first marriage, and you want to be certain that you won’t lose property you’ve already acquired if your marriage comes to an end. No matter what your circumstances, taking a serious look at your and your partner’s financial situation can save major headaches down the road. The only real requirement for a prenuptial agreement is a desire to spell out what will happen if the marriage does not last forever.

When Should You Create a Prenup and What Can It Cover?

The best time for you to sign a prenup is a few months before the wedding.  Waiting until right before the wedding will just add stress to an already hectic occasion. From a legal standpoint, a last-minute prenup might also look rushed, or like it was signed under duress, raising the possibility that a court might invalidate it. You and your partner need to provide an honest list of your assets, and you should both have an attorney, preferably an estate planner who has experience with prenuptial agreements.

While most people think of a prenuptial agreement as a financial document, a prenup can cover a great many subjects, as long as the document complies with state law. Most prenups include issues like premarital and marital assets and debts, division of property (like who would get the family house after a divorce), and whether someone will pay alimony in the case of divorce. They can also include incentives for certain types of behavior, or cover the consequences of infidelity.

It is important to remember that prenuptial agreements in Arkansas are subject to Arkansas state law. This means that, while there may be issues or subject matter you would like to include, you need to ensure that the provisions of your prenup are enforceable. An experienced estate planning attorney will help you go over everything and make sure your interests are well served.

Why Prenups Make Sense For All Income Levels

It is clear that many people think of prenuptial agreements as a tool utilized by the very wealthy to keep their assets safe in the event of divorce. While prenups do serve that purpose, they do so for all income levels. When you consider the issues associated with the average divorce, the biggest and most costly legal battles involve property and asset ownership — the very subjects at the heart of most prenups.

Since these issues are among the most costly in a divorce, having an enforceable prenuptial agreement in place beforehand can make divorce go more smoothly, and save a lot of money and emotional upset in the process. This is especially true when two people in two different financial brackets get married and divorced; it can save both a lot of unforeseen expenses in the future.

Is a Prenup Enforceable?

If it is drawn up and executed correctly, and is in compliance with state law, a prenup will be legally binding and will usually be held up in court. Ensuring your prenup is not invalidated requires avoiding common mistakes, though, such as:

• You or your partner signing, or appearing to sign, under duress
• Incomplete financial disclosures being made by you or your partner
• Including provisions having to do with child support and/or the custody of as-yet-unborn children
• You or your partner failing to consult with an attorney
• The prenup being signed too close to the wedding, like in the car on the way to the church

It is important to remember that a prenuptial agreement is not a substitute for a will, a trust, or any other document that is part of your estate plan. Even if you have a prenuptial agreement in place, you still need a legally binding will, trust, or other legal estate document to protect your assets and to ensure they are distributed according to their wishes upon your death.

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Creating a prenuptial agreement does not have to be unromantic or difficult. In fact, crafting a prenup can be one of the first rational acts of a married couple acting in partnership with each other. Spending a small amount of time creating an agreement you and your partner can live with will provide peace of mind, and a greater feeling of financial security, for everyone involved in the union. Contact Estate Planners of Arkansas today at 501-414-8965 for a free consultation.

The post Prenups Are For Anyone, Not Just the Rich! appeared first on Estate Planners of Arkansas.

A will is a document that details how you want your property distributed after you die. It is the most common method people use to put their final affairs in order while they are still alive. Wills are not the only way to do this, but they can be relatively easy and inexpensive to create.

Crafting a will lets you make decisions on your own behalf rather than having the state of Arkansas make those decisions for you. Having a will means you get to make decisions about your assets and your heirs even after you have passed away, and a will gives you a significant amount of flexibility when it comes to fulfilling your wishes.  

The importance of estate planning

Only 4 in 10 Americans have created a will or a living trust. That is not good enough. The legal term for dying without a valid will is “dying intestate.” When a person dies intestate, the state probate court decides what happens to the person’s assets, and the line of succession is based on state law. If you die intestate, your assets will go to your closest living relatives, in accordance with state laws, whether or not you wish it.

If you feel comfortable with allowing the state to divide your assets, then dying without a will may seem fine. However, that does not mean you should not have a will in place. How you organize your affairs at the end is very important and can greatly affect your loved ones, even as they grieve over their loss of you. Not having a will only worsens the situation, so it’s best to detail what happens to your assets before you are gone.

Make Sure Your Will is Legally Valid

Perhaps you have seen movies in which someone writes a will on a scrap of paper just before death. Maybe you have also heard of someone writing a will on a legal pad, leading to a drawn-out family dispute. Such wills could be legal under certain circumstances, but that is always a gamble. For example, there are specific laws determining what makes a handwritten will legal in Arkansas.

State law governs legal wills. In general, the person creating the will must at least 18 years old and of sound mind. The will must be in writing, and it must be signed in the presence of witnesses. A handwritten will, referred to as a holographic will, must be written entirely, and signed, in the hand of the person creating it. After death, at least three credible disinterested witnesses will need to verify the handwriting and signature on a holographic will.

Testamentary capacity

The validity of a will also depends on what state law refers to as the “testamentary capacity” of the person making the will.  

In order to meet the requirement for “testamentary capacity,” the person writing the will must understand a few things. First, he or she must understand the purpose of a last will and testament. Second, he or she must understand that the document he or she is signing is a will. Lastly, he or she must understand that his or her signature on the document orders the distribution of assets in a prescribed manner following his or her death.

A will should designate an executor

An important part of putting together a valid legal will can include naming an executor of your estate. This is the person you choose in your will to administer your estate. After you die, the executor you name will be appointed by the Arkansas probate court to handle your estate. The executor will have the legal authority to carry out your wishes as stated in your will.

Update your will regularly

On the one hand, wills do not expire. They are good for as long as they are needed. However, it is not a good idea to put your last will and testament in a lockbox and forget about it. Circumstances change, and some of those changes can affect the provisions of your will. For example, any of the following can result in a need to modify your will or else risk that your wishes will not be met:

• Divorce
• Marriage
• The births of children or grandchildren who had not yet been born when you signed the original will
• Children who were minors when the will was prepared, but who are now adults
• The disposition or acquisition of assets

Review your will about every 4-5 years, or as often as needed, and check each provision to make sure it still reflects your wishes.

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Do not let someone else determine how your assets are distributed after your death. Contact Estate Planners of Arkansas today for a free consultation.

The post What It Takes to Make a Legal Will appeared first on Estate Planners of Arkansas.

This is one reason informed estate planning is so important. By planning for what happens when you pass away, you will relieve your family and friends from making difficult decisions regarding things like medical bills and your funeral details and expenses. Your family will have to handle these while also grieving your loss. They will have to deal with probate and everything that comes with it, and that can be a tall order.

What is an estate tax?

The estate tax, also erroneously called an “inheritance tax” and a “death tax,” is a tax on the assets you leave your heirs. It is paid to the federal government upon receipt of money or other assets from the estate of the deceased. In other words, it comes out of your estate before it is distributed to your heirs.

There is an exempted amount that you can pass on to your heirs without being taxed. This amount of $11.19 million for 2019 changes quite often. If you think the federal government will want more of your money in the future, then you have to look at the exemption going down. The $11.19 can change. The current tax rate is between 35 percent and 55 percent for any amount above the exemption, depending on how much you have, so this can amount to a significant loss of assets for your family or other heirs.

The executor of the estate is charged with the responsibility of computing, filing, and paying any and all estate taxes that are due. This is where the difference between estate taxes and inheritance taxes matters. Though they are often confused, there is a clear difference. Estate taxes are charged to and paid by the decedent’s estate while inheritance taxes are paid by the beneficiaries of the estate on the portion of the decedent’s assets they received.

What is an inheritance tax?

There is no federal inheritance tax. States alone charge this. Only 11 states still have an inheritance tax, and Arkansas is not one of them. However, if one of your beneficiaries lives in one of those 11 states, then it could be good to incorporate protections for those taxes into your estate plan. For example, if your heir inherits property in Connecticut or New Jersey, then they will have to pay that state’s inheritance tax on the property if it rises above the amount of exemption in those states. Your estate planning attorney will help you decide this.

Likewise, 17 states exercise their own estate tax laws, so consider this in your estate plan. Most states with an estate tax base their rate on the federal estate tax. Most have an exempt amount that varies from state to state. This is one reason it is important to have an estate planning attorney helping you formulate a plan. They can access this information and incorporate it into your overall plan in a way that limits the tax consequences for everyone.

Since January 1, 2005, Arkansas has not collected a state-level estate or inheritance tax. Prior to that, Arkansas charged a “pick-up” or “sponge” tax that equaled a portion of an estate’s federal estate tax bill, but that has not been the case over the last 14 years.

Why you should still plan for “death taxes”

The fact that Arkansas has neither an inheritance tax nor an estate tax does not mean all Arkansans are exempt when it comes to tax consequences as part of an estate plan. The amount exempted from federal estate taxes is $11.19 million for 2019, but if you do not plan properly, then your family or other heirs could end up getting far less of your assets than you intended.

Remember that the exemption amount fluctuates constantly. The only exemption amount that counts is the exemption after you die.

If you are putting together an estate plan and all of your assets are located in Arkansas, then you are in good shape. You will only have to worry about federal estate taxes. However, if you have assets in one of the 11 states with an inheritance and/or the 17 states (or the District of Columbia) with an estate tax, then you might want to incorporate that into your overall estate plan.

There are other reasons you should consider incorporating tax protections into your estate plan even in Arkansas. Although Arkansas does not collect an inheritance tax or estate tax now, there is a possibility it could put one or both in place between now and the end of your life. It is also possible the exemptions for the federal estate tax could shrink at some point.

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You and your Arkansas estate planning lawyer should do all you can to shield as much of your money as possible from current and potential future taxes. They can do this by helping you create trusts for almost any eventuality, or arrange for gifts to your heirs that are structured to avoid gift taxes now and estate or inheritance taxes in the future. Contact Estate Planners of Arkansas today for a free consultation.

The post Is There An Inheritance Tax in Arkansas? appeared first on Estate Planners of Arkansas.

While wills and trusts can both be part of the estate planning process, they are different tools for distributing property after your death. To evaluate the positive and negative aspects of wills and trusts, it is necessary to understand some important concepts in estate planning, including:

• The role of probate in the estate-transfer process;
• The minimum value of a taxable estate;
• The manner in which assets are titled or owned.

Probate is a legal process that serves to administer the estate of the deceased. In Arkansas, probate is necessary when the minimum value of the estate is more than $100,000 if you have creditors or when the estate is contested. If the estate is valued at less than $100,000, is uncontested, and has no creditors, then heirs may receive the property without going through the probate process.

Finally, the manner in which assets are titled at the time of your death is extremely important, and will prevail over the terms of either a will or a trust. For example, a joint owner of an account of any type will receive the funds from that account, no matter what your will says. That makes titling assets properly an essential part of your estate plan, so discuss this with your estate planning professional.

So, What’s Best for You?

Now that you understand what’s at stake, which is the best choice for you: a will or a trust?

The actual answer to the question “Should I have a will or a trust?” will almost always be, “It depends.” You and your estate planning attorney or other professional should consider all of the following factors:

• The value and nature of your assets now and their projected value at the time of your death
• Your ability and your level of desire to bear the current expense of setting up your estate plan
• The ability and the willingness of your personal representative to handle a court proceeding upon your death

It also helps to understand the relative advantages of each type of estate planning device.

Advantages and Disadvantages of a Will

The main advantage of having a will is that it is simpler to create. And because it is simpler, it tends to be less expensive to produce. Even if you decide to set up a trust, it is still a good idea to have a will, and the will can be prepared to address all of your needs with the assistance of a skilled estate planning professional.

The greatest disadvantage of having a will is that probate will be required after you die. Probate can be a straightforward process, but even the simplest probate can take months or even years, and probate is usually at least a moderately involved process. If the will is prepared properly, probate involves the administration and distribution of your assets by the executor, which is the legal term for the person you appoint in your will to act as your personal representative. If you leave no will or the will is deemed invalid, the judge in probate court will appoint the personal representative. Probate of a well-prepared will can take an average of nine months or longer to complete, which means your estate will incur attorney’s fees and court costs.

If you want the simplest and least expensive option for your estate plan now, then a will may be your best option, but the cost may be substantial on the back end when you pass away.

Advantages and Disadvantages of a Trust

While setting up a trust is more involved and could cost a little more in the here and now, the long-term advantages of a trust could make it worthwhile in the long run. The basic advantages of a trust are:

• The avoidance of probate, which means your family, friends and other heirs see a quicker and more pain-free distribution of your assets;
• You can have increased confidence in the proper administration and distribution of assets because you make most of the decisions when you set up the trust and, in the case of a revocable living trust, you manage the trust while you are alive and able to do so;
• You often have greater flexibility with a trust over how and when your beneficiaries receive your assets.

Some disadvantages of trusts are that they can be costlier to create and more complex to manage than wills. Also, if a trust is not properly funded, or if assets have not been properly transferred to the trust, your assets will not be distributed the way you would have wanted them to be.

So, Which is Best For Me?

When comparing wills and trusts, the best solution will depend on your perspective. A properly executed will may suit all of your purposes and be very inexpensive to create as well. On the other hand, the expenses and delays that could occur during probate may be a significant negative factor, especially when you consider the grief and stress your loved ones will already be experiencing after losing you.

A properly established trust may work best for you and take the delays and expenses of probate out of the equation. While a trust may be more expensive to create in the first place, you may find that paying some money up front now is preferable to having your family and other heirs pay more later.

The fact of the matter is that deciding between a will or a trust can be complicated, and the assistance of an experienced estate planning attorney can be very beneficial. An attorney will lay out all the options and allow you to make an informed decision, which will go a long way toward ensuring that you choose the option that is right for you and your heirs, both now and in the future.

Speak to an estate planning attorney.

Whether you decide to use a will or a trust, it’s important to make sure you choose the estate planning device that’s right for your needs. Learn more by contacting Estate Planners of Arkansas today at 501-414-8965 for a free consultation.

The post Should I Have a Trust or a Will? appeared first on Estate Planners of Arkansas.

Hello. My name is Timothy Russell. I’m president of Estate Planners of Arkansas. A living trust is a piece of paper similar to a will in which you set out where your assets are going to go when you pass away, but with the living trust, it takes effect as soon as you sign it. While you’re living, while you’re living incompetent, and when you pass away.

With a living trust, you still maintain 100% control of all your assets. You use your money and the banks and investments as you wish, and you don’t have to answer to anyone. You maintain 100% control.

One important thing to know about a living trust is that it’s a worthless piece of paper unless you’ve transferred all your assets over into it. Here at Estate Planners of Arkansas, we’re one of the few firms that I’m aware of in the state that takes responsibility for transferring all the assets over into the trust. We have a follow-up confirmation process where even after the trust is signed, we mail all the paperwork out to all the different institutions. We still work with the client to make sure that all those different institutions actually did what they were supposed to. We offer a free initial consultation. In that meeting, I can find out about the family situation, your kids, grandkids. Get a rough idea of the types of assets you have and a rough idea of the value to see if there’s a state tax issue. Then I can say here’s one option, here’s the good and bad and what it costs. Here’s another option. Then you can just make up your mind whichever way you think is best. So, before you say yes, I want to do it, or no, I don’t, you’ll know down to the penny exactly what the costs are going to be, and you’ll know about any potential hidden costs. If you have any Estate Funding questions or you would like to set up a free initial consultation, give us a call at 501-414-8965 or go to our website at estateplannersofarkansas.com.

Thank you.

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Many people who are trying to put together an estate plan are unaware that life insurance can be included in your estate when you die. Depending on the size of the policy or policies, this could have significant estate tax repercussions. Also, you may be concerned that your policy beneficiary will be unable to properly manage the money that you are leaving, either because of age for other reasons. Thankfully, there are possible solutions to these problems, including the formation of an irrevocable life insurance trust (ILIT) to take over ownership of the insurance policy.

An ILIT is a trust that has specifically been set up to take over ownership of one or more life insurance policies. You can transfer ownership of an existing policy to the ILIT, or the trust can purchase a new policy directly.

With an ILIT, you must ensure that you do not have what is called “incidents of ownership.” Just transferring the policy to the trust is not enough to realize the tax benefits of the trust: you can’t retain the rights to change the policy’s beneficiary, to borrow against the policy, or to use the policy as collateral for a loan. This is why an ILIT is irrevocable: once you set it up, you can’t rescind it or make any changes.

Unlike with a living trust, you cannot serve as the trustee of an ILIT. Since the trust is required to be irrevocable, you may only fund it and make payments on the premiums for the policy, typically by making gifts to the trust that the trustee uses to pays the premium. That said, you will appoint the trustee. If you’re not sure about who to appoint, your estate planning attorney can help you make this important determination.

With an ILIT, the primary beneficiary of the insurance policy is the ILIT itself. All death benefits will be deposited into the ILIT when you die and the money will be held in trust for the benefit of the individuals you have named in the trust documents and distributed to them according to your detailed instructions.

The Difference Between a Will and a Trust

Whereas many use the terms “will” and “trust” interchangeably in common conversation, the fact of the matter is that when you are putting together an estate plan, they are two completely different concepts. Which one you choose will depend on your desires and goals for the future, which should be a primary topic of discussion between you and the estate planning professional you choose.

The major difference between a will and a trust is that a will must go through the probate process. Wills are the most common instrument in estate planning because they are very easy to create. Almost anyone can write a will, although an improperly drafted will – such as one created without the assistance of an estates and trusts attorney or other estate planning professional – is more likely to get bogged down in probate. Though wills are easy to draft, it is also easy to make mistakes with them. Poorly drafted wills are more likely to be challenged by your heirs or invalidated by the judge in probate court. If you die and the will you leave behind is deemed invalid, your assets will be distributed according to Arkansas intestacy laws. In other words, your final wishes will not be carried out as you intended.

Like a will, a trust ensures that your assets go to the people who you want to have them. The difference is that trusts do not go through probate. Once you fund a trust, the assets in the trust belong to the trust. With a revocable living trust, you can continue to retain complete control of those assets while you are alive, but upon your death, the trust will be managed, and assets distributed, by the trustees you have appointed without the input of the Arkansas probate court.

Potential Problems With a Life Insurance Trust

If you transfer your life insurance policy or policies into an ILIT and you die within three years of doing so, the IRS will still include the proceeds as part of your estate for tax purposes. This can be avoided in some cases by having the trust purchase the policy, but that may not always be possible, especially if the policy you currently own is substantial.

You will also need to make sure issues don’t arise with gift taxes or with the federal generation-skipping transfer tax, which comes into play when your beneficiaries are more than one generation removed from you, such as grandchildren. An experienced estate planning attorney will make sure your ILIT is properly drafted to avoid any problems.

Contact

An ILIT can help your loved ones receive the greatest possible benefit from your life insurance policy. If you’d like to discuss the advantages with an experienced estate planning attorney, contact Estate Planners of Arkansas today at 501-414-8965 for a free consultation.

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