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Estate Planning


You end up in probate court—which can be extremely time-consuming and expensive. The court takes a look at your will (if you have one), as well as any heirs or potential creditors, and then oversees the distribution of your assets and payments to creditors. (LearnVest Note: LegalZoom estimates that probate costs American families $2 billion a year—$1.5 billion of which goes to attorney’s fees.)

The federal government imposes taxes on gratuitous transfers of property made during lifetime or at death that exceed certain exemption limits. Gift taxes are imposed on transfers during lifetime that exceed the exemption limits, and estate taxes are imposed on transfers at death that exceed the exemption limits. The generation-skipping transfer (GST) tax is imposed on transfers to grandchildren and more remote descendants that exceed the exemption limits.


he most important thing you need to remember is to actually transfer the ownership of your assets to the trust, so nothing is left out and sent to probate. It may seem weird to change the ownership of a bank account from your personal name to a trust, but the revocable trust uses your Social Security number as the tax ID—so it’s basically an extension of you. And it won’t change anything for income tax purposes


You can also avoid probate if everything is owned jointly between you and your spouse—as long as your assets don’t exceed the estate tax exemption. If you have more than the state or federal exemption, you’ll likely want to set up two revocable trusts—one for you, and one for your spouse—to help diminish estate taxes owed.


If you leave your money outright to your kids in a will in Massachusetts, there’s a uniform transfer of assets once they turn 21. (Different states have different rules.) Of course, most people wouldn’t want a 21-year-old child to get all of their money in a lump sum. By setting up a trust, you can name a responsible trustee who will manage the funds and distribute your assets according to your wishes.

Not quite. It’s important to review your estate planning documents—especially if you have children—every three to five years to make sure you’ve designated the most appropriate people. For example, if your trustee moves across the country, you’re likely better off naming someone local.


You can follow a different guideline, and review your estate plan every time there’s a major life event, such as the birth of a grandchild, the death of a parent or a divorce. You’ll want to revisit those documents because you may inherit assets that you’ll need to protect or you’ll have to add or change names on your documents.


It’s important to designate a health care proxy, as well as give someone durable power of attorney. A health care proxy will make medical decisions for you in the event that you can’t make decisions for yourself. When you give someone durable power of attorney, that person can carry out your financial obligations if you’re unable to do so.


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