Tag Archives: Revocable Living Trust

Estate Planning Docs Part 2 – Trusts

Last Monday we replayed Part 1, here in our post, one week later we wanted to re-roll out Part 2 of this all important Document review, checklist and explanation – Enjoy!

Trusts, in our opinion are most helpful for organization, directives for minors, and very useful in avoiding Estate Taxes, just to name a few.

Estate Tax Review

Estate taxes are the tax that is incurred upon the final death of an estate member. Unlike Federal taxes, Estate taxes are accessed on the TOTAL VALUE of all assets less liabilities. Currently these taxes begin just under $5.5 million for a single person and if done correctly can be double ($11 million total) for married couples. Above these total amounts, the tax rate quickly gets to 40%. For this reason, the popularity and needs of many of the following Trusts have grown and will continue.

Trusts – All Type ReviewLivingTrustEstatePic

Over the last several years we have grown warmer to the use of Trusts. Residing in Texas, a low cost probate state, Trusts frequently have lessor place in the Estate plan. However, we are finding more and more uses for them, and as such wanted to have a detailed list of the various Trusts – This is the second, and more deep dive to our original Estate Planning Doc Summary.

Revocable Trust – By far the most common and most commonly misunderstood Trust of the bunch. Revocable means it can be changed at the grantors request. Due to this fact, there is very little tax or liability avoidance. The key positive for this trust is organization, especially over state borders. In high probate cost states may prevent substantial probate costs.

Testamentary Trust – Trust that is usually embedded in a Will and is created upon the grantors death. Testamentary trusts can take many forms, but are a key aspect of Estate planning for minors, estate tax, and generational transfers. It has virtually no existence until the grantor passes away.

Irrevocable Trust – The Hulk of Trusts. Being Irrevocable, once established and funded, this Trust is a beast. Estate tax, liability, inheritance are just a few items that can be addressed with an Irrevocable Trust. The biggest issue of this type of trust is it what makes it a beast, Irrevocable … once you put assets in it, there is no turning back. Careful use is advised.

QTIP Trust : Qualified Terminal Interest Trust – Most common set up by Grantor to give direction to assets beyond the spouse. Frequently used in second marriages to protect children from a prior marriage. Created and resides most frequently in a Will.

Credit Shelter/A:B Trust – Type of trust that is used to help minimize Estate taxes by maximizing the first person in a married couples Estate tax exemption upon death commonly resides in a Will. Can give directives to eventually end up to a non-spouse beneficiary, but living spouse maintains control during lifetime.

GST or Generation Skipping Trust – This handy estate planning trust gives relief to Grantors by jumping a generation and essentially skipping the Grantors children and passing to the grandchildren. Income may be distributed to the children, but the ultimate beneficiary will be the grandchildren. Under current law there is Estate tax relief from this trust.

ILIT : Irrevocable Life Insurance Trust – This trust is very useful in getting life insurance proceeds out of a Grantors estate. While life insurance is free from Federal taxes in most cases, proceeds are included in an Estate for Total Estate Tax purposes. Done correctly, the ILIT trust can limit most if not all of the proceeds from an estate and thereby estate taxes.

Pat yourself on the back (especially if you are still awake and made it this far.) With a reasonable understanding of these types of trusts, you now have deep knowledge of the types of Trusts available. Reach out if you have any questions.

Have a Great Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com

Estate Planning Docs Part Two – Trusts

Trusts, in our opinion are most helpful for organization, directives for minors, and very useful in avoiding Estate Taxes, just to name a few.

Estate Tax Review

Estate taxes are the tax that is incurred upon the final death of an estate member. Unlike Federal taxes, Estate taxes are accessed on the TOTAL VALUE of all assets less liabilities. Currently these taxes begin just under $5.5 million for a single person and if done correctly can be double ($11 million total) for married couples. Above these total amounts, the tax rate quickly gets to 40%. For this reason, the popularity and needs of many of the following Trusts have grown and will continue.

Trusts – All Type ReviewLivingTrustEstatePic

Over the last several years we have grown warmer to the use of Trusts. Residing in Texas, a low cost probate state, Trusts frequently have lessor place in the Estate plan. However, we are finding more and more uses for them, and as such wanted to have a detailed list of the various Trusts – This is the second, and more deep dive to our original Estate Planning Doc Summary.

Revocable Trust – By far the most common and most commonly misunderstood Trust of the bunch. Revocable means it can be changed at the grantors request. Due to this fact, there is very little tax or liability avoidance. The key positive for this trust is organization, especially over state borders. In high probate cost states may prevent substantial probate costs.

Testamentary Trust – Trust that is usually embedded in a Will and is created upon the grantors death. Testamentary trusts can take many forms, but are a key aspect of Estate planning for minors, estate tax, and generational transfers. It has virtually no existence until the grantor passes away.

Irrevocable Trust – The Hulk of Trusts. Being Irrevocable, once established and funded, this Trust is a beast. Estate tax, liability, inheritance are just a few items that can be addressed with an Irrevocable Trust. The biggest issue of this type of trust is it what makes it a beast, Irrevocable … once you put assets in it, there is no turning back. Careful use is advised.

QTIP Trust : Qualified Terminal Interest Trust – Most common set up by Grantor to give direction to assets beyond the spouse. Frequently used in second marriages to protect children from a prior marriage. Created and resides most frequently in a Will.

Credit Shelter/A:B Trust – Type of trust that is used to help minimize Estate taxes by maximizing the first person in a married couples Estate tax exemption upon death commonly resides in a Will. Can give directives to eventually end up to a non-spouse beneficiary, but living spouse maintains control during lifetime.

GST or Generation Skipping Trust – This handy estate planning trust gives relief to Grantors by jumping a generation and essentially skipping the Grantors children and passing to the grandchildren. Income may be distributed to the children, but the ultimate beneficiary will be the grandchildren. Under current law there is Estate tax relief from this trust.

ILIT : Irrevocable Life Insurance Trust – This trust is very useful in getting life insurance proceeds out of a Grantors estate. While life insurance is free from Federal taxes in most cases, proceeds are included in an Estate for Total Estate Tax purposes. Done correctly, the ILIT trust can limit most if not all of the proceeds from an estate and thereby estate taxes.

Pat yourself on the back (especially if you are still awake and made it this far.) With a reasonable understanding of these types of trusts, you now have deep knowledge of the types of Trusts available. Reach out if you have any questions.

Have a Great Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com

 

August 2015 Financial Planning Tip, Capital Market Review (Video)

Welcome to our monthly Economic, Capital Market, and Financial Planning tip of the month.

This months Financial Planning Tip of the month is when you may NOT want to file an insurance claim !

Once again a special thanks to all of  YOU … the best clients and friends, as your experiences have again given us the subject matter for our Financial Planning Tip of the Month.

For those new to our writings, we touch on the most pertinent Financial “stuff” along with a video of my mug that has even more specialized details of the latest month as well as this post.

Ok…let’s go!

 

August 2015 Video

 

VIDEO

YouTube Direct Link 

 

When NOT to file an insurance claim

  • Deductible is near the full value of claim or the net claim is very small — not worth the ding on your history
  • Inability to prove value of claim- i.e. Jewelry
  • Coverage amount has greatly declined/depreciated – old roof

Thinking of insurance as a major dollar safety net (not piggy bank) is a good idea and will keep you on the correct path in most cases. Also… One of the biggest reminders is to know your coverage and think twice about calling your carrier as you may end up with a chink on your record, just by calling!

We were honored to have our article posted on ABC News, USA Today, Yahoo and credit.com. Best of all, this was an actual experience and conversation!USA Today Article Circle JK

Give us a call if you have any confusion/questions!

Commodities falling No more – Maybe?

Last month we mentioned commodities- oil had fallen dramatically.

Certainly could go lower. Hated by many – Zig when others Zag!

Suddenly there is life in oil and commodity related instruments.

8-31-15 WTI 5 min chart

Time will tell!

Have a Great Day!

John A. Kvale CFA, CFP

http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225JK Street Cents Logo

July 2015 Financial Planning Tip, Capital Market Review (Video)

Welcome to our monthly Economic, Capital Market, and Financial Planning tip of the month.

This months Financial Planning Tip of the month is a reminder of another important account Title issue !

Once again a special thanks to all of  YOU … the best clients and friends as your experiences have again given us the subject matter for our Financial Planning Tip of the Month.

For those new to our writings, we touch on the most pertinent Financial “stuff” along with a video of my mug that has even more specialized details of the latest month as well as this post.

Ok…let’s go!

VIDEO

YouTube Direct Link 

 

To Trust or not to Trust – Do I need a Revocable trust? – Another great estate Planning Tip: LivingTrustEstatePic

  • Privacy
  • Avoids probate
  • Corporate law versus probate law
  • Easily changed
  • Can lead to inadvertent mistakes in Estate Planning
  • May dramatically help in higher probate cost states (Think CA and FL)

Trusts, once thought only for aristocrats have become much more mainstream. They are easy to set up and easy to change. Revocable trusts, the most common, are great planning tools. The revocable trust, while providing little creditor protection and virtually no federal estate tax benefits, in many cases is a great solution for organization and a way around a hefty probate cost state.

Give us a call if you have any confusion/questions!

Commodities falling

7-31-15 Bloomberg Commodity Index

Not only did this broad-based commodity index take out the 2008/9 lows, but it dropped to a never seen before low !

Certainly could go lower. Hated by many – Zig when others Zag!

In the endeavor to find assets that are not frothy, a never seen before, all time low, MIGHT be one.

Never go all in of course — but does not look frothy!

John A. Kvale CFA, CFP

http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225JK Street Cents Logo

Do you need a Trust? Maybe, Maybe Not … Benefits of a Revocable Living Trust

Trust – It should have been a four letter word considering all of the confusion it causes. Living in Texas, there are not as many uses for the revocable trust, however, we continue to warm to the Trust and find it very useful in many situations.LivingTrustEstatePic

To Trust or not to Trust?

To prevent a lengthy discussion, the focus of this post is on the Revocable Trust. This type of trust is the most common, but much different from its relative, the Irrevocable Trust.

Just a few benefits of the REVOCABLE Living Trust:

  • Easy to set up
  • Simple to change
  • Avoids Probate (Especially helpful in expensive probate states such as California and Florida –Not as much in Texas, but again still useful)
  • Great Organizer of affairs and death directives
  • Helps with privacy-non probate
  • Holds almost any type of asset
  • Relies on corporate law versus probate law
  • Neither helps or hurts from a Tax standpoint and does not require its own Tax ID

misunderstood aspects of a revocable Trust:

Does very little to prevent creditor exposure. — Since it is revocable, creditors can argue since you can do almost anything you wish with the assets, they are essentially yours and liabilities pass through to the trust.

Upon death of the beneficiary, in most cases a revocable trust becomes very strong and will have greater protections.

Lastly, a revocable trust rarely helps with Federal ESTATE Taxes. These are the taxes levied on estates over $5.4 million by individuals or $10.8 by couples.

Still confused? Drop us a line !

Have a Great Wednesday!

John A. Kvale CFA, CFP

http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225

JK Street Cents Logo