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Wednesday, June 13, 2012

Common Estate Planning Myths

Estate planning is a powerful tool that among other things, enables you to direct exactly how your assets will be handled upon your death or disability. A well-crafted estate plan will ensure you and your family avoid the hassles of guardianship, conservatorship, probate or unpleasant estate tax surprises. Unfortunately, many individuals have fallen victim to several persistent myths and misconceptions about estate planning and what happens if you die or become incapacitated.

Some of these misconceptions about living trusts and wills cause people to postpone their estate planning – often until it is too late.

Myth: I’m not rich so I don’t need estate planning.
Fact: Estate planning is not just for the wealthy, and provides many benefits regardless of your income or assets. For example, a good estate plan includes provisions for caring for a minor or disabled child, caring for a surviving spouse, caring for pets, transferring ownership of property or business interests according to your wishes, tax savings, and probate avoidance.

Myth: I’m too young to create an estate plan.
Fact: None of us know exactly what the future holds. Even if you have no assets and no family to support, you should have a power of attorney and health care directive in place, in case you ever become disabled or incapacitated.

Myth: Owning property in joint tenancy is an easier, more affordable way to avoid probate than placing it in a revocable living trust.
Fact: In Alaska, only a husband and wife can jointly own property with a right of survivorship.  Holding title to real property with someone other than your spouse results in a tenancy in common.  Tenants in common have no right of survivorship, meaning that if one tenant in common dies, that tenant's interest in the property will be part of his or her probate estate and pass to their heirs and devisees either by will or intestate succession. 

Myth: Keeping property out of probate saves money on federal estate taxes.
Fact: Probate, and probate avoidance, are governed by state law and address how property passes upon your death; they have nothing to do with federal estate taxes, which are set forth in the Internal Revenue Code. Estate planning can reduce estate taxes, but that has nothing to do with a discussion regarding probate avoidance.

Myth: With a living trust, a surviving spouse need not take any action after the other spouse’s death.
Fact: Failure to adhere to the proper legal formalities following a death could result in significant administrative and tax implications. While a properly drafted and funded living trust will avoid probate, there are still some tasks that have to be performed such as filing documents, sending notices and transferring assets.  

Which myths have you heard? Which ones have you believed? 

 

 


Wednesday, May 30, 2012

Family Business: Preserving Your Legacy for Generations to Come

Are you a business owner? If so, you need to consider the following truth: Someday you will exit your business.  For most closely-held business owners, this reality is hard to imagine, but without taking time to plan for the inevitable, you will not be able to ensure that your business and the wealth that you have created are protected and pass smoothly to future generations.

More than 70 percent of family businesses do not survive the transition to the next generation. Ensuring your family does not fall victim to the same fate requires a unique combination of proper estate and tax planning, business acumen and common-sense communication with those closest to you. Foley & Foley can help business owners develop a sound exit planning roadmap and assist in the preparation of strategies and business organizational requirements to help assure a smooth business transition from one generation to the next.  Below are some steps you should consider taking as part of your business succession plan. 

  • Meet with an estate planning attorney at Foley & Foley to develop a comprehensive plan that includes a will and/or living trust. Your estate plan should account for issues related to both the transfer of your assets, including the family business and estate taxes.
  • As part of the estate planning process, communicate with your family members about their wishes concerning the business. Enlist their involvement in establishing a business succession plan with your attorney to transfer ownership and control to the younger generation. 
  • Make sure your succession plan includes:  preserving and enhancing “institutional memory”, who will own the company, advisors who can aid the transition team and ensure continuity, who will oversee day-to-day operations, provisions for heirs who are not directly involved in the business, tax saving strategies, education and training of family members who will take over the company and key employees.
  • Discuss your estate plan and business succession plan with your family members and key employees. Make sure everyone shares the same basic understanding.
  • Plan for liquidity. Establish measures to ensure the business has enough cash flow to pay taxes or buy out a deceased owner’s share of the company. Estate taxes are based on the full value of your estate. If your estate is asset-rich and cash-poor, your heirs may be forced to liquidate assets in order to cover the taxes, thus removing your “family” from the business.
  • Implement a family employment plan to establish policies and procedures regarding when and how family members will be hired, who will supervise them, and how compensation will be determined.
  • Have a buy-sell agreement in place to govern the future sale or transfer of shares of stock held by employees or family members.

You have worked very hard over your lifetime to build your business, but you should resist the temptation to retain total control of your business well into your golden years. There comes a time to retire and focus your priorities on ensuring a smooth transition that preserves your legacy – and your investment – for generations to come.  If you want to better understand how we can assist your business make this transition, contact us today for an initial business planning consultation.
 

 

 


Monday, May 14, 2012

5 Events Which May Require a Change in Your Estate Plan

Creating an estate plan is not a one-time event. You should review your estate plan periodically, to ensure it is up to date, and make necessary changes if your personal situation, or that of the people you wish to receive and administer your estate, has changed. There are a number of life-changing events that require your estate plan to be revised, including:

1)  Change in Marital Status: If you have recently been married or divorced, it is imperative that you review and modify your estate plan. With a new marriage, you must determine which assets you want to pass to your new spouse or step-children, and how that may relate to the beneficiary interest of your own children. Following a divorce it is a good practice to revise your estate plan to formally remove the ex-spouse as an heir. While you’re at it, you should also review the beneficiaries listed on any life insurance policies, pensions, or retirement accounts to ensure they are consistent with your estate plan. Estate planning is complicated when there are children from multiple marriages.  If one of your beneficiaries experiences a change in marital status, that may also trigger a need to revise your estate plan. 

2)  Births: Upon the birth of a new child, parents should amend their estate plans immediately, to include in their wills the names of the guardians who will care for their child if both parents die.  In addition, parents and grandparents alike may wish to modify the distribution of assets provided in their estate plans, to include the new addition to the family.

3)  Deaths or Incapacitation:  If any of the named beneficiaries, personal representatives, trustees, or guardians for your children, pass away or become incapacitated, your estate plan should be revised accordingly.

4)  Change in Assets: Your estate plan may need to be changed if the value of your assets has significantly increased or decreased, or if you dispose of an asset.  You may want to modify the distribution of other assets in your estate to account for the changed value or disposition of the asset.  In addition, changes in the estate and gift tax laws can occur at any time.  The current estate tax exemption of $5.12 million is set to expire the end of 2012.  Changes in the size of your estate or in the estate and gift tax laws could make some tax planning strategies advantageous to you and your heirs and devisees.

5)  Change in Employment:  A change in the amount and/or source of income means your estate plan should be examined to see if any changes must be made.  Retirement or changing jobs could also entail moving to another state, and possibly subjecting your estate to the laws of that state when you die.  If the change in income modifies your investing, saving or spending habits, it may be time to review your estate plan to make sure the distribution to your heirs and devisees will be as you intended.

Changes can cause the best estate plans to become obsolete over time. At Foley & Foley, we are here to help ensure that your estate plan is always current and will work the way that you intend by offering regular updating and maintenance of your plan through our Generations Program.   

 

 


Thursday, January 5, 2012

Welcome!

Welcome to our new website which was launched on Jan. 5, 2012.  The design and content of the website have been developed after a great deal of thought and effort. We hope that you find the website helpful and informative. 

Coincidentally it has been exactly 25 years since our law firm was founded.  The Law Office of Susan Behlke Foley opened for business on January 7, 1987.  The Law Office of Richard H. Foley opened in September of 1987.  The company was formally incorporated as Foley & Foley, P.C. in 1988.  We are proud to be celebrating our silver anniversary in 2012.

If you are looking for more information about probate, we maintain an informational website called probatealaska.com, that provides comprehensive guidance about the probate process in Alaska in language that you can understand.  Probatealaska.com was launched in December 2011.

 

Richard Foley


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Foley, Foley & Pearson, P.C. is a full service Estate Planning law firm. We offer our clients services in Probate Administration, Estate Taxes, Wills, Trusts, Disability and Incapacity Planning, Estate Administration, Corporate and Business Law, Business Succession Planning, and Planned Giving and Charitable Bequests.