Sunday, November 22, 2009

Plan your Affairs-simple ways to avoid Legal fees, taxes and Legal costs

Legal fees are incurred when attorney gets involved or a matter has to be handled in court. Typical example is Will-contest or probate fees (attorneys fees and court fees) in Probate Court.
Taxes are incurred when someone has poor estate tax planning or no estate tax planning. Estate taxes are due nine (9) months after the death and have to paid in cash. No installments. The Estate Tax is a tax on your right to transfer property at your death. Assets have to be sold at the value they can fetch in “fire-sale”.
Legal costs such as probate fees etc. again are incurred when there is poor or no estate planning.
Here are some of the simple ways to avoid legal fees, costs and taxes (estate taxes or gift taxes).
1.       Do not die without a will. At least have a will. No will (for estate worth $100,000 or more) = Probate-for sure. Even a will does not avoid probate but it can give some direction to probate court and help move things along much faster. Something is better than nothing.
2.       Take benefit of tax laws and codes which allow lot of tax savings and cost savings by forming revocable living trust. Revocable Living Trust allows one to take benefit of federal unified tax credit system and save money on legal fees and costs. It also ensures privacy.
3.       Write out your health care and financial affairs power of attorneys which will help deal with your affairs in the event of a disability rendering you incapable of handling your own affairs. Designate someone who is capable of handling the affairs properly. Base your designation and appointment of your agent on competency and not emotion.
4.       Title your accounts properly. If you have a checking account with your son or daughter and there is not much money in the same account, designate it as payable upon death to make the transfer easier.
5.       Give gifts. Of course, everybody cannot or does not need to give gifts; however, gift tax planning is definitely required for individuals with large estates to take benefit of unified tax credit system. Proper gifting on annual basis can go a long way.
6.       In the event of a business, make sure to properly insure it and have provisions of its continuity. This is critical in the case of partnerships, for example, to express your desire about how the business will continue in the event of one partner’s death. Buy-sell agreements or 2nd to die policies are great way to make up for the loss and ensure smooth continuity of the business.
7.       Benefit from Asset Protection strategies to avoid lawsuits or potential liability.