Attorney Stephen P. Levesque is Rhode Island’s premier estate planning, asset protection and probate administration law firm. With a bachelors degree in accounting and taxation we have been able to counsel, plan with and guide thousands of client’s through the process of securing a bright future for their children and grandchildren. Stephen’s goal is to help you create a financial plan that includes estate planning strategies designed to help you reflect the things that are important to you. Call 401-490-4900 for your free initial consultation.
It’s never too early to begin thinking about your legacy or to shape your estate plan. Contrary to what many people think, you don’t need to be a millionaire to have an estate plan. An estate plan is an important part of any ongoing financial planning process. Your life, your dreams, your legacy transcends money; it also encompasses your values. Your wishes and dreams may include using your assets to help secure your family’s future or you may choose to support another cause close to your heart. This might be your favorite charity, your community, or your place of worship, to name a few.
Designing a legacy consistent with your dreams and values is a personal, often complex process. But it’s well worth the effort. Consider setting up a family estate planning meeting to help improve communication, prevent conflicts and let your family know what’s important to you. After giving some thought to your wishes, including the needs of family members you want to provide for, write down the thoughts and opinions shared. This information will be invaluable when deciding your future health care directives and assets distribution.
A will lets you specify your wishes, including how you want your property distributed, who will administer your estate and who will care for your minor children. A trust holds your assets in advance of your passing and is generally for the benefit of one or more people (you, your spouse, your children). Life insurance proceeds are paid to a beneficiary at your death. Gifts are transfers of property made during your life to family, friends or charity.
To help you estimate the value of your estate, you’ll need to take into consideration: Current income and likely future income; Annual expenses Current assets and debts; and, Tax implications of federal transfer taxes, state death taxes and federal income taxes. Revisit your estate plan regularly. Just like your financial plan, it’s important to review your will and other estate planning documents regularly, or when significant life events occur. Call today 401-490-4900 for your free initial 30 minute consultation.
Conversations to Have with Family
We spend a lot of time talking with family members about politics, the news and our personal lives. But planning for the future starts with a conversation. It may be that talking about the future and family financial matters is stressful, sometimes even painful. But having these conversations can help make sure you’re prepared for some of the key events that most families experience. Between children and their parents or parents with their attorney. Our goal is to facilitate the tough conversations. Words are important, below are pointers and suggestions to help you begin the conversation. They will help you uncover insights that create a foundation for you to begin the process. Here are three conversations to have soon with family:
A. Pre-Retirement Conversations
1. Your Life Partner
Couples often assume their dreams and goals are on the same page. But when they start talking about them, they discover they’re on different wavelengths. One person imagines living on the beach by age 60; the other hopes to join a local Rotary Club, start a business or keep working past age 70. Did you know? Among adults age 18 to 46, the number one threat to their retirement plans is job security. The number two is heath care costs? To avoid unnecessary surprises, discuss retirement goals with your spouse or partner during your working years and especially as you near retirement age. That way dreams and financial situations can change or take shape. Start by talking about where you envision living in retirement, when you see yourselves retiring and how you’ll want to spend your time. Stress that you want to ensure you both feel good about the direction you’re heading. Ask questions about your partner’s dreams, and then share your own. Together, these conversations should create a clearer vision that you can plan around. Once you have basic goals in mind, write them down. We can help you build a roadmap to get you closer to your dreams so you can live a more confident retirement.
2. Your Parents Future:
Your parents’ long-term care It’s never too early to talk with your parents about the future. They may still be healthy, or they may already be grappling with aging-related issues. Either way, the reality is that getting older often means sacrificing some independence, whether it’s moving into an assisted living facility or giving up the car keys. It’s important to have conversations about the “what ifs” long before your parents need to make any major life changes. Did you know? Most of young and middle-aged adults worry their parents won’t have enough financial resources for a financially secure retirement. First, let them know you love them and want to ensure that any transitions they make later in life are as smooth and comfortable as possible. You might say, “It’s going to be very difficult for me to make big decisions on my own, and I want to make sure your wishes are respected.” Then ask (as sensitively as possible) how they envision living in their later years and whether they’ve thought about where they’d want to live. Inquire if they have made any arrangements or have a long-term care policy or other financial resources set aside to pay for future housing, caregiving and transportation needs. Keep in mind that if both parents are still living they may have very different expectations. In the end you are helping you parents make key future decisions related to in-home care, assisted living, transportation, respite care and help with chores.
3. Your Grandparent’s Wisdom:
Your grandparents and other senior family members likely have invaluable insights to share about their lives, their values and how they built your family’s financial foundation. They can share mistakes and smart decisions they made in their lives, providing lessons you can learn from and pass on to future generations. Some families even create videos and other living histories to document the life experiences of their eldest members. Ask your grandparents about their childhood and their working years. Many of today’s older Americans lived through the Great Depression and have remarkable stories to tell. Listen for how they approached their finances, saved money and built wealth. You may learn things that can help you create your own legacy. Did you know? Very few people age 58 to 93 feel “very optimistic” about their financial future, a significant drop in the past five years.
B. Post Retirement Conversations
1. Your Life Partner
An important conversation to have as you age is about the kind of legacy you wish to leave behind. This will affect how you’ll be remembered. Couples may be surprised to discover they have very different perspectives. Ask your spouse or partner how he or she hopes to be viewed by future generations. This can lead to conversations about how you both envision passing along your wealth. For example, you may want to donate to your favorite charities, gift during your lifetime and divide inheritance assets among the children, grandchildren or other heirs. Couples may have different views about the importance of leaving an inheritance, so you will want to make sure your expectations are on the same track.aligned. Also discuss how to best relay your financial ideals to younger family members to help them carry the torch. Once you agree on the legacy you want to build, make sure it’s reflected in your estate plans: in your will, account beneficiary designations, trusts and insurance policies. Since estate planning can be quite complex, it’s worth consulting an attorney who can help ensure your estate is divided according to your wishes.
2. Your Children’s Inheritance
Your adult children will likely be vital to ensuring that your legacy and wishes are passed along. You don’t have to reveal every last detail about your estate plans with them. But it’s worth sharing enough information to help them plan ahead and maintain the values and financial foundation you’ve worked so hard to create. Start by explaining the kind of legacy you hope to leave so they understand your motives. Keep in mind that conversations involving inheritance and estate plans can be emotional, so it’s worth approaching them with sensitivity and understanding. Did you know that less than one third of baby boomers feel like they have not had adequate discussions with their parents about key financial issues, such as their wishes for financial accounts and long-term care. It is important to ask questions that encourage them to open up: Have you provided enough information so they understand what you’re hoping to accomplish through your estate plans? Do they feel they will have the financial resources they need in the future? Tell them you care about their feelings and want to make sure they fully understand your intentions. If you haven’t already, let them know who will serve as executor of your estate, whether it is a family member or friend, and, make sure that person has all the necessary documents and information needed to execute your wishes and to carry out your long term legacy plan.
3. Your Grandchildren’s Independence
Today’s younger generations face many financial challenges. As the job market evolves and education costs skyrocket, many worry about finding secure employment after college and saving enough to retire someday. One of the greatest gifts you can bestow on them is the wisdom and values you’ve acquired over the years. Encourage your grandchildren to talk about how they envision their future. What kind of career they’d like to pursue? What kind of life they imagine living and where? This often naturally leads to conversations about finances and, for instance, how a career choice may affect their future lifestyle. Make sure not to approach such conversations with a heavy hand, but rather as an opportunity to share your thoughts about the value of education and choosing a fulfilling career path. You might tell your grandkids about early job experiences you had and how your family saved money and built wealth. They can learn from your experiences, and anything you pass along today can help ensure your family’s financial legacy is maintained into the future.
A Primer for Probate and Administration
When you die, property (real estate and personal) owned solely by you and for which you have not designated a beneficiary or co-owner by appropriate means (your “estate”) may be placed under the supervision of the Probate Court in the town or city where you lived. If you do not have a will, your property may be distributed to your heirs at law pursuant to Rhode Island General Laws or by other means allowed by law. It is common misconception that probate court can be avoided if no will exists. If you have a will, the property will be distributed under the terms of your will. It is recommended that you leave a will which sets forth your directions for how you want your estate to pass after your death; it is a document best prepared by an attorney and signed by you during your lifetime. Your will may be changed by you at any time prior to your death and is not effective until you die. In addition to your direction as to how you wish your property to be divided, you also appoint a person(s) to be in charge of the distribution of your property and to wrap up your affairs after you have passed (the “Executor” of your estate). That person is usually given authority to act on your assets and estate without further permission of the Probate Court. You may wish to appoint more than one person to do this and usually it is someone whom you trust to be able to perform these tasks promptly, efficiently and honestly. You should discuss this with your attorney as you prepare your will and in certain cases with the person you are thinking of appointing.
1. What happens when you die without a will?
A common misconception is that an estate escapes additional expenses by not having a will. Generally, it is less expensive to probate an estate if there is a will, because fewer court appearances are necessary (reducing attorney fees) and the administration period is shorter because the will needs less court guidance and approval. What happens when an individual dies without a will? In general, the following occurs: Your heirs/spouse submit to the Probate Court in the town or city where you resided a petition requesting that the court appoint someone to administer your estate (usually a family member) called an Administrator. After notice to your heirs at law and at a hearing, the Probate Judge appoints the Administrator who has the duty to gather all your assets, value them and submit this value of your assets to the court (a 1% tax is collected from your estate based on this value, exclusive of real estate owned by you, and the maximum tax is $1500.00). The court will also require a bond from your Administrator insuring the value of your estate (sometimes with a corporate bonding company as a “surety,” adding additional cost to the administration of your estate). The Administrator and surety are then responsible to the court for the honest administration of your estate. The Administrator pays your debts outstanding at the time of your death, the costs of your last illness, your burial expenses, any taxes due to the State or Federal government based on the size of your estate (these may vary year to year, so you need to consult with your attorney regarding them) and the costs to administer your estate, including a fee to the Administrator and legal fees and costs. The estate remains open for at least six (6) months to allow for the filing of claims against the estate by your creditors. If claims are filed and found to be valid and estate funds are available, your estate is required to use them to pay them. The Probate Court must approve each sale or disposition of the real and personal property you owned in your own name by the Administrator. After all of the above has been completed, the Administrator of your estate closes it by an accounting with the court or by an affidavit of complete administration accepted by the court, and disburses the balance of funds in the estate to your heirs at law.
2. What happens when an individual dies with a will?
In general, the following occurs: The person(s) you have designated as your Executor usually submits a petition with your will to the Probate Court in the town or city where you resided Executor. After notice to your heirs at law and at a hearing, the Probate Judge determines if your will should be allowed and, if so, appoints the Executor you have designated. The Executor then performs the necessary tasks to administer your estate, similar to the duties of an Administrator (see above) except it is a person you appoint with sufficient authority to allow action on your estate without Probate Court intervention. The Executor values your assets and submits the value to the court (a 1% tax is collected from your estate based on this value, exclusive of real estate owned by you, maximum $1500.00); the court will also require a bond from your Executor insuring the value of your estate. The Executor is then personally responsible to the court for the honest administration of your estate. (Usually in your will, you request that your Executor not provide corporate surety for his bond, thus not incurring an expense to your estate.) The Executor pays your debts outstanding at the time of your death, the costs of your last illness, your burial expense, any taxes due to the State or Federal government based on the size of your estate (these may vary year to year, so you need to consult with your attorney regarding them) and the costs to administer your estate, including a fee to the Executor and legal fees and costs. The estate remains open for at least six (6) months to allow for the filing of claims against the estate by your creditors. If claims are filed and found to be valid and estate funds are available, your estate is required to use these funds to pay the claims. After all of the above has been completed, the Executor of your estate closes it by an accounting with the court or by an affidavit of complete administration accepted by the court. The balances of funds in the estate are then disbursed pursuant to the directions you placed in your will.
Wills – Preparing for your Future
If you care about what happens to your money, home, and other property after you die, you need to do some estate planning. There are many tools you can use to achieve your estate planning goals, but a will is probably the most vital. Even if you’re young or your estate is modest, you should always have a legally valid and up-to-date will. This is especially important if you have minor children because, in many states, your will is the only legal way you can name a guardian for them. Seeking an attorney’s help can ensure that your will accomplishes what you intend.
Probably the greatest advantage of a will is that it allows you to avoid intestacy. That is, with a will you get to choose who will get your property, rather than leave it up to state law. State intestate succession laws, in effect, provide a will for you if you die without one. This “intestate’s will” distributes your property, in general terms, to your closest blood relatives in proportions dictated by law. However, the state’s distribution may not be what you would have wanted. Intestacy also has other disadvantages, which include the possibility that your estate will owe more taxes than it would if you had created a valid will.
Wills distribute property according to your wishes. Wills allow you to leave bequests (gifts) to anyone you want. You can leave your property to a surviving spouse, a child, other relatives, friends, a trust, a charity, or anyone you choose. There are some limits, however, on how you can distribute property using a will. For instance, your spouse may have certain rights with respect to your property, regardless of the provisions of your will. Gifts through your will take the form of specific bequests (e.g., an heirloom, jewelry, furniture, or cash), general bequests (e.g., a percentage of your property), or a residuary bequest of what’s left after your other gifts.
Wills also allow you to nominate a guardian for your minor children. In many states, a will is your only means of stating who you want to act as legal guardian for your minor children if you die. You can name a personal guardian, who takes personal custody of the children, and a property guardian, who manages the children’s assets. This can be the same person or different people. The probate court has final approval, but courts will usually approve your choice of guardian unless there are compelling reasons not to.
A will allows you to designate a person as your executor to act as your legal representative after your death. An executor carries out many estate settlement tasks, including locating your will, collecting your assets, paying legitimate creditor claims, paying any taxes owed by your estate, and distributing any remaining assets to your beneficiaries. Like naming a guardian, the probate court has final approval but will usually approve whomever you nominate.
Wills specify how to pay estate taxes and other expenses The way in which estate taxes and other expenses are divided among your heirs is generally determined by state law unless you direct otherwise in your will. To ensure that the specific bequests you make to your beneficiaries are not reduced by taxes and other expenses, you can provide in your will that these costs be paid from your residuary estate. Or, you can specify which assets should be used or sold to pay these costs.
Wills can fund an existing (or living trust) or be used to create a testamentary trust. You can create a trust in your will, known as a testamentary trust, that comes into being when your will is probated. Your will sets out the terms of the trust, such as who the trustee is, who the beneficiaries are, how the trust is funded, how the distributions should be made, and when the trust terminates. This can be especially important if you have a spouse or minor children who are unable to manage assets or property themselves. During probate, the selected assets passing through your will can “pour over” into the trust. From that point on, these trusts work very much like other trusts. The terms of the trust document control how the assets within the trust are managed and distributed to your heirs. Since you have a say in how the trust terms are written, these types of trusts give you a certain amount of control over how the assets are used, even after your death.
Wills can help minimize taxes Your will gives you the chance to minimize taxes and other costs. For instance, if you draft a will that leaves your entire estate to your U.S. citizen spouse, none of your property will be taxable when you die (if your spouse survives you) because it is fully deductible under the unlimited marital deduction. However, if your estate is distributed according to intestacy rules, a portion of the property may be subject to estate taxes if it is distributed to heirs other than your U.S. citizen spouse.
Assets disposed of through a will are subject to probate. Probate is the court-supervised process of administering and proving a will. Probate can be expensive and time consuming, and probate records are available to the public. Several factors can affect the length of probate, including the size and complexity of the estate, challenges to the will or its provisions, creditor claims against the estate, state probate laws, the state court system, and tax issues. Also, owning property in more than one state can result in multiple probate proceedings. This is known as ancillary probate. Generally, real estate is probated in the state in which it is located, and personal property is probated in the state in which you are domiciled (i.e., reside) at the time of your death.
Will provisions can be challenged in court Although it doesn’t happen often, the validity of your will can be challenged, usually by an unhappy beneficiary or a disinherited heir. Some common claims include: You lacked testamentary capacity when you signed the will; You were unduly influenced by another individual when you drew up the will; The will was forged or was otherwise improperly executed; or, The will was revoked.
Trusts – Planning for the Future
Whether you’re seeking to manage your own assets, control how your assets are distributed after your death, or plan for incapacity, trusts can help you accomplish your estate planning goals. Their power is in their versatility. Many types of trusts exist, each designed for a specific purpose. Although trust law is complex and establishing a trust requires the services of an experienced attorney, mastering the basics isn’t hard.
What is a trust? A trust is a legal entity that holds assets for the benefit of another. Basically, it’s like a container that holds money or property for somebody else. You can put practically any kind of asset into a trust, including cash, stocks, bonds, insurance policies, real estate, and artwork. The assets you choose to put in a trust depend largely on your goals. For example, if you want the trust to generate income, you may want to put income-producing securities, such as bonds, in your trust. Or, if you want your trust to create a pool of cash that may be accessible to pay any estate taxes due at your death or to provide for your family, you might want to fund your trust with a life insurance policy.
Why create a trust? Since trusts can be used for many purposes, they are popular estate planning tools. Trusts are often used to: Minimize estate taxes; Shield assets from potential creditors; Avoid the expense and delay of probating your will; Preserve assets for your children until they are grown (in case you should die while they are still minors); Set up a fund for your own support in the event of incapacity; or Provide benefits for charity. The type of trust used, and the mechanics of its creation, will differ depending on what you are trying to accomplish. Depending on the type of trust you choose, you may give up some control over the assets in the trust. In certain cases, you may need more than one type of trust to accomplish all of your goals.
When you create and fund a trust, you are known as the grantor (or sometimes, the settlor). The grantor names people, known as beneficiaries, who will benefit from the trust. Beneficiaries are usually your family and loved ones but can be anyone, even a charity. Beneficiaries may receive income from the trust or may have access to the principal of the trust either during your lifetime or after you die. The trustee is responsible for administering the trust, managing the assets, and distributing income and/or principal according to the terms of the trust. Depending on the purpose of the trust, you can name yourself, another person, or an institution, such as a bank, to be the trustee. You can even name more than one trustee if you like. The trustee of the trust is a fiduciary, someone who owes a special duty of loyalty to the beneficiaries. The trustee must act in the best interests of the beneficiaries at all times. For example, the trustee must preserve, protect, and invest the trust assets for the benefit of the beneficiaries. The trustee must also keep complete and accurate records, exercise reasonable care and skill when managing the trust, prudently invest the trust assets, and avoid mixing trust assets with any other assets, especially his or her own. A trustee lacking specialized knowledge can hire professionals such as attorneys, accountants, brokers, and bankers if it is wise to do so. However, the trustee can’t merely delegate responsibilities to someone else. Although many of the trustee’s duties are established by state law, others are defined by the trust document.
Living (revocable) trust is a special type of trust. It’s a legal entity that you create while you’re alive to own property such as your house, a boat, or investments. Property that passes through a living trust is not subject to probate. It doesn’t get treated like the property in your will. This means that the transfer of property through a living trust is not held up while the probate process is pending (sometimes up to two years or more). Instead, the trustee will transfer the assets to the beneficiaries according to your instructions. The transfer can be immediate, or if you want to delay the transfer, you can direct that the trustee hold the assets until some specific time, such as the marriage of the beneficiary or the attainment of a certain age. Living trusts are attractive because they are revocable. You maintain control and can change the trust or even dissolve it for as long as you live. Living trusts are also private. Unlike a will, a living trust is not part of the public record. No one can review details of the trust documents unless you allow it. Living trusts can also be used to help you protect and manage your assets if you become incapacitated. If you can no longer handle your own affairs, your trustee (or a successor trustee) steps in and manages your property. In the absence of a trustee, a court could appoint a guardian to manage your property. Despite these benefits, living trusts have some drawbacks. Assets in a living trust are not protected from creditors, and you are subject to income taxes on income earned by the trust. In addition, you cannot avoid estate taxes using a living trust.
Irrevocable trusts unlike a living trust, can’t be changed or dissolved once it has been created. You generally can’t remove assets, change beneficiaries, or rewrite any of the terms of the trust. Still, an irrevocable trust is a valuable estate planning tool. First, you transfer assets into the trust; assets you don’t mind losing control over. You may have to pay gift taxes on the value of the property transferred at the time of transfer. Provided that you have given up control of the property, all of the property in the trust, plus all future appreciation on the property, is out of your taxable estate. That means your ultimate estate tax liability may be less, resulting in more passing to your beneficiaries. Property transferred to your beneficiaries through an irrevocable trust will also avoid probate. As a bonus, property in an irrevocable trust may be protected from your creditors. There are many different kinds of irrevocable trusts. Many have special provisions and are used for special purposes. Some irrevocable trusts hold life insurance policies or personal residences. You can even set up an irrevocable trust to generate income for you.