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Tuesday, January 23, 2007

Reasons for a Will

  1. General Benefits
    a) Ensures a clear WRITTEN clear plan for the distribution of assets after your death
    i. Provides proof of plan
    ii. You get to choose who serves as executor, trustee and guardian
    iii. A clear plan can help avoid infighting amongst surviving family members
    b) Important means of ensuring that money will go to whom you wish it to go rather than according to state law
    c) Eliminates need for Insurance bond for Trustees and Guardians (Savings of approximately $500 for every $100,000 that the estate is valued at)

  2. Establish trusts for your children/grandchildren
    a) Minors – allows for both discretion over distribution and control over timing of distributions
    i. Tiered distribution – traditional means of giving money to children (age 21, 25, 30)
    ii. Dynasty trusts – stays in family blood forever if funded with enough money.
    b) Problem children – can give trustee discretion as to when to distribute money out

  3. Flexibility
    a) A Modern Will should allow for a great deal of flexibility because of the ever-changing tax laws.
    i. Regardless of whether a Testator’s estate goes up or down, the will should contain formulas to take into account the current state of the tax laws and future anticipated changes.
    ii. Ability to take into account State Tax laws in conjunction with Federal Tax Laws
    b) Trustee provisions - Many problems occur when beneficiaries are stuck with trustees whom they cannot remove. A modern Will should have the ability for trusted beneficiaries to replace trustees and appoint independent trustees to allow for invasion of principal to beneficiaries in a way that will not produce adverse tax consequences.
    c) Post mortem planning - A will should allow for the surviving spouse or an independent executor to do planning after the death of the testator including tax planning.
    i. Disclaimers
    ii. Limited Powers of Appointment – You can allow the surviving spouse to appoint the balance of a trust among your children as he or she sees fit. (This is especially useful when children have varied income levels.)
    iii. Granting of a General Power of Appointment for tax purposes.
    d) Side letters – Under New Jersey law, a testator may revise the provisions regarding disposition of tangible personal properties without redoing the entire will. (E.g. You can easily change your mind about who you want to leave your golf clubs to without redoing your Will.)
    e) Combining trusts – A well drafted will (and trust) should allow you to combine two or more trusts with similar terms to save time and money.

  4. Minimization of Tax consequences
    a) Establishing trusts allows couples to make full use of both spouses’ tax exemptions.
    b) Anyone who plans to distribute to non-lineal descendents, up or down, must plan to minimize inheritance taxes
    c) Establishment of multiple trusts for minimization of Generation Skipping Transfer Tax (GST tax)

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