Estate Planning - Private Affairs

P Believe it or not, you have an estate. In fact, nearly everyone does. Your estate consists of everything you own: your car, home, other real estate, checking and savings accounts, investments, life insurance, furniture, personal possessions. No matter how large or how modest, everyone has an estate and something in common—you cannot take it with you when you die. 

When that happens (and it is if not when), you probably want to control how those things are given to the people or organizations you care most about. To ensure that your wishes are carried out, you need to provide instructions stating whom you want to receive something of yours, what you want them to receive, and when they are to receive it. You will, of course, want this to happen with the least amount paid in taxes, legal fees, and court costs.

That is estate planning—making a plan in advance, naming the people or organizations you want to receive the things you own after you die, and taking steps now to make carrying out your plan as easy as possible later. However, good estate planning is much more than that. It should also do the following:

• include instructions for your care and financial affairs if you become incapacitated before you die
• include arrangements for disability income insurance to replace your income if you cannot work due to illness or injury, long-term care insurance to help pay for your care in case of an extended illness or injury, and life insurance to provide for your family at your death
• provide for the transfer of your business at your retirement, disability, incapacity, or death
• name a guardian for your minor children’s care and inheritance
• provide for family members with special needs without disqualifying them from government benefits
• provide for loved ones who might be irresponsible with money or who may need protection from creditors or in the event of divorce
• minimize taxes, court costs, and unnecessary legal fees, which may include funding assets into a living trust, completing or updating beneficiary designations, or otherwise aligning your assets with your estate plan

Importantly, estate planning is also an ongoing process, not a one-time event. You should review and update your plan as your family and financial circumstances (and the relevant laws) change over your lifetime.

Estate Planning Is for Everyone

It is not just for retirees, although people do tend to think about it more as they get older. Unfortunately, we cannot successfully predict how long we will live, and illness and accidents happen to people of all ages.

Estate planning is not just for the wealthy either, although people who have accumulated wealth may think more about how to preserve it. Good estate planning is often more impactful for families with modest assets because the loss of time and funds as a result of poor estate planning is more detrimental.

Too Many People Do Not Plan

People put off estate planning because they think they do not own enough, they are not old enough, it will be costly or confusing, they will have plenty of time to do it later, they do not know where to begin or who can help them, or they just do not want to think about it. Then when something happens to them, their families have to pick up the pieces.

If You Do Not Have a Plan, Your State Has One For You—But You Might Not Like It

At disability: If your name is on the title of your assets and you cannot conduct business due to mental or physical incapacity, only someone appointed by a court can sign for you. The court will supervise and ultimately control how your assets are used for your care through a conservatorship or guardianship (depending on the term used in your state). It can become expensive and time-consuming, it is of public record to some extent, and it can be difficult to end even if you recover.

At your death: If you die without a valid estate plan, any assets owned in your individual name and without a beneficiary designation or other governing contract will be distributed according to your state’s intestacy laws, typically through a court-supervised probate proceeding. In many states, if you are married and have children, your spouse and children will each receive a share, even if your children are from a prior marriage or no longer minors. That means your spouse could receive only a fraction of your estate, which may not be enough to live on. If you have minor children, the court will control their inheritance. If both parents die (e.g., in a car accident), the court will appoint a guardian without knowing whom you would have chosen.

Given the choice—and you do have the choice—wouldn’t you prefer that these matters be handled privately by your family, not by the courts? Wouldn’t you prefer to keep control of who receives what and when? And if you have young children, wouldn’t you prefer to have a say in who will raise them if you cannot?

An Estate Plan Begins with a Will or Living Trust

A will provides your instructions, but it does not avoid probate. A will only directs how assets titled in your name and without a beneficiary designation or other governing contract will be distributed. The assets must still go through your state’s probate court before they can be distributed to your intended beneficiaries. (If you own property—usually real estate—in other states, multiple probates may be required, each one according to the laws in that state.) The process varies greatly from state to state, but it can become expensive with attorney’s fees, executor commissions, and court costs. It can also take anywhere from a few months to two years or longer. With some exceptions, probate proceedings are open to the public, and your creditors and any excluded heirs are notified of their opportunity to file for payment of a debt or a share of your estate. In short, the court system, not your family, controls the process and the timing of distributions to your beneficiaries.

Not everything you own will go through probate. Jointly-owned property and assets that let you designate a beneficiary (for example, life insurance, IRAs, 401(k)s, annuities, and certain other accounts) are not controlled by your will and usually will transfer to the surviving owners or beneficiary without probate. However, there are many problems with joint ownership and using these methods for estate planning. In addition, avoidance of probate is not guaranteed. For example, if a valid beneficiary is not named, the assets will have to go through probate and will be distributed along with the rest of your estate. If you name a minor as a beneficiary, the court will probably require a guardianship until the child reaches the legal age of majority for the state, often between eighteen and twenty-one years of age.

For these reasons, a revocable living trust (combined with a pour-over will) is preferred by many families and estate planning professionals. Establishing and funding a revocable living trust can avoid probate at death (including multiple probates if you own property in other states), prevent court control of assets if you become incapacitated during life, bring all of your assets (even those with beneficiary designations) together into one plan, and provide increased privacy. Because the trust is revocable, the instructions governing it can be changed by you at any time. The accompanying pour-over will is a backup measure in the event that any assets are not funded into your trust during your lifetime and provides that those assets should be poured over into your trust upon your death.

Unlike a probate, which will end at some point, a trust can continue long after your death. Assets can stay in your trust, managed by the trustee you selected, until your beneficiaries reach the age you want them to inherit or longer to provide for a loved one with special needs; to protect the assets from beneficiaries’ creditors, spouses, and irresponsible spending; or to provide for future generations.

An estate plan that includes both a living trust and pour-over will is not necessarily more expensive initially than an estate plan that only includes a will, but it is more likely to avoid fees and costs later, considering that a funded trust can avoid court involvement at incapacity and death.

Planning Your Estate Will Help You Organize Your Records and Correct Titles and Beneficiary Designations

Would your family know where to find your financial records, titles, and insurance policies if something happened to you? Planning your estate now will help you locate and organize your information and documents, as well as find and correct errors.

Most people do not give much thought to the wording they put on titles and beneficiary designations. You may have good intentions, but an innocent error can create problems for your family at your incapacity or death. Beneficiary designations are often out-of-date or otherwise invalid. Naming the wrong beneficiary on your tax-deferred plan can lead to devastating tax consequences. Correcting titles and beneficiary designations now can save time, attorney’s fees, and taxes for your family later.

Estate Planning Does Not Have to Be Expensive

It is important to understand that trying to do your own estate planning to save money now can cost your family more later and may have consequences that you did not intend. An experienced estate planning attorney will be able to provide critical guidance and peace of mind that your documents are prepared properly to meet your objectives.

The Best Time to Plan Your Estate Is Now

None of us really like to think about our own mortality or the possibility of being unable to make decisions for ourselves. This is exactly why so many families are caught off-guard and unprepared when incapacity or death does strike. Don’t wait. You can put something in place now and change it later—which is exactly the way estate planning should be done.

The Best Benefit Is Peace of Mind

Knowing you have a properly prepared plan in place—one that contains your instructions and will protect your family—will give you and your family peace of mind. Estate planning is one of the most thoughtful and considerate things you can do for your loved ones.

What Is Estate Planning?

Estate planning is the preparation of tasks that serve to manage an individual’s asset base in the event of their incapacitation or death. The planning includes the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help with lawyers experienced in estate law.

Understanding Estate Planning

Estate planning involves determining how an individual’s assets will be preserved, managed, and distributed after death. It also takes into account the management of an individual’s properties and financial obligations in the event that they become incapacitated.

Assets that could make up an individual’s estate include houses, cars, stocks, artwork, life insurance, pensions, and debt. Individuals have various reasons for planning an estate, such as preserving family wealth, providing for a surviving spouse and children, funding children’s or grandchildren’s education, or leaving their legacy behind to a charitable cause.

The most basic step in estate planning involves writing a will. Other major estate planning tasks include the following:

• Limiting estate taxes by setting up trust accounts in the names of beneficiaries
• Establishing a guardian for living dependents
• Naming an executor of the estate to oversee the terms of the will
• Creating or updating beneficiaries on plans such as life insurance, IRAs, and 401(k)s
• Setting up funeral arrangements
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Writing a Will

A will is a legal document created to provide instructions on how an individual’s property and custody of minor children, if any, should be handled after death. The individual expresses their wishes through the document and names a trustee or executor that they trust to fulfill their stated intentions. The will also indicates whether a trust should be created after death. Depending on the estate owner’s intentions, a trust can go into effect during their lifetime (living trust) or after their death (testamentary trust).

The authenticity of a will is determined through a legal process known as probate. Probate is the first step taken in administering the estate of a deceased person and distributing assets to the beneficiaries. When an individual dies, the custodian of the will must take the will to the probate court or to the executor named in the will within 30 days of the death of the testator.

The probate process is a court-supervised procedure in which the authenticity of the will left behind is proved to be valid and accepted as the true last testament of the deceased. The court officially appoints the executor named in the will, which, in turn, gives the executor the legal power to act on behalf of the deceased.

Planning for Estate Taxes

Federal and state taxes applied to an estate can considerably reduce its value before assets are distributed to beneficiaries. Death can result in large liabilities for the family, necessitating generational transfer strategies that can reduce, eliminate, or postpone tax payments.

During the estate-planning process, there are significant steps that individuals and married couples can take to reduce the impact of these taxes.

Appointing the Right Executor

The legal personal representative or executor approved by the court is responsible for locating and overseeing all the assets of the deceased. The executor has to estimate the value of the estate by using either the date of death value or the alternative valuation date, as provided in the Internal Revenue Code (IRC).1

A list of assets that need to be assessed during probate includes retirement accounts, bank accounts, stocks and bonds, real estate property, jewelry, and any other items of value. Most assets that are subject to probate administration come under the supervision of the probate court in the place where the decedent lived at death.

The exception is real estate, which must be probated in the county in which it is located.

The executor also has to pay off any taxes and debt owed by the deceased from the estate. Creditors usually have a limited amount of time from the date they were notified of the testator’s death to make claims against the estate for money owed to them. Claims that are rejected by the executor can be taken to court where a probate judge will have the final say as to whether or not the claim is valid.

The executor is also responsible for filing the final personal income tax returns on behalf of the deceased. After the inventory of the estate has been taken, the value of assets calculated, and taxes and debt paid off, the executor will then seek authorization from the court to distribute whatever is left of the estate to the beneficiaries.

We understand that providing services for trusts, companies and other structures is a long-term commitment that may last for decades. We have the expertise and capability to provide this long-term administration to support your family. There are several key benefits of a trust structure:

Your Family

To help safeguard what matters the most to you, trust a bank that has your best interests at heart.

 Private Trusts

Trusts and Sharia’a compliant Trusts can play an important role in the wealth protection and management for individuals and families, particularly in family estate and succession planning control, to also include asset management protection and confidentiality.

 Foundation

A variety of foundation structures are being implemented in both DIFC and ADGM to hold real estate, trading companies, and investments. We can help clients establish their UAE foundations which can assist with asset protection, and privacy.

 Asset holding companies

Potential uses for Asset holding companies may include assets such as art, jewellery, aircraft, yachts, intellectual property, and image rights.

Your Business

Benefit from our experience in structuring and managing bespoke solutions for your business

 Investment Holding Vehicles

We have experience with the Incorporation and administration of Jersey domiciled investment holding vehicles, to include provision of experienced professional corporate directors, and transaction management.

 Property Holding Companies

Jersey has been a destination of choice to hold international property investment via holding structures and is well proven in providing high quality legal, accounting and administration expertise. Property holding entities can be established quickly and cost efficiently with each type of structure providing flexibility to meet the investor’s requirements.

 Jersey Companies for Acquisition

Jersey companies are considered as a proven vehicle for the acquisition for private equity investment, or the option to invest on behalf of a corporate institution directly.

We are experts in expatriate estate planning, and can create cost effective, tax-efficient, robust solutions for you.

Your estate plan may typically include:

• A will,
• Guardianship documentation,
• Trusts,
• Foundations,
• Holding companies,
• Insurances,
• An inheritance tax (IHT) mitigation strategy.

Your plan will be bespoke and will ensure your family’s financial security over the long-term.

Good financial planning includes having strategies in place to also manage the effect of inheritance tax on your properties, your pension fund, your investments, and other assets which could form a significant portion of your wealth.

Considering the impact of illness or death, and getting a plan to cover the risks involved with life, are vital steps to achieving complete peace of mind.

Succession planning

In an increasingly globalised world, the fall-out from a family death can be extremely challenging. 

Succession laws differ from country to country, and expatriates may inadvertently get taxed twice – or spend years trapped in probate. 

Rising property prices, and widespread misunderstandings about inheritance tax obligations, mean careful planning can be required to ensure your loved ones aren’t left with nasty surprises when you pass on your estate.

We work with you to deliver a plan that will ensure the smooth succession of your global assets, whether that is for family succession, a charitable legacy or business continuity reasons.

Estate planning isn’t only for ultra-high net worth families and corporations, it’s essential for all expatriates:

• Protect dependants of any age.
• Ensure assets are passed to the correct people.
• Remove all risk of contention.

Without a plan in place:

• Assets can be frozen,
• Probate can be costly,
• Dependants can lose visa rights,
• Your wishes can be overridden.