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Transcript of E ., CPA Living trusts (revocable and irrevocable) and testamentary trusts can be created for many...

  • © 2015 Lawrence Israeloff, Esq., CPA Page 2

    Copyright © 2015 by LAWRENCE ISRAELOFF, ESQ., CPA All rights reserved. No part of this book may be used or reproduced in any manner whatsoever without written permission of the author.

    ISBN: 978-1-941645-27-7

    Design and Published by:

    Speakeasy Publications 73-03 Bell Blvd #10 Oakland Gardens, NY 11364 www.SpeakeasyMarketingInc.com 888-225-8594

  • © 2015 Lawrence Israeloff, Esq., CPA Page 3

    DISCLAIMER

    This publication is intended to be informational only. The information in this book is not intended as legal advice. No legal advice is being given, and no attorney-client relationship is intended to be created by reading this material. If you are facing legal issues, whether criminal or civil, seek professional legal counsel to get your questions answered.

    The Law Offices of Lawrence Israeloff, PLLC 445 Broad Hollow Road Suite 205 Melville, NY 11747 (516) 537-4440 www.israelofflawcpa.com

  • © 2015 Lawrence Israeloff, Esq., CPA Page 4

    TABLE OF CONTENTS Attorney Introduction .................................................................. 6

    What Is An Estate Plan? ............................................................... 8

    What Happens If Someone Dies Without An Estate Plan In

    Place? ............................................................................................ 9

    The Trust As Part Of An Estate Plan .......................................... 10

    Who Are The Parties Involved In A Trust? ................................ 12

    What Assets Can Be Owned By A Trust? ................................... 14

    Why Retain An Attorney To Establish A Trust? ....................... 16

    What Is Probate? ........................................................................ 17

    Do All Of A Decedent’s Assets Go Through Probate, Or Are

    There Non-Probate Assets? ........................................................ 19

    What Is The Estate Tax? ............................................................. 21

    What Is The Gift Tax? ................................................................. 22

    The Generation Skipping Transfer Tax ..................................... 24

    What Is The Difference Between The Taxable Estate vs.

    The Probate Estate? .................................................................... 25

    How Do Revocable Living Trusts Work? ................................... 26

    Advantages Of A Revocable Living Trust .................................. 29

  • © 2015 Lawrence Israeloff, Esq., CPA Page 5

    Disadvantages Of A Revocable Living Trust .............................. 33

    Common Misconceptions About RLTs ...................................... 35

    Do Living Trusts Provide Asset Protection? ............................. 39

    What Assets Cannot Be Owned By A RLT? ............................... 42

    What Common Mistakes Do People Make In Establishing

    Or Utilizing A Trust? .................................................................. 44

    How Is A Trust Treated For Income Tax Purposes? ................. 47

    Beneficial Provisions Of A Trust ................................................ 50

    Trusts For Married Couples ....................................................... 51

    Which States Are Most Favorable For Establishing A

    Trust? .......................................................................................... 53

    Planning Ahead Before Creating A Trust................................... 55

  • © 2015 Lawrence Israeloff, Esq., CPA Page 6

    ATTORNEY INTRODUCTION

    Lawrence Israeloff, Esq., CPA, CFP®, is an experienced

    New York tax attorney and CPA.

    His practice focuses on federal,

    state and local income tax

    planning for individuals and

    businesses, personal financial

    planning, transactional tax

    consulting and research, trusts, estates, and gift tax

    planning, tax return preparation and compliance, tax

    controversies, business entity formation, planning and

    compliance, and insurance and retirement planning.

    He is also an adjunct professor of law at Pace University

    School of Law in White Plains, New York.

    Mr. Israeloff previously served as an associate with

    prestigious New York City law firms and Big 4 CPA firms.

    He has lectured, been quoted and written articles on

    various topics related to tax planning and compliance.

    Mr. Israeloff is admitted to the bar of the State of

    New York, is licensed as a Certified Public Accountant in

    New York, is qualified as a Certified Financial PlannerTM,

    and holds a Bachelor of Science in Economics degree from

  • © 2015 Lawrence Israeloff, Esq., CPA Page 7

    the Wharton School of the University of Pennsylvania, a

    Juris Doctor degree from Columbia University School of

    Law, and a Masters of Law in Taxation (LL.M.) degree

    from New York University School of Law. He is a member

    of the American Bar Association, the New York State Bar

    Association, the American Institute of Certified Public

    Accountants, and the New York State Society of CPAs.

  • © 2015 Lawrence Israeloff, Esq., CPA Page 8

    WHAT IS AN ESTATE PLAN?

    From a simple standpoint, many people initially think of

    an estate plan as having a will. On

    the more complicated end, some

    think of an estate plan as an

    elaborate arrangement only rich

    people need to plan who gets what

    out of their millions of dollars. Most people think estate

    plans only apply to the ultra-wealthy.

    But no matter how large or how modest, everyone has an

    estate. Your estate is comprised of everything you own—

    your car, home, bank accounts, investments, life

    insurance, furniture, personal possessions. And just like

    the wealthy, you probably want to control, with the least

    expense, how those things are given to the people or

    organizations you care most about. That is estate

    planning—making a written plan in advance with

    instructions stating whom you want to receive the things

    you own after you die.

    Estate planning is not just for “the wealthy.” Good estate

    planning often means more to families with modest

    assets, because they can afford to lose the least.

  • © 2015 Lawrence Israeloff, Esq., CPA Page 9

    WHAT HAPPENS IF SOMEONE DIES WITHOUT AN ESTATE PLAN IN PLACE?

    A person who dies is known as the “decedent.” A decedent

    who dies without a will is known as dying “intestate.”

    If a person dies without a will, a court of law must follow

    state law (instead of the

    decedent’s desires) to

    establish who is entitled to

    receive the decedent’s

    property. These state laws

    are called laws of intestate succession. State intestate laws

    generally direct the distribution of a decedent’s estate

    based on hereditary succession, i.e., to surviving relatives.

    The court process that takes place after a person’s death to

    validate the will or to determine proper intestate

    succession is known as probate, and is discussed in more

    detail later in this book.

  • © 2015 Lawrence Israeloff, Esq., CPA Page 10

    THE TRUST AS PART OF AN ESTATE PLAN

    To the layperson, trusts can appear complicated. People

    often think trusts are only for the very wealthy. In reality,

    trusts can be useful for people of all income levels.

    A trust is a legal arrangement under state law governed by

    a written trust agreement by which

    property or assets are owned in the

    name of one or more trustees with a

    fiduciary responsibility to protect

    and manage the property for the benefit of another person

    or persons. A trust divides the ownership of property into

    two parts: the legal title, which is in the name of trustee,

    and the beneficial ownership interest, which is managed

    by the trustee for the benefit of the beneficiaries.

    A trust is created by the signing of the trust agreement by

    the creator (also called the grantor or the settler of the

    trust) and the trustee. The trust agreement specifies the

    duties and obligations of the trustee and how the income

    and principal of the trust will be distributed to the named

    beneficiaries. Trusts provide considerable flexibility in

    transferring property from one generation to another.

  • © 2015 Lawrence Israeloff, Esq., CPA Page 11

    A trust created during the creator’s lifetime is called an

    “inter vivos” trust or living trust. A living trust can be

    either a revocable trust or an irrevocable trust. A

    revocable trust is a trust that can be changed or revoked

    by the creator. An irrevocable trust cannot be changed or

    revoked by the creator (although an irrevocable trust can

    sometimes be changed or terminated by the trustee under

    certain