An advance directive for healthcare, also known as a living will or healthcare power of attorney, is a legal instrument that allows you to accomplish two important things in the event of your incapacity. First, it allows you to specify what medical treatment you wish to authorize in the event you are incapacitated. Second, it allows you to appoint someone to make decisions on your behalf in the event of your incapacity. Both of these can be of vital importance at some point in your life.

Incapacity can strike at any time and for any reason. A devastating car crash, stroke or other medical emergency can leave you unconscious and unable to express your wishes. As we age, mental incapacity is also a possibility that no one wants to think about but must be faced. Although you cannot prevent the possibility of an incapacitating event, you can create a legal plan for the possibility that protects you in the event that the possibility becomes a reality.

People often mistakenly assume your spouse will legally be allowed to make healthcare decisions on your part. This is simply not the case. In the absence of a healthcare directive, a loved one may need to petition a court for the right to make those decisions. By executing a healthcare directives prior to your incapacitation, you are legally appointing that person, as well as an alternative if you choose, to make those decisions on your behalf.

Furthermore, an advance directive for healthcare allows you to specify what type of treatment you wish to authorize in the event of your incapacity. For example, you can authorize life sustaining measures such as a breathing machine or specifically indicate that you do not wish those measures to be taken. You can also decide whether or not you wish to authorize experimental treatments.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

 A trust is a legal arrangement that requires you to designate assets to be held in the trust, appoint one or more beneficiaries to receive the benefits of a trust, and appoint a trustee to administer the trust. Although there are numerous and varied trusts, all of them utilize a trustee. Before deciding who to appoint as trustee of your trust, be sure you understand the responsibilities of the trustee.

The trustee plays a critical role in a trust. While the terms of a trust dictate how the trust assets are to be handled, the trustee has the day to day control over the trust assets once the trust becomes active. The trustee is charged with not only protecting the trust assets, but also attempting to grow those assets by investing them in many cases. As you can clearly see, the choice of trustee is an extremely important decisions when creating a trust. Although a family member or loved one may seem a logical choice for trustee, many people choose to appoint an attorney or bank because of the impact the trustee has on the trust.

Along with guarding and growing the trust assets, the trustee has an obligation to the beneficiaries to treat them equally and impartially and to keep them informed. In some cases, this obligation can be complicated. For example, if a trust has current as well as future beneficiaries, the trustee must consider what decisions allow both classes of beneficiaries the most benefits when investing the trust assets.

Additional trustee responsibilities include disbursing the trust assets as directed by the trust, keeping records of the trust business and filing tax returns with state and local tax authorities.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

If you have worked hard over your lifetime and managed to amass a sizable estate that you wish to pass down to future generations, you undoubtedly wish to avoid allowing the government to take a large portion of it in taxes before it can be passed down. That is precisely what can happen unless you create an estate plan that minimizes the tax impact on your estate upon your death. One tool that can be used in your estate plan is a generation skipping trust.

The Internal Revenue Code requires estate taxes to be paid on the estate of a decedent before any assets can be transferred, or passed down, to the beneficiaries or heirs. Although the estate tax rate changes on a regular basis, it is not uncommon for it to be as high as the highest individual income tax bracket. To put this in perspective, if you leave an estate valued at one million dollars, it is possible that over $300,000 of your estate will be lost to taxes before your heirs, or beneficiaries, receive anything. One solution, or loophole in the IRS code, is to use a generation skipping trust.

A trust is a legal agreement that requires a grantor (you), a trustee, a beneficiary and assets to fund the trust. As implied by the name, a generation skipping trust is a trust created by you that names your grandchildren as the beneficiaries, thereby “skipping” a generation. By leaving the assets to your grandchildren, they are not subject to estate taxes. Your children do not have to be left out of the trust entirely. You may be able to draft the trust in such a way that your children can receive benefits from the trust in the form of interest, for example, while the principal trust assets remain in the name of your grandchildren. By using generation skipping trusts, a family can often keep a sizable estate in the family for many generations without losing the bulk of it to estate taxes. Consult with your estate planning attorney for details about how a generation skipping trust may work for your estate planning purposes.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

At some point, most people start to worry about how their assets will be passed down to family and loved one’s. Proper estate planning can make the process of transferring your assets simple and as pain-free as possible upon your death. Along with deciding who you wish to leave your assets to upon your death, you may wish to consider how you want those assets to be transferred. Unless you take steps now to avoid the necessity of probate upon your death, your assets will likely be required to pass through a probate court before your family and loved ones will have access to them. Among the various options available to help avoid probate is the creation of a living trust.

A trust, at its simplest, is a legal agreement that allows you to place assets into the trust that are to be used for the benefit of beneficiaries that you name in the trust. A trust must also have a trustee whom you appoint as well as a successor trustee. In most cases, you may appoint yourself to be the trustee. As the name implies, a living trust is a trust that you create and activate while you are alive. A living trust can be created as a revocable living trust, meaning that you, as the maker of the trust, have the power to revoke the trust, or modify the terms of the trust, at any time prior to your death.

Upon your death, property owned by you must pass through probate; however, property that you placed into a trust is considered trust property, meaning you do not legally own the property at the time of your death. When you die, the successor trustee takes over and is able to transfer the trust property directly to the beneficiaries named in the trust, thereby avoiding the need for the assets to be included in the probate process. Often, using a living trust in combination with other estate planning tactics can allow your estate to avoid probate altogether upon your death.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

Most people have heard the term “trust” used in a variety of contexts, but you may not understand exactly what a trust is and how it functions. A trust is a legal agreement, created in a document, that allows you to place assets in the care of a trustee for the benefit of another person or persons. State laws determine the specific rules required to form a trust as well as what types of trusts can be formed within the state. While there are numerous different types of trusts, and minor variations regarding trust rules among the states, there are also some trust basics that may help you better understand trusts.

Understanding who the participants are in a trust is the best place to begin. The person who creates the trust is referred to as the grantor, settlor or trustor. The person in charge of overseeing the trust is known as the trustee. The people who are intended to receive the benefit of the trust assets are the beneficiaries. Now this is where it can become a bit tricky. In some states and for some types of trusts, an individual can hold more than one title within the trust. A grantor may also be a trustee for example, or a beneficiary may be allowed to also be the trustee. The important thing to understand is what each designation means.

Regardless of why a trust is created, the basic function remains the same. The grantor designates assets to be used in the trust. Assets can be cash or property–both tangible and intangible. Those assets then become trust assets. The grantor must also designate a trustee. The trustee then holds those assets for the benefit of the beneficiaries under the terms of the trust. The trustee is responsible for guarding and accounting for the trust assets at all times. The trustee may also be responsible for dispersing the assets to the beneficiaries. The beneficiaries are the people who receive benefits in the form of interest or principal payments from the trust assets. The terms of the trust will dictate how, when and in what amount the beneficiaries are to receive funds from the trust.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

When the premarital agreement first started to make its way into the public consciousness it raised a lot of eyebrows outside of the circles of the “rich and famous.” How could you ask someone to sign an agreement delineating personal property simultaneous to asking this person to marry you? Doesn’t that fly in the face of romance? And on top of that, isn’t marriage supposed to be a partnership?

These were the questions people had, and there would be a good bit of validity to them if all marriages were of the storybook variety. Indeed, it may be somewhat out of context for a 25-year-old young man to ask his 23-year-old paramour to sign a premarital agreement when neither has any children or any assets to speak of. But the fact is that not all marriages mirror this scenario.

Somewhere between forty and fifty percent of marriages end in divorce, and around three out of every four of those who go through a divorce eventually remarry. Over sixty percent of these second marriages involve children from previous marriages. So when you put that into perspective, you can see the premarital agreement in an entirely different light. Executing a pre-nup is a way to make sure that you have some personal assets set aside that are earmarked for your children after you pass away.

Once you have carved out these funds you may want to consider the creation of a QTIP, which stands for qualified terminable interest property trust. The way these trusts work is that upon your death your surviving spouse receives all of the income that is earned by the assets in the trust for life. But, when you create the trust you determine who will inherit the trust after your surviving spouse passes away. So you take care of your spouse for the remainder of his or her life without running the risk of your children being disinherited after you pass away.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

People who have been successful usually get there by doing the right things. They obtain a good education, develop a work ethic, and then apply their personal talents to the utmost. That is how you achieve your full potential. When you have traveled this path and you are planning your estate here in Atlanta you may be in a position to change the lives of your heirs financially upon your passing. But with that power comes a great deal of responsibility.

The entirety of your legacy includes more than just money. With this in mind, most people want to leave behind a pathway to personal achievement, not an easy meal ticket. We see time and again in the media and through direct experience how wealth that was not earned can do more harm than good.

So when you are planning out the inheritances that you intend to bequeath to your heirs you may have some mixed emotions. You can’t take it with you, as they say, and you want to show your love as a parting gift. But at the same time you don’t want to prevent your loved ones from realizing their full potential by making things too easy on them.

One way that this conundrum can be addressed is through the creation of incentive trusts. With these vehicles you fund the trust, name your beneficiary, and appoint a trustee to administer the assets. When you are drawing up the trust agreement you include stipulations that are meant to act as incentives toward positive behavior and/or away from self-destructive actions.

For example, many people attach distributions to academic achievement. Others will foster a work ethic in an heir by stipulating that the trust will issue a distribution to match every dollar earned by the beneficiary. If you have a family member with a history of substance abuse you can include stipulations involving treatment and testing. You can include any conditions that you want to, so the possibilities are limited only by the boundaries of your creative wisdom.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

We live in a culture that is becoming increasingly do-it-yourself oriented, and there are a number of reasons behind this DIY mentality. The motivation for the most part is going to be financial, though there are those who really enjoy certain types of DIY projects and consider them to be a hobby. Of course, people have always been interested in saving money. The reason why doing things for yourself is so popular today is because there is so much information readily available over the Internet. But once you get knee deep into a project you may find that you don’t have the tools that the professionals use.

Knowing which tools are right for the job is key in every field of endeavor and it is certainly important when you are planning your estate here in Atlanta. With that in mind we would like to look at a very useful tool that is known as the grantor retained annuity trust or GRAT for short. These trusts can help you gain estate tax efficiency and pass some assets on to your heirs in a tax-free manner if the “zeroed out” GRAT strategy can be executed successfully.

First, you fund the trust with assets that you would expect to appreciate significantly, and you name your beneficiary and appoint a trustee. You decide on the term of the trust and the amount of the annuity payments that you would like to receive. The gift to the trust is subject to the gift tax, and the IRS valuates its taxable value using 120% of the federal midterm rate. So to zero it out you take payments equal to this entire taxable value so no gift tax is due. But, if the assets in the trust appreciate beyond this amount, your beneficiary assumes ownership of this remainder in a tax-free manner.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

When you are doing any type of financial planning there are inherent challenges involved. In a very real sense you have to try to predict the future, and it’s tough to find a good crystal ball these days. When it comes to planning for your elder years it is especially difficult to project reasonably accurate numbers because you don’t know how long you will live or how your health will hold up. So there are people who would consider putting their assets into a trust to enable the very smooth transfer of resources to their heirs but don’t feel comfortable relinquishing full control.

This is one of the reasons why revocable living trusts are such popular estate planning tools. With these trusts you move assets from your estate into the trust, which can provide you with estate tax efficiency if that is necessary. To retain complete control of your property you can name yourself the trustee and the beneficiary, so your access remains the same. But you name a successor beneficiary who will receive distributions out of the trust once you pass away and a successor trustee to administer the vehicle.

These trusts are indeed revocable so you can make changes as you see fit or dissolve the trust entirely should you choose to do so. Another advantage of the revocable living trust is the fact that your control actually extends beyond the end of your life. The trust agreement can stipulate that only the earnings from the assets in the trust will be distributed and the principal can never be touched except under emergency circumstances at the discretion of the trustee. In this manner the trust can provide income for the beneficiary and even his or her heirs indefinitely if the principal remains intact over the years.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

A lot of people consult with Atlanta estate planning attorneys because they would like to gain tax efficiency in light of the estate tax and its 35% top rate in 2011. They feel as though they paid taxes on the money that they earned all of their lives, and this added up to a considerable contribution to the federal coffers. To them it seems like they have paid more than their fair share during the course of their lives and they see no reason why they should have to give the government more than half of what’s left at the time of their death. They would prefer to pass their legacies on to their loved ones fully intact.

There are a number of strategies that can be implemented to position your assets out of the cross hairs of the estate tax, and one of these is the generation skipping trust. After you decide how to fund the trust you name your grandchildren as the beneficiaries, skipping a generation as it were. Your grandchildren will receive the remaining assets after your children, the second generation, pass away free of any estate tax liability assuming the amount is less than the generation skipping tax, which is $5 million in 2011.

You may say that this is all well and good, but what about my children? The nice thing about the this type of trust is that your children can benefit from the trust throughout their lives and receive cash distributions from the earnings of the trust and otherwise utilize trust property. For example, one of your children could reside free of rent in a home that had been placed in the trust. So generation skipping trusts provide estate tax efficiency, but they also deliver asset protection. Since the trust does not belong to your children, the assets therein cannot be targeted by claimants seeking judgments against them.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.