Estate Planning Introduction

This VIDEO is a great introduction into estate planning. All persons should have an estate plan in place for a number of reasons: privacy, allocation of assets, probate avoidance and family protection. Your estate plan should work in coordination with your business and asset protection plans. Here at Breglio Law Office we do things a bit differently that many estate planning attorneys as we are focused on all your assets.

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Trusts Generally

Trusts are contractual arrangement among three individuals or entities. They were designed to transfer the ownership and/or control of an asset until the meeting of certain conditions. A simple example is when parents want to leave their home to a child but the child isn’t old enough to take care of it. And they are worried they might die before the child reaches an appropriate age. They therefore set up a trust that transfers the property to a trustee to hold on behalf of the child until he or she reaches an appropriate age, or gets married or whenever the parents decide.

There are MANY types of trusts used for MANY different purposes. But the basic mechanics are the same for all of them. Trusts are NOT business entities but in many respects can resemble them. However, because they transfer asset ownership they can help protect the asset from creditors for protection purposes. They are also established for tax purposes (estate and gift taxes) and the avoidance of probate litigation.

There are TWO types of trusts that we establish for our clients. First is the “Family Living Trust.” This is the typical trust that anyone can set up as an estate planning tool. It’s a crucial to avoid probate and allocate assets like real estate or business entities. Wills do not accomplish this.

The second type of trust we create is the Asset Holding Trust. Many real estate investors might know this as the “land” trust. While very similar there are some differences.

The Parties in a Trust:

In a basic trust there is a Grantor who initially owns the asset and grants (or gives) it to the corpus (the body) of the trust. The “trust” now owns the asset–not the Grantor. This is called funding the trust.

The Trustee is the person who is charged with handling the corpus (all the assets in the trust) and making sure the guidelines of the trust are followed. The guidelines can include how to manage the asset, grow it financially, or deliver the proceeds or the asset itself to the intended recipients. Finally, the Beneficiary is the party that receives the benefits of the asset (or the asset itself at some point in time) placed into trust.

TRUST TIP: UNLESS YOU ACTUALLY TRANSFER THE ASSET TO THE TRUST, IT ISN’T PROTECTED. SIMPLY SETTING UP THE TRUST IS NOT ENOUGH. TRANSFERRING THE ASSET IS CALLED “FUNDING” THE TRUST.

You can be both a grantor and beneficiary and even trustee. It depends on the purpose of the trust and what legal and tax considerations are most important.

A family trust and living trust are two common types for individuals that offer flexibility of controlling the asset and making changes down the road. An irrevocable trust is more rigid. While it is one the safest places to put an asset, there are restrictions on how you (as the grantor) can amend the trust or benefit from the asset. There are dozens of other kinds of trusts as well.

Breglio Law Office always consults with individuals before recommending most types of trusts.

However, a land trust is a simple vehicle for purchasing and transferring real estate and, in some cases, can be more efficient than using a business entity.

Use Self- Direction

THIS INFORMATION IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE. PLEASE CONSULT AN ATTORNEY.

Retirement Accounts

Surprisingly, many self-employed people don’t realize that they can contribute to retirement accounts. There are many ways, each with its own set of rules, to do invest in retirement. We will keep it simple here just so you are aware of the opportunities. You can check with us or a financial planner. But once these accounts are established, you can use them to invest in real estate. This is call “Self-Direction” because you have more control (direction) over the kinds of assets to invest in.

Individual Retirement Account (IRA): IRAs have been around a long time and are the primary vehicle for the self-employed to save for retirement. There are both Traditional IRAs and Roth IRAs. Contribution to a Traditional is pre-tax which means it comes out before you pay taxes on it. It can lower your taxable income the year you make the contribution. Roth contributions are post-tax. Therefore, they won’t lower your taxable income  that year (you still pay taxes on the amount you contribute) but it grows and can be withdrawn later tax free (with certain conditions). The biggest drawback is that there is a $5500/year limit on your contribution. Not exactly a lot to put away.

401K Accounts: Very few of our clients realize that there are “individual” 401K options and they think the only way they can contribute to one is through their employer. While your own company can set up 401Ks for you and your employees, this is often expensive (set up and maintenance costs) and a hassle for many many small businesses. You, however, as a self-employed individual can set up a 401K through a provider and make contributions to both Traditional- and Roth-type accounts. You can contribute as an individual and your business can contribute! The limits are higher than IRAs so you can put away more!

Note, however, that there are income thresholds that may further limit your contributions and may prevent you from contributing to both IRAs and 401Ks.

Use Self- Direction

THIS INFORMATION IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, FINANCIAL OR TAX ADVICE. PLEASE CONSULT AN ATTORNEY, ACCOUNTANT OR FINANCIAL ADVISOR BEFORE ESTABLISHING ANY RETIREMENT ACCOUNT OR TOOL.

Signing Documents

How you sign on behalf of any business entity, be it an LLC, an Inc, or a Trust, is extremely important for your overall corporate liability protection and validity of the document you’re signing. If you don’t sign correctly, that document can be challenged and even voided. This is particularly true in real estate. Signing a purchase contract incorrectly can give the other party the right to cancel the contract! So, here is how you should sign on behalf of different entities.

  • There are two important point about signing your name: Your Title and The Entity. Keep this in mind as you read further.

Signatures for LLCs:

Sometimes you sign as a “member” and sometimes, if your LLC is managed by managers, as a “manager.” For most of our clients, we create manager-managed LLCs (see, LLC Members and LLC Managers for more info about those roles), so you will need to know when you’re signing as a member and when as a manager.

Sign as a “member” when acting as a Member of an LLC and for most “internal documents.” Internal documents are Minutes for Meetings of the Members, the Operating Agreement or amendments and changes to your company. The MEMBERS OF AN LLC ALWAYS DO THESE THINGS! So, sign like this to sign when signing an internal document:

  • BY: Donald Duck, Member

Se how we listed Donald’s “title” after his signature!

Internal documents should already have the name of the company on them, so you don’t need to state the entity you are signing on behalf of. This is true on any document:

  • NOTE: If the entity for which you are signing is listed above or below your signature, you do not need to print or sign it again. You also do not have 
  • NOTE: If the document comes pre-printed with your name and title, then all you have to do is sign your name. There is no need to sign your title. 

Remember, if your LLC is member-managed, you will always sign as a member. If your LLC is manager-managed (most!), then you will sign as a manager on almost all other documents because the authority to run the day-to-day operations is vested in the manager.

Always sign as a manager when signing most “external documents.” These would be ALL contracts with third parties, lease agreements, etc. These are part of daily operations that a manager signed. Here are some examples for both member-managed and manager-managed LLCs:

If your LLC is Member-Managed, this should be printed above or below the signature line:

  • BY: Donald Duck, Member
  • FOR: Goofy Tunes, LLC

If your LLC is Manager-Managed, this should be printed above or below the signature line:

  • BY: Tweety Bird, Manager
  • FOR: Goofy Tunes, LLC

Signatures for INCs:

All the same rules apply to signing corporations as for LLCs, except for the titles. There are no members or managers (usually) with an Inc. Instead there are typically board members called Directions, officers called President, Vice President, Secretay and so on and the owners called Shareholders. Your name, title and the entity for which you are signing should be printed above or below the signature line. here’s an example:

  • BY: Tweety Bird, President
  • FOR: Goofy Tunes, Inc.

Signatures for Trusts:

Again, the same rules apply to Trusts. For a trust, there are three possible titles. You will either be signing as a Grantor (or, Truster), Trustee or Beneficiary. Grantors and Beneficiary are like the members and usually only sign internal documents. The Trustee is like a manager on an LLC, they do all the day-to-day operations, they will sign most external documents. Here’s an example of a Trustee signature block:

  • BY: Donald Duck, Trustee
  • FOR: The Goofy Tunes Trust dated January 1, 2018

Note how we wrote the date of the trust as part of the trust name.

Signing can become even more complicated when an entity (instead of an individual) is representing another entity. For example, sometimes a business entity will be the trustee of a trust. In this case, there are three lines associated with your signature.

  • BY: Tweety Bird, Manager
  • FOR: Goofy Tunes, LLC
  • FOR: The Laugh A Lot Trust dated February 1, 2018.

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