Estate and Legacy Planning

Golf House

This might be your estate,


Sailing Race

this might be your Estate.

You don't have to own a large home, or be a large property owner to have an Estate.  Your estate is characterized by all of your assets including the property that you own, even if you have a mortgage.  It is still property that is in your name and decisions should be made now regarding what would happen to this property in the event of your death.  Do you have a will? Do you or your family need to consider a Trust?  Who will take care of paying off the mortgage in the event of your death?  Do you not have family members to leave your estate to but have a favorite non-profit you have been affiliated with while you were alive?  This may be a church or Synagogue, or a University where you may want to leave your assets.

These are questions that you need to ask an Estate Planner.  Estate Planners can either be legal professionals or they can be financial professionals, like the ones at Banyan Financial Group, who partner with Attorneys so that formal documents can be orchestrated in your name or in the name of a Trust.   Other than the legal documents that are needed to put your Estate Plan into place, there are other instruments that you might need from a professional financial planner to secure your estate.  Professional financial planners, like those at Banyan Financial Group,  will include estate planning in your complete financial plan and may use instruments such as life insurance and tax-deferred annuities.  This can be done without an attorney.  A professional insurance planner can install a Trust-Owned Annuity in the name of your Trust.  Professional planners will assist you with a financial plan helping you defer taxes and growing a portfolio so that you can enjoy your retirement, and then finally leave behind the legacy you have worked for your entire life to other family members or your favorite charity.  

Estate Planning Documents

There are a number of estate planning documents most people should have.  These include:  A will.   A Durable Power of Attorney.  An Advanced Care Directive, which incorporates two other documents:  A Health Care Proxy and a Living Will.

The Revocable "Living" Trust

A revocable trust is a document (the “trust agreement”) created by you and your attorney to manage your assets during your lifetime and distribute the remaining assets after your death. The person creating the trust is called the “grantor” or “settlor.” The person responsible for managing the trust assets is the “trustee.”  You can serve as the trustee, or you may appoint another person, bank or trust company to serve as trustee. The trust is termed “revocable” because you can modify or terminate the trust during your lifetime, as long as you are not incapacitated.

During your lifetime the trustee invests and manages the trust property. Most trust agreements allow the grantor to withdraw money or assets from the trust at any time, and in any amount. One of the advantages of a revocable trust, is if you become incapacitated, the trustee is authorized to continue to manage your trust assets, pay your bills, and make investment decisions. This may avoid the need for a court-appointed guardian of your property. 

Upon your death, the trustee (or your successor if you were the initial trustee) is responsible for paying all claims and taxes, and then distributing the assets to your beneficiaries as described in the trust agreement. The trustee’s responsibilities at your death are discussed below:

Your assets such as bank accounts, real estate and investments, must be formally transferred to the trust before your death to get the maximum benefit from the trust, or “Funding” the trust.  This requires changing the ownership of the assets to the trust. Assets not properly transferred to the trust may be subject to probate. There are certain assets that should not be transferred to a trust because income tax problems may result.  Consult with your attorney, tax advisor and investment advisor to determine if your assets are appropriate for trust ownership.

Trusts And Tax Deferral Of Annuities

The “standard” tax treatment for deferred annuity is that they are tax-deferred (note: the reason they’re called “deferred” annuities is not because they’re tax-deferred, but because the date of annuitization is deferred to the future).   IRC Section 72(u) actually limits this treatment in the event that an annuity is not held by a “natural person” (i.e., a living, breathing human being). Instead, the tax code prescribes that when an annuity is not held by a natural person – e.g., a corporation or other business entity – any gains in the contract will be taxable annually as ordinary income. The exception to the 72(u) “natural person rule” is that if an annuity is held “by a trust… As an agent for a natural person” it will still be eligible for tax-deferral treatment.  For a trust to qualify as an “agent for a natural person” all the beneficiaries, both income and remainder, current and future, must be natural persons.   Since annuities already pass directly to beneficiaries by operation of contract, they avoid probate without any need for ownership by a revocable living trust.  An annuity can either be in the name of a trust, or can just be titled in the person or married couple's names.  In either event, an annuity can serve as a useful tool used in estate planning to preserve wealth, defer taxes and protecting your heirs. 


Banyan Financial Group, LLC,  and it's associates do not provide tax or legal advice. Be sure to consult with your own tax and legal advisors before taking any action that may have tax or legal consequences. Any estate plan should be reviewed by an attorney who specializes in estate planning and is licensed to practice law in your state.