Wednesday, February 01, 2012 You Can Help Your Child Become a Homeowner—But Do Your Research First
American culture is one that respects independence and self-reliance; but with the current tough economic situation, and the fact that more young adults are graduating from college without jobs, or living at home until well into their 20’s, many families are opting to do things the old-fashioned way—with parents giving kids the financial help they need to buy their first home.
Helping your child make such a significant purchase, however, requires foresight and planning in order to do it without hurting your own tax- and estate-planning potential, and without creating family conflict later on. This article from CNN Money has some good advice for would-be parental mortgage-lenders.
The first thing to remember ANY time you make a monetary gift is that the federal government will only let you give away so much each year without incurring a gift tax. “In 2012, a taxpayer can give $13,000 to an individual without triggering so-called gift taxes. Married couples may underwrite their child to the tune of $26,000 a year.”
If you’d like to contribute more than $13k or $26k toward your child’s first home there are ways to go about it without hurting your own tax status later on. Your best option in this case might be to “lend money to your child -- and you can offer terms far more generous than any bank's. To make sure the money is considered a loan and not a gift for tax purposes, you'll need to charge interest based on the IRS's ‘applicable federal rate’ minimum for various loan maturities.” These rates are generally very good, “as low as 0.19% for loan terms of three years or less to 2.63% for loan maturities of over nine years.”
Of course, if you become your child’s mortgage lender the government isn’t going to just take your word for it; you’ll want to be sure you have the proper contracts drawn up and signed, and that you keep good records of all payments. “If the loan is properly structured as a mortgage and filed, the interest will be tax-deductible for your child. Having a contract also makes estate planning easier.”
Monday, January 30, 2012 How to Ensure Your Valuable Antiques Don’t End Up in Someone’s Yard Sale
Have you seen Antiques Roadshow? It’s a PBS television show in which antique experts travel around the country to critique and appraise antiques brought in by local people. Quite often on the show someone will bring in an old knick-knack they found in grandma’s attic, only to find out it’s actually worth hundreds or thousands of dollars! Now imagine that for every person who makes this valuable discovery on television, there are at least three people who end up selling their own unrecognized treasure for a few bucks at a yard sale. It’s painful to consider.
How can you ensure that your family recognizes the value of your treasures? The first step is to talk to your attorney about creating the right estate plan to protect ALL your assets, and provide for their distribution upon your death. Your next step is to make a list of assets and keep it with your estate planning documents, where it can be easily found. Your list of assets should include not only real estate property and financial accounts, but personal property as well—the artwork, historical artifacts, and antiques you value so highly. Your list should include a description of each item, an approximate value, and the name of the person you would like to inherit the item (if applicable.)
This list is called a Personal Property Memorandum, and can be an essential component in your estate plan. Very often the person named as executor of an estate is the most responsible and organized member of the family; this is just what you need in an executor, but it’s not always the person who will look at a 200 year old, somewhat worn, antique bureau and recognize its value. Having a list of assets included in your estate plan will ensure that the valuable pieces are recognized and appreciated—regardless of who is named as the executor of the estate.
For more information about personal property memorandums, or about creating the best estate plan to protect your family, please contact our office.
Friday, January 27, 2012 The Joys and Sorrows of Gift-Giving During Your Lifetime
“You can’t take it with you.”
These are good words to keep in mind as we go through life, they remind us not to take ourselves too seriously, not to hold onto things we don’t need, and to be generous to those less fortunate than ourselves. Whether you’re thinking about estate planning or gift planning, however, there are a few other words to keep in mind: How much should I give away?
Fortunately, this article in Smart Money—and the advice of an experienced estate planner—can help you answer the questions of how much to give away, when to give it away, and to whom.
The article wisely counsels that two of the most important things to remember when considering your gift-giving questions are the estate tax exemption and the gift tax exemption. The estate tax exemption is the amount you can leave, tax free, to heirs upon your death. “For 2011 and 2012 you can leave bequests worth up to $5 million free of any federal estate tax ($5.12 million for 2012)... If you're married, both you and your spouse are entitled to separate $5 million (or $5.12 million) exemptions.” This is something that should be planned for and taken advantage of in your estate plan.
The gift tax exemption is the amount you can give away during your lifetime. “You can give away a cumulative total of up to $5 million to relatives, friends, whomever during your life without owing any federal gift tax or $5.12 million for 2012... If you're married, both you and your spouse are entitled to separate $5 million (or $5.12 million) gift-tax exemptions.”
There is also an annual gift tax exclusion amount of up to $13,000. “[Annual] gifts made under the so-called $13,000 tax-free-gift rule will not trigger any federal gift taxes, nor will they reduce your federal gift-tax or estate-tax exemptions.” However, as the article points out, any gifts made in excess of this $13,000 amount in any given year will begin to cut into your estate tax exemption or your gift tax exemption. So if you plan on making any large financial gifts this year you would be wise to contact your estate planning attorney first for advice.
Wednesday, January 25, 2012 Republican Primary Inspires Discussion of Trusts
If you follow current events at all it is impossible to ignore the fact that we are now in the thick of the Republican primary race—and that the Presidential election will not be far behind. With the political machine in full swing there have been quite a few news stories about the candidates’ financial backgrounds, and more than a little talk of “blind trusts.”
Many of our readers will already know that a blind trust is a vehicle which holds the wealth of a candidate (or a politician serving in office) in an effort to avoid any conflicts of interest. We thought this might be a good opportunity, however, to discuss trusts in general: Which trusts are out there, what are the differences between them, and what purposes do they serve?
Revocable Trust: A revocable trust is one of the most commonly used trusts because it is able to be revoked or changed so long as the grantor (the person who created the trust) is still living. There are many other trusts that fall under the category of “revocable trust”, including a pet trust (which addresses the physical and financial care of your pets), an education trust (which provides for your child’s educational expenses), and many more.
Irrevocable Trust: An irrevocable trust, logically, is one which cannot be revoked or changed after it has been signed. The irrevocability is what makes these trusts useful for tax planning and asset protection. Some types of trusts which fall under the category of “irrevocable trust” include life insurance trusts (which save the beneficiary on the policy from paying exorbitant estate taxes), spendthrift trusts (which reduce the beneficiaries' estate taxes and protect trust assets from creditors' claims), and more. It is important to note that any revocable trust becomes irrevocable upon the death of the grantor.
Charitable Trust: A charitable trust is one in which at least one of the beneficiaries is a charity or non-profit. These trusts allow the grantor to claim a portion of their contribution as a charitable deduction under income tax laws. A charitable trust can be either revocable or irrevocable to begin with, but if distributions will be made during the grantor’s lifetime the trust must be irrevocable.
Special Needs Trust: Sometimes also called a “Supplemental Needs Trust”, is a trust created for the benefit of a person receiving government benefits—this usually includes someone with a physical or mental handicap—and its purpose is to allow outside sources to provide the beneficiary with supplemental funds without endangering their right to receive government benefits. A special needs trust can be either revocable or irrevocable, but usually includes a clause instructing that the trust be dissolved if its existence disqualifies the beneficiary for government benefits.
We have only discussed some of the most commonly used trusts here, but there are many, many different kinds of trust which can be valuable for estate planning or asset protection. If you have any questions about trusts or estate planning, please contact our office.
Monday, January 23, 2012 The Bum Rap of Prenups: Why They Are More Romantic Than You Thought
Valentine’s Day is only a couple of weeks away, and love and marriage are in the air; but going hand in hand with love and marriage should be the wisdom to protect yourself and your beloved with a prenuptial agreement. We know that most people don’t consider prenuptial agreements a very romantic gesture, but here are 5 reasons why the bum rap of the prenup is undeserved.
1. Prenups encourage couples to think and talk about the future. The process of writing a prenup includes talking about what each party brings with them to the marriage, and how each partner envisions that contribution fitting into the whole as they create their lives together.
2. Agreeing to a prenup is often the very thing that makes marriage possible for two people who come from complicated backgrounds or disapproving families. This is not only true of young people from families with “old money,” but also of elderly couples whose grown children may disapprove of a blending of finances so late in life.
3. Having a prenup means that a couple has studied their finances separately, dealt with any lingering trouble spots before the wedding, and can now move forward in their marriage together, with clear minds and bright futures.
4. A prenuptial agreement bestows security because it requires the agreement of both partners. This mutual agreement ensures that both partners feel they will be provided for as they desire and deserve, no matter what happens.
5. A prenup is the perfect lead-in to an estate plan. The information-gathering and decision-making process for creating a prenup is very similar to the process of creating an estate plan. Couples who execute a prenup before they marry have a head start on creating the estate plan they will want to protect their family after they’re married.
The bottom line is that prenuptial agreements will help protect you, your beloved, your family, and your future... and there’s nothing more romantic than that. Our firm can help you decide if a prenup is right for you and your partner—contact us today.
Friday, January 20, 2012 The Other Side of “Putting Your Affairs in Order”
Everyone knows that because 2012 is the last year on the Mayan calendar it is thought by some to be “the end of the world as we know it.” Most of us don’t believe that the end of the world is nigh, but that doesn’t stop us from contemplating how we’ve lived our lives, what we might put on our “bucket lists,” and what words of wisdom we’d like to pass on to the next generation. For estate planning and elder law attorneys—as well as our clients and readers—this is most likely something we’ve already considered, and hopefully something we’ve planned for as well.
Many people believe that “putting your affairs in order” simply means making your financial arrangements and updating your legal documents; and although these tasks certainly are of immense importance, putting your social, familial and emotional affairs in order is just as important. We’ve written often on our blog about how to put your financial and legal affairs in order, so today we’d like to talk about the other side of things. Some of the suggestions you’ll see below may strike you as small or obvious, but when dealing with the day-to-day tasks and challenges that life brings it’s sometimes all too easy to lose sight of the little things.
1. Tell your family how you feel. If you’re close to your family you may think you do this all the time anyway; but even if you speak to your family often, writing a letter letting them know what they mean to you and how much you love them can make a different kind of impact. A letter is also something tangible your family can keep and treasure after you’re gone.
2. Make family history a priority. How much do you know about the lives of your grandparents and great-grandparents? How much do you wish you knew? Most of us don’t think that our lives or our stories are all that important in the grand scheme of things, but your grandchildren and great-grandchildren may feel differently. Take a shot at writing your memoirs for the benefit of curious future generations. If you think you’re not a writer, or have trouble knowing where to start, there are plenty of books and resources to help you get going.
3. Do something just for you. Whether it’s written it down or not, everybody has a bucket list, a catalogue of things they dream of doing before they die. Well, there’s no time like the present. Nobody lives forever, and the time to do the things you love and see the places you dream about is always right now. Whether you’re taking big leaps or baby steps, don’t let another year go by without making one of those dreams on your bucket list a reality.
Monday, January 16, 2012 The Family Vacation Home: A Place to Make Memories or Enemies?
A family vacation home—whether it’s a summer house on the beach or a winter skiing bungalow in the mountains—can be just the thing that brings a family together. Unfortunately, it can also be just the thing that tears a family apart when parents pass away and the time comes to decide what to do with this wonderful family treasure. This article in the Wall Street Journal mentions that “Tensions often mount when a family figures out what to do with a property that could be a lightning rod for sibling rivalries—not to mention a sizable chunk of an estate.”
There are a number of issues that can be brought to the surface when adult children or grandchildren try to share a family property. “One big friction point in such an arrangement is how to pay the costs involved in maintaining a home—including taxes, insurance, utility bills.” But that’s only the beginning. “Other factors to consider: How the family gets along, where they live, what happens when the children who inherit a home get married and who is going to use the property.”
Fortunately, this is one family fight that can be prevented (or at least softened) by a little bit of forethought and planning. One of the first suggestions in the WSJ article is to leave family property to the next generation in a trust funded by life insurance. “That way, a professional trustee can manage the property, and the insurance proceeds can cover expenses.” A Qualified Personal Residence Trust (QPRT) or a Dynasty Trust can both be perfect for this purpose.
Another beneficial safeguard is to form a Limited Liability Company (LLC) for the property. An LLC can help establish an operating agreement to “cover rights of use and property management,” as well as shield heirs from estate taxes.
Having a good plan in place for your family vacation home can be the determining factor which allows the property to continue to serve as a place where your entire family can come together, to create happy memories that will last a lifetime.
Wednesday, January 11, 2012 Beware of Mistakes in Your Old Estate Plan
Do you already have an estate plan? Or perhaps you don’t have an estate plan per se, but over the years you’ve collected all of what you feel are the necessary documents to provide security and protection for your family and your assets after your death? Well, you may want to take a moment to review that existing estate play of yours. According to this recent article there are five common mistakes made in estate plans, and just one could end up derailing your goals for yourself or for your family.
Some of the common mistakes listed in the article are things that are very easy to fix once you’re aware of them—listing the wrong beneficiary on an old retirement account or life insurance policy, for example. All too often people get a new job or new policy and list the right beneficiary at the time, then that policy goes in a drawer or filing cabinet for years. During those passing years you may get married or divorced, or you may have children. Any of these big life events require changing those beneficiaries. Luckily, making that change is generally a quick and easy fix.
If you aren’t worried about your retirement or life insurance beneficiaries, consider what what will happen to your children in the event of an emergency. Many clients agonize over who to name as guardians of their minor children, but forget to review those decisions every few years. The energetic young couple you chose 7 years ago might now have children of their own, or have moved to another state, and may not be as ideal a choice as they once were. If you listed your parents 10 years ago you might decide in the intervening years that an aging couple is not quite as able as you thought to take on so much added responsibility.
The fact of the matter is that our lives are not static or stagnant, they are constantly growing and changing, and estate planning documents will need to grow and change with them. If it has been more than 2 years since you last reviewed your plan, it’s time to get out the magnifying glass and give your documents another good look. Chances are you won’t have any big changes to make, but those little details can turn into glaring problems when left neglected for too long.
Monday, January 09, 2012 Women and Finances: Looking at Money from a Different Angle
We’ve all red the disquieting statistics about girls and math: That they’re less likely to participate in math and science in school, and that they’re less likely to choose one of these as a major in college. Happily, great strides have been made by girls in these subjects in the past few decades, but apparently there is still one subject in which women continue to trail behind men—talking about finances and retirement planning.
According to a recent article in Business Insider, “when the Transamerica Center for Retirement Studies asked women in their 50s and 60s if they ever discussed saving, investing and financial retirement planning with friends or family, the answer they got was a big NO from 30 percent of respondents and a tepid ‘occasionally’ from 62 percent. Only 8 percent said ‘frequently.’" Clearly women need to find a way to become more comfortable discussing their financial futures—either with their friends and families or with trusted financial advisors.
What is most interesting about this from an estate planning perspective is that in our line of work women are often the driving force behind a family or couple coming in for an initial consultation. Women may not feel comfortable talking about finances, but they are obviously very aware that—when coupled with future and well-being of their families—it is an important issue that needs to be addressed.
The Business Insider article mentioned above closes with 5 questions that might help get the financial conversation started among women; we would only add to this that a discussion of family finances, as well as personal finances, may be a good way to get the ball rolling.
We understand that not everybody has the same concerns when it comes to financial and estate planning. Contact our office today and let us know what your concerns and goals are for your future, and for the future of your family. We can help.
Friday, December 30, 2011 Don’t Forget the Final (And Crucial) Step to Setting Up Your Trust
Once you’ve worked with your attorney to create the perfect trust to protect your family, you’ll need to re-title any assets you’d like to be protected into to name of your trust. This is called Funding. Funding a trust is not difficult at all, but when you don’t know where to start it can seem daunting. The result is that even the best of us may be tempted to procrastinate, sometimes to the point of negligence.
Here are a few tips to get you started on the process. Each trust will be different, but the following suggestions are a foundation to begin funding just about every revocable trust:
Bank Accounts: For this you will need your Certification of Trust. This is the document your bank will require to put your account(s) in the name of your trust. With this document it’s a quick matter to stop by the bank some afternoon and ask them to make your trust the owner of your accounts. NOTE: You should NOT be required to change the name on your checks or bank cards!
Real Property: Check your records to make sure your home is in the name of your trust. Even if you know you transferred your home into your revocable trust, refinancing will often result in your home being taken out of it. If your home is not owned by the trust, contact your attorney to have it put back in.
Stocks and Investments: Contact your broker, financial advisor, or transfer agent to change the title of the investment accounts to the name of the trust. For stocks owned outside of an investment account, ask for the certificate to be re-issued in the name of your trust.
Personal Property: Tangible personal property such as antiques or artwork often cannot be titled in the name of a trust. But you can tell your attorney you’d like to sign an Assignment of Personal Property, sometimes called a Comprehensive Transfer Document. This states your intention to hold all of your tangible property in the name of, and for the benefit of, your revocable trust.
Don’t let your trust turn into an empty shell. The funding process is much easier than you think. Once you get started you’ll gather momentum quickly. Before you know it your assets and your family will all be safely protected, and you can truly heave that big sigh of relief.
Wednesday, December 28, 2011 3 Steps to Help Protect Your Family and Your Future in 2012
We all want to ensure our loved ones are protected and provided for, but sometimes the process of doing so can appear overwhelming, and prevent you from even taking the first steps. When it comes to protecting your family and your future with an estate plan, the process can actually be as easy as 1... 2... 3...
1. Assessment. The first step to creating a plan that can protect your family, your future, and your family’s future begins with simply taking stock of what you have and where you are. Begin by making a list of all your assets, including your house, stocks, investments, bank accounts and personal property. Next consider your responsibilities and goals: what are your plans for the future or for retirement? Who do you wish to provide for in your will? Do you have a spouse or children who might benefit from a trust?
2. Implementation. Now it’s time to put all that information you gathered in step one into play. The particulars of your estate will have a great impact on how you build your estate plan: A small estate and straightforward inheritance plan may require only a well-drafted will, while a larger estate may benefit from the asset protections found with a trust. Your goals for the future and your wishes for your family will have an equally large impact on your choice of estate planning strategies as well, including whether to include an education trust for young students, a pet trust for your furry family members, or a retirement trust to protect your own investments. An estate planning attorney can help you understand your options and implement the strategy you feel works best for your family.
3. Follow-Through. Once your estate plan is drafted, signed, and tucked safely away you’ll want to ensure that it continues working as you intend it to. The best way to do this is to review your plan with your estate planning attorney every 2 or 3 years. Your family and financial situation is likely to change over the years—estate taxes and laws change as well—and all the hard work you put into creating your plan can be undone if you don’t keep up with the changes.
Friday, December 23, 2011 New Year’s Resolutions: Protecting Your Minor Children
Parents of young children always seem to be busy, and we know that it can be difficult to find the time to think about something that you hope will never happen. With all the “To Do’s” and distractions out there, too many parents simply avoid thinking about a will, trust, or guardianship for their children; hoping that it will never be needed. But your children deserve more than good luck and crossed fingers, and we recommend making 2012 the year that you take the (sometimes difficult) steps necessary to ensure that your minor children are protected no matter what the future may bring.
1. Create a nomination of guardians for your children. The single-most important step you can take to ensure the well-being of your children is to execute a nomination of guardians. This is the document that names who you believe are the best and most loving people to parent your children if something should happen to you. This document is your children’s best protection against unqualified guardians or the foster care system.
2. Talk to your attorney about protecting your children’s inheritance (and in some cases protecting your children from receiving an inheritance too soon) with a trust. With a trust you can ensure that your children will be provided for financially until they reach adulthood, as well as leave a legacy for your children which includes your financial, philanthropic, and educational values.
3. Invest in your child’s higher education. Education is more important than ever in our current economic situation, and parents can resolve in 2012 to secure their child’s education by setting up a 529 education savings plan. This is something that parents can contribute to regularly, as well as grandparents, aunts and uncles, and more. A 529 plan that you set up today will be there even if you can’t be. After all, protecting your child’s future doesn’t stop when they reach 18.
If you have other questions or concerns about how to protect your minor children please contact our office today. We can help ensure your children will be provided for—and that you will have the peace of mind you deserve.
Monday, December 19, 2011 New Year’s Resolutions: Achieving Your Financial Goals for 2012 and Beyond
As the old year draws to a close and the new year approaches, many people are taking the time to reflect on 2011 and look forward to 2012, making the traditional New Year’s Resolutions for the year ahead. Many of these resolutions will be very personal—having to do with exercise, work, or personal habits, but there will be some resolutions that can be made which will benefit not just an individual, but their family and loved ones as well. The focus of our blog this week will be on which resolutions you can make to benefit your family and loved ones in 2012, and how we can help.
Times have been tough financially for a lot of people over the past few years, and although things are finally beginning to look up, many people will still be making New Year’s resolutions that focus on fiscal responsibility and financial security. Below are three financial resolutions that can help your family in 2012:
1. Take stock of your current financial situation. Being well-informed and keeping good records of your income, expenses, investments and assets is absolutely essential for good financial health. If something happened to you tomorrow would your spouse or family know what to do and have access to the documents or information needed to protect or pass on your estate? Make a list of all your assets and investments, including account numbers and contact information and keep it in a safe place where your financial agent (or someone else you trust) can find it if and when necessary.
2. Make an investment plan for the future. As with anything in life, it’s important to be prepared for what the future may hold. Having a five year, ten year, and fifty year plan for your financial future is one of the best things you can do for yourself and your family. When making your plans take into account your current situation, your future goals, and your wildest hopes and dreams for the years ahead. Consult with a knowledgeable financial advisor who can help you plan for and achieve these goals.
3. Protect your assets. We live in a litigious and uncertain world and protecting the assets you have is of the utmost importance. Our firm can help you evaluate and implement the many options available to you to protect your assets. The asset protection strategies you choose will depend on the nature of your assets, the situation of your family, and your goals for the future.
Taking the right steps in 2012 can mean a strong financial base now, as well as a bright and secure future in the years ahead for you and your family. Our firm would like to help protect that future. Call us today.
Wednesday, December 07, 2011 Could A Trust Be Good For Your Family?
The answer to the title question is that just about every family can benefit from a trust. The rich and famous tend to utilize trusts because of the privacy they provide, the long-term asset protection, the tax benefits, and their flexibility; but each and every family, regardless of fame or income, can reap the exact same benefits making a trust a part of their estate plan.
According to this article on the CNN Money website, you can benefit from a trust “if you have a net worth of at least $100,000 and meet one of the following conditions...
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“A sizable amount of your assets is in real estate, a business or an art collection;
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You want to leave your estate to your heirs in a way that is not directly and immediately payable to them upon your death. For example, you may want to stipulate that they receive their inheritance in three parts, or upon certain conditions being met, such as graduating from college;
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You want to support your surviving spouse, but also want to ensure that the principal or remainder of your estate goes to your chosen heirs (e.g., your children from a first marriage) after your spouse dies;
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You and your spouse want to maximize your estate-tax exemptions;
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You have a disabled relative whom you would like to provide for without disqualifying him or her from Medicaid or other government assistance.”
The article goes on to explain that depending on your assets, your family, and your goals you may have a number of different trust options to choose from. The article gives very helpful explanation of the various types of trusts you may have available to you, and will give an idea of just how powerful and flexible a trust can be.
What the article doesn’t mention is that some of these trusts can be used in conjunction with each other, to provide layers of protection and control of your assets. The world of trusts is complex, but full of potential. Please contact our office (or your own local estate planner) to learn more about trusts, and determine how a trust might be good for your family.
Wednesday, November 30, 2011 The Smart Way to Leave an Inheritance to Unprepared Children
Most parents (even parents of adult children) want to provide for their children—but not necessarily right away, and maybe not all at once. According to a recent article in Barron’s, “A growing number of parents are shunning the time-honored practice of handing big inheritances to their children when they turn 21. Instead, they're waiting until the kiddies are in their 30s and 40s.”
The reason for this is that more and more parents are coming to realize that there is a learning curve associated with handling large sums of money, and dropping a large inheritance in your child’s lap may be giving he or she more than they can reasonably handle all at once, essentially setting your child up for failure. “Premature distributions to heirs can have the same effect as the jackpot has on lottery winners... The money becomes a burden, and your child may not fully develop into the adult you hope to raise.”
Luckily, if you don’t want to bequeath a fortune to your children all at once, you have a number of options for ensuring your children are provided for and eventually receive the inheritance you intend for them. As mentioned in the Barron’s article, some of the most popular strategies include passing an inheritance through either a revocable or an irrevocable trust. A trust allows a parent to transfer assets to their children while still retaining control of when and how the assets will be distributed. Of these two options, a revocable trust can provide more flexibility, while an irrevocable trust can provide more asset protection, although both kinds of trusts provide a measure of each. You will want to discuss with your estate planning attorney which option will work best for your family.
With either trust option parents can choose to simply keep the inheritance in trust until the child reaches a certain age, or distribute funds slowly over the course of time, to better acquaint the recipient with the responsibilities of wealth. However you choose to structure your estate plan, our firm can help you accomplish your goals for yourself and for your children.
Wednesday, November 23, 2011 This Holiday Season an Estate Plan is the Perfect Gift
The holiday season is upon us, and as others rush about the malls and the internet looking for gifts, we can recommend a unique, useful and memorable gift that will be perfect for any loved one: An Estate Plan!
Before you roll your eyes at the idea, consider this: An estate plan is something every person needs, whether it’s your single younger nephew, your older sister with her two young children, or your retired, aging parents. Furthermore, although everyone needs an estate plan, many people (wrongly) consider it a luxury, and put off creating one—often until it’s too late.
You may be thinking, No, an estate plan is too personal (too expensive, too morbid) to give as a gift. But we can safely say that not one of these excuses is true. If you feel an estate plan is too personal a gift, we recommend giving a gift certificate good for the cost of a basic plan, which the recipient can then design and add to according to his or her needs. If you feel an entire estate plan is too expensive a gift, you may want to consider paying for a portion of the plan, or for the first consultation with an attorney, just to get your loved one started. And if it’s morbidity that you’re worried about, perhaps giving a “Loving Family Legacy Plan” sounds more appealing.
This year, don’t give a gift that will impress for a moment but be forgotten within a week; instead, give the gift that will protect your loved one—and their loved ones!—and will last for years to come. Give the gift of an estate plan.
Wednesday, November 16, 2011 Not All Families Are Warm and Happy—How to Disinherit a Family Member
Much is made every November and December about spending time in the warm presence of your family, appreciating and caring for each other. If you belong to a close family we have plenty of posts on our blog about how you can protect and care for your family with an estate plan. But the sad truth is that not all families are happy, and estate planners learn that not everybody wants their parents or siblings (or even, on rare occasions, their children) to benefit from their wealth upon their death.
It’s not as unusual as you may think for someone to ask “How do I make sure my money won’t go to my family when I die?” The answer to this question is actually very easy—if you’ve had the foresight to create some kind of estate plan, that is. Without any kind of estate planning (a will or a trust, for example) the law automatically distributes your estate to your closest living relatives upon your death. But the simple act of creating a will or a trust can prevent this automatic distribution from happening.
A will or a trust can be as basic or as complex as you choose. Simply naming the people or organizations of your choice as your heirs is often enough to ensure that your wishes are followed, but if you are worried about relatives who may contest your wishes you may want to ask your attorney about stronger measures, such as including a disinheritance clause or a no-contest clause in your will or trust. This can be as simple as including a single sentence stating “I have specifically chosen not to provide for my brother John.”
We understand that not all families are the same, and not all people will want their wealth distributed in the usual manner. If you have a unique family situation, or unusual circumstances or requests, please don’t hesitate to contact our office. We can help.
Monday, November 14, 2011 How to Give Help to Family without Neglecting Your Own Financial Needs
As the cost of a college education skyrockets, and the unemployment rate for new college graduates holds steady at a depressing 17 percent, more and more grandparents are feeling the pressure to help their college age grandchildren pay for college expenses, or help with student loans after graduation.
While college students (and their families) could certainly use the help, is lending financial assistance a good idea for grandparents? This article in the Wall Street Journal says maybe not. “Some grandparents are making financial mistakes that could put their own financial future in jeopardy. Promising too much to grandchildren, not saving enough for their own possible health-care needs and paying off their grandchildren's loans are some of the mistakes well-meaning grandparents are making”
For grandparents who would like to lend a helping hand to their children and grandchildren, but are worried about neglecting their own financial futures, our office would like to suggest that there are a number of ways to help without shortchanging yourself. The WSJ article suggests that grandparents can “give support in other ways such as volunteering with their grandchild or encouraging them to pursue an education.”
Another option is to spend your money wisely during your lifetime and make arrangements with your estate planner to leave the remainder of your fortune where it will do the most good after your death. If your grandchildren are still young you may want to have their inheritance used to fund an education trust, or specify that it is to be used to pay off any existing student loans. If you have older grandchildren you can provide invaluable financial assistance by specifying that an inheritance should be used to pay for their children’s college education, giving them some breathing room during those lean financial years.
However you choose to be of assistance to your children, grandchildren, or even your great-grandchildren, our office can help you accomplish your goals. Call us today.
Monday, November 07, 2011 5 Things To Discuss With Your Doctor On Your Next Visit
Ensuring you get the medical care you want in an emergency is a team effort which includes your attorney, your doctor, your healthcare agent, and your family and loved ones. But none of these people can be part of the team if they are unaware of your preferences. Here are five things to discuss with your doctor to make sure he or she is in the loop:
1. Your Advance Health Care Directive or Living Will. If you have already created a health care directive or living will we strongly suggest you give your primary care physician a copy of the document. It can be even more helpful to briefly discuss the document with your doctor and have him or her sign off on it, if possible. This prevents any unwelcome surprises, should an accident occur.
2. Your wishes for medical treatment if you are incapacitated. Part of creating an Advance Health Care Directive is outlining your wishes for medical treatment if you are incapacitated. This is more than just making a decision about a DNR (discussed in item #5), this also includes what medications or treatments you would like to receive and under what circumstances, it includes where you would like to receive long-term treatment if necessary, and it includes who you would like to be involved in medical decision-making (from your spouse, to your parents, to your favorite doctor or doctors.)
3. Your health care agent. This is the person who will be making medical decisions for you if you are unable to make them for yourself. We are not suggesting you bring your chosen agent in to meet your doctor, but briefly telling your doctor who the person is (your spouse, your brother, your daughter) and why you chose them can make all the difference.
4. Your HIPAA Authorization. This is the document that gives medical staff permission to share information about your health status with certain people. You can sign a generic HIPAA Authorization with your attorney as part of your estate plan, but it is likely that your physician and your local hospital will have their own forms to be signed. Ask your doctor how to ensure that the right people are getting the right information in case of emergency.
5. The inclusion (or lack) of a DNR statement in your medical file. We always hope that this will never be necessary, but we all learned our lesson from the Terri Shiavo case and know that it is better to be safe than sorry when it comes to your end-of-life wishes. Talk to your doctor about under what circumstances you would or wouldn’t want life-saving treatment, and the best way to include these wishes in your health care directive AND in your medical file.
Friday, November 04, 2011 Estate Planning with a Chronic or Terminal Disease
We mention often on our blog that each family will have unique circumstances and unique estate planning needs—this is especially true of families in which one member has a chronic or terminal disease such as cancer, diabetes, or, as mentioned in this article in Forbes Magazine, multiple sclerosis.
For most people, the documents in their estate plan constitute a “someday” or a “what if” scenario, but for those people with chronic or terminal diseases the documents in their estate plan address issues that are much more immediate and certain. For this reason, the advice in the article mentioned above focuses mainly on doing whatever you can to take control of your estate planning, health care, and financial affairs right now. Some of the suggestions include:
* Finding financial and estate advisors who are comfortable discussing your situation, and can help you customize your plans to fit your needs.
* Customizing your estate planning documents, including your will, trust, or living will.
* Signing important forms right now, while you still can.
* Making use of your temporary or limited powers options in your healthcare and financial documents, giving your chosen agents the limited power while you are temporarily incapacitated to “pay your bills and file your taxes but not sell your house or make gifts of your assets.”
Living with a chronic or terminal disease is a unique situation and requires unique planning and preparation—planning that is best done right away, for the good of your family and for yourself. If you have questions about estate planning with a chronic or terminal disease please don’t hesitate to contact our office—we can help.
Wednesday, November 02, 2011 Charitable Giving Through Legacy Planning
Most of our readers and clients are concerned about more than just making a will or trust; they want to leave a legacy which reflects their values and beliefs. One popular way to do this is to make charitable giving a part of your estate plan; but you don’t have to wait until the end of your life to make your charitable contribution, this article from the New York Times reveals how current tax rules can allow any philanthropically-minded person to give more to a favorite charity right now.
According to the article, “One way to increase the tax savings — and consequently what you can afford to give — is to give appreciated assets to a qualifying charity instead of cash.” These “appreciated assets” can include stocks with long term gains, real estate, artwork or collectibles. Giving appreciated assets such as real estate, collectibles, or the like may not be as simple as giving cash—instead it “is complicated with a lot of little rules”—but in the end, “the benefits can be substantial.” Not only for the recipient of the gift, but for the donor as well. “Very large gifts may also reduce a donor’s taxable estate.”
If your interest lies in long-term rather than one-time-only giving then you may want to consider “setting up a donor advised fund through a community foundation or a financial institution... [This] allows the donor to put money in one year and get the tax deduction, but spread the gifts out over several years.” In fact, this particular method of charitable giving lends itself perfectly to the long-term legacy planning that so many clients prefer.
We know that creating an estate plan and financial plan is about much more than simply providing for your family monetarily. Designing these plans can also be about exploring your family’s values, continuing to give to the causes that have been important to you throughout your life, and perhaps encouraging your children or grandchildren to know the joys of giving as well. Our firm can help you design a financial legacy that will last for generations.
Monday, October 31, 2011 Planning for Death Can Be a Celebration of Life
Halloween is the one day of the year when not only is it ok to think about death, it’s expected! So it seems like the perfect time to bring up the subject of funerals—specifically your own funeral.
It has been said that funerals and memorial services are for those who are left behind after the death of a loved one, not the one who has passed away; and while this is true, it is also true that most meaningful service is one which accurately reflects the personality and wishes of the loved one it is memorializing. For this reason, some people are choosing to plan their own funerals or memorial services before they pass away.
A recent article in the Wall Street Journal describes how funerals and “last rites” seem to be going through a change. “While religion and family tradition have dictated last rites for hundreds of years, funerals today are changing dramatically. Baby boomers, in particular, are shifting to more personalized—and less religious—memorial services, often calling them 'A Celebration of Life.'”
The article goes on to describe a new website (MyWonderfulLife.com) which helps people make plans for their own funerals. While we’re glad more people are aware that they have this option, none of this is news to estate planners, who have been helping their clients plan, share, and pay for their own funerals, memorials, and disposition of remains for years.
Thinking about your own death and funeral may sound morbid, but many people are pleasantly surprised at how much of a celebration of life it can be. Please contact our office to get started on your own plans, or for more information.
Wednesday, October 26, 2011 Entrepreneurs, Family Business, and Estate Planning
If you’re an entrepreneur, or a small or family business owner, you have more to lose if you don’t have an estate plan. An estate plan help you protect not only your family and your assets, but also the business you’ve spent years (or decades) building. A recent article at Entrepreneur.com, entitled What Entrepreneurs Should Know About Estate Planning, describes some of the main components of an estate plan and how they can be useful to a business owner.
That article covers eight estate planning components, beginning with a will and a living trust and ending with long term care insurance and disability insurance. All of these components are extremely useful (and in some cases absolutely necessary) and we highly recommend reading through the entire article. We would also suggest that there are three more documents that an entrepreneur should consider to help preserve business and wealth for future generations.
Family Limited Partnership (FLP): A Family Limited Partnership is an asset protection tool which allows parents to take business assets out of their taxable estate and transfer the value of that asset to their children while still remaining in control of the business.
Buy-Sell Agreement: A buy-sell agreement is a formal plan or contract between business partners establishing what will happen to the business should one of the partners die. This document specifies whether a partner may or may not buy your ownership shares for your heirs and for what price, or if you want to block certain family members or individuals from having any ownership share in the business.
Succession Plan: A succession plan should be a key element in any business plan, but especially for small or family businesses. A succession plan is exactly what it sounds like, a formal plan outlining your wishes for passing your business on to your successors. You may design a succession plan to facilitate your retirement, or to provide a smooth transition in the event of your death. In any case, a succession plan is essential for any business owner.
Don’t leave your business—or your family—out in the cold. Take the necessary steps to protect them both in the event of your death with a well-designed estate plan.
Monday, October 24, 2011 There’s No Excuse for No Nomination of Guardians
Children are a blessing... But being a parent is a difficult job! Most parents of young children already feel overwhelmed with the necessary day to day responsibilities, the last thing they want to do in their down time is think about the difficult and emotional subject of guardianship and estate planning. This explains why, as this article from The Huffington Post points out, “over half of the population doesn't have a will, and the percentage only climbs for those with kids -- the group that actually can't afford to live without one.”
The author of the article goes on to explain that most parents will give the same four reasons for not having nominated guardians for their children—and that ALL of these reasons are bogus. The article does an excellent job explaining why parents shouldn’t let any of these excuses (or “myths”, as the author refers to them) stop them from taking the necessary steps to provide for their children.
These “myths” are no surprise to estate planners, who know all too well how hard it can be to think about your own death, and to what lengths people will go to avoid doing so, but the one that is the most concerning is the one the article lists as #3: “A good number of parents say they've stashed a letter somewhere, or have this email on their laptop outlining their last wishes...”
When it comes to your children’s future, there is no substitute for a professionally prepared nomination of guardians. Informal documents such as a letter or e-mail simply may not hold up in court. “No matter how eloquently you've voiced your preferences, your letter or email is not legally binding. A judge could take it under advisement, but he could also come to his own ‘better’ assessment. And why risk it? If you've taken the time to consider the right person, why not just make it official and seal the deal?”
If you have minor children, executing a nomination of guardians may be the most important way to secure their future if something should happen to you. Contact our office for more information about how to choose (and nominate) guardians for your child.
Wednesday, October 19, 2011 When is the Best Time to Plan Your Estate?
The estate tax laws of the past few years have been so inconsistent that many people are still “waiting for things to even out” before they create (or update) an estate plan. This wait-and-see approach seems perfectly reasonable on the surface; after all, nobody wants to spend hard-earned money creating an estate plan only to have it rendered obsolete within a year. Our firm is here to let you know that there’s bad news and there’s good news...
The bad news is that estate tax law doesn’t appear to be settling down any time soon. We all know the estate tax was repealed in 2010, and then reinstated in 2011. And now, as this article from AARP mentions, “federal estate tax rates are slated to change again in 2013, unless Congress decides otherwise.” Furthermore, there are quite a few other mercurial tax laws that have a significant impact on estate planning, including the capital gains tax and the gift tax, to name just two. Both of these factors mean that the future of estate planning is still cloudy.
The good news is that even with all this uncertainty, an estate planner can help you plan for just about any situation. There is much more to an estate plan than just tax planning, including providing for your loved ones, planning a smooth financial transition for your spouse and children, ensuring you’ve nominated the best people to make medical and financial decisions if you become incapacitated, and much more. All of these are foundational elements, and don’t have to change if and when the tax laws do. Making the right plans now means you may have to make only a few small tweaks when 2013 rolls around.
The one thing you can be certain of is that life rarely plays out the way we expect. It’s better to make solid plans now that may change a few years down the line, than to wait unprepared and unprotected for tragedy to strike. Our office can help you build an estate plan that can weather whatever the future may bring.
Wednesday, October 12, 2011 Plan Ahead to Avoid Court-Ordered Conservatorship
Young adults are often urged to plan ahead and take control of their future; whether that means getting good grades and planning for college, searching for internships in their career area of interest, or saving money for the day when they are out on their own. Older adults, on the other hand (aside from being advised to save for retirement) may not know that there is one very important way to plan for their own future: choosing a guardian or conservator.
As the elderly population moves into their 70s, 80s and 90s it is not unusual to lose the ability to drive, manage their own finances, or even care for their own daily physical needs. When this happens, and the ability to care for yourself is lost, the courts will often give care over to a guardian or conservator—someone who will manage your money, medication, household tasks (or all of the above) for you.
If you have not taken steps ahead of time to name the person or people you trust to serve as your guardian or conservator then the courts will name one for you. Often the person named as guardian or conservator is the first person to petition the court for the job—although this may not be the person you would choose to manage your money or your care.
The best way to ensure that you have the right person managing your finances or your health care when the time comes is to plan ahead and execute a Nomination of Conservator, a Healthcare Directive, and a Durable Power of Attorney. Together these three documents let the courts know who you trust with your physical or medical care, and who you feel is qualified to properly manage your money without taking advantage. These three documents will help you take control of your own future, even at a time when losing some of that control may seem inevitable.
Monday, October 10, 2011 Death of Steve Jobs Saddens the World
The recent death of creative visionary and Apple co-founder Steve Jobs saddened the world. News of his death traveled like wildfire, and had the online social networks humming with tributes, memorial posts, and sentiments of grief. Mr. Jobs was very private about his personal life, but through his public appearances and his support of various creative enterprises he touched and changed the lives of many individuals; just as his visionary ideas changed the face of technology.
The sad announcement of his death has many people now wondering “what next?” How will this change the company he started? What will happen with his family? As this article from ABC News relates, “The ever-private Steve Jobs was famously secretive when it came to Apple's new products. As with his personal life, the future of Steve Jobs' wealth [and family] will also stay under the radar.”
The article mentioned above states that “Given Jobs' vast wealth and penchant for privacy, he likely set up private trusts for his family and charitable purposes.” Private trusts would certainly have been the logical thing to do, under the circumstances. Trusts are a much more flexible, powerful, and private tool than a simple will when it comes to estate planning. Trusts are useful under any circumstances, but they provide a much greater amount of control and protection of assets, especially when dealing with very large estates.
If Steve Jobs did choose to create trusts to protect his estate then it is possible that we may never truly know how he chose to distribute his wealth. It is probably safe to assume, however, that in addition to providing for his family and loved ones, he may have left a considerable amount to charitable or visionary endeavors. His words and actions during life provide a clue about how he thought about wealth: “Being the richest man in the cemetery doesn't matter to me…Going to bed at night saying we've done something wonderful…that's what matters to me.”
Friday, October 07, 2011 How to Cope After the Death of a Spouse
Losing a spouse may be one of the most difficult life events that any of us have to deal with. A spouse is a parenting partner, a co-CFO, a best friend and a beloved soul mate. Losing the person who supports you in so many ways can create an emptiness which can be almost paralyzing.
This is why it’s so important after the death of a loved one to have the support you need to get through the detail-oriented and often emotionally draining probate process, which includes tasks such as sorting through a financial history, submitting legal documents to the probate court, contacting creditors and family members, and more. Some people have family or friends to help with these time-consuming tasks, others enlist the help of an estate planning or probate attorney, but one thing is clear: no one should do it alone.
Every family or couple will have a different experience with the probate process, but our firm would like to offer a basic list of universal “to-do” items to remember after the death of a spouse. We hope this will help give our readers a little bit of security during a very emotional and stressful time.
* Obtain multiple copies of the death certificate
* Gather any and all estate planning documents
*Contact an estate planning attorney. Even if you don’t plan to retain an attorney, a brief initial consultation can help you understand the task ahead and prevent you from skipping important steps
* Notify the person named as executor or trustee
* Notify the necessary institutions or agencies (the deceased’s employer, social security administration, insurance company, creditors, post office, etc.)
* Remove spouse’s name from all joint accounts or ventures, such as bank accounts, utility companies, credit card accounts, etc.
*Pay final bills
*Cancel accounts, subscriptions, etc.
Depending on your situation and location, there may be many more tasks to be done. Additionally, if you are serving as executor or trustee (as many spouse’s do) there will be a great number of administrative tasks to be performed in addition to the ones on this list. Under these circumstances even the strongest and most capable people can feel overwhelmed. Remember that you don’t have to go through the process alone.
Monday, October 03, 2011 The Pros and Cons of a Crummey Trust
If you are looking for a reliable way to leave financial gifts to family members you may find that a Crummey trust is the right estate planning strategy for your family. A recent article in the Wall Street Journal explains that “Crummey trusts are used in many circumstances, but are best suited for making gifts to minors—especially when a parent is giving money to a young child who isn't ready to handle a large sum.”
While it’s true that Crummey trusts can be a very convenient and reliable estate planning tool, they do require a certain amount of annual attention and maintenance, and may not be the right strategy for everyone.
Crummey trusts can be used for many different kinds of assets, but they are most commonly used to protect life insurance policies from estate taxes. Your estate planner can help you set up the Crummey trust and use it to purchase a life insurance policy. Then you “fund the premiums with annual gifts... That gets money out of the estate while skirting the gift tax. Since the trust owns the policy, the death benefit ultimately goes to the trust, shielding it from federal estate taxes.”
Once the initial work of setting up the trust and buying the insurance policy is done, “The trustee must send out ‘Crummey letters’ each year, informing beneficiaries that they can withdraw the gifted amount during a window of time, say 30 days. Usually, the beneficiary leaves the money in the trust. But the IRS considers it a tax-free gift only if the person has the right to take it in the short term, and the Crummey letter proves that he has that right.”
Sending letters once a year isn’t a difficult task, but forgetting even once can lead to consequences with the IRS. Our advice is to be very careful to select a trustee you can count on to be timely and detail-oriented with the Crummey letters. Alternatively, the estate planner who set up your trust will often be willing to take over the administrative task of sending annual Crummey letters as well. Contact our office for more information. Friday, September 30, 2011 When “Equal” is not Always “Fair”
Every parent wants to be fair to their children; avoid showing favoritism, give each the same advantages, and eventually leaving each a fair and equal inheritance. But every parent also knows that there are times when equal is not always fair—a dilemma that is often faced by parents drawing up their will or estate plan. This is exactly the issue that is addressed in this recent article in the Wall Street Journal entitled Wills: How to Give One Child Less.
The article mentions that there are a number of different reasons why parents may want to give seemingly unequal financial distributions in their wills, “Many parents want to support children who need more financial help, while others want to repay children who have provided important support or caregiving. Some parents already may have helped one child considerably more than another during his or her lifetime, such as paying for a pricey graduate-school education or providing money for a down payment for a house. Other parents are reluctant to reward a particularly difficult or problematic child.”
There is absolutely nothing wrong with choosing to leave more to one child than another, but problems may arise when children are caught by surprise and feel neglected or betrayed; this happens most often when children don’t understand the reasons for their parents’ seeming favoritism, and can result in one child choosing to contest your will in court.
The WSJ article recommends a few strategies to avoid these hurt feelings and expensive court proceedings, but the first and best strategy is to talk to your children about it ahead of time, if possible. Hearing the news (and the reasons behind it) from mom and dad themselves can be much less hurtful than hearing about it from an attorney. Furthermore, telling your children yourself gives you the opportunity to explain your decision in a sensitive and loving manner.
If you still worry that your decision might be contested there are a number of precautions you can take to help ensure your planning documents will hold, including taking steps to prove your mental capacity is sound, creating what the WSJ calls “serial wills,” including a no-contest clause in your will, and more. Which method you may choose to employ will depend completely on your unique situation, and your estate planning attorney will be able to help you decide which is best.
We all know logically that “equal” is not always “fair,” but the heart does not always understand what seems logical to the head. Breaking the news gently to your kids ahead of time can go a long way toward avoiding hurt feelings later. Wednesday, September 28, 2011 Three Estate Planning Documents You Need During Your Lifetime
There are a number of very important documents in your estate plan which come into play after your death, but as this article in Forbes reminds us, there are two or three estate planning documents that are of the utmost importance while you are still alive: your Healthcare Proxy, your Advance Directive (also called a Living Will), and your Power of Attorney. Together, these three documents ensure that your medical and financial affairs will be taken care of and that your wishes will be followed should you somehow become incapacitated.
Healthcare Proxy: This document nominates the person (or people) who will interact with medical staff, have access to your medical records, and make healthcare decisions for you if you are ever unable to do so yourself. This can be a standalone document, but it can also be wrapped up as part of the next document;
Advance Healthcare Directive (or Living Will): This is the document that describes in as great or as little detail as you wish your preferences for medical treatment, your wishes for resuscitation (or lack thereof) and even your wishes for the disposition of your remains. An Advance Healthcare Directive also often includes a section nominating a healthcare agent (or healthcare proxy) to make decisions for you if you cannot.
Financial Power of Attorney: If you ever become incapacitated you will still have bills to be paid, investments to be monitored, and financial decisions to be made; the Financial Power of Attorney gives the person you nominate the power to keep all those various financial balls up in the air. The person named as your power of attorney will have the power to access your bank (and other financial) accounts, so be sure the person you choose is someone you trust.
The Forbes article mentions that “One in eight baby boomers will get Alzheimer’s after they turn 65. Sure, you hope you won’t be one of them. But the risk of a slow decline and incapacity, meaning that you don’t know what assets you have, what you want to do with them and who your family members are, lurks for us all.” Having the three above-mentioned documents ensures that you—and your family—will be ready for whatever the future may hold. Friday, September 23, 2011 There’s More than One Way to Name IRA Beneficiaries
Do you know the best way to pass your IRA savings on to your loved ones when you die? It sounds like a simple question, but naming beneficiaries for your IRA is not always as straightforward as it sounds. This article in CBS MoneyWatch explains: “Without proper estate planning, you may be reducing your family’s future wealth potential. That’s because improper planning can mean not only a premature end to your IRA at your death, but also assets being inherited by the wrong individuals or entities.”
Deciding who should inherit your retirement savings is fairly simple (although it is not uncommon for an ex-spouse to receive IRA benefits because beneficiary designation forms are not updated after significant life events such as a divorce,) it’s figuring out how the assets should be distributed that poses the problem. If done correctly, inherited IRA assets can be rolled over and stretched out by beneficiaries for years. But without the correct planning your heirs may find themselves paying significant taxes on their inheritance or worse yet, unable to access the funds at all.
The article explains that each of the many options for IRA beneficiaries requires a different kind of planning. Naming a spouse as a beneficiary is fairly straightforward, your spouse can either “Roll the funds into his or her own IRA” or “Open an inherited IRA and take distributions based upon his or her remaining life expectancy.” Planning to leave your IRA to a single child is somewhat similar to planning to leave it to a spouse.
But if you would like to leave your IRA to more than one child, or to a trust for the benefit of multiple individuals or charities, you’ll likely want to contact an attorney or accountant for more significant planning. As beneficial as these options can be, there are regulations and requirements involved with multiple beneficiaries, and “there are a lot of complexities with naming trusts as beneficiaries, so seek a competent estate planner for assistance.” Monday, September 19, 2011 How Important Is Religion When Planning Your Estate?
In a multi-cultural, multi-religious country such as ours the subject of personal faith or religious beliefs is one that many advisors are reluctant to bring up. Some advisors are afraid of offending their clients, other advisors may simply feel that religion has no bearing on the financial service they provide; but a recent article in the Wall Street Journal questions this assumption and asks is there a circumstance under which business and religion should mix?
The WSJ article takes the view that yes, there are circumstances when religious beliefs do have a bearing on financial matters. For example, “Making sure a client's living will and health-care proxy are in line with his or her religious beliefs—or lack of belief—should be a priority for advisers.” Additionally, creating a “‘family values and mission statement,’ which typically includes a section about the family's ‘spiritual values’... [can help a client] gain clarity about their family's priorities.”
When it comes to estate planning, religious beliefs and values are often a very large part of the planning process. Parents and grandparents hope that they can leave a moral and financial legacy, and how you choose to do this will have a significant effect on your estate plan. In order to serve their client to the fullest an estate planning attorney has to know which questions to ask and how to listen with an open mind in order to ascertain the complete scope of a client’s goals and help our client achieve those goals.
Including religious beliefs in an estate plan won’t be a priority for everyone. But for those who do wish to address the subject, they may find it’s not so easy to jump right into the topic with a relative stranger. The most natural place to start is often with a healthcare directive or living will, where you will want to include your end-of-life wishes and memorial instructions. Discussing values in this context can often lead to a greater discussion of how to pass your values on to your heirs through your will or trust as well. Friday, September 16, 2011 How To Give An Inheritance To A Child Who Might Squander Or Abuse It
Giving your children an inheritance can be one of the most generous, most loving things a parent can do... Unfortunately, under certain circumstances it can also be the most dangerous. A recent article in the New York Times addresses a question asked by many parents in estate planning offices all over the country: How to give an inheritance to a problem child who might squander or abuse it?
It is not unusual for estate planners to hear concerns from parents or families about one child or sibling who is not quite as mature, not quite as responsible as the others. In some cases the concern is not with a child or sibling, but with an untrustworthy spouse of a child or sibling. In both cases the estate planning challenge is the same—how to provide for the one you love without feeding any dangerous habits or predatory relationships.
There are actually a great number of ways parents can use estate planning to either protect or motivate an irresponsible child. The one your family chooses will depend on your unique circumstances. The article mentions a few of these strategies, including:
Eliminate temptation by restricting access to large sums of money. “Money does not cause problems, but it can sure accelerate them. The simplest strategy is to choke off that fuel.” Parents can do this through annuities, through specific instructions in trusts, or through a trusted and like-minded trustee. What is not recommended is putting another sibling in charge of the estate and asking that sibling to “parent” the less responsible one. This is a recipe for disaster.
Use your estate plan to give your child incentives to improve. “Incentive trusts can set hurdles for children to receive money or make payments only for set reasons. Pretty much anything can be a trigger, from being admitted to a certain college or matching money children earn on their own to being clean from drugs for a certain number of years.” Your estate planner can tell you how to best set this up.
Keep something in reserve for future years and generations. If your goal is to encourage children and grandchildren to lead productive lives and contribute to future generations then your estate planner can help you design a plan that will last for decades or generations. Recent tax developments have made this an especially good time to create a lasting legacy. “People with substantial wealth may want to take advantage of the $5 million exemption from taxes and 35 percent tax rate over that amount.” Wednesday, September 14, 2011 IRS Announces Another Extension for Estate Tax Filing Deadline
Just a few weeks ago the IRS announced the November 15, 2011 estate tax filing deadline for large estates of decedents who passed away in 2010; but some executors might be relieved to know that the IRS recently extended the deadline to January 17, 2012.
This extension gives executors of large estates more time to determine whether or not its in the best interests of the heirs to take advantage of the 2010 estate tax repeal. The decision facing executors of the 2010 estates is this:
* Choose not to pay estate taxes, but subject the assets of the estate to carryover basis rules (meaning heirs will pay capital gains taxes based on the price of an asset when it was initially acquired by the decedent); or
* Pay estate taxes under the 2011 rules, with a $5 million per-person exemption and a 35 percent top rate, but with a stepped-up income tax basis (meaning heirs will pay capital gains taxes on the price of an asset when it was inherited.)
For any executors who haven’t already made the decision, they can now take more time to weigh the pros and cons, and maybe even enlist the advice of an estate planner, tax planner, or probate attorney to help walk them through any possible unexpected consequences. If you are an executor or an heir faced with this particular and time-sensetive issue, please don’t hesitate to contact our office for assistance. Monday, September 12, 2011 The Dangers of Joint Ownership As An Estate Planning Strategy
Estate planning does not consist of a single, uniform goal or strategy. Instead, estate planning exists on a spectrum, with a simple will on one end and a comprehensive and interconnected series of documents and/or entities on the other. But as this recent article in Forbes points out, joint ownership by itself does not constitute an estate planning strategy.
All too often we see parents in their later years choose to simply add the name of one of their adult children to their bank account, instead of creating a will. “This is often done to help with bill paying, as a will-substitute to avoid probate court (often called a “poor-man’s will”), or simply to help an elderly loved one who needs assistance managing his or her assets. This is a big no-no!”
While adding a child’s name to a bank account can seem like an easy way to give that child power of attorney, it is simply too risky as an estate planning or a financial planning strategy. As the Forbes article points out, there are simply too many things that can go wrong. For example, even if you trust your adult child completely, adding another person as a joint owner on a bank account not only gives that person access to your money, but also gives other (perhaps less trustworthy) people such as creditors, litigants, or ex-spouses access to your money as well.
Family fighting is another tragic and common result of using joint ownership as an estate planning strategy, because it leaves the parent’s true intentions for the distribution of wealth in doubt. Mom may have wanted her account to be shared equally between many siblings, but “if Johnny won’t share, his siblings can sue him and claim that Mom’s actual intent was not for him to keep the money, but she only added his name as a convenience. The siblings have to prove what her actual intent was, and that’s not very easy to do.”
The bottom line is that joint ownership, while it may seem like a quick and easy estate planning strategy, is just too ambiguous, too exposed, and too dangerous to be practical. For other estate planning strategies that will provide your family with strong and lasting protection please contact our office today. Wednesday, September 07, 2011 Leaving an Inheritance to a Special Needs Child
If you have a child with special needs, planning your estate takes on a whole new dimension; especially, as this article in Forbes points out, now that “state and local governments are tightening income restrictions for medical benefits and supportive services, which are typically paid for by Social Security and Medicaid. Those services are tough to find—or afford—in the private sector for many adults with disabilities so severe that they can't live alone... As a result, it's increasingly important to structure an inheritance in a way that won't disqualify a child for such benefits down the road.”
Structuring an estate plan with a special needs child as a beneficiary takes special consideration. Because a direct inheritance could disrupt that child’s public benefits, “some parents simply leave another child all their assets in their will. If there are three children, they might leave two-thirds to the child who lives closest to the one with special needs.”
Unfortunately this particular strategy is rife with possible dangers. The heir may be tempted to use his special needs sibling’s money for his own purposes, or could decide he’s simply tired of being a caretaker. Even worse, the heir could pass away unexpectedly, in which case the entire inheritance would go to the heir’s spouse or children, with nothing left for the special needs child.
The article gives a number of suggestions for safe and reliable ways to leave your special needs child an inheritance, including leaving property to your child in a Qualified Personal Residence Trust, setting up a housing collective, and the tried-and-true option of a Special Needs Trust. But we know that each family is going to have different needs and goals, and there isn’t one solution that will work across the board.
If you have a special needs child your very best course of action is to contact a knowledgeable and experienced attorney to help you understand your options and choose the one that will best protect your child. Friday, September 02, 2011 Make Your Estate Plan a Masterpiece
A recent article in Forbes has shed light on a fact that estate planners have always known: There is far more to creating a good estate plan than just drafting the documents. In fact, according to the article, there is a fine art to putting together a good estate plan. “Estates are often shrouded in some mystery even for the people who plan and manage them. It is logical that an estate plan should offer a clear map of what a person owns, but this isn't always the case.”
The point is made in the article that very few estate plans contain an accurate accounting of what the estate entails. There may be any number of reasons for this; in some cases a person “doesn't have an accurate balance sheet to start with, and chooses not to update it or to share every detail.” In other cases “people may withhold information because they do not entirely trust an adviser, or because they are embarrassed to talk about money.”
The job of an estate planner is to draft a plan solid enough to offer security, but flexible enough to hold up to unexpected surprises—and how to achieve this will be different for every client. “A big part of the job is to value assets properly, and that task is an art, not a science.”
Of course, the clients who come back every few years for an update and review have a much better chance of their estate plan remaining accurate and secure, but not every client will be willing or able to do this, and estate planners do take this into account. However, “even a plan that starts out based on a complete accounting will be thrown out of whack if the estate owner doesn't come in to update it after a big life event like marriage or the sale of a business.”
Whether you are considering creating a new estate plan, or looking for someone to help you update an existing one, contact our office for help. We can help you make sure your plan is a masterpiece. Monday, August 29, 2011 Should Beneficiaries Also Serve as Executor or Trustee?
When someone
creates a will or a trust of course they want to choose a dependable and
trustworthy person as executor or trustee. For most people this means someone
close to them—a family member or friend, or often the most responsible of their
adult children. However, this often means that the person they’ve chosen as
executor or trustee is also a beneficiary. The question that occurs is this: Is it a conflict of interest to be both executor/trustee
and beneficiary?
As executor
or trustee a person has a legal duty to manage the property in the decedent’s
estate for the benefit of the trust or estate beneficiaries. This means that
while the executor/trustee should be compassionate, he or she must act in an
equal and unemotional manner toward ALL the beneficiaries.
A
beneficiary, on the other hand, is often by definition emotional. Even those
beneficiaries who are not concerned with the monetary aspect of their
inheritance (and let’s be honest, many heirs are more concerned with the dollar
amount than they might let on) will likely be emotionally invested in the heirlooms
of the estate. Many family feuds are sparked when siblings can’t agree on who gets
the family silver or great grandma’s engagement ring. And the potential for
conflict only increases when real estate is involved.
If you are
creating your will or trust, the best way to avoid this conflict is to be as
specific as possible in your instructions to your executor and beneficiaries. Spelling
out in no uncertain terms who gets the family silver will decrease the chances that
the executor will be tempted to take advantage of his or her position. You may
also want to consider naming a disinterested party as a trust advisor or
co-executor to provide checks and balances throughout the administration
process.
If you are a
beneficiary who is also serving as executor/trustee there are a few things you
can do to ensure you keep your executor and beneficiary roles separate:
* You may
want to consider contacting a probate or estate planning attorney to mediate or
oversee the process.
* Rely on
random but fair methods (such as flipping a coin, drawing straws, or organizing
a round robin) to distribute unassigned personal property with emotional value.
* Be sure to
involve an impartial appraiser if real property is involved.
* If all
else fails, an executor or trustee is always permitted to step down and hand
the role over to a qualified and disinterested party. Wednesday, August 24, 2011 Some Tax Saving Strategies from the Wall Street Journal
Income, estate,
and other federal tax levies have commonly been a bone of contention between
those with different political ideologies; but the current conflict has reached
unusual heights, with various million- and billionaires publicly expressing
their views (pro or against) about current tax laws. Of course, million- or
billionaires aren’t the only ones with strong opinions about taxes.
If you feel
that you pay too much in taxes, Brett Arends of the Wall Street Journal has some
tips to help you save on taxes in the future. Much of his article is
tongue-in-cheek, but the suggestions are valuable ones. Of special interest to
our firm and our clients are four of the tips nestled in the middle of the
article:
Give to your family. “Until the end of 2012 you can give
$5 million, tax-free... In addition you can give $13,000 a year to each
recipient -- each child or grandchild -- and a spouse can do the same. So a
married couple with, say, three children and eight grandchildren can give another
$286,000 a year, on top of that one-off $10 million. Over ten or twenty years
that really adds up.”
Put your grandkids—and great grandkids—through
college. “Money paid
directly to schools or colleges escapes estate taxes.” Furthermore, if you
contribute to a 529 educational savings account that money can be tucked away—and
eventually used by the student for whom it is intended—tax free (so long as it
is used for educational purposes.)
Buy life insurance. Proceeds from a life insurance
policy can go to your beneficiaries tax-free upon your death, although you may
have to make some arrangements ahead of time.
The article states that “Typically you put the policy in an Irrevocable
Life Insurance Trust... The premiums that you pay annually are gifts to the beneficiaries...
And when you die, the proceeds of the policy go to the trust, for the beneficiaries,
free of estate tax.”
Talk to an estate planner. “There are other moves that can cut
your estate tax, too. A Qualified Personal Residence Trust can slash the estate
taxes on a residence. A Grantor Retained Annuity Trust, or GRAT, can slash them
on an investment portfolio. So, too, can setting up a Family Limited
Partnership. Financial planners say this is a great time to put investments --
like stock -- into a GRAT.”
If you have
questions about these tax-saving strategies, or other strategies that can help
you preserve your estate for your heirs, please contact our office. We can help
you determine what your best options
are to help protect your assets—and your family—in the years to come. Monday, August 22, 2011 Don’t Let Tax Laws Limit Your Generosity
The past two
years have been tough on the average American family. The economy has been floundering and the
unemployment rate has been hovering around 9-10% since 2009, not to mention the
roller coaster ride we’ve all been through with the stock market. But through
it all some families and individuals have fared better than others—and many of
these lucky ones are eager to extend a helping hand to their family and
friends... if only the tax laws would let them.
A recent
article in Forbes, entitled 6
Ways to Give Family and Friends Financial Aid, explains that “the tax law
regulates your [financial] generosity... This kind of assistance is considered
a lifetime gift unless it’s for someone whom you are legally obligated to
support, such as a child.” This is important because “lifetime gifts” over a
specific amount (currently $5 million per person) are subject to taxation.
“Gifts of
cash or other assets can count against your $5 million exclusion from gift or
estate tax. If you exceed that limit, you could wind up owing gift tax of up to
35%. Even if you don’t, your lifetime gifts would reduce how much you can pass
tax-free through your estate plan.”
But if you
are willing to work within the system there are
ways to give financial assistance to friends and family without having to pay
gift tax. Here are a few strategies suggested in the Forbes article:
1. Don’t give more than $13,000 (or $26,000 if you are giving as a
married couple) per person per year. $13,000 is the current annual gift exclusion amount, and giving
more than this can count against the $5 million lifetime exclusion.
2. Pay medical, dental, or tuition
expenses directly to the provider. “Without using your annual exclusion or dipping into the
lifetime limit, you can pay for tuition, dental and medical expenses of anyone
you want. Note that you must make the payments directly to the providers of
those services.”
3. Contribute to 529 educational
savings plans. While
contributing to a 529 savings plan does
still count as a financial gift, once in the account the money can grow and be
withdrawn tax-free, “provided it is used to pay for college, a graduate,
vocational or another accredited school, or for related expenses.”
These are
only a few of the suggestions offered in the article, and a consultation with
your attorney or financial planner could reveal even more options available to
you should you wish to offer aid to friends or family without coming up against
the lifetime gift or estate tax. Please
contact our office for more information. Friday, August 19, 2011 Executors of 2010 Estates Have Until Nov. 15 to Make Estate Tax Decisions
Everyone
will remember the “wonderful boon” that was the 2010 estate tax repeal, which
(in theory) allowed decedents to pass on their assets free of any estate taxes. However, the situation was complicated in
December of 2010 when, as
this article in Bloomberg puts it, “Congress extended the tax retroactively
[giving] executors of estates of people who died that year a choice. They could
decide to skip the estate tax or pay the tax with a $5 million per-person
exemption and a 35 percent top rate, the same as in 2011.”
Executors
have had almost a year to consider their options, but now it is just about time
to make the decision, because “the Internal Revenue Service is giving executors
of estates of people who died in 2010 until Nov. 15 to opt out of the estate
tax.” According
to the IRS the forms and instructions for 2010 estate tax returns will be
made available early this fall.
But executors
don’t have to wait until the forms are available to consider which tax option
might be the most profitable one. Many financial planners and estate planning
attorneys have already done their research, and they’ve found that opting not to pay estate taxes may end up
costing you more in the long run. This
article in Forbes explains: “Opting out of the estate tax regime means
opting out of stepped-up basis (for income tax purposes)… and opting into the
modified carryover basis rule… One of
the main plusses about estate tax is that it is paired with a stepped-up income
tax basis. You should not be paying both
estate tax and income tax on the same assets.”
Of course,
each estate will be different depending on a number of factors, including the
size of the estate, the nature of the assets, the preferences of the beneficiaries,
and any previous planning the decedent may have done. Executors should consider
their options carefully, and consult with an experienced estate planning
attorney before deciding whether opting out of the estate tax is really in
their best interest. Wednesday, August 17, 2011 Unusual Things Happen Every Day…
In a recent article in the Huffington
Post financial
columnist Don McNay tells the frustrating, sad, and “unusual” story of how the
greater part of his mother’s and his sister’s estates ended up in the hands of
people they would never have chosen to receive it… all because neither of them
had a will or estate plan when they died.
When McNay’s
mother died unexpectedly in April 2006 neither he nor his sister really worried
about her lack of a will. After all, “her only asset was our childhood home,
and my sister and I were her only children. We would split the ownership of the
house equally.” McNay paid for the funeral, and “advanced the estate money to
pay delinquent property taxes, some outstanding bills, and the mortgage on
Mom's house,” and he and his sister worked out an informal deal to even things
up financially once the estate was settled and the house was mortgaged.
Tragically,
his sister fell down some steps and died in October 2006, also without a will,
and this is when the real trouble began. Although his sister had left her
husband years before, they had never formally divorced; which meant that
McNay’s sister’s share of their mother’s estate now belonged to her ex-husband,
her adult son, and her minor daughter—and none of it would be used to reimburse
McNay for what he had lent the estate.
McNay writes
honestly and persuasively about his experience, and we recommend reading the entire article, but the long and short of it is
this: After several rounds in court, after the involvement of several
attorneys, and after being forced to sell the family home for less than what it
was worth, “the person who got the most money from my mother's estate was my
former brother-in-law.”
Unfortunately,
McNay’s story is all too common. Situations such as this one could be easily
(and inexpensively) avoided simply by consulting an attorney and drawing up a
simple will; and yet more than 60 percent of Americans don't have wills.
Whether it’s because they’re uncomfortable thinking about their own death,
think they’re too young to worry about it, or simply feel they don’t have
enough assets to worry about it, more than half of Americans today refuse to
take the one simple step that can protect their families from heartache and
expense.
We suspect
that most people believe (erroneously) that this kind of thing just won’t
happen to them. After all, as McNay
writes in his article, “My family's series of events was unusual,” but then
again, “unusual things happen every day.” Friday, August 12, 2011 Don’t Inadvertently Disinherit Your Loved Ones—Review Your Estate Plan Regularly
All of our
readers know just how important—how essential—a
will is to protecting your family after you pass away. Leaving clear and
tangible instructions can prevent family infighting as well as hurt or
unsettled feelings; and leaving a legally airtight will can prevent wasted time
and money in unnecessarily long probate proceedings. But for all of this, there are a few assets
that your will may not be able to address.
This
article in CNN Money describes three assets that could cause you to “unwittingly
disinherit intended beneficiaries, including your children, from significant
portions of your estate,” namely your 401(k) plan, your IRA account, and your
life insurance.
You can name
anybody you’d like as a beneficiary in your will, but when it comes to 401(k)
plans it’s your spouse who is entitled to the money when you die. “If you want
to leave a 401(k) to someone else, your spouse must first file a written
statement waiving rights to it.” Even a prenuptial agreement won’t help if you
want to keep your 401(k) assets out of the communal pot, you’ll have to
convince your spouse to sign a waiver after
you’ve tied the knot. “A person can't give up spousal rights to inherit a 401(k)
until actually married. ‘A prenup by itself is not a valid waiver according to
the rules governing 401(k) plans.’"
Who will
inherit your IRA or your life insurance is a little easier to control than who
will inherit your 401(k). In the case of IRA or life insurance accounts the person
named as the beneficiary on the account will always take precedence over a beneficiary
named in your will. The most common inheritance
issues we see with these accounts is when people forget to update their
beneficiary forms after a significant life change such as a divorce or the
birth of a child. In these cases it’s important to review and update your
beneficiaries every 2-5 years to ensure there’s no confusion between your will
and the designated beneficiary on the account.
Having a
will is important, but a will is simply
one piece of a whole plan—a plan that likely includes many pieces. Being
aware of all the pieces of your estate plan, and keeping those pieces working
together and in harmony, is essential to ensuring that your family and your
legacy is protected. Our office can help. Wednesday, August 10, 2011 The Estate Planning Post Every Woman Should ReadAlthough couples usually come into our office together to discuss their estate plans, quite often it’s the women who lead the discussion about planning for the guardianship of children, and the men who lead the discussion about financial planning.
Estate planning is a subject which has a significant impact on women—in fact, this article in Forbes suggests that estate planning may affect women even more than men because “Among Americans 65 and older, 42% of women, but just 14% of men are widowed. Women’s longer life expectancy, combined with their tendency to marry older mates and their lower lifetime earnings means they are far more likely to see their living standards compromised in retirement if proper estate planning isn’t done.”
How can women ensure that this doesn’t happen to them? The best answer is for women to be involved in the estate planning process—not just the issue of guardianship, but financial issues as well. Talk to your partner about what happens if (as is likely) your spouse passes away first leaving you a widow. Talk to your spouse and your family about how the remainder of your estate should be distributed upon your death. And don’t discuss the topic in vague terms, bring your estate planner or financial planner into the conversation and talk about cold, hard numbers.
Our firm understands that this is not the easiest conversation to begin. Talking about money in our culture has generally been considered a “dirty topic,” not to mention that nobody likes considering their own (or their spouse’s) mortality, but the consequences of avoiding the discussion can be disastrous.
If you’d like to start a conversation about estate planning with your family but aren’t quite sure how, the Forbes article mentioned above has quite a few excellent suggestions, including “start with current events or an anecdote about other people. Perhaps it’s a movie you saw, a book you read, a news report about someone your age who recently died or a sudden death in your community.” If you’re trying to bring up the subject with your parents as opposed to your spouse you may want to consider telling them “I just did my own estate plan. Don’t you think you should update yours?”
Alternatively, you may simply want to print out this blog post (or the Forbes article) bring it to your spouse/parent/children and read it together. Getting the conversation started is the hardest part, but it’s also the most important. If you can get the ball rolling, our firm can help with everything else. Friday, August 05, 2011 Blended Families Require Special Estate Planning
With the current high rates of divorce and remarriage—even into the retirement years—many blended families have a lot to consider when they create their estate plans. This article entitled “Inheritance plans for blended families present many options” considers the situations of Alice and Jack, 70 year old common law partners who wonder what is the best way to provide for each other, as well as children they each have from previous marriages, should one of them pass away.
Blended families now have more options than ever when it comes to creating estate plans. All of these options ensure that each family—each person—will have the opportunity to achieve their goals; but be careful, many of the strategies that sound ideal on the surface will have hidden consequences down the road.
Take the spousal trust as an example: “Jack is thinking about having his lawyer draw up a new will to include a spousal trust to hold his investments. If he dies first, the trust could provide cash flow for Alice for her lifetime. Ultimately the capital would pass to his children after Alice dies. Such a trust can defer tax on capital gains and allow some investment income to be taxed at the lowest bracket rate.” But there’s more to it than what is seen on the surface. “What if Jack's children have to wait 20 or more years to inherit? Indeed, Jack's children may never inherit anything if Alice has the power to dip into the trust capital.”
Luckily, a knowledgeable and experienced estate planner can not only help you look into the future to help you see what long-term effects of each planning option might have, but also offer a wide variety of options, many of which can be tweaked and customized to fit your blended family’s unique needs.
When it comes to protecting your family it’s wise to consider all your options... and never settle for less than the best. Monday, August 01, 2011 Planning Your Estate Can Help Loved Ones Cope With Loss
In our line of business we like to think that what we offer our clients is more than a way to minimize estate taxes or avoid a lengthy probate, we like to think that what we really offer our clients is an opportunity for peace and comfort during a time of stress and emotional upheaval.
Sharon Epperson, in her article on MSNBC entitled “How Dad’s Planning Helped Us Cope With His Death” gets to the heart of what we think everybody is trying to accomplish when they contact an estate planner. “By making some important decisions while living, my father helped to lessen the overwhelming stress of coping with sudden loss.”
Epperson goes on to explain that while simple things like a clear-cut will, pre-made funeral arrangements and an up-to-date life insurance policy can make all the difference in the world to grieving relatives, “only 45 percent [of respondents in a State Farm survey] say they've actually made plans.”
The truth is that the hardest part of creating an estate plan is simply getting started. Asking that first question, making the first decision, creating the first document... once you’ve taken the first step the rest comes easily—especially if you have a knowledgeable and compassionate advisor to help you along the way.
When clients come to our office asking about a last will and testament, or a trust for their children, we know that the question underlying the entire experience is “How can I ensure my family will be taken care of?” Our goal is to address ALL of your concerns, and help you provide your loved ones with a port of comfort and security in the storm. Friday, July 29, 2011 Retirement Assets May Be Unpleasant Surprise for Heirs
You’ll often read news articles or blog posts about saving for retirement—when to start, how much to save, what savings or investment plan is best—but there’s an important retirement topic which often goes underreported: How these retirement accounts impact your heirs.
As noted by this article in the Wall Street Journal, “The new, higher threshold for the federal estate tax has many heirs happily thinking they won’t have to surrender a big piece of their inheritance.” But these heirs “may need to think again if they’re in line to receive a lot of money from tax-protected retirement accounts like 401(k)s and IRAs.”
Many (if not most) retirement assets these days are IRD assets, this is “income in respect of a decedent,” and it means that the assets are income earned by a person, but not taxed or received before that person passed away. These IRD assets can be wonderfully beneficial to the investor... but they can be an unpleasant surprise for heirs, who will end up paying the taxes on these assets.
“Heirs who receive retirement accounts often pay far more tax on IRD than they have to, collecting payments from the plan but failing to take an annual deduction that is available to beneficiaries. Sometimes that’s because the tax attorney who planned the estate knew about the deduction, but the accountant who prepares the heir’s taxes doesn’t.”
Some of the solutions suggested in the article are to take advantage of a recent rule change which allows many IRD savings accounts to be converted to Roth 401(k)s. Taking advantage of this and converting the money to a Roth allows the owner to pay any applicable taxes now, so that heirs won’t be liable. Another option is to move money from the IRD retirement account into an irrevocable life insurance trust, thus removing it from the taxable estate.
“People need to refocus their thinking on what heirs are truly inheriting.” Our office can help you do just that. A little bit of thought and action now can save your heirs a lot of taxes and confusion down the line, and this is especially true if you are lucky enough to have a significant amount of savings that you anticipate passing on to your children or grandchildren. Wednesday, July 27, 2011 After A Tempestuous Life Amy Winehouse Leaves Clear and Certain Will
Following the death of British singer Amy Winehouse there have been a number of news stories and blog posts about her turbulent career and the last few years of her life. In the midst of all this scrutiny, perhaps the most surprising discovery is the fact that Winehouse’s affairs were in incredibly good order, with a carefully crafted will leaving all of her sizeable estate to her parents and brother instead of to her incarcerated ex-husband.
This timely article in U.S. News and World Report remarks that “celebrities and non-celebrities alike often leave their estates in disarray when they die. That lack of awareness and planning can make death more stressful and more costly for family members as they struggle to quickly plan a funeral and think about dividing up family property while grieving.”
All too often our office is contacted by family members who are overwhelmed with the task of probating or administering a poorly planned estate. Sometimes these bereaved relatives are dealing with overwhelming and confusing debt, or terrible family infighting, but more often than not they are simply trying to make their way through the long and arduous process of probating an estate without the benefit of a will or trust.
One of the many things we can learn from the life and death of Amy Winehouse is that even in the midst of troubled times it is possible to think clearly about the future. If you’d like to start planning for your family’s future, please contact our office today. Monday, July 25, 2011 Charitable Lead Trusts Can Benefit Your Heirs AND Your Favorite Charity
2011 and 2012 are good years not only for heirs but also for charities; high estate- and gift-tax exemption amounts (as much as $5 million per person) have many wealthy families exploring their options for gift-giving, and record-low interest rates are prompting many financial advisors to recommend that their clients set up charitable lead trusts to leave money to both their favorite charity and their heirs with little or no tax hit.
When setting up a charitable lead trust the grantor puts the desired assets into a trust for a specified number of years, naming a charitable foundation as the first beneficiary, and a non-charity (children or grandchildren) as the remainder beneficiary. Each year during the specified time period payments are made from the trust to the grantor’s designated charity, once the trust's term expires, what is left goes to the grantor’s heirs.
Charitable lead trusts have fallen in and out of favor with financial advisors over the years, and were most recently popular after Ms. Jacqueline Kennedy Onassis used one to great effect. This recent article in the New York Times describes the pros and cons of the charitable lead trust:
“Over the years, charitable lead trusts have been a way to give money to charity with the possible benefit of passing what was left to children without paying estate taxes.” Although the payout (to both beneficiaries) of a charitable lead trust is highly dependent on the starting interest rate, “the likelihood today that one of these trusts would have money left for heirs [is] 95 percent. The trusts are written so that the assets appreciate substantially over time, but even if they do not, the designated charity — often a family foundation — will still get the money.”
One of the downfalls of a charitable lead trust is that rules and regulations can be confusing, “they are hard for someone who is not a tax lawyer to understand.” Furthermore, some families have “used these trusts to give money to their family foundation. This runs the risk of being deemed self-dealing if the person who set up the trust names his foundation as the recipient and then parcels out the money himself.”
The bottom line is that while a charitable lead trust can be an incredible useful tool benefitting both your heirs and your favorite charity (especially if set up during the next year and a half), it is not something to be done lightly, without the advice and help of an experienced attorney or financial planner. Wednesday, July 20, 2011 How Should A Caregiving Relative Be Compensated?
It is common knowledge in our society of aging Baby Boomers that many adult children end up taking months or even years off from their lives and careers to provide care for their elderly parents. Most children do this out of love and a sense of duty, but even in the closest of parent-child relationships there may be an unspoken expectation that appreciation for the caregiving child’s time and effort may be reflected in the parent’s will or trust. After all, professional caregivers demand a salary, is it too much to expect that a relative serving as caregiver should be compensated as well?
Take as an example the case of Anthony Olivo, who this article in Forbes describes as “a tax lawyer who ended up providing nearly full-time care for his mother and father.” Anthony “worked in law firms from 1976 to 1988 and then opened his own practice. Yet by 1994, given all the time he was devoting to his parents and their health problems, he found it hard to maintain his practice. He lived with his parents and gave them round-the-clock care from 1994 through 2003, during which he earned no significant income from his law practice.”
Now Mr. Olivo is asking that the U.S. Tax Court deduct $1.24 million from the estate of his parents for fees it paid to Anthony while he was serving as caregiver. Mr. Olivo is not challenging his parents’ wishes, he is not asking for more of the estate than his parents bequeathed to him; rather, he is asking that a “salary” for caregiving be deducted from the taxable portion of his inheritance.
Unfortunately, in the absence of a legal agreement, the tax court is unable to rule in Mr. Olivo’s favor: “The court was careful to note that Anthony rendered extraordinary care and that his efforts were commendable. However, the court ruled that his mother’s estate did not establish that Anthony was entitled to that pay. There were no written agreements and scant evidence the family agreed to pay him.” Furthermore, “There was no contract and no firm evidence of how much Anthony’s services were worth.”
We sympathize with Mr. Olivo, and hope that our firm can help save our clients from ending up in a similar situation. Simply leaving the caregiving relative “a little extra” in a will or trust is not enough, we cannot stress enough the importance of a legal caregiver agreement if a family member is providing caregiver services—especially if that family member is giving up time from his or her own career to do so. Monday, July 18, 2011 QPRTs Offer A Chance to Have Your Cake and Eat It Too
Since the burst of the housing bubble a few years ago and the subsequent crash of real property value, many of the clients who have come into our office have bemoaned the lowered value of their homes, but we have good news for these clients: You do have options.
One of those options is a QPRT (Qualified Personal Residence Trust) a specific kind of trust which allows you to continue living in your home, while at the same time removing it from your taxable estate. Sound too good to be true? It almost is. In fact, this article in Reuterscalls it “a chance for clients to have their proverbial cake — a sweet vacation home in Florida, for example — and eat it, too.”
Here is how it works: “In a QPRT, the grantor transfers up to two residences into an irrevocable trust and retains the right to use the home for a pre-determined period, or trust term. Terms can vary widely — 10 years is typical, but can run for 40 — and the idea is to make sure grantors outlive the term... Once the term concludes, the grantor then pays rent to the trust. The beneficiaries become landlords, and open a brokerage-type vehicle to receive payments titled to the trust. There’s no income tax on those payments, a big plus for beneficiaries.”
The reason the QPRT is such a boon right now, while property values are low, is that grantors are able to “gift” the residence into the trust while the value is low and still under the gift tax exemption amount. If the value of the property increases over the term of the trust (which it almost certainly will) the grantor does not have to pay gift tax on that increase, but the recipients of the trust will still benefit from the increased value.
The QPRT appears to be a perfect tool for gifting property to children, but you do want to be careful about how you structure the trust, and consider carefully your relationship with your children. Once the trust term is over the property belongs to the beneficiaries (your children.) Many families arrange to have the grantor continue to live in the home, but begin paying rent to the beneficiaries once the trust term is up; however, the beneficiaries have no obligation to allow the grantor to continue living in the property.
And if you think you can escape the eviction concern by simply making the term of the trust so long you’re likely to pass away before the term is up, think again. “Die before the term’s up and your property reverts to the estate and takes an estate tax hit. That’s why planners stress picking a term you and your spouse expect to outlive.”
If you feel a QPRT may be a good planning tool for your family, give us a call. We can answer any questions you have and help you determine whether a QPRT could benefit you. Friday, July 15, 2011 The Best Laid (Estate) Plans...
A recent story in the Chicago Tribunewill be of interest to anybody who has created, or is considering creating, an estate plan—regardless of state of residence. The article tells of Heather Rooney, the widow of wealthy businessman Thomas McNamee, and her ongoing fight to get the inheritance she believes her deceased husband wanted her to have.
Approximately six months before his death Thomas McNamee found out he had a deadly form of brain cancer. After learning that his cancer treatments had failed McNamee took steps to get his affairs in order; these steps included marrying Rooney, his girlfriend of 15 years, and setting up a $3.5 million trust fund for the benefit of Rooney and other family members.
It seems like he took care of everything—prenuptial agreement signed before the wedding, trust created before he became too sick to manage his affairs—what could go wrong?
Unfortunately, according to Heather Rooney, the arrangements left after his death were not what her husband actually intended. “According to [Rooney’s] suit, [McNamee] intended to leave Rooney a $500,000 trust fund to maintain her at the 24-acre Dundee-area property where the couple lived. He also intended to leave her two parcels in East Dundee, including one with a beauty salon that Rooney operated.” Rooney also claims that she was coerced mere minutes before their wedding into signing a prenuptial agreement that did not accurately reflect her or Thomas McNamee’s true wishes.
At this point, we can’t know for certain what McNamee’s true wishes were. It certainly seems as if he created a thorough plan which would accurately reflect his wishes not only for his widow but also for other family members. But one would think a person as savvy as McNamee would have informed his spouse of his plans ahead of time, eliciting her grudging agreement, if not her wholehearted approval.
Unfortunately, even the best laid plans can be contested by unhappy relatives. But with the help of an experienced attorney you can make your plan as strong or as flexible as you believe is necessary to ensure that your wishes are followed and your loved ones are provided for. Wednesday, July 13, 2011 As Priorities Change, So Does Your Estate Plan
Estate plans have been changing quite a bit over the past few years, not only because of changing laws and new tools for protecting your assets and your heirs, but also because our priorities as a society are changing and growing. A recent article in the Wall Street Journalsums up the situation well:
“Even the simple question of who your heirs will be is getting more complicated. Nowadays more people are considering pets and even children posthumously conceived from genetic material in their estate-planning mix, say financial advisers. That often means setting up trusts that just a few years ago would have been unthinkable.”
Some of these “new” trust arrangements include:
Pet trusts: Money set aside in trust to be distributed to your pet’s caretaker as per your instructions. Some people choose to make the caretaker the trustee of the trust as well, others choose to have a separate trustee who can ensure the caretaker is caring for your pet according to the guidelines in the trust.
Trusts for posthumously conceived children: As fertility treatments get more and more advanced, “a growing number of states are passing laws defining the inheritance and Social Security rights of posthumously conceived children. Earlier this month, legislation took effect in Iowa granting posthumously conceived children the right to participate in trusts. Texas, Washington, Colorado and North Dakota confer similar rights.”
As technology advances, and as the legal system works to keep up with it, you have more and more options when it comes to protecting your family and passing on your estate as you choose. If you have questions about unique estate planning choices please don’t hesitate to contact our office. Monday, July 11, 2011 Joint Ownership A Dangerous Way to Avoid Probate
When asking about how to avoid probate, many clients have asked about the wisdom of adding family members as joint owners to bank accounts. While joint ownership will achieve the goal of avoiding probate, there are many dangers and drawbacks to adding family members—even trusted family members—as joint owners on bank accounts:
Vulnerability to creditors: Your only goal in adding a family member as a joint owner may be to avoid probate, but in the eyes of creditors that bank account is suddenly fair game, and may be used to pay off the debts of your co-owner.
Vulnerability to lawsuits: In the same way that joint accounts are vulnerable to the creditors of both owners, they are also vulnerable to potential lawsuits against both owners.
Gift tax assessment: If a new owner is added to an account as a joint owner, but doesn’t contribute any funds to the account, the IRS may see the move as a monetary gift. If the “gift” exceeds the annual gift tax exclusion amount the IRS will require it be reported on a gift tax return.
Joint ownership can adversely affect Medicaid planning: Even if an account is jointly owned by two people, the state considers ALL the funds in the account to be at the disposal of the owner applying for Medicaid. Furthermore, if your co-owner chooses to remove assets from the account Medicaid could consider this an improper transfer of assets and you could be rendered ineligible for Medicaid for a certain period of time.
And of course, the number one danger of joint ownership for probate avoidance purposes is that your co-owner may act unethically or irresponsibly.
For more reliable—and more effective—estate planning strategies to protect your assets and avoid probate, please contact our office. Friday, July 08, 2011 Estate Planning Challenges (and Benefits) for Same-Sex Couples
There are many changes going on nation-wide for same-sex couples as more and more states legalize gay marriage. But there are still a few areas of the law—estate planning being one of them—which present challenges no matter what your state of residence. This article in the Wall Street Journal points out just a few of the challenges same-sex couples still face, and one of the highest on their list is death and inheritance.
“The biggest problems [for same-sex couples] may not come until death do you part. Although same-sex spouses are legally entitled to inherit assets from each other whether there's a will or not, since inheritance is governed through state law, they don't have federal rights.”
In states which have legalized gay marriage (including Massachusetts, Vermont, New Hampshire, Connecticut, Iowa, and now New York) same-sex couples are still inhibited by federal law in the following ways:
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Same-sex partners aren’t able to inherit retirement plans with the same ease that opposite-sex partners have. “Unlike opposite-sex spouses, same-sex spouses would have to transfer [401(k) and other] accounts to inherited IRAs and start taking distributions each year, rather than allowing the tax-deferred assets to continue to potentially accumulate tax-free earnings.”
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Same-sex partners still won’t get the federal marital deduction—the ability to “leave each other unlimited assets without owing any estate tax”—regardless of their state of residence. These assets may be considered joint by the couple and by the state, but not by the federal government. This means assets will be taxed once upon the death of the first partner, and may be taxed again upon the death of the second partner.
But there may be one opportunity not available to traditional married couples which same-sex couples can take advantage of: gay couples are legally entitled to “set up a ‘grantor-retained income trust,’ a type of trust that family members aren't allowed to create for one another. You put an asset into a trust and retain the right to income from it.”
No matter where they live, same-sex couples are simply going to have more challenges creating estate plans that will hold water on both a state and federal level. The good news is that in spite of these challenges it is possible, with the right help, to plan to protect yourself, your partner, and your family now, and in the future. Monday, June 27, 2011 Frequently Asked Questions About Probate
What is probate?
Probate is defined as “the legal process of administering the estate of a deceased person by resolving all claims and distributing the deceased person's property under the valid will. A probate interprets the instructions of the deceased, decides the executor as the personal representative of the estate, and adjudicates the interests of heirs and other parties who may have claims against the estate.”
The definition doesn’t sound too bad, but probate can be a very trying process. Even in the best of circumstances there are procedures that must be followed to the letter, and the actual process (depending on the size of the estate and the laws of the state in which the property is being probated) can take anywhere from 6 months to a few years.
Do I need a lawyer to help probate an estate?
As a rule it is not necessary to have a lawyer help you probate an estate. However, if you have been named as executor, probate can often become an overwhelming maze of deadlines, notifications and potential liabilities. This is why many executors do choose to hire a probate lawyer to help them through the process.
You may want to think about hiring an attorney if you are serving as an executor under any of the following circumstances:
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There are a number of beneficiaries who are not on friendly terms, or are receiving varying sizes of inheritance.
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The decedent had large estate with many different assets, especially if the assets are not commonly held.
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The decedent was a resident in a different state than your own home state.
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A large number of creditors are making claims on the estate.
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There is a disagreement about the will, or if more than one will was found.
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The will is challenged or contested.
Do Life Insurance or Retirement Benefits Have to Go Through Probate?
The answer to the question above is generally “no”; life insurance and retirement benefits do not have to go through probate if the account has a named beneficiary. Benefits from life insurance accounts can be paid directly to the named beneficiary, and money from IRAs, Keoghs, and 401(k) accounts transfer automatically to the named beneficiaries of those accounts as well. The persons named as beneficiary, however, will most likely want to consult with a financial advisor to determine what needs to be done with the proceeds from these accounts. Another type of account that may not be subject to probate is a pay on death (or POD) account, the money from which can pass directly to the named beneficiary upon the death of the owner.
Probate is a subject most people don’t want to spend much time considering, not only because the rules and requirements can be convoluted and confusing, but also because of the close association between probate and death. If you have any questions at all about the probate process please don’t hesitate to contact our office—or your own local attorney who specializes in probate—for more information. Monday, June 20, 2011 “Trouble” Helmsley Makes Headlines One Last Time
The recent announcement of the death of “Trouble,” the famous canine heir of Leona Helmsley’s fortune, has made the issue of pet trusts once again headline news—something which is likely to bring positive results to pets all over the country. According to this article in MSN Today, “Pet estate planning has grown since Helmsley's will made headlines [in 2007]. Today there are retirement homes for pets all across the country, and at least 45 states allow for pet trusts.”
The growing awareness of pet trusts (or at least the need to make some arrangements for your pets in the event of your death) has benefitted not only pets of all shapes and sizes, but society in general. “A study from the late 1990s published in the Journal of Applied Animal Welfare Science found 1 percent of dogs and 1.5 percent of cats coming into 12 animal shelters had been surrendered because of owner death.”
These days, because of the media’s close attention to the controversy surrounding the inheritance of “Trouble” Helmsley, not only do more pet owners make provisions for their pets in their wills or trusts, but more charitable bequests are mad to animal shelters and other animal care/protection agencies in general. Additionally, some veterinary schools have taken it upon themselves to provide for pets who have lost their owners: “A few veterinary schools offer estate planning options like lifetime care for pets and placement in a home. The Stevenson Companion Animal Life-Care Center, established by the Texas A&M College of Veterinary Medicine, offers a place for pets to live in addition to veterinary care.”
The truth is that making arrangements for your pet in the event of your death isn’t all that difficult to do. While “some owners leave money to whomever they're entrusting their pet to as a way of making sure the animal does not become a financial burden;” this may not be necessary for ALL pet owners. Many owners simply write instructions for the care of their pets into their wills or trusts, somewhat similar to a nomination of guardians for minor children.
As with most estate planning issues, there are many options available when it comes to the care of your pets. The important thing is not what you choose to do, but that you choose to do something to ensure that your pet won’t be left out in the cold if something happens to you. Friday, June 17, 2011 Estate Planning for Beginners Part 6: Funding
The hard part is done. Your estate plan has been created, all the documents signed and witnessed and notarized. But wait, you’re not quite done yet—especially if your estate plan includes a trust. The task of funding that trust still remains. Without the completion of this crucial step all of your hard work could be for naught.
Funding is the process of putting all of your property into the trust. Your trust is more than just a piece of paper, it works like a protective box, keeping its contents private and safe from probate; and funding is the process of filling that box. Without funding, your trust is just an empty box, and doesn’t provide much protection at all.
The first question you may ask is “what should go into the box”? The easy answer is EVERYTHING. Start by asking your attorney to create a deed to help you put your home into your trust. For most people, their home is their greatest asset, and the first and most important to put into the protective box.
The next step is to go to your bank and investment advisor and put your bank accounts and stocks or investments, and any other immediate assets into the name of your trust. To do this you will need your Certification of Trust, which is a short document proving the existence of your trust. Your attorney can provide you with copies of your Certification of Trust.
The third step is to look at all of your tax-deferred assets such as retirement accounts, 401(k) accounts, or life insurance policies. These tax-deferred assets cannot be owned by the trust, but to ensure that the proceeds of these assets are distributed according to your wishes you will need to make your trust the primary beneficiary of the accounts or policies. By doing this you are arranging to funnel the proceeds of these assets into the protective box when the time comes. But keep in mind that not all tax-deferred assets are created equal—ask your advisor before placing these into the trust.
Your last step is to execute a comprehensive transfer document, a simple document stating your desire to put all small or tangible property such as furniture, artwork, antiques, etc., into that protective box, and be considered trust property, rather than subject to probate.
Of course every estate will be different; ask your attorney for a comprehensive list of assets to put into your trust. It is only once you’ve tucked all your assets away under the protection of your trust that you can finally breathe that final sigh of relief. Wednesday, June 15, 2011 Estate Planning for Beginners Part 5: Guardians of Minor Children
Quite often, an individual or couple’s decision to finally create an estate plan is motivated by a strong need to ensure that their minor children will be protected and provided for. This kind of planning for young children often begins with choosing the person or couple who will care for and raise the children if the parents pass away. But what many parents find is that choosing people who will serve as guardians of their young children is not as easy as they first imagine. In fact, it can be the most difficult and most emotional part of creating an estate plan.
For some families choosing guardians is easy—they simply pick a sibling or parent who is close to their children and who shares a similar parenting philosophy, but for other families the choice is not as clear. The following questions may be helpful ones to keep in mind when considering who may be in the best position to serve as guardian for your young children.
1. Is the person someone your child already knows and feels comfortable with?
2. Does the person live in the same state as you and your child, or will your guardian or child have to relocate?
3. Does the person share a similar parenting philosophy with you?
4. Is the person married? Does he or she have children already? Are they in a position to welcome another child into their lives?
5. Does your potential guardian work or stay home? Would this change if they were to accept guardianship of your child?
6. If family is important to you, would your guardian ensure that your child had opportunities to spend time with your extended family?
7. Would this person serve as both guardian and trustee until your child came of age, or would you choose two people for these roles—one as guardian and one as trustee?
These are just a few of the many questions you may want to keep in mind when considering a guardian for your child.
In rare circumstances there may be a person you want to explicitly bar from ever gaining custody of your child—an abusive aunt or uncle, or a sibling with a dangerous addiction. In these cases it may be prudent to create an anti-nomination of guardians, a document in which you name the person or couple who should under no circumstances receive guardianship of your children.
We know that these plans concerning the future and care of your children are possibly the most important you will ever make; and we know you’ll want to ensure you make them with the best information and most trusted guidance available. Please contact our office for more information, or to get started today. Monday, June 13, 2011 Estate Planning for Beginners Part 4: Healthcare Documents
Thus far our “Estate Planning Basics” series has focused primarily on financial documents, but the documents pertaining to your health care are an equally important part of any estate plan.
The most important healthcare document in your estate plan will be your healthcare directive. Depending on where you live, this document naming a healthcare agent and detailing your wishes for decisions made on your behalf and end of life treatment may also be called a living will, an advance healthcare directive, healthcare power of attorney, or a personal directive.
Perhaps the most important part of a healthcare directive is the nomination of your healthcare agent. This is the person who will be making decisions (potentially life-and-death decisions) about your medical treatment in the event that you are unable. The person you choose should be trustworthy, sensitive to the concerns of your other loved ones, and have the strength to ensure that your wishes are followed—even if those wishes are difficult or unpopular.
Like a financial power of attorney, the advance healthcare directive can be very general or very specific in its instructions. In addition to a nomination of agent, most healthcare directives also include (but are not limited to):
· Instructions for life-saving treatment (or your desire for a DNR order)
· Any existing medical conditions
· Your preferences for alternative medical treatment, if any
· The name of your primary care physician
· Your instructions for the final disposition of your remains
While some people have very specific preferences for medical treatment and end-of-life care, others prefer to leave these decisions in the hands of their loved ones, letting those who care about them make the choices that will bring the most comfort. Whether you choose to leave detailed instructions for care or leave the decision-making to others, your healthcare directive should reflect your choice. We all know the tale of Terry Schiavo, whose lack of a living will resulted in a seven year court battle between her husband and her parents over her end of life care... Don’t let the same thing happen to you or your family. Friday, June 10, 2011 Estate Planning for Beginners Part 3: Powers of Attorney
Once you are secure in the knowledge that you’ve provided for your family and ensured that your wishes for the distribution of your hard-earned fortune are clear, it’s time to take steps to ensure that YOU will be protected and financially secure during your lifetime. It is not uncommon for seniors to need help with the finer details of their finances as they age, or in rarer circumstances for someone who is injured or incapacitated to require an agent to make financial decisions for them. A Power Of Attorney is the document that gives your chosen agent permission to make choices on your behalf, as well as giving instructions as to how those choices should be made.
Here are some of the most important things you should know about your Power of Attorney:
· A Power of Attorney is only effective during your lifetime; it gives your agent (or attorney-in-fact) the power to act for you while you are alive but unable to act for yourself.
· A Power of Attorney can be created to go into effect immediately or only become effective when you become incapacitated. This latter Power of Attorney is called a Springing Power of Attorney because it “springs” into effect once it is proven that the predetermined conditions (generally incapacity of the principal) have been met.
· A Power of Attorney can be revokedat any time so long as you have mental capacity.
· A Power of Attorney is for financial and legal issues only, a medical agent or power of attorney is granted in a separate document (to be discussed in our next blog post.)
Because your Power of Attorney grants your agent-in-fact such broad powers it is of the utmost importance to choose an agent who will not only be able to make wise decisions for you but who will also have your best interests at heart. While Power of Attorney does grant an agent very broad powers, there are ways to build a system of checks and balances into the document; some of these include requiring your agent to keep detailed records and present these records to the principal (you) or other named individuals, or using restrictive language in the document itself which sets limits on the agent’s power. Wednesday, June 08, 2011 Estate Planning for Beginners Part 2: Trusts
We’ve said it before on our blog and we’ll say it again: It doesn’t matter whether you’re a billionaire business executive or a teacher with a modest salary, it doesn’t matter whether you’re the patriarch of a large family or a stay-at-home mom of a newborn, a revocable living trust may be exactly what your family needs to protect their assets and their best interests. This is because a trust is probably the most comprehensive and versatile tool in your estate plan, and is a key part of helping you accomplish your goals.
There are two basic kinds of trusts—revocable and irrevocable. Revocable means that it is able to be revoked or changed so long as the grantor (the person who created the trust) is still living. Logically enough, an irrevocable trust cannot be changed once it has been signed. The reason this question of revocability is so important is because a trust is not merely a set of instructions for how your wealth should be distributed, a trust actually owns the property placed within it, with the person or people serving as trustee (usually for a revocable trust this is the grantors themselves, while they are living) controlling the trust property within. It is for this very reason that trusts can be such a powerful and flexible tool for tax planning and estate planning.
The specifics of your trust will vary greatly depending on what you hope to accomplish. Parents of young children may wish to include a general trust for the benefit of all the children, with distributions made to the guardians as necessary. This general trust can be split into separate individual trusts when all of the children have reached a certain age or graduated from college. Parents (and often grandparents) may want to include education trusts under the umbrella of their revocable living trust. Many families feel it is important to include instructions for charitable giving in their estate plan, and may choose to set up a charitable trust with their children or grandchildren as trustees. Pet owners often create pet trusts to ensure that their animals will be well cared after the owner has died.
A trust, much more than a simple will, allows the grantor far greater control over their assets—and for a longer period of time—which is why trusts are particularly useful for anybody entering into a second or third marriage, or for any parent who worries about the choices a beneficiary might make once they come into their inheritance. Unlike a simple will, trusts are designed to withstand the test of time, allowing you to leave a legacy that can last for decades. Monday, June 06, 2011 Estate Planning for Beginners Part 1: Wills
Every new project has to begin somewhere, and most newcomers to estate planning choose to begin with a will. A will is the most well-known of all estate planning documents, it is generally the simplest and easiest to create (although some wills can be very lengthy and complex), and in most states a will can contain within it instructions for peripheral topics such as guardianship of minor children or the final disposition of your remains.
But everybody knows that the main purpose of a will is usually to dispose of your assets and effects. In its most basic form, a will should include these important parts:
1. The testator’s (creator’s) name and crucial information
2. Nomination of an executor to carry out the wishes of the testator
3. The naming of the beneficiaries
4. Instructions as to how the estate should be distributed to the beneficiaries
5. Signature of the testator and the date signed
6. Signature of witnesses and the date signed
As mentioned above, this is a will in its most basic form, but in fact most wills will also contain instructions for probate, instructions regarding the payment of debts and taxes, the names of any organizations to receive charitable distributions, a mention of relatives who may purposefully NOT have been named, and more.
Because a will can be so basic, many people believe that a will can easily be created on one’s own, without the help of an estate planning professional; in fact, there are plenty of companies who offer “Do It Yourself” will creation software for a fee. However, it is important to understand that while a will itself can be very simple; the federal and state tax and probate laws are rarely so. If you feel your estate is small and your wishes are modest then by all means keep your will short and sweet as well. However, we strongly urge ALL of our readers (even those with small and simple estates) to have an estate planning professional at least review your will and advise you as to its validity before you sign it and tuck it away. Wednesday, May 18, 2011 Even the Most “Normal” Families Require Special Estate Planning Consideration
Many people would like to think that estate planning is a piece of cake: choose your beneficiaries, write up a simple will, and voila - you’re done! The truth is that while estate planning can sometimes be achieved with this amount of simplicity, most of the time there’s more to it than that—a lot more—especially if you have any variables or special circumstances to consider. Variables and special circumstances can encompass just about anything, including:
· Young children
· Adult children with differing financial needs
· Adult children who don’t get along
· A child, parent or sibling with special needs
· A second (or third) marriage
And according to this article in the Chicago Tribune special circumstances also include:
· A non-citizen spouse
· A much younger spouse
· Health concerns
One of the best tools you have in your estate planning toolbox to deal with any or all of these “special circumstances” is to distribute your assets through a trust rather than just a simple will. A trust is comprehensive, plus it gives you the flexibility to you need to provide for every circumstance—even if these circumstances change after your death.
For example, parents with three children ages 21, 17 and 15 would likely not want to split their estate evenly, especially considering that they’ve likely already paid for the 21-year old’s college education, but have yet to pay for college for the 17 and 15 year olds. These parents can place their assets into a common trust which can be used to pay for the needs of all the children at the discretion of the trustee, and then split into separate and equal trusts when the youngest child reaches the age of 21, or when all have graduated from college.
Very few families fit the simple “boiler-plate” description, and even fewer families will benefit from a boiler-plate estate plan. Our office can help you craft exactly the estate plan you need to fit your family’s unique and special circumstances—right now, and years in the future. Monday, May 16, 2011 Take Advantage of Tax Law Changes and Give Grandkids a Head Start
We’ve recently seen a number of news stories with disturbing figures about the rising cost of college education, and the growing inability of graduates to pay off the debt they incur from student loans. In fact, recent studies reveal that student loan debt now exceeds credit card debt in the U.S.!
All of this has motivated many grandparents to find a way to help pay for their grandchildren’s college education. According to this article in the Wall Street Journal “Recent tax-law changes are making it easier for families to help pay education bills for multiple grandchildren and even future generations. But grandparents have to make some tough decisions first.”
For grandparents whose grandchildren are already in school there may be fewer tough decisions to make, these grandparents will find it easy to “pay an unlimited amount of tuition directly to an accredited school for their grandchildren's education without incurring any gift tax or using their exemption.” Additionally, under the annual gift tax exclusion, anybody—including grandparents—can “give up to $13,000 to an unlimited number of people each year free of tax.”
Grandparents with younger grandchildren are finding that they also now have more options if they want to contribute to their grandchild’s future college education. “Under the Tax Relief Act of 2010, the federal gift-tax exemption increases to $5 million from $1 million for individuals, as does the exemption for the generation-skipping tax... The changes make it easier to pass along money for education to future generations free of taxes—at least through 2012, after which the exemption is scheduled to revert to $1 million.” The only question is how is the best way to set aside the money until the child reaches college age?
The most popular method right now is for the grandparent to set up or contribute to a 529 College Savings plan for their grandchild. “Assets you contribute to a 529 account are no longer part of your estate. If you are the account owner, you can withdraw the assets later without penalty.” However, care must be taken with 529 plans because “When the assets are withdrawn they will be counted [for tax purposes] as the student's income.”
Other options for savings include “setting up a ‘pot trust,’ or dynasty trust, which names all of the grandchildren, including any future babies, as beneficiaries. The length of such a trust varies by state but generally can serve at least a few generations of college students.” Of course setting up a trust with such a long intended duration means choosing a trustee who is likely to outlive you. Many grantors choose one of their own children (a parent, aunt or uncle of their grandchildren) or a trusted financial advisor, although corporate trustees (such as a bank) are also an option. Friday, May 13, 2011 Estate Tax Calculator May Provide a Peek into the Future
Everyone who kept up with the recent changes in the estate tax laws—and the flurry of speculation, news stories and blog posts that came with it—knows just how important estate taxes are to estate planning. Although we make it clear on our blog that estate planning should be at least as much about family and personal legacy as it is about money and taxes, the truth is that much of the technical planning that goes into creating your estate plan is hugely affected by the estate tax laws and regulations.
This is why we thought our readers might like to have a little sneak peek at what you might owe in estate taxes were you to pass away under the current laws. SmartMoney.com recently published an interactive Estate Tax Calculatorwhich can help estimate the amount you might owe based on your current financial information.
Although it is certainly interesting to see what you may end up owing in estate taxes, and it is absolutely helpful to see a list all of your assets and liabilities in one place, please remember that what this calculator provides is only an estimate. There is more to estate tax calculation and estate planning than can be provided in one form. What we hope is that this calculator may pique your interest, and inspire you to contact our office for the more thorough planning you and your family deserve; planning based on face to face discussions about your unique goals and situation. Monday, May 09, 2011 The Importance of Estate Planning for New Parents
News sources such as the Washington Post entertainment sectionpromise that this summer will be flush with celebrity newborns and proud mamas and papas. Some of the stars expecting additions to their families include Natalie Portman, Kate Hudson, Jennifer Connelly and more. Here at our office we wonder how many of these new parents will remember to update their wills or estate plans after the birth of their child... and how many of our readers have remembered (or will remember, if they are currently expecting a new child or grandchild) to update their own estate plans after an addition to their families.
Every parent knows that the time after the birth of a new baby can be a tired, busy and chaotic transition, and updating their estate plan is probably the last thing on any new parent’s mind. But after the first few months, when things have calmed down and you’ve settled into a routine, updating your estate plan to include and provide for your new little one should take top priority.
Here are a few things new parents will want to consider as they prepare to update their estate plan:
· Guardians for your child. Who are the people who will raise your child if the unthinkable should happen to you and your spouse? Many people choose close family members, others choose trusted friends.
· Keep your child’s inheritance in trust. Settling your entire estate on a 5, 10 or 16 year old is never a good idea. Consider instead creating a trust for your child which will provide for him until he reaches maturity.
· Trustees of your child’s inheritance. Who do you trust to invest and distribute the estate for your child while she is still a minor? Some parents choose to have the guardians also serve as trustees; others prefer to nominate separate trustees and guardians who will work together, providing a natural system of checks and balances.
· Providing for your child’s special needs. If your child has special needs he will need special planning to ensure that his needs continue to be provided for. Ask us (or your own local estate planning attorney) about a special needs trust.
Guardians, trustees, trusts and special needs planning are the very basics of estate planning for families with minor children, and should serve as a jumping off point for further discussion with your estate planner. Friday, May 06, 2011 How to Protect and Pass On Artwork, Antiques, and Other Valuable Assets
Some assets—such as real property, stocks and savings—are fairly straightforward when it comes to bequeathal to heirs; other assets—such as valuable artwork or antiques—are not so easy. How do you will an asset to a loved one when there is no deed of ownership? And just as importantly, how do these paperless assets figure into the size and administration of your “taxable estate”?
According to this article by Bonnie Kraham, how you dispose of these assets can be extremely important to the administration and taxation of your estate. One particularly dangerous method is referred to as “the empty hook” method, wherein “When the collector dies, the beneficiaries simply remove the artwork (from the hooks) in accordance with name tags on the items for the intended recipients. Thus, the estate is left with "empty hooks" of what may be part of a sizable taxable estate for estate tax purposes.”
The problem that arises with the “empty hook” method is that wealthy families who collect artwork or antiques as investments often have records of their purchases and sales, as well as a list of valuable items for insurance purposes. Any of these documents and records would be reviewed during probate or administration of the estate. “If you don't fully disclose the value of your art collection, or don't properly plan to gift art in compliance with estate tax rules and regulations, you can pass on tax fraud, instead of art, to your beneficiaries.”
Perhaps the best way to hold and legally dispose of your art or antiques collection upon your death is to transfer ownership of these valuable assets into a trust. “Transferring your art collection to a trust may be the most effective, efficient and transparent way to administer your estate after death . . . Trusts are private documents and, although the tax reporting remains the same for trust assets, trusts protect the privacy of an art collector or artist, which can be an emotional protection for the beneficiaries.” Additionally, keeping valuable artwork in trust provides an extra layer of protection from divorce or frivolous lawsuits during your lifetime.
Contact our office, or your own local estate planning attorney, for more information. Monday, May 02, 2011 The Benefits of a Retirement Trust
Most of us start thinking about retirement as soon as we get our first job. Even if we can’t start saving as much as we’d like right away, we know it’s there, looming on the horizon, and we think about it. The closer we get to retirement age the more we begin to consider our options and make specific plans. But even with all these years of thought and planning, U.S. News and World Report thinks that there may be a few things you haven’t considered in regards to your retirement. Although not specifically mentioned in the article, one of the things you probably haven’t considered is how your retirement savings will fit into your estate plan.
The first and most common option for distributing your retirement benefits upon your death is simply to name your spouse or children as the beneficiary (beneficiaries) of your retirement benefit plan; however, there is another way. A Retirement Benefit Trust (or Irrevocable Retirement Trust) can be used to keep retirement assets out of your spouse’s taxable estate upon your death. This may not be a big deal if your retirement assets are waning, but if retirement assets comprise a large portion of your estate then this can be a huge benefit.
A Retirement Trust also has the advantage of allowing your beneficiaries to stretch out the financial opportunities of your retirement assets. Instead of withdrawing the entire amount of your retirement savings right away (and paying taxes on the income) a trust allows your beneficiaries to make withdrawals over the course of their entire lives; not only stretching out the investment opportunity, but also helping to keep them in a lower tax bracket.
For more information on Retirement Trusts, and whether one could benefit you and your family, contact our office today. Friday, April 29, 2011 How Successful CEOs Keep the Family Business in the Family
How long will your family business stay in the family? One generation? Two generations? How about 4 generations down the line?
The truth is that very few family business stay in the family beyond the first generation. Statistically, Only 40% of family owned businesses survive to the second generation, 12% to the third, and 3% to the fourth. There are many possible reasons for this, such as lack of interest by subsequent generations or the evolving market and economy, but one of the main reasons that family businesses don’t survive to the second and third generation is lack of planning.
Which families have been successful with succession planning for their businesses? This article in Business Week profiles the famous families of business, and includes some interesting discussion of why certain families are successful where others aren’t. Parent-child relationships often become fraught with tension when the time comes to pass the baton, but history has shown that succession transitions are much smoother when the occur gradually, and according to a plan created and agreed upon by ALL interested parties.
Business succession planning is a key element to owning your business at any step of the game, not just at retirement age. This is because it is not merely about exit strategy, but about making goals and planning for future success. Leaving the business to your children is not your only option. You may decide to sell your business, or leave it to a partner. The options are out there, if you only know where to find them.
This is where an estate planning attorney can help.
Whether your business is in its first generation or its fifth, whether you intend to pass it on to your children or sell it, planning is essential if you want your business to survive. Our firm can help you do just that. Whether through wills and trusts, or the succession planning described in this blog, it is our business to look to the future. Trust us to help you do the same. Wednesday, April 27, 2011 One Simple Step Now Can Save Time and Money Later
Being named as the executor of the estate of a deceased loved one comes with many challenges, including dealing with the probate system, and refereeing unhappy family members; but one of the most difficult (and least discussed) challenges is sorting through the plethora of paper and information that people collect over the course of a lifetime.
You can save your executor (and your family) time and money later by organizing your important documents and finances right now. If you’re not sure where to begin, or what information an executor would need to know, we’ve assembled a list of information and documents an executor might need quick and easy access to if anything were to happen to you:
Instructions and letter to trustee:Contact information for your EP attorney and trustees, instructions on how to begin the process.
Minor children:Information about your minor children, nearby guardians or relatives, medical and health insurance information.
Personal Information:Birth and marriage certificates, passports, family, friends and contact people.
Estate Planning Documents:Trust, wills, any amendments, personal property memorandum.
Employment/Business Information:Contact information for supervisors, client information if you are a small business owner.
Health Care: Advanced Health Care Directive, HIPAA, emergency contact information, phone numbers for doctors, health insurance particulars.
Financial Powers of Attorney
Real Estate and Tangible Property:Deed to your home, mortgage information, homeowners and fire insurance, vehicle records, artwork and antiques.
Bank Accounts and Investments:Account numbers and locations, contact information.
Monthly Expenses and Bills:A copy of one monthly statement for each.
Information about recent Taxes
Retirement Accounts/Government Benefits: Account numbers, beneficiary information.
Life Insurance:Account numbers, beneficiary information
Memorial and Burial/Cremation:Preferences, pre-paid arrangements, phone numbers.
Memberships/Secured Accounts/Passwords
Once you are organized, keep your information in an accessible place and make your executor aware of the location. This simple act of organization will not only benefit you right now, it will save your family and your executor much time, money and frustration later on. Monday, April 25, 2011 Memories Make Your Legacy About More Than Property Alone
Have you ever wished you could go back in time and know your mother or father as a young person? Have you researched your family history or genealogy and kicked yourself for not asking your grandparents about their knowledge and experiences when you had a chance?
Technology has changed so much in the past century or half-century that never before has the world in which our grandparents grew up seemed so foreign to us. It’s hard for many people to imagine a world without cell phones or the internet, let alone a world without cars, Tupperware, or refrigerators. And it isn’t only technology that has undergone incredible changes: International politics and the great wars of the 20th century have changed the face of the world map many times over. Third world countries have become major world players.
It is for these very reasons that writing memoirs, or a family history, has become very popular in recent years. In the midst of all these staggering world and technological changes, a family history provides a rich cultural education and perspective, and plays a huge part in how we define ourselves and identify with the world around us. Many young people are hungry to know where they come from, and are asking their parents or grandparents to put down their history and experiences in a personal memoir.
Writing your memoirs or a family history may seem daunting, but it doesn’t have to be difficult. In fact, it has become so popular that there are quite a few books and toolsout there to help guide you through either writing your own history or interviewing older relatives to record theirs.
Everyone knows that you create an estate plan to provide for your descendents and pass on your estate: property, assets, and wealth. But this is only a part of what you want to pass on to your children and grandchildren. An Estate Plan can insure that your wealth is passed down, but your history and experience are just as important an inheritance. Your attorney can help you with the former, but only you can preserve the wisdom and experience that makes your history so unique. Wednesday, April 20, 2011 Protecting Your Children with a Nomination of Guardians
Choosing a guardian for your minor child could be one of the most personal decisions you ever make—it’s also one of the most important, which is why many couples turn to an attorney they trust to not only help them draft their nomination document, but also help advise them in this crucial decision. With such a personal matter the decision-making criteria will stem primarily from the heart, but there are some legal factors and implications that may affect the decision, and this is where an attorney can be helpful.
Forbes online recently published an articleoutlining the specific ways in which an attorney can be indispensable when choosing a guardian for a minor child; these include:
Explaining relevant statutory framework regarding guardianship to parents. As the article mentions, guardianship laws vary significantly from state to state. The manner in which you choose to name your guardians will likely be different depending on which state in which you live. For example, will you name just one guardian for both person and property, or will you need to name specific guardians for each of those two areas?
Discussing factors clients should consider when naming a guardian.There are so many criteria to consider when choosing a guardian that many parents get caught up in how to prioritize essential qualities of potential guardians. An attorney certainly can’t tell you which of your friends and family may be most fit to care for your child, but an attorney can help you asses the financial ability, emotional willingness, and compatibility of values of your candidates.
Emphasizing economic implications of the client’s decision. Most parents, when considering guardians for their children, think primarily of emotional attachment, family dynamic, and parenting style; but an attorney will remind you that finances should also be a significant part of your decision-making process. Guardians are not necessarily legally obligated to use their own funds to support their wards, which means that parents will want to discuss with an attorney the best way to provide financial support for their children.
Drafting provisions setting forth client wishes regarding the upbringing of their children.Parenting is an incredibly personal process; hundreds of small choices are made each day which shape the minds and values of our children. Some parents may want to express their wishes for how their child should be raised, even after their death. Guardians cannot be required to follow parenting guidelines when they accept guardianship; an attorney, however, can suggest a few ways that parents can encourage guardians to respect their wishes regarding upbringing.
A nomination of guardians may very well be the most important estate planning document you draft, our firm can help ensure that every bit of information has been considered and addressed before you make your final decision. Monday, April 18, 2011 New Portability Provision Should be Considered with Caution
A new “Portability Provision” in The Tax Relief, Unemployment Insurance Reauthorization, and Jobs Creation Act of 2010 has some couples excited about the financial possibilities. As explained in this article in the Wall Street Journal, the new portability provision “permits surviving spouses to elect to use the unused portion of the estate tax applicable exclusion amount of their predeceased spouses. This provides the surviving spouse with a larger exclusion amount and allows married couples to transfer a collective $10 million estate.”
The new provision may seem like a boon, but the author of the article advises caution for a few reasons: “First, portability may encourage procrastination rather than planning; second, complications emerge with GST taxes, remarriages, and state exclusions; and third, the temporary nature of the act and the unpredictability of Congress make for uncertainty in estate planning for the future.”
Our readers will know that there are a number of planning tools and opportunities that crop up over the years; this new portability provision is certainly one of them. Our readers will also know that none of these tools will necessarily be the “silver bullet” of estate planning. The fact is that estate planning is like anything else—to do it right and to do it effectively requires intelligence and research; a dedication of time and resources. Most families simply don’t have the time or the resources to devote to researching every new “perfect planning tool” that crops up promising to save your family money.
This is why our firm is here; it is our business to research the best planning tools for your family. We listen to your goals; we take into account your financial history and your current status. We help you create the plan that works best for you. If you think that this portability provision—or any other strategy you’ve heard about—might be your “silver bullet”, please call our office for an appointment. We can give you the resources and information you need to make an educated and effective plan for your family. Friday, April 15, 2011 When It Comes to Estate Plans, How Crazy is TOO Crazy?
We often mention on our blog how important it is to create an estate plan regardless of the size of your estate. We also frequently remind our readers of how flexible estate plans can be to protect your family in all the varied and unique ways you require. Well, just in case our word isn’t enough for you, the San Francisco Chronicle helps us out with this article naming 10 of the strangest wills in recent history, including:
Leona Helmsley, who left $12 million in trust to her dog.
Harry Houdini, who directed in his will that a séance be held every year on the anniversary of his death.
Gene Roddenberry, who requested that his ashes be scattered in space (outside of the earth’s atmosphere.)
Mark Gruenwald, the Executive Editor of certain beloved Marvel comics, who instructed that his ashes be mixed with ink and used to print comic books.
Charles Vance Miller, wealthy Toronto attorney, who bequeathed a large portion of his estate to whichever Toronto woman produced the most children in the decade following his death.
And more...
Aside from the amusement these eccentric estate plans provide, they teach a valuable lesson as well: No estate is too large or too small, no request too strange, no question too crazy to bring to your estate planner. An estate plan (and estate planner) can help you achieve your goals no matter how mundane or unusual they may seem. Wednesday, April 13, 2011 5 Missteps That Can Sabotage Your Estate Plan
When it comes to protecting your wealth and your family creating an estate plan is one of the most important things you can do. An estate plan is your key to ensuring that your hard-earned assets are distributed (or saved or invested) as you designate. An estate plan is your family’s safety net. Unfortunately, too many people attempt to take shortcuts with their plan, and find themselves with a safety net that is falling apart just when they need it most. Below are 5 of the most common missteps that can sabotage your estate plan, and how you can avoid them.
1. Neglecting to fund your trust. A trust can be a wonderful tool for protecting your assets; flexible and customizable, a useful trust can be created for just about every situation. But a trust is like a strongbox—if you don’t fill it up it has nothing to protect. Accounts and assets must be put in the name of your trust for it to work as you’ve designed it to.
2. Not enlisting the help of an estate planning attorney. There are a number of Do-It-Yourself will and estate planning programs out there that promise you a full estate plan for a cheaper price; but estate plans are complicated things, requirements change depending on your state of residence, the size of your estate, the age and situation of your beneficiaries, and much more. If you aren’t able to work with an attorney to create your plan, at the very least we urge you to have an attorney review your plan before you sign it.
3. Neglecting to mention previous estate planning documents, or making unofficial changes in the margins of documents that have already been signed. When creating a will or a trust or any other common estate planning document it is usually necessary to revoke any previous documents so there is no confusion about which document is current and valid. Neglecting to do this can end with your assets tied up in probate court for months or years—or even worse, invalidating both documents completely.
4. Putting your plan somewhere safe—somewhere so “safe”, in fact, that nobody can find or access it! People recognize that estate planning documents are things of value, and as such should be protected in a locked filing cabinet or safe deposit box. Wherever you choose to store your documents, be sure one or two trusted individuals have not only the knowledge of where the documents are, but also the ability to access them. An estate plan does no good if it cannot be accessed when it’s needed.
5. And finally, one of the most common missteps that can sabotage your estate plan is failing to update your plan regularly.Not only do federal and state laws change periodically (as we have recently experienced) but you will undoubtedly experience changes in your own life and fortune. Failing to update your plan to keep up with the law or with your own life can result in an estate plan that is as useful as a car you neglected to maintain—it may look fine on the outside, but it simply won’t run anymore. Monday, April 11, 2011 6 Things You Should Know About Your Healthcare Directive
We have recently seen one or two stories in the news that have brought the issue of health care directives to forefront of people’s minds. Most people know that a healthcare directive is one of the primary documents of any complete estate plan, but not everybody knows exactly what should be included in the document itself. Do you have to specifically name your spouse if you want that person making decisions for you? Is the healthcare directive the place to include a DNR (Do Not Resuscitate) statement? What about funeral arrangements or organ donation—does a healthcare directive deal with things that happen after death?
These are all good questions; here we attempt to answer these questions and more, as well as list some of the important things to know about—and include in—your healthcare directive:
1. Healthcare directives can have many names depending on where you live and the exact nature of the document. Some common names are: Advanced healthcare directive, Advance directive, Healthcare power of attorney, or living will. (Note: These are not all the same document with different names, but they do all serve similar or related functions. Contact our office for more information)
2. A healthcare directive should first and foremost name your healthcare agent: the person you want making decisions for you when you are unable.
3. A healthcare directive should absolutely include your wishes and preferences for healthcare treatment, including a DNR statement, preferences for artificial nutrition and hydration, antibiotics, pain relief, and other medications.
4. Your healthcare directive should include the name of your primary care physician, if you have one, as well as any pertinent medical history or conditions.
5. Healthcare directives can be written to reflect your religious or spiritual beliefs, including religious beliefs relating to blood transfusions, end of life care, and pregnancy.
6. A healthcare directive can and should make reference to post-mortem issues such as organ donation and funeral arrangements. Whether or not your wishes can be enforced may depend on your family and the state in which you live, but including your wishes may be of considerable help and comfort to your family. Friday, April 08, 2011 Understanding Your Last Will and Testament
Although recent news surrounding the estate tax—both its repeal and its reinstatement—has died down, many people are still talking about their estate plans. Most people recognize that now is the time to create their estate plan, or to review and update their existing plan if they have one. This means that many people are asking questions about the primary document in just about any estate plan: the Last Will and Testament.
What is a Will?
A will is, for many people, the cornerstone of their estate plan. In fact, if you only create one estate planning document (which we don’t recommend) that document is probably a will. A will is the document which details your wishes about how and to whom your property will be distributed upon your death. A will can list your property in great detail, or it can make a statement about “all my legal property” in general. Your will names an executor, the person who will carry out your wishes as detailed in the document. And if you have minor children your will can name guardians, the adults you choose to care for your children in your absence.
What is required to make a Will?
At its heart a will is very simple. Requirements will differ depending on your state of residence, but there are some basic requirements that will be the same across the board:
· A will must be created by a testator who is of legal age, who is proven to be of sound mind and judgment, and who is under no duress.
· A will should revoke all previous wills and codicils.
· A will should be signed and dated.
· A will generally needs the signatures of witnesses, and in some states must also be notarized.
It is important to note that there is no requirement that a will must be created by or with an attorney; however, homemade wills have been frequently found to be invalid, or have been contested by disgruntled heirs or potential heirs, so having the help and advice of an attorney is highly recommended.
What happens if you don’t have a Will?
If you don’t have a will your property will be distributed according to the intestacy laws of your state. Property will generally be inherited by a spouse, or equally by a spouse and children. If there are no spouse or children then property will generally go to living parents or siblings, then to nieces, nephews, or other living relatives who can be found. The state will choose an executor for your estate, as well as guardians for any minor children you have. Unfortunately, the people chosen by the state to serve in these roles may not be the people you would have chosen. Additionally, the probate process is likely to be even longer than usual as the extent of your estate, as well as any outside claims to it, are investigated.
Luckily, there is very little reason for anyone to die without a will. Although wills can be designed to be as comprehensive and intricate as you like, they are at heart very simple documents which can provide an incredible peace of mind for you and your family. Contact our office—or another attorney you trust—to help guide you through the process of creating your own last will and testament. Monday, March 28, 2011 Icon, Businesswoman, Philanthropist—What Happens Now to Elizabeth Taylor’s Fortune?
The recent passing of Elizabeth Taylor has many wondering what will now happen with Ms. Taylor’s sizeable fortune? According to this article in Forbes Ms. Taylor’s fortune includes not only the millions she made in the Hollywood movie industry, but the even greater amount made she made with her fragrance line.
“In her most savvy business move, Taylor licensed her name to Elizabeth Arden and came out with several perfumes, including Passion, White Diamonds, and Black Pearls. Her fragrances have reaped a reported $200 million in sales over the years. Perfumes are one of the highest margin products out there, which is why celebrities love them. Taylor was doing it before anyone.”
Furthermore, a recent article in ABC News reports that Elizabeth Arden has no plans to discontinue the Taylor brand anytime soon. "White Diamonds remains a best seller almost 20 years after its 1991 introduction, a testimony to her transcendent and enduring appeal... Our best tribute to Elizabeth Taylor will be to continue the legacy of the brands she created and loved so much."
The question now is, what will happen to this sizeable (and growing) fortune now that Ms. Taylor has passed away? ABC News has some guesses: “On the question of what could happen to her estate now that she has passed away, many speculate it will be distributed to her four children and 10 grandchildren [with whom she is reported to have been on good terms]... And Taylor most likely bequeathed a substantial amount of money to her charitable work. Taylor was a devoted AIDS activist, helping form the American Foundation for AIDS Research in 1985 and the Elizabeth Taylor AIDS Foundation in 1991.”
Thus far no last will and testament has been released, which suggests that Ms. Taylor may have had a trust, an extensive document which protects your family and assets while remaining private. But given what we do know about Ms. Taylor, it is not unreasonable to believe that her estate will be split between her family and her charitable endeavors, especially the AIDS Foundations to which she gave so much in life. Friday, March 18, 2011 Frequently Asked Questions: Does Your Family Need a Trust?
Estate planning attorneys get asked a lot of questions about how to protect every different kind of family and situation, but the questions that are asked the most tend to be about trusts. For this reason, we’d like to take a moment to review with our readers the basic definition and benefit of trusts—which are, for most families, the most comprehensive, most reliable tool for protecting your assets and passing them on to your beneficiaries.
The primary benefit of trusts is their versatility. Trusts are so useful and versatile, in fact, that they serve as the backbone of just about every different kind of estate plan; from the plan created by an elderly grandparent, to the one executed by the new young couple. This isn’t to say that each trust is the same for every estate plan—far from it! Each person and family will be different; from their property and assets, to the people (or charities) they’d like to name as heirs, all the way down to their values and beliefs (which can be expressed and passed on through a trust.) With all of these differences, each living trust must be customized to suit the individual.
This is the beauty of trusts, they are indeed highly customizable. Perhaps the most well-known and commonly-used trusts are the living trust or a testamentary trust, but trusts provide far more options than those three mentioned above. Other options include special needs trusts, irrevocable trusts, retirement trusts, education trusts, gifting trusts, and many more . . . even pet trusts!
If you are considering creating a will or estate plan, or planning to update the one you already have, the best thing you can do is to know your options. Contact our office for more information about trusts, and which of the many trust options may be the right tool to protect your family. Friday, March 11, 2011 6 Things to Have on Your First Visit with Your Estate Planning Attorney
Your first meeting with an estate planning attorney can be daunting. Nobody really enjoys talking about their own death with a complete stranger, and many people mistakenly believe it will be sad or difficult. But creating your estate plan isn’t about your death—it’s about your life. In fact, the very first things you will discuss with your estate planner are the things that are most important to you, the issues that will be at the heart of your estate plan: Your family, your assets, and your goals.
If you want to get the most out of this first visit it helps to be prepared. Of course, every firm will be a bit different, but here are a few universal tips on how to be prepared and get the most out of your first visit to an estate planning attorney.
Have your financial statements.A large part of what an estate planning attorney does is to help you protect your assets. In order to do this, she needs to know what assets there are and what your general financial situation is. Having actual numbers, rather than vague ideas, is a huge help.
Know how the deed to your home is held.For most people, their home is their largest asset. How title is held, and in what the state of ownership, will have a large part in deciding what your best course of action will be.
Have some preliminary thoughts about who you may to be your executor and health care agent.This may change once you know more about what these roles entail, but having one or two people as a starting point will speed the process considerably.
Bring contact information for financial advisors with whom you work on a regular basis.Having your attorney work directly with your financial advisors, if any, is integral to having an airtight estate plan and financial plan. Not to mention that it makes things much easier on you to not have to act as a go-between.
If you’re married, or planning with a partner, come to the meeting together.Planning as a couple really needs to be done as a couple. “I’ll have to talk it over with my partner” only means you’re likely to have to have the same meeting all over again. If you’ll both be signing documents, you both should be there for the initial meeting.
Bring a list of questions to ask the attorney.Even if you only have one or two, and you think they’re naïve, bring your list of questions. Your questions tell an attorney a lot about what your goals are, and will help you get a good read on what the attorney is like as a person and professional. Wednesday, March 09, 2011 A Way to Help Parents and Grandparents in Financial Need
Estate planning is often about how people can pass wealth on to their children or grandchildren, but what if a child wants to give financial gifts to a parent or grandparent? This article from Bloomberg discusses just that: how GRATs Let Children Pass Millions to Mom or Granny Free of U.S. Gift Taxes.
As the elderly population of the U.S. increases, and as the effects of the economic downturn hit, more and more adult children find that their parents or grandparents are not doing as well financially as they had hoped. Many need help paying for medical expenses, home care expenses, mortgage or rent payments, etc. Adult children would like to be able to help, and a properly executed GRAT can be the perfect vehicle for wealthy children to give financial aid to their parents or grandparents without taking away from their lifetime gift-tax exemptions.
“With a GRAT, a child sets up a trust with a term of at least two years and funds the trust with stock or other investments. The trust pays the principal plus interest back to the child over its term as if it were an annuity, based on an interest rate set by the Internal Revenue Service. Any appreciation of the underlying investments above this ‘hurdle’ rate passes on to the GRAT’s beneficiary, in this case the parents, without being considered a gift for tax purposes.”
However, this opportunity may not be around forever. The Obama administration has recommended imposing a 10 year minimum term on GRATs, an act which would make the GRAT strategy significantly less useful for many families. Adult children who would like to use a GRAT to pass wealth up to their parents or grandparents should consult with a financial or estate planning advisor sooner rather than later.
If you do miss out on the GRAT window, however, there are other options for helping elderly relatives, including paying medical expenses for the loved one (so long as payments are made to the service provider directly, rather than to the relative.) Contact our office for other options and more information about helping elderly parents and grandparents. Monday, March 07, 2011 Who Owns Credit Card Debt After the Death of a Parent?
Administering the estate of a deceased loved one can be complicated and emotional under the best of circumstances, but executors who take on this overwhelming task may find themselves facing more than just the demands of relatives and heirs—they may also find themselves facing the illegitimate demands of creditors. This article on the New York Times’ New Old Age Blogwarns readers to “Be wary of collection agencies that try to convince you that you are responsible for payment on a card owned solely by a deceased parent.”
After the death of a parent, children and heirs often receive calls from debt collectors looking for someone—anyone!—to pay off the debts of the deceased, even if the heirs have no obligation to do so. In most situations relatives are not required to pay the debts of the deceased from their own assets. “Spouses, children or other loved ones don’t ‘inherit’ credit card debt unless they co-signed the card... When someone dies, credit card companies have to wait near the back of the line to receive payment. If what’s left over after settling the estate isn’t enough to pay the bill, credit card debt is written off.”
Probate or administration of an estate is a process which follows established steps; heirs and credit card companies alike must wait their turn in line. “Administrative fees (like executors’ fees, filing fees, appraisals of property and tax-preparer fees), mortgages, reverse mortgages, taxes and even funeral expenses have to be paid off before heirs can inherit anything from the estate.” Unfortunately, most bereaved relatives aren’t aware of the laws on this subject, and debt collectors take advantage of that ignorance.
The best way to avoid this painful interaction is to have a proper estate plan. “Most of the headache can be avoided with a will... If you make it well known who owns what, both in terms of assets as well as liabilities, you can prevent a lot of this from taking place outside of your control.” The article also recommends taking preemptive action. “After the death of a parent, send a letter or call the banks and credit card companies to cancel cards and let them know that the cardholder has died.” Monday, February 28, 2011 Where Should You Live to Escape the Estate Tax?
Do you live in a state that has a friendly attitude toward the estate tax or inheritance tax? You may think you do, but according to this article in Forbessome states made changes to their estate or inheritance tax policies in 2010 as a response to the lengthy uncertainty over the federal estate tax: “Congress took so long to agree on what to do about the federal estate tax, allowing it to lapse in 2010, and many states take their lead from the federal system.”
The federal estate tax is set (for now) but you may still expect some states to continue making changes to their own estate tax. The fact is that state governments are caught between a rock and a hard place; “The changing state landscape... reflects a lot of ambivalence by state officials themselves. They want the estate tax revenue, but worry about chasing wealthy seniors across state borders.”
If you’re looking for an estate-tax-friendly state to which to retire you can check out the link to the map in the Forbes article; but before you move be sure to do your research. Just because a state has no estate tax (or a high exemption amount) one year doesn’t mean it won’t change the next. The best strategy is to be familiar with the state’s history. How long has their estate tax been in place? Has there been any legislation proposed recently regarding the tax? How likely is it that their tax policies will remain the same as they are when you move?
Illinois recently made changes to the state laws regarding estate tax, and other states that are most likely to make changes in the future include Hawaii, Ohio, Connecticut and Vermont. “But don’t count on these efforts... even if you get relief one year, the levy can go up again the next.”
As always, the best strategy is to plan ahead, review your plan often, and have a knowledgeable estate planning attorney on your side. Friday, February 25, 2011 How a Special Needs Trust Can Help Your Child
You know how important it is to protect your family with an estate plan, but if you have a child with special needs then taking steps to protect them if something should happen to you is essential. Unfortunately, for families which include special needs children, knowing exactly the best way to protect your child(ren) isn’t always so clear. As Joe Perez, the widowed father of 14 year old Danny, and the subject of this article on the ABC News websitefound out, it’s not as simple as leaving your child with a good guardian and decent inheritance—special needs children need a little more planning than that.
You know what you want for your child, you want him to live as contentedly as possible, with loving guardians and engaged in activities which will bring pleasure and peace. But how can this dream be achieved on the limited assets that Medicaid recipients are allowed to have without losing their government benefits? How can responsible parents safely leave an inheritance to their special needs child? For many parents, part of the answer to that question is having a special needs trust.
Unfortunately, not all parents are aware of the benefits of a special needs trust, or how easy it can be to create one—with the right help. A special needs trust is the vessel that will hold your child’s inheritance (from you or from another source) without disrupting that child’s government benefits. It gives your child the funds they need beyond the basic living expenses provided by SSI or Medicaid.
If your family could benefit from a special needs trust, please contact our office for more information. A special needs trust is not the kind of document that can be found in a software package or created from a standard trust template. The needs of your child are unique, and should be addressed as such. Friday, February 18, 2011 A Will Reveals More About You Than Just Assets and Distribution
We tell our readers quite often that a will is one of the most important documents in your estate plan—an essential document, to be quite honest—but sometimes we like to remind our readers that wills are interesting family and historical documents as well.
Genealogists will often use an ancestor’s last will and testament to determine important details about family members: names and birthdates of siblings or children, extent of property, last known address, etc. Additionally, these are the documents in which we make our final wishes known. This is often where our true selves come out; who we liked best and what we valued most.
A last will and testament can be very revealing indeed. In honor of President’s Day we offer these interesting tidbits relating to the wills of the leaders of our nation:
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George Washington was concerned with the future of our young nation to the very end, and gave some of his estate toward establishing the first American Institutions of higher education, an attempt to prevent young Americans from being “sent to foreign Countries for the purpose of Education, often before their minds were formed, or they had imbibed any adequate ideas of the happiness of their own; contracting, too frequently, not only habits of dissipation and extravagance, but principles unfriendly to Republican Government & to the true and genuine liberties of mankind.”
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Interestingly, President Abraham Lincoln left no will—and he was a prominent lawyer who should have known better!
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President Harry S. Truman included careful tax planning in his last will and testament.
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President Warren G. Harding must have had some kind of premonition when he conveniently decided to write his will 6 weeks before his sudden death.
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The will of President Calvin Coolidge was just 23 words long: "Not unmindful of my son John, I give all my estate, both real and personal, to my wife, Grace Coolidge, in fee simple."
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President John F. Kennedy was a bit poetical in his will, and included this haunting phrase, “being of sound and disposing mind and memory, and mindful of the uncertainty of life…”
Wednesday, February 16, 2011 Estate Tax Laws Aren’t the Only Things That Change
We’ve written before about the importance of reviewing and updating your estate plan, but it’s a topic worth mentioning again—especially in light of the many recent changes to estate tax law. The plain truth is that no matter how perfect your estate plan is when you create it, change is inevitable, and when your life (or the tax law) changes, it’s important that your estate plan change with it.
Reviewing your estate plan every 2-5 years is essential to keeping it up to date and working the way you intended it to work. Luckily, reviewing your estate plan can be quick and easy if you know what you’re looking for. Here are 5 key components you’ll want to review:
1. Fiduciaries-How have the people in your life moved or changed?
2. Assets-Are your finances different than they were a few years ago?
3. Distribution and Beneficiaries-Are there any new members of your family?
4. Health Care-What changes have you experienced in your health recently?
5. Legal Updates-Have the laws changed?
If we’re lucky, our lives are constantly changing—our families evolve, our finances improve or decline, we meet and form strong relationships with knowledgeable friends and professionals. It only makes sense that your estate plan should change too. What seemed best for your family 4 years ago might not be the ideal situation now. By reviewing and updating these 5 components on a regular basis, and touching base with your attorney, you will insure that your estate plan will continue to protect yourself and your family the way you intended it to when you first created it. Monday, February 14, 2011 Retirement Advice for EVERY Age
“Retirement”—It’s a word that goes hand-in-hand with “Baby Boomer” these days. After all, as has been pointed out over and over again, retirement is the issue of the hour as the first round of Baby Boomers hits that magic age. But what about the younger set? Is there anything that twenty- or thirty-somethings should be considering regarding retirement at this point in their lives?
Actually, according to this article by Steve Vernon at MoneyWatch.com, it is never too early to start thinking about retirement; and there is plenty for adults in their twenties or thirties to consider right now that can help them get a jump on retirement a couple decades down the line.
According to the article, “The challenge facing most people in their 20s and 30s is juggling competing priorities — usually there isn’t enough money in the budget to do it all... ‘Should I save money for retirement, a down payment on a house, or for my kid’s college education?’... How do you prioritize?” While all of these things are important, Vernon suggests that your first priority in your twenties should be yourself. He suggests that the best investments you can make at this time are in your career, your home, your health, and your spending habits.
What our firm would like to point out is that a large part of investing in those things mentioned above is protecting those things. An estate planner can help you decide how to best protect your home from taxes, lawsuits, or divorce; an estate planner can also help you protect your health with a living will or healthcare directive. Additionally, many young adults (frustrated with the current state of the job market) have decided to take employment into their own hands by starting their own businesses—and many have been very successful! An estate planner can help you with the overwhelming but necessary task of protecting and planning for the future of your small business.
The news may be flush with stories about (and advice for) Baby Boomers entering or nearing retirement, but we know that everybody can use help and advice when it comes to planning for the future. Our office can help you prepare for your best future—regardless of your age. Call us today. Wednesday, February 09, 2011 Estate Tax Lessons from 2010 and Things to Watch Out for in 2011
We all know from the many news stories of last year that estate tax laws are not set in stone, they can fluctuate and change both at the state and the federal level; and as this article in Forbes points out, keeping up with those fluctuations can be of the utmost importance to you and your loved ones.
The many celebrity news stories we saw last year provide all the examples we need of what can happen when you plan well (as was the case with Brittany Murphy’s estate plan) or when you neglect your estate plan—or even worse, when you fail to plan at all. Here are some celebrity examples of common estate planning pitfalls and mistakes:
Failing to update your estate plan.We tell all of our clients how important it is to review and update your estate plan every 2 to 5 years; Gary Coleman provides a prime example of what can happen if you neglect to follow through on those updates and reviews. “[Coleman] created a handwritten codicil to his will in 2007 leaving much of his estate to his wife, Shannon Price. After they divorced, however, Coleman never updated his will or created a new one. That led to a court fight after he died about whether Coleman was still married to Price. Even though they never officially tied the knot for a second time, Price claimed they had a ‘common-law marriage,’ which would mean that the handwritten will would be valid.”
Failing to fund your estate plan.A revocable living trust is a wonderful tool, but it’s just an empty vessel until you fund it by re-titling your assets in the name of your trust. Michael Jackson created what is most likely a wonderful living trust, but his failure to fund it properly means that 2010 saw “The estate of Michael Jackson... dragged on with no end in sight.”
Waiting too long to create your plan.If you are a senior citizen, waiting too long to create your plan leaves you open to the exploitation or undue influence of acquaintances or family members who might try to take advantage of you. Even if nothing of the sort has taken place, just the suspicion of undue influence can land your estate in a lengthy court battle. “Does the Anna Nicole Smith case come to mind? The United States Supreme Court ruled in 2010 that it will hear her case for the second time. Did she wrongly take advantage of her 90-year old husband, or did his son use fraud and other improper means to stop the billionaire from leaving money to Anna Nicole?”
We can all benefit from the very public airings of these celebrity estates. Our office can help you avoid the mistakes listed here, plus many more. The new laws of 2011 provide the perfect opportunity to create a plan (or update your existing plan), and ensure that your family will be well protected now, and in the future. Wednesday, February 02, 2011 Minnesota Health Care Dispute Raises Fears for Everyone
As estate planning attorneys we help our clients plan ahead. We help them create the documents and take the legal action they need to protect themselves and those they love. We help them talk through painful possibilities, and support them as they make difficult decisions. We work to ensure that our clients and their families will be prepared for any eventuality—but deep down we hope that they will never really need to make use of some of these documents and plans.
One of the situations that estate planners (or any compassionate advisor) dreads is one that is happening right now in Minnesota. According to the Minneapolis Star Tribune the family and friends of 85 year old Al Barnes are struggling to make a difficult decision about his end-of-life care—a decision made no easier by the fact that not all family members (or Mr. Barnes doctors and health care providers) can agree on the next course of action.
“Numerous doctors have assessed Barnes in the past year, and agree on his prognosis. According to court records, Barnes suffers from a level of dementia so profound that doctors believe it is pointless to treat his kidney failure and respiratory failure.” But this isn’t the whole story. Al Barnes’ wife Lana Barnes believes that “her husband suffers from chronic Lyme disease, and that antibiotic treatment of the tick-borne bacterial infection would reverse his dementia -- and necessitate treatment for his other conditions as well.”
Mr. Barnes does have a Health Care Directive which lists his wife Lana as his agent, but it apparently goes no further than that, giving no specific instructions or information about what his wishes for end-of-life care would be. And herein lies the dispute. “A Methodist Hospital doctor wants to take decisionmaking rights from [Mrs. Barnes] because he believes she is demanding hopeless and painful treatments. The 56-year-old wife is accusing the doctor and others of misdiagnosis that has left Barnes substantially -- but not irreversibly -- incapacitated.”
The Minneapolis Probate Courts temporarily took away Mrs. Barnes’ authority over her husband’s care earlier this month after the disagreements between wife and doctors came to a head. “Lana and doctors from Methodist Hospital [are] due to resume arguments over his medical care Wednesday in Hennepin County Probate Court... After Wednesday's hearing, a judge will decide whether Lana Barnes remains in charge.”
This is exactly the kind of situation we hope to help our clients avoid by encouraging a little bit of forethought, conversations between family members and loved ones, and by preparing a thorough, decisive, and well-thought-out health care directive. Monday, January 31, 2011 Planning to Make Your Life Extraordinary
One of the best parts about doing the work that our firm does is that we get to help people evaluate their priorities and define for themselves what is truly important. Sometimes it’s too easy to get caught up in the day-to-day stresses and activities and to lose sight of what your true focus is. In the concerns of the ordinary it’s easy to forget to pay attention to the extraordinary.
It may not sound appealing, but planning for your death makes you take a look at life from a very different point of view. Take the typical To-Do list, for example. Most people have a To-Do list filled with tasks such as “pay the bills” or “wash the car”, but don’t these lists evoke a feeling of heavy obligation rather than pleasant anticipation? If you were to take your list of Things to Do and add onto the end of it “Before I Die”, how would that change your list?
This is a large part of what estate planning is all about. It’s about separating the wheat from the chaff, about evaluating your life, realizing what is truly important, and planning to accomplish and protect those things of value.
Of course, nobody can live every minute in this state of heightened awareness. The bills do need to be paid and the car does need to be washed. But as you make that list of ordinary To-Do’s each morning try to include one thing that brings you closer to your extraordinary goal. Keeping the big picture in mind can give you perspective, and keep you focused on what’s really important. Make your own “To Do” list one that will bring you a sense of pleasant anticipation at the dawn of each day, and of happy contentment when you turn the final page. Friday, January 28, 2011 It’s Never Too Early to Make Your First Will
We’d like to share with our readers a recent article in Forbes entitled How To Write Your First Estate Plan. This article supports something we’ve been saying in our blog all along: That everyone needs a will—whether you’re a young couple just starting out, an established family with valuable assets to protect, or an entrepreneurial business owner with succession on your mind. The article reminds us that a will “is the cornerstone of an [estate] plan,” and at whatever stage of life you may be is not too early to make your first will.
“There's a lot more to an estate plan than just a will, even for folks who don't need a more complicated estate-tax oriented version. You might have pieces of it already--a living will signed when you had elective surgery or a beneficiary form filled out for a 401(k) when you got your first job. You need to make sure the pieces fit together.”
Many couples or individuals are first motivated to create a will when they have young children, and the primary purpose of their will is to ensure that their minor children will be cared for and provided for should anything happen to the parents. This is certainly one of the best reasons to create your will or estate plan, but it is not the only reason, not by a long shot. If you drafted your will when your children were young and haven’t looked at it since—or if you never created a will because you don’t have kids and therefore didn’t think you needed one—it’s time to revisit the subject.
An estate plan not only ensures that minor children will be provided for, but also that:
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Older children have the means to continue their education if something happens to you
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Your spouse or children are the recipients of your life insurance or retirement proceeds, and not the tax man or (even worse) an ex-spouse or ex-boyfriend or girlfriend.
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You have someone trustworthy distributing your assets as you wish after you pass away.
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Your business will transfer smoothly if you aren’t able to run it anymore.
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And much more.
“Whatever motivates you, fine. The point is--whether you're in estate tax territory or not, if you don't have an estate plan, you need one. (And if you have a really old one, you probably need a whole new one.)” Any opportunity is the perfect opportunity to start planning to protect your loved ones. Call our office (or your own trusted attorney) to learn what steps you can take toward protecting your loved ones right now. Wednesday, January 26, 2011 Knowledge and Communication is Key to Avoiding Family Fights
Do your adult children know which of them will be your power of attorney if something happens to you? Most people don’t want to think about Alzheimer’s, dementia, or getting old; and those who have thought about it often choose to keep their wishes secret, their documents held under lock and key until the time comes when they are needed. But according to a recent article in Reuters, one of the most critical steps a parent can take toward preventing sibling fights is to state early and openly which adult child is their choice for power of attorney.
“In order to avoid conflict, parents [should] sit down with their children and spell out who has been appointed and why... It’s something that really has to be thought out in advance, hopefully before a crisis has arisen and while the parent is still able to express their goals.”
Open communication can go a long way toward smoothing relationships between family members, but if that by itself isn’t enough to keep the fights to a minimum, the advice of a trusted advisor can often dispel suspicions that may be brewing just beneath the surface. But don’t wait until arguments have already exploded, the best course of action is to consult with your advisor before intervention is necessary. Asking your advisor to sit down with yourself and your family members gives each child a chance to ask questions and voice their concerns; it also gives them a chance to hear from your own lips what you’re planning and why you’re planning it. Monday, January 24, 2011 5 Essential Tips for Executors or Trustees
Serving as executor or trustee of a will or a trust is an honor... but it’s also a job—a BIG job—and not one to be taken lightly. The role of executor or trustee can be one of great financial power, but it carries with it a heavy fiduciary obligation. Fiduciary obligation means that an executor or trustee must act in the best interests of the beneficiaries; it means that although the executor or trustee may be doing all the work, he or she may see very little return on that work, which is all for the benefit of the named beneficiaries.
If you have been nominated (or are currently serving) as an executor or trustee there are a few things you’ll want to remember as you go about your duties:
1. The will or trust is your guide, the mission statement by which you should operate; read and understand the document completely, and have an attorney help you, if necessary.
2. You need to be pro-active—to an extent. If you are managing a large amount of money or assets over a period of time it is probably not in the best interests of the beneficiary to let those funds sit in a savings account. Create (with an advisor, if necessary) a financial plan for the trust assets.
3. Although you may be handling the estate assets, you should not have any personal financial dealings with the trust. You should under no circumstances borrow from or lend money to the trust. Keep your finances separate!
4. Communication and transparency is key! Keep detailed records of all of your actions and transactions regarding the will or trust, and send regular reports to the beneficiaries. Regular communication prevents unhappy surprises or angry lawsuits in the future.
5. You don’t have to do it alone. If you were picked as a trustee because of your financial knowledge and experience—great! But if you were picked because you are the oldest, or the most responsible, or the favorite you may feel overwhelmed by the job ahead of you. Don’t try to muddle through alone, get the help and support of an experienced attorney or advisor. Friday, January 21, 2011 Non-Traditional Couples Face Estate Planning Challenges
The new estate tax laws (with their friendly bent toward the taxpayer) have been cause for celebration for many wealthy and affluent Americans, but there is at least one group which has not had cause to celebrate—gay and unmarried couples. Under current federal law, a married person could transfer an unlimited amount of their estate to their spouse upon death, free of taxes; but this generous marital deduction does not apply to same-sex couples—even if they live in one of the five U.S. states which recognize gay marriage.
A recent article in Reuters explains that “there is no [recognition of same-sex marriage] on a federal level, which means same-sex couples do not get the marital deductions on U.S. taxes. They also cannot make large gifts or pass on assets to each other without paying taxes.”
The new laws may help some same-sex or unmarried couples; for the next two years unmarried individuals may transfer up to $5 million upon their death tax-free. But this isn’t permanent (the law will likely change again at the end of 2012) and anyone with an estate over $5 million will end up leaving their heirs with a hefty estate tax bill.
Luckily, some of these estate tax challenges can be overcome with some good estate planning and by thinking ahead. “If one partner has more assets, he can transfer some assets to his partner each year... Each year, individuals can make gifts up to $13,000 to any number of people. That can even up the two partners' estates and hopefully avoid a big estate tax bill when the richer partner dies.” If it’s clear that estate taxes simply cannot be avoided, the wealthier partner may want to consider setting up an Irrevocable Life Insurance Trust to cover the cost of estate taxes.
Beyond the issue of estate taxes, the article brings up the good point that “same-sex couples are more likely to face challenges to their wills, usually from family members who do not approve of their lifestyle.” This provides more incentive than ever to have a well-thought-out estate plan, which can be drafted with just such a possibility in mind.
Regardless of state of residence, same-sex or unmarried couples simply do not have the same benefits as traditionally married couples, which means that same-sex or unmarried couples have to plan carefully to achieve their estate planning goals. It may require more forethought and effort, but the good news is that with the right kind of planning it is possible for non-traditional couples to protect and provide for the people they love. Monday, January 17, 2011 Excuses, Excuses... Why You Don’t Have a Healthcare Directive
What is keeping you from signing a healthcare directive?
A recent article in Reuters mentions that only 2 out of 5 U.S. citizens have some kind of healthcare directive, and that our own U.S. laws might be the cause. A study done by Rebecca Sudore of the University of California, San Francisco found that “Most states had practical restrictions that could make it difficult for many people to complete an advanced directive... In addition, many of the documents used in end-of-life planning were written in complicated legal language that the average person would have trouble understanding.”
Some portions of an advance directive might be written in complicated legal language out of necessity, but we don’t think that’s any excuse not to have one, especially not if you have a knowledgeable and trusted attorney who is willing to go through the legal language with you to ensure you are comfortable with it. As for the other obstacles, the fact that “many states do not allow oral advance directives, and usually require that written documents have witnesses' signatures, be notarized, or both...” and that currently “40 states do not automatically allow domestic partners and same-sex partners to become the default healthcare proxy;” well, these seem to us to be all the more reason to make sure you DO contact your attorney and get your healthcare directive in place.
A healthcare directive, along with a will and a durable power of attorney, are the three foundational documents of any estate plan. Whether you choose to move on to more advanced planning techniques or not, every person should have these three documents at the very least. These simple documents can end up saving you and your family a world of heartache and expense.
Of course, according to Reuters there is one other possibility about why you might be putting off your healthcare directive, "The biggest issue is that people do not want to do advance directives... There is a fear of planning for how we die." Don’t let superstition keep you from protecting yourself or your loved ones. Wednesday, January 12, 2011 No More Excuses, It’s Time To Plan Your Estate
The dust surrounding all the estate tax law “remodeling” is finally settling, and it’s time now for families to give their old (or future) estate plans some serious scrutiny. For all of you who were waiting until Congress made some firm decisions on the estate tax laws—there are no more excuses. Forbes writers Janet Novack and Ashlea Ebeling explain in their recent article why—now that the estate tax is no longer in flux—it is so important to move quickly on your estate plan.
Many first time planners will be ready to take advantage of the new laws, now that the “hefty $5 million exemption, combined with a new portability provision, should allow many affluent couples to simplify their planning.” Couples with estate plans already in place will be able to take advantage of the new laws as well, but the motivation to update their existing plans may have more to do with the need to undo outdated formulas in wills and trusts that, with the new laws in place, may now do more harm than good.
“Many couples have old wills designed mainly to preserve the estate tax exemption of the first spouse to die, something the law now does. Under these old "formula" wills, when the first spouse dies assets equal to his or her federal estate exemption go into a "bypass trust" for their kids. The surviving spouse has access to the trust's earnings and, if need be, principal, but what's in the trust "bypasses" the survivor's estate. Problem is, with the exemption jumping to $5 million (it was only $2 million in 2008) the survivor could be left with nothing outside the trust.”
The new estate tax laws are much friendlier to middle-income families, but don’t let that fool you into thinking you don’t need to plan at all. “Whatever your age, marital status or net worth, you need a will (saying who gets your stuff); a living will (stating your wishes about end-of-life care); a health care proxy (naming someone to make medical decisions for you if you can't); and a durable power of attorney (designating someone to act on your behalf in financial and legal matters if you can't).” Not to mention you still may have state taxes to contend with in your estate plan.
Now is the time to call your attorney and talk about estate planning in the New Year. There is no more reason to procrastinate, and it’s your family’s legacy that’s on the line. Monday, January 10, 2011 A Low-Pressure (And Fun) Way to Discuss Legacy and Estate Planning
The hardest part of legacy planning or estate planning isn’t necessarily choosing the right fiduciaries, or deciding how to distribute your wealth fairly among your loved ones... the hardest part of legacy planning or estate planning is often simply talking about it with family. In fact, having “The Discussion” can be such a daunting task that many families simply don’t do it, choosing instead to take their chances when the family patriarch or matriarch passes away and the succession plan is revealed.
But avoiding the subject isn’t going to do you or your family any favors. More family infighting takes place after a death than at any other time. After all, this is when loved ones are grieving and emotions are high, when the central family figure or peacemaker may no longer be with you, and seemingly unequal inheritance distributions can no longer be explained.
What if there was a way to have “The Discussion” before it was forced upon you? What if there was a way to make that legacy and estate planning discussion low-pressure and even fun? That is exactly what husband and wife psychologist team Carolyn Friend and James Weiner have done with their book and accompanying card game, The Legacy Conversation: the missing gem in wealth planning.
A review of the Conversation Starters card game in Forbesgives a more detailed description of the game, including 7 or so sample questions to get the juices flowing; obvious questions such as “What cherished possession might your family fight over?” to the not-so-obvious questions such as “Have you ever found wisdom in a song’s lyrics? Name that tune.” The point of the Conversation Starters is not merely to discuss the family legacy, but to get to know your family members better, enjoy each other, and perhaps even grow closer in the process.
If your family has been putting off the necessary discussion of succession and legacy planning, this might be just the game you need. Don’t be afraid to tackle the difficult subjects, you might find you enjoy them more than you expect. And when you’re ready, call our office. We can help your family with the practical details and legal legwork. Monday, December 20, 2010 At Long Last: What to Expect from Estate Taxes in 2011
It has been a long and uncertain year for anybody interested in the future of the estate tax, filled with a few ups, a few downs, and a lot of speculation. But after the recent passage of the new bipartisan tax bill all of the confusion and speculation is finally at an end, and it’s very close to what we anticipated early last week. The bill is good news for most taxpayers; the Wall Street Journal says there are “many winners, a few losers,” and according to the New York Times “Almost no one will have to worry about paying the estate tax under the tax legislation just approved by Congress.”
Here is a brief overview of what you can expect in 2011:
New Estate Tax Exemptions and Rates:The new bill sets the estate tax exemption at $5 million per individual ($10 million per married couple), with amounts over the exemption taxed at a 35% rate. This is opposed to the $3.5 million exemption and 45% rate some lawmakers were hoping for.
Tax Election Option for 2010 Estates:As mentioned in a previous post, this is one of the biggest parts of the new bill. There may have been no estate tax in 2010, but there was also no “step up in basis,” meaning that heirs selling inherited assets were taxed based on the original acquisition cost of the assets, not on their value as of the date of the taxpayer’s death, as is usually the case. This led to a higher tax paid on the assets if and when they were sold, in spite of the lack of estate tax. Tax election gives 2010 estates the choice of whether to use 2010 or 2011 tax rules—a happy option for 2010 heirs.
Estate, Gift, and Generation-Skipping Taxes: In recent years these three levies have had varying exemption levels, making gift giving and succession planning and challenging exercise at best. The unification of all three makes tax planning and giving gifts to grandchildren much easier than it used to be.
Individual Income and Payroll Taxes: The new bill wasn’t just about estate taxes; it also extends the Bush-era income tax rates; this is good news as it prevents a rise for nearly all taxpayers.
How Long Will It Last? We’re all glad that the waiting is over and we finally know what to expect, but the new law is only effective through 2012, at which point the provisions will “sunset.” This new tax package sets our minds at ease now, but the estate tax issue is far from over. It looks as if we may have to revisit the issue in 2012-2013.
With the threat of high estate taxes out of the way does any reason remain to create (or update) your estate plan? Absolutely!
Estate planning is about more than just planning for taxes, it’s about taking control of your assets and choosing how your estate will be distributed. Divorce, second marriages, planning for college, charitable gifts—these are just a few of the reasons why estate planning is essential regardless of the state of the estate tax.
At the very least, the recent fluctuation of the law means that you’ll want to call our office and make an appointment to have your existing plan reviewed and updated to ensure you don’t have any outdated clauses that could negatively affect your heirs. Monday, December 13, 2010 Estate Tax Update: The End Is Near
It looks as if the long and weary road to estate tax clarity may soon be at an end. Especially if Washington lawmakers vote to approve the tax package negotiated between President Obama and Republican leaders without making too many changes.
Laura Saunders of the Wall Street Journal claims in her recent article that everything looks to be coming up roses, “it seems estate planners got everything they wanted and nothing they didn't.” Good news for estate planners translates into good news for our clients. We recommend you read the entire article for the full story, but here are some of the highlights of what estate taxes may have in store for us in 2011:
Tax Election for 2010 Estates:This is one of the biggest parts of the deal. “The bill gives 2010 estates the choice of whether to use 2010 or 2011 tax rules.” This is good news because “the tax on heirs who sell assets of those who died in 2010 is based on the original acquisition cost of the assets, not on their value as of the date of the taxpayer's death, as is usually the case,” meaning that “taxes were higher if they died in 2010 than 2009 or 2011.”
Unification of the Estate, Gift, and Generation-Skipping Taxes: “In recent years the exemptions for the three levies have been out of synch, complicating succession planning for family businesses and other matters.” With the new deal, however, there would be a simple $5 million per-individual exemption for all three.
And of course we can’t have a conversation about estate taxes without discussing Effective Date and Duration: The effective date of the new provisions is set to be January 1, 2011. As for duration, “The Senate's bill makes this regime effective only for 2011 and 2012, at that point the provisions ‘sunset.’” What this means is that the new tax package may be only a temporary reprieve, and we could be going through all of this again in 2012-2013. Monday, December 06, 2010 Make This Year Memorable: A 2010 Gift-Giving Guide
Fruit baskets, kitchen gadgets, and Kindles aren’t the only gifts you can give loved ones this year (although you’ll see below that video game systems still make the cut.) Instead, why not give something unique that will leave a lasting impression and help protect your loved one? Here are a few non-traditional ideas for friends and family of every age.
Young Adults: What do you get the kid who already has all the video games he could want? How about a meeting with a financial planner? It may not sound exciting, but young adults are leaving home with less financial experience than ever, making it difficult for them to know how to budget for their own household, plan to eventually buy a house, or even stick to a strategy to pay of credit debt or student loans.
Parents of Young Children:A nomination of guardians drafted by a qualified estate planning attorney is an excellent gift for young parents. So also are advanced healthcare directives and a last will and testament. All of these will help protect the young family as well as provide peace of mind.
Baby-Boomer Friends and Family:The big concern among Baby-Boomers right now is long-term care. After paying for their elderly parents to grow old Boomers are now turning a concerned eye to their own futures.
Elderly Parents and Grandparents:Forget your teenage nephew; your elderly grandparent is the person who could benefit from having a video game. According to this story in the New York Times game systems such as the Xbox Kinect and Nintendo Wii Fit help get the elderly up and moving and can significantly improve their balance.
This year, forget about the impersonal gift cards or scented candles; instead give a gift that will leave a legacy. Wednesday, December 01, 2010 A Good Year for Giving
The season of giving is upon us... and thanks to 2010’s unusual tax laws we may see some very large gifts before the year is out! If you are considering being particularly generous this year, this article from Reuters explains why the federal government is making 2010 an exceptionally good year for giving.
Most people know that for this year only there is no estate tax. But the year is almost over, and next year the estate tax is slated to go up to an astounding 55%. The more you can afford to give away now, the less that will eventually be subject to the estate tax. However, “the incentive to give stems not just from a looming increase in the estate tax, but also from the lowest tax rate on gifts in a generation -- a maximum of 35 percent. That top rate was 45 percent in 2009 and jumps to 55 percent next year unless Congress acts.”
Those last three words, “unless Congress acts,” carry a lot of weight. Congress could choose instate lower and more reasonable tax rates in 2011; but right now we just don’t know, and the clock is ticking to the end of this “golden year.” There is nothing wrong with waiting to see what happens, but you may want to at least have the conversation with your estate or financial planner, so you know your options and can act swiftly when the time comes.
Very few people really want to give away their hard-earned money; but as the saying goes, you can’t take it with you, and most people would rather leave their legacy to their family rather than the government. Monday, November 29, 2010 Estate Planning Through the Ages
Can you remember what you were doing in your early 20s? Can you imagine what kind of life you’ll be living in your 70s or 80s? We experience incredible changes as the decades roll by—not just to ourselves, but in the world at large. With our lives changing so much, our estate planning documents and strategies should hardly remain static. Here is a guide to how your estate plan may or may not evolve through the decades.
In Your 20s:You’re young, just finishing school and starting in your career, unlikely to be married yet... the last thing you’re thinking about is estate planning! At this time of life, who gets your “stuff” may not be as important as who will make your decisions. Choosing your financial and healthcare agents and creating your power of attorney and healthcare directive are the important things to do at this time.
In Your 30s:Marriage, children, home ownership—most of these things happen in your 30s, and your estate plan should reflect that. Now is the time to choose guardians for your young children, decide with your spouse how your joint property will be distributed, and get serious about life insurance.
In Your 40s:This is when your strategy may switch from simple direction of inheritance to more serious asset protection. You’ve worked hard and saved, and you’ll want to think about the best way to maximize your assets with trusts and tax planning.
In Your 50s:As your children start to become independent you may have more freedom with your income. Some people choose to create charitable trusts, some prefer to invest for retirement, and still others decide it’s time to take a risk and start over with a second career. Your estate planner can advise and help with all of these.
In Your 60s:Ah retirement! Making the big change from work to retirement means making changes to your estate plan as well. If you’ve been keeping up with your planning through the decades all that is required now will be some basic maintenance; changes to account for marriages of your children, the birth of grandchildren, and your own relocation to someplace warm and sunny. But beyond the basic maintenance, you may want to start doing some simple Medicaid and long-term care planning—just in case.
In your 70s and Beyond: Health is the key word now. Our life-spans are getting longer, but so are our illnesses, you need to be ready. Tighten up your estate plan, invest in long-term care insurance, and although it may sound morbid, talk to your doctors and family about your end-of-life decisions.
The life alterations that come over a span of decades are difficult enough; you don’t want to have to find a new lawyer every time your circumstances change. Our firm makes it our business to keep up with you at every stage. Monday, November 22, 2010 How to Avoid Being “Strangers Rather Than Spouses”
Over the past few years certain states have taken steps to legalize same-sex unions, with many same-sex couples joyously taking advantage of the new laws... but in spite of state approval, these newly married couples do not have the same rights as traditional married couples under federal law. This recent article from Elder Law Answers describes how one gay widow is suing the federal government for reimbursement of the estate tax bill she paid after her wife’s death.
“Edith Windsor and Thea Spyer became engaged in 1967 and were married in Canada in 2007, although they lived in New York City. Ordinarily, spouses can leave any amount of property to their spouses free of federal estate tax. But when Ms. Spyer died in 2009, Ms. Windsor, 81, had to pay Ms Spyer's estate tax bill because of the The Federal Defense of Marriage Act of 1996, which denies federal recognition of gay marriages. ‘While New York State considered us married, the federal government did not, so the government taxed Thea's estate as though we were strangers rather than spouses.’"
This story illustrates again how important it is for any non-traditionally married couple to take their estate planning seriously. A properly drafted will, trust, power of attorney and health care directive can help ensure that you and your partner are treated as spouses rather than strangers.
Contact an attorney in your state to find out how estate planning documents can help you achieve your goals. Friday, November 19, 2010 Estate Planning for Adoptive Families
We’ve mentioned in previous posts how important it is to update your estate plan when you experience big life changes; this includes moving, getting married, having a child... and it especially includes adopting a child.
A recent article in Forbes reminds us that “An adopted child only has rights to your estate once the adoption has been finalized. The length of time it takes to finalize an adoption depends on where the adoption was initiated as well as a host of other factors. This process can take anywhere from six months to several years to complete. In the event that you pass away before this process is complete, it is likely the child would not be entitled to any of your assets.”
Creating or updating an estate plan is one way to ensure that the child of an adoption-in-progress receives the rights and benefits he or she needs. An estate plan can not only provide financially for your adopted child through your will or trust, but can also nominate guardians for the child, make provisions for the child’s medical treatment (if necessary), and specify your wishes for the child’s future education or living arrangements.
The article above points out that “Particularly in the case of an open adoption, it is important to establish a good relationship with the individuals outside your immediate family, such as the child’s birth parents, who will have a direct interest in your child’s life.” Making provisions in your estate plan for birth parents or grandparents can smooth the way for your child and for the guardians you’ve chosen if anything should happen to you.
Anyonewith children should have detailed and updated estate plan; but for families with adopted children having a plan in place is of the utmost importance. Wednesday, November 17, 2010 Make It Easy for Your Heirs to Say “No”
People have been known to do crazy things when taxes are as unpredictable as they are currently. No, we don’t mean “offing” their relatives (although there have been plenty of those kinds of jokes going around this year), we’re talking about saying “No thanks” to an inheritance (also called disclaiming.) This article in Investors.com explains that “By disclaiming, one heir can abstain from taking an inheritance, leaving the assets for other beneficiaries. Planning in advance for such a move can save huge amounts of estate tax. That means more money for heirs.”
We realize that with no estate tax in 2010, disclaiming an inheritance is not a likely scenario this year; but next year the tax is expected to come back, although at what rate or with what exemption is still anybody’s guess. That means there are plenty of reasons why someone might want to pass on a large inheritance, including:
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To pass the benefit of the inheritance on to another family member (generally a younger family member who could use the money for college, a first house, etc.)
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To avoid passing the inheritance directly on to creditors if the initial beneficiary is in debt or involved in a lawsuit.
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To avoid being bumped into a higher tax bracket.
The best reason to account for the possibility of disclaiming in your will or estate plan is that it provides your heirs with flexibility. “Even if a new estate tax law is passed, uncertainties will remain. You don't know when you'll die. You can't know for sure how much you'll be worth. Congress may create new exemptions, tax levels and other rules.”
You never know what the future may hold—for you or your heirs. When in doubt, it pays to make provisions for any eventuality. Monday, November 15, 2010 Family and Future: The Keys to Top Notch Estate Planning
We write a lot on this blog about what estate planning is truly about: it’s about laws, taxes, assets, and documents of course; but deep down, estate planning is about relationships.
As estate planners and advisors, an important part of what we do is creating the best estate planning or asset protection vehicle we can for our clients; but achieving this goal involves far more than simply writing a document—it also involves listening to our clients, reading between the lines of sensitive family interactions, and it often involves looking into the future to catch potential problems before they happen.
A recent article in the Wall Street Journal describes the unorthodox lengths to which advisors will go to help clients achieve their goals. “For the family with the gridlocked siblings, [their financial advisor] arranged a session of personality-type charting with an outside expert. The tests showed one of the brothers-in-conflict to be a hard-driver who loved to make decisions on the fly. His brother was more analytical, and needed time to reach conclusions... Establishing that these conflicting traits are permanent characteristics has helped the brothers understand each other’s work habits and function better as a team. “
Our firm may not yet have had to arrange personality-type charting sessions, but this “running interference” or acting as a mediator and guide is exactly what we do. Evaluating goals, assessing relationships, identifying priorities and facilitating productive discussions is part and parcel of being a good estate planner and a great family attorney and advisor.
Estate planning and asset protection may sound like it’s about things and wealth, but a good advisor knows that it is always about family and relationships. Consider this when you’re looking for an estate planner: Do you want an advisor who is simply protecting your wealth, or do you want an advisor who is looking out for your future and your family? Friday, November 12, 2010 The Ins and Outs of Incapacity
Most people think that having a trust is about controlling (to an extent) what happens to your assets after you die. This is true, but a trust actually has a much broader scope: a trust can also protect and provide for your loved ones—and more importantly, it can protect and provide for you—if you should ever become incapacitated.
In basic terms, incapacity means that you are no longer able to make decisions for yourself. Sometimes it is easy to determine incapacity: the person is in a coma or unconscious and obviously unable to make decisions. But sometimes it’s more difficult. What about whether or not a person is able to make rational decisions? What if someone is suffering from Alzheimer’s, Dementia, or even a severe mental illness... should that person be making important financial decisions?
It is important to include a discussion of incapacity in your trust, because this one word carries a lot of weight. It is when you are incapacitated that your successor trustee will take over, when the agent nominated in your Healthcare Directive will get the authority to make health care decisions for you, and when your financial Power of Attorney will go into effect. With so much hanging on a single word, it’s important to know exactly what that word means.
Every standard trust should have a definition of incapacity as determined by a court of law. This means that you are deemed incapacitated when a court of competent jurisdiction determines that you are unable to legally handle your own affairs. A really good trust will also include a definition of incapacity as determined by two physicians; which means that two independent, licensed physicians have examined you and have determined that in their opinion you are unable to effectively manage your property or financial affairs.
There are many reasons why you want to have more than just the standard definition of incapacity, the primary reason being that court proceedings can be lengthy and filled with red tape. While your agent is spending days or weeks going through the legal process, your estate is languishing and your financial agent is powerless to take action on your behalf. Giving two physicians the power to determine your incapacity will circumvent the red tape and prevent lengthy delays.
Call or come into our office for more information about incapacity and what it means in your trust or Healthcare Directive. Monday, November 08, 2010 Estate Planning As A Multi-Generational Affair
Creating an estate plan is a very personal matter; the planning party usually consists of you, your partner, and your attorney. Although you may consider and provide for your extended family, they are not often a part of the planning process itself. However, there are some circumstances under which estate planning should be a family affair—perhaps even a multigenerational one.
Planning as an extended family has its time and place. This year the the generation-skipping transfer (GST) tax exemption means that more people than ever are bringing multiple generations of the family into the attorney’s office to talk about making gifts before the end of the year. But the GST tax exemption is not the only reason extended families might want to plan as a whole unit. Here are some other specific situations in which families might want to consider multigenerational planning:
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Planning for succession within a family business.
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When multiple generations of families own property together.
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If the family is responsible for significant debt.
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If a family has a history of supporting certain charitable foundations and desires to continue doing so.
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To provide for family members who live out of the country.
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To make provisions for a non-traditional family situation, such as unmarried partners.
Planning with your extended family doesn’t necessarily mean you won’t be able to create a private plan for you and your spouse as well. It is quite possible to create individual estate plans for each nuclear family while still respecting the decisions that the extended family made together. Of course, this process will be made much easier if the extended family and each nuclear family works with the same attorney, but it is certainly not necessary so long as each attorney and family is willing to communicate and act together.
If you aren’t sure if you should plan privately for your family or include your whole multigenerational unit in the process, give our office a call. We can help you look down the road ahead and create a plan of action that will make every member of your family feel secure. Friday, November 05, 2010 Estate Planning Is Easier Than You Think
Have you ever seen the “1001 Must Do” books series? 1001 Movies You Must See Before You Die, 1001 Books You Must Read Before You Die, or maybe 1001 Natural Wonders You Must See Before You Die? Let’s face it, 1001 things is a lot of pressure! This is why we like this article in the San Francisco Gate, which lists only 16 estate planning things to do before you die.
Creating your estate plan can seem complicated and scary, but it’s not as daunting as you think—especially if you have the right person helping you. The article mentioned above lists 16 things to do in order to get your affairs in order, but even those 16 things can be pared down to only 5 essential tasks:
1. Make a list of your assets-include your home and other real property, checking and savings accounts, retirement assets, life insurance, investments, as well as high ticket physical items and heirlooms.
2. Make a list of your debts-including credit card debt, remaining mortgage debt, auto loans.
3. Choose your beneficiaries-consider not only children or grandchildren, but also any charities you would like to support. Think about what you want for your legacy beyond the first generation. Also, although it can be difficult, consider what you would want should your children or grandchildren predecease you.
4. Decide who you trust to be your agents/executors to handle your affairs-getting your affairs in order means choosing people to make decisions when you are unable. Agents with power-of-attorney will make financial decisions if you are unable, health care agents work with your doctors to determine your medical care, and trustees will control any assets you place in trust for the benefit of yourself or your beneficiaries.
5. Meet with an estate planning attorney-creating an estate plan is not as simple as checking a few boxes and signing a will. An estate plan requires an evaluation of your assets and goals, careful research into federal and state laws, and a determination of which of the myriad of documents best meets your needs. Have an experienced attorney help make your plan perfect. Monday, November 01, 2010 The Quiet Devastation of Alzheimer’s Disease
According to a recent report put out by the Alzheimer’s Association, 5.3 million people have Alzheimer’s disease. Chances are that you or someone you know has been touched by this illness. In spite of these overwhelming statistics, Alzheimer’s continues to be a disease that sneaks up on individuals and their families, quietly tearing apart lives with uncertainty and confusion. Estate planners and elder law attorneys sometimes see this heartbreaking confusion in our own offices when elderly clients or their families come to us, concerned that a loved one no longer has the capacity to sign or make decisions about legal documents.
A new article in the New York Times discusses the slow and sometimes invisible development of Alzheimer’s disease, and some of the earliest warning signs that your loved one may be suffering. “New research shows that one of the first signs of impending dementia is an inability to understand money and credit, contracts and agreements.” This comes as particularly bad news to families who put off their estate planning year after year, each time telling themselves “We’ll do this next year for certain.”
By the time families come into our office with their suspicions about their aging loved one it may be too late for us to help. “Lawyers have guidelines, published in 2005, that include warning signs of diminished capacity, like memory loss and problems communicating and doing calculations. The guidelines instruct lawyers to look at the legal requirements for capacity in specific situations, like making a gift. But many questions remain.”
Plans created after the suspicion of Alzheimer’s or dementia has set in can be fraught with doubt, and often cause conflict among family members. We have seen the rifts and heartbreak the illness causes in even the strongest of families. We urge you to take care of important legal and estate planning issues early, before questions of competence can cast the shadow of doubt over your wishes. Friday, October 22, 2010 Take Care in Making Large Gifts to Hei
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