Wills, Trusts & Dying Intestate: How They Differ Most people understand that having some sort of an estate plan is a good thing. However, many of us don’t take the steps to have an estate plan prepared because we don’t understand the nuances between wills and trusts – and dying without either. Here’s what will generally happen if you die, intestate (without a will or trust), with a will, and with a trust. For this example, we’re assuming you have children, but no spouse: If you should die intestate, your estate will go through probate and all the world will know what you owned, what you owed, and who got what. Your mortgage company, car loan company, and credit card companies will all seek payment on balances you owed at the time of your death. After that, state law will decide who gets what and when. For example, your state’s intestate statute may mandate divvying up proceeds equally among your children. Your older children will get their shares immediately if they’ve attained adulthood. But, the court will appoint a guardian of its choosing to manage the money for your minor children until they become adults and possibly a separate guardian to raise your minor children. Shockingly, that guardian can charge a lot of money to manage the money for your minor children and be a total stranger – as can the guardian who raises your minor children. If you die without a valid will, the court, not you, will decide the futures of your minor children. Keep in mind that since your death has been published to alert valid creditors, it’s possible for predators (fake creditors) to come forth and make demands for payment – even if they’re not owed anything. The bottom line? Dying intestate allows state law and the court to make all the decisions on your behalf – regardless of what your intent might have been. Publicity is guaranteed. If you die with a valid will, your assets will still go through the probate process. However, after creditors have been satisfied, the remaining assets go to whom you’ve identified in your will. If you want to leave money to your children and name a guardian for the minor ones, the court will usually abide by your wishes. The same holds true if you specified that you wanted to give assets to a charity, your Aunt Betty, or your neighbor. Keep in mind that predatory creditors are still an issue as your death has been publicized. Even with a will, probate is a public process. The bottom line? While a court oversees the process, having a will allows you to tell the court exactly how you want your estate to be handled. But, a public probate is still guaranteed. If you’ve created a trust, you’ve taken control of your estate plan and your assets. Trust assets are not subject to the probate process and one of the most important benefits of trusts is that they are private. Although notices to creditors may be published, most of the other details (your assets, who is receiving what, etc.) remain private, helping your family minimize the risk of predators. As part of the trust drafting process, you’ll have named a trustee to manage your estate, when you are no longer able to, and provide him or her with specific instructions on how your assets should be dispersed and when. One word of caution – trusts must be funded in order to bypass probate. Funding means that your assets have been retitled in the name of your trust. Think of your trust as a bushel basket. You must put the apples into the basket just as you must put your assets into the trust for either to have value. Even if you have a trust prepared, you still need a will to pour any assets inadvertently or intentionally left out of your trust and to name guardians for minor children. However, this type of will is much shorter and less complicated than one that is responsible for disposing of all of your assets to your beneficiaries. The bottom line? Trusts allow you to maintain control of your assets through your chosen trustee, avoid probate, and leave specific instructions so that your children are taken care of – without receiving a lump sum of money at an age where they are more likely to squander it or have it seized from them. Don’t let the will versus trust controversy slow you down. Call our office today so we can answer any questions you may have and put together an estate plan that works for you and your family whether it be a will, trust, or both.
Consider “Micro” Estate Planning in the New Year You are probably familiar with the idea and benefits of traditional estate planning: eliminating probate fees, lowering tax liabilities, and providing financial peace of mind and security for your loved ones. If you do not currently have an estate plan, you should consider getting one as soon as possible. But while many are aware of traditional estate planning techniques, they may not be familiar with the more short-term planning approach—often referred to as “micro” estate planning. As the New Year approaches, now is a great time to sit down and put your short-term wishes in a legal document. “Micro” Estate Planning Explained Simply put, traditional estate planning focuses on the big-picture—putting together and planning for long-term goals. “Micro” estate planning, on the other hand, looks to short-term needs and how to address them—such as an expected absence, property needs during an illness, or even temporary care of children or pets. Accordingly, “micro” estate plans are simpler and more flexible than traditional estate plans and can be updated more frequently to meet your needs at the moment. A copy of your “micro” estate plan can be stored along with your other traditional estate planning documents and can also be kept in a visible and accessible place in your home. One major benefit of “micro” estate planning is that it can fill in any gap and meet any need that your traditional estate plan cannot address. For example, who will take care of your minor children or pets in the immediate days or hours after your passing or incapacity before legal guardianship is transferred and established by a court? This is particularly important because without a legal document instructing what should happen and/or whom should be contacted in the event of your death or incapacity, law enforcement may be required to contact child protective services. This is also an important issue for pet owners because your pet may need immediate care and you do not want your beloved pet to end up at a local animal shelter. Planning for a minor child or pet to stay with a trusted neighbor or other person while the guardian is contacted can be the best way to protect your loved ones immediately. Contact an Estate Planning Attorney As with traditional estate plans, “micro” estate planning can help you plan ahead for the “what if” situations that may arise during your lifetime. Make sure to take this opportunity to create or update your estate plan and speak with an experienced estate planning attorney today to learn about your options under applicable law. We are here to answer any questions you may have and to help you plan for any circumstance that may arise.
Estate Planning...A must whether you have a little or a lot! While everyone is celebrating during this holiday season, the manner of these celebrations can vary based on differing family traditions, religions, and geographic regions. Estate planning is no different—protecting your family’s future must be customized to fit your and your family’s unique needs. No matter your level of wealth, it is important to understand that the reasons for estate planning are universal. Estate Planning Basics There are several reasons why an estate plan is necessary for everyone. Some of these include protecting beneficiaries, sidestepping probate, protecting assets from creditors, and avoiding a mess in the event of incapacity or death. Estate planning gives you the tools to specify what happens to you, your assets, and even your loved ones should you pass away or be unable to handle your own affairs. Regardless of your motivations for establishing your estate plan, one important need is appointing the right fiduciaries (agent under a power of attorney, successor trustee, and patient advocate) who will make medical and financial decisions for you when you are unable. The creation of a will or trust can lay out who receives your property and how. They can also be used to appoint a pet caretaker who can ensure that your furry family member is taken care of when you are gone. Likewise, a guardian nomination lets you determine who will care for your minor or special needs children or family members. Finally, determining what values you want to pass along to family members, friends, or other loved ones can be spelled out in a number of ways including an ethical will, an incentive trust, or a charitable plan. A major benefit of having an estate plan put together—no matter how much wealth you may have—is to minimize costs. Having your estate go through probate—which is the court-supervised process of the distribution of assets—can result in attorneys’ fees, court costs, appraisals, and other expenses. This financial cost is in addition to the length of time it can take to administer an estate—from several months to several years depending on the circumstances. Do Not Wait Life can be full of surprises—what you leave behind for your family and loved ones should not be left to chance. For this reason, everyone should have an estate plan in place to ensure the security of their family’s future. Contact us today to learn more about your options.
Your 5 Task Year-End Estate Planning To-Do List 2019 is fast approaching. As we all prepare for the holidays and a new year, it is important that we wrap up any loose strings. Before entering into the new year, here are some things that need to be on your end of year checklist: Make Sure Your Estate Planning is Up To Date Will or Trusts Now that the federal estate tax exemption is fixed at $10 million per person adjusted for inflation ($11.18 million in 2018), it is important that you review your estate planning to ensure that it still makes sense. For example, when reviewing your estate planning documents, look for such terms as “Marital Trust,” “QTIP Trust,” “Spousal Trust,” “A Trust,” “Family Trust,” “Credit Shelter Trust,” or “B Trust.” With the exemption amount so high, it may not be necessary to utilize these planning strategies anymore. In addition, you will want to make sure those individuals you have appointed to serve as your fiduciaries (successor trustee, agent under a financial power of attorney, patient advocate, trust protector, etc.) are still able to act on your behalf if the need arises. Lastly, if your family has gone through any changes such as a birth, death, marriage, divorce, etc., you will want to double check the distribution scheme in your will or trust to make sure that the beneficiaries are still those you would like to leave assets to. Health Care Directives While the federal Health Insurance Portability and Accountability Act (known as “HIPAA” for short) was enacted in 1996, the rules governing it were not effective until April 14, 2003. Thus, if your estate plan was created before then and you have not updated it since, you will definitely need to sign new health care directives so that they are in compliance with the HIPAA rules. With that said, it’s possible that health care directives signed in 2003 or later lack HIPAA language, so check with us just to make sure that your estate plan documents reference and take into consideration the HIPAA rules. Financial Power of Attorney How old is your Power of Attorney? Because of liability risks, banks and other financial institutions are often wary of accepting Powers of Attorney that are more than a couple of years old. This means that if you become incapacitated, your agent may have to jump through hoops to get your stale Power of Attorney honored, if it can be done at all. This could cost your family valuable time and money. And, several states have enacted new laws governing Powers of Attorney. If you want to increase the likelihood that your Power of Attorney will work without any hitches, then redo your Power of Attorney every few years so that it doesn’t end up becoming a stale and useless piece of paper. Check Your Beneficiary Designations Another area of estate planning that needs revisiting at the end of the year are your beneficiary designations on any life insurance, retirement accounts, bank accounts, vehicles, or real estate. If you have previously completed the forms for any of these assets, you should review them to ensure the beneficiary named is still the person(s) you want receiving the assets. If you have not done so already, you also should make sure that your estate planning attorney has this information as well. Because a beneficiary designation may overrule any provisions you have in your will or trust, it is important that your designations and other estate planning documents all match and carry out your objective instead of having contrary intents. Gather Tax Documents for 2018 Income Tax Return The Tax Cuts and Jobs Act made several changes to the tax code, which may make filing your income taxes for 2018 a little different. Because of these changes, it would be prudent to spend a little extra time collecting the necessary paperwork to show your income and any deductions you may be claiming instead of waiting until the last minute. Review Car and Homeowners Insurance Policies Everyone likes to save money and an easy way to do so is to call you insurance agent. Analyze the coverage you currently have for your home and car to see if you are properly covered and to see if there are any additional savings available to you. Sometimes, you can save money by having more than one policy through an insurer. You may also be able to get a reduction on your rates if you have not filed any claims within a specific period of time. You never know unless you ask. Review Your Paycheck Withholdings When it comes to your 401(k), IRA, and Health Savings Account, the federal government allows you to contribute a maximum amount per year pre-tax. As we approach the end of the year, it is a good idea to review how much you have contributed and see if you are able to give more. Because this is done pre-tax, it is a good way to put more money away for your retirement or future medical needs while saving some money on your tax bill now. Call Us Today!
Planning on Giving Money This Holiday Season The holiday season is a time to enjoy friends, family, and loved ones. Often we consider our life circumstances and may get in the spirit of giving. This is particularly true if you are at a point in your life were you have enough from a financial standpoint. If you are planning on giving money as a gift this holiday season, below are five things to consider. What to Consider When Giving Sharing your resources – whether money, vehicles, property, or other assets – in a manner that is both simple and smart as well as financially prudent can prove complicated. Accordingly, there are several things to consider such as what the gift is for, the type of gift, and if the gift is for charity. Below are five common scenarios: You Want to Create a Foundation or Give to Charity: You do not have to be Bill Gates or Warren Buffet to be charitable. Through a donor-advised fund (DAF), which are like charitable savings account, you can benefit from an immediate tax deduction for any cash or investments placed in the fund. Of note, any money sitting in a DAF must be donated to charity but any money sitting in the fund can be invested tax free. Notably, changes in tax law make charitable giving different from a tax perspective than prior years. If you want to get a deduction or want to use your IRA to make the gift and you are over 70 ½, you should seek guidance. Grandchildren Need Tuition for College: Consider a 529 College Savings Plan – where the money grows tax free and can also be withdrawn tax free when applied to qualified educational expenses – as a way to save for a child’s future education. There are also tax-free withdrawal benefits for pre-college education, depending on applicable state law. While a grandparent can create an account for a grandchild, contributing to a plan created by the parent can help reduce offsets on any potential financial aid award granted to the child. If your child or grandchild is already in college, consider making payments directly to the institution to avoid gift tax issues. Your Car or Boat is Not Being Used: One option is to gift the property, making sure title is officially transfer and filing a gift tax return if the fair market value is above a certain amount. If you instead are passing along the old car or boat worth more than $15,000 to a family member, make sure to let your tax preparer know so they can file any necessary gift tax returns. (You probably won’t owe any gift tax, but filing the return is a way to protect yourself from the IRS.) Alternatively, the property may be donated to a charity to receive a possible tax benefit. What the charity does with the property – in other words, uses it for the organization or sells it at a low price – can affect your tax benefit and how much the charity ultimately gets. The Next Generation & the Vacation Home: First, make sure to ask whether or not your loved one wants the home. You may be surprised that they do not and, in that case, sell the property. If they do, however, make sure to work out issues in advance that may arise from the transfer of property. One way to minimize issues is to transfer title to an LLC and give LLC ownership to the children, spelling out each member’s rights and responsibilities regarding the property. You should also address what happens if someone wants to sell his or her portion and exclude spouses from the universe of eligible owners in the even of a divorce. These can be complex transactions, even for seemingly simple circumstances, so always speak with an attorney before transferring property into or out of an LLC. Your Kids Have Different Needs: Sometimes fair does not mean equal. This is particularly true if your children have different levels of need due to a disability, younger age, or better financial stability. For some children, it may be necessary or advantageous to gift a portion of his or her inheritance prior to your death because of immediate need. Whatever your reasons, the division of your estate is up to you. While you cannot prevent dissatisfaction among your children once you are gone, you can try to minimize these issues. One way is to leave a letter behind explaining your motivations and adding a no-contest clause in the will. Estate Planning Help While gifting may be the right thing to do, it needs to be done so that everyone, including you, gets the maximum benefit. The tax implications to you depends upon the purpose of your gift, the type of gift, and whether the gift is to charity. We can advise you on your options under applicable law and what tools you can use so that everyone benefits the most from your generosity.
Giving Thanks with your Estate Plan Estate planning covers more than just financial matters. Indeed, many use their estate plan to pass along their values as well as their wealth. One way to do this is to give thanks with your estate plan, by designating charitable giving or specific gifts that will help ensure your legacy. It is important, however, to balance your income and the needs of your beneficiaries with the available tax incentives. Your Legacy While the general purpose of estate planning is to ensure you and your family are taken care of when most needed, you do not need to contain your estate planning to financial issues. Indeed, many individuals use estate planning to pass along family history and traditions through their giving. An estate plan may specify how a beneficiary can use their inheritance such as for studying abroad, embarking on a particular trip, or other values that are important to the giver. In addition, you can choose to give to a qualified charitable organization in your will so that the gift is distributed upon your death or incapacity. Giving to charity during your life or after you have gone can help significantly reduce federal estate and gift taxes and allows you to support charitable causes that are meaningful to you. One way to pass along your values as well as your wealth is an incentive trust. An incentive trust is a type of trust that includes provisions that reward a beneficiary for achieving a specified range of desired goals or behaviors. The trust may also indicate how the money may be distributed. Another estate planning tool is the charitable lead trust, which allows payments to be made to the charity during the settlor’s lifetime. When the settlor passes away – or at the end of a shorter term of the settlor’s choosing – the remainder of the assets in the trust go to the decedent’s estate, his or her spouse, or other beneficiaries. A third way to continue your legacy is through a donor-advised fund. A donor-advised fund is similar to a charitable investment account with the specific purpose of supporting charitable organizations. Pre-funded charity gifts can help your family decide which organizations will be financially supported. These are just some of the estate planning tools available for charitable giving and allowing you to pass along values and give thanks with your estate plan. Estate Planning Professionals No matter what your goals regarding your estate plan, it is important to craft a plan that takes advantages of the tools and tax benefits available to you under applicable law. We can explain the options available to you and your family, and help create the best plan to suit your needs. Give us a call today.
Three Tips for Talking about your Estate Plan during the Holidays The holidays are right around the corner, bringing the joyous season of gathering with family and loved ones into full swing. It is the time to slow down, get caught up with loved ones, and enjoy the family and experience quality time around the dinner table. It is also a great idea to take this opportunity to review your estate plan and talk about the topic with your loved ones. Do Not Be Indifferent While the entire topic of estate planning can be a touchy subject, covering your eyes about the issue is not good for you or your family. According to a Caring.com survey from 2017, as many as six in 10 Americans do not have an estate planning document put together – like a will or a trust. This is particularly alarming when it is estimated that $30 trillion in wealth is set to transfer between baby boomers and their heirs in the next few years. Accordingly, it is vital that families discuss estate planning well in advance of an emergency or life tragedy – while the eldest members of the family are still physically and mentally healthy. Leaving the topic to chance can result in disastrous or costly outcomes. Time it Right Not surprisingly, estate planning is a topic that does not come up in everyday conversation. And randomly informing your loved ones who will get your things when you die or if you become incapacitated will likely damper the holiday spirit. There are ways, however, to discuss estate planning during this season with grace and tact. Instead, choose or make a time when you and your loved ones can be together and talk within a comfortable, calm, and private environment. Make sure that everyone is relaxed and distractions are at a minimum so the conversation stays on track. In an ideal situation, the parents – or the elders – will bring up the subject. Sometimes, however, they refuse to discuss estate planning. In such a case, children have to broach the subject. Asking where important papers and records are kept is a great start. Boundaries Are Important Once you find the time, place, and opportunity for the conversation about estate planning to happen make sure to set down some ground rules. Keep the discussion as transparent as possible, perhaps by having each family member address their thoughts, questions, or wishes and discuss together. Some items that may be on the list to discuss may include: Notifying them that you have a will or living trust that spells out how assets will be divided when you die or become incapacitated; Letting them know who will act as the executor of your will or trustee of your trust; Discussing who will serve as your agent under your financial power-of-attorney and patient advocate under your healthcare power-of-attorney; and Explaining to your family how to handle any medical or long-term care situations, if necessary. Bottom Line While discussing estate planning needs can be straightforward and simple, the conversation can quickly become complicated when personalities clash or emotions get in the way. The main goal is to let your family and loved ones know you have a plan, without needing to go into detail about the plan’s contents. We can help parents and children come together and create an appropriate plan that will meet your family’s short- and long-term estate planning needs.
Your 2018 Taxes - Get Started Now While the end of the year is not quite here yet (but rapidly approaching), now is an opportune time to take a moment and start your year-end tax planning for 2018. This is particularly necessary this tax year because of the changes to the tax law that became effective in 2018. As a result of the significant changes in the law, your taxes may look different this year, so you should allow for some extra time in the preparation. Getting started early is even more essential if you are a business owner, have moved to another state, or plan to make charitable contributions before the year ends. Things to Consider Now is the best opportunity to make use of tax strategies to take advantage of tax-deferred growth opportunities, charitable-giving opportunities, as well as tax-advantaged investments among others. During this tax planning process, you will also want to make sure you maximize deductions and credits ahead of the busy tax season. As you consider your year-end options, make sure to sit down with your attorney or other advisors to review your investments to ensure they still align with your goals, the economic landscape, and the current tax law. This conversation can help you identify where adjustments may be necessary for the future. What You Need Know that the “traditional” year-end planning we’ve recommended for years still applies to your 2018 taxes. Make sure you are harvesting losses to offset your gains, are contributing the appropriate amount to your Individual Retirement Account (IRA) and/or Health Savings (HSA) accounts, and have taken the necessary required minimum distribution from your IRA (if this applies to you). Other things to consider is fully funding employer-sponsored retirement plan contributions such as 401(k, 403(b) or 457 plans before the end of the year. The same rings true for college savings plans, such as 529 plans. You may even want to consider converting a traditional IRA to a Roth IRA. Beyond these important points, also make sure to start gathering the necessary documentation you may need for any deductions that you are claiming. These may include copies of statements or receipts regarding your property taxes, medical expenses, dental expenses, child care expenses, education expenses, moving expenses, and heating/cooling expenses. For business owners, the new 199A deduction for business income will have additional paperwork requirements. It’s best to work with your bookkeeper and accountant at gathering those records now, rather than waiting until the hectic tax season. Seek Professional Advice With changes to the U.S. tax code now in effect, it is especially important to make the right decisions when it comes to your year-end financial moves. A skilled tax attorney or financial advisor can help explain your options under the law and provide you with guidance so that you can make the best decisions for you, your family, and your future. If you have any questions, feel free to contact us.
Why receiving an inheritance changes your estate plan Receiving an inheritance is a huge blessing but, if not handled properly, can also become a curse. Often times, the inheritor does not know what to do with the new asset and runs into financial trouble, squandering most, if not all of it. This could happen due to the inheritor having outstanding creditor issues or tax troubles or being inexperienced with managing the new assets. No matter what the financial obstacles maybe, estate planning can help address or even eliminate these issues. For these reasons, it is vital to update your estate plan – or create one if you have not already – if you have received or are expecting to receive an inheritance. How Inheritances Affect Estate Plans An inheritance will likely change your assets in a major way, which may result in a change in your tax and financial planning needs. An inheritance may also increase your exposure to lawsuits since people are more likely to seek out the “deep pockets” in a lawsuit. If your inheritance is the first time you have invested or have had substantial assets, an estate plan can set up safeguards to both manage and protect your wealth. If you already have an estate plan in place, it is critical to update it so that the plan incorporates your recent inheritance. The presence of more assets may require a revision in order to make sure that your intentions are properly carried out. This is particularly true if you have a blended family, have changed from a non-taxable to a taxable estate because the value of your assets is now over $11 million, or if your original estate plans involved utilizing a charitable strategy. Putting your inheritance to work – whether it be for short-term or long-term financial goals – will help you avoid wasting your inheritance. Preserving Your Family’s Wealth Another important reason to re-evaluate your estate planning when you receive an inheritance is to preserve your family’s wealth. Unfortunately, statistics on wealth preservation across generations are grim. Studies estimate that 70 percent of wealthy families lose their wealth by the second generation, and 90 percent lose it by the third. One common reason for these surprising statistics is the lack of communication among generations. Needless to say, proactive steps are necessary to preserve wealth for the long-term. Families fail to discuss this important topic because money can be a taboo topic to discuss openly, the older generations fear that the younger generations will become lazy and entitled if they are made aware of their inheritance too soon, or they fear their private financial information will be leaked to those who should not have the information. But, if your family is open, honest, and everyone plans properly, your family does not have to see its collective fortune evaporate within a couple generations. Estate planning can provide the foundation to ensure assets continue to be managed properly and are preserved instead of dissipated. Proper planning can also make wealth a part of the family legacy instead of a burden or societal ill. Seek Professional Advice An inheritance can be used up faster than you would think, but proper planning can reduce this risk. If you have received an inheritance – or expect to receive one in the near future – it is vital that you seek out financial and legal advice. Give us a call to schedule an appointment so we can discuss your options to help preserve your family legacy.
What Estate Planning Awareness Means for You The third week of October is National Estate Planning Awareness Week (Oct. 15-21, 2018). Estate planning is important for everyone regardless of wealth or family status because if you become incapacity or pass away without an estate plan, you are leaving the distribution of your assets subject to state law – and the results may not be what you want or expect. Estate Planning Explained Estate planning includes the growth, protection, and transfer of a person’s wealth through the creation and maintenance of an estate plan. The concept of estate planning is important and twofold: (1) to have a strategy that will maintain your financial security during your lifetime, and (2) to ensure that your intended transfer of property and assets occurs upon your death. Both of these issues are analyzed through the lens of the unique situation of the family and the possible expense of different methods used in the estate plan. Benefits of Estate Planning There are several benefits to having an estate plan. At a minimum, an estate plan provides clear written guidance to your loved ones on what to do with your assets when you are deceased. But perhaps the most important reason is to be in control of how your family is provided for in the event of your death or incapacity. Estate planning can address several issues including: Who will raise your minor children, Who will inherit your assets and how they will be distributed, Who will care for loved ones who are unable to care for themselves, Who will care for your pets, and Who will receive your life insurance and other insurance proceeds. Finally, good estate planning can ease the time-consuming, administrative strain placed on your family during an already difficult time. Estate Planning Statistics According to studies, 6 in 10 adults have not put a will in place. And, while many have likely heard that it is wise to avoid probate – the legal process by which the assets of a deceased are disposed of under court supervision – many do not understand why probate should be avoided. Three main issues with probate include: (1) the tying up of the decedent’s assets for months or even years while the probate is open, (2) the cost, sometimes as much as 5 percent of the estate’s value is spent on attorney and court fees alone, and (3) the loss of privacy in the probate process when it comes to the decedent’s financial information. There are many financial and legal tools that may be used in the estate planning process. Contact us today to discuss your situation and learn about your specific options.