Estate Planning is About More Than Just Taxes
May 15, 2013
With the new $5.125 million cap on lifetime and after-death transfers of wealth, many Americans who have not yet created an estate plan are breathing easy. However, as a recent article points out, there is much more to estate planning than death and taxes.
Many estate planners see estate planning as not only a way of creating a plan for death, but also as a way of creating a plan for life. Estate planning serves many functions during a person’s life, including assisting living persons to:
- Own and control their property as they see fit during life
- Plan how they would like to provide for their loved ones should they become physically or mentally disabled
- Ensure that, upon their death, their property goes to the people they have selected, and is distributed according to their preferences
The new wealth transfer cap, therefore, should have only a small impact on the way that people view estate planning. Every person over 18 who is mentally able should have an estate plan in place, regardless of their wealth or situation. Minimally, a good estate plan should include a financial and health care power of attorney, and a will. Those with significant assets should also consider incorporating a trust into their estate plan.
Planning Around Your Child’s Spouse
May 8, 2013
Sometimes, parents of married children feel uneasy about the prospect of their child’s spouse inheriting a portion of that estate. A recent article addresses this common concern.
Just Married Couple (Photo credit: almoko)
Parents should not be concerned about the spouses of their siblings inheriting their assets outright. As spouses are not related by blood, they have no legal right to inherit anything. Spouses may only inherit from their in-laws if the in-laws have specifically named them as a beneficiary in their estate plan.
Therefore, if parents have drafted an estate plan, they can simply not include the spouses. If the parents die intestate (without a will), state intestacy statutes leave out non-blood relatives. If a person’s married child predeceases him, the share of assets that would have gone to the child will pass to the next blood relation as though the child never existed.
If your child inherits your assets, then predeceases his spouse, it is likely that the spouse would inherit his or her estate – your assets included. If this is unacceptable, consider setting up a trust to transfer your assets to that child. By setting up a trust, you can provide for distributions to your child during his or her lifetime, then you can direct that the remainder will go to whomever you choose.
Controlling Assets After Death: The Perpetual Trust
April 17, 2013
In the 17th century, the Duke of Norfolk attempted to maintain power long after his death by drafting an estate plan that passed his titles down to his heirs for countless generations. Not long after his death, however, the House of Lords tore up his will. In doing so, they created the notion that it would be too difficult to allow a person to control property beyond the lives of those who are currently living.
Regardless of this notion, people are still attempting to create estate plans that allow them to maintain control from the grave. One popular tool through which people attempt to achieve this result is the perpetual trust. Perpetual trusts are legal in 29 states; New York may soon become the 30th. As their name suggests, it is unclear how long a perpetual trust may actually last.
According to estate lawyer Kathleen Scallan, “It’s all the rage right now . . . Clients are attracted to the idea of leaving a lasting family legacy.” Scallan notes that clients like perpetuity trusts not only because they can exist for long periods, but also because they allow clients to shield trust assets from creditors and taxation, potentially forever.
One-Third of Those Over Fifty Have Out of Date Estate Plans
April 3, 2013
A recent study conducted by Saga Legal Solutions has revealed that 34% of those over the age of 50 have experienced a major life event yet have not changed their will accordingly. One in five adults surveyed had not updated their estate plan since becoming a grandparent, and one in ten adults surveyed had not updated their estate plan since moving into a new house.
The study further revealed that one in seven, or 14% of adults over the age of 50, check their estate planning documents regularly to ensure that it is up to date. Only 44% of those interviewed reported that they review their estate planning documents every 3-5 years.
Most estate planning attorneys suggest that clients review their will every 2 to 3 years. According to chief executive of Saga Services, Roger Ramsden, “Once you have a will you need to review it regularly and ensure you update it when your circumstances change. Keeping it up to date is the only way to ensure that your wishes will be carried out after you have gone. It also helps family members when sorting your affairs at such a distressing time.”
It is also important to have the correct type of will for your age and situation. Popular types of wills include single wills, mirror wills, and wills with trusts.
Estate Planning Especially Important for Women
February 13, 2013
According to an article in Forbes, estate planning affects women “more profoundly” than it does men. This is partially because women, who tend to live longer and marry men who are older than they are, are more likely to become widowed at the age of 65. Despite the importance of estate planning for women, however, the article cited a recent survey which found that women “care more about losing weight than about protecting their financial assets.”
Because a married women will likely have the final say over the distribution of her and her husband’s assets, it is vital that all women cultivate at least a basic understanding of various aspects of the estate planning process.
Before considering asset distribution, however, women should ensure that their wishes for their own care are known. An important part of any estate plan is appointing the people you trust to act on your behalf should you become incapacitated. These people are appointed through a “durable power of attorney.” When executing this document, its a good idea to also execute a “living will,” which allows you to specify your preferences for end-of-life care.
After ensuring that you will be cared for according to your wishes, it is time to consider how your assets will be distributed. Remember that everyone, not just the wealthy, has an estate. Your estate consists of everything you own upon death. If you do not create a distribution plan, the State will determine how your assets are distributed.
The New Age of Estate Planning
February 6, 2013
In passing the American Taxpayer Relief Tax Act of 2012, Congress has finally ended the uncertainty experienced by the wealthiest American taxpayers. During the 2012 holiday season before the deal was struck, estate-planning attorneys worked overtime to assist frenzied taxpayers in making the most of their $5.12 million tax exemption.
In the last three months of 2012, attorney Alan Gassman set up more trusts for his clients than he had done in the previous nine months. His clients were fueled by fears that the amount they could transfer tax-free to their children and grandchildren had nowhere to go but down.
After all was said and done, however, the $5.12 million tax exemption actually increased to $5.25 million for individuals to keep pace with inflation. In reacting to the new deal, Gassman stated, “You go from having more work than you ever dreamed you can do to wondering ‘is anyone going to love me this year.’” Gassman further noted that his clients are now wondering if they did the right thing in light of the new deal.
With the exemption amount remaining over $5 million, fewer people need to worry about estate tax when developing plans to transfer their assets to the next generation. Accordingly, estate-planning attorneys will need to look ahead to new growth areas in their field to keep their practice afloat in the new age of estate planning.
One-of-a-Kind Families Need One-of-a-Kind Plans
September 3, 2012
According to statistics the average U.S. family size is 3.2 members. The median age of a man upon his first marriage is 28.1, 47% of women aged 75 or older live alone. Also according to statistics, approximately 60% of couples own their home, 70.7% of mothers with children under the age of 18 go back to work, 6% of men are likely to be unemployed, and approximately 485,000 grandparents aged 65 or more have the primary responsibility for their grandchildren.
Do these statistics accurately portray your family?
“Average,” “median,” and “approximately” may be fine for statistics, but it’s certainly not what you want from your estate plan. Your estate plan should represent your family; your hopes for the future as well as your current needs. This may include a nomination of guardian and education trust for young children, it may include a special needs trust for a disabled child or parent, or it may include incentive trusts for unambitious heirs. Alternatively, you may find that you need none of these, and that a will and simple ancillary documents will serve you just fine.
Whatever your family’s needs may be, you want them to be met by a keen, compassionate, and knowledgeable attorney; someone who will meet you face to face and listen to your concerns with an open mind, not a machine which will spit out a standard document based on numbers and averages. Estate planning may be a business, but it’s also an art, and as such it takes a real person to help create the plan that will provide for you and your family now and in the years to come. The members of our firm have our own families, we understand that you want the best for your family, and we want to help.
To Tell or Not to Tell About Inheritance; Sharing Your Estate Plan with Your Heirs
August 20, 2012
Should you talk to your heirs about your estate plan?
The subject of inheritance is one that most people studiously avoid for a number of different reasons: superstition, fear, lack of knowledge, or a desire for secrecy. Many adults were raised to believe that money was a private affair, and that talking about it was inappropriate; but beyond that, many people simply fear that if they talk about their estate plan with their heirs they will meet with resistance, disagreement, or in a worst-case scenario—their heirs will try to counter the estate plan with legal action of their own.
While in some families and circumstances these fears are justified, in most circumstances being silent about your estate plan can have disastrous consequences. A refusal to talk about money or your estate plans with you children means that they will have a difficult time following your wishes in regards to your medical treatment or protection of your assets should disaster strike. Most adult children are actually eager to fulfill their parents’ last wishes, regardless of how it may or may not impact their own inheritance.
Furthermore, your plans for leaving a legacy for your children or grandchildren may clash with their own needs or plans. For example, you may want to leave extra money to a grandchild with special needs, but if that child is receiving government benefits, leaving a significant inheritance in their own name could disrupt that. Discussing your plans with your children ahead of time can prevent situations like this from occurring.
So the answer to the question above is yes, you should talk to your children or heirs about your estate plan if you can. Talking about it will not only make it easier for them to follow your wishes, it may even help you determine how you want to make the best difference in the lives of your heirs.
An Advance Healthcare Directive Can Make a Difficult Conversation a Little Bit Easier
August 13, 2012
Does your family know your preferences for end-of-life care in case of emergency? Are you sure? If you haven’t created an Advance Healthcare Directive or spoken to your loved ones specifically about this issue, then chances are they don’t know your wishes, no matter how close you believe you are.
Our firm understands that opening up a conversation about DNR directives or end-of-life care can be difficult and awkward. Thinking about your own death, or the death of someone you love is painful. But the arguments—and potentially lengthy court battles—that can occur between caring relatives when these issues are not discussed will be even more painful. If the tragic Terri Schiavo case taught us anything it should have taught us that a difficult conversation now can save our loved ones years of pain and hardship later on.
We may not be able to save you from a difficult conversation, but this article from ABC News might help you get the conversation started. The first suggestion is to put your wishes in writing and then mail a copy of those wishes to your loved ones or to your healthcare agent. The article suggests a resource workbook which can be found online, but an even better option would be to execute an Advance Healthcare Directive with your estate planning or elder law attorney.
Executing and Advance Healthcare Directive not only provides you with an opportunity to say to your loved ones “I want to talk about this;” it also ensures that there will be no legal obstacles if tragedy should strike and you are unable to make your own healthcare decisions.
Once your loved ones know your preferences for end-of-life care this opens the door for them to ask questions if they have any, and even perhaps express their own views and preferences. Your primary care physician should receive a copy of your Advance Healthcare Directive as well. Confirm that your physician will be able to honor and respect your wishes if and when the time comes.
For more information about Advance Healthcare Directives, or talking to your family and friends about end-of-life decisions, please contact our office.
Tax Law Allows Married Couples to Reduce Their Estate Taxes
August 8, 2012
Married couples take note: Congress passed a law in 2010 that can significantly reduce the amount your estate pays in estate taxes. Unfortunately, most couples are either completely unaware of this opportunity for savings, or they find out about it too late to take advantage of it.
This recent article in the Wall Street Journal gives an example to explain the law both under the previous law and the newer, 2010 law: “A husband and wife together have $7.5 million of assets, $6 million of it in a business owned by him and the rest owned by her. Under prior law, if they died and each partner left everything to the other (with no trusts), the estate of the second-to-die partner would owe federal tax on $2.5 million—even though the law gave each spouse a $5 million exemption. Under the new rules, when the first partner dies—say it’s the wife—the executor files an estate-tax return preserving the value of her $5 million exemption. The result: At the husband’s death, the wife’s exemption is added to his, and the entire $7.5 million passes to heirs tax-free.”
Taking advantage of this opportunity isn’t difficult to do… but only if married couples (or their financial/legal advisors) are aware of the law. And in this case it’s not enough to be simply aware of the law, couples will need to be made aware of the law in time to take advantage of it within the limited time frame. “An estate-tax return must be filed soon after the first partner’s death—usually within nine months—in order for a couple to get this new benefit.”
For more information about this beneficial tax law, or to find out how to take advantage of it before it’s too late, please contact our office.