Estate Planning

Monday, May 14, 2012

Living Trusts & Probate Avoidance

You want your money and property to go to your loved ones when you die, not to the courts, lawyers or the government. Unfortunately, unless you’ve taken proper steps and engaged in certain estate planning procedures, your beneficiaries could lose a sizable portion of their inheritance to probate fees and expenses. A properly-crafted and “funded” living trust is one ideal probate-avoidance tool which can save thousands in legal costs, enhance family privacy and avoid lengthy delays in distributing your property to your loved ones

What is probate, and why should you avoid it? Probate is a court proceeding during which the deceased’s Will is reviewed, executors are approved and appointed, beneficiaries, and creditors are notified, assets are gathered and valued, debts and taxes are paid, and the remaining estate is distributed according to your Will (or according to state law if you don’t have a will). Depending on your state’s procedures, Probate can be costly, time-consuming and very public.

A living trust on the other hand, allows your property to be transferred to your beneficiaries quickly and privately, with little to no court intervention, maximizing the amount your loved ones end up with.

A basic living trust is a document that is similar to a will in its form and content, but very different in its legal effect. In the trust, you name yourself as trustee, the person in charge of your property. If you are married, you and your spouse are typically co-trustees. Because you are trustee, you retain total control of the property you transfer into the trust. In the trust agreement, you must also name successor trustees to take over in the event of your death or incapacity.

Once the trust is established, you must transfer ownership of your non-retirement property to yourself, as trustee of the living trust. This step is critical; the trust has no effect over any of your property unless you formally transfer ownership into the trust. The trust also enables you to name the beneficiaries you want to inherit your property when you die, including providing for alternate or conditional beneficiaries. You can amend your trust at any time, and can even revoke it entirely.

Even if you create a living trust and transfer all of your property into it, you should also create a back-up will, known as a “pour-over will”, because the assets that are left out of your trust, will pour over into the trust after your death. This is a “belt” and “suspenders” approach because it will ensure that any property you own – or may acquire in the future – that you don’t get around to transferring to your trust while you are alive, will be distributed to your trust upon your death and then ultimately distributed according to the trust provisions. Without a pour over will, any property not included in your trust will be distributed according to state law.

After you die, the successor trustee you named in your living trust is immediately empowered to transfer ownership of the trust property according to your wishes. Generally, the successor trustee can efficiently settle your entire estate within a few weeks or months by completing relatively simple paperwork without court intervention and its associated expenses. The successor trustee can solicit the assistance of an attorney to help with the trust administration process, though such legal fees are typically a fraction of those incurred during probate.

 

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Friday, May 04, 2012

Avoid Family Feuds through Proper Estate Planning

A family feud over an inheritance is not a game and there is no prize package at the end of the show. Rather, disputes over who gets your property after your death can drag on for years and deplete your entire estate. When most people are preparing their estate plans, they execute wills and living trusts that focus on minimizing taxes or avoiding probate. However, this process should also involve laying the groundwork for your estate to be settled amicably and according to your wishes. Communication with your loved ones is key to accomplishing this goal.

Feuds can erupt when parents fail to plan, or make assumptions that prove to be untrue. Such disputes may evolve out of a long-standing sibling rivalry; however, even the most agreeable family members can turn into green-eyed monsters when it comes time to divide up the family china or decide who gets the vacation home at the lake.

Avoid assumptions. Even the most loving of families can have problems and issues after a parent’s death. Do not presume that any of your children will look out for the interests of your other children. To ensure your property is distributed to the beneficiaries you select, and to protect the integrity of the family unit, you must establish a clear estate plan and communicate that plan – and the rationale behind certain decisions – to your loved ones.

In formulating your estate plan, you should have a conversation with your children or other loved ones to discuss who will be the executor or trustee of your estate, or who wants to inherit a specific personal item. Ask them who wants to be the executor or trustee, or consider the abilities of each child in selecting who will settle your estate, rather than just defaulting to the eldest child. This discussion should also include provisions for your potential incapacity, and address who has the power of attorney and as such, who will make medical, financial and legal decisions for you if you cannot.

Do not assume any of your children want to inherit specific items. Many heirs fight as much over sentimental value as they do monetary items. Cash and investments are easily divided, but how do you split up Mom’s engagement ring or the table Dad built in his woodshop? By establishing a will or trust that clearly states who is to receive such special items, you avoid the risk that your estate will be depleted through costly legal proceedings as your children fight over who is entitled to such items.

Take the following steps to ensure your wishes are carried out:

• Discuss your estate planning with your family. Ask for their input and explain anything “unusual,” such as special gifts of property or if the beneficiaries are not inheriting an equal amount.    
• Name guardians, as back-up parents, for your minor children, if both mom and dad should die while they are still minors.  
• Write a letter, outside of your will or trust, that shares your thoughts, values, stories, love, dreams and hopes for your loved ones.  
• Select a special, tangible gift for each heir that is meaningful to the recipient.  
• Explain to your children why you have appointed a particular person to serve as your trustee, executor, agent or guardian of your children.  
• If you are in a second marriage, make sure your children from a prior marriage and your current spouse know that you have established an estate plan that protects their interests.  
• Seek the guidance of an experienced estate planning attorney to help you establish your estate plan and make sure that you leave your intended legacy.

   

 

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Thursday, April 19, 2012

How Much of Your Estate Will Be Left Out of Your Will? (It’s Probably More Than You Think)

You’ve hired an attorney to draft your will, inventoried all of your assets, and have given copies of important documents to your loved ones. But your estate planning shouldn’t stop there. Regardless of how well your will is drafted, if you do not take certain steps regarding your non-probate assets, you run the risk of unintentionally disinheriting your chosen beneficiaries from a significant portion of your estate.

A will has no effect on the distribution of certain types of property after your death. Such assets, known as “non-probate” assets are typically transferred upon your death either as a beneficiary designation or automatically, by operation of law.

For example, if your 401(k) plan indicates your spouse as a designated beneficiary, he or she automatically inherits the account upon your passing.  In fact, by law, your spouse is entitled to inherit the funds in your 401(k) account.  If you wish to leave your 401(k) retirement account to someone other than a surviving spouse, you must obtain a signed waiver from your spouse indicating her agreement to waive her rights to the assets in that account.

Other types of retirement accounts also transfer to your beneficiaries outside of a probate proceeding, and therefore are not subject to the provisions of your will.  An Individual Retirement Account (IRA) does not automatically transfer to your spouse by operation of law as is the case with 401(k) plans, so you  must complete the IRA’s beneficiary designation form, naming the heirs you want to inherit the account upon your death. Your will has no effect on who inherits your IRA; the beneficiary designation on file with the financial institution controls who will receive your property.

Similarly, you must name a beneficiary on your life insurance policy. Upon your death, the insurance proceeds are not subject to the terms of a will and will be paid directly to your named beneficiary.

Probate avoidance is a noble goal, saving your loved ones both time and money as they close your estate. In addition to the assets listed above, which must be handled through beneficiary designations, there are other types of assets that may be disposed of using a similar procedure.   These include assets such as bank accounts and brokerage accounts, including stocks and bonds, in which you have named a pay-on-death (POD) or transfer-on-death (TOD) beneficiary; upon your passing, the asset will be transferred directly to the named beneficiary, regardless of what provisions are in your will. Most such designations also allow for listing of alternate beneficiaries in case they predecease you.

Another non-probate asset is real estate that is co-owned with someone else where the deed has a survivorship provision in it.  For example, some deeds to real property owned by married couples or by two unmarried individuals are owned jointly by both people, with right of survivorship.  Upon the passing of either person, the interest of the passing person immediately passes to the surviving person by operation of law, irrespective of any conflicting instructions in your will.  Keep in mind that you need not be married for such a provision to be in effect; joint ownership of real property with right of survivorship can exist among any group of co-owners.  If you want your will to be controlling with regard to disposition of such property, you need to have a new deed prepared (and recorded) that does not have a right of survivorship provision among the co-owners.

You’ve spent a lifetime of hard work to accumulate your assets and it’s important that you take all necessary steps to ensure that your wishes regarding who will get your assets will be honored as you intend. Carve a few hours out of your busy schedule, a couple times a year, to review all of your assets and beneficiary designations to make certain that they remain consistent with your objectives.

When considering hiring an estate planning attorney, it’s important to hire someone who will take a holistic approach and help you in coordinating all your assets – your probate and non-probate assets as well as your non-financial assets (your values, hopes, dreams, etc) so that your overall estate plan will meet your goals and objectives and help you leave your intended legacy.

 

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Monday, April 16, 2012

Retirement Accounts and Estate Planning

For many Americans, retirement accounts comprise a substantial portion of their wealth. When planning your estate, it is important to consider the ramifications of tax-deferred retirement accounts, such as 401(k) and 403(b) accounts and traditional IRAs. (Roth IRAs are not tax-deferred accounts and are therefore treated differently). One of the primary goals of any estate plan is to pass your assets to your beneficiaries in a way that enables them to pay the lowest possible tax.

Generally, receiving inherited property is not a transaction that is subject to income tax. However, that is not the case with tax-deferred retirement accounts, which represent income for which the government has not previously collected income tax. Money cannot be kept in an IRA indefinitely; it must be distributed according to federal regulations. The amount that must be distributed annually is known as the required minimum distribution (RMD). If the distributions do not equal the RMD, beneficiaries may be forced to pay a 50% excise tax on the amount that was not distributed as required.

After death, the beneficiaries typically will owe income tax on the amount withdrawn from the decedent’s retirement account. Beneficiaries must take distributions from the account based on the IRS’s life expectancy tables, and these distributions are taxed as ordinary income. If there is more than one beneficiary, the one with the shortest life expectancy is the designated beneficiary for distribution purposes. Proper estate planning techniques should afford the beneficiaries a way to defer this income tax for as long as possible by delaying withdrawals from the tax-deferred retirement account.

The most tax-favorable situation occurs when the decedent’s spouse is the named beneficiary of the account. The spouse is the only person who has the option to roll over the account into his or her own IRA. In doing so, the surviving spouse can defer withdrawals until he or she turns 70 ½; whereas any other beneficiary must start withdrawing money the year after the decedent’s death.

Generally, a revocable trust should not be the primary beneficiary of a tax-deferred retirement account, as this situation normally limits the potential for income tax deferral. However, a trust may be the preferred option under certain circumstances, such as if a life expectancy payout option or spousal rollover are unimportant or unavailable, or when it’s used as a contingent beneficiary designation after the surviving spouse’s death, but this should be discussed in detail with an experienced estate planning attorney. Additionally, there are situations where income tax deferral is not a consideration, such as when an IRA or 401(k) requires a lump-sum distribution upon death, when a beneficiary will liquidate the account upon the decedent’s death for an immediate need, or if the amount is so small that it will not result in a substantial amount of additional income tax.

The bottom line is that this is a complex area of law involving inheritance and tax implications that should be fully considered with the aid of an experienced estate planning lawyer.

Monday, March 26, 2012

Issues to Consider When Gifting to Grandchildren

Many grandparents who are financially stable love the idea of making gifts to their grandchildren. However, they are usually not aware of the myriad of issues that surround what they may consider to be a simple gift. If you are considering making a significant gift to a grandchild, you should consult with a qualified attorney to guide you through the myriad of legal and tax issues that are involved in making such gifts.

Making a Lifetime Gift or a Bequest:  Before making a gift, you should consider whether you want to make the gift during your lifetime or leave the gift to your grandchild in your will or living trust.  If you make the gift as a bequest in your will or living trust you will not experience the joy of seeing your grandchild’s appreciation and use of the gift. However, if you make the gift now, while you are still around to share in their joy, you are depleting your assets and there’s always the possibility that you will need the money to live on during your lifetime, and in reality, once a gift is made it cannot be taken back. Also, if you anticipate needing Medicaid or other government programs to pay for a nursing home or other benefits at some point in your life, if you have not done the proper planning ahead of time, any gifts you make in the prior five years can be considered as part of your assets when determining your eligibility.

What Form Should the Gift Take:  You may consider making a gift outright to a grandchild. However, once such a gift is made, you give up control over how the funds can be used. If your grandchild decides to purchase a brand-new sports car or take an extravagant vacation, you will have no legal right to stop the grandchild. The grandchild’s parents could also in some cases access the money without your approval.

You could consider making a gift under the Uniform Gift to Minors Act (UGMA) or the Uniform Transfer to Minors Act (UTMA), depending on which state you live in. The accounts are easy to open, but once the grandchild reaches the age of majority, he or she will have unfettered access to the funds. You could also consider depositing money into a 529 plan, which is specifically designed for education purposes. Finally, you could consider establishing a trust with an estate planning attorney, which can be more expensive to set up, but can be customized to fit your needs. Such a trust can provide for spendthrift, divorce and creditor protection while allowing for more flexibility for expenditures such as education or purchase of a first home.

Tax Consequences: If you have a large estate, giving gifts to grandchildren and other loved ones may be a great way to get money out of your estate in order to reduce your future estate tax liability. In 2012, a single person can pass $5 million at death free of estate tax, and a couple can pass a combined $10 million without paying estate taxes, if they should both pass away in 2012. In addition, a person can give up to $13,000 in 2012 to any number of individuals without incurring any gift taxes or need to file a gift tax return. A grandparent with 10 grandchildren could give $130,000 per year total to all grandchildren (and a married couple could give $260,000), thereby removing that property from his or her estate. There are some unique gifting options available in 2012 that may not be around in years to come. If this may be of interest to you, contact your attorney or this firm to discuss your options.
 

 

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Tuesday, March 13, 2012

Family Business: Preserving Your Legacy for Generations to Come

Your family-owned business is not just one of your most significant assets, it is also your legacy. Both must be protected by implementing a transition plan to arrange for transfer to your children or other loved ones upon your retirement or death.

More than 70 percent of family businesses do not survive the transition to the next generation. Ensuring your family does not fall victim to the same fate requires a unique combination of proper estate and tax planning, business acumen and common-sense communication with those closest to you. Below are some steps you can take today to make sure your family business continues from generation to generation.

• Meet with an estate planning attorney to develop a comprehensive plan that includes a will and/or living trust. Your estate plan should account for issues related to both the transfer of your assets, including the family business and estate taxes.
• Communicate with all family members about their wishes concerning the business. Enlist their involvement in establishing a business succession plan to transfer ownership and control to the younger generation. Include in-laws or other non-blood relatives in these discussions. They offer a fresh perspective and may have talents and skills that will help the company.
• Make sure your succession plan includes:  who will own the company, advisors who can aid the transition team and ensure continuity, who will oversee day-to-day operations, provisions for heirs who are not directly involved in the business, tax saving strategies, education and training of family members who will take over the company and key employees.
• Discuss your estate plan and business succession plan with your family members and key employees. Make sure everyone shares the same basic understanding.
• Plan for liquidity. Establish measures to ensure the business has enough cash flow to pay taxes or buy out a deceased owner’s share of the company. Estate taxes are based on the full value of your estate. If your estate is asset-rich and cash-poor, your heirs may be forced to liquidate assets in order to cover the taxes, thus removing your “family” from the business.
• Implement a family employment plan to establish policies and procedures regarding when and how family members will be hired, who will supervise them, and how compensation will be determined.
• Have a buy-sell agreement in place to govern the future sale or transfer of shares of stock held by employees or family members.
• Add independent professionals to your board of directors.

You’ve worked very hard over your lifetime to build your family-owned enterprise. However, you should resist the temptation to retain total control of your business well into your golden years. There comes a time to retire and focus your priorities on ensuring a smooth transition that preserves your legacy – and your investment – for generations to come.

 

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Friday, March 02, 2012

Do I Really Need Advance Directives for Health Care?

Many people are confused by advance directives. They are unsure what type of directives are out there, which ones are suitable for them, and whether they even need directives at all, especially if they are young. There are several types of advance directives. One is a living will, (which in Texas is called a Directive to Physicians and Family or Surrogates) which communicates your wishes about end of life choices and treatment and informs your doctors whether or not you want extraordinary medical measures taken under certain situations. Another type is called a health care or medical power of attorney. In a medical power of attorney, you give someone the power to make health care decisions for you in the event you are unable to do so for yourself. A third type of advance directive for health care is a do not resuscitate order. A DNR order is a request that you not receive CPR if your heart stops beating or you stop breathing. Depending on the laws in your state, the health care form you execute could include all three types of health care directives, but more typically, each document is prepared independently. Another important medical document is the HIPAA Authorization which allows certain persons to access your protected medical information and discuss your care with medical providers.

If you are 18 or over, it’s time to establish your health care directives. Although no one thinks they will be in a medical situation requiring a directive at such a young age, it happens every day in the United States. People of all ages are involved in tragic accidents that couldn’t be foreseen and could result in life support being used. If you plan in advance, you can make sure you receive the type of medical care you wish, and you can avoid a lot of heartache to your family, who may be forced to guess what you would want done.

Many people do not want to sign health care directives because they may believe some of the common misconceptions that exist about them. People are often frightened to name someone to make health care decisions for them, because they fear they will give up the right to make decisions for themselves. However, an individual always has the right, if he or she is competent, to revoke the directive or make his or her own decisions.  Some also fear they will not be treated if they have a health care directive. This is also a common myth – the medical power of attorney simply informs caregivers of the person you designate to make health care decisions and the type of treatment you’d like to receive in various situations.  Planning ahead can ensure that your treatment preferences are carried out while providing some peace of mind to your loved ones who are in a position to direct them.

Thursday, December 08, 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.

 

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Monday, November 28, 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/probate 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.)
* Discuss with your attorney before you remove spouse’s name from all joint accounts or ventures, such as bank accounts, utility companies, credit card accounts, etc.
* Discuss with your attorney before you pay final bills, and 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.

 

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Tuesday, November 22, 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.

 

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Tuesday, November 15, 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.

 

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Monday, October 10, 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.”

Friday, September 23, 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.

Tuesday, August 23, 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.”

Thursday, August 11, 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 deceased lived and where the property is being probated) can take anywhere from a few months to a few years.

Do I need a lawyer to help probate an estate?

This depends on the state in which you live and sometimes on the local rules of the courts within the state. Some courts will not allow a party to probate a will without an attorney and some will. If you have been named as executor, probate can often become an overwhelming maze of deadlines, notifications and potential liabilities, and this is why most executors do choose to hire a probate lawyer to help them through the process.

Lawyers can very helpful under any of the following circumstances:

• There are a number of beneficiaries who are not on friendly terms, or are receiving varying sizes of inheritance.
• The decedent had large estate with many different assets, especially if the assets are not commonly held.
• The decedent was a resident in a different state than your own home state.
• A large number of creditors are making claims on the estate.
• There is a disagreement about the will, or if more than one will was found.
• 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. Other types of accounts that may not be subject to probate are survivorship accounts (JTWROS),  pay on death (POD) accounts, or transfer on death (TOD) accounts, the money from which can pass directly to the named joint tenant or 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.

Tuesday, August 02, 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 that it is reported 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 Reportremarks 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.

Wednesday, July 13, 2011

Estate Planning for Beginners Part 3: Healthcare Documents

Thus far our “Estate Planning Basics” series has focused primarily on financial documents, but the documents pertaining to your health care are a vitally important part of any estate plan.

The most important healthcare document in your estate plan will be your healthcare directive – in Texas it is called a Medical Power of Attorney.  Depending on where you live, the documents which name a healthcare agent and detail 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, directive to physicians and family or surrogates or a personal directive.

Perhaps the most important part of a healthcare directive/medical power of attorney 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 healthcare directives can be very general or very specific in its instructions.  

In Texas, a Directive to Physicians and Family or Surrogates, which is commonly referred to as a Living Will, allows you to communicate your wishes now about certain end of life decisions in the future at a time when you are not able to communicate your wishes.

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.

Wednesday, July 06, 2011

Estate Planning for Beginners Part 2: 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.

·         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, property 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 or attorney-in-fact such broad and sweeping 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 a 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 using restrictive language in the document itself which sets limits on the agent’s power.

Wednesday, June 29, 2011

Estate Planning for Beginners Part 1: Wills and Trusts

Every new project has to begin somewhere, and most newcomers to estate planning choose to begin with a will and a trust. This is because wills and trusts form the foundation for how your property will be distributed, how your beneficiaries will be cared for, and how the probate process and estate taxes will be handled.

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.  Although, there are valid reasons to have those other instructions contained in separate documents.

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 in Texas should include at the very least, these important parts:

• The testator’s (creator’s) name and crucial information
• Nomination of an Independent Executor to carry out the wishes of the testator
• The naming of the beneficiaries
• Instructions as to how the estate should be distributed to the beneficiaries
• Signature of the testator and the date signed
• Signature of witnesses and the date signed
• A self proving affidavit

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.

Instead of using a will as your primary dispositive vehicle, many individuals and families choose to create revocable living 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 an office worker 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 or others 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.  Additionally, revocable living trusts are much better incapacity protection planning tools than are powers of attorney. Unlike a simple will, trusts are designed to withstand the test of time, allowing you to leave a legacy that can last for decades.

Wednesday, June 01, 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.

Tuesday, May 24, 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.

Monday, May 16, 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 leaving them to your beneficiaries; other assets—such as valuable artwork or antiques—are not always so easy.  How do you will an asset to a loved one when there is no deed or title 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 can provide an extra layer of protection from divorce or lawsuits during your lifetime.

Contact our office, or your own local estate planning attorney, for more information.

Thursday, April 28, 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.

Wednesday, April 20, 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 one of the primary documents 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 definitely don’t recommend) that document should probably be 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 distributing “all of my property” in general.  Your will also names an executor, the person who will carry out your wishes as detailed in the document. 

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 should be the same across the board:

·         A will must be created by a testator who is of legal age, of sound mind and judgment, and under no duress.

·         A will should be in writing and signed and dated by the testator.

·         In Texas, if the will is not wholly in the handwriting of the testator, the will should be attested by two or more credible witnesses over the age of 14. 

·         And in some states, it must also be notarized.

·         It’s also a good idea that the will revoke all previous wills and codicils.

It is important to note that there is no requirement that a will must be created by or with an attorney; however, there have been many instances where homemade wills have been 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 by a spouse and children in certain percentages.  If there is 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 will be much more expensive and will take even longer than usual as the extent of your estate, as well as any outside claims to it, are investigated and your legal heirs will have to be formally determined and ordered by the court.

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 can also be 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.

Tuesday, April 05, 2011

Frequently Asked Questions: Does Your Family Need a Trust?

Estate planning attorneys are asked a lot of questions about how to protect every different kind of family and situation, and many of these questions are 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.

Although there are many different types of trusts, the fundamental basics of trusts include the following:  a transfer of property to someone who promises to hold the property for another according to the transferor’s instructions.  No matter how complicated or simple the trust instrument may be, the basics remain the same.

One of the primary benefits of a trust is its 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 beneficiaries, 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 mentioned above. Other options include special needs trusts, irrevocable trusts, life insurance 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 and loved ones.

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.

Friday, March 04, 2011

Tough Decisions Await Executors of 2010 Estates

If you are the executor of the estate of a decedent who died in 2010 you may think you’re in the clear.  After all, there was no estate tax in 2010 right?  Making distributions should be a piece of cake.  Wrong.  Because of the estate tax election available on the estates of 2010 decedents, administering those estates will actually be more work than you may think.

The repeal of the estate tax in 2010 also brought with it a repeal of the “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.  This generally resulted in a higher tax paid on assets than the normal estate tax rate—not good for taxpayers. But 2010 estates don’t have to go by these rules. The legislation passed in December of 2010 gave 2010 estates the opportunity to elect whether they wanted to use the 2010 estate tax laws, or the new laws for 2011.  This article in Forbes explains what this means:

“The 2010 Tax Relief Act restored the estate tax for individuals dying in 2010 with a $5 million per person exemption and a maximum rate of 35%. It also repealed the modified carryover basis rules for property acquired from a decedent who died in 2010. However, estates of individuals dying in 2010 can elect zero estate tax and the modified carryover basis rules that would have applied before they were repealed. That means the basis of assets acquired from the decedent would be the lesser of the decedent’s adjusted basis (carryover basis) or the fair market value of the property on the date of the decedent’s death.”

In general this tax election is a good thing, it allows executors to choose which tax formula will cost the beneficiaries the least in taxes; but it does mean a lot more paperwork and a lot more attention to detail.  If you are the executor of an estate of a decedent who died in 2010, don’t hesitate to call us.  We can answer your questions and help you explore your options.

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.

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.

Thursday, February 03, 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:

• Older children have the means to continue their education if something happens to you
• 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.
• You have someone trustworthy distributing your assets as you wish after you pass away.
• Your business will transfer smoothly if you aren’t able to run it anymore.
• 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

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.

Wednesday, January 19, 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, 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:

• 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.)
• To avoid passing the inheritance directly on to creditors if the initial beneficiary is in debt or involved in a lawsuit.
• 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:

• Planning for succession within a family business.
• When multiple generations of families own property together.
• If the family is responsible for significant debt.
• If a family has a history of supporting certain charitable foundations and desires to continue doing so.
• To provide for family members who live out of the country.
• 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 Heirs

Do you have a provision in your will or trust to pass your house on to your kids when you die?  If so, you may want to consider giving the house to them now, before the end of the year. According to this article in the New York Times, doing so could be beneficial to both your heirs and yourself.

 It’s easy to see how your heirs might benefit from receiving at least part of their inheritance now. The lapse in the estate taxes only last through the end of the year, “it is scheduled to come back next year with a vengeance. Unless Congress changes current law, the estate tax rate will be 55 percent (60 percent in some cases) on all but the first $1 million, except for what you bequeath to your spouse or charity.”

What may not be quite as obvious is how gifting a large asset right now can benefit you as the giver.  “By shifting real estate now, you remove the asset and any subsequent increase in its value from your estate — an especially timely move if your property’s value is depressed and you expect it to bounce back at some point. What’s more, if you wind up owing tax on the gift, the rate now is less than it may be later. Barring Congressional action, the tax rate for 2010 is 35 percent, rising to 55 percent on Jan. 1.”

Making such a large gift is not necessarily without its “hurdles” as the article calls them.  Amongst these hurdles include deciding whether you want to continue living in the house, whether to break up interest in the asset or keep it as a cohesive whole, and the potential awkwardness of having a business relationship with family.  The article offers a number of thoughtful solutions to these issues, all well worth considering. 

As beneficial as such a gift may be to both grantor and recipient, we strongly urge you to discuss the details of such a large gift with your estate or financial planner before you take any action.

Wednesday, October 20, 2010

Plan Ahead to Avoid Financial Pitfalls in 2011

A recent article in U.S. News and World Report points out that although “the Great Recession may technically be over... Consumers [still] don't want to spend and are still slowly digging their way out of the mountain of mortgage and personal debt that helped fuel the downturn.” Among those groups who are still struggling the most are seniors and retirees, many of whom took a devastating hit to their retirement investments and savings, and are still struggling to recover.

Unfortunately, according to the article, 2011 may bring with it some new financial concerns for seniors.  Some of the “major money issues” seniors will have to think about in the coming year include a zero cost of living adjustment from the Social Security Administration, changes to certain Medicare policies, a rise in income and capital gains tax rates, and the return of the estate tax, among others.

Although the article itself offers no particular solutions to these financial concerns—it merely gives a warning of what’s to come—there are steps you can take to avoid some of the worst financial pitfalls.  Because each individual situation will be different there is a danger to blindly following (or offering) standard advice across the board.  However, with consultation and careful planning there are a number of strategies estate planners can recommend that may help your family protect your assets now, and when the estate tax returns. Forewarned is forearmed, and taking the time to consult with your estate or financial advisor and plan ahead may be the best action you can take.  

Monday, October 18, 2010

Can You Foolproof Your Power of Attorney?

“The best laid plans of mice and men often go awry.”  Although we hate to admit it, this statement will also sometimes apply to estate planning; and more often than we would like, it happens with powers of attorney.

A power of attorney is the document in which you nominate an agent (or attorney-in-fact) to make financial decisions and take legal action for you when you are incapacitated or otherwise unable. (This does not include healthcare decisions, covered in another document called a health care directive.) Unfortunately, as this recent article on the Elder Law Answers website points out, “many people experience difficulty in getting banks or other financial institutions to recognize the authority of an agent under a power of attorney.”

This difficulty usually has nothing to do with the validity of the document; rather, it is the bank’s attempt to protect itself.  But while a little bit of caution is understandable, it can have frustrating—or even tragic—results if not addressed.  Luckily, there are steps you can take to improve your chances of having your power of attorney honored. The article mentioned above includes a number of good suggestions:

·         Talk to your bank about your plans ahead of time.

·         Ask your financial institutions if they have any requirement for powers of attorney, or even their own standard form.

·         Update your power of attorney forms or documents frequently (every 2-5 years.)

Talking to a representative from your bank every 2-5 years may seem like an inconvenience now, but imagine the inconvenience if you are incapacitated and your agent is unable to access the funds he or she needs to pay your bills, make your mortgage payment, or provide for the needs of your family. A little bit of time spent now can save a mountain of stress later on.

Friday, October 15, 2010

What Is Probate?

With all the recent news about what will happen with estate taxes, the process of probate has come up quite a bit.  Sometimes probate is mentioned in a low-key, matter-of-fact kind of way; at other times it is presented as something scary, and to be avoided at all costs. We know our readers have seen the term often enough here in our blog, but under the circumstances we thought it a good idea to go back to basics, and have a discussion of exactly what is probate, and what’s all the fuss?  

Probate is the process by which the court determines the legal property of a person who has died, and facilitates the distribution of those assets.It sounds like it should be simple, but 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.

You may wonder why probate can take so long, especially if the deceased person has left a will making their wishes clear.  A good will can certainly make the process easier, but even with a will, there are certain steps that must be followed to complete the probate process, some of which can be very time consuming.  Some of these steps include:

·         The appointment of an executor or personal representative

·         Verification of the will

·         Taking an inventory of assets belonging to the deceased

·         Giving notice to creditors

·         Paying valid claims against the estate

·         Preparing and paying taxes

·         Notifying beneficiaries

·         Distributing the assets to the beneficiaries or heirs

If you think that just reading the above paragraph takes your breath away, imagine the confusion of having to actually go through all of those steps—and possibly more!

Whether or not your estate will eventually be subject to a lengthy or expensive probate often depends on a number of factors: the size of your estate, how your assets are held, and how cooperative your next of kin may be. But one way to increase your chances of avoiding probate is to have clear (and clearly valid) estate planning documents, including a will, power of attorney, and possibly a revocable living trust. 

If you are concerned about probate, or would like to know more about how you can protect your assets and help your loved ones avoid a lengthy probate, contact our office—or a qualified estate planning attorney in your home state—to discuss your options.

Wednesday, October 13, 2010

Prepare Now for an Uncertain Future

There’s a useful saying that goes something like this: “Expect the best, but prepare for the worst.”  Never has that saying been as useful as it is right now in regards to asset protection and estate planning.  As Laura Lallos mentions in her article in the Morningstar Advisor, “Estate attorneys are trained to prepare for every contingency. But how do you plan for the unimaginable? Who would have predicted a U.S. tax system with no estate tax at all--and no certainty about what the estate tax will look like in 2011?”

Planning for the future when the future is so foggy is a challenge at best, but this unique year for taxes offers some once-in-a-lifetime opportunities for giving and saving as well.  This seems to be a time of contradictions. As the article points out, “The best strategy that financial advisors and attorneys can pursue now is to prepare their clients for the worst. On the bright side, some clients can also seize opportunities created by the gaping holes in the tax law for 2010.”

The article suggests a number of strategies that you can implement now to prepare for an uncertain future.  Some of these include:

Give monetary gifts now, when the gift tax rate is a low 35%, in order to lessen your taxable estate.

Take advantage of the one-year-only lapse in the Generation Skipping Transfer Tax.

Create a Grantor Retained Annuity Trustbefore the end of October to take advantage of the currently very low Section 7520 rate.

See your estate planner and make sure your estate and asset protection plans truly are “prepared for the worst.”  We may not yet know what next year will bring, but that doesn’t mean we can‘t take steps to ensure our clients are prepared for whatever the future may hold.

Monday, October 11, 2010

What to Do With Your Estate Plan After a Divorce

When it comes to estate planning, the steps you take after a divorce are not so different from the steps you’ll take after a death—many of the phone calls will be the same, many of the changes you make and details you change will be similar.  This all makes sense, because a divorce is basically the death of your marriage, and in the financial and legal world your marriage was like an entity all its own.

One question many people ask is “Who gets the estate plan?” The answer is that both of you and neither of you get the estate plan. Ideally, you both put a lot of thought into your estate plan and it reflects both of your wishes.  All of this work was not for nothing.  The details of your plan will have to change, this is true, but the basic ideals can most likely stay the same.

Your first order of business should be to consult with an estate planning attorney. Many changes you will want to make should be coordinated and discussed with an attorney who can help you look at the plan as a whole. One thing to consider quickly is to change your beneficiary designations.  Most married couples name their spouses as the primary beneficiary on insurance policies, retirement accounts, wills and trusts, with their children or immediate family members named as secondary beneficiaries.  Unless you think your ex-spouse deserves to benefit from all your hard work, you’ll want to remove him or her as a beneficiary immediately. (Documents to change: will, trust, ALL life insurance policies, IRA or 401(k) accounts, JTWROS  bank accounts, investment accounts that are POD or TOD accounts, credit card insurance policies.)

Your second order of business will be to amend your agent/executor/trustee designations.  It is likely that while you were married you named your spouse as the primary person in all of these roles; you’ll now want to move your secondary nominee to the primary position, or find someone new. (Documents to change: will, trust, All powers of attorney, health care directives, declaration of guardian forms for yourself, emergency contact forms.)

Not necessarily your third order of business, but somewhere in there you may want to change your declaration of guardian for minor children.  You and your ex-spouse probably chose people you both knew and trusted to be guardians of your minor children if anything happened to both of you.  Divorce can bring up many powerful emotions and hard feelings, so although these people are probably still good and trustworthy people, you may want to nominate someone else.  Depending on your custody arrangement, your ex-spouse will still be your children’s primary guardian if anything happens to you.  This doesn’t mean you shouldn’t execute a new designation of guardians, but keep in mind that your nomination of guardians will only come into play if your spouse dies first. (Documents to change: declaration of guardians for minor children, emergency contact forms, authorization for consent to medical treatment of minors.)

The most important thing to remember is that the more you put it off, the more likely it is that your wishes will go unacknowledged. As a rule, it’s a good idea to visit your estate planning attorney after any life change, especially one as significant as divorce.

Wednesday, October 06, 2010

Power of Attorney from the Agent’s Perspective

In our last post we discussed the importance of choosing the right person as your agent or executor and some of the things to consider as you make your choice.  In today’s post we’ll look at the agent/executor situation from a different perspective—that of the person serving in the role.

What happens if you’re named as agent or executor and don’t have what you need to do the job well? In this recent post on the New Old Age Blog, a reader asks the question of what to do if you are named co-agent of a power of attorney and the other agent isn’t doing his share.  This is just one example of some of the difficulties that can crop up when you’re serving in a fiduciary capacity.

The first thing to remember is that just because you’re nominated doesn’t mean you have to take the job. Serving as power of attorney can be a weighty job, and if you don’t have the time or energy to put into the role it might be better all around for it to pass to an alternate nominee.

Another thing to keep in mind is that you don’t have to do it alone.  This is not to say that you should have a co-agent (although as evidenced by the article above some people do choose to name co-agents rather than just one person), but it does mean that you can ask for help.  If you aren’t sure what to do don’t be afraid to ask your attorney (or the testator’s attorney) for help.

Finally, if you know ahead of time that a friend or relative is naming you for a fiduciary role, take the time to talk to that person about their values and wishes.  Ask the questions you anticipate might crop up later.  Having the conversation when you still can will help immensely when the time comes to make decisions on that person’s behalf.

Monday, October 04, 2010

Executors and Agents: Choosing Your Own Replacement

When people think about estate planning they generally think about inheritance, or taxes, or even guardianship—but rarely are the words “executor” or “agent” the first ones that come to mind.  And yet, choosing your executor or your agent is one of the most important decisions you’ll ever make.

Your executor is the person who carries out the instructions in your will.  You may spend hours (sometimes months or even years) agonizing over inheritance plans and making decisions; but in the end, when the time comes for all of those decisions to be implemented, you’re not going to be around.  If there are any questions to be answered or clarifications to be made they’re going to fall to your executor.

Your agent is the person who—depending on whether the document is a health care directive or a financial power of attorney—will make your important financial or health care decisions when you are unable. This person is your proxy during your life, signing checks on your behalf or talking to doctors about your treatment.

Considering all of this, it is understandable why so many people have trouble naming an agent or executor.  It’s not easy to choose your own replacement, so to speak.  But the most difficult decisions are often the most important. If you are a parent of more than one child then you know about the sibling fights that can erupt seemingly out of nowhere, even in loving and agreeable families. This is especially true when there is any uncertainty about what mom or dad’s true wishes were.  The right agent or executor can relieve much of that uncertainty.

So how do you choose the right agent or executor?

First of all, think it through carefully.  Choose someone reliable, whose decisions you trust. You’ll want someone who’s careful; and you’ll want to choose someone who isn’t already overloaded, because they’ll need to have time to do a thorough job. Choose someone who knows you and who knows your family; a familiar face will be comforting in hard times.  On the other hand, nominating a financial institution rather than a personal friend can work out well under the right circumstances, but research your choices carefully.

If there isn’t one clear choice you may decide to nominate two people to make decisions together.  This can be a good alternative, but it can also be a recipe for disaster, so be sure to build in some protections: name an uneven number of agents or executors to prevent tie-decisions, or nominate a mediator or tie-breaker who can step in to prevent serious disagreements from having to be decided in court.

Monday, September 27, 2010

How to Keep Your Children from Squandering Their Inheritance

Many parents come into our office with one concern on their minds: protecting and providing for their children. We help these parents select loving guardians and set up solid trust or inheritance plans to ensure that their children will have everything they need.  But parents often have another concern as well—how to keep their children from squandering an inheritance received too early. 

These parents want to protect their children from "predators" and "creditors"  including the potential disaster of being given too much financial responsibility before they are mature enough to handle it; they either want to keep their inheritance in trust for the children or gradually relinquish control or assets as each child reaches the milestones which prove they are fiscally prepared. We are happy to help parents design a plan that helps them achieve this goal. 

One strategy to help a child reach financial maturity is to specify an age at which a child may be co-trustee of his or her own trust. The child can then partner with a co-trustee of the parents’ choosing; this could be a close friend of the family, a trusted financial advisor, or even a corporate trustee such as a bank. This gives the child the opportunity to get a taste of responsibility and begin making decisions, but with a safety net beneath them. When the child reaches a certain age (or alternatively, after attaining a goal such as graduation from college or graduate school, or gainful employment for a specified amount of time) he or she may then become sole trustee of his or her own trust.

If parents don't want to keep the inheritance in continuing trusts for their children, another strategy is to give the child access to the trust principal itself in gradual increments. For example, the child may receive 1/3 upon graduation from college, another 1/3 ten years later, and the remaining 1/3 ten years after that. Of course the ages and amounts are completely up to each client, but the slow distribution of assets allows the child to have a learning curve, something which makes the parents (and the child) much more comfortable.

At our office we understand that there is no substitute for parental involvement, but we can give our clients options that can lay a strong foundation for fiscal responsibility. If you are a parent with similar concerns, contact our office for more information.

Friday, September 24, 2010

Lapse in Generation-Skipping Transfer Tax Makes Giving to Grandkids Easier Than Ever

Wealthy grandparents have a unique opportunity this year to give their grandchildren gifts of substantial value without incurring a hefty tax. This is a huge savings opportunity!—so why aren’t more people taking advantage of it? 

Part of the reason may be lack of awareness. Everyone knows about the Bush administration’s year-long repeal of the estate tax, but very few people seem to be aware that the Bush tax cuts included a year-long lapse of the generation-skipping transfer (GST) tax as well, as discussed in this article in Reuters. 

But before you call the grandkids with the good news, consider whether or not you feel comfortable giving them a large sum outright.  If your grandkids are still young (and not yet responsible about money and finances) you may not want them having such a large sum to play with; and unfortunately, giving the gift in trust is not an option in this case.  “To take full advantage of the GST tax break, assets should be transferred directly to beneficiaries and not to a trust. Money placed into a trust may lead to taxes when distributions are made later on.”

If your grandchildren are responsible adults, and if you’ve been considering giving them a monetary gift anyway, this lapse in the generation-skipping transfer tax could be just the push you need.  Talk to your attorney or financial advisor about your gift-giving options.

Wednesday, September 22, 2010

Charitable Remainder Trusts: Philanthropy in Death Can Benefit You in Life

If you have a favorite cause, foundation or charity you have probably considered leaving some money to that organization in your will or living trust. Perhaps you’ve even taken it a step further and toyed with the idea of specifying that the executor of your will or trustee of your trust set up a trust in the name of your favorite charity, rather than simply giving a one-time gift.

If you have ever considered either of these options you may want to ask your estate planner about setting up a Charitable Remainder Trust, which, according to this Elder Law Answers article, not only supports your favorite charity after your death, it also benefits you during your lifetime.

“A charitable remainder trust is an irrevocable trust that provides you (and possibly your spouse) with income for life. You place assets into the trust and during your lifetime you receive a set percentage from the trust. When you die, the remainder in the trust goes to the charity (or charities) of your choice.”

The altruistic reasons for setting up a charitable remainder trust are obvious, but here are some other advantages you may not have considered:

• Reduction of your taxable income
• Charitable tax deduction at the time you fund the trust
• Diversification of assets
• Income from the trust during your lifetime

In addition to all of these financial advantages, setting up a charitable remainder trust provides you with the opportunity to leave a family legacy and impress your values upon your children and grandchildren.

 Please remember that charitable remainder trusts are irrevocable trusts, which means once they’re done they can’t be undone, so it’s not something to take lightly.  If you are interested in creating a charitable remainder trust, call our office or talk about it with your own attorney before you take action.

Wednesday, September 15, 2010

State Of Washington Takes Action Against DIY Legal Document Retailers

There has been lot of hullabaloo in the news recently about Do-It-Yourself Wills and Estate Planning, most notably a debate on Forbes.com with articles presenting The Case For Do-It-Yourself Wills and The Case Against Do-It-Yourself Wills. Well, the state of Washington just weighed in on the subject with a settlement between the Washington Office of the Attorney General and Legal Zoom, a company that offers DIY legal documents online; and the ruling leaves no question as to where the Washington Attorney General stands in his opinion:

“’LegalZoom offers do-it-yourself legal documents online but can’t provide you with legal advice or tell you which forms to fill out,’ Attorney General Rob McKenna said.

Under a settlement with the Attorney General’s Office, LegalZoom can’t compare its costs to attorneys’ fees unless the company clearly discloses that its service isn’t a substitute for a law firm.

Simply selling legal forms doesn’t constitute the practice of law. LegalZoom can only provide an online form service that allows consumers to choose and complete their own legal documents, explained Consumer Protection Division Chief Doug Walsh.

The agreement filed today in Thurston County Superior Court also prohibits LegalZoom from engaging in the unauthorized practice of law, selling personal information obtained from Washington customers or misrepresenting the benefits of any estate distribution document.”

Regardless of your existing thoughts on the subject of DIY wills and estate planning, the comments and actions of the Washington Attorney General certainly provide food for thought.

Monday, September 13, 2010

How to Prepare for Dismaying Changes to Estate Tax Law

This may seem like we’re listening to a broken record, but once again Congress’ inability to act is creating uncertainty in the estate-tax-planning world.  We’re little over 3 months away from a major upheaval in the estate tax, and according to the New York Times the upcoming law is likely to cause a lot of grumbling unless Congress takes action.  And it’s no wonder when the new law will mean that more families are taxed at a higher percentage:

“The amount of each estate that is exempt from estate tax is scheduled to become $1 million in 2011 (down from $3.5 million in 2009, when the tax was last in effect). The tax on the balance is to rise to 55 percent in most cases (up from the 2009 rate of 45 percent). So now is the time to consider the various tax strategies available.”

What this lower exemption rate really means, however, is that more families will be caught off-guard when a loved one passes away and the survivors are suddenly hit with a massive tax bill.

That is unless families start planning now.

The Times article mentioned above suggests that “the easiest way to reduce the tax bill is to give as much as $13,000 a year each to as many people as you like — which you can do without paying gift tax;” but when you consider how little $1 million really is (especially when the value of your home, retirement savings, etc. are all included when adding up your total assets) we’re guessing that there are a lot of people out there who are over the exemption amount, but don’t feel they can afford to go handing out $13,000 every year. Much more appealing are some of the other planning strategies suggested in the article, including:

• “Buy a one- or two-year [life insurance] term policy to cover the tax billif the exemption amount is only $1 million.” The policy will help your heirs cover what could be a hefty tax bill, but the policy “[could] be canceled if Congress eases your estate tax concerns;” and
• “Create a trust.”The article suggests a GRAT (Grantor Retained Annuity Trust), which is a great tool for high-value assets that are expected to appreciate during your lifetime; but for married couples simply looking for a way to protect their children from a hefty federal estate tax down the road a Credit Shelter Trust may be a better option.

There are a number of other ways you might be able to prepare for the coming estate tax upheaval—the best way to protect your own family is to contact an estate planning attorney and ask about your options.

Wednesday, August 25, 2010

A Step-By-Step Guide to Getting Started With Your Estate Planning

You’ve heard all the arguments in favor of estate planning, you know it’s the right thing to do, you want to get your planning done... you just aren’t sure how to get started.  This is understandable; estate planning can feel like an overwhelming endeavor when you’re presented with everything at once.  The trick to getting started with your planning is to take it one step at a time.

Write down your goals. You may have a number of intertwined goals for your estate plan (this is especially true for blended and multigenerational families), or one simple-but-important goal such as “ensure my minor children have a place to go” or “keep the family business intact.” Knowing your goals from the outset will make all subsequent decisions much easier.

Make a list of the people you trust. Throughout your estate plan you’ll be nominating people to take over financial, healthcare, and guardianship responsibilities if something happens to you.  Have a rough list of people you would trust in these roles.  Begin with your initial goal and go from there.  For example, if your initial goal was guardianship of minors, make a list of people you would trust with the care your child, and move from there to financial decision-makers, etc.

Make a list of people you don’t trust.  If you’re having trouble coming up with people for the list above, it sometimes helps to consider the people you would NOT want to be responsible for your child, your finances, or your healthcare.  Write down those people and work backward from there.  If your kids must be kept from crazy Uncle Joe at all costs, would your cousin Emily be an acceptable alternative, even if she does have a different parenting style?

Know your assets. Make a list of all your assets and their approximate values. This will help your estate planner determine what kind of asset protection you need in your plan. Assets include:

• Your Home
• Investment/Vacation Property
• Bank Accounts
• Savings/Investment Accounts
• Retirement Accounts
• Life Insurance
• Family Owned Business
• Etc.

Bring In the Professionals. Estate planning is a very technical process, and the laws may frequently change, so you’ll definitely want professional help with the details of the process.  The good news is that now that you’ve completed the beginning steps, the follow-through with your chosen professional advisor will be a snap!  If you already have a relationship with a trusted attorney, insurance agent, financial advisor or CPA you’ll want to start there.  Let that person know your goals and that you’re ready to begin planning in earnest; he or she will be able to guide you onto the next steps, or give you the name of an estate planning professional who will help you build your ideal plan.

Although it looks overwhelming from the outset, estate planning is really just a series of small steps, each of which leads you to the achievement of your ultimate goal: Preserving your assets and protecting your loved ones.  Now that you know it’s so easy... what are you waiting for?

Monday, August 23, 2010

Debunking 5 Common Estate Planning Myths

There are five common myths that frustrate all estate planners—particularly because we know that not only are they patently untrue, but also because their continued circulation can be harmful. 

1. Estate Planning is only for rich people. This is probably the single most common estate planning myth there is—and it is a myth.  Many people believe that "estate planning"  deals only with saving estate taxes upon death.  But that is certainly not so.  A commonly used definition of "estate planning" includes ... I want to control my property while I am alive, take care of myself and my loved ones should I become disabled or incapacitated, and give what I have, to whom I want, the way I want, and when I want.  Furthermore, if I can, I want to save every last tax dollar, professional fee and court cost legally possible.  Everyone needs an estate plan of some sort, regardless of your net worth.

2. “I have plenty of time.”  AKA: Only old people need estate plans. First of all, just because you’re young doesn’t mean bad things can’t happen to you.  But you know this, and anyway, this post is not about fear.  Unexpected tragedies aside, an estate plan is useful even when you’re young because an estate plan is not just about death.  A good estate plan will include not only a will or living trust to transfer assets upon your death, but it will also include incapacity protection tools - including a Medical Power of Attorney, directives and HIPAA Authorization (which are useful if you find yourself facing a surprise stay in the hospital or are unable to make health care decisions for yourself), Designation of Guardian (should you later need a guardian to be appointed for yourself), Statutory and/or General Power of Attorney documents (which you may need if you are unable to sign for yourself on financial or legal documents), and various legal documents relating to minor children, including Designation of Guardians, (if both parents die, who would take care of the children?) and medical authorizations (in case you leave the children for extended periods of time with other family, friends or sitters).

3. Married people don’t need estate plans. While many people think that a married person with straightforward wishes for the distribution of his or her property (all to their spouse) has less need of estate planning, it does not necessarily follow that they should skip estate planning altogether. Since many married couples hold their financial accounts as joint tenants with rights of survivorship, in that case, the property will pass to the surviving spouse upon the death of the first spouse... But what happens if the surviving spouse gets re-married?  What about the property you would specifically like to go to your children, or to your parents or siblings? And what if both you and your spouse die together? These are the reasons why even married people should consider drawing up at least, a simple estate plan.

4. All I need is a quick and simple will and I’m done. A quick and simple will is certainly better than no will.  And if you want to be technical, you don’t even need a will; after all, your state of residence has a plan already in place for you.  The problem is that it may not be the plan you want. There is a saying that “anything worth doing is worth doing well.” This goes for wills (or any other legal document) as well.  If you want the basics you can have the basics.  But if you want a well thought out, reasoned plan, you’re going to need to spend a little more time on it.

5. Estate Planning is only about money. Although money is often one of the main motivating factors behind creating an estate plan, money is absolutely not what estate planning is all about.  Estate planning is about people.  It’s about your family and doing what’s right for them.  Estate planning is not just about saving your family from estate taxes, or making sure Junior gets the house; it’s about leaving them peace of mind. A well thought-out will or trust saves them from a lengthy probate process, but also reassures siblings that they are doing what mom or dad really would have wanted.  An estate plan is full of documents designed not just to save you or your heirs money, but to allow you to express your wishes and values even after your death. Estate Planning is about more than just money—it’s about family, legacy, and love.

Friday, August 20, 2010

Women and Finances: How Estate Planning Can Help

When it comes to family matters, women are often the head (and sometimes the sole member) of the planning committee.  Vacations, dinner parties, school activities and celebrations... many of these wouldn’t happen at all if the women of the family didn’t take the lead.  Estate Planning tends to be no different: Many first phone calls, appointments, and attendance at estate planning or elder law seminars are initiated by women.  However, studies suggest that this tendency in women to plan ahead may not apply to financial planning.

A recent article from CBS news suggests that although women are actively involved in family and household finances, they are less likely to be involved in long-term financial decisions. According to the article, although many women “know how to spend and get by on a short term basis... they have a time getting a grip on their long term saving and planning." Of course this is a generalization, and won’t apply to everyone; but considering the importance of the topic, it is definitely a worthwhile subject for discussion.

Here are a few statistics to consider that impact women and their long-term financial decisions:

• Older women (65+) outnumber older men by 22.4 million to 16.5 million. (Administration on Aging)
• Poverty rates are higher among older women than older men by 20.4 to 13.1. (U.S. Census Bureau)
• The median weekly earnings of full-time wage-earning women is $657, or 80 percent of men’s $819. (U.S. Dept. of Labor)
• Not to mention that on average, it is the woman of the family who will end up putting her career on hold for caregiving duties at various times in her life (either to care for young children or aging parents.)

Put all of this together and it means that women need to take control of their finances, not the other way around!  Luckily, this may not be as difficult as you think. The CBS news article mentioned above has some suggestions on how to take charge of your finances; but beyond that, planning your estate can be a huge step toward planning for your financial future as well, because any estate planning includes taking stock of of your financial assets—including savings accounts, retirement assets, individually owned assets as well as those owned jointly by a married couple.

We encourage women (and their families) to let their estate planning contribute to their financial future—it’s not just about how your assets will be distributed after your death, but also what steps you’d like to take to preserve those assets during your lifetime.

Monday, August 16, 2010

The REAL Reason to Plan Your Estate

We write often on our blog about specific pieces of the estate planning whole: elder law, retirement planning, estate administration, etc... But sometimes it’s important to pull back and look at the big picture—to remind ourselves why we’re doing all this in the first place. And the plain truth is that there is one main reason we do this: Love. 

Now, “love” may sound sappy and sentimental, but when it comes down to it love truly is the only reason we would spend time and money thinking about the unpleasant subject of death, and planning for a time that we won’t be around to enjoy.

Estate Planning Ensures Your Minor Children Have a Home

Part of creating your estate plan includes nominating guardians for your minor children.  Without this nomination your children are at the mercy of the court should anything happen to you. Estate planning also allows you to ensure that your minor children and their guardians have the financial security they need to make a smooth transition during a difficult time.

Estate Planning Preserves Sibling Relationships

There are fewer things more stressful to a family than the death of a beloved parent.  And it is at this time more than any other that fights are liable to break out between normally loving siblings: Fights over what to do for mom’s funeral, over who gets treasured heirlooms, over who dad would have wanted to distribute the estate. All of these fights can be easily avoided by creating an estate plan that spells out your wishes in clear and loving terms.

Estate Planning Allows You to Provide for Your Children and Grandchildren

You spend a lifetime raising and caring for your children knowing that someday, when you’re gone, they’ll have to fend for themselves. Creating an estate plan allows you to leave a little bit behind, a cushion your children can hold in reserve in case of emergency.  An estate plan allows you to continue providing for your children even after you’ve gone.

Estate Planning Leaves an Enduring Legacy

Estate planning is not just about finances and paperwork, it’s about relationships.  Creating your estate plan allows you to brush away life’s minor details and minutia and focus on what’s really important, allowing you to connect with your loved ones in a more meaningful and lasting way than ever before.  Your estate plan expresses your enduring values, leaving a legacy for your family that will live on for generations to come.

Friday, August 13, 2010

Does Marriage Matter in Estate Planning?

How much does “marriage” matter when it comes to estate planning?  The recent California court ruling on gay marriage has thrown marriage and its meaning once again into the limelight, and has many people thinking about what marriage means on a legal level.  

Anyone who pays taxes knows that your marital status matters to the state and federal government.  Your marital status also impacts your rights when it comes to insurance, privacy, pensions, and even probate. For example, the property of a married person who dies without a will automatically passes to their spouse (and children)*—this is not necessarily the case for unmarried couples. Similarly, in an emergency medical situation a spouse will have access to information about his or her injured spouse, but unmarried couples do not always have this same privilege.  Although there is good reason behind these privacy laws, it can be particularly distressing when couples who have lived together for years may suddenly have trouble getting medical staff to recognize their partner when a medical decision needs to be made.

Luckily, your estate planning attorney can help circumvent some of the potential problems unmarried couples may face in case of incapacity or upon death.  Executing an Advanced Health Care Directive or Health Care Power of Attorney will ensure that medical personnel recognize the authority of a trusted partner to make medical decisions for you.  Similarly, by creating a Will or Trust you can nominate the person you want to act as executor of your estate upon your death, and who the beneficiaries of your property will be, regardless of whether you have a marriage license or not.

The issue of marriage is one that is obviously very close to the heart, but estate planners see it on a very practical level as well.  In the legal world of estate planning our goal is to ensure that your wishes for end of life health care and final distribution of wealth are honored—regardless of your marital status.  

*Please note: Probate laws will vary from state to state—be sure to talk to your estate planning attorney about the laws specific to your state of residence.

Friday, August 06, 2010

Jane Austen’s Will: It Used to Be So Easy

Many clients are shocked when they see the sheer volume of paper in a truly well-done estate plan.  A trust by itself can be hundreds of pages, not to mention the other 6 to 16 documents you may or may not have—depending on your family situation. You may find that the “simple” estate plan you thought you were getting has turned into something of a size that would rival War and Peace! 

It didn’t always used to be this way.  The last will and testament of the great Jane Austen, for example, was only one paragraph long:

I Jane Austen of the Parish of Chawton do by this my last will I testament give and bequeath to my dearest sister Cassandra Elizabeth everything of which I may die possessed, or which may be hereafter due to me, subject to the payment of my Funeral expences, & to a Legacy of £50. to my Brother Henry, & £50 to Mde de Bigeon - which I request may be paid as soon as convenient. And I appoint my said dear sister the executrix of this my last will & testament.

Jane Austen

April 27 1817

Although this simplicity may have worked in 1817 England, it isn’t practical in the here and now.  Things just aren’t that simple anymore.  First of all, although Austen appoints her sister Cassandra as the executrix of her will, the will itself neglects to specify what powers are included in that appointment, leaving Cassandra effectively unable to carry out Austen’s wishes.  Secondly, the will neglects to make alternative provisions—what if Cassandra had unexpectedly died before Jane? Also notably lacking (from our contemporary perspective) are any provisions for estate taxes. And finally, discerning readers may notice that the will does not include the signatures of any witnesses, something which is absolutely necessary in order to execute a valid will today (with the exception of holographic wills, which are often created in emergency situations, are entirely hand written, and do not require the signatures of witnesses.) 

We all may long for simpler times, especially when it comes to something most people think will only benefit their heirs and not themselves; but many of the rules and regulations that are dismissively thought of as “hoops to jump through” are there for your best interest.  They exist to protect your heirs and your legacy from fraud, misuse, greed and neglect.  Far from being a chore, creating a thoughtful and legally valid will these days is actually an act of love... One might even say it’s a matter of sense and sensibility.

Wednesday, August 04, 2010

You Know the Importance of Planning... But Do Your Aging Parents?

If you have been reading our blog then you know that this year—the year without a federal estate tax—is an important year, and that next year—when the estate tax returns—will be an even more important year for planning and reviewing your estate.  You know this... but do your parents?

Kimberly Palmer, author of this article in U.S. News and World Report says that “bringing up the estate tax with your aging parents can be as awkward as inquiring after their sex life.”  Talking about any kind of estate planning with your parents can indeed be awkward, but as Palmer points out it is extremely important... especially now when the repeal and reinstatement of the estate tax means that “ignoring the issue could mean giving Uncle Sam a big chunk of one's estate inadvertently.”

So how can you bring up the topic of estate planning with your parents without them thinking that you’re more interested in your inheritance than your parents’ well-being? The article mentioned above has a few ideas, including:

• Talk about your own estate planning experienceand how relieved you are that everything is in place.
• Talk about recent celebrity deathsthat have been in the news: George Steinbrenner, Michael Jackson, etc.
• Mention how concerned you areabout the uncertain estate tax situation.

Of course, the best policy is to just be honest. Tell your parents truthfully that you are concerned about their financial stability, about keeping the family peace, about your grasping uncle Mickey taking the antique dining set you’ve loved since you were a child.  Explain that you only want to help... but remember that the choice is ultimately theirs.  As author Deborah Jacobs says in the article, "if they don't want to talk about money, then you need to drop it and accept that this is not something you should pursue... If you have tense times towards the end of your parents' life because you're talking about estate planning, it will stay with you forever, and it's just not worth it."

Wednesday, July 28, 2010

Not Just Estate Tax Anymore

Anyone who has been following the news the past 6 months knows that the expiring Bush tax cuts (including the repeal of the estate tax this year and the tax’s reinstatement next year) have given lawmakers no end of trouble as they struggle and debate—and debate and struggle—to agree on new tax legislation moving forward. In fact, The Wall Street Journal calls the issue “a ticking time bomb,” while the New York Times warns that “an epic fight is brewing.” It seems that the only thing everyone does agree on is that something has to be done before December 31, 2010.

Unfortunately, according to both news sources, politics takes precedence over legislation.  “The tax fight will serve as a proxy for the bigger political clashes of the year, including the size of government and the best way of handling the tepid economic recovery,” warns David M. Herszenhorn of the NY Times, “’...this is code for the role of the federal government, the debate over the size of government and the priorities of the nation.’”

According to David Wessel of the WSJ party lines are clearly drawn.  “The Obama administration is pressing to extend the Bush tax cuts for everyone with an income under $250,000 a year and to raise taxes on those above. A recent Pew/National Journal poll found that only 11% of Democrats favor extending all the Bush tax cuts.” Meanwhile, “Republicans are happily staking out the no-new-taxes turf, playing to their traditional constituency. Pew says 52% of Republicans favor extending all the Bush tax cuts.”

It would certainly give taxpayers some comfort if legislation could be passed quickly and decisively, but Herszenhorn warns that it’s not likely to happen, “Given the partisan gridlock of recent months, there is a chance that the battle could go down to the last minute, or even — in the face of a stalemate — that the tax cuts could be allowed to expire completely, a development that... lawmakers in both parties say could be the worst outcome.”

Either way, the best advice we can give our readers is to be prepared.  Just because lawmakers keep putting off a decision doesn’t mean you should.  Talk to your attorney about the best way for your family to weather the coming storm.  Be aware of changes to tax laws and update your estate plan accordingly.

Monday, July 26, 2010

The Comfort That Comes With Planning Ahead

Everybody thinks it won’t happen to them.  Or rather, everybody knows it’s going to happen to them eventually, but nobody thinks it’s going to happen tomorrow, or next week, or even next year.  The “it” of which I speak is, of course, death. It is this perceived immortality that allows so many people to put off their estate planning until it is too late. 

But today’s blog post is not a cautionary tale about a family who put off their planning and regretted it, today’s post is about the peace and relief that forethought and planning brings not just to your family, but to you as the person making the plan.

In this article in Market Watch Chuck Jaffe tells the moving story of his brother Rob, who insisted 2 years ago on creating an estate plan even though he and his wife were both healthy.  As Jaffe puts it, “While not pleasant subject matter, it was not morbid... you'd rather be drinking lemonade on the veranda, but it wasn't a sharp stick in the eye.”  However, when Rob became unexpectedly ill in May of this year the estate plan turned out to be a comfort to Rob and his family—such a comfort, according to Jaffe, that Rob “made me [Chuck] promise that I would write about him... when his time was up, because his story would help others.”

"People need to understand... how big a blessing it is to know -- when their time comes -- that they have everything in order, that they don't need to stress or worry about how things they worked their whole life for are going to turn out. ... I would not want to waste a minute of my life now having to do estate planning or worrying that I live long enough to get documents filed or whatever garbage comes with it... Focusing on death and dying while you are living, that's easy; having to focus on death when you are dying, that would be unimaginable."

In our business we frequently see how much easier it is for people to create a plan when they’re healthy, as opposed to the stress that comes with creating a plan when they are sick.  Thank you Mr. Jaffe for sharing your brother’s moving story.  We hope that your (and your brother’s) words will help motivate others to take comfort in planning ahead.

Friday, July 23, 2010

Should You Pre-Plan Your Own Funeral?

In just about every will or trust you will find something about the estate “paying the deceased’s final expenses,” otherwise known as funeral and/or memorial costs.  As a small portion of what can sometimes be a very large and intricate document, this “final expense” clause can seem unimportant—but we know better.

A funeral comes at a time when the death of a loved one is recent and close, and many people are still in shock and in some cases struggling with the reality of loss.  Funerals help grieving loved ones come to terms with death and say their final goodbyes… but for the person planning the funeral the experience can sometimes be a frustrating, painful, and expensive experience. Planning ahead for your own funeral—discussing it with your loved ones and even including your wishes in your estate plan—can remove this burden from their shoulders when the time comes.

Although pre-planning a funeral is essential, pre-paying for a funeral can actually be detrimental.  According to The Funeral Consumers Alliance there are just too many things that can go wrong, “[prepaying for] funerals may not cover every item of service you and your family expect, and there's often no guarantee the money you pay today will keep up with inflation to pay the cost of the service you've picked out.” In addition, “many state laws don't offer much protection for your prepaid funeral money.” If you change your mind or move out of the area there’s no assurance that you’ll get your money refunded. That having been said, although pre-paying may be a no-no, but setting aside funds—in an account, CDs, or a specially designated insurance policy—is always a good idea.

Talking about your wishes for “final disposition of your remains” is something that should always be discussed with your estate planning attorney. Whether you choose to pre-plan your funeral or not, having some basic instructions in your will or health care directive for your preferences regarding burial, cremation, organ donation and so on will be a huge help to your loved ones during a difficult and emotional time.

Monday, July 19, 2010

Estate Planning Advice for Ex-Pats and World Travelers

Estate planning can be a pretty involved affair, even for people whose lives are fairly straightforward; but if you are an ex-patriot, have dual citizenship, or plan to leave assets to family members in another country the estate planning process can by downright mind-boggling. This is because each country is going to have its own laws regarding heirs and distribution, while some governments (according to this article in the New York Times) will even “require their citizens or residents to pass assets on to people other than those whom they would choose.”

The United States has avoided these “forced-heirship” laws (although your state’s laws regarding distribution of assets in the absence of a will or estate plan may feel like forced-heirship), but these laws “are prevalent in many parts of the world, notably the Middle East, where Islamic law predominates, and continental Europe.”  If you are a United States citizen residing in one of these “forced-heirship” countries—or if you are a citizen of one of these countries residing in the United States—you will definitely want to talk to your attorney about how best to protect your family and your assets.

Just how you will go about building your web of protection will depend on a number of variables, including your citizenship, your country of residence, and in which country the assets were acquired or are held. Most estate planners agree that a trust is generally the best way to go about protecting your assets, but a trust may not work in every situation.  “The legal systems that have forced-heirship rules tend not to recognize trusts.” You may find that you’ll have to set up a will or estate plan in two places: one in your country of origin and one in your country of residence. 

And of course international estate planning is not all about heirs and distribution—especially if you have young children. International guardianship documents should be carefully drafted and should include provisions for temporary guardians, travel arrangements, and medical powers of attorney for minors.

Living in a global community has its pros and its cons—the best way to successfully span two countries or cultures is to be flexible... and be prepared!

Friday, July 16, 2010

One Man's Trash is Another Man's...Heirloom?

Families have a way of acquiring great numbers of treasured objects and mementos: photo albums, antique books, Wedgewood China... a mounted deer head?  You just never know what’s going to end up in the trash-heap and what will be kept and passed on to the next generation.  Ellen Lupton mentions in her recent article in the New York Times that she and her husband kept the Wedgewood China and (surprisingly enough) the deer head.  But the question she puts forth is... why?

Lupton’s article, entitled How to Lose a Legacy, makes the point that the difference between old stuff as trash and old stuff as treasure lies largely with you and how you choose to leave all this stuff to your heirs. “You can’t buy an heirloom at Pottery Barn or IKEA. It comes via gift, bequest or a heated sibling brawl.”

Lupton says early on in her article that “Even folks in the ‘die broke’ crowd, determined to enjoy their remaining assets rather than leave them to the ungrateful grandkids, may secretly hope the family will love and honor their dearest possessions.” But secret hopes aren’t of any use to your children or grandchildren after you’ve passed away.  Part of the job of an estate planner is to help you express these secret hopes to your heirs and leave your treasured possessions in safe and appreciative hands.

Of course your heirs are going to have minds (and memories) of their own, and your treasured silver cake platter could still end up in the local antique store; but the best way to keep your treasures in the family is to make sure your family knows your wishes.  If they know how much your grandmother’s English tea set meant to you (and why it meant so much to you) it’s going to mean that much more to them.

You may share a life and history with your heirs, but you can’t expect them to read your mind.  If you can put your stuff into context—let each heirloom tell a part of your story and reflect a meaningful relationship—the legacy you leave will be priceless.

Wednesday, July 14, 2010

Will Billionaire Steinbrenner’s Death Inspire Congress to Reinstate the Estate Tax?

Common superstition says that famous deaths come in threes, but the death of New York Yankees owner George Steinbrenner on July 13 makes four billionaire deaths in 2010.  It’s hard to deny the significance of such events in a year when there is no estate tax.

According to the Associated Press Steinbrenner’s family is set to receive a tax break of “about $328 million” because of the estate tax repeal this year.  This number, along with the millions of dollars saved (that would otherwise have gone to pay estate taxes) by the families of Dan L. Duncan, Walter Shorenstein, and Mary Janet Morse Cargill may inspire Congress to take action on the issue of the estate tax before the year is over. The Washington Post quotes Senator Bernard Sanders of R.I. as saying, “In the midst of this terrible recession, the idea of giving billionaires a massive tax break is obscene... Already we have four billionaire families who are not paying taxes -- Steinbrenner's being the last one. Many billions are being lost. We have to address that reality right now.”

Although there is still some talk of the possibility of the estate tax being reinstated retroactively, most lawmakers and attorneys agree that the further into 2010 we get the less likely this becomes. But missing out on the estate taxes of four billionaires has to hurt, and the members of Congress are not likely to drag their feet much longer.  One way or another, we can soon expect to see the issue of the estate tax become a hot topic of debate in Washington.  Our firm will keep you abreast of any changes to the law that could affect you, your loved ones, or your estate.