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house taxes

What are My Taxes on a House I Inherited?

Say your mom transferred the deed of the house over to you in November 2014 with a life estate for her. She dies in 2016. Mom paid about $18,000 for the home in 1960. This is the son’s primary and only residence. He wants to put the house on the market for $375,000. Will he have to pay capital gains tax?

The son probably won’t owe any tax on the sale of the house. Nj.com’s recent article entitled “Will sale of inherited home cause a tax liability?” explains that the profit can be calculated, by subtracting the cost basis from the sales price. That cost basis is the original purchase price plus any capital improvements.

As far as the son’s repairs, he should look at capital improvements, which is somewhat nebulous. The IRS definition is “add to the value of your home, prolong its useful life, or adapt it to new uses.” Any improvements must be evident when you sell. If you replace a few shingles on your roof, it is a repair. However, if you replace the whole roof, that’s a capital improvement. If you don’t have receipts for the capital improvements, you can use reasonable estimates. However, the IRS may not accept them, if you’re audited.

Inherited property receives a “step up” in cost basis to the fair market value as of the date of death. This means that the original purchase price of the property and any capital improvements prior to the date of death are no longer relevant.

If a property is sold after it is inherited, the profit is calculated by deducting the date of death value from the sales price with an adjustment for any capital improvements made to the property after the date of death.

As far as the mom’s life estate in the home, this is a special type of real estate ownership, where the owner retains the exclusive right to live in the property for as long as she’s alive. However, a remainder interest is given to someone else, like a child. This “remainderman” automatically becomes the owner of the property upon the death of the life tenant.

Even with the life estate, the home receives a full step-up in cost basis upon the death of the life estate owner. The first $250,000 of profit on the sale of a primary residence is also exempt from tax, as long as the seller owned the home and lived in the home for two out of the last five years.

As such, the basis of the home will be the fair market value of the home in 2016, when the son inherited it as the remainderman of the life estate deed, plus any capital improvements he made since then.

In this situation, because the son has owned and lived in the house for two out of the last five years, he can exclude up to $250,000 of profit. With estimated sale price of $375,000, he shouldn’t owe any capital gains tax.

Reference: nj.com (Dec. 31, 2020) “Will sale of inherited home cause a tax liability?”

Read more related articles at:

How Taxes Can Affect Your Inheritance

How to Avoid Paying Taxes on Inherited Property

Also, read one of our previous Blogs at:

What Exactly Is the Estate Tax?

Click here to check out our On Demand Video about Estate Planning.

2020 deaths

Celebrity Deaths in 2020 — Six Estate Planning Lessons We Can Learn

Celebrity Deaths in 2020 — Six Estate Planning Lessons We Can Learn

 

As estate planners, we are often shocked to learn about wealthy celebrities who pass away without a will or trust. These wealthy celebrities had the financial resources to implement a comprehensive, up-to-date estate plan yet failed to do so before their deaths. So what went wrong? More importantly, what lessons can we learn from these high profile deaths? In this article, by JDSUPRA.com  we analyze the estate planning mistakes and successes made by famous individuals in an effort to help educate others – famous or not – as to why good estate planning is important for everyone, regardless of your age or current health.

Tony Hsieh (1973-2020): $850 million
Estate Plan Efficacy Rating: 0/10

Tony Hsieh, the founder of Zappos, passed away after a tragic accident at the age of 46.  Worth hundreds of millions of dollars at his death, Tony has become well-known for the critical mistakes he made in his estate planning. Tony’s family filed documents in Nevada probate court alleging that Tony died without a will. Under Nevada law, this means that Tony’s fortune will pass to his parents. The biggest challenge will be valuing Tony’s estate and identifying his assets. Tony left “thousands” of sticky notes representing potential business deals and financial commitments all over his Park City, Utah mansion. Tony also owned numerous properties in different states, often purchasing real estate for friends and family. It is unknown whether these purchases were gifts or personal investments, and the probate court will be tasked with sorting it all out. It will likely take several years before his estate is fully settled.

Kobe Bryant (1978-2020): $600 million
Estate Plan Efficacy Rating: 5/10

Kobe Bryant was not only a famous basketball player, he was a savvy businessman, brand-builder, and investor. It is no surprise that Kobe had a carefully crafted estate plan in place prior to his untimely death at the age of 41. Kobe’s estate plan protected his assets, reduced estate-tax liability, and passed his wealth to his family members. Despite careful planning, Kobe made a tragic oversight. Kobe failed to update his estate plan after the birth of his daughter, Capri Bryant, who was just six months old at the time of his death. Seeking to fix this oversight, the co-trustees of the Kobe Bryant Trust petitioned the court to modify Kobe’s trust to add Capri as a beneficiary, so that she will be eligible to inherit her share of the family estate. This mistake not only requires the trust to expend unnecessary legal fees, it also eliminates the privacy aspect of Kobe’s estate plan because the trust and its terms have become public record.

A second (potential) mistake was Kobe’s failure to leave a gift to his mother-in-law. Kobe’s mother-in-law has alleged that Kobe promised “to take care of her” for the rest of her life. Unfortunately for his mother-in-law, Kobe did not memorialize these promises in his estate plan. Kobe’s widow, who is the primary beneficiary of his estate and a co-trustee of the trust, is refusing to support her mother despite Kobe’s alleged promises. This dispute has drawn widespread public attention and driven a wedge between Kobe’s widow and her own mother.

Eddie Van Halen (1955-2020) $100 million
Estate Plan Efficacy Rating: 7/10

Rock and roll legend Eddie Van Halen passed away from cancer at the age of 65. Little is known about Van Halen’s estate plan, suggesting he likely executed a trust or other estate planning device prior to his death. Nonetheless, Van Halen’s death raises several important reminders about estate planning for individuals with multiple marriages. Van Halen was married twice, and had a son with his first wife, Valerie Bertinelli. Although we do not have details about Van Halen’s estate plan, we can learn a few lessons from his situation. For those who have experienced divorce, children, and remarriage, there are unique estate planning issues to consider. For example, estate planning should account for any alimony (spousal support) that may have been put in place at the time of a divorce. The terms of the divorce and the conclusions regarding property ownership may significantly impact how one plans to distribute his or her property. Additional considerations regarding children from that union should also be addressed. This becomes even more important if more children are brought into the picture during a second marriage.

Justice Ruth Bader Ginsburg (1933-2020) $5-7 million 
Estate Plan Efficacy Rating: 10/10

Known by her initials “RBG,” Justice Ginsberg passed away in September of 2020, leaving a long legacy in her wake. Yet little is known about Justice Ginsburg’s estate. This is not by accident. When a famous individual dies and the estate planning is done properly, there is virtually no media coverage. Justice Ginsberg was a pioneer for gender equality, successfully arguing that men should not have preference over women for appointment as administrator of a decedent’s estate. It would come as no surprise if Justice Ginsburg nominated a women to serve as the administrator of her estate.

Lesson 1. Make an estate plan. Dying without an estate plan means the probate court will divide up your estate pursuant to state law. This may result in your assets being inherited by estranged family members or, even worse, family members who you strongly dislike. Make it a priority to find the time to execute your estate plan. Simple estate plans are affordable. Most estate planners will prepare a simple will for under $1,000. For high net worth individuals, failing to execute an estate plan may expose your estate to the federal estate tax, which could reduce the net value of your estate by up to 40%. Phillip Seymour Hoffman’s estate plan was prepared by his CPA. His estate ended up paying approximately $15 million in estate tax, almost all of which could have been avoided with proper tax planning.

Lesson 2. Update your estate plan. After a divorce or the birth or adoption of a new child, you should always revisit your estate plan. It is not uncommon for a child to be left out of a trust or a will, or for an ex-spouse to be the named beneficiary of an IRA. Many people mistakenly believe that a divorce automatically revokes any gifts to an ex-spouse. Although this is true for gifts left to a spouse in a will, this is not always the case with other gifting devices, such as IRAs. After a divorce, you should contact the financial institutions to verify that your ex-spouse has been removed as the beneficiary.

Lesson 3. Minimize family disputes and honor your promises. The ongoing bitter dispute between Kobe’s widow and her mother may have been avoided if Kobe had included a gift to his mother-in-law in his trust, honoring his alleged promise to take care of her. One of the most common disputes we encounter in probate court is when a family member claims that the deceased person made a verbal promise to that family member, but that promise was never documented in the estate plan. These promises include cash gifts, gifts of sentimental personal property, or forgiveness of loans.

Lesson 4. Avoid unnecessary administrative expenses. The administration of Tony Hsieh’s probate estate will undoubtedly drag on for many years, costing millions of dollars in attorney and other professional fees. This is precisely what happened in the administration of Prince’s estate. Although he did not die in 2020, there is much we can learn from Prince’s untimely death in 2016. Prince died without a Will. As a result, Prince left a large amount of money—approximately $250 million—to his six siblings and half-siblings. Prince’s probate case has dragged on for years. Since 2016, bankers, lawyers, and other professional consultants have been paid millions of dollars to help administer the estate. These extraordinary administrative fees could have been avoided if Prince had a trust or will.

Lesson 5. Honor charitable giving. During his life, Tony Hsieh made generous gifts to several charities and private foundations. By not having an estate plan, not a single dollar of Tony’s estimated $850 million estate will pass to charity. The same is true for Prince. It was well-known in the Minneapolis community that Prince was a generous donor to many charities. Because he failed to implement an estate plan, Prince lost the opportunity to leave a portion of his wealth to his favorite causes.

Lesson 6. No news is good news. When Justice Ginsburg died, the public heard nothing about the administration of her estate. Why? Because she most likely had a comprehensive, up-to-date estate plan in place before her death. Good estate plans minimize family fighting, keep the estate plan private, honor promises, and leave a legacy of good will.

Read more related articles at:

Lessons From The Rich And Famous: Why Estate Planning Should Be Part Of Your Retirement Plan

Notable deaths in 2020

Also, read one of our previous Blogs at:

Which Stars Made the Biggest Estate Planning Blunders?

Click here to check out our On Demand Video about Estate Planning.

 

 

DEATH OF SPOUSE

How Do You Plan for the Death of a Spouse?

How Do You Plan for the Death of a Spouse?

The COVID pandemic has become a painful lesson in how important it is to having estate plans in order, especially when a spouse becomes sick, incapacitated, or dies unexpectedly. With more than 400,000 Americans dead from the coronavirus, not every one of them had an estate plan and a financial plan in place, leaving loved ones to make sense of their estate while grieving. This recent article from Market Watch titled “How to get your affairs in order if your spouse is dying” offers five things to do before the worst occurs.

Start by gathering information. Make all of your accounts known and put together paperwork about each and every account. Look for documents that will become crucial, including a durable power of attorney, an advanced health care directive and a last will. Gather paperwork for life insurance policies, investment portfolios and retirement accounts. Create a list of contact information for your estate planning attorney, accountant, insurance agent, doctors and financial advisors and share it with the people who will be responsible for managing your life. In addition, call these people, so they have as much information as possible—this could make things easier for a surviving spouse. Consider making introductions, via phone or a video call, especially if you have been the key point person for these matters.

Create a hard copy binder for all of this information or a file, so your loved ones do not have to conduct a scavenger hunt.

If there is an estate plan in place, discuss it with your spouse and family members so everyone is clear about what is going to happen. If your estate plan has not been updated in several years, that needs to be done. There have been many big changes to tax law, and you may be missing important opportunities that will benefit those left behind.

If there is no estate plan, something is better than nothing. A trust can be done to transfer assets, as long as the trust is funded properly and promptly.

Confirm beneficiary designations. Check everything for accuracy. If ex-spouses, girlfriends, or boyfriends are named on accounts that have not been reviewed for decades, there will be a problem for the family. Problems also arise when no one is listed as a beneficiary. Beneficiary designations are used in many different accounts, including retirement accounts, life insurance policies, annuities, stock options, restricted stock and deferred compensation plans.

Many Americans die without a will, known as “intestate.” With no will, the court must rely on the state’s estate laws, which does not always result in the people you wanted receiving your property. Any immediate family or next of kin may become heirs, even if they were people you with whom you were not close or from whom you may even have been estranged. Having no will can lead to estate battles or having strangers claim part of your estate.

If there are minor children and no will to declare who their guardian should be, the court will decide that also. If you have minor children, you must have a will to protect them and a plan for their financial support.

Create a master list of digital assets. These assets range from photographs to financial accounts, utility bills and phone bills to URLs for websites. What would happen to your social media accounts, if you died and no one could access them? Some platforms provide for a legacy contact, but many do not. Prepare what information you can to avoid the loss of digital assets that have financial and sentimental value.

Gathering these materials and having these conversations is difficult, but they are a necessity if a family member receives a serious diagnosis. If there is no estate plan in place, have a conversation with an estate planning attorney who can advise what can be done, even in a limited amount of time.

Reference: Market Watch (Jan. 22, 2021) “How to get your affairs in order if your spouse is dying”

Read more related articles here:

‘When life goes sideways’ – how to prepare for the death of a spouse

Death Of A Spouse Planning Tips

Also, read one of our previous blogs here:

What Do I Need to Do after the Death of My Spouse?

Click here to check out our On Demand Video about Estate Planning.

Living Trusts

Does Living Trust Help with Probate and Inheritance Taxes?

Does Living Trust Help with Probate and Inheritance Taxes?

A living trust is a trust that’s created during a person’s lifetime, explains nj.com’s recent article entitled “Will a living trust help with probate and inheritance taxes?”

For example, New Jersey’s Uniform Trust Code governs the creation and validity of trusts. A real benefit of a trust is that its assets aren’t subject to the probate process. However, the New Jersey probate process is simple, so most people in the Garden State don’t have a need for a living trust.

In Kansas, a living trust can be created if the “settlor” or creator of the trust:

  • Resides in Kansas
  • The trustee lives or works in Kansas; or
  • The trust property is located in the state.

Under Florida law, a revocable living trust is governed by Florida Statute § 736.0402. To create a valid revocable trust in Florida, these elements are required:

  • The settlor must have capacity to create the trust
  • The settlor must indicate an intent to create a trust
  • The trust must have a definite beneficiary
  • The trustee must have duties to perform; and
  • The same person can’t be the sole trustee and sole beneficiary.

Ask an experienced estate planning attorney and he or she will tell you that no matter where you’re residing, the element that most estate planning attorneys concentrate on is the first—the capacity to create the trust. In most states, the capacity to create a revocable trust is the same capacity required to create a last will and testament.

Ask an experienced estate planning attorney about the mental capacity required to make a will in your state. Some state laws say that it’s a significantly lower threshold than the legal standards for other capacity requirements, like making a contract.

However, if a person lacks capacity when making a will, then the validity of the will can be questioned. The person contesting the will has the burden to prove that the testator’s mental capacity impacted the creation of the will.

Note that the assets in a trust may be subject to income tax and may be includable in the grantor’s estate for purposes of determining whether estate or inheritance taxes are owed. State laws differ on this. There are many different types of living trusts that have different tax consequences, so you should talk to an experienced estate planning attorney to see if a living trust is right for your specific situation.

Reference: nj.com (Jan. 11, 2021) “Will a living trust help with probate and inheritance taxes?”

Read more related articles at :

Best Ways to Protect Your Estate and Inheritances From Taxes

Understanding Living Trusts

Also, Read one of our previous Blogs at:

What Should I Know about a Living Trust?

Click here to check out our On Demand Video about Estate Planning.

Spouse dying in hospital

Get Estate Plan in Order, If Spouse Is Dying from a Terminal Illness

Get Estate Plan in Order, If Spouse Is Dying from a Terminal Illness

Thousands of people are still dying from COVID-19 complications every day, and others are dealing with life-threatening illnesses like cancer, heart attack and stroke. If your spouse is ill, the pain is intensified by the anticipated loss of your life partner.

Wealth Advisor’s recent article entitled “Your Spouse Is Dying: 5 Ways To Get Your Estate In Order Now,” says that it’s frequently the attending physician who suggests that your spouse get his affairs in order.

Your spouse’s current prognosis and whether he or she’s at home or in a hospital will determine whether updates can be made to your estate plan. If it has been some time since the two of you last updated your estate plan, you should review the planning with your elder law attorney or estate planning attorney to be certain that you understand it and to see if there are any changes that can and should be made. There are five issues on which to focus your attention:

A Fiduciary Review. See who’s named in your estate planning documents to serve as executor and trustee of your spouse’s estate. They will have important roles after your spouse dies. Be sure you are comfortable with the selected fiduciaries, and they’re still a good fit. If your spouse has been sick, you’ve likely reviewed his or her health care proxy and power of attorney. If not, see who’s named in those documents as well.

An Asset Analysis. Determine the effect on your assets when your partner dies. Get an updated list of all your assets and see if there are assets that are held jointly which will automatically pass to you on your spouse’s death or if there are assets in your spouse’s name alone with no transfer on death beneficiary provided. See if any assets have been transferred to a trust. These answers will determine how easily you can access the assets after your spouse’s passing.

A Trust Assessment. Any assets that are currently in a trust or will pass into a trust at death will be controlled by the trust document. See who the beneficiaries are, how distributions are made and who will control the assets.

Probate Prep. If there’s property solely in your spouse’s name with no transfer on death beneficiary, those assets will pass according to his or her will. Review the will to make sure you understand it and whether probate will be needed to settle the estate.

Beneficiary Designation Check. Make certain that beneficiaries of your retirement accounts and life insurance policies are current.

If changes need to be made, an experienced elder law or estate planning attorney can counsel you on how to best do this.

Reference: Wealth Advisor (Jan. 26, 2021) “Your Spouse Is Dying: 5 Ways To Get Your Estate In Order Now”

Read more related articles at:

How to get your affairs in order if your spouse is dying

Planning During Terminal Illness

Caring for someone with a terminal illness: Planning for deterioration and death

Also, read one of our previous Blogs at:

Surviving Spouse Needs An Estate Plan

Click here to check out our On Demand Video about Estate Planning.

 

 

Larry King Will

What Is Status of Larry King’s Handwritten Will?

What Is Status of Larry King’s Handwritten Will?

Larry King’s widow Shawn is set to go to court over a recently discovered hand-written will that cuts her out of a share of his fortune.

Fox News reports in the article entitled “Larry King’s widow Shawn King plans to contest star’s will in court” after King’s handwritten will was discovered. The will is said to say that his $2 million estate would be divided among his five children.

The document is said to have been drafted on October 17, 2019—just two months after Larry filed for divorce from Shawn. The new will doesn’t mention her at all and also lists his now-deceased children Chaia and Andy as beneficiaries. This will was written a few months before the loss of 65-year-old Andy and 51-year-old Chaia, who died within weeks of each other.

Larry’s three remaining children — Larry King, Jr., 59, Cannon, 20, and Chance, 21 — were also named. Cannon and Chance are King’s children with Shawn. However, Shawn contends that there was already a plan in place between she and King that wasn’t reflected in the alleged document.

“We had a very watertight family estate plan,” she told Page Six of a plan she and her husband drew up “as a couple” in 2015.

“It still exists, and it is the legitimate will. Period,” she remarked. “And I fully believe it will hold up, and my attorneys are going to be filing a response, probably by the end of the day.”

The handwritten will is complicated by the deaths of his children in 2020; in addition, Larry also told Page Six before his death that he and Shawn had once again become close. However, it is not known if the divorce was still moving forward.

Shawn also said that she and her husband spoke daily and claimed she was never made aware of an amendment to his will.

“It beats me!” she said when asked why she thinks Larry drafted the new document.

Their two sons were also “shocked” to hear about the change, she said, and claimed they “are not happy about this.”

Shawn also said she thinks someone exerted influence over the broadcast legend to have him write the new will, although offered no additional evidence of this contention.

“Based on the timeline, it just doesn’t make sense,” she said, noting that she doesn’t believe he would have cut her out due to the filing of divorce papers.

According to People magazine, Larry King allegedly wrote in the document, “This is my Last Will & Testament. It should replace all previous writings. In the event of my death, any day after the above date, I want 100% of my funds to be divided equally among my children Andy, Chaia, Larry Jr., Chance & Cannon.”

It looks like under the current will, Shawn would likely get around $300,000 after the $2 million estate was divided among King’s sons and presumably the survivors of his late children. However, she says it’s the principle.

Larry King’s attorney said that while the firm has no comment on Shawn’s position, they feel that “the will, which we will be asking the court to admit to probate on March 25th, reflects Larry’s intent to divide his estate equally among his children.”

Reference: Fox News (Feb. 15, 2021) “Larry King’s widow Shawn King plans to contest star’s will in court”

Read more related articles at:

Larry King’s wife, son on opposite sides in court battle over late talk-show host’s handwritten will

Larry King’s widow disputes handwritten will

Also, read one of our previous Blogs at:

Did Larry King have an Estate Plan?

Click here to check out our On Demand Video about Estate Planning.

Estate Battle with Millions at Stake in New Orleans

Estate Battle with Millions at Stake in New Orleans

Jessica Fussell Brandt filed an eviction petition against her daughter, Julie Hartline, her son-in-law Darryl Hartline and two grandchildren, Alexis and Zachary Hartline. She is pitted against them in a legal fight over an estate valued at more than $300 million, reports nola.com in the article “In Ray Brandt estate battle, widow tries to evict family from Old Metairie compound.”

Before auto magnate Ray Brandt died at age 72 from pancreatic cancer, the entire family shared a compound that includes two mansions located next to the Metairie Country Club. Brandt has been trying to sell the property which belongs to the estate, as its executrix. The family members living there don’t want to move, even taking down “For Sale” signs from the lawn.

Her attempt to evict them comes after she won a case in her attempt to maintain control of her late husband’s estate, which includes a large number of auto dealerships and collision centers across Louisiana and Mississippi.

On January 25, a Jefferson Parish judge invalidated the last will and testament that Ray Brandt signed just weeks before his death and another last will drafted in 2015. The district judge ruled that both last wills contained a flaw in how they were notarized: neither notarization specified that Ray Brandt, the witnesses, and the notary were together when it was signed.

The decision is being appealed, but it appears to leave the fate of Brandt’s empire to a last will he made in 2010. Unlike the others, this last will places Jessica Brandt in full control of his estate and trust, including the auto dealerships, until her death.

Ultimately, Ray Brandt directed that her grandchildren, who he legally adopted as adults before he died, would split the estate’s assets.

Despite issuing a statement saying that Jessica was “pleased with the prospect beginning the healing process,” after the Jefferson Parish decision, the eviction filing revealed that Jessica’s attorneys sent an email urging family members to leave the property by January 31, 2021.

Jessica made a statement that her wish to evict family members was a result of the multiple citations issued by Jefferson Parish for continuing violations at the compound. The latest one was for a trailer and mud buggy parked in a driveway on a vacant lot. She also said that the family members own two other homes, one in Metairie and one in Fort Beauregard.

The compound where the family settled seven years ago is estimated to be worth more than $8 million.

The heart of the dispute pits Jessica Brandt against Archbishop Rummel High School principal Marc Milano, who Ray Brandt named as a trustee to oversee the auto group and the rest of the estate until Jessica Brandt dies. Milano has accused Jessica of taking money from the estate and trying to claim an ownership interest in the dealership. She sued him for defamation.

Now the grandchildren have filed their own legal action, challenging a petition to put Ray Brandt’s last will into effect. Their argument is the trust that Ray Brandt set up in 2015 makes it clear that he meant for Milano to oversee the assets.

This estate battle will no doubt keep the Jefferson Parish courts and newspapers busy for some time. It’s a lesson to keep your family’s business private, by ensuring that your estate plan is properly prepared and up to date.

Reference: nola.com (Feb. 3, 2021) “In Ray Brandt estate battle, widow tries to evict family from Old Metairie compound”

Read more related articles at:

Fate of Ray Brandt’s auto empire in doubt amid roiling family squabble over estate

‘Stop all of this!’ Ray Brandt’s widow bemoans the family battle over his massive estate

In Ray Brandt estate battle, widow tries to evict family from Old Metairie compound

Also, read one of our previous Blogs at:

Celebrity Estates: Battle Over Inheritances

Click here to check out our On Demand Video about Estate Planning.

Corona 3

Did the Pandemic Put a Premium on Estate Planning?

Did the Pandemic Put a Premium on Estate Planning?

The number of life insurance applications from people under age 44 increased by more than 7% in 2020, according to the MIB Group, a data sharing service for insurance companies, which tracks life insurance applications.

NBC News’ recent article entitled “Americans flocked to buy life insurance, prepare wills and trusts last year” says that life insurance applications for the age group had been mostly down over the last several years. So, that’s a big increase.

There are a number of factors that contributed to the spike, but experts point to the pandemic and the insurance awareness it brought on.

People are looking at mortality like they’ve never looked at it before, especially younger adults. Those who felt invincible have been shaken by COVID-19. They now realize we are all mortal.

With millions of jobs lost during the early stages of the pandemic, many workers had to leave behind their employer-paid life insurance through their employee health benefits packages. Roughly 54% of Americans had life insurance earlier this year, most of them through their employers.

Overall, insurance applications are up by 4% this year. Northwestern Mutual, the nation’s largest seller of life insurance last year, sold 15% more life insurance policies from April to September, compared to the same time last year, CNBC reported in October.

Other companies also saw their applications grow.

In estate planning, the number of people drafting wills and trusts is also on the upswing because of the pandemic. A recent LegalZoom survey found that 32% of people ages 18 to 34 drafted wills because of COVID-19, and about 21% of that group did so because they knew someone who had contracted the virus.

Estate planning attorneys know that preparing for death can be cumbersome. However, as the pandemic has shown us, our demise can come at any time. We should all be prepared.

Reference: NBC News (Jan. 1, 2021) “Americans flocked to buy life insurance, prepare wills and trusts last year”

Read more related articles at:

Pandemic highlights importance of estate planning

Estate Planning In The Pandemic Age: It’s Time To Prepare For The Unexpected

Also, read one of our previous Blogs at:

How Can Estate Planning Protect Me from COVID-19?

Click here to check out our On Demand Video about Estate Planning.

Estate Plan- Biden

Does an Estate Plan Need to Change because of the New Administration?

Does an Estate Plan Need to Change because of the New Administration?

Changes in the White House and the Senate have many people wondering how federal estate and gift tax laws may change and when those changes will occur, as reported in an article “Estate planning in light of a new presidential administration: What should you do now?” from the St. Louis Business Journal.

While campaigning, Joe Biden pledged to undo many of the prior administration’s tax policies, promising a progressive approach to taxation focusing on shifting the burden of taxes to high-income individuals and businesses.

The Tax Cuts and Jobs Act (TCJA) temporarily doubled the federal estate and gift tax exemption to $10 million (adjusted annually for inflation) until 2025. For 2021, the exemption stands at $11.7 million for individuals and $23.4 million for married couples. These amounts were set to expire after 2025 to $5 million for individuals and $10 million for married couples, but changes are expected to arrive sooner.

Biden also said he would end the “step-up” in basis that spares beneficiaries from having to pay income taxes for capital gains on inherited assets that appreciated in value, typically stocks, mutual funds and real estate. If a beneficiary sells an inherited asset now, the capital gains generated is the difference between the asset’s fair market value at the time of the sale minus the stepped-up basis, i.e., the fair market value of the asset at the date of the deceased’s death, rather than the basis at the date of the original purchase.

Without the step-up in basis, the capital gains generated upon the sale of the inherited assets would be far higher, increasing capital gains taxes paid by heirs.

Does it make sense to prepare or review your estate plan now, in light of the potential changes ahead? Having an outdated estate plan might be a bigger risk. When it comes to big changes in future tax laws, there are two things to keep in mind:

Making changes out of fear of tax law changes that have not occurred yet, could have lasting effects, and not always good ones. It is prudent to remain informed and prepared, but not to anticipate changes that have not become law yet.

What is more important is to be prepared for change, by understanding your current estate plan and being sure that it still works to minimize taxes and accomplish goals.

A few questions to consider:

  • Do you fully understand your current estate plan?
  • Do you know the total value of your assets and liabilities?
  • Do you know if federal and state estate taxes will be an issue for your heirs?
  • Have you reviewed your beneficiary designations recently?
  • When was your estate plan last updated? That includes your last will, revocable living trust, power of attorney and health care directives.

Changes are coming to estate law, but what they are and when they will occur are still unknown. Having an experienced estate planning attorney create or review your estate plan right now is more important than waiting to see what the future will bring.

Reference: St. Louis Business Journal (Jan. 27, 2021) “Estate planning in light of a new presidential administration: What should you do now?”

Read more related articles at: 

Estate Planning under the Biden Administration: What should you do for 2021?

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Millennials, It’s Time to Talk Estate Planning With Your Parents

Millennials, It’s Time to Talk Estate Planning With Your Parents

Every generation gets it. some stigma as to how they act as a generation. Some say millennials are selfish and uncaring about the future. They have have gotten a bad rap from a lot of generalized society. As with everything, this theory doesn’t hold water. Millennials continue to get older and can no longer be looked at as children anymore. Lots of millennials are responsible adults now. Some are even moving into their forties. This means that Boomers, also known as their parent’s generation. are also continuing to get older, which means, Millennials may need to begin speaking to their parents, whom are Boomers, about estate planning.

Boomers are at the age when it becomes necessary to have the difficult conversations with them, and the estate planning conversation is one of the most important. This discussion goes further than just conversations about wills and inheritance. It is important to discuss power of attorney, living wills, and even death event planning.

You should discuss wills, trusts, inheritance and any documents needed in regard to those matters. Documents for power of attorney or health care proxy will likely need to be discussed. Also, a living will is very important in the case of your parents being unable to do tasks like pay the bills and other things.

These conversations are not easy and are often uncomfortable and difficult to bring up. One way to help this is to approach estate planning as a way to alleviate anxiety and stress and present the idea to your parents as such.

See Erin Lowry, Millennials, It’s Time to Talk Estate Planning With Your Parents, Bloomberg, December 30, 2020.

Read more related articles at:

Millennials, It’s Time To Talk Estate Planning With Your Parents from Financial Advisors Mag

Are You A Millennial? Talk to Your Parents About Estate Planning

Also, Read one of our previous Blogs at:

The Estate Planning Conversation To Have with Your Parents

Click here to check out our On Demand Video about Estate Planning.

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