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Estate Planning

Estate Planning Meets Tax Planning

Estate Planning Meets Tax Planning


Estate Planning Meets Tax Planning.  Not keeping a close eye on tax implications, often costs families tens of thousands of dollars or more, according to a recent article from Forbes, “Who Gets What—A Guide To Tax-Savvy Charitable Bequests.” The smartest solution for donations or inheritances is to consider your wishes, then use a laser-focus on the tax implications to each future recipient.

After the SECURE Act destroyed the stretch IRA strategy, heirs now have to pay income taxes on the IRA they receive within ten years of your passing. An inherited Roth IRA has an advantage in that it can continue to grow for ten more years after your death, and then be withdrawn tax free. After-tax dollars and life insurance proceeds are generally not subject to income taxes. However, all of these different inheritances will have tax consequences for your beneficiary.

What if your beneficiary is a tax-exempt charity?

Charities recognized by the IRS as being tax exempt don’t care what form your donation takes. They don’t have to pay taxes on any donations. Bequests of traditional IRAs, Roth IRAs, after-tax dollars, or life insurance are all equally welcome.

However, your heirs will face different tax implications, depending upon the type of assets they receive.

Let’s say you want to leave $100,000 to charity after you and your spouse die. You both have traditional IRAs and some after-tax dollars. For this example, let’s say your child is in the 24% tax bracket. Most estate plans instruct charitable bequests be made from after-tax funds, which are usually in the will or given through a revocable trust. Remember, your will cannot control the disposition of the IRAs or retirement plans, unless it is the designated beneficiary.

By naming a charity as a beneficiary in a will or trust, the money will be after-tax. The charity gets $100,000.

If you leave $100,000 to the charity through a traditional IRA and/or your retirement plan beneficiary designation, the charity still gets $100,000.

If your heirs received that amount, they’d have to pay taxes on it—in this example, $24,000. If they live in a state that taxes inherited IRAs or if they are in a higher tax bracket, their share of the $100,000 is even less. However, you have options.

Here’s one way to accomplish this. Let’s say you leave $100,000 to charity through your IRA beneficiary designations and $100,000 to your heirs through a will or revocable trust. The charity receives $100,000 and pays no tax. Your heirs also receive $100,000 and pay no federal tax.

A simple switch of who gets what saves your heirs $24,000 in taxes. That’s a welcome savings for your heirs, while the charity receives the same amount you wanted.

When considering who gets what in your estate plan, consider how the bequests are being given and what the tax implications will be. Talk with your estate planning attorney about structuring your estate plan with an eye to tax planning.

Reference: Forbes (Jan. 26, 2021) “Who Gets What—A Guide To Tax-Savvy Charitable Bequests”

Read more related articles at:

5 Estate Planning Tips to Keep Your Money in the Family

Estate Planning Strategies to Reduce Estate Taxes

Also, Read one of our previous Blogs at:

Big News for Trust Taxation

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


What Can You Do to Help Support the Seniors You Love Right Now?

What Can You Do to Help Support the Seniors You Love Right Now?

From Focus on the Family.com

Assisting Aging Loved Ones With Estate Planning

What Can You Do to Help Support the Seniors You Love Right Now? Do you have any advice for me as I attempt to help my elderly mother protect her financial assets and make sure her wishes will be carried out after her death? Wills, trusts, partnerships, probate, power of attorney — I know next to nothing about them. How should we plan her estate?

In response to the growing aging population in the U.S., a new, specialized area of law has emerged over the past several years – elder law. Elder-law lawyers are a relatively new specialty of attorneys who concentrate on handling the often complicated legal affairs of seniors. The National Academy of Elder Law Attorneys (NAELA) maintains a website that includes a series of “Law and Aging” brochures addressing various elder law topics. An elder-law attorney can help you clarify the pros and cons of obtaining a power of attorney, a trust, a conservatorship, a guardianship, Medicare benefits and Medicaid benefits and a number of other legal documents designed to preserve and protect your mother’s assets. You need to be aware of both your rights and obligations as you enter into any of these binding agreements. Here’s a list of the ten most common arrangements:


Every person should have a will. This is a legal document that describes how the person wants her property distributed after her death. A will can contain the name of an executor or personal representative who will take responsibility to see that it is carried out. Unless a will has been drawn up, the state will decide how to divide the person’s possessions and property according to its own guidelines.


A trust is a document that gives a person the right to manage another person’s money and property. It’s an agreement between your mother (the settlor or trustor) and the individual she appoints (the trustee) to carry out her wishes. Unlike a durable power of attorney, the trust is a long and detailed document that outlines specifically how money and property should be handled. In addition, the trust often remains in effect after the person dies. It can be either revocable or irrevocable, and there are several different kinds of trusts, depending on how your loved one wants to arrange the protection and disbursement of her inheritance.

Letter of instruction

This is a document prepared by your mother and her lawyer. It should contain the names of the individuals to be notified upon her death, funeral arrangements, directions for disposal of personal property, numbers of bank accounts, information on insurance policies, anatomical-gift information, etc. This is not a legal document; it’s just a listing of personal requests to be followed along with the will.

Family limited partnership

This estate-planning tool allows seniors who own their own businesses to reduce the value of the business for tax purposes and to adjust the cash flow received by children who are “limited partners” in the business. It’s a way for a businessperson to protect his or her business and provide for surviving relatives.

Joint tenancy

Husbands and wives quite often have joint ownership of their money, property and other possessions. One form of common ownership is called “joint tenancy with a right of survivorship.” This means that if one spouse dies, the other automatically inherits everything. Other joint-tenancy agreements add an adult child to the agreement. Joint tenancy can help a loved one avoid probate, but it has its drawbacks and it’s certainly no substitute for a will. A lawyer can advise you on the pros and cons of joint tenancy.


This is the process by which legal title to property is transferred from the deceased’s estate to her beneficiaries. If the person dies with a will (“testate”), the probate court determines if the will is valid, orders that creditors be paid, and makes sure the will distribution instructions are followed properly. If a person does not have a will (“intestate”), the probate court appoints a person to process all claims against the estate. A will can be contested during probate for a variety of reasons.

Power of attorney

Your mother can give someone power of attorney over her affairs. You can have either general or special power of attorney. General power of attorney grants you power to take care of any financial transactions, and sometimes includes the power to make health care decisions as well. A special power of attorney authorizes you to do a limited number of actions for your grandmother. A power of attorney is usually granted only for a specific period of time. A Durable power of attorney, which does not terminate if the person granting it becomes mentally incompetent, involves the creation of a document (with the help of a lawyer) to give a trusted friend or relative the power to make either financial or medical decisions on your mother’s behalf when necessary.


If your mother becomes legally incapacitated, you can go to a probate court and ask that you be appointed a conservator over her property. Note that this can be done against your mom’s wishes and may cause friction between siblings. So use extreme caution before adopting this plan, and be sure to communicate clearly with other members of the family.


If the court determines that your mother is incapacitated and unable to make her own decisions because of physical or mental disability, you can be named her guardian. She becomes your “ward,” and you have authority to manage her money or property.

Representative payee

If your mother has a disability and is unable to manage a pension or public-benefit income, you may want to consider becoming a representative payee. Social Security, Veterans Affairs, and other public agencies can appoint you to disburse the funds. You should contact each specific agency for an application form.

For more information, you may wish to take a look at the website of the National Association of Area Agencies on Aging. If you could use further information and guidance, please don’t hesitate to give our Gift and Estate Planning staff a call. They would be happy to listen to your concerns and assist you with some practical suggestions. You can contact them Monday through Friday between 8:00 a.m. and 5:00 p.m. Mountain time at (800) 782-8227.

Read more related articles at:
Avoiding Probate

Avoiding Unnecessary Probate Costs

Avoiding Unnecessary Probate Costs


Each year, millions of dollars are spent on soaring attorney and court fees associated with probate proceedings upon the death of a loved one. Avoiding probate in estate planning allows the decedent’s property to be distributed to the designated person at a designated time without substantial costs.

  • Avoiding probate can help allow the distribution of the estate with fewer costs.
  • The probate process involves proving the last will.
  • Transferring property to a trust is one way to avoid probate.


Background on the Probate Process

Probate is the process of proving the will is, in fact, the last will, and there are no challenges to it and of adjudicating any claims against the estate under court supervision. Probate usually occurs in the appropriate court in the state and county where the deceased permanently resided at the time of his or her death. If there is no valid will (called intestacy), the title to the property will pass under state intestacy laws to “heirs at law,” normally giving one half to the surviving spouse and dividing the remainder equally among the children. With or without a will, the property must go through the probate proceedings. Even if a person dies with a will, a court generally must allow others the opportunity to contest the will. Creditors are allowed to step forward; the validity of the will can be scrutinized, and the deceased’s mental capacity at the time the will was drafted can be questioned. These proceedings take time and money, and your heirs are the ones who will have to pay. Since probate proceedings can take up to a year or two, the assets are typically “frozen” until the courts decide on the distribution of the property. Probate can easily cost from 3% to 7% or more of the total estate value.


Simplifying or Avoiding Probate Altogether

Even though probate takes place regardless of whether you made a will you can look to other tools that help your inheritors. Transfer Property to a Trust.  Revocable living trusts or inter-vivos trust were invented to help people bypass the probate process. Unlike the property listed in your will, the property in a trust is not probated, so it passes directly to your inheritors. You simply create a trust document and then transfer the property title to the trust. Many people name themselves as the trustee  to keep total control of the trust property. A trust also allows you to name alternate beneficiaries; it does not require a waiting period after death and is much harder to attack in court.

Set up Payable-on-Death Registrations

Also known as transfer-on-death accounts, these allow you to name one or more beneficiaries of the account to avoid the probate process. It’s simple to create and usually free, and the beneficiary can easily claim the money after the owner dies. The ability to name a beneficiary, however, is a feature that you must add to the account, but most banks, savings and loans, credit unions, and brokerage firms allow you to do so. It requires some extra paperwork and time, so you’ll need to be persistent and ask your institution for the required forms.

Make Tax-Free Gifts

Making gifts helps you avoid probate for a very simple reason: you no longer own the property when you die. For tax years 2020 and 2021, you can give your heirs up to $15,000 per person each year without a gift tax penalty. Giving before you die helps lower your probate costs because, typically, the higher the monetary value of assets going through probate, the higher the probate costs.

Revisit the Beneficiary Designations on Your Stuff

Dust off that old life insurance policy and make sure your beneficiaries are up to date. Too many times, individuals forget to change their beneficiary after their second marriage, and then the ex-spouse gets everything. Call your custodians and update the beneficiaries on your IRAs, 401(k), life insurance policies, annuity contracts, and other retirement accounts. These types of accounts pass at your death by contractual beneficiary designation, meaning whoever you name in your will is irrelevant to these accounts; beneficiary designation will take precedence in court. Avoid naming your estate as the beneficiary, which will cause your property to go through probate.

Use Joint Ownership

Joint tenancy with right of survivorship, tenancy by the entirety, and community property with right of survivorship are the types of joint ownership that allow your property to bypass the probate process. If you hold your stocks, vehicles, home, and bank accounts in joint ownership, the title of the property automatically passes to the joint survivor upon your death. Remember, once you title your property jointly, you’ll be giving up half ownership in the property.


The Bottom Line

Although we’ve demonstrated some weaknesses of having a will as your sole estate planning tool, don’t think that you no longer need one. The guidelines above point out great tools to build a more effective plan. However, you’ll want to draft a will to cover property acquired shortly before you die or anything that might have been overlooked. A good estate plan should distribute a decedent’s property when and to whomever the person desired, and with a minimum amount of income, estate, and inheritance taxes, as well as attorney and court fees. Avoiding probate is an important part of achieving these goals.

Read more related articles at:

Consumer Pamphlet: Probate in Florida

How Much Does Probate Cost?

Also, read one of our previous Blogs at:

How Do You Handle Probate?

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

Estate Planning

Trusts, Wills, and Estate Planning: Facts You Should Know

Trusts, Wills, and Estate Planning: Facts You Should Know

Estate planning conjures images of conniving lawyers and bankers discussing million-dollar trusts for many people, and considering which conditions to place on a bequest to a ne’er-do-well relative. But that’s not usually the case. Even people of modest means can spare their loved ones serious headaches by creating an estate plan and will to dictate what happens to their property at the time of their deaths.

Your “estate” is everything you own—all your property and property rights, even assets with loans against them. They don’t die when you do. They have to move into the ownership of a living beneficiary, because a decedent can’t own property. How your property is managed and distributed after your death depends on whether you die “testate” with a valid will, or “intestate” without a will.

The Statistics on Who Has a Will

The number of people who have wills has been steadily declining in the millennium, according to a 2020 survey by Caring.com. Almost 25% fewer American adults had wills in 2020 compared to 2017. Even older adults are less likely to have wills. Their number dropped by 20% in 2019, and 25% fewer middle-aged adults had wills in that time frame.

Leaving a will ensures that your wishes are carried out if at all possible and your property is distributed in the way you choose. It can also make probate of your estate much easier. Probate is the legal process by which ownership of your property is transferred to living beneficiaries. The court also uses the probate process to establish the validity of a will when the deceased left one. You would designate an executor in your will, someone to manage your estate through the probate process and see to it that your wishes are carried out.

A Will vs. No Will

Dying intestate—without a will—doesn’t mean that your loved ones will avoid a court proceeding. Intestate estates still require probate, but state law gets involved to determine who gets your property because you didn’t outline your wishes in a will. Each state has its own legislative code for intestate succession: who gets to inherit first and in what percentages, and who won’t inherit unless everyone in line ahead of them is also deceased. The hierarchy in most states places surviving spouses first in line, followed by the decedent’s children, then parents, siblings and finally more distant relatives. Individuals who aren’t related to the decedent are left out entirely.

Every state has a scheme that will dictate the steps of intestate administration, but the typical process goes something like this:

  • Someone initiates a case in probate court.
  • The court determines that there is no will and appoints an administrator rather than an executor, usually a family member or heir.
  • The administrator gathers the deceased’s assets, identifies the heirs, and notifies the deceased’s creditors.
  • The administrator liquidates estate assets to the extent necessary to pay the deceased’s debts, taxes, and the costs of estate administration, such as attorney’s and accountant’s fees.
  • The administrator distributes the remaining proceeds and assets according to the intestate succession schedule set out in state statutes.
  • Intestate administration is often a lengthy, inefficient, and expensive proceeding because the administrator is usually required to seek permission from the court for each of these actions. The administrator will spend much time requesting court orders and attending hearings. An intestate administration often takes two years or longer.

Untitled Assets

Some assets can pass directly to an heir if there’s no need to officially pass title to the property. Personal property like furniture and jewelry usually won’t have documentation to establish ownership. There may be no need to go to court if your estate is comprised entirely of untitled assets unless your heirs can’t agree among themselves on how to distribute this property.

Assets That Pass Outside Probate

Some assets will pass directly to your heirs outside the probate process even if you do leave a will.

  • Your spouse will take sole ownership of at least their share of community property if you’re married and live in one of the community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Wisconsin, and Washington.
  • Some assets transfer automatically because they’re contractual in nature—you designated a beneficiary who will take ownership when you die. They include life insurance proceeds, annuities with death benefits, and many retirement accounts.
  • Bank accounts often have “payable-on-death” provisions that allow you to designate a successor.

In each case, there’s no need for the intervention of a probate court because the account already has a legal means by which to transfer to your beneficiary or successor.

The Role of Trusts in Estate Planning

A trust is an entity or an agreement that allows you, as the grantor or donor, to transfer property to someone known as the trustee for the benefit of a third party, called the beneficiary. Trusts are often used in estate planning to take advantage of favorable tax treatment, to place conditions on the use or distribution of assets, or to allow the heirs to take possession of assets without a probate proceeding. The trustee holds the assets in a fiduciary capacity. They have a high responsibility to see that the assets are preserved for the beneficiaries. A living trust is created during your lifetime, and it provides a way for you to preserve and retain control over your assets even if you should become incapacitated. It can alleviate the need for a guardianship or conservatorship if you’re unable to make decisions on your own. A testamentary trust is one that’s formed according to terms contained in your will. It doesn’t exist until you die. Your executor would then create the trust, transferring some or all of your property into it.

Revocable vs. Irrevocable Living Trusts

Living trusts are either revocable and irrevocable. You can name yourself as the trustee of a revocable trust, retaining control over the assets you transfer into it during your lifetime. This type of trust can provide a lot of flexibility during your lifetime, including the ability to revoke or dissolve the trust as your needs change. You can provide for a successor trustee to take over upon your incapacity or death. Irrevocable trusts can’t be changed once assets have been transferred into them. They can’t be revoked or undone—the transfer of assets is permanent. But irrevocable trusts generally allow for the best estate tax consequences. A revocable trust will become irrevocable upon your death because you’re no longer available to amend or revoke it.

Trusts for Specific Purposes

There are many different types of trusts, and state law will determine which of them are recognized in your state. Trusts are also subject to some federal laws, particularly with regard to how they’re treated for estate tax purposes. Federal estate taxes can be assessed if the property exceeds a certain minimum value.

  • A spendthrift trust can be used to preserve your assets, allotting bequests incrementally and under certain terms, for beneficiaries who are less than responsible with money.
  • A special needs trust ensures that an heir with special needs will have sufficient assets to provide for those needs without jeopardizing their government benefits.
  • A life insurance trust collects insurance on the grantor’s life and administers it to beneficiaries. It’s irrevocable and can be used to avoid estate taxes.
  • A QTIP trust provides income for a spouse, then passes the remainder of the assets to other heirs.

Be Prepared

Wills and trusts can be used to accomplish many goals, and they can be as flexible as your needs and wishes require. Ensuring that those needs and wishes are carried out requires careful planning in choosing the best trusts or the best provisions for your will.

Read more related articles at:

What You Should Know about Wills and Trusts

Estate planning 101: Your guide to wills, trusts and all your end-of-life documents

Also, read one of our previous Blogs at:

Spring has Sprung. When Should I Start my Estate Plan? Now!

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

Avoid Probate

Why You Might Want to Avoid Probate and How to Do It

Why You Might Want to Avoid Probate and How to Do It

Why You Might Want to Avoid Probate and How to Do It. You’ve probably heard that probate is a long, expensive nightmare that should be avoided at all costs, or you might have heard that it really isn’t that bad after all. In fact, both scenarios can be accurate. It often comes down to how complicated and extensive an estate is. Some estates are so small they don’t even require probate. Others are quite large, requiring deliberate and meticulous legal planning to avoid a probate snarl. In either case, you might want to arrange your estate to avoid probate for a few common reasons ranging from a cash crunch for your heirs to a total lack of privacy about your personal affairs.


Your Family Might Have No Immediate Access to Cash

It can take weeks or even months to access a deceased person’s cash. Your heirs can be stuck footing the bill for everything from the funeral to your household utilities during that time if your estate must be probated. Your family probably won’t be able to access the cash in your bank accounts during this time period, either. They’ll have to maintain property insurance and pay taxes and possibly storage fees until probate is officially opened, and that can’t happen without a court order. Your property and insurance policies must be maintained until the estate can take over. If you have a spouse who doesn’t work and doesn’t have access to her own funds, she can be left scrambling to pay for even the most basic living expenses, like groceries.

Court approval is often required for every little step during the probate process, including running or selling the deceased person’s business, repairing or selling real estate, or abandoning worthless assets, such as timeshares with high annual maintenance fees. Numerous rules must be met, forms filed, and appraisals completed and submitted. You can avoid all this if your estate manages to bypass probate. Your family won’t have to deal with a probate judge interfering in family financial matters.

Probate Can Cost a Lot of Money

Courts all over the country are prone to financial crises, and they often hunt for revenue when money gets tight. One way to raise funding is to increase court filing fees, including probate fees. If your estate requires the assistance of an attorney, this individual must be paid, too. Many states base attorneys’ fees on a percentage of the estate. Even a modest estate comprised of a home, a vehicle, and some bank or investment accounts can result in legal fees in the tens of thousands of dollars.  All these fees are payable out of your estate, sometimes from the sale of assets you intended to leave to your heirs. Probate can mean less money for them.

Probate Records Are Public Records

Probate is a state court proceeding, so all information about a deceased person’s assets, liabilities, beneficiaries, and personal representatives are a matter of public record. Anyone at all can access your probate court file and find out just about anything he wants to know. All he has to do is ask for the entire file and it’s unlikely that anyone at the clerk’s office will care or ask why. Worse, entire probate files are available for viewing online in some states. People don’t even have to go to the courthouse to request a file. Avoiding probate keeps your family matters and your financial information private.

How to Avoid Probate

A deceased person can’t legally own property, so probate becomes necessary when ownership of an asset has no other legal means by which to pass to a living beneficiary. Speak to an estate planning attorney about how to title your property so probate isn’t required to move ownership. You might name your spouse or another family member on a bank account, or designate an account beneficiary on a payable-on-death account. You can place your assets in a revocable living trust and include terms for what you want to happen with them in your trust formation documents. You can hold title to real estate with rights of survivorship. All these options bypass probate, but it’s important to speak with an attorney because the exact rules can vary by state.

Read ,more related articles at:

What Is Probate and How Can You Avoid It?


Also, read one of our previous Blogs at:

Avoiding Probate with a Trust

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

Talking to Parents about Estate Planning

How to Talk to Your Parents About Estate Planning

How to Talk to Your Parents About Estate Planning

It’s a hard conversation to have but a necessary one

Discussing estate planning with your parents is a conversation that can be difficult to have. You might not want to think about the day that they are no longer here, or even consider that they might experience a decline in health that severely limits their ability to think clearly or communicate with you. However, if you don’t have this conversation when your parents are able to share information and instructions, their passing or incapacitation will be even more painful as you grapple with their estate. Results from the December 2020 Wells Fargo/Gallup Investor and Retirement Optimism Index showed that 43% of investors between the ages of 50 and 64, and 17% of those 65 or older, have neither a written will nor written estate plans. Furthermore, nearly 40% of investors either don’t ever talk to their parents about estate planning, dread the talk, or avoid it. Though an estate planning conversation can be intimidating, there are several steps you can take to make the dialogue happen in an effective and inclusive way.

If you have brothers and/or sisters, you should include them in the conversation with your parents. For one, you’ll want to maintain the appearance of fairness, Eido Walny, founder of Milwaukee-based Walny Legal Group, told The Balance in an email. “Fair is in the eye of the beholder, and what is fair to one person may not be fair to another,” Walny said. “The best way to overcome this obstacle is to have a frank, open conversation that includes all the stakeholders. This prevents fighting later over what you think your parents ‘would have wanted.’” Including siblings can also tamp down any sort of distrust among family members. “All too often, there are contentions in estate administrations that mom or dad would not have done something but for the meddling of one of the kids,” Walny said, pointing out the legal term for this is “undue influence.” Another factor here is that parents worry their children will fight over their estate after they pass—but, by not having a family meeting to talk about estate planning, they’re actually increasing the chances of this happening, Brian Simmons, co-founder of Las Vegas-based trust-services firm IconTrust, told The Balance by email. “This can lead to litigation, and the only people who win in litigation are the attorneys,” Simmons said. “We have seen estates litigated over the silliest of things; usually personal property, like trinkets, equipment, furniture, artwork, etc.”  If your parents don’t have a plan, ask them to create one where their expectations are upfront to avoid problems in the future.

Find the Right Time to Talk About Money

As with most thorny topics, deciding when to talk to your parents about estate planning may cause apprehension about the discussion, too. However, it’s not a matter of whether the conversation should take place after dinner on Tuesday, or before Saturday brunch; time is of the essence. Some people advise waiting until there’s a life changing event, like a new birth, or changes to the tax law, but this is a risky approach, according to David Bross, a senior estate planner at Cincinnati-based Truepoint Wealth Counsel.“The right time to talk to your parents about estate planning is now, because, unfortunately, nothing in life is certain,” he told The Balance via email. Estate planning not only involves planning for assets at death but also includes planning for situations like health care and day-to-day financial decisions.  “Health care powers of attorney and financial powers of attorney provide direction as to who will handle health care/financial decision making for a parent should that parent be unable to act for himself or herself during his or her life,” Bross said.

The unpredictability of 2020 hammered home the frailty of life and how quickly someone can succumb to an ailment. But besides the possibility of your parents getting sick, there are other reasons to have this conversation now. In short, it’s not always about an inheritance or power of attorney, according to Zachary Morris, co-founder of Atlanta-based Paces Ferry Wealth Advisors.  “Many adult children may be planning for their own retirement, and the cost of caring for an ailing parent can derail even the best-laid retirement plans,” Morris told The Balance by email. “Knowing that your parents have done well financially, and maybe even have long-term care insurance, can go a long way in preparing for your own retirement.” Plus, you need to know if you have a role in their estate plan. For example, if you are named the executor of the estate, do you know where all the necessary estate documents are?  “Making sure your parents have a proper estate plan in place can help avoid unintended consequences regarding how the estate settlement is handled—potentially by a court-appointed executor if someone hasn’t already been named in the will,” Morris said.

Learn What Estate Planning They Have Done—And If Anything Has Changed

If your parents have already done some estate planning, it’s important to have a conversation to see if anything needs to be updated. “If they haven’t done anything, you may have to start from scratch,” Lisa Anne Haidermota, estate planning attorney and principal owner at Tampa-based Lisa Anne Haidermota, PA, told The Balance by email. “They also could have named executors when the children were minors and those executors have passed away.”

Child-Specific Trust Rules May Be Outdated

If your parents established a trust when you and your siblings were minors and you are now adults, changes may need to be made. “The safeguards that they set up in the trust may no longer be relevant,” Haidermota said. “Their concerns for their minor children may have changed as they reached adulthood, and now they want their adult children to serve as their executor, trustee, power of attorney, or health care surrogate.”

Multiple Marriages May Have Complicated Things

Jonathan Breeden, founder of North Carolina-based Breeden Law Office, pointed to another reason why you need to know what planning your parents have done. “There should be specific instructions about what goes to the husband/wife versus what goes to the children,” Breeden said in an email to The Balance. “This can be especially helpful for someone who got married a second (or third) time.” The problem for some people is getting their parents to agree to share this information, some of which can be sensitive. “Some parents see this as an issue of privacy and are hesitant to share such details,” Walny said. “[However], understanding your parents’ financial footing is important because it may open or close options with regard to nursing-home or long-term care planning.”

Helps Kids Know Their Roles and Avoid Surprises

Walny has also seen situations in which a substantial inheritance caused severe shock for the children who received it. Conversely, if the children aren’t receiving as much as they thought, this may affect their life decisions as well. Hearing parents explain why they made certain decisions about who gets which asset and what role you and your siblings play can clear up uncertainty. “If all children understand their roles and their possible inheritance, there are little to no questions once the estate plan is needed,” Bross said. “Each child has had an opportunity to hear from [their] parent as to why [the parent(s)] chose a certain plan or a certain person to manage their affairs.”

Cover Key Estate Planning Topics

It’s unlikely that you’ll cover everything in one conversation. Some of the issues may require your parents to pause and think about their decisions. But when the series of discussions is over, you should have covered the following key estate planning topics.

Estate Plan

“During this conversation, we review the estate plan with all of our client’s children to ensure each child has an understanding of what the documents say and how they will be administered,” Bross said. Since everyone is present (in theory), the parents can discuss why the plan was put into place and ask questions to ensure that everyone is on the same page.

Net-Worth Statement

A net-worth statement helps children get an overall understanding of their parent’s wealth. “While this helps the family understand the potential inheritance, it can also give children peace of mind that their parents have the wealth to cover expenses later in life, such as health expenses,” Bross said.

Family Business  

If there is a family business, Bross recommended discussing a succession plan for the business. When the parents pass, who will take over the business and in what capacity?

Power of Attorney

“An estate plan should also include a power of attorney to grant authority to handle financial matters,” Seta Keshishian, a financial advisor at JSF Financial in Los Angeles, told The Balance by email. Any competent adult (age 18 or older) can receive power of attorney The Florida Bar recommends choosing someone who is trustworthy and reliable.

Power of Attorney for Health Care

It’s possible that your parents may become incapacitated, and when that happens, your parents should have someone chosen who can make medical decisions on their behalf. Keshishian advised adult children to initiate conversations with their parents to talk through their wishes for medical care, long-term care, and life-sustaining treatment. “Often, emotions can run high in an emergency situation, so it’s helpful to have clear instructions from the parent in advance,” she said.

Power of Attorney for Digital Assets 

“This person would ensure that online accounts, computers, and phones can be accessed,” Keshishian said. “It is important to confirm that all trust assets are properly titled, including the primary residence and brokerage accounts.”


According to Natalie Elisha Goldberg, founder of Goldberg LLP in Evergreen, Colorado, trusts have actually entered the mainstream for the middle class. Trusts may help families avoid the probate process, and even probate court. If a trust is set up in advance, it could help cover the cost of expensive nursing-home or long-term care in the future.

Set Long-Term Goals Together

Setting long-term goals together can prevent unpleasant surprises, but it will take open and honest communication. “It’s incredible that the values of parents and kids are often very different, and we often see parents struggle to treat their kids ‘equally’ and ‘fairly’ without understanding what those terms mean to the kids,” Walny said. For example, while parents may focus on financial equality, Walny said the kids may be more concerned about items that have sentimental value. Sometimes, these conversations may not be pleasant. That’s why Goldberg recommended having a team of financial professionals present, such as an attorney or tax advisor. In fact, her law firm also calls in a financial advisor and CPA for family meetings—and they allow grievances to be aired so all of the family members can be seen and heard. Remember, another key to success is understanding that setting long-term goals isn’t a one-time event, according to Gino Pascucci, a fellow co-founder with Simmons at IconTrust.“You don’t ‘set it and forget it,’” Pasucci said in an email to The Balance. “We have found the most successful families have periodic meetings—i.e., yearly or on some set schedule—with the parents’ attorney or financial professional present, as this helps everyone stay on task and set long-term goals together as a team.”

Read more related articles at:

How to talk with your parents about their estate plan, even if they don’t want to

How to talk to your parents about their estate without seeming like a greedy jerk

Also, read one of our previous Blogs at:

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

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

Dying without a will

What Happens If You Die Without a Last Will and Testament?

What Happens If You Die Without a Last Will and Testament?


What Happens If You Die Without a Last Will and Testament? It is never too early to create a last will and testament as many difficulties can arise if you die without this document in place. Your will gives directions about your wishes for the distribution of your estate after your death. When you create this document you will name an executor who will be in charge of paying off your remaining debts and distributing property to your beneficiaries and heirs.

If you fail to make a last will and testament before you die, then your estate will be divided up among your intestate heirs based on the intestacy laws of the state where you live at the time of your death. Your property may also be subject to the intestacy laws of any other state where you own real estate or tangible personal property. Aside from this, if you have minor children and you and your spouse die before the children become adults, then a probate judge will decide who will get custody of your children and who will manage their inheritance until they reach the age of 18. In many cases, your state’s intestacy laws will give different results from what you would have wanted had you taken the time to make a last will and testament. Aside from this, if you do own real estate and/or tangible personal property outside of your home state, then you could end up having two different sets of beneficiaries of your estate.

If You Don’t Own Property Outside of Your Home State

If you only own real estate and tangible personal property in your home state or you don’t own any real estate at all, then who will inherit your entire estate will be determined by the intestacy laws of your state of residence. If this situation applies to you, then you need to understand the intestacy laws of your state because these laws vary dramatically from state to state. Read below to see an illustration of the differences between the intestacy laws of Florida and Virginia.

You Do Own Property in More Than One State


If you live in one state and own real estate and/or tangible personal property in a different state, then who will inherit your property will be determined by the intestacy laws of two different states, and the end result may well be two different sets of beneficiaries. And what about property owned in three different states? Three different intestacy laws will apply and you’ll possibly end up with three different sets of beneficiaries.

Minor Children and Their Inheritance

Aside from what will happen to your property, what will happen to your minor children and their inheritance? If your spouse (or ex-spouse) is living, then they, as the natural parent of the children, will be the “natural” choice to take care of the children and manage their inheritance. But what if the other parent of your children is also deceased? Then a judge, who has never met you, your children, the other parent of your children, or either of your families, will decide who will take care of the children and their inheritance.

Examples of Intestacy Laws

In Florida, if you are survived by a spouse and children who are all children from the marriage, then your spouse will inherit 100% of your estate and your children will receive nothing. The result will be exactly the same in Virginia under these same facts. However, use the same facts above except that one or more of your children are from a different spouse. In Florida, your current spouse will inherit 1/2 of your estate and your children will share equally in the remaining 1/2 of your estate, while in Virginia your current spouse will only inherit 1/3 of your estate and your children will share equally in the remaining 2/3 of your estate. What will happen if your children are minors and your spouse (or ex-spouse) is also deceased? Then a probate judge will have to decide what is in the “best interest” of your children, which will mean that the judge will have to choose between someone from your side of the family and someone from the other parent’s side of the family as the “best” person to take care of your children and their inheritance. Scary thought, isn’t it?

What Should You Do?

The examples above illustrate what a big difference state laws can make. The only way to ensure that your property will go to the beneficiaries of your choice after your death when you want them to receive your property, and in the way that you want them to receive it, and who will take care of your minor children and their inheritance, is to make an estate plan.

Read more related articles at:

Should I have a will?

10 Reasons Why You Should Have A Last Will And Testament

Also, read one of our previous blogs at:

Not Having a Will Should Scare You

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

Lady bird deed

What Is a ‘Lady Bird Deed’?

What Is a ‘Lady Bird Deed’?

I heard about something called a “Lady Bird deed” that could be useful if I need to apply for Medicaid. What exactly is it and why is it named that?

A “Lady Bird deed” (also known as an enhanced life estate deed) is a way to transfer property to someone else outside of probate while retaining a life estate in the property. But unlike a regular life estate, a Lady Bird deed gives you the power to retain control of the property during your life, including the right to use the property for profit or to sell the property.

Lady Bird deeds can be very beneficial if you want to pass your home to someone else but may need to apply for Medicaid soon thereafter. In order to qualify for Medicaid, an applicant cannot have transferred property within five years of the application. Because the deed allows you to retain control of the property, depending on the state it may not count as a transfer of assets for Medicaid eligibility purposes. In addition, these deeds can help avoid estate recovery.  After a Medicaid recipient dies, the state can make a claim for repayment of benefits from the recipient’s estate. Because property under a Lady Bird deed passes outside of probate, it won’t be subject to a claim for reimbursement in states that make claims only against probate property.

These deeds are not legal in most states, so you need to talk to an attorney to find out if you can use one in your state.

What about the deed’s name? According to Texas Tech professor Gerry W. Beyer,  the Florida lawyer who created this form of deed in the 1980s explained the concept by using the names of President Lyndon B. Johnson’s family, and the name stuck.

Read more related articles at:

How Lady Bird Deeds Protect a Medicaid Recipient’s Home for Their Loved Ones

What Is an Enhanced Life Estate Deed?

Also, read one of our previous Blogs at:

How Does a Life Estate Work?

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


How Do You Handle Probate?

How Do You Handle Probate?

While you are living, you have the right to give anyone any property of your choosing. If you give your power to gift your property to another person, typically through a Power of Attorney, then that person is your agent and may give away your property, according to an article “Explaining the basic aspects probate” from The News-Enterprise. When you die, the Power of Attorney you gave to an agent ends, and they are no longer in control of your estate. Your “estate” is not a big fancy house, but a legal term used to define the total of everything you own.

Property that you owned while living, unless it was owned jointly with another person, or had a beneficiary designation giving the property to another person upon your death, is distributed through a court order. However, the court order requires a series of steps.

First, you need to have had created a will while you were living. Unlike most legal documents (including the Power of Attorney mentioned above), a will is valid when it is properly signed. However, it can’t be used until a probate case is opened at the local District Court. If the Court deems the will to be valid, the probate proceeding is called “testate” and the executor named in the will may go forward with settling the estate (paying legitimate debts, taxes and expenses), before distributing assets upon court permission.

If you did not have a will, or if the will was not prepared correctly and is deemed invalid by the court, the probate is called “intestate” and the court appoints an administrator to follow the state’s laws concerning how property is to be distributed. You may not agree with how the state law directs property distribution. Your spouse or your family may not like it either, but the law itself decides who gets what.

After opening a probate case, the court will appoint a fiduciary (executor or administrator) and may have a legal notice published in the local newspaper, so any creditors can file a claim against the estate.

The executor or administrator will create a list of all of the property and the claims submitted by any creditors. It is their job to ensure that claims are valid and have been submitted within the correct timeframe. They will also be in charge of cleaning out your home, securing your home and other possessions, then selling the house and distributing your personal furnishings.

Depending on the size of the estate, the executor or administrator’s job may be time consuming and complex. If you left good documentation and lists of assets, a clean file system or, best of all, an estate binder with all your documents and information in one place, it can alleviate a lot of stress for your executor. Estate fiduciaries who are left with little information or a disorganized mess must undertake an expensive and burdensome scavenger hunt.

The executor or administrator is entitled to a fiduciary fee for their work, which is usually a percentage of the estate.

Probate ends when all of the property has been gathered, creditors have been paid and beneficiaries have received their distributions.

With a properly prepared estate plan, your property will be distributed according to your wishes, versus hoping the state’s laws will serve your family. You can also use the estate planning process to create the necessary documents to protect you during life, including a Power of Attorney, Advance Medical Directive and Healthcare proxy.

Reference: The News-Enterprise (Feb. 2, 2021) “Explaining the basic aspects probate”

Read more related articles at:

What Happens During the Probate Process?

Six Steps of the Probate Process

Also read one of our previous Blogs at:

What’s Involved in the Probate Process?

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


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.

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