Smart Women Protect Themselves with Estate Planning

The reason to have an estate plan is two-fold: to protect yourself, while you are living and to protect those you love, after you have passed. If you have an estate plan, says the Boca Newspaper in the article titled “Smart Tips for Women: Estate Planning,” your wishes for the distribution of your assets are more likely to be carried out, tax liabilities can be minimized and your loved ones will not be faced with an extended and expensive process of settling your estate.

Here are some action items to consider, when putting your estate plan in place:

If you have an estate plan but aren’t really sure what’s in it, it’s time to get those questions answered. Make sure that you understand everything. Don’t be intimidated by the legal language: ask questions and keep asking until you fully understand the documents.

If you have not reviewed your estate plan in three or four years, it’s time for a review. There have been new tax laws that may have changed the outcomes from your estate plan. Anytime there is a big change in the law or in your life, it’s time for a review. Triggering events include births, deaths, marriages, and divorces, purchases of a home or a business or a major change in financial status, good or bad.

If you don’t have an estate plan, stop postponing and make an appointment with an estate planning attorney, as soon as possible.

Your estate plan should include advance directives, including a Durable Power of Attorney, Health Care Surrogate, and a Living Will. You may not be capable of executing these documents during a health emergency and having them in place will make it possible for those you name to make decisions on your behalf.

Anyone who is over the age of 18, needs to have these same documents in place. Parents do not have a legal right to make any decisions or obtain medical information about their children, once they celebrate their 18th birthday.

Make a list of your trusted professionals: your estate planning attorney, CPA, financial advisor, your insurance agent and anyone else your executor will need to contact.

Tell your family where this list is located. Don’t ask them to go on a scavenger hunt, while they are grieving your loss.

List all your assets. You should include where they are located, account numbers, contact phone numbers, etc. Tell your family that this list exists and where to find it.

If you have assets with primary beneficiaries, make sure that they also have contingent beneficiaries.

If you have assets from a first marriage and remarry, be smart and have a prenuptial agreement drafted that aligns with a new estate plan.

If you have children and assets from a first marriage and want to make sure that they continue to be your heirs, work with an estate planning attorney to determine the best way to make this happen. You may need a will, or you may simply need to have your children become the primary beneficiaries on certain accounts. A trust may be needed. Your estate planning attorney will know the best strategy for your situation.

If you own a business, make sure you have a plan for what will happen to that business, if you become incapacitated or die unexpectedly. Who will run the business, who will own it and should it be sold? Consider what you’d like to happen for long-standing employees and clients.

Smart women make plans for themselves and their loved ones. An estate planning attorney will be able to help you navigate through an estate plan. Remember that an estate plan needs upkeep on a regular basis.

Reference: Boca Newspaper (March 4, 2019) “Smart Tips for Women: Estate Planning”

Why Is a Revocable Trust So Valuable in Estate Planning?

There’s quite a bit that a trust can do to solve big estate planning and tax problems for many families.

As Forbes explains in its recent article, “Revocable Trusts: The Swiss Army Knife Of Financial Planning,” trusts are a critical component of a proper estate plan. There are three parties to a trust: the owner of some property (settler or grantor) turns it over to a trusted person or organization (trustee) under a trust arrangement to hold and manage for the benefit of someone (the beneficiary). A written trust document will spell out the terms of the arrangement.

One of the most useful trusts is a revocable trust (inter vivos) where the grantor creates a trust, funds it, manages it by herself, and has unrestricted rights to the trust assets (corpus). The grantor has the right at any point to revoke the trust, by simply tearing up the document and reclaiming the assets, or perhaps modifying the trust to accomplish other estate planning goals.

After discussing trusts with your attorney, he or she will draft the trust document and re-title property to the trust. The assets transferred to a revocable trust can be reclaimed at any time. The grantor has unrestricted rights to the property. During the life of the grantor, the trust provides protection and management, if and when it’s needed.

Let’s examine the potential lifetime and estate planning benefits that can be incorporated into the trust:

  • Lifetime Benefits. If the grantor is unable or uninterested in managing the trust, the grantor can hire an investment advisor to manage the account in one of the major discount brokerages, or he can appoint a trust company to act for him.
  • Incapacity. A trusted spouse, child, or friend can be named to care for and represent the needs of the grantor/beneficiary. She will manage the assets during incapacity, without having to declare the grantor incompetent and petitioning for a guardianship. After the grantor has recovered, she can resume the duties as trustee.
  • This can be a stressful legal proceeding that makes the grantor a ward of the state. This proceeding can be expensive, public, humiliating, restrictive and burdensome. However, a well-drafted trust (along with powers of attorney) avoids this.

The revocable trust is a great tool for estate planning because it bypasses probate, which can mean considerably less expense, stress and time.

In addition to a trust, ask your attorney about the rest of your estate plan: a will, powers of attorney, medical directives and other considerations.

Any trust should be created by a very competent trust attorney, after a discussion about what you want to accomplish.

Reference: Forbes (February 20, 2019) “Revocable Trusts: The Swiss Army Knife Of Financial Planning”

When Was the Last Time You Talked with Your Estate Planning Attorney?

If you haven’t had a talk with your estate planning attorney since before the TCJA act went into effect, now would be a good time to do so, says The Kansas City Star in the article “Talk to estate attorney about impacts of Tax Cuts and Jobs Act.” While most of the news about the act centered on the increased exemptions for estate taxes, there are a number of other changes that may have a direct impact on your taxes.

Start by looking at any wills or trusts that were created before the tax act went into effect. If any of the trusts use formulas that are tied to the federal estate tax exemption, there could be unintended consequences because of the higher exemption amounts.

The federal estate tax exemption doubled from $5.49 million per person in 2017 to $11.18 million per person in 2018 (or $22.36 million per couple). It is now $11.2 million per person in 2019 (or $22.4 million per couple).

Let’s say that your trust was created in 2001, when the estate tax exemption was a mere $675,000. Your trust may have stipulated that your children receive the amount of assets that could be passed free from federal estate tax, and the remainder, which exceeded the federal estate tax exemption, goes to your spouse. At the time, this was a perfectly good strategy. However, if it hasn’t been updated since then, your children will receive $11.4 million and your spouse could be disinherited.

Trusts drafted prior to 2011, when portability was introduced, require particular attention.

Two other important factors to consider are portability and step-up of cost basis. In the past, many couples relied on the use of bypass or credit shelter trusts that pay income to the surviving spouse and then eventually pass trust assets on to the children, upon the death of the surviving spouse. This scenario made sure to use the first deceased spouse’s estate exemption.

However, new legislation passed in 2011 allowed for portability of the deceased spouse’s unused estate exemption. The surviving spouse’s estate can now use any exemption that wasn’t used by the first spouse to die.

A step-up in basis was not changed by the TCJA law, but this has more significance now. When a person dies, their heir’s cost basis of many assets becomes the value of the asset on the date that the person died. Highly appreciated assets that avoided income taxes to the decedent, could avoid or minimize income taxes to the heirs. Maintaining the ability for assets to receive a step-up in basis is more important now, because of the size of the federal estate tax exemption.

Beneficiaries who inherit assets from a bypass or credit shelter trust upon the surviving spouse’s death, no longer benefit from a “second” step-up in basis. The basis of the inheritance is the original basis from the first spouse’s death. Therefore, bypass trusts are less useful than in the past, and could actually have negative income tax consequences for heirs.

If your current estate plan has not been amended for these or other changes, make an appointment soon to speak with a qualified estate planning attorney. It may not take a huge overhaul of the entire estate plan, but these changes could have a negative impact on your family and their future.

Reference: The Kansas City Star (Feb. 7, 2019) “Talk to estate attorney about impacts of Tax Cuts and Jobs Act”

This is the Year to Complete Your Estate Plan!

Your estate plan is an essential part of preparing for the future. It can have a dramatic effect on your family’s future financial situation. Estate planning can also have a significant impact on your tax liability immediately. Utah Business’s article, “5 Estate Planning Tips For 2019,” helps us with some tips.

Your Will. If you have a will, you’re ahead of more than half of the people in the U.S. Remember, however, that estate planning isn’t a one-time thing. It’s an ongoing process that requires making sure your plan reflects your current wishes and financial situation. You should review your will at least every few years. However, there are also some life events that should trigger a review, regardless of when the last review occurred. These include marriage, divorce, the birth or adoption of a child or grandchild, an inheritance, a large financial loss and the loss of a spouse.

A Trust. Anyone can create a trust, and it has real estate planning advantages. You can use a trust to pass assets to heirs and other beneficiaries, just like you could with a will. However, assets passed through a trust don’t need to go through probate. Using a trust to transfer assets provides privacy.

The Current Tax Breaks. The 2017 Tax Cuts and Jobs Act gives us some significant tax cuts in 2019, such as a temporary doubled lifetime exclusion for the gift and estate tax, temporary exemptions from the generation-skipping transfer tax, higher annual gift limits and charitable contribution deductions. To see if you can use of any of these tax benefits, speak to an experienced estate planning attorney.

Talk to an Attorney for a Review of Your Estate Plan. It’s important to remember that estate planning is complicated. You should, therefore, develop a comprehensive estate plan with the help of an experienced attorney. Don’t be tempted to use an online legal do-it-yourself service to save a few dollars, because any mistakes you make could have a big impact on you and your family’s financial future.

Every state has its own laws regarding the formalities required to create a valid will. If you fail to follow any of these, a court may declare your will invalid during probate. Your entire estate will then be distributed according to the laws of intestate succession. These laws may not reflect your wishes for the distribution of your estate. Meeting with an attorney will make certain that your estate planning documents are in order. It will also help you to identify your goals and ensure that your assets are protected and transferred in the most efficient way possible.

Reference: Utah Business (February 5, 2019) “5 Estate Planning Tips For 2019”

Will Stepmother Take Dad’s Money When He Dies?

Here’s a savvy and responsible stepmother—she called for a meeting with the estate planning attorney. At age 57, married to a 72-year old man with three kids from his first marriage and two kids from their marriage, she wanted to make sure that his wealth didn’t become a source of agitation for the family, when he passed. That, says Forbes, typifies how the “new” American family has changed, in the article “How Long Will Stepmom Live? And Other Vexing Estate Planning Questions for Modern Families.”

The stepmother did not want to be seen as rapacious or coming between the kids and their inheritance.

The solution was as follows: money for the stepmother was left to a marital trust with provisions for her benefit, while the children received accelerated inheritances through a series of Grantor Retained Annuity Trusts (GRATs), a qualified personal residence trust for a vacation compound and annual exclusion gifts.

Here’s another example: a male descendent of a wealthy family acknowledged that he had fathered a child without being married to the child’s mother. He had to seek legal determination to ensure that the child would be cared for.

Welcome to today’s new family. They include three-parent families, artificial reproductive heirs and blended families. These are all hot issues in the world of estate planning and attorneys are now addressing these new dynamics.

There are five basic questions that must be addressed when creating an estate plan today:

Who? Who gets your money and your stuff?

How much? How will it be divided among heirs?

When? Will it be at a specific age, or just when you die?

Outright versus in trust? With a trustee, you name a person who will control your assets.

Who represents you? An agent and a fiduciary, with a power of attorney who acts on your behalf, if you become incapacitated, an executor who is in charge of administering your estate, and a trustee who manages any trusts created.

Modern families don’t want old-school estate planning solutions. They want to know that their estate plan will work for their situation, which may not match the old “Mom, Dad, Brother, Sister, Brother” construct. So, how should you handle the distribution of wealth for non-traditional families? If a child dies, and a live-in partner is rearing the children, should there be money for the children in a trust? What about taking care of the surviving partner, even if they were not married?

What about late-in-life marriages? If there’s a huge gap in years between grandparents and grandchildren, how will family wealth be passed down? Funding 529 trusts is one answer, and trusts are another. If the age gap is so big that grandparents never meet their grandchildren, a statement of intent in documents can be used to convey the goals and wishes the grandparents have for their grandchildren.

Providing for all children equally isn’t always the goal of the modern family. Some might think their ex-spouse will provide for children and leave them fewer assets than they would have, if that were not a factor. However, don’t assume that, even if you can’t have that conversation with your ex. If your intention is to distribute assets in unequal portions, you may save your loved ones a lot of pain and fighting, by either talking with them about it while you are still living or leaving a letter behind explaining your decision-making process.

It’s hard to tell what changes will come to families in the future, but one thing will remain the same: the need for an estate plan, done with the guidance of an experienced estate planning attorney, is essential.

Reference: Forbes (Jan. 29, 2019) “How Long Will Stepmom Live? And Other Vexing Estate Planning Questions for Modern Families”

How Do I Include My Pet in My Estate Plan?

A recent survey of pet owners showed that nearly half (44%) of pet owners have prepared for the future care of their animals, in the event their pets outlive them. With traditional financial planning instruments like living trusts, life insurance, and annuities, pet owners can have peace of mind knowing their pets’ needs will be met.

Forbes’s article, “3 Financial Planning Tips For Pets Owners,” says that typically, “pet estate plans” should cover more than simply who will care for the pet, when you are no longer around. Expenses such as food, doggie day care, veterinarian bills and medication should also be considered.

20% of all respondents in the survey said they have financially planned for their pets’ future care. About 38% said they added the pet’s future caregiver as a beneficiary to a life insurance policy and 35% added more coverage to their life policies. 13% also recently purchased annuities naming the pet’s caregiver as the beneficiary.

However, many pet owners forget about end-of-life planning. Consider an individual trust for your pet or donating funds to your local humane society or pet shelter.

One question many have before adding a new animal to the family, is whether they can afford it. The cost of an animal from a breeder can be high, so a more affordable option is to check out your local humane society or animal rescue group. Remember that the costs of food, vet bills and other supplies are just as important to think about, before making a pet a part of your family. Pets are too often returned to animal shelters, because pet parents were unable to afford to properly care for the pet.

Last, ask about pet insurance at your veterinarian. Many clinics offer plans and staff members will be able to talk to you about the right option based on the type of animal, breed, age and other criteria of your pet.

Simple steps like these will make certain your pets are cared for properly and affordably.

Reference: Forbes (January 27, 2019) “3 Financial Planning Tips For Pets Owners”