When most people think about creating an estate plan, they usually focus on what will happen when they die. They typically do not consider what their wishes would be if they were alive but unable to manage their own affairs (in other words, if they are alive but incapacitated). In many cases, failing to plan for incapacity can result in families having to seek court involvement to manage a loved one’s affairs. It does not matter who you are, how old you are, or how much you have—having a proper plan in place to address your incapacity or death is necessary for everyone. Recently, comedian and late-night talk show host Jay Leno had to seek court involvement to handle his and his wife’s estate planning needs due to his wife’s incapacity. Consulting with Reno estate planning lawyers can help you avoid such situations.
A conservator is a court-appointed person who manages the financial affairs for a person who is unable to manage their affairs themselves (also known as the ward). In Nevada, a conservator is known as a Guardian. The conservator is responsible for managing the ward’s money and property and any other financial or legal matters that may arise. They are also required to periodically file information with the court to prove that they are abiding by their duties. To have a conservator appointed, an interested person must petition the court, attend a hearing, and be appointed by a judge. This can be very time-consuming, and there are court and attorney costs that must be paid along the way. Reno estate planning lawyers can help streamline this process and provide necessary guidance.
In January 2024, Jay Leno petitioned the court to be appointed as the conservator of the estate of his wife, Mavis Leno, so that he could have an estate plan prepared on her behalf and for her benefit. Unfortunately, Mrs. Leno has been diagnosed with dementia and has impaired memory. Her impairment has made it impossible for her to create her own estate plan or participate in the couple’s joint planning. According to court documents, Mr. Leno wanted to set up a living trust and other estate planning documents to ensure that his wife would have “managed assets sufficient to provide for her care” if he were to die before her. Right now, Mr. Leno is managing the couple’s finances, but he wanted to prepare for a time when he is no longer able to do so.
On April 9, 2024, the court granted Mr. Leno’s petition. According to the court documents, the judge determined that a conservatorship was necessary and that Mr. Leno was “suitable and qualified” to be appointed as such. During the proceedings, the judge found “clear and convincing evidence that a Conservatorship of the Estate is necessary and appropriate.”
Although there was a favorable outcome in this particular case, it still took several months for Mr. Leno to be appointed by the court. In addition to the initial filings and court appearances, there will likely be ongoing court filing requirements to ensure that Mrs. Leno’s money is being managed appropriately. Had they prepared an estate plan ahead of time, much of this time and hassle would likely have been avoided. Reno estate planning lawyers can assist in preparing these crucial documents ahead of time to prevent such scenarios.
While many people may dismiss the Lenos’ experience as something that applies only to the rich and famous, the truth is that you could find yourself in the same situation (although with a smaller amount of money and property at play) if you are not careful. Let’s use this opportunity to learn from their mistakes.
We can help you and your loved ones regardless of where you find yourself in the estate planning process. Whether you are looking to proactively plan to ensure that your wishes are carried out during all phases of your life, or if you need assistance with a loved one who can no longer manage their own affairs, give us a call. Our team of Reno estate planning lawyers is here to assist you.
Wrongful Death and Probate in Reno: Consulting a Wrongful Death Lawyer in Reno
Wrongful death lawsuits and probate proceedings are both civil legal matters that occur after somebody has died. When the death of a loved one is caused by another individual or entity, it can lead to the filing of a wrongful death lawsuit and, ultimately, the awarding of compensation to surviving family members. Probate is a court proceeding that deals with administering a decedent’s estate, inventorying their accounts and property, paying off creditors, and making distributions to heirs or beneficiaries. Consulting a wrongful death lawyer in Reno can help navigate these complex legal processes.
While probate proceedings are fairly common when a person dies, very few deaths give rise to a wrongful death claim. However, wrongful death and probate can intersect if somebody dies due to another’s misconduct.
The Role of a Wrongful Death Lawyer in Reno
State laws vary on who has the legal authority to file a wrongful death case. There is also considerable state variation on how the proceeds of a wrongful death claim are distributed to survivors. A wrongful death lawyer in Reno can provide the necessary guidance on state-specific laws and procedures.
What Is a Wrongful Death? Understanding with a Wrongful Death Lawyer in Reno
A wrongful death, as the term implies, is a death that results from the “wrongful” action of another, such as negligence, carelessness, recklessness, or intentional conduct. Both individuals and entities, such as businesses and governments, can commit a wrongful action that leads to death. For example:
Wrongful death is a matter of civil law, although in some cases—perhaps most famously the O.J. Simpson case—a person’s death can lead to both criminal and civil charges. To navigate such cases, the assistance of a wrongful death lawyer in Reno is crucial.
Who Can File a Wrongful Death Lawsuit? Consult a Wrongful Death Lawyer in Reno
A wrongful death lawsuit can award damages to pay for the decedent’s medical bills, pain and suffering, and funeral expenses. It can also provide money to survivors for their economic and emotional injuries, such as loss of financial support, household services, and love and companionship.
The question of who can file a wrongful death lawsuit comes down to state law. Generally, states allow one of the following to sue:
In states where survivors are allowed to sue for wrongful death, the right to file suit is typically prioritized based on the closeness of the relationship, with a surviving spouse and children given priority. Some states allow groups of survivors to sue. Others give priority to family members and give them a limited amount of time to file a lawsuit, and, if they fail to do so, additional relatives and even unmarried domestic partners can then sue.
There are also certain states where only the decedent’s probate estate can file a wrongful death lawsuit. In these states, the personal representative of the probate estate (for example, a family member or a lawyer) is the only party who has the legal authority to act on behalf of the estate and file the lawsuit. The personal representative of the probate estate might be someone who was named in the decedent’s will or appointed by a judge according to state law if the decedent died without a will. Consulting with a wrongful death lawyer in Reno can help clarify these rights and responsibilities.
Wrongful Death, Estates, and Probate: Insights from a Wrongful Death Lawyer in Reno
Probate is not always necessary when someone dies; there are instances when the value of the decedent's money and property is small enough to avoid probate, or the family uses estate planning tools such as living trusts to avoid it.
Wrongful death claims, as previously mentioned, are relatively uncommon. In 2022, there were just over 227,000 preventable deaths caused by injuries nationwide and not all of these were wrongful deaths.
Even if a person has no accounts or property or if their estate is otherwise eligible to skip probate, numerous factors can make opening an estate and filing for probate necessary to resolve a wrongful death claim.
Here are some areas where a wrongful death claim overlaps with opening an estate and engaging the probate court:
To summarize, if a wrongful death lawsuit is filed, it is likely to trigger probate and court involvement considerations in one way or another. The specific ways in which wrongful death and probate intersect, however, are largely dependent on state law. Consulting a wrongful death lawyer in Reno can help navigate these complex intersections.
Who Gets the Money from a Wrongful Death Lawsuit? Consult a Wrongful Death Lawyer in Reno
Determining who benefits from a wrongful death settlement or jury verdict, like other aspects of a wrongful death lawsuit, comes down to state statute.
The different ways that states approach the distribution of damages awarded in a wrongful death lawsuit include the following:
As these examples show, there is a high degree of variability among states about wrongful death lawsuit award distributions. States may give significant latitude to family members to decide how the proceeds should be split or strictly adhere to statutory provisions.
States also vary on the types of damages that can be awarded in a successful wrongful death claim. Most state laws allow economic and noneconomic damages to be recovered, but they may give itemized descriptions of the specific damages that can be awarded to particular survivors and distinguish between damages recoverable by survivors and recoverable by the estate. In some states, each heir must present evidence to the court of their losses to receive a share of the wrongful death damages. A wrongful death lawyer in Reno can help navigate these state-specific rules and ensure fair distribution.
Talk to a Wrongful Death Lawyer in Reno About Wrongful Death and Settling an Estate
Closing the book on a loved one’s estate can be procedurally complicated and emotionally difficult no matter the circumstances of their death, but if their passing also involves a wrongful death claim, the situation can become much more emotional and increasingly complex.
Whether you are a personal representative or family member responsible for filing a wrongful death lawsuit, an heir seeking to claim a portion of a wrongful death payout, or you want to make sure that your estate plan anticipates the possibility of a wrongful death and addresses how to best deal with it, our attorneys can help.
Contact us to set up a time to talk to a wrongful death lawyer in Reno about the intersection of wrongful death, probate, and estate law.
Life is unpredictable, and a sudden disability can throw even the best-laid estate plans into chaos. Understanding how to adapt your estate plan to accommodate new disability considerations is crucial for ensuring peace of mind and financial security for you and your loved ones. This guide will help you navigate this challenging situation with the assistance of a Reno estate attorney.
When a disability occurs, it can significantly impact your existing estate plan. Assets you intended to leave to your loved ones may need to be reallocated to cover unexpected medical expenses and long-term care costs. Moreover, the management of your estate might need to be adjusted to accommodate the new circumstances. A Reno estate attorney can help you reassess your plan and make necessary adjustments to ensure your assets are protected and allocated according to your new needs.
One of the first steps to take is reviewing your beneficiary designations. Ensure that these designations align with your current wishes and the new needs created by the disability. This includes reviewing life insurance policies, retirement accounts, and other financial instruments to ensure that your estate plan remains intact and beneficial to all involved. Your Reno estate attorney can assist in this review to ensure accuracy and alignment with your updated goals.
Updating your power of attorney documents is essential. This legal tool allows you to designate someone to make financial and healthcare decisions on your behalf if you become incapacitated. Ensure your chosen representative understands your wishes and is prepared to act in your best interest. A Reno estate attorney can help you explore your options and integrate long-term care insurance into your overall plan.
A living will outlines your healthcare preferences should you become unable to communicate them. Updating this document to reflect any new medical conditions or preferences resulting from the disability is critical. It ensures that your healthcare decisions are respected and followed.
Your Reno estate attorney can collaborate with your financial planner to create a comprehensive plan that addresses all aspects of your financial needs.
Consider investing in long-term care insurance if you haven't already. This type of insurance can cover expenses that traditional health insurance does not, such as nursing home care, in-home care, and assisted living facilities. It can be a
crucial component of your updated estate plan.
Work with a financial planner to budget for the new expenses associated with the disability. This may include medical treatments, home modifications, and daily living assistance. Proper financial planning can help ensure that your estate remains solvent and can continue to support your loved ones.
A special needs trust can be an invaluable tool for managing the finances of a disabled loved one without jeopardizing their eligibility for government assistance programs. These trusts allow you to set aside funds specifically for the care of the disabled person, ensuring their needs are met without compromising their benefits. A Reno estate attorney can help you establish and manage a special needs trust tailored to your situation.
In some cases, establishing a guardianship may be necessary. A guardianship gives someone the legal authority to make decisions on behalf of the disabled person. This can provide peace of mind, knowing that a trusted individual is managing the affairs of your loved one in accordance with your wishes.
Adapting your estate plan in light of a disability requires careful consideration and expert guidance. By understanding the impacts on your current plan, updating essential legal documents, making financial provisions for long-term care, and utilizing tools like special needs trusts and guardianships, you can ensure that your estate plan continues to serve its intended purpose.
At Anderson, Dorn & Rader Ltd., we are here to help you navigate these changes. Contact us for a personalized consultation to discuss how we can adapt your estate plan to meet new disability cons
iderations, ensuring peace of mind and financial security for you and your family.
When it comes to legal matters, it's crucial to seek advice and representation from qualified professionals. Unfortunately, many individuals and businesses fall prey to nonlawyers acting like lawyers, leading to significant legal and financial consequences. As experienced Reno estate planning lawyers, Anderson, Dorn & Rader Ltd. is here to help you understand the risks and ensure you receive legitimate 
Relying on nonlawyers for legal advice can expose you to numerous risks. Nonlawyers lack the necessary training and qualifications to navigate complex legal issues, potentially leading to incorrect advice, missed deadlines, and improperly prepared documents. These mistakes can result in severe financial losses, legal penalties, and unresolved legal issues that could have long-lasting effects. Reno estate planning lawyers are trained to handle these complexities and provide accurate guidance.
Nonlawyers pretending to be lawyers often take advantage of people's lack of legal knowledge. They may promise quick solutions or low-cost services, but their lack of expertise can end up costing you much more in the long run. It's essential to recognize these red flags and seek help from licensed professionals. Reno estate planning lawyers are equipped to identify and address these issues properly.
A qualified lawyer is someone who has completed a rigorous educational path, including a bachelor's degree, law school, and passing the bar exam. Additionally, lawyers must adhere to ongoing education requirements and ethical standards set by the state bar association. These qualifications ensure that they have the knowledge, skills, and legal authority to provide accurate and effective legal advice. Reno estate planning lawyers meet these stringent requirements to serve you better.
Licensed lawyers are required to stay current with changes in the law through continuous education. This commitment to ongoing learning ensures they can provide informed and up-to-date legal counsel. In contrast, non lawyers lack this formal training and certification, making them ill-equipped to handle legal matters competently. Reno estate planning lawyers prioritize continuous education to maintain high standards of legal practice.
Nonlawyers can provide certain types of assistance, such as typing up documents or offering general information about legal procedures. However, they cannot represent you in court, provide legal advice tailored to your situation, or draft complex legal documents. Misrepresentation of legal qualifications is illegal and can result in severe penalties for both the nonlawyer and the client.
It's crucial to be aware of the boundaries of legal practice. Always verify the credentials of anyone offering legal services. A simple check with the state bar association can confirm whether a person is a licensed attorney. This due diligence can protect you from falling victim to unqualified and potentially fraudulent individuals.
There have been numerous instances where nonlawyers have misrepresented their qualifications, leading to disastrous outcomes for their clients. For example, a nonlawyer providing estate planning advice might incorrectly draft a will or trust, resulting in probate issues or unintended disinheritance. These mistakes can lead to prolonged legal battles, increased costs, and significant emotional stress for the affected families.
Clients who rely on nonlawyers may find themselves facing legal challenges that could have been avoided with proper legal counsel. Incorrect advice or improperly handled legal matters can result in financial losses, legal disputes, and complications that may take years to resolve. Seeking advice from a qualified lawyer ensures that your legal matters are handled correctly and efficiently.
Legal matters require the expertise of qualified professionals. Relying on nonlawyers can lead to significant legal and financial risks. As experienced Reno estate planning lawyers, Anderson, Dorn & Rader Ltd. is dedicated to providing legitimate legal guidance to help you navigate complex legal issues. Don't let unqualified individuals jeopardize your legal matters.
Contact Anderson, Dorn & Rader Ltd. for a consultation and ensure you receive the professional legal advice you need. Visit our website or office in Reno to learn more about how we can assist you with your estate planning and other legal needs.
Estate planning is a vital step in securing your legacy and ensuring that your assets are distributed according to your wishes. However, one crucial question often derails even the most well-thought-out estate plans: "Are my beneficiary designations up-to-date and accurate?" As estate planning attorneys in Reno, we at Anderson, Dorn & Rader Ltd. are here to help you understand the importance of beneficiary designations and how to ensure they align with your overall estate plan.
Beneficiary designations are instructions you provide to financial institutions, insurance companies, and retirement plan administrators, specifying who should receive the proceeds of your accounts upon your death. These designations override your will and trust, making them a crucial element of your estate plan.
Beneficiary designations ensure that your assets are transferred quickly and directly to the intended recipients without the need for probate. This can save time, reduce legal fees, and provide immediate financial support to your beneficiaries. However, they must be carefully managed to avoid conflicts and ensure they reflect your current wishes.
One of the most common mistakes is failing to update beneficiary information after major life events such as marriage, divorce, the birth of a child, or the death of a loved one. Outdated beneficiary designations can lead to unintended recipients, causing family disputes and legal complications.
Naming minor children as beneficiaries without establishing a trust or appointing a guardian can create legal challenges, as minors cannot legally manage inherited assets. Instead, consider setting up a trust or appointing a guardian to manage the assets until the children reach adulthood.
Failing to name contingent beneficiaries—those who will inherit if the primary beneficiary predeceases you—can result in your assets becoming part of your probate estate, defeating the purpose of having beneficiary designations. Always include contingent beneficiaries to ensure your estate plan is comprehensive.
If your beneficiary designations do not align with your will or trust, the designations will take precedence, potentially leading to outcomes that contradict your estate planning intentions. For example, if your will leaves all assets to your spouse, but your beneficiary designations name a former spouse, the former spouse will receive those assets.
Conflicting information can lead to legal disputes among family members, causing delays and increasing the cost of estate administration. Ensuring that your beneficiary designations are consistent with your overall estate plan helps prevent such conflicts and ensures your wishes are honored.
Take the time to review all your financial accounts, insurance policies, and retirement plans to ensure the beneficiary designations are current and accurately reflect your wishes. This includes checking for primary and contingent beneficiaries.
Working with experienced estate planning attorneys in Reno can help you navigate the complexities of beneficiary designations. An attorney can provide guidance on the best strategies for aligning your designations with your overall estate plan and ensure that all legal requirements are met.
Make it a habit to review and update your estate plan, including beneficiary designations, at least once a year or after significant life events. Regular updates help ensure that your estate plan remains accurate and effective, providing peace of mind for you and your loved ones.
Beneficiary designations play a critical role in your estate plan, but they are often overlooked. By understanding their importance, avoiding common mistakes, and ensuring they are consistent with your overall estate plan, you can safeguard your assets and ensure your legacy is managed according to your wishes.
Contact Anderson, Dorn & Rader Ltd. for a consultation to learn how real estate administration works and how you can properly prepare for it. Let us help you navigate the legal landscape to secure your legacy and provide peace of mind for your loved ones.
When it comes to estate administration, TV shows and movies often take creative liberties, leading to widespread misconceptions. While these portrayals can be entertaining, they rarely reflect the complexities of real-life estate planning and administration. As Reno estate planning lawyers, we at Anderson, Dorn & Rader Ltd. are here to clarify some of the common myths and provide accurate information to help you make informed decisions about your estate.
One of the most common misconceptions perpetuated by TV and movies is the immediate distribution of assets following someone's death. Characters often receive their inheritance instantaneously, with little to no legal proceedings.
In reality, the distribution of assets is far from instantaneous. The estate must go through a series of legal procedures, including probate, which can take several months or even years. During probate, the court oversees the validation of the will, payment of debts and taxes, and distribution of the remaining assets to the beneficiaries. This process ensures that all legal requirements are met, and any disputes are resolved before the assets are distributed.
TV and movies often depict the probate process as a long, drawn-out nightmare filled with endless court battles and legal fees. This portrayal can be misleading and discourages people from engaging in necessary estate planning.
While probate can be complex, it is not always the horror story that entertainment media suggests. With proper estate planning, the process can be streamlined and managed efficiently. Creating a comprehensive estate plan, including a will and possibly a trust, can help minimize the probate process's length and complexity. Working with experienced Reno estate planning lawyers can further ensure a smoother and more manageable probate experience.
Another common misconception is that legal challenges to an estate are rare and easily resolved. In movies, disputes over a will or trust are often quickly settled with a dramatic courtroom revelation.
In reality, legal challenges to an estate can be complex, contentious, and protracted. Disputes over the validity of a will, allegations of undue influence, or conflicts among beneficiaries can lead to lengthy legal battles. These challenges require careful navigation by skilled attorneys to ensure that the deceased's wishes are honored and that the estate is administered fairly. Proper estate planning and clear documentation can help mitigate the risk of such disputes.
TV and movies often depict the resolution of estate matters as happening within a very short timeframe. Characters might resolve all estate issues in a single episode or film, giving the impression that estate administration is a quick process.
In real life, estate administration is a lengthy process that involves multiple steps and can take months or even years to complete. The timeline can vary depending on the estate's complexity, the presence of any disputes, and the efficiency of the probate court. Executors must gather and inventory assets, pay debts and taxes, and distribute the remaining assets to beneficiaries, all while adhering to legal requirements and deadlines.
While TV shows and movies can provide an entertaining glimpse into the world of estate administration, they often fall short of depicting the realities involved. Understanding the true complexities of estate administration is crucial for effective estate planning. By dispelling these common myths and working with knowledgeable Reno estate planning lawyers, you can ensure that your estate is managed according to your wishes and that your beneficiaries are well cared for.
Contact Anderson, Dorn & Rader Ltd. for a consultation to learn how real estate administration works and how you can properly prepare for it. Let us help you navigate the legal landscape to secure your legacy and provide peace of mind for your loved ones.
Generational wealth is an aspiration many families strive to achieve. However, planning for the seamless transfer of wealth across generations can be complex, especially when considering adoption and the use of dynasty trusts. This guide aims to provide clarity on how these tools can be used effectively to build and preserve generational wealth.
Dynasty trusts offer several benefits, including:
Setting up a dynasty trust requires careful legal structuring. This involves:
Adoption can significantly impact estate planning and the transfer of generational wealth. Legally, adopted children have the same rights as biological children in terms of inheritance. This means they can be included as beneficiaries in dynasty trusts and other estate planning instruments.
Adopting children can bring financial benefits beyond the joy of expanding your family. For instance:
To ensure a dynasty trust remains effective, it must be actively managed. This involves:
Life is unpredictable, and estate plans should be flexible enough to adapt to changes. This could involve:
Creating generational wealth through adoption and dynasty trusts requires careful planning and professional guidance. Anderson, Dorn & Rader Ltd. is here to help you navigate this process. Contact us for a personalized consultation to ensure your estate planning goals are effectively met.
As you approach retirement, it's essential to understand how different components of your financial portfolio fit into your estate plan. Pensions and other retirement accounts, such as IRAs and 401(k)s, each have unique characteristics and are treated differently in estate planning. This article will explore these differences to help you make informed decisions and ensure your estate plan is comprehensive and effective. For personalized advice, consider consulting an estate planning attorney in Reno.
A pension is a retirement plan that provides a fixed monthly income to retirees, typically funded by employers. Pensions are often referred to as defined benefit plans because they promise a specified benefit amount upon retirement, usually based on factors such as years of service and salary history.
Retirement accounts, such as IRAs and 401(k)s, are defined contribution plans where employees contribute a portion of their salary, often matched by employers, into investment accounts. The final amount available at retirement depends on the contributions made and the investment performance of the account.
Pensions are generally not directly included in an estate plan because they provide a lifetime income to the retiree and, in some cases, a surviving spouse. Upon the retiree's death, the pension benefits may cease or continue at a reduced rate to the spouse, depending on the plan's provisions.
Many pensions offer survivor benefits, allowing a designated beneficiary, usually a spouse, to receive benefits after the retiree's death. It's crucial to understand the specific terms of your pension plan to ensure your spouse or other beneficiaries are adequately provided for.
Pensions and defined contribution plans like IRAs and 401(k)s fall under different legal frameworks. Pensions are governed by the Employee Retirement Income Security Act (ERISA) and must comply with specific regulations concerning benefit distributions and protections for beneficiaries.
While pensions often bypass the estate process due to their structure, IRAs and 401(k)s can be more directly managed within an estate plan. Beneficiary designations for these accounts can be updated to reflect changes in your estate planning goals, offering greater flexibility in asset distribution.
Pension benefits are generally subject to federal income tax when received by the retiree or surviving spouse. However, these benefits typically do not generate additional estate tax implications because they are not considered part of the retiree's estate.
IRAs and 401(k)s, on the other hand, can have significant tax implications. The value of these accounts is included in the estate and may be subject to estate taxes. Additionally, beneficiaries who inherit these accounts may face income tax on distributions. Proper planning can help mitigate these tax burdens and maximize the benefits to your heirs.
Incorporating pensions and other retirement accounts into your estate plan requires a thorough understanding of their unique characteristics and legal considerations. While pensions provide a steady income stream and often include survivor benefits, IRAs and 401(k)s offer more flexibility in terms of beneficiary designations and estate planning strategies.
To ensure your estate plan is comprehensive and tailored to your needs, contact Anderson, Dorn & Rader Ltd. for personalized advice. We can help you navigate the complexities of estate planning, ensuring your financial legacy is protected and optimized for your beneficiaries. Join our free webinar on estate planning essentials to learn more.
As a parent, ensuring the well-being and future of your child is paramount. However, unforeseen circumstances such as illness or incapacity can disrupt your ability to provide care. Understanding how to plan for these possibilities is crucial. By working with an incapacity planning attorney in Reno, you can ensure that your child's future is secure, no matter what happens. This article will explore the importance of legal guardianship, setting up a trust for your children, choosing the right guardian, and Nevada state laws regarding custody and guardianship.
Legal guardianship is a legal process that allows an individual to be appointed to care for a minor child if the parents are unable to do so. This can occur due to various reasons such as incapacity, death, or other unforeseen circumstances. The guardian assumes the responsibilities of raising the child, including making decisions about their education, health care, and overall well-being.
Establishing legal guardianship ensures that your child is cared for by someone you trust. It provides peace of mind knowing that your child's needs will be met and their best interests will be protected. Without a legal guardian in place, the court may appoint someone who may not align with your wishes or values.
A trust is a legal arrangement that allows you to manage and protect your assets for the benefit of your child. Setting up a trust can provide financial security for your child by ensuring that funds are available for their education, healthcare, and other essential needs. A trust can also specify how and when the funds should be distributed, preventing potential misuse.
There are different types of trusts you can set up for your children. A common option is a revocable living trust, which allows you to maintain control of the assets during your lifetime and designate a trustee to manage them if you become incapacitated. Another option is an irrevocable trust, which offers tax benefits and protection from creditors but cannot be altered once established.
Choosing a guardian for your child is a significant decision that requires careful consideration. Some factors to keep in mind include the potential guardian's values, parenting style, financial stability, and willingness to take on the responsibility. It's also essential to consider the relationship between the guardian and your child to ensure a smooth transition.
Once you have chosen a guardian, it's important to communicate your decision with them and ensure they are willing to accept the role. It's also advisable to have a backup guardian in case the primary choice is unable to fulfill the responsibilities. Documenting your choice in your estate plan and discussing it with family members can help prevent conflicts and ensure your wishes are respected.
Nevada state laws have specific requirements and procedures for establishing guardianship. It typically involves filing a petition with the court, providing notice to interested parties, and attending a court hearing. The court will consider the best interests of the child when determining guardianship.
Navigating the legal requirements for guardianship in Nevada can be complex. Working with an experienced incapacity planning attorney in Reno can help you understand the legal process and ensure all necessary documents are properly prepared. An attorney can also provide guidance on other aspects of your estate plan, such as setting up trusts and powers of attorney.
Planning for your child's future in the event of your incapacity is a critical aspect of estate planning. By understanding legal guardianship, setting up a trust, carefully choosing a guardian, and complying with Nevada state laws, you can ensure your child's well-being and security. Contact Anderson, Dorn & Rader Ltd. for a personalized consultation to discuss your estate planning needs, including guardianship options.
When establishing a third-party special needs trust, one of the most critical decisions you'll make is choosing the trustee. The trustee will manage the trust assets, ensure that the beneficiary's needs are met, and navigate the complex regulations surrounding government aid. In this article, we will explore the key responsibilities of a trustee, the pros and cons of professional versus family trustees, the legal considerations involved, and the long-term impact of this decision.
The trustee is responsible for managing the assets held in the trust. This includes investing the assets wisely, ensuring they grow and are preserved for the future. A trustee must be knowledgeable about financial management or have access to professional advice to make informed decisions.
Another crucial responsibility is making distributions to the beneficiary. The trustee must ensure that distributions align with the terms of the trust and do not jeopardize the beneficiary's eligibility for government aid programs such as Supplemental Security Income (SSI) and Medicaid. This requires a thorough understanding of the rules governing these programs.
The trustee must balance the need to preserve trust assets with the need to provide for the beneficiary's current and future needs. This includes paying for medical expenses, education, housing, and other necessities that enhance the beneficiary's quality of life.
Appointing a family member as the trustee has several advantages. Family members are often more familiar with the beneficiary's needs and preferences, which can make them more compassionate and understanding trustees. They may also be more willing to serve without compensation, which can preserve trust assets.
However, there are downsides to consider. Family members may lack the financial and legal expertise required to manage the trust effectively. They may also face conflicts of interest or emotional stress from managing the trust, especially if they are already involved in caregiving.
A professional trustee, such as a lawyer, bank, or trust company, brings expertise in managing trust assets and navigating legal requirements. Professional trustees can provide a high level of impartiality and are less likely to face conflicts of interest. They also offer continuity, ensuring the trust is managed consistently over time.
The main drawback of professional trustees is cost. They typically charge fees for their services, which can be a percentage of the trust assets or a flat fee. Additionally, they may not have the same personal connection to the beneficiary as a family member would.
Trustees have a fiduciary duty to act in the best interests of the beneficiary. This means they must manage the trust assets prudently, avoid conflicts of interest, and comply with the terms of the trust. Trustees can be held legally liable for any breach of these duties.
Serving as a trustee involves potential legal liabilities. If the trustee mismanages the trust assets or fails to comply with legal requirements, they can be sued by the beneficiaries or other interested parties. It is crucial for trustees to understand these risks and seek professional advice if necessary.
The choice of trustee has a profound impact on the long-term welfare of the beneficiary. A well-chosen trustee can ensure that the beneficiary's needs are met without jeopardizing their eligibility for government aid. They can also provide stability and continuity, which are essential for the beneficiary's peace of mind.
A trustee's ability to manage the trust effectively will determine whether the trust can meet its intended purpose. This includes preserving assets for the beneficiary's lifetime, making appropriate distributions, and adapting to changes in the beneficiary's needs and circumstances.
Choosing the right trustee for a third-party special needs trust is a decision that requires careful consideration. It involves balancing the need for expertise and impartiality with the personal connection and understanding that a family member can provide. At Anderson, Dorn & Rader Ltd., we are here to help you navigate this complex process and ensure that your loved one's future is secure. Contact us to schedule a consultation and discuss how to set up a special needs trust with the appropriate trustee.
Planning for the future involves more than just financial investments and retirement savings. One crucial aspect that often gets overlooked is incapacity planning. Preparing for the possibility that you may become unable to make decisions for yourself is a critical step in safeguarding your future and protecting your loved ones. Here are five essential legal documents you need for incapacity planning in Reno.
A durable power of attorney (DPOA) allows you to appoint someone you trust to handle your financial and legal matters if you become incapacitated. This person, known as your agent, will have the authority to manage your bank accounts, pay your bills, and make financial decisions on your behalf.
Having a DPOA in place ensures that your financial affairs are managed smoothly and without interruption. It also provides peace of mind knowing that someone you trust is making important decisions in your best interest. Without this document, your family might have to go through a lengthy and costly court process to gain the legal authority to manage your affairs.
A health care power of attorney (HCPOA) designates a person to make medical decisions on your behalf if you are unable to do so. This document is crucial for ensuring that your healthcare preferences are followed, even if you cannot communicate them yourself.
With an HCPOA, you can ensure that someone who understands your values and wishes is making medical decisions for you. This person, known as your healthcare agent, will work with your doctors to provide the care you would want. This document prevents family conflicts and ensures your medical care aligns with your desires.
A living will, also known as an advance directive, specifies your wishes regarding medical treatment and life-support measures in the event of your incapacity. This document guides your healthcare providers and loved ones on the types of medical interventions you do or do not want.
A living will takes the burden off your family to make difficult decisions during stressful times. It ensures that your preferences for end-of-life care are respected and followed, providing clarity and direction when it's needed most. This document can cover a range of situations, including the use of ventilators, feeding tubes, and other life-sustaining treatments.
A revocable living trust helps manage your assets during your lifetime and offers a smooth transfer of management upon incapacity or death. Unlike a will, a living trust can provide ongoing management of your assets without the need for court intervention.
With a revocable living trust, you can appoint a successor trustee to manage your assets if you become incapacitated. This ensures that your financial affairs are handled efficiently and according to your wishes. Additionally, a living trust can help avoid probate, saving time and money for your beneficiaries.
While primarily known for its role in distributing assets after death, a last will and testament is also essential for incapacity planning. It allows you to name a guardian for minor children and make specific bequests, ensuring that your loved ones are taken care of according to your wishes.
A will works in conjunction with other incapacity planning documents to provide a comprehensive plan for your future. It ensures that your estate is distributed according to your wishes and provides clear instructions for your family.
Incapacity planning is a vital aspect of preparing for the future. By having these essential legal documents in place—Durable Power of Attorney, Health Care Power of Attorney, Living Will, Revocable Living Trust, and Last Will and Testament—you can ensure that your affairs are managed according to your wishes and that your loved ones are protected.
Contact Anderson, Dorn & Rader Ltd. for a personal consultation to discuss your incapacity planning needs. Our experienced team can help you establish these crucial documents, providing peace of mind and security for you and your family.
Ensuring the financial stability and care of a loved one with disabilities is a crucial concern for many families. One effective way to secure their future while preserving eligibility for essential government benefits is by setting up a special needs trust. At Anderson, Dorn & Rader Ltd. in Reno, we specialize in helping families navigate this complex process, providing peace of mind and financial security for their loved ones.
A special needs trust (SNT) is a legal arrangement designed to benefit individuals with disabilities while preserving their eligibility for government assistance programs like Supplemental Security Income (SSI) and Medicaid. These trusts are created to hold assets that can be used for the beneficiary's supplemental needs without jeopardizing their access to these critical benefits.
One of the primary reasons families consider a special needs trust is to ensure that the beneficiary remains eligible for government programs. SSI and Medicaid have strict income and asset limits; receiving a large sum of money directly can disqualify an individual from these programs. A special needs trust allows funds to be set aside for the beneficiary's use without being counted as personal assets.
This careful planning ensures that your loved one can continue to receive the essential support provided by these programs while also benefiting from the additional resources available through the trust.
When establishing a special needs trust, several factors must be taken into account to ensure it meets the legal requirements and effectively serves its purpose. Here are some key considerations:
The trustee plays a vital role in managing a special needs trust. Their responsibilities include:
Given the complexity of these duties, families often choose to work with professional trustees or fiduciary services to ensure that the trust is managed effectively and in the best interest of the beneficiary.
Setting up a special needs trust is a significant step in securing your loved one's future. At Anderson, Dorn & Rader Ltd., we understand the intricacies of these trusts and can guide you through the process with expertise and compassion. Contact us today for a personalized consultation to explore how a special needs trust can be tailored to your family's unique situation, ensuring that your loved one receives the care and support they need without compromising their eligibility for essential government benefits.
As we look ahead to 2026, the landscape of estate taxes is poised for significant changes that could impact your financial planning. The Tax Cuts and Jobs Act (TCJA) of 2017 brought substantial changes to the federal estate tax exemption, raising it to $13.61 million in 2024. This increased exemption allows individuals to transfer a larger amount of wealth to their heirs without incurring estate tax liabilities. However, this generous exemption is set to sunset at the end of 2025, potentially bringing major implications for estate planning.
The Congressional Budget Office projects that the new exemption amount will decrease to $6.4 million in 2026, adjusting for inflation. This reduction means that what is exempt from estate tax today might not be exempt tomorrow. As such, it's crucial to seek guidance from a professional, like an estate planning attorney in Reno, to navigate these impending changes effectively.
The federal estate tax has a long history, first introduced in 1916 to generate government revenue. Over the years, the exemption limits and rates have seen numerous adjustments. Notably, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) progressively increased the estate tax exemption and lowered the tax rates until the exemption hit zero in 2010. However, without further legislative action, the exemption reverted to the 2001 levels for deaths occurring in 2011, setting the exemption at $5 million.
The TCJA of 2017 was a game-changer, doubling the estate tax exemption from $5.49 million to nearly $11 million, aiming to stimulate economic growth and job creation. This adjustment continues to account for inflation, offering an unprecedented opportunity for individuals to transfer significant wealth free from federal estate taxes.
Embedded within the TCJA is a sunset provision that limits the duration of the higher estate tax exemption. Without legislative intervention, this exemption will be cut in half to $5 million, adjusted for inflation, by 2026. This potential reduction could create an estate planning crisis for individuals with substantial estates as the December 31, 2025, deadline approaches. According to the Congressional Budget Office, the exemption is expected to drop to $6.4 million in 2026.
As we approach 2025, it is vital to reassess your estate planning goals and strategies in light of potential changes to the federal estate tax exemption. Collaborating with trusted advisors, including an estate planning attorney in Reno, is essential to review and potentially adjust your estate plan, investments, and property. This proactive approach ensures that your financial legacy remains protected despite upcoming legislative changes.
An estate planning attorney in Reno can help you navigate these complexities, providing insights and strategies tailored to your specific situation. Whether it involves lifetime gifting, reassessing property values, or developing comprehensive succession plans, professional guidance is crucial to minimize your estate tax liability and safeguard your wealth for future generations.
As the estate tax exemption is set to change in 2026, individuals with significant wealth need to act now to address potential future tax burdens. The Tax Cuts and Jobs Act (TCJA) currently provides a high estate tax exemption, but this is scheduled to decrease in 2026. Preparing for this reduction is essential, and working with an estate planning attorney in Reno can help you develop and implement effective strategies to minimize estate tax liability.
Consider the Andersons, a wealthy family living in a high-cost state. Robert Anderson, a successful entrepreneur, and his wife, Sarah, an accomplished artist, have built a substantial estate worth $16 million. Their assets include business holdings, valuable artwork, life insurance, real estate, and other investments. Their two adult children, James and Emily, are actively involved in the family business
With the current federal estate tax exemption set at $13.61 million per individual, adjusted for inflation, the Andersons have felt secure in their estate planning. This exemption is projected to increase to $13.61 million by 2024. The Andersons have taken initial steps to secure their financial legacy, such as creating a trust, considering a family limited partnership, and exploring gifting strategies. However, if the exemption drops to $6.4 million adjusted for inflation in 2026, they may face significant estate tax challenges. An estate planning attorney in Reno can provide essential guidance in navigating these complexities.
The family business forms a significant part of the Andersons' estate. To ensure its continued viability, they need a comprehensive business valuation and succession plan. This planning will help minimize the estate tax burden and facilitate a smooth ownership transition to their children, James and Emily. Consulting an estate planning attorney in Reno is crucial for developing a robust succession plan.
Given the potential changes in estate tax laws, the Andersons must reassess their financial accounts, retirement investments, life insurance policies, real estate, and artwork. Accurate valuations are essential to determine how these assets will impact their estate tax calculation. This reassessment will help them understand the potential tax liability they face if the exemption amount is reduced.
To reduce their taxable estate while the higher exemption is in place, the Andersons might consider accelerated lifetime gifting strategies. The IRS has clarified that gifts made under the increased exclusion from 2018 to 2025 will not be subject to additional taxes if the exclusion amount drops after 2025. Gifting up to $13.61 million in 2024 can be done without tax liability, but exceeding $6.4 million in 2026 may have significant consequences. An estate planning attorney in Reno can ensure these gifts are managed correctly.
To provide for their loved ones, the Andersons should consider using life insurance. Establishing an irrevocable life insurance trust to own the policy can remove its value from their estate, protecting the death benefit for their beneficiaries. Consulting an estate planning attorney in Reno is vital to ensure this strategy is implemented correctly.
High-net-worth families like the Andersons may benefit from advanced tax planning techniques, such as an AB trust. This approach optimizes each spouse’s estate tax exemption, potentially minimizing their liability. Upon the first spouse's death, an amount equal to the current exemption is placed in a trust, and the remainder goes to a second trust for the surviving spouse, qualifying for the unlimited marital deduction.
Spouses can transfer an unlimited amount to each other without estate or gift tax concerns. However, filing an estate tax return at the first spouse's death can document the unused exemption, allowing the surviving spouse to add it to their own exemption. This portability can be crucial for estate planning, and an estate planning attorney in Reno can guide you through this process.
If the Andersons are inclined towards philanthropy, establishing a charitable remainder trust could be an excellent option. Though setting up such a trust can be complex, it offers significant tax benefits and aligns with their charitable goals.
If your situation resembles the Andersons', seeking expert advice is essential to address estate tax concerns. Understanding how the potential reduction in the estate tax exemption will impact your estate is crucial. Consulting an estate planning attorney in Reno can provide the specialized expertise needed to navigate these challenges, protect your assets, and ensure a smooth transition of wealth.
As we move into 2025, reviewing your estate planning goals and strategies is vital. The TCJA's estate tax exemption, currently set at $13.61 million adjusted for inflation, may revert to pre-2017 levels by the end of 2025. Depending on your assets, including business interests, life insurance, and real estate, you may need to reassess their values to avoid exceeding the lower exemption limit.
Developing a comprehensive business succession plan is critical, particularly if you want your business to continue after you retire or pass away. Strategies like gifting shares to the next generation or creating a family limited partnership can help minimize tax liability. An estate planning attorney in Reno can assist in structuring these plans effectively.
Life insurance can play a crucial role in your estate plan. Reviewing your policies with the federal estate tax exemption in mind is essential. Transferring policy ownership to an irrevocable life insurance trust can protect the death benefit and reduce estate tax liability.
Real estate can present unique challenges in estate planning. Reassessing property values and using trusts, like qualified personal residence trusts (QPRTs), can help transfer real estate to heirs while minimizing estate tax exposure. Creating entities to own real estate may offer additional asset protection.
The estate tax landscape is evolving, making it crucial to keep your estate plan current. Collaborating with trusted financial and tax advisors ensures your plan is customized to your unique circumstances. Consulting an estate planning attorney in Reno can provide the expertise needed to navigate these complex challenges and protect your financial legacy.
In the world of estate planning, Dynasty Trusts have become increasingly popular due to their ability to bypass estate taxes and shield assets from creditors across many generations. Not all states are created equal when it comes to the laws governing these trusts. Alaska, Delaware, Nevada, and South Dakota have emerged as leaders in attracting out-of-state Dynasty Trusts, thanks to their favorable laws.
A Dynasty Trust is a robust irrevocable trust crafted to last through several generations. It's designed not only to preserve family wealth but also to offer protection from creditors, divorce settlements, and bankruptcy. These trusts often empower the primary beneficiary with significant control over the trust assets, mimicking outright ownership but without the associated risks.
Alaska allows trusts to potentially last up to 1,000 years and offers strong protections against creditors, including protection from claims by divorcing spouses.
Delaware is known for its perpetual trusts for personal property, though real property trusts are capped at 110 years. It has unique decanting laws that allow for flexibility in trust management but requires careful drafting to avoid issues with divorcing spouse claims.
Nevada boasts a 365-year limit on trust duration and is noted for its lack of state income tax on trusts, robust spendthrift provisions, and flexible decanting rules that enhance creditor protection.
South Dakota allows for perpetual trusts and has advantageous decanting and creditor protection laws, making it a strong contender for setting up a Dynasty Trust.
Decanting Laws Across States
Decanting is a process that allows trustees to transfer assets from one trust to another—a useful feature that can adapt a trust to changing laws or family circumstances. Among the four states, Delaware, Nevada, and South Dakota offer more flexibility in decanting practices compared to Alaska, providing significant strategic advantages in long-term trust management.
While Alaska, Delaware, Nevada, and South Dakota are top choices, other states like Tennessee, Ohio, and Wyoming also offer strong Dynasty Trust provisions. Selecting the right jurisdiction depends on specific trust goals, the location of trust assets, and the residence of beneficiaries. Working with knowledgeable estate attorneys in the chosen state can ensure that the trust is set up to maximize benefits.
For those considering a Dynasty Trust, these states offer compelling reasons to look beyond your home state. With their strong legal frameworks for long-term asset protection and tax benefits, they present golden opportunities for securing family wealth across generations.
When you pass away, your debts, including your mortgage, do not simply vanish. If your will or trust leaves your property, which still has a loan against it, to a beneficiary, they will inherit both the real estate and the remaining debt. The beneficiary might have the option to assume the mortgage, allowing them to retain ownership of the house, or they could opt to sell the property and use the proceeds to settle the debt. The specific outcomes depend on the terms of the mortgage and the directives laid out in the estate plan. Planning ahead for the transfer of your real estate assets can significantly simplify the process for your heirs, making it a smoother transition during a challenging time.
In recent years, American housing debt has soared to unprecedented levels. According to the US Census Bureau, the homeownership rate was approximately 66 percent in 2022. By the end of September 2023, the Federal Reserve Bank of New York reported that Americans were carrying $12.14 trillion in mortgage balances. This figure represents a significant portion of US consumer debt, emphasizing the crucial role of real estate in personal finance. The increase in mortgage debt highlights the importance of addressing how these obligations are managed after the homeowner's death.
With housing debt constituting a substantial part of consumer debt, it's not surprising that many Americans pass away while still owing on their mortgages. A survey by CreditCards.com revealed that 37 percent of Americans died with unpaid mortgages. This situation poses potential complications for heirs and underscores the need for comprehensive estate planning.
The inclination to leave a home to one's children is strong among American parents, with a 2023 Charles Schwab survey indicating that more than three-quarters of parents intend to do so. However, the reality of inheriting a home is complex, especially given the current real estate market dynamics. Nearly 70 percent of potential heirs express a preference to sell the inherited property, often due to financial considerations or the rising costs of real estate.
When it comes to estate planning, one of the critical concerns is how to handle mortgages on inherited properties. The process varies significantly depending on the decedent's estate plan, the terms of the mortgage, and state laws.
When a property is left to a single beneficiary, whether through a will, trust, or deed, several outcomes are possible. The beneficiary might assume the existing mortgage, pay off the mortgage with other funds, or sell the property and use the proceeds to settle the debt. Some lenders may also allow for the refinancing of the loan under the new owner's name, potentially offering more favorable terms.
In cases where multiple beneficiaries inherit a property, the situation becomes more complex. These beneficiaries must agree on how to manage the inherited mortgage, whether by assuming it jointly, selling the property, or using other funds to pay off the debt. Disagreements can lead to legal challenges, potentially resulting in a court-ordered sale of the property.
For those who die without a will or trust, the probate process determines the distribution of their assets, including real estate. The executor of the estate is responsible for managing the deceased's debts and assets, which may involve using estate funds to maintain mortgage payments until the property can be sold or transferred.
Estate planning goes beyond merely distributing assets; it's about ensuring that your legacy is passed on according to your wishes without imposing undue burdens on your loved ones. For homeowners, this means considering the implications of mortgage debt and making arrangements to ease the financial strain on heirs.
An effective estate plan addresses all aspects of your assets, including your home and any outstanding mortgage. It might include setting aside funds to cover mortgage payments, instructions for the sale of the property, or provisions for refinancing the mortgage to benefit your heirs.
Given the complexities of estate law and the intricacies of mortgages, seeking advice from an estate planning attorney is advisable. They can provide tailored guidance that aligns with your goals and ensures your estate is handled smoothly.
As American housing debt continues to climb, the importance of incorporating real estate into your estate planning cannot be overstated. Understanding how your mortgage debt will be managed after your passing is crucial to ensuring your heirs can navigate their inheritance without undue stress. Through careful planning and professional advice, you can secure your legacy and provide for your loved ones even after you're gone.
If you have significant wealth, you may be exposed to future estate tax burdens that must be acted on before the Tax Cuts and Jobs Act reduces the estate tax exemption in 2026. Developing and implementing the right estate planning and tax strategies takes time. You may need to prepare regardless of whether the estate tax continues at its current level or if it is cut in half. This means strategizing to minimize your estate tax liability now.
Meet the Andersons, a well-off family living in a state with a high cost of living. Robert Anderson, the father, is a successful entrepreneur who built a thriving business over the years. His wife, Sarah, is a high salary earner, and together they have accumulated a substantial estate of $8 million each, for a total of $16 million. Their estate is primarily composed of their business assets, valuable artwork, life insurance, a family residence, a vacation home, and other lucrative investments. They have two adult children, James and Emily, both actively involved in the family business.
With the generous federal estate tax exemption set at $10 million adjusted for inflation per individual in 2017, steadily increasing to $13.61 million in 2024, the Andersons have felt relatively secure about avoiding estate taxes. Their primary concern has been preserving the family legacy and ensuring a smooth transition of their assets (business, accounts, and property) to the next generation. They had taken some initial estate planning steps, such as creating a living trust, discussing the use of a family limited partnership, and exploring gifting strategies to transfer the assets to their children gradually.
If the estate tax exemption drops to $5 million adjusted for inflation, the Andersons may face several estate tax issues that require professional advice and assistance before the end of 2025. The Andersons need to find other ways to protect their money and property.
The family business represents a significant portion of the Andersons’ estate, and the sunsetting of the higher exemption amount could have profound implications for its continued viability. Robert and Sarah need to develop a comprehensive business valuation and succession plan now to minimize the total estate tax burden and ensure a smooth ownership transition to James and Emily later.
Given the potential changes in the estate tax landscape, the Andersons need to revisit the valuation of their financial accounts, retirement and life insurance investments, personal property, real estate, and artwork to ensure accurate assessments. Then they need to determine which items will affect the estate tax calculation and any remaining exemption they have left from prior legacy planning. Depending on their assets’ values, these items can easily put them over the potentially soon-to-be lower estate tax exemption, exposing them to a 40 percent tax rate.
With the uncertainty surrounding the estate tax exemption, the Andersons may want to consider accelerated lifetime gifting strategies to reduce their taxable estate while the higher exemption is in place. The Internal Revenue Service declared in 2019 that individuals who take advantage of the increased gift tax exclusion from 2018 to 2025 will not be negatively impacted after 2025 if the exclusion amount drops.1 Gifting up to $13.61 million in 2024 has a zero tax liability. But gifting over $6.4 million in 2026 may have major consequences.
The Andersons may want to use life insurance to ensure that their loved ones are provided for at their passing. They may want to consider creating an irrevocable life insurance trust to own the life insurance policy and be the recipient of the death benefit. This removes the value of the policy from the Andersons’ estate and protects the death benefit for their chosen beneficiaries.
The significant portfolios of high-net-worth and ultra-high-net-worth families may require advanced tax planning techniques, including an AB trust, to optimize each spouse’s estate tax exemption and potentially minimize their estate tax liability. At the client’s death, an amount equal to the current estate tax exemption amount is placed in one trust, which uses the exemption, and the remainder is placed in a second trust for the surviving spouse’s benefit, which qualifies for the unlimited marital deduction. This results in no estate tax being owed at the death of the first spouse.
Spouses are able to give an unlimited amount of money and property to each other without having to worry about estate or gift tax. Because of this, some clients may not have an estate tax issue at the first spouse’s death because everything (or a substantial portion) went to the surviving spouse. Because they are utilizing the unlimited marital deduction, the deceased spouse’s exemption is not needed. However, even if this is the case, it may be advisable to file an estate tax return at the first spouse’s death to document how much of that deceased spouse’s exemption is being used, if any, and that the remainder is going to the surviving spouse. This will allow the surviving spouse to add the deceased spouse’s unused exclusion (DSUE) to the surviving spouse’s own exemption amount and apply that combined amount against their own estate at the time of death.
If the Andersons are philanthropically inclined, another great option would be to engage in charitable giving through the use of a charitable remainder trust. Setting up this type of trust can be time-consuming—sometimes the process is fairly straightforward but often highly complex, requiring advanced planning and consideration.
If your situation is similar to the Andersons, expert guidance is necessary to address estate tax issues and help you evaluate the impact of the potential sunsetting of the higher estate tax exemption amount on your estate. Contact us to learn more about strategies to protect, preserve, and pass down valuable property.
1 Estate and Gift Tax Facts, IRS.gov, https://www.irs.gov/newsroom/estate-and-gift-tax-faqs# (last updated Dec. 5, 2023).
The year 2026 is quickly approaching, bringing substantial changes that may affect your estate tax situation. The Tax Cuts and Jobs Act (TCJA) in 2017 significantly increased the federal estate tax exemption to $10 million adjusted for inflation. This is the amount you can gift or leave to your loved ones at your death without incurring a gift or estate tax liability. Any portion of the exemption used during lifetime reduces the total exemption amount available at death for estate tax purposes.
However, the countdown has begun for the potential sunset of this generous exemption by the end of 2025. Adjusting for inflation, the Congressional Budget Office estimates the new exemption amount will be $6.4 million in 2026.1 There are strong arguments for and against the changes in legislation. Whether the current exemption amount remains or is reduced to roughly $6.4 million, valuable insights from professional advisors can prepare you for either scenario. What is not taxable today might be taxable tomorrow.
The federal estate tax was first enacted in 1916 to generate revenue for the government. Over the years, it has undergone various changes in exemption limits and rates.
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) gradually increased the estate tax exemption and reduced the tax rate until it reached zero in 2010.2 However, the estate tax was set to return to the 2001 amounts for deaths occurring in 2011 unless further legislative action was taken.3 In 2011, the estate tax exemption was reinstated at $5.0 million.4
In 2017, the TCJA doubled the estate tax exemption from $5.49 million to nearly $11 million to stimulate economic growth and create jobs.5 The exemption continues to adjust for inflation, offering individuals an unprecedented opportunity to pass on substantial wealth free from federal estate tax. In 2024, the este tax exemption is $3.61 million.
A sunset provision was embedded within the TCJA to limit how long the higher estate tax exemption could continue. Without legislative intervention, it will be cut in half to $5 million adjusted for inflation in 2026, creating a potential estate planning crisis for people with considerable estates on December 31, 2025. Adjusting for inflation, the Congressional Budget Office estimates the exemption amount will be $6.4 million in 2026.6
Maintaining or increasing the already high estate tax exemption amount could be seen as a move that benefits the wealthy, broadening the tax burden for others. It can also be seen as maintaining the status quo. And the current law ensures that most people will not be subject to federal estate taxes.
A higher estate tax exemption was expected to foster economic growth and capital investment by allowing wealthier individuals and families to reinvest in businesses and job creation.7 Yet the federal government relies on estate tax revenue to fund various programs and therefore would not want to reduce a lucrative revenue source. Without the estate tax, other revenue sources would have to foot the bill for these programs and potentially face cuts in the benefits and services provided.
For the estate tax exclusion to remain at the higher amount beyond 2025, Congress will need to take action.
The TCJA was part of a short-term tax cut package. Lawmakers had to make room in the budget for the tax cuts introduced by the legislation.8 They did this by temporarily increasing the estate tax exemption.
Reverting to a lower exemption amount is believed to generate more revenue by increasing the number of people who pay the tax and increasing estate tax exposure to those with net wealth above the current exemption amount. Estate tax revenues are projected to increase sharply after 2025, when the exemption amount is scheduled to drop. From 2021–2031, the combined estate and gift tax revenues are projected to total $372 billion.9
As we move into 2024, it is crucial to review estate planning goals and strategies that may be affected by potential changes in the federal estate tax exemption law. By working together with your other trusted advisors, we can reevaluate your current estate plan to ensure that you are protected and your financial legacy is preserved.
1 Understanding Federal and Gift Taxes, Cong. Budget Off., https://www.cbo.gov/publication/57272 (last visited Jan. 2, 2024).
2 Darien B. Jacobsen et al., The Estate Tax: Ninety Years and Counting, SOI Bull. 124, https://www.irs.gov/pub/irs-soi/ninetyestate.pdf (last visited Jan. 2, 2024).
3 Id.
4 Mark Luscombe, Historical Look at Estate and Gift Tax Rates, Wolters Kluwer (Mar. 9, 2022), https://www.wolterskluwer.com/en/expert-insights/whole-ball-of-tax-historical-estate-and-gift-tax-rates.
5 Tax Cuts and Jobs Act (TCJA), Tax Found., https://taxfoundation.org/taxedu/glossary/tax-cuts-and-jobs-act (last visited Jan. 2, 2024).
6 Understanding Federal Estate and Gift Taxes, supra note 1.
7 Id.
8 How Did the Tax Cuts and Jobs Act Change Personal Taxes?, Tax Pol’y Ctr., https://www.taxpolicycenter.org/briefing-book/how-did-tax-cuts-and-jobs-act-change-personal-taxes (last visited Jan. 2, 2024).
9 Understanding Federal Estate and Gift Taxes, supra note 1.
When we think about Reno estate planning, our minds often jump to major assets like real estate, bank accounts, retirement funds, and life insurance proceeds. However, there is another aspect that is just as crucial, yet frequently overlooked: our personal belongings, or the 'stuff' that we accumulate over a lifetime. These items, ranging from family heirlooms to everyday objects, carry both monetary and sentimental value, making them an integral part of estate planning.
Balancing Monetary and Sentimental Values
Monetary Value: Items like antique furniture or rare collectibles may have significant financial worth. It's important to accurately appraise these items and ensure they are adequately insured. Considerations like maintenance and storage should also be communicated to the future recipients to preserve their value.
Sentimental Value: Often, items like a grandparent's watch or a handmade quilt carry immense sentimental value. These are the belongings that can lead to emotional disputes among family members. Thoughtful planning and clear documentation of your wishes are crucial in navigating these sensitive areas.
The Logistics of Bequeathing Personal Property
Discussing with Beneficiaries: Open conversations with potential heirs about their interest in specific items are essential. This discussion can reveal who genuinely values an item and who may be burdened by its maintenance or storage requirements.
Multiple Interests: In cases where several beneficiaries desire the same item, consider ways to equitably distribute your assets or find creative solutions to avoid disputes.
Unwanted Items: Sometimes, what matters to us may not hold the same value for our loved ones. Planning for the possibility that no one may want certain items is also necessary. Options like selling, donating, or passing them to acquaintances should be considered.
Incorporating Personal Belongings into Your Estate Plan
Specific Gifts in Wills or Trusts: You can explicitly state in your will or trust who should receive specific items. For example, “I leave my antique vase to my daughter, Susan.” However, any changes to these wishes would require updating the legal documents.
Personal Property Memorandum: This flexible tool allows you to list items and their intended recipients. Unlike wills or trusts, this document can be updated without extensive formalities and is generally easier to amend.
The Residuary Clause: This clause covers any items not specifically mentioned. It can be structured to distribute these remaining belongings among a group of people or to a single individual, like a spouse or child.
The Importance of Professional Guidance
Creating a comprehensive and enforceable estate plan that includes your personal belongings is a complex task. It's advisable to work with an experienced estate planning attorney who can tailor a plan to your unique situation. Their expertise ensures that your wishes are clearly articulated and legally binding, providing peace of mind for both you and your loved ones.
