What can you do if your mother or father has become incapacitated and no longer able to handle his or her own affairs. You may have already obtained a power of attorney in order to be able to handle your parent’s affairs. Unfortunately, if your mother or father receives Social Security benefits, Social Security will not recognize a power of attorney for the purpose of negotiating its benefit payments. This means, a person with power of attorney for an incapable or incompetent beneficiary will be required to apply to SSA to become “representative payee.”
What is a Representative Payee?
A representative payee is either an individual or organization appointed to receive and manage Social Security or SSI benefits on behalf of someone else. A representative payee, of course, is required to use the funds they receive for the use and benefit of the beneficiary only. They must be used for that person’s best interest. Individual representative payees are typically relatives, guardians, or friends. An Organizational payee can include a social service agency, institution, State or local government agency, or financial institution.
What is the role of the representative payee
As a representative payee, you will decide how to spend the benefits, in order to maintain a stable living environment for the beneficiary, while ensuring that your loved one’s basic needs of food, shelter, clothing, and medical care are met. Once current needs have been met, you should save any remaining funds for the beneficiary’s future needs. Once a year, you will be required to report on how you used or saved the benefits you received. So, you must keep records of deposits and expenses.
How to become a representative payee
The first step to becoming a representative payee is to contact your local Social Security office and file an application. Typically this is done during a face-to-face interview. During the interview, you will discuss your relationship with the beneficiary, and your ability to carry out the responsibilities of a payee. The duties you are expected to carry out will be explained to you, as well as the potential liability for failing to report to the Social Security Administration as required.
Fiduciary Duties of a Representative Payee
As a representative payee, you are required to return any overpayment promptly. It is also important that you keep all records and accounts for your beneficiary separate from any others. Those records must be maintained for at least two years, and should include all payments received from SSA, all bank statements, and receipts or cancelled checks for rent, utilities, and any major purchases made for the beneficiary. Be careful when converting any assets to cash, as that income may impact the beneficiary’s social security payments or eligibility for SSI.
If you have questions regarding Social Security there are multiple online resources, including the official website. For information regarding powers of attorney, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
A trust can be a significant financial tool, helping you to control your money and provide for the future of your loved ones. If you are wondering whether you should create a trust, as part of your overall estate planning, also consider how useful they are in helping to avoid estate taxes. So, how do trusts save taxes?
The purpose of a trust
The basic purpose of a trust, in estate planning, is to reduce estate taxes as much as possible and avoid probate. A trust is essentially a fiduciary agreement, that is - one based on confidence and trust, between the trustee and the grantor or maker of the trust. The agreement authorizes the trustee to hold and manage the trust assets on behalf of the beneficiaries, while providing specific instructions on how to manage and distribute those assets. There are many different types of trusts, each with their own specific purposes or goals.
The general benefits of a trust
If one of your goals in estate planning is to ensure that more of your property and money is left to your beneficiaries, as opposed to being reduced by estate taxes, then a trust may be a great option. But, creating a trust does not magically reduce your estate tax rate. One way to reduce estate taxes is to reduce the value of your estate. This is done by transferring your assets to a trust, in order to lower your estate’s value. Because the assets you transfer to a trust technically belongs to the trust, you may reduce the amount that will be taxed, with the appropriate documentation. However, there are other tax issues that also arise after your death. Therefore, consulting with an estate planning attorney is essential.
What about a Grantor trust?
If you create a grantor trust, then you can retain your power over most aspects of the trust. As the grantor, or the person who establishes the trust, you personally continue to pay the income taxes on the assets. For tax purposes, you are considered a “disregarded entity,” so the taxable income or deductions that are earned by the trust will be included on your tax return.
What are the tax advantages?
There are several advantages in creating a grantor trust. Your trustee, at your death, can sell the trust assets without recognizing the capital gain from the sale. You can also lend money to your trust at the minimum interest rate allowed. However, the interest income will not be taxable to you, as the grantor. In other words, the trust assets can grow for the benefit of your beneficiaries, while eliminating the economic burden of paying income taxes. That way, the gifts you make to your beneficiaries that are below the annual exemption amount, will be free of the gift tax.
If you have questions regarding tax savings, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
The last will and testament is still very popular, certainly not the only estate planning instrument available. There are many other options, some of which may be better suited for your particular needs. One of those estate planning tools that has become very popular in the last couple of decades is the revocable living trust. Living trusts have many benefits, including probate avoidance. They also provide other benefits, both before and after death – something a will simply cannot do.
How does a revocable living trust work?
Like any other trust, a revocable living trust is a written agreement between you and a trustee, who will ultimately be responsible for managing the assets you place in the trust and distributing them to your beneficiaries. The difference is, a living trust is established while you are still living, naming you as the primary trustee and beneficiary in most cases. If it is a “revocable” living trust, then you maintain the power to modify or revoke the trust at any time, as long as you are still mentally competent. A revocable living trust will become irrevocable, upon your incapacity or death.
The parties to a living trust
A living trust will have three parties to the trust agreement: the creator of the trust, the trustee, and the named beneficiaries. The trustee is the person whom you have chosen to manage your assets, in conformity with the terms of the trust agreement. Of course, the beneficiaries are those individuals you have chosen to receive the benefit of your assets. By naming yourself as the primary trustee and beneficiary, you can maintain full control of your assets during your lifetime. Upon your disability, you will have named a successor trustee to take your place, but the trust assets are still to be used for your benefit. At death, the successor trustee will administer the estate by taking care of the taxes and bills and then distribute the assets to the ultimate beneficiaries you have named in your trust agreement.
The differences between a living trust and a will
Your last will and testament, like a living trust, will set out your instructions regarding inheritance of your estate. However, a living trust allows you to avoid probate, a lengthy and costly process. Furthermore, a trust is more private than a will, which becomes public record. Probate proceedings, which include an inventory of the assets and the contact information of your beneficiaries, are also open to the public.
Additional benefits of a living trust
Unlike your last will and testament, a living trust can also include terms that allow someone to take over management of your assets in the event you become incapacitated for any reason. Thus, you will most likely avoid the need for a court appointed guardian or conservator. Another benefit is that you can specify that your assets be distributed to your beneficiaries as trusts, as opposed to immediate distribution after your death. Doing so increases protection of the inheritance from the beneficiaries' creditors or divorcing spouses.
What if I don’t have a will or a trust?
If you do not leave any instructions behind, in either a will or a trust, your property will be distributed pursuant to your state’s laws of intestate succession. Generally, that will mean that your assets will go to your spouse or your closest surviving family member, if you have no spouse. In some cases, it will mean that the surviving spouse will get only a fraction of your assets, with the remainder going to your children. Children receive the estate at age of majority - 18 in most states. There is also the chance that someone will be selected by the court to manage your estate and the distribution of your property, whom you do not trust to handle your affairs. Having a plan in place allows you to make all of these decisions for yourself, ahead of time.
If you have questions regarding living trusts, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
If you are familiar with the concept of capital gains, you may have heard of the term “step up in basis.” Generally speaking, capital gains is the difference between the purchase price and the sales price of a particular asset. The IRS imposes a tax on all capital gains, as it is essentially income. When it comes to inherited property, though, the rule on capital gains is different. A “step up in basis” can provide a valuable tax break.
How the “step up in basis” works
A step up in basis basically adjusts the value of your inheritance in order to save on taxes. For instance, you may inherit a house from your uncle, which cost $70,000 when he purchased it. Now the home is worth $200,000, so your basis will be stepped up from $70,000 to $200,000, in terms of calculating your capital gains. So, if you later sell the house for $250,000, your capital gains would only be the difference between $200,000 and $250,000. Without the step up in basis, your capital gains would be $180,000, as opposed to $50,000.
Mistakes that effect the step up in basis
The step up in basis is a straightforward rule, but you can jeopardize these savings if you are not careful. Two of the most common mistakes are jointly owning your home or other appreciating asset with your child, and holding the title of your appreciating assets in joint tenancy with your spouse.
Joint ownership with your child
If it is your desire that your child inherit your home after your death, the best way to make that happen is to transfer the home to a living trust, which will pass the home on to your child upon your death. On the other hand, joint ownership with your child will prevent his or her use of the “step up in basis” rule. Instead, your child will be taxed on the capital gains for at least 50%, but could be as much as the full appreciation of the property, at the time that asset is sold.
Joint-tenancy ownership with your spouse
A similar problem exists when you hold the title of your home in joint tenancy with your spouse. Your surviving spouse will receive a setup in basis of 50%. The remainder will be taxed at the original cost of the home, as opposed to the step up in basis that would be available, if the house had been held in community property. Converting the nature of the asset to community property and holding it in the living trust will provide the best of both worlds by avoiding probate and getting the step up in basis.
Preserving the step up in basis
The step up in basis rule may be one of the most valuable tax breaks provided by the IRS, especially when it comes to assets that have appreciated substantially. It would be a terrible waste to lose or diminish this valuable benefit, by making mistakes that can easily be avoided. The best thing you can do to preserve this benefit, is to discuss your options with your estate planning attorney.
If you have questions regarding step up in basis, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
The first piece of federal legislation addressing this issue was passed in 1956 and was known as the Uniform Gifts to Minors Act. The initial statute was based on an earlier law sponsored by the New York Stock Exchange and the Association of Stock Exchange Firms. Eventually, all of the states adopted this legislation or one of its amended forms. Some states also added other amendments that defeated the uniformity of the law. In response, the statute we now know as the Uniform Transfers to Minors Act was passed in 1983.
Topics covered in this report include:
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Appropriate estate planning requires time and money. Unfortunately, people often try to save costs and cut corners by using “do-it-yourself,” boilerplate forms. The bad news is, one size does not fit all in estate planning. Many of these pre-made forms cause more problems than they solve. When legal estate planning documents are not properly drafted, the result may be an invalid will or trust, or something that does not actually achieve the results you expected. Even if the document is valid, it's probably a “bare bones living trust.”
Filling in the blanks is not enough
When you hear someone refer to a “bare bones” living trust, they usually mean a lean boilerplate document that most often lacks the necessary details and technical requirements that make the living trust most effective. For instance, many clients are looking to create a trust for the purpose of probate avoidance. Unless you accomplish the second step to establishing a trust, you cannot accomplish your goal of avoiding probate.
Your living trust must be fully funded
One of the pitfalls of using a bare bones living trust is that the owner does not address the necessary step of funding the trust. If a living trust is not fully funded, then it cannot provide probate avoidance. Funding a trust requires actually transferring the titled assets to the trust's name. There are basically three ways this is accomplished. Funding requires either changing the title of property to the trust, assigning ownership rights to the trust, or naming the trust as a beneficiary on certain accounts or other assets.
Bare bones trusts lack meaningful instructions
Pre-made legal forms are only designed to accomplish limited objectives. As such, they generally lack many of the important details that a properly drafted trust agreement would include. With a bare bones living trust, protections for your beneficiaries that could be included are most often lacking. Because a pre-made form is meant to be used by anyone, it is written as a one-size-fits-all document. However, no two clients have the exact same estate or the same family dynamic. The terms of the trust are supremely important.
Don’t miss out on the real benefits of a proper trust
There are a great many benefits to be gained from establishing a living trust. Some of these benefits include the ability to protect property for your beneficiaries, reduce or eliminate estate taxes, plan for your incapacity, and avoid probate. If, however, your trust only has the “bare bones,” you are definitely missing out.
If you have questions regarding living trusts, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
The proper estate plan can answer the most important questions, not only for your other relatives, but also for the court, if you are no longer there to take care of your young children. Learn more about Nevada estate planning for families with minor children in this presentation.
A trust is more than just a way to avoid probating an estate. There are many benefits, such as the ability to protect your property for your heirs, and reduce the amount of estate taxes that will be incurred. A trust also helps you to prepare for the possibility of incapacity, and to avoid a potential will contest. For clients who agree that a trust is a good option, the next question is usually about the annual fees for a trust in Nevada. There are several factors that determine what the costs may be.
Trustees are entitled to a fee for their services. How much they may be entitled to, can differ from state to state. Whether they will even charge a fee also depends on their relationship to you, in most cases. If the trust is a revocable living trust, you are likely your own trustee, so you obviously would not charge yourself a fee. Family and friends who have agreed to serve as your trustee in the event of your death, often turn down the fee, if they are beneficiaries in the trust, as well. On the other hand, if your trustee is a financial institution, such as a bank or trust company, it will likely have an established fee scheduled, depending on the type of services they provide to you.
On average, annual trust fees can run between one and two percent of the total value of the assets being administered. When a trust is not being supervised by the probate court, there are generally no limitations on what the trustee can be paid for his or her services. But, if you want to avoid disputes in the future, it is best to set the trustee’s compensation in the terms of the trust. That way, there can be no dispute between the trustee and the beneficiaries about the amount of the fees.
Typically, trusts are not created to be managed by a court. In the case of a testamentary trust (one created by a will that takes effect at death), or a trust that has been challenged in court, the probate court will order the trustee to be paid a “reasonable” fee. Nevada provides, by statute, for “reasonable compensation” (Nev.Stat. §153.070) and extra compensation is allowed for any “extraordinary services” (Nev.Stat. §150.030).
Courts have established that the following criteria can be used for determining reasonable compensation:
Nevada’s statute, § 153.070 (2013), provides as follows:
On the settlement of each account of a trustee, the court shall allow the trustee his or her proper expenses and such compensation for services as the court may deem just and reasonable. Where there are several trustees, it shall apportion the compensation among them according to the respective services rendered. It may fix a yearly compensation for each trustee, in a set amount or pursuant to a standard schedule of fees, to continue as long as the court may deem proper.
If you have questions regarding trust fees, or any other estate planning needs, please contact living trust attorneys at Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Creating a comprehensive estate plan is one of the most important things you can do to protect the future of your loved ones. An appropriate plan allows you to remain in control of your finances, including how they are distributed, while sparing your loved ones from the frustration and expense of managing your affairs after your death.
An estate plan can include any number of tools for managing and protecting your assets, including life insurance policies. In fact, the importance of life insurance in estate planning should never be overlooked.
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When couples go through a divorce, emotional and financial strain is often significant. Estate planning is probably the last thing on either person’s mind. Nevertheless, it is very important to revisit your estate plan after a divorce, as updating its provisions can save you a lot of unnecessary stress and complication in the future. Estate planning after a divorce is important if you want to ensure that your current wishes and plans are still reflected by its terms.
Important changes to be made following a divorce
There may be many specific terms that you will want to change following a divorce, but you may not know where to start. The first step, is to revoke your will or trust and create a new one. The changes you need to make to your will or trust involve your beneficiaries, your executor/trustee and a guardian for your minor children. These are the most important aspects of your estate plan that should be addressed after a divorce.
If you have a will already, it should be revoked and a new one drafted. If you do not have a will, it is time to make one. The same is true if you and your former spouse made a living trust together, which acts as a will, but does not need to go through the probate court.
Changing your beneficiaries
If you made your will or trust while you were married, most likely you left everything to your spouse. That is no longer the case, now. So, the first step is to identify new beneficiaries, as well as alternate beneficiaries, to inherit your estate. You may also want to reconsider any gifts to relatives of your former spouse (i.e., your in-laws).
Luckily, in most states, gifts to your former spouse are automatically revoked after a divorce. This may not be what you want, however, if you and your spouse parted amicably. Either way, you need to revisit your named beneficiaries to ensure that your current wishes are reflected.
Naming a new executor
Most people name their spouse as the executor of their estate. However, after a divorce, that should be changed. Just as you may no longer want your former spouse to inherit your property, you likely do not want your former spouse to be in charge of your estate. Similar to the revocation of gifts to former spouses, many states revoke the appointment of a former spouse as executor of a will, or trustee of a trust. If you named an alternate executor, that person will serve if possible. But, in case he or she is no longer available, it is important to change your executor now, and name a new alternate.
Choosing a guardian for your minor children
For couples with minor children, a crucial part of their estate plan is nominating a guardian for those children, in the event both parents pass away. Certainly, this is a difficult decision to make. The issue becomes much more difficult if the parents become divorced.
Most clients assume that, if they pass away while their children are still minors, the other parent will take care of them. While that is true in most cases, what if both parents pass away at the same time, or within a short time of one another. We cannot predict what may happen. In the event that your former spouse predeceases you, it is important to have a guardian nominated, in case something happens to you. If you and your former spouse can agree on who should be nominated, that is even better.
If you have questions regarding estate planning after a divorce, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Often, members of the gay community are concerned about privacy when it comes to how they choose to leave their estate to, after death. Indeed, privacy is a common concern for most clients. Since there are so many options in estate planning, you have the ability to customize your plan in a way that keeps your assets, as well as your plan for distributing them, as private as you wish. A major benefit of creating an estate plan, as opposed to relying simply on a will, is that the distribution of an estate can be kept from nosey neighbors and prying eyes.
Probate proceedings are always public
A major drawback of relying only on a will to handle the distribution of your estate is the fact that wills must be probated. This means that a will has to be filed with the local probate court. The only way the terms of a will can be enforced, or put into action, is through the court system. As a result, the specific details of your will become public record, including the identity of your beneficiaries, the amount of assets you have, and who you decide to give them to. Basically, once your will is filed in court, anyone can go to the probate court and ask to see it, and even obtain copies of your probate documents.
An estate plan using revocable living trusts provides privacy
There are many benefits to using revocable living trusts as part of your estate plan. One important benefit is the amount of privacy that this estate planning tool can provide. For instance, a revocable living trust is essentially a private contract between you and your chosen trustee. Because it is a living trust, you retain authority over the trust during your lifetime, including the power to make all decisions regarding the investment of your assets and the use of income earned by the trust. If you become mentally incapacitated, the trustee can then take over management of the trust. Of course, upon your death, your trustee will become the decision maker, based on the terms of your trust. Your trustee is always required to follow your instructions and distribute your assets as you indicate in the trust agreement.
Why does a revocable trust stay private?
The main difference between a will and a living trust is the fact that a trust is not required to be filed in court. Your instructions are followed immediately upon your death or incapacity, without your estate going through the probate process. It is the probate process that makes your estate open to the public. Therefore, only your trustee has access to its terms.
If you have questions regarding privacy in estate planning, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Some clients ask, often with apprehension, whether they will have to deal with a paralegal. In reality, the benefits that a well-trained estate planning paralegal can bring to the attorney-client relationship are many. While not every law firm has paralegals on staff, many do. A paralegal’s value, especially in probate matters, can be substantial. More importantly, dealing with a paralegal on any type of legal matters, does not mean that clients will not work with their attorney.
Initial evaluation of the needs of the client
The initial meeting with a client is critical and should be attended by the attorney. Paralegals are very helpful when it comes to gathering all relevant information from the client, as well as providing the types of services the attorney determines is required for the client, based on his or her needs. A well-trained paralegal knows the documents and services for the client once the determination is made by the attorneys. After the initial consultation, paralegals will create and manage a customized calendar of important dates relevant to the client’s case, prepare documents, stay in touch with the client to make certain all necessary information is gathered and deadlines are met.
Paralegal as liaison
A paralegal’s job is often to be the liaison between the client and attorney. Why is this a good thing? Because attorneys have great demands on their time and a paralegal can help make communication between attorney and client more efficient.
Creating an inventory for probate matters
Probate paralegals, in particular, assist in filing the asset inventory with the court, as required. They are generally responsible for collecting asset information from the client and then drafting the actual inventory document to be filed. Paralegals can also evaluate assets, at the time of the decedent’s death, to determine any alternate valuation date that may apply.
Handling legal documents
Probate paralegals are specially trained to prepare and file most, if not all, of the documents required for the administration and closing of an estate in probate. Paralegals, with the supervision of the attorney, are capable of interpreting the provisions of wills and handling all aspects of surrendering life insurance and other death benefit claims. Taking care of these matters is very useful for the attorney and the client, as many tasks can be completed in a very efficient manner.
Evaluating creditor claims
Once a decedent’s creditors have been notified of the death, the paralegal will review any claims submitted by creditors to determine whether they are legitimate. The paralegal also keeps the financial records for the estate, verifies bank balances and prepares estimates for paying estate taxes, as necessary. They can then create the first draft federal estate tax returns and state inheritance tax returns, to be completed by the attorney and/or accountant, if required.
Non-probate related matters
Paralegals are also very useful in other areas of estate planning. They are often trained to handle the drafting of wills, trusts, documents needed for establishing guardianships, conservatorships, and many other estate planning documents. Paralegals are capable of drafting real and personal property sales documents, and power of attorney documents, among many other essential estate planning documents.
Paralegals are always supervised by attorneys
A paralegal’s work is always reviewed by the estate planning attorney for whom the work is being performed. As a paraprofessional, it is actually required that they work under the direct supervision of a licensed attorney. Similar to physician assistants and teaching assistants, paralegals are trained to assist the attorneys, who have more extensive training in the field. You can be certain that, if you work with a paralegal in our office, you will be receiving the top notch service we guarantee.
If you have questions regarding probate work, or any other estate planning needs, please contact Anderson, Dorn & Rader, LTD either online or by calling us at (775) 823-9455.
Selecting the right trustee is very important. A trust is an agreement between you and your trustee, who will ultimately be in charge of your assets and your personal affairs. The trustee is responsible for making sure the terms of your trust are being followed. The duties of a trustee typically include handling your financial affairs by paying your bills, making investments and maintaining accurate records of your finances. Clients ask if: can my attorney be my trustee? Choosing your estate planning attorney to be the trustee of your living trust is an option you should consider.
Is it a good idea to name my attorney as my trustee?
An attorney is always a good choice when you need someone to provide fiduciary services, such as a trustee. Attorneys have specialized skills and experience that can be a great value to clients. Also, the attorney who drafted the trust document is already intimately familiar with its terms, as well as the family and financial situation of the client. If necessary, your attorney can always obtain assistance with investment management by hiring an investment professional.
What are the ethical considerations?
There are no inherent ethical or legal issues that would specifically prevent an attorney from serving in the capacity of trustee. The normal ethical considerations that every attorney must take into account, while serving as a fiduciary to his or clients, still exist. There are often disclosures that need to be made to a client, so that attorneys can prevent certain conflicts of interest from occurring. Your estate planning attorney will be very familiar with the professional ethics requirements in this area, and should be able to prevent any problems before they start.
Attorneys are required to exercise professional judgment
When an attorney takes on the task of creating a trust for a client, it is proper for the attorney to inform the client of his or her own availability to serve as trustee. It must be presented as merely another option the client is allowed to consider. Yet, the attorney must not allow self-interest to interfere with his or her duty to recommend the best choice of trustee to the client. Care must also be taken to avoid violating the ethical rules regarding solicitation of clients and entering into a business relationship with a client, as these rules are set out by each state’s local bar.
Informed consent is usually sufficient to avoid ethical problems
As long as the attorney ensures that the client has received sufficient information to provide “informed consent,” there should be no problems with an attorney serving as trustee. “Informed consent” simply means that the attorney communicates to the client all possible risks and all available alternatives. When the client understands this information, but agrees to the proposed course of conduct, such as service as trustee, that clients has given “informed consent.”
If you have questions regarding trusts, trustees, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
When it is time to start planning for the care of your pet after your death, you have several estate planning options, ranging from provisions in your will, to a complicated trust.
Topics covered in this whitepaper include:
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When it is time to start planning for the care of your pet after your death, you have several estate planning options, ranging from provisions in your will, to a complicated trust. Learn more about the advantages and disadvantages of Nevada pet trusts in this presentation.
