A revocable living trust can be amended whenever necessary, during your lifetime. When clients buy a new house or car, they may ask, "should I amend my trust?" If you are simply purchasing an asset, it is not necessary to amend your trust. You simply title the new asset in the name of your trust. In Nevada, a certificate of trust is a recognized tool to assist you in the titling process.
When should you amend your trust? When your family situation, financial status or any other facet of your life changes, it is always a good idea to revisit your trust and, if necessary, revise its terms. That flexibility is what makes a revocable living trust a very useful estate planning tool. How do you modify your trust? Never attempt to modify your trust on your own. More often than not doing so will land the trust in court where a judge will try to determine what you intended by the modification you have attempted. You entered into the trust process to avoid having your estate go to court; have the process done by qualified counsel.
There are primarily two methods for making changes to a revocable living trust. An amendment to be added to your original trust, is the simplest approach. You can also create a restatement of the terms of your trust, incorporating your changes. Restating the trust is usually best when there are several amendments or when there are a number of provisions in the trust that need revising. Either way, it is essential that you understand and follow the laws of your state, to make sure your trust remains valid and that the changes do not create ambiguity or confusion.
In some situations an amendment is sufficient to effect the changes you require. For example, if you have a child, a simple amendment that adds him or her as a beneficiary, is likely sufficient. If your spouse or a beneficiary passes away, or you change your mind about a particular gift, you can amend the trust to revise those specific terms.
On the other hand, if you anticipate your revisions will be extensive, and possibly complicated or confusing, it may be a better idea to restate the trust altogether and start from scratch. This way you can make sure the terms of your trust are accurate and clear without having to re-title your assets. Revoking the trust and starting again is usually only necessary if a married couple enters into a trust arrangement and later divorces. Revoking a trust will require the trouble and expense of starting over and transferring the property once again. Whether you simply create an amendment, restate the trust, or revoke your trust and start anew, the choice is ultimately yours.
Adding several amendments to an existing trust document can become confusing. Restating the existing trust, you update the entire trust, while keeping the original date of the trust. This way, the property that is already held in trust will not need to be disturbed. Restating voids all prior amendments, thus reducing the possibility of confusion in finally administering the trust estate.
What about amending a shared trust?
If you have created a shared trust, with your spouse for instance, either of you can revoke the trust, as to the share the revoking party contributed. The same is true of amending the trust. Obviously, it is best when amending or revoking the trust, if you both agree to those changes and do so together. Depending on the terms of the trust agreement when one spouse dies, the surviving spouse is free to amend the entire trust, or just those terms of the trust that relate to his or her personal assets. In many trust agreements, the surviving spouse cannot change any terms of the trust which refer to the deceased spouse's trust assets.
If you have questions regarding trusts, or any other estate planning needs in Reno, Nevada please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-WILL (9455).
Wills are very common estate planning tools with great value when it comes to having the freedom of determining to whom your estate will be distributed after your death. Without one, you die “intestate,” which means how your estate is distributed is established by the intestate succession laws in your state. Even with its clear benefits, there can be complications if your will is challenged after your death. Will contests can be expensive and stressful on your family. An easy way to guard against one common challenge to the validity of your will is to create, what is called a “self-proving will.”
The first step in drafting your will is making sure it meets all of the legal requirements to be valid. Each state sets out the specific legal requirements for a valid will. Most states accept wills from another state, as long as the legal document is considered valid under the other state’s laws. The general requirements for a valid will are the same in most states. The will must be in writing, it must be signed by the person creating the will, and it must be signed by at least two witnesses who were present at the execution of the document by the "testator" (the person whose will it is) and the signatures of the other witnesses.
Nevada’s laws regarding “Wills and Estates of Deceased Persons,” are set forth in the Nevada Revised Statutes, Title 12, Chapter 133 Wills, Sections 133.020 through 133.050. In Nevada, every person of sound mind, over the age of 18 years, can create a will. The terms “sound mind” simply means the person has not been determined to be, or is not obviously legally incompetent. As in most states, a will in Nevada must be in writing and signed by the testator and two witnesses.
Witnesses must also be 18 years of age or older and generally competent. The beneficiaries should not be witnesses; rather the witnesses should be independent third parties. A will is not invalid because one of the witnesses is a beneficiary. However, if there are not at least two disinterested witnesses, then the one who is a beneficiary must give up the portion of their gift that exceeds the amount or value they would have received under the laws of intestate succession.
It is not uncommon for wills to be challenged. The benefit of creating a self-proving will is that, the court will automatically accept the will as authentic. Consequently, the probate process, when a self-proven will is involved, is much simpler. There is no need for the witnesses to be located and brought into court to give testimony.
Creating a self-proving will in Reno is not very difficult. The only extra step is for the testator and the witnesses to affirm the will’s authenticity by notarized affidavit, or by affirming under penalty of perjury that they have witnessed the signing of the testator, verified that he or she is over the age of majority and is apparently competent. The process of self-proving a will can be completed at the time the will is executed, or later, including upon the testator’s death. The affidavit is typically made a part of the will and attached to it. Even if the witnesses are available to testify when the testator dies, having a self-proving affidavit eliminates the delay and effort in requiring the witnesses to testify in court.
If you have questions regarding self-proving wills, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Considering how to pass your wealth on to the next generation? Then the generation skipping tax is something with which you should be familiar. The generation skipping transfer tax is a tax assessed on property as it is passed on to a generation that is two or more levels below the generation actually transferring the property. Simply put, if you transfer your property to a grandchild, instead of your daughter or son, the transfer would be subject to the generation skipping tax. The same is true if you transfer your estate to someone who is unrelated, and who is 37 ½ years or more younger than you. This type of transfer would also be subject to the generation skipping transfer tax.
Government tax schemes do not take into consideration those of us who want to include our grandchildren in our estate planning. Instead, the government apparently believes a family’s wealth should only be allowed to trickle down from one generation to the next. However, some grandparents may choose to assist their grandchildren in paying for their education or getting on their feet with their new families. The purpose of the generation skipping tax was to close the obvious loophole in the estate tax, and ensure that taxes will be paid at each level.
In 2009, the federal government created an exemption for property transfers up to $3.5 million from the generation skipping transfer tax. The tax was actually repealed in 2010, but reinstated in 2011, with a $5 million exemption. Since then, the exemption has been increased from $5 million to the current exemption of $5.34 million, as of 2014.
Yes. There are specific estate planning tools designed to eliminate estate taxes at each generational level. A Generation Skipping Trust, also known as “dynasty trusts,” is a kind of irrevocable trust created to deal with this tax, especially.
A General Skipping Trust is intended to avoid, or at least minimize, estate taxes on transfer to subsequent generations. This trust accomplishes this by holding the assets in the trust and distributing the funds in a pre-defined way to each generation. This way, the entire amount of the trust will be protected from estate taxes with each passing generation. Because these trusts also provide protection from creditors and predators, Generation Skipping Trusts are not just for wealthy families.
Another option is gifting assets to your grandchildren. This can potentially reduce the size of your estate, as well as the tax that must be paid upon your death. A grandparent can give his or her grandchildren up to $14,000 per recipient per year without having to report the gift. This money can also be placed in a properly established and maintained gift trust. Although you can make an outright gift, pay health care or education expenses directly, or put the money in a custodial account, putting the money into a trust has some major advantages that you should discuss with your estate planning attorney.
Generation skipping trusts are complex legal documents that should be drafted by a competent, experienced Reno estate planning attorney. They are most knowledgeable about deciding whether a generation skipping trust in Reno would benefit you.
A Power of Attorney is a very common estate planning tool, that can easily be customized to fit each client’s needs. When a Power of Attorney is created, the usual purpose is to handle legal, financial or medical needs for someone else. For instance, a power of attorney can be used to manage bank accounts and pay bills. Or, if one is incapacitated, it can allow an agent to manage their medical treatment. An agent’s actions are governed by the authority given in the power of attorney document, so what an agent can do is determined by the instructions you give. If making gifts on your behalf is a power you want your agent to have, then you can indicate your wishes when the power of attorney is drafted. Deciding whether agents make gifts under your power of attorney is up to you.
When you create and execute a power of attorney, you are known as the “principal”. The person to whom you give the power to act on your behalf, is known as the “agent”. How how much power you give your agent is determined solely by the type of power of attorney you execute and the language you use in that legal document. A power of attorney can be either limited or general.
If you create a limited power of attorney, you need to be very detailed in describing the authority you want to give your agent. Only the powers specifically mentioned in a limited power of attorney can actually be exercised by your agent. So, if you execute a limited power of attorney, and you want him or her to be able to make gifts on your behalf, then you must specifically convey that authority. Otherwise, he or she will not be able to do so.
On the other hand, when you execute a general power of attorney, your agent will be allowed to do nearly anything you, as the principal, would be able to do. A general power of attorney is a very powerful legal document, which conveys significant power. When executing a general power of attorney, you should assume that the agent will have authority over all of your assets. In that situation, the agent will have the ability to make gifts of your assets, in your name. Most states, however, prohibit an agent from making gifts to himself or herself, while acting as an agent, unless that authority is specifically mentioned in the document.
Being an agent is a serious role that should not be taken lightly. An agent is expected to act in good faith, and avoid any conflicts that would prevent him or her from acting in the principal’s best interests. It is considered improper to override the desires of the principal in favor of the agent’s own preferences.
Also, an agent must keep his or her own money and property separate from the property of the principal. Whenever an agent conducts financial transactions on behalf of the principal, only the principal’s funds can be used for the principal’s benefit. The agent is also required to keep accurate and complete records of all transactions.
If you have questions regarding a power of attorney, or any other estate planning needs in Reno, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
So, you just set up a revocable living trust. The next step is funding your trust. How the trust is funded depends on the type of assets you want to transfer to the trust. There are different methods for different types of assets. Understanding the most common methods will make the process less complex. Funding a trust is just as important as establishing the trust. Your estate planning attorney can help.
The goal of funding a Revocable Living Trust is to make sure your property is subsequently governed by the terms of the trust agreement. Once that is accomplished, the trustee will be able to manage those accounts, in the event you become mentally incapacitated, or upon your death. In order for a Revocable Living Trust to function as it should, you, as the trustor, must do more than simply sign the trust agreement.
After the trust agreement is signed and executed, you must then “fund” your assets into the trust. There are three general ways this is done, in order to properly fund a Revocable Living Trust. Which method is required depends on the type of asset being funded. The three methods are:
None of these methods are especially complicated. However, the procedures must be followed in order to properly fund the trust.
Assets such as bank accounts, investment and brokerage accounts (other than retirement accounts such as IRA or 401(k)); stocks and bonds held in certificate form or street form, and real estate, are funded into a Revocable Living Trust by simply changing the owner of the asset from your name into the name of the trust itself. Some institutions may require only that the name on your account be changed; while others may require you to close the original account and open a new one in the name of your trust.
If you have personal property that requires no certificate of legal title (e.g., Jewelry, artwork, antiques); personal loans, partnership and membership interests in limited liability companies, these types of assets are funded into a Revocable Living Trust by assigning ownership rights from your name into the name of the trust. This is done by creating a document called an assignment that the owner simply signs. Royalties, copyrights and patents can be assigned, but should also be changed in the office or agency that issued the certification.
Any asset that requires the naming of a beneficiary, like life insurance, certificates of deposit that will charge a fee for re-titling, and other such accounts, is not re-titled into the name of the Revocable Living Trust. Instead, the primary beneficiary of these accounts or policies is changed to the trust.
Retirement plans such as IRAs, 401(k)s and the like are trusts in and of themselves. Under limited circumstances, a Revocable Living Trust may be designated as a beneficiary, but often there are adverse tax consequences. You will want to discuss the pros and cons with qualified counsel before naming a beneficiary on those assets. Simply put, any property that is titled in your personal name must be probated when you die. If you overlook the importance of funding your Revocable Living Trust, your estate plan will not be as effective as you or your family anticipated when the trust was created, and the trust will not serve its purpose.
If you have questions regarding funding a trust, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Living Trust vs Power of Attorney? The answer may surprise you. In order to create a comprehensive estate plan, you actually need both. Estate planning is much more than simply transferring your assets to your loved ones when you die. Although both a living trust and a power of attorney essentially provide the same benefit, a way to manage your affairs when you are incapacitated, most comprehensive estate plans include both.
A living trust controls not only the management of your assets if you ever become incapacitated, but it also addresses the distribution of your assets after your death. With a living trust, you must re-title your assets to your living trust in order for it to become effective. The living trust is meant to give your agent, referred to as the “trustee,” the authority necessary to manage all of the assets you place in the trust. What a living trust does not do, is give your trustee authority over any of your assets that are not included in your living trust.
What happens when your trustee realizes, after your incapacity, that you failed to transfer some of your assets to your living trust. Not to mention all of the assets that were intentionally left out, such as retirement accounts, annuities, and Social Security benefits. How will your agent manage any of these assets for you, upon your incapacity? The living trust does not give your trustee the power to manage assets not titled in the name of, or assigned the trust. This is where the durable power of attorney becomes necessary.
If you also include a Durable Power of Attorney in your estate plan, your agent will have the authority to manage the remaining assets, including those you unintentionally left out of your trust, as well as your annuities, retirement accounts and social security funds. You can also control the extent of your agent’s powers over your assets.
A general power of attorney gives broad power to the agent relating to certain categories of decisions, such as legal, financial or business decisions. A limited power of attorney can be created for the specific purpose of allowing someone to make decisions for you, only as to a particular activity, such as selling your real property when you are away, or making investment decisions in the event you cannot. Another example would be creating a power of attorney to allow a business partner to use specific assets for the benefit of your business if you become incapacitated. If you own rental property, for instance, your agent can be given the authority to handle all aspects of managing that property. Health care or medical powers of attorney allow another person to make medical decisions in the event of your incapacity - also a limited power of attorney.
Comprehensive estate planning should include both a Living Trust and a Power of Attorney. Your agent should be aware of the relationship between these two documents in order to know which document should be presented when attempting to manage your affairs in the event of your incapacity.
If you have questions regarding trusts or 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.
It is not uncommon to revise a will more than once throughout your lifetime. Circumstances are bound to change, and so must our estate plans. Like a will, you can revoke living trusts whenever you desire. In fact, that is one of the benefits of creating a revocable living trust – its flexibility.
The choice is always yours. However, there are some situations where an amendment may be sufficient. For example, if you get married or have a child, if you eliminate substantial property that was to be specifically distributed to a particular person in the trust, if your spouse or a beneficiary dies, an amendment would be in order. If you change your mind about who should inherit a particular item, or if you move to a state that has different laws that will affect the terms of your trust, an amendment may also be necessary.
If, on the other hand, if you need to make extensive revisions that may prove to be somewhat confusing, or if you get divorced, either restating or revoking the trust entirely is usually required. Either way will allow you to start fresh and be sure to include those terms that will meet your changing needs.
If you want to make changes to a will, it is easy to revoke the will entirely by simply executing a new one. Well drafted wills revoke all prior wills. It is a little more complicated with a living trust, however, because the property in the trust has already been transferred. You could revoke the trust, draft a new one and transfer the property again. Because the expense and trouble of doing this is substantial, restating the living trust agreement is usually a better option. A joint married living trust, however, will require revocation of the trust in the event of a divorce.
Simply adding amendments to an existing trust document can get confusing. However, if you restate the existing trust, without revoking it entirely, but include in the restatement any necessary changes, you can keep the original date of the trust and not have to re-title the property that is already held in trust. By doing so, you also eliminate the headache of trying to go through many amendments, which can create confusion, waste time and cost more in administration fees.
Look at it this way. You create a living trust transferring your house to the living trust, making yourself trustee. You name your sister as your successor trustee. Let’s say three years later, you decide you should name your brother as successor trustee, instead. That would require a simple amendment. Then you decide to change a beneficiary; now another amendment. Next, you decide that you really wanted your sister to be a trustee after all. Next, your attorney informs you that there has been a significant change in the law, so you amend again. After several of these, it would be easy to miss something. To eliminate the possibility of confusion, you can simply create a new trust that clearly indicates it is a restatement of the original trust. The restated trust will make it explicit that all trust amendments are now irrelevant and the terms you want are now in effect. It’s that simple.
If you create a joint trust with your spouse, for example, either of you can revoke the trust as to the share of the assets the revoking spouse contributed. The same is true of an amendment. You can see, however, that if you decide to revoke or change any of the terms of the trust, it is best if both of you agree to do so in writing. After one spouse dies, the surviving spouse is free to amend the terms of the trust, if the trust is a "married simple trust". If the trust divides into a trust for the surviving spouse and another trust for the deceased spouse's assets, the surviving spouse cannot change any terms of the deceased spouse's trust.
If you have questions regarding revoking, restating or amending a trust, or any other estate planning needs in Reno, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Joint ownership in property can be created in one of three forms: with rights of survivorship, as community property, or as tenants in common. The type of ownership you have in certain property will determine how that property is transferred at your death.
Topics covered in this report include:
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Trusts are a vital wealth planning tool, not only for asset protection, but also for safeguarding the family’s wealth, regulating access to property and assets by younger family members, and providing long-term oversight and investment management for families. The trustee is responsible, either directly or indirectly, for investing those assets and making sound decisions in making distributions to beneficiaries.
Regardless of the size of your estate, it is important to consider protecting your assets and creating a plan to ensure that your family wealth will be passed on as you wish. The goal of asset protection is to shelter the wealth you have created from unnecessary risks. A family wealth trust can be the most effective and flexible option for protecting family wealth. When your estate planning attorney properly customizes a trust for your family, the benefits will far exceed simply leaving assets to family members in your will. Remember, a Family Wealth Trust is not just for the wealthy.
What Is a Trust?
A trust is just an agreement between a trustor, trustee and beneficiary regarding how and when assets will be transferred. The “trustor” is the person who owns the assets in and creates the trust. The “trustee” is the person to whom the legal title of the assets passes. The “beneficiary” is the person who eventually receives the assets after specific conditions have been met. Trustees can be friends, relatives or professionals, such as attorneys or accountants. In some cases, an entity such as a bank or a trust company can serve as trustee.
How do Family Wealth Trusts actually provide protection?
Usually, a family wealth trust becomes irrevocable when the trustor dies. This simply means its terms cannot be changed once it has been created. Furthermore, the assets are no longer part of the trustor’s estate once the trust becomes irrevocable. So, when the trustor passes away, these assets are not considered part of the personal estate and will not be subject to the beneficiary's creditors. This is only one advantage of this type of trust.
A Generation-Skipping Trust
Another option to consider is the Generation-Skipping Trust, which will allow you to retain your tax exemption on gifts to your grandchildren and avoid the tax on any amounts exceeding that exemption. In 2014, the Generation-Skipping tax exemption is $5.34 million, which is the same as the federal estate tax exclusion. This is also a beneficial estate planning tool, if you want to leave assets to your grandchildren. For instance, you can put $100,000 in a generation-skipping trust and allow it to accumulate earnings for any number of years. Still, your lifetime exemption would only be reduced by the original $100,000. If you have any questions about these or any other asset protection tools, please contact our office.
In the case In re Estate of Karter Wu (Supreme Court of Queensland, Australia), Mr. Wu created and stored his Last Will and Testament on an iPhone, along with a series of other documents, most of them final farewells.
Wu’s iPhone Will named an executor and successor, set forth how he wished to dispose of his assets at death, dealt with his entire estate, and authorized the executor to deal with his financial affairs. The Will began with the words “This is the Last Will and Testament of Karter Wu.” At the end of the document, Wu typed his name where the testator would normally sign his name, followed by the date and his address. The Australian court admitted the Will to probate.
The law for the execution of a valid Will in Queensland, Australia, is set forth in the Succession Act of 1981. The Act provides the requirements for execution, however, it provides that, if the court is satisfied that a person intended a document to form his Will, then the document shall be considered a Will as long as it purports to state his testamentary intentions. Australian law defines a “document” to include any disc, tape, article, or any materials from which writings are able to be produced or reproduced. Citing a New South Wales, Australia, case that held a Word document stored on a laptop computer to be a document, the court held the electronic record on the iPhone was a document for purposes of the statute. Since the record contained on the iPhone named an executor, authorized the executor to deal with his financial affairs, and provided for the distribution of Wu’s entire estate at a time he was contemplating his imminent death, the court held that it met the requirements of the Succession Act 1981.
California Probate Code § 6110 provides that a Will shall be in writing and signed by the testator, or signed in the testator’s name by some other person in the testator’s presence and at the testator’s direction, or by a conservator pursuant to court order. The Will must have the signatures of two witnesses. If the Will does not meet these requirements, it shall be treated as if it did meet the requirements if the proponent of the Will establishes by clear and convincing evidence that, at the time the testator executed the Will, he or she intended the document to be his or her Will.
Similarly, New Jersey law provides at N.J.S. 3B:3-2 that a document or writing is treated as complying with the normal rules for executing a Will if the proponent of the writing establishes by clear and convincing evidence that the decedent intended the document to constitute the decedent’s Will.
The California and New Jersey statutes are based on § 2-503 of the Uniform Probate Code. The impetus for the enactment of this section of the Uniform Probate Code may have been a case where an attorney attempted to probate the unsigned draft of a Will of a decedent who was killed in the World Trade Center attack on September 11, 2001.
California Probate Code § 6130 further provides: “a writing in existence when a Will is executed may be incorporated by reference if the language of the Will manifests this intent and describes the writing sufficiently to permit its identification. California Probate Code § 6131 states: “a Will may dispose of property by reference to acts and events that have significance apart from their effect upon the dispositions made by the Will, whether the acts or events occur before or after the execution of the Will or before or after the testator’s death. . . .”
Recently, a Will was admitted to probate in California where the Will referred to the disposition of assets in accordance with recordings that the decedent had left, both prior to the execution of the Will and would leave after the execution of the Will, on his answering machine at his residence. The judge found that the recordings constituted a writing within the meaning of the California Probate Code and were to be incorporated by reference and were to be considered to be acts of independent significance. Therefore, the recordings were given effect with regard to the disposition of property as governed by the Will.
While the existence of these statutes in many states have broadened what may be admitted as a Will for probate, it is not a good idea to rely on these statutes to assure that one’s Will will be accepted by the local probate court. Having a Will drafted by an attorney experienced in estate planning and drafting is always the best course of action to assure there will be no problems with the disposition of one’s estate at death.
Furthermore, there are many reasons why one may not wish to subject his or her estate to probate upon death, including potential additional costs, delays in administration, and the publicity of both the extent of the decedent’s wealth and the identification of the beneficiaries of the estate. There are many ways to avoid a probate administration at death, including the execution and funding of a revocable or irrevocable trust during the individual’s lifetime.
For more information about the ways to avoid probate, contact our law office. Our office focuses on estate planning, probate administration, and methods to avoid probate for those who have a desire to do so. We work with clients of all wealth levels and ages. As a member of the American Academy of Estate Planning Attorneys, our firm is kept up-to-date with information regarding estate planning and estate and trust administration strategies. You can get more information about scheduling a complimentary estate planning appointment and our planning and administration services by calling Gerald M. Dorn, Esq. at (775) 823-9455
Dying “intestate” simply means you did not have a will. Each state has its own “intestate succession” laws. Nevada is no exception. How your property is distributed upon your death, depends primarily on which relatives survive you, or are still living at that time.
The Laws of Intestate Succession in Nevada.
Generally, only assets that you own alone in your name only will pass through intestate succession. Examples of property that does not pass through intestate succession, assuming the beneficiaries or joint owners are living at your death include:
Instead, these assets will pass to the surviving co-owner or beneficiary you named, whether or not you have a will.
Which relatives are in line to inherit in Nevada?
If you have children when you die, but no spouse, parents or siblings, then your children will inherit your estate. Next in line would be your spouse, parents and your siblings, in that order.
Because Nevada is a Community Property state, your spouse will inherit your share of the community property upon your death. “Community property” is property acquired while you were married, except gifts and inheritances given to only one spouse, even if acquired during marriage.
So, if you have a spouse and children who survive you, your spouse inherits all of your community property and 1/2 or 1/3 of your separate property. If only your spouse and parents survive you, they split your separate property equally, but your spouse inherits all of the community property. The same is true for siblings and a spouse, if your parents are not living at the time of your death.
Who are legally considered to be “children?”
Children who have been legally adopted receive a share along with any biological children. However, foster children or stepchildren that were not legally adopted do not automatically receive a share. Children you placed for adoption and who were legally adopted by another family are no longer entitled to a share of your estate.
Special Circumstances in Nevada
There are a few other special circumstances that warrant mentioning. Children you conceived, but were not born before your death (posthumous children) can still receive a share. Children born outside of marriage can only receive a share of your estate if it can be proven that you acknowledge them as your children and contributed to their support.
So-called “half” siblings inherit as any other sibling would. Relatives entitled to an intestate share of your property will inherit whether or not they are citizens or legally in the United States. Finally, Nevada’s “killer” rule says, that anyone who feloniously and intentionally kills you, will not receive a share of your estate. If you have any questions regarding inheritance and intestate succession, or need assistance in will drafting in Nevada, please give us call.
A very common question asked by estate planning clients is “what happens to my property if I am single when I die? The answer to this question generally depends on three things: (1) whether you have a will, (2) the laws of the state you live in and (3) which of your relatives are still alive when you pass away. This would be true even if you are married when you die. Each state has its own set of “intestate succession” laws which determine where you property will go if you die without a will. If you have a will, on the other hand, the terms of your will determine who will inherit your property.
A will is an estate planning document that allows you to specify the individuals, institutions or other organizations (including charities) you want your assets distributed to when you pass away. Whether you are married or single when you die, the terms of your will always determine where your property will go. If you die without a will, or “intestate,” the laws of your state will determine how your assets are distributed.
In Nevada, if you have children but no spouse, your children will inherit everything. If your parents are living, but you have no children when you die, they will inherit everything. Likewise, if your parents are deceased and you have no children, but your siblings survive you, they will inherit everything. If any of your siblings are deceased, the share they would have received will go to their descendants.
If you do not have a will, and you have children, In Nevada they will receive what is called an “intestate share” of your estate. The size of the share will depend on how many children you have, because they will share equally. They must legally be your children; it will not go to step children. If you legally adopt a child, he or she will receive an intestate share along with any biological children. However, foster or stepchildren who have not been legally adopted do not receive a share.
If you have a child who was legally adopted by another family, that child will no longer be entitled to a share of your estate. Men who have children born outside of marriage can only receive a share if paternity has been acknowledged or proved in court. A child that was conceived by you, but not actually born before your death, will still receive a share of your estate in Nevada.
There are a few miscellaneous rules or definitions that may apply to your particular situation. For example, “half” relatives inherit as if they were “whole.” So, your brother with whom you share a mother, but not a father, will have the same right to your property as he would if you had both parents in common. Citizenship does not affect inheritance, either. Nevada also recognizes what is known as the “killer” rule, which provides that if someone commits a felony and it results in your death, that person cannot inherit any part of your estate.
If you have any questions regarding inheritance and intestate succession laws in Reno Nevada, or need assistance in will drafting in Nevada, please give us call.
You have to be concerned about taxation when you are planning your estate. Taxes on asset transfers at death are going to be a factor for many high net worth families. Nevada, however, has no inheritance or estate tax, so we only have to be concerned about the federal estate tax.
There is an estate tax credit or exclusion. In 2014 the amount of this exclusion in this country, including Reno Nevada, is $5.34 million. Lifetime asset transfers exceeding this amount are potentially subject to a transfer tax of 40 percent.
The question of whether or not an inheritance recipient will be required to pay taxes is a multifaceted one. If the assets that comprise the estate do not exceed $5.34 million in value, the estate as a whole will not be taxed. So the answer is no on this level, when the estate is worth less than $5.34 million.
If it was worth more, the individual beneficiaries do not pay the estate tax. The estate is responsible to pay the tax, so it comes out before other transfers, which means that the value of the estate as a whole would be reduced by the imposition of the tax.
Many laypeople would naturally think that an inheritance tax and an estate tax are exactly the same thing. They assume that these are just different terms that describe the same death tax.
In fact, an inheritance tax is something that is by definition different from an estate tax. As we have already touched upon, an estate tax is imposed on the entire estate. An inheritance tax is levied upon each person receiving an inheritance.
Fortunately, there is no inheritance tax in the United States on the federal level and as mentioned above, we do not have a state level inheritance tax in the state of Nevada. However, there are some states in the union that do have inheritance taxes. As we said, the beneficiaries of the estate typically pay an inheritance tax in those states. State level estate taxes are typically paid by the estate, similar to the federal estate tax.
In fact, residents of New Jersey and Maryland are faced with the prospect of paying a state level estate tax, a state level inheritance tax, and the federal estate tax.
It should be noted that states that have an inheritance tax generally exempt very close relatives like spouses and children.
You may wonder if you are going to be forced to report an inheritance on your annual tax return claiming it as income. If you receive a bequest, generally speaking it is not going to be looked upon as taxable income.
However, if the inheritance was to appreciate during the administration process before it was distributed, the gains could be taxable. Similarly, if income is generated during that time, it could be subject to income tax.
Of course, if you sell property that you inherited at a later date after it appreciated, the capital gains tax would be a factor, but the cost basis is stepped up to the value as of the date of the deceased owner's death, so the tax would only be for the appreciation after that date.
This post provided a little bit of information about estate planning and taxation in Reno Nevada. To learn all of the details, contact our firm to schedule a free tax efficiency consultation.
It can be intimidating to consider the possibility of relinquishing control over your property. People sometimes assume that you do surrender control of assets when you create a trust.
In this post we will provide some clarity about creating a trust in northern Nevada.
There are different types of trusts. Perhaps the most commonly utilized trust in Reno NV in the field of estate planning is the revocable living trust.
These trusts are largely useful to enable probate avoidance. If you use a last will to state your final wishes, the estate must be probated before your heirs receive their inheritances.
This process can be expensive and time-consuming. Most people would like to facilitate timely asset transfers.
When you use a revocable living trust to arrange for these transfers the distributions to the beneficiaries will take place outside of probate.
Because of the fact that the trust is revocable, you do retain control of assets that you convey into this type of trust.
You can act as both the trustee and the beneficiary while you are still living, and most people will do this. As a result, you can control investments and give yourself distributions as you see fit.
The control doesn't stop there. Because the trust is revocable, you can actually dissolve or revoke it at any time. The terms that you originally set forth are not etched in stone either. You can change them and add or subtract beneficiaries.
There are irrevocable trusts as well. With some exceptions, these trusts do require you to surrender incidents of ownership, so you do not continue to have control of the property that has been conveyed into the trust.
Because the trust is not revocable, you cannot dissolve it, and generally speaking the terms cannot be changed.
Why would you want to create a trust that did not allow you to retain control? There are a number of reasons.
Certain estate tax efficiency strategies involve irrevocable trusts. Because the assets would be owned by the trust rather than the estate, there are certain benefits.
In addition, when you surrender incidents of ownership by placing assets into an irrevocable trust they are generally going to be protected from creditors and claimants seeking redress. Nevada does allow some irrevocable trusts to be "self-settled," so some incidents of ownership are retained, but these are sophisticated strategies that require the advice of competent counsel to establish and fund.
The best way to proceed if you have questions about estate planning would be to discuss everything in detail with a licensed Reno Nevada estate planning lawyer.
Rather than looking for answers to general questions about what trusts can and cannot do, you would be better off consulting with an attorney. You can explain exactly what you want to accomplish, and your attorney can give you direct answers to your specific questions.
November 11 is Veterans Day, and people around the country are taking some time to remember the contributions that have been made by former service members. In this post we would like to share some thoughts about retirement and estate planning for veterans.
The Basics
Veterans have the same concerns that we all do when it comes to estate planning. You want to make sure that you are taking all the appropriate steps with regard to the transfer of your assets after you pass away. It is also important to be financially prepared for the different stages of life.
When it comes to the latter component, if you are a careerist you have some great opportunities when it comes to retirement planning. The military pension that service members are entitled to after at least 20 years of service can be a fantastic supplement to Social Security income.
In addition, many people embark on careers in the private sector after serving 20 years. If you joined up after college at the age of 22 for example, you would be just 42 when you leave the service.
You would have an extraordinary resume. Your undergraduate education would have been in place before you joined, and you may well have added onto that while you were in the military.
This presents an extraordinary opportunity for wealth building. You could be drawing a significant retirement pension while you are traversing a civilian career path. If you plan ahead effectively, you could potentially accumulate quite a bit of wealth while you enjoy a comfortable lifestyle.
This would all lead to the ability to enjoy your retirement years to the utmost once you decide to put your working years behind you.
Legacy Planning
Service members are inherently involved in history making. When you have served in the Armed Forces, especially during a time of war, you have experienced things that civilians simply cannot fully grasp.
A legacy plan can involve leaving behind autobiographical notes or memoirs. This can be a gift that has a lasting impact that transcends dollars and cents.
Veterans should definitely consider putting their experiences into writing. You can include these memoirs among your estate planning documents. Family members can learn much, and perhaps ancestors yet unborn can learn some history when they read your reminiscences.
There is also the matter of physical mementos. Veterans often retain ownership of items that hold a great deal of significance to them. When you share the stories that are attached to things that you will be leaving behind, you imbue these items with meaning that can be felt over the generations.
Honoring Veterans
We would like to thank all veterans for their service. Without their sacrifices we would not have the freedoms that we enjoy each and every day.
During 2010 the estate tax was temporarily repealed. This repeal was in place due to provisions that were included in the Bush era tax cuts.
Under the laws as they existed during 2010, the estate tax would return in 2011. The amount of the federal estate tax credit or exclusion would be just $1 million. The top rate for estates in excess of $1 million was scheduled to come in at 55 percent.
In 2009 the estate tax exclusion was $3.5 million, and the top rate was 45 percent. It seemed that come 2011, we would be facing a huge tax increase.
Fortunately, in December of 2010 a new tax relief measure was passed through Congress. This measure is called the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.
Under terms contained within this act, the estate tax exclusion was set at $5 million for 2011 and 2012. Ongoing annual adjustments for inflation were mandated. A maximum rate of 40 percent was put into place. The law was scheduled to sunset at the end of 2012 again, but fortunately Congress made it permanent in 2013.
Incremental Increases
For 2012 the Internal Revenue Service raised the exact amount of the federal estate tax exclusion to $5.12 million to account for inflation. Another adjustment was applied in 2013, bringing the amount of the exclusion up to $5.25 million.
2013 is rapidly coming to a close, so the IRS has announced the amount of the estate tax exclusion for 2014. An additional $90,000 will be added to the existing $5.25 million exclusion. Next year the exclusion will be $5.34 million.
Exclusion Afforded to Each Taxpayer
It should be noted that this is a per person exclusion. Each individual taxpayer is entitled to an exclusion of $5.34 million. As a result, if you are married you and your spouse would have a combined exclusion amount of $10.68 million next year.
If you were to pass away next year, your spouse can take some legal steps that would still allow him or her to have a total exclusion of $10.68 million, because the estate tax exclusion is portable between spouses.
Annual Gift Tax Exclusion
In addition to the estate tax there is also a federal gift tax. The two taxes are unified. The $5.34 million exclusion that we will see next year will apply to transfers by gift during your life or by inheritance at death. Because it covers taxable gifts that you give while you're living along with the value of the assets that will be passed to your heirs after you die, the gifts you make that are in excess of the annual exemption will reduce the exemption amount at your death.
The annual gift tax exclusion is the amount you can give without filing a gift tax return or reducing your estate tax exclusion. You don't use up any of your unified lifetime exclusion unless you make a gift to a single person during a calendar year that exceeds the amount of this annual exclusion.
During 2013 the amount of this exclusion has been $14,000. Because of the fact that the Internal Revenue Service raised the lifetime unified exclusion, you may wonder if the annual gift tax exclusion was increased as well.
Unfortunately, the annual gift tax exclusion is not going to be raised for the 2014 calendar year. The $14,000 figure will remain in place next year. Remember, however, it is a per person exclusion, so you and your spouse can gift $14,000 each to your daughter and her husband, a total of $56,000 per year without filing a return or adversely affecting your lifetime exemption.
Probate stands in the way of your heirs and their inheritances when your assets are in your name at the time of your death. Nevada probate can take a significant amount of time (often a year or more), and most people would like their heirs to receive their inheritances in a more timely manner. For some, this wait is not a problem. For other families, however, there may be an immediate need for liquidity.
The waiting period is only one of the problems with the Nevada probate process. Expenses can accumulate during this process , and they can ultimately consume a noticeable percentage of the estate (often 4% - 8% or more if there is a contest). This is all money that could have gone to the heirs if probate was avoided.
It is possible to avoid probate in Nevada. There are a number of ways to go about it, and one of the most popular probate avoidance solutions is the revocable living trust.
Once you convey assets into the name you have given to your revocable living trust you name a trustee that is empowered to manage the assets that are titled in the trust. You also name a beneficiary or beneficiaries who would receive distributions out of the trust. The nature of these distributions would be decided by you when you create the trust agreement.
Initially you may serve as both the trustee and the beneficiary. By doing so, you do not surrender control or beneficial use of the assets. You can distribute assets to yourself, manage your own investments, and change the terms of the trust agreement if you want to do so. Since the trust is revocable, you can even revoke it entirely if you ever choose to do so. Since the point is to facilitate the transfer of your financial assets after you pass away you name a successor trustee, and you name beneficiaries who will receive distributions out of the trust after you die.
Once the assets have been conveyed into the revocable living trust they are no longer considered to be probate assets under the laws of the state of Nevada. As a result, when the trustee distributes monetary resources to the beneficiaries of the trust these asset transfers are not subject to the process of probate.
The creation of a revocable living trust is one way to avoid the probate process, but there are others as well. If you would like to discuss all of your options with a licensed professional please feel free to contact Anderson, Dorn & Rader, Ltd. to request a no obligation consultation.
We will listen carefully as you explain your objectives, gain an understanding of your unique personal situation, and make the appropriate recommendations. You can then go forward with a tailor-made estate plan that will facilitate a fast, efficient, and cost-effective transfer of assets to your loved ones when the time comes. To learn more, please download Anderson, Dorn & Rader, Ltd.'s free probate process report.
There are different types of wills that are used in the field of estate planning. One of them is the last will or last will and testament, which is used to transfer assets following your death. You can also nominate a guardian for dependents in your last will. Another type of will that should be a part of every comprehensive estate plan is a living will. Some people confuse living wills with living trusts, so we would like to provide some clarity here.
Individuals generally equate a will with the transfer of property. This can lead to the misconception that a living will facilitates property transfers while you are still alive.
This is not the case. A living trust is a vehicle of asset transfer. However, a living will has nothing to do with financial matters.
With a living will you state your wishes with regard to the implementation of life-sustaining measures like the utilization of feeding tubes, respirators, and ventilators.
It seems that modern medicine can keep people alive almost indefinitely using these measures, even if there is no hope of recovery. Some individuals would want this to continue, and others would prefer to allow nature to run its course. How you feel about it is a personal preference, and you can state that preference by executing a living will.
If you don't have a living will and you do fall into an incapacitated state your closest relatives would be forced to make decisions in your behalf. This is a very difficult position to be placed in. You essentially have a matter of life or death in your hands, and you may not know how the person in question would have acted if he or she could communicate.
Disagreements among family members often arise, because this is an issue about which people can be very passionate. This is a difficult time for all concerned, and family members should be pulling together. You can prevent this type of situation if you take the time to execute a living will.
A living will is an advance directive for health care. Since we are covering an important advance directive in this post we would like to mention another one that is highly recommended, the health care power of attorney.
Medical decisions may present themselves that are not specifically covered in the living will. They may be quite sensitive. You can appoint someone of your choosing to make these decisions for you if it becomes necessary by executing a durable power of attorney for health care.
When you do this the agent you name will have the legal authority to act on your behalf when it comes to health care decisions.
