35% had a last will.
29% had a living will.
77% of those over the age of 55 had at least one of these documents.
24% of those under 35 had at least one of the documents.
48% of those 65 and over had a financial power of attorney.
51% of those 65 and over had a health care power of attorney.
58% of those 65 and over had a living will.
Click here to view a larger image.
Wealth preservation involves the deployment of estate tax strategies. To determine whether or not your wealth is potentially subject to the estate tax before it is passed on to your heirs you should be aware of the federal estate tax exclusion.
For the rest of this year the estate tax exclusion is $5.25 million. The maximum rate of the federal estate tax is 40% under the provisions of the American Taxpayer Relief Act of 2012. (Ironically, prior to this "relief" the maximum rate was 35%.)
Under existing laws the estate tax exclusion can be adjusted annually for inflation if such an adjustment is warranted. As a result you may see a slightly different estate tax exclusion amount in 2014 and in subsequent years assuming existing laws remain in place.
In addition to the federal estate tax we have a federal gift tax. It carries the same top rate, and it is unified with the estate tax. As a result, the $5.25 million exclusion is a unified exclusion. It applies to taxable gifts and your estate's value. For this reason giving gifts using this exclusion throughout your life is going to reduce the estate tax exemption at death, so you have to determine which is the best approach for you.
The good news is that there is an annual per person gift tax exclusion that exists separate from the lifetime unified exclusion. The exact amount of this exclusion does not necessarily remain constant every year, but in 2013 the amount of this annual per person exclusion is $14,000.
As a result, if you wanted to write a $14,000 check and give it to your son this transaction would not be taxable, and your lifetime unified exclusion would not be reduced by the value of the gift.
This is an exclusion that is afforded to each taxpayer. So, a married couple could give as much as $28,000 to any number of gift recipients this year free of taxation. If you had several children, friends or others to whom you wish to make gifts, you could transfer quite a bit of money tax-free, and you could also give tax-free gifts to their spouses using this annual exclusion.
The estate tax exclusion is portable. This means that the surviving spouse could use the unused portion of the exclusion that his or her deceased spouse was entitled to.
When you're planning your estate you should be aware of the fact that there is an unlimited marital deduction. You can give your spouse any amount of money while you are living free of the gift tax. Your spouse can also inherit any amount of money from you without incurring any estate tax exposure.
An estate consists of the assets you own at any given time. It is your estate that you will leave behind after you pass away. Estate planning is the process of providing for the appropriate distribution of the assets that will comprise your estate in the event of your death.
Many people will think about estate planning and immediately equate it to the execution of a last will. A last will is utilized to express your final wishes with regard to the distribution of your assets.
When you draw up a will you must also choose a personal representative (historically, called an executor or executrix). This is the individual that will administer the estate.
You should choose your personal representative wisely because it is not just a ceremonial role. The personal representative must guide the estate through the process of probate. During probate final debts must be settled, and property must be inventoried and in some cases liquidated before it is divided and distributed among the heirs of the estate.
Because of the business that must be conducted the personal representative should be someone who is comfortable taking care of these tasks. There could be a good bit of time involved so you should also select someone who has the time to do the job.
A last will is not your only option for transferring assets at your death. Because wills must be probated through the courts and probate is time-consuming many people choose to avoid it by arranging for asset transfers using methods other than a last will.
A popular choice for probate avoidance is a revocable living trust. With these trusts you retain control of the assets while you are alive by acting as both the trustee and the beneficiary.
After you pass away, a successor trustee distributes assets to the beneficiaries that you choose according to your wishes. These asset distributions take place outside of the probate court.
There are other types of trusts that can be used beyond revocable living trusts. The correct choices vary on a case-by-case basis depending on the objective of the person creating the estate plan.
People who are in possession of considerable wealth have to concern themselves with the federal estate tax. This tax carries a 40% rate , and in 2013, the amount of the exclusion is $5.25 million.
It is possible to position your assets in a way that mitigates your estate tax exposure if you work with a licensed estate planning attorney.
In addition to the estate tax concerns, other estate planning objectives include asset protection, special needs planning, and spendthrift protections.
Every responsible adult should have an estate plan in place. This is something that you are doing for the benefit of your loved ones, and you could be leaving a potentially difficult situation behind if you don't take the appropriate steps in advance.
The Sopranos television series obviously generated a lot of revenue, and as you might imagine "Tony Soprano" James Gandolfini left behind a considerable estate. At the time of his passing his net worth was estimated to be approximately $70 million.
The accumulation of wealth can result in a great deal of estate tax liability if you don't take the correct steps to position your assets with wealth preservation in mind.
Apparently the actor did not plan ahead very effectively. He did have an estate plan in place, but most of his wealth is being transferred under the terms of a last will. Simply creating a simple will to direct the transfer of assets is not going to do anything to provide you with estate tax efficiency.
On the federal level the estate tax carries a 40% maximum rate, and the current exclusion is $5.25 million. Gandolfini resided in New York, so his family faces yet another layer of taxation because there is a state-level inheritance tax in the state of New York.
The New York state inheritance tax exclusion is $1 million, and the maximum rate of the tax is 16%.
When you combine the rates on both the federal and the state level you are looking at total taxation that consumes more than half of the taxable portion of an individual's estate.
In the case of James Gandolfini it is estimated that his heirs will receive only $40 million out of the $70 million that he left behind after estate taxes have been paid. With proper planning, there is a good possibility that the entire estate tax liability could have been avoided. Unfortunately, most of us rationalize our procrastination until we have a "wake up call" such as a personal medical event or the death of a loved one. Gandolfini was not elderly and had little forewarning, so he likely thought he had time to consider his estate planning. Perhaps, his untimely death and the tremendous costs associated with it will be the wake-up call more of us need to meet with qualified counsel and complete our estate planning before the unfortunate event occurs.
When you see some of the estate planning failures that have been taken by others, you may be motivated to avoid the same mistakes. People sometimes fail to plan ahead for the inevitable because they are under the impression that they are too young to concern themselves with estate planning. While it is obviously true that people in their 30s do not usually pass away, sometimes they do. It is not entirely uncommon for younger people to pass away in motor vehicle accidents. Catastrophic illnesses sometimes strike, and there are those who are the victims of criminal acts.
Longtime NFL quarterback Steve McNair was unfortunately in the latter category. He was killed in 2009 by his mistress when he was just 36, and he left behind a wife and children. He did not have a last will expressing his final wishes. All responsible adults should have an estate plan, but it becomes absolutely essential when you are a married person with children depending on you. You may feel that things automatically fall neatly into place, but this is simply not the case. While Steve McNair did in fact have significant financial resources, his assets were frozen by the probate court because he did not have a will, a trust, or any other estate planning documents in place. His assets were frozen in large part because of his estate tax exposure. He could have taken steps to mitigate this exposure while he was still alive through proper estate planning. The federal estate tax carries a 40% maximum rate so it can certainly play havoc with your financial legacy. Another individual who was victimized by this lack of planning was Steve McNair's mother, Lucille.
McNair was apparently quite grateful to his mother for all the things that she had done for him while he was growing up. During the prime of his career he was a superstar with the Tennessee Titans, and he was in a position to provide his mother with the home of her dreams. He built her a ranch in Mississippi that sat on 45 acres. Lucille looked upon this home as a gift that was given to her by her son. However, the fact is that Steve McNair kept the home in his name. His mother was not the legal owner of the home at the time of his passing. As a result, the home was looked upon as probate property. Steve McNair's widow was named as the personal representative or executor of the estate by the probate court. She demanded $3000 a month rent for the property, and Lucille could not pay so she had to move. It is unlikely that Steve McNair would have wanted to see this outcome. He could have prevented it if he would have taken the time to construct his estate with the assistance of a licensed estate planning attorney.
Don't be another estate planning failure and speak with an experienced Estate Planning Attorney at Anderson, Dorn & Rader, Ltd. Contact us online or call (775) 823-9455 to set up an appointment.
You should be aware of the process of probate in Nevada when you are making preparations for the distribution of assets to your loved ones after your passing. When you hear some of the details you may decide that you would like to take steps to avoid probate.
If you have a will, it is filed by the executor and is reviewed by the court to determine its validity. If there is no will, the probate court will follow the "will" found in the statutes of the state where you reside. These are call the laws of intestate succession. During the probate process final debts of the deceased must be reviewed, allowed or challenged and, after approval by the court, paid by the executor out of estate funds.
This can include the payment of taxes, so services of an accountant are often necessary. Certain assets may need appraisals, and this can require the engagement of an appraiser or appraisers.
Because probate is a legal process the executor is also going to need the assistance of a probate lawyer in many cases.
When you add up the fees that will be charged by all these professionals they can be considerable. Further, the executor who is administering the estate is entitled to payment for his or her time and trouble.
One reason to avoid probate is to avoid these costs. Another is to reduce the time spent in administration that increases the wait for distribution to the beneficiaries.
Some people decide they want to avoid probate and they do it by adding a co-owner to property and financial accounts. This is called joint tenancy with right of survivorship.
The idea is that the surviving joint tenant inherits the property in question after the death of the other co-owner, without the need for probate.
There are a number of risks you take if you were to go this route.
Let's say that you make your brother the co-owner of your property. Someone sues your brother. The property you have worked for all of your life is suddenly fair game for the litigant seeking redress.
Another risk you take is that the person you add to your bank account has total access to the funds. Clearly you are going to select someone that you trust, but their creditors also have total access.
These are a couple of things to think about, but there are many other unintended consequences that can result if you use joint tenancy as an estate planning solution.
The creation of a revocable living trust would be a better way to avoid probate. You as the creator of the trust are called the "trustor" or "settlor." While you're living you can act as the trustee and the beneficiary so you have sole control of the assets.
Because the trust is revocable you can dissolve it if you wish, or amend and change the terms at any time. After your passing the trustee you choose to succeed you when you create the trust becomes the trustee. He or she then administers the estate outside of the courtroom and distributes the assets to the beneficiary or beneficiaries in accordance with your expressed wishes.
The process of estate planning involves some very measured and informed decision-making. If you make certain assumptions as a layperson you may be making errors of commission and omission.
Because of the fact that there are websites on the Internet selling do-it-yourself generic, fill-in-the-blanks last wills, more and more people are getting the idea that they can go it alone. Unfortunately, this is increasing the numbers of people who are not properly prepared.
With a will, you need to consider the fact that your estate must be probated before the heirs receive their inheritances. The probate laws in the state of Nevada require rigid formalities that may cause delay and expense if they are not followed precisely.
When you work with a qualified estate planning attorney who is licensed in Nevada you can be certain that your will is properly constructed.
If you use a boilerplate document that you picked up on the Internet or at the book store you have no way of knowing if the will is truly up to par.
And then there is the simple fact that a last will may not be your best choice.
Last Will Alternatives
The probate process that we mentioned above is time-consuming, and, when all the costs, fees and expenses are considered, quite expensive.
There are effective ways to arrange for asset transfers to your heirs directly, outside of probate. One of them would be through the creation of a revocable living trust.
With these trusts you can retain control of the assets while you are alive and well. If you were to become incapacitated, your successor trustee would be empowered to handle your financial affairs, usually avoiding the need for a guardianship.
Upon your passing the trustee administers the estate outside the probate court and then distributes assets to the beneficiaries in accordance with your wishes.
Specialized Concerns
There is no one-size-fits-all estate plan because different families have different concerns. For instance, if you have estate tax exposure you must take steps to position your assets in a tax efficient manner to avoid a 40% hit.
If asset protection is a concern you would implement certain strategies that would not be important if you were not concerned about shielding assets from creditors and litigants.
Special needs planning is a factor for some people. You have to be careful about the way you set aside money for a person with a disability who is relying on government benefits like Medicaid and Supplemental Security Income.
People who are owners of small businesses are going to have estate planning concerns that differ from those who work for someone other than themselves.
These are just a few examples of the unique circumstances that require varied approaches.
Decision Makers
It is also important to include an incapacity component within your estate plan. The courts could, at considerable expense to your estate, appoint a guardian to manage your affairs if you don't take the appropriate action. This guardian may not be someone that you would have chosen.
You can select potential future decision-makers using an appropriate revocable living trust combined with a durable power of attorney.
All these solutions are best handled with a qualified estate planning law firm.
There are numerous federal government benefits that legally married same-sex couples have traditionally been unable to enjoy. Even though a number of states sanction same-sex marriages, the federal government has not recognized them.
This is because of provisions contained within the Defense of Marriage Act (DOMA).
One of the benefits that has not been extended to same-sex spouses is the unlimited marital estate tax deduction. If you are legally married in the eyes of the federal government you can transfer any amount of money to your spouse without incurring any estate tax liability.
Back in 2009 a New York woman named Thea Spyer passed away and left her spouse, Edith Windsor, a significant sum of money. The two women had married in 2007 in Canada after being together for decades.
The Internal Revenue Service imposed the estate tax.
Edith Windsor took legal action, challenging the constitutionality of the portion of DOMA that strictly defines marriage as a union between a man and a woman. She cited the equal protection clause in the Constitution.
The Supreme Court sided with Edith Windsor's contention by a 5 to 4 vote.
As a result the matter of whether or not gay marriages are legal will be left up to each individual state to decide. The federal government will indeed start to recognize these marriages, and benefits like the unlimited marital deduction will be available to legally married same-sex spouses.
If you have questions about how this ruling may impact your existing estate plan contact our firm to schedule a free consultation.
It is important to understand that estate planning documents do not exist in a vacuum. Estate planning is one of the most technical and dynamic areas of the law. Properly planning an estate requires consideration of federal and state tax issues, state property law, state probate law and state trust law. Estate planning documents must be carefully customized to meet each individual’s unique circumstances and objectives. If they are not, unintended, and often costly, consequences may result.
Suppose you use a generic template that you find online to create a last will and testament or revocable living trust. Are you sure that the documents that you wind up with will stand up to any challenges that may present themselves after your death? Are you sure the tax sensitive provisions of your documents have been properly considered for your particular circumstances? Could there be conflicting clauses that require your family to go to court to interpret the document after you have passed? Has the document been thoughtfully drafted under state law so that your beneficiaries’ inheritances are protected from a divorcing spouse or other potential creditors?
Another thing to consider is best explained by way of example. Let's say that you never played golf before. You look into the bag and you see a lot of clubs, but you really don't know what club you should use. You may not use the right clubs as you try to negotiate the course without any information. The same is true of estate planning. There are numerous different legal instruments that can be utilized. Just arbitrarily deciding which ones you are going to use in a DIY last will and testament or revocable living trust is simply reckless.
These are a few things to think about, but if you would like to learn more of the facts we urge you to download our free report on DIY estate planning. This special report goes into a good bit of detail about the dangers of do-it-yourself wills and living trusts.
We urge you to download your copy of the report. Access will be granted if you follow the simple instructions that you see after clicking this link: The Dangers of DIY Wills & Living Trusts.
A living will is an advance directive for health care, and, along with a health care power of attorney, should be part of any comprehensive estate plan. It is important to plan ahead for the possibility of incapacity before passing away, but many people fail to do so.
While it is not a pleasant subject, you should consider the period of time that will precede your death. During this interim there may be some medical decisions that have to be made and you may not be capable of making these decisions yourself.
This is why advance directives are important.
A living will is used to state your choices with regard to the use of artificial hydration and nutrition, ventilators, and other life-sustaining procedures when you are in a terminable condition.
Opinions vary widely about being kept alive indefinitely through the utilization of artificial means. You should state your own wishes in your living will. Your health care power of attorney will allow someone you have designated to act in your place to decide your level of care according to your express wishes.
When you do this you are doing what you can to ensure the outcome that you would prefer. You are also avoiding potential disagreements among family members who may have differing opinions about your wishes for the level of care you would prefer.
A reputable legal website recently conducted a survey that revealed some startling results. 61% of the adults who responded said that they didn't have a living will.
If you are among them you would do well to take action to put your advance health care directives in place as soon as possible. If you live in the Reno-Sparks area and you are unsure about how to proceed don't hesitate to contact our firm to request a free consultation.
Most people would agree that it is not easy to reach your financial goals and accumulate a significant store of wealth. For those fortunate enough to achieve this objective, the focus should shift to balancing wealth accumulation with various asset protection techniques.
Various reports have concluded that the number and size of lawsuits brought against wealthy individuals is on the rise. Unfortunately, most people fail to address this need until after a liability already exists. Unfortunately, most asset protection opportunities are no longer available at such time because of fraudulent conveyance laws.
When it comes to asset protection planning there are a number of different strategies that should be considered. The best techniques to utilize to accomplish this objective vary considerably on a case-by-case basis.
Many people use Nevada limited-liability companies for asset protection. Nevada has some of the best laws in the country designed to protect a member’s interest from attachment by his or her creditors. These entities can also provide significant tax advantages as interests in a limited-liability company can be transferred among the family members at a discount for gift tax purposes.
Other people use a Nevada asset protection trust to protect their assets. Nevada is one of a limited number of states that allow a person to create an asset protection trust for oneself. Nevada’s asset protection trust law became effective on October 1, 1999, yet many doctors, business owners, corporate executives and other high net worth individuals still have not taken advantage of this opportunity.
Assets transferred to a Nevada asset protection trust are generally protected from the transferor’s creditors two years after the transfer to the trust. Nevada law is superior to the laws of many other domestic asset protection jurisdictions in this regard since the required waiting period in most of the other jurisdictions is four years. The trust instrument must be irrevocable in order to provide the desired protection. However, the trust may be structured so that it can be modified by the trust creator to change the beneficiaries at the trust creator’s death. In this way a Nevada asset protection trust can be designed to be very flexible despite being irrevocable.
Some people will combine the Nevada asset protection trust with one or more Nevada limited- liability companies in order to provide two layers of protection. Used in combination these strategies can make it very undesirable for a creditor to pursue the assets contained within these structures.
To provide some sound information to people here in northern Nevada we have prepared a number of free special reports. These reports are available to you for download at any time, and one of the reports covers asset protection strategies.
If you are interested in protecting what you have earned from creditors, claimants, and former spouses you may want to access the information that is contained within this report. To access your copy click this link: Free Nevada Asset Protection Report.
If once you have read the report you have questions or would like to schedule a free consultation, we invite you to contact our firm. We can be reached by phone at (775) 823-9455.
The federal estate tax carries a 40% maximum rate, and the exclusion amount is $5.25 million in 2013. What this means in simple English is that only $5.25 million worth of assets can be passed on to your heirs before the estate tax is imposed. Married couples, with proper planning, can preserve the exclusion amount for both spouses for a combined exclusion of $10.5 million.
We also have an unlimited marital deduction that allows you to leave any amount to your spouse free of the estate tax, even if it exceeds the exclusion amount. That is, as long as you and your spouse are both United States citizens.
It is not entirely uncommon, however, for Americans to marry people who are citizens of other countries. At any given time we have a lot of military personnel stationed overseas, and sometimes they marry people that they meet in other countries.
Many civilians work abroad as well, and there are international dating sites that some people find to be appealing. And of course world travelers sometimes fall in love along the way.
Whatever path you may have taken to an international marriage you must concern yourself with the estate tax because the marital deduction is not extended to an American who is married to a non-citizen.
A partial solution could be the creation of a qualified domestic trust. With these trusts the beneficiary, your surviving spouse, can receive distributions from the trust for their needs according to an ascertainable standard established by the IRS.
What remains in the trust at the spouse's death would be subject to the estate tax. However, applying other strategies, it could be possible to avoid the estate tax, altogether.
To learn more about these trusts and other tax efficiency tools contact our firm to set up a free consultation.
People that have assets that exceed the exclusion amount ($5.25 million in 2013) most certainly need to discuss tax efficiency strategies with a licensed estate planning attorney who places an emphasis on wealth preservation.
However, there are those who the only reason someone would meet with an estate planning lawyer is to avoid taxes. They may reason that because their estate is less than the exclusion amount, there is no need for estate planning. In fact, there are myriad concerns that can be addressed with a properly constructed estate plan that have nothing to do with tax exposure.
One of these concerns could be long-term access to financial resources. You may be concerned about leaving lump sum inheritances to certain people on your inheritance list. After all, you won't be around to help if someone in the family was to burn through his or her inheritance too quickly.
A way to respond to this would be to convey assets into a spendthrift trust. You appoint a trustee, and this could be a family member, the trust department of a bank, or a trust company. This trustee will administer the funds according to your stated wishes and distribute assets to the beneficiary in a measured fashion. The beneficiary will not be able to control the principal, which also means their creditors would not have access, either.
This is only one possible scenario. There are many others, including planning for blended families and providing for a family member with special needs without jeopardizing disability benefits.
Arranging for the transfer of your financial assets to your loved ones is a profound act. It is something that is best undertaken with the benefit of professional guidance.
There are DIY legal document sites on the Internet that sell generic fill-in-the-blanks legal documents including last wills. Another type of do-it-yourself estate planning involves the use of joint ownership. It is possible to add a co-account holder to your brokerage and/or bank accounts. If you do this the co-owner would be the only owner of the assets in these accounts at the time of your passing. You could instruct this individual to distribute this remainder to other people of your choosing. Voilà, you have an estate plan in place (or so the story goes).
There are difficulties with this strategy of joint ownership. Clearly you are going to choose a joint owner that you think you can trust. Be that as it may, you have no guarantees regarding what this person does with the money after you pass away. He or she may not agree with your inheritance ideas. As a result individuals that you care about may ultimately be disinherited. There is also the matter of creditors. If your co-owner was to accrue debt his or her creditors could seek to attach or lien property that is held jointly. The same is true of anyone who may be suing the co-owner for one reason or another. In the case of divorce a departing spouse could target these funds as well. Then there is the issue of a loss of the full step up in basis of appreciated assets.
Joint ownership is not a truly viable alternative to a properly constructed estate plan. Discuss these matters with a qualified estate planning attorney to be sure that your wishes become a reality after you pass away.
The role of Life insurance is extremely important when considering your estate plan. We would like to highlight three commonly asked questions about the tax implications, and provide the answers to them here.
I have been made aware of the fact that I am the beneficiary of a life insurance policy, and I'm concerned about the tax implications. Will I be required to report the receipt of the proceeds when I file my income tax return?
This is a frequently asked question, and the answer is probably going to be a welcome one. In general proceeds received from a life insurance policy are not going to be looked at as taxable income by the Internal Revenue Service.
I own a number of insurance policies, and my estate is quite valuable. Will the value of the insurance policy proceeds count as part of my taxable estate for estate tax purposes?
Unfortunately the answer to this question is yes. At the present time the estate tax exclusion is $5.25 million, and the maximum rate is 40%. If the sum total of your assets is in excess of $5.25 million, including your life insurance policy proceeds, the estate tax may indeed be a factor.
Can anything be done to remove these policies from my taxable estate?
Yes, it would be possible to place the policies into an irrevocable life insurance trust. However, to satisfy IRS regulations you must live for at least three years after transferring the policies into the trust for the assets to be effectively removed from your estate. There are ways to avoid the three-year wait, but they must be addressed by a qualified estate planning lawyer.
Sometimes people would like to leave behind some type of asset to another individual without giving the recipient the right to decide who receives it after the recipient dies. Life estates are sometimes used when this circumstance exists.
Let's explain why and how life estates are typically used by way of example. Let's say that you get married as a younger adult and you have children. Years pass and you and your spouse ultimately decide to divorce.
Under the terms of the divorce settlement you emerge from the marriage in sole possession of your home.
After a while you meet someone special, and you decide that you would like to get remarried. At this point you have some estate planning concerns with regard to the future well-being of your children.
It would be possible to use a life estate to make sure that your children ultimately inherit your home. You create the life estate and you make your spouse the life tenant. After you pass away your spouse would be able to remain in the home as usual with certain ownership rights.
However, when you are drawing up the life estate you name what is called a remainderman. This is the person or people who would assume ownership of the home after the death of the life tenant.
Since your goal is to leave the house to your children you make them the remaindermen and they would own the property outright after the death of the life tenant, and this assumption of ownership would take place outside of probate.
The last will is the most commonly utilized asset transfer vehicle in estate planning. Many individuals assume that this is their only logical option because they are under the impression that trusts only serve the interests of the very wealthy.
In fact, this is not true at all. There are indeed trusts that are created to serve the interests of high net worth individuals. However, some trusts, such as revocable living trusts, don't provide the asset protection and estate tax efficiency that many wealthy people would be seeking.
Revocable living trusts enable asset transfers outside of the probate process. This is the primary reason why people create them.
Probate is a time-consuming process that comes along with some considerable expenses. With a living trust you may save your heirs a considerable amount of time as you avoid probate expenses.
Another one of the pitfalls of probate is the fact that you and your family's personal matters are no longer private. The probate court will be supervising the administration of the estate, and the things that go on are a matter of public record. Anyone could access the probate court records to probe into the business that was conducted during probate.
For various reasons many people would prefer that their final affairs remain private and confidential.
If you'd like to learn more about the value of revocable living trusts we invite you to download our free report on the subject. You can gain access by clicking this link: Free Nevada Living Trust Report.
Estate planning involves confronting some sensitive matters. For many people considering marriage, one such issue is the decision to ask your spouse-to-be to enter into a premarital agreement. Those who are entering into a first marriage without a lot of assets and no children may not need a premarital agreement. However, if you're getting remarried after you have enjoyed financial success throughout your life, the decision becomes more complex. This is amplified if you have children from a previous marriage or marriages.
If you are married and live in a community property state like Nevada or California, all earnings and efforts that produce something of value after the marriage are community property. Many people believe that so long as they don't commingle funds and assets remain titled in their sole name that they are protected. This is not the case. While the assets with which you enter a marriage are your sole and separate property, all post-marriage earnings, regardless of where they are deposited or invested, are community property. Our office has handled the administration of several estates where a surviving spouse, or the children of a deceased spouse, brought claims to establish assets titled in the name of the other spouse or his or her estate as community property. In many of these cases assets were diverted to a surviving spouse and/or a deceased spouse's children in contradiction to the intent of the other spouse's estate plan. In addition, many states laws, including Nevada's and California's, allow a spouse to make a number of different claims against the will or trust of a deceased spouse, potentially further frustrating the deceased spouse's estate plan.
To address these problems it is possible to enter into a premarital agreement. Every state has its own requirements for a premarital agreement to be enforceable. In Nevada, it is important that both parties provide a reasonable disclosure of their property and debt. In addition, it is important that both parties are represented by independent legal counsel. The agreement should also be executed as well before the wedding and, and the terms of the agreement should not be unconscionable (i.e., too one-sided). These are just a few of the factors the courts look at to determine the validity of a premarital agreement.
Aside from claims upon the death of a spouse, there is the matter of possible divorce. There is a post on the Psychology Today blog that looks at the high rate of divorce among people who get remarried after having been married previously. This piece states that 67% of second marriages do not last. Third marriages are even more precarious with a 73% divorce rate. When you understand the fact that a significant majority of second and third marriages fail, you may conclude that premarital agreements may not be in poor taste after all. Perhaps they are simply a pragmatic response to a stark reality.
