An important aspect of estate planning considers the needs of beneficiares and how best to meet those needs. If you have a beneficiary with a disability it is crtitical to understand the public benefits that they are receiving, or may be eligible to receive, and how a distribution from your estate may affect those benefits. An outright distribution from your estate to such a beneficiary could disqualify him or her for public benefits, including medical benefits, which could be devastating. Medicaid benefits can provide for very costly long-term medical care and they're only available to those who do not have the resources to pay for them out of pocket.
A third-party special needs trust will provide for the special needs of a disabled beneficiary while preserving eligibility for public benefits, including Medicaid and Supplemental Security Income. The language of a Special Needs Trust must be extremely precise so as not to make the assets in the trust directly available to the beneficiary. Generally, the trust resources can only be used for what are considered to be "supplemental needs" under Medicaid rules. A third-party special needs trust may be revocable and you can include a secondary beneficiary to receive distribution of the remaining assets after the primary beneficiary passes away.
By creating a Special Needs Trust for your disabled beneficiary you can ensure that he or she receives all the benefits of your estate without jeopardizing his or her eligibtility for public benefits. Special-needs planning is a very sensitive matter that requires the highly technical expertise of an estate planning attorney knowledgeable in the complex area of disability planning.

For a number of reasons more and more people have been engaging in do-it-yourself projects over the last several years, and in the big picture this would have to be viewed as a positive development. It can be fun and rewarding to roll up your sleeves and take on a DIY project that improves your home or simply enhances your quality of life in some way. Some people choose to build on their DIY successes and become rather serious hobbyists, and this is a great way to spend some time constructively and save some money while you're doing it.
The fact that you can find information on virtually any subject instantly by popping the term into a search engine has helped fuel the DIY craze, but is important to pick your spots. There are some things that make for good do-it-yourself projects, but there are others that are better left to the experts and estate planning would fit into the latter category.
When you are surfing the web looking for information on estate planning you will invariably see some websites selling estate planning software and do-it-yourself will kits. They claim that all you have to do is fill in the blanks and you'll be good to go, but the fact is that there's no such thing as a "one-size-fits-all" legal document that you can truly count on being legally binding in every jurisdiction.
Plus, each individual estate is different and the correct combination of legal instruments that is appropriate for you may be different from that required by the next person. These software programs and general templates can't evaluate the intricacies of your financial situation and the details of your wishes and make recommendations that are specifically designed for you and your family.
There's nothing wrong with doing your research and using the Internet wisely to gain a basic understanding of estate planning principles. But when it comes actually executing the documents that you will be relying on for the transfer of assets to your loved ones upon your death you would do well to engage the services of a licensed legal professional.

One of the provisions that was included in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reduced the max rate of the estate tax to 35%. It was scheduled to return from a one year repeal with a 55% top rate, so your first thought upon the news of the change would logically be one of relief.
But we need to put the matter into perspective. Since when is a 35% tax on after-tax earnings a cause for celebration? Compared to 55% this 35% seems almost tame, but in reality it is an extremely harsh bite and an instance of double taxation regardless of the rate.
In addition, the selective nature of the tax is patently unfair. The last time it was in effect in 2009 the exclusion was $3.5 million. Now it is $5 million, so it took a baby step in the right direction, but why should some people pay the tax while others don't? Why should a $10 million estate owe $1.75 million to the IRS while a $5 million estate owes nothing?
The polarizing pro-tax talking points involve making villains of Americans who would be subject to the tax, but it could be argued that anyone who buys into this is being misled. Let's say you created something like Facebook or invented a better mousetrap and you wound up with an estate worth a billion dollars. Under this "tax relief" act, $995 million of it would be taxed at 35% as you passed it along to your heirs after your death. So the federal government would take more than $348 million.
If you had the inspiration to create such a wealth building enterprise, would you feel as though the government deserved over a third of what was earned after you pass away? Some say they could afford to lose that much, if they could create that much wealth, but could the money lost to the government be more effectively used in further research and development that would create more wealth and provide jobs for more families?
Beyond that, consider the potential good that the $348 million could do as an inheritance. If it was in the hands of your children they would invest it to stimulate commerce and create jobs. If it goes to the government, it is swallowed up into a black hole of infinite debt and does little good for anyone.
The bottom line is that the matter of the estate tax has not been resolved, the debate goes on, and many Americans are still in favor of a total and permanent repeal of this draconian federal death levy.

There were some big changes to the estate tax parameters included as part of the new legislation signed into law by the president on December 17th that is being called the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.
The lead story from an estate planning perspective involved the rate of the tax and exclusion amount. Rather than the $1 million exclusion that was scheduled upon the expiration of the Bush tax cuts the exclusion is set at $5 million, and the rate of the tax is now 35% rather than the 55% that was on tap.
Is worthwhile to underscore the fact that this $5 million estate tax exclusion is for each individual. So if you are married you and your spouse have a total combined estate tax exclusion of $10 million to work with going forward in 2011 and 2012. If you think this through, a logical question will arise: If I passed away would my spouse get to use my $5 million exclusion as well as his or her own?
In estate planning circles this idea is defined as the issue of "portability." To many observers the estate tax in and of itself is unfair, so as you might expect most of the rules surrounding it tend to defy logic as well. Until the passage of this new tax relief legislation in December the answer to the above question was no, your surviving spouse could not use your estate tax exclusion if you were to pass away.
The reason why this is unfair is because the estate that is accumulated by a married couple is the product of the earnings and investments of each individual; this wealth represents the combined efforts of two people. When one of these two people passes away his or her contribution to the estate still exists and it is taxable, but his or her exclusion is not available to defray the tax liability.
As a result of the new law the estate tax exclusion is now portable, and your spouse can indeed use your $5 million exclusion if either of you were to pass away. Unfortunately, the new measure is only available for the next 22 months and dies with the sunset provision in 2013. Who knows what the law will look like at that time, but at least there is now a "toe in the door."

When you are a busy person you have to set your priorities, and when you do some things are going to wind up being neglected as other "more pressing" matters arise. Estate planning is something that people often procrastinate about because let's face it, dying is something that you have etched onto the very bottom of your to-do list in almost permanent ink.
Aside from the the fact that people simply don't want to consider the unpleasant notion of passing away, there are actually some practical reasons for the procrastination. For one, even if you have no difficulty accepting the fact that you have to plan for the distribution of your assets after your death you may simply feel as though you will get to it when you have more time - maybe after retirement.
But once you retire, you may be occupied doing the things that you always wanted to do while you were busy working, and once again estate planning goes to the back burner. This is understandable, but it is risky all the same. And the fact is that that the people you are damaging when you do not plan your estate intelligently in advance are the ones that you love the most.
If you do not create an estate plan and record your wishes, should you pass away the state will decide who gets your assets, and the matter can be held up in the probate court for a significant period of time. There will be court costs and a number of additional fees, and of course many of your family members may be left out in the cold by the state when you would have remembered them had you taken the time to record your wishes.
How you use your time is a personal choice, but not all choices are good ones. To put it bluntly, when you move through life without having an estate plan in place you are neglecting one of the core responsibilities of adulthood and turning a blind eye to the needs of your loved ones. When I am asked who my competitors are, I always respond, "My biggest competitor is procrastination." Now is the time to act.

People are routinely living into their late eighties and nineties these days. Life is a gift and we all welcome each new day but there are certain perils looming when for those who reach an advanced age. Dementia is one of those risks and it is in fact alarmingly widespread. Statistics tell us that approximately 50% of people eighty-five years of age and older are suffering from some form of dementia. Though the severity of these cases can vary widely, those who suffer the effects of dementia generally are unable to make their own medical and financial decisions in a sound manner.
For this reason it is a good idea to include durable powers of attorney in your estate plan. You can execute a durable medical power of attorney and appoint someone that you trust to make health care decisions in your behalf. In addition, you can appoint an attorney-in-fact to handle your financial matters via the execution of a durable financial power of attorney.
Though you may well enjoy mental clarity throughout your final years, it is a good idea to be prepared for any eventuality. If you do need others to make decisions in your behalf at some point in time it is comforting to know that they will be people that you have personally selected rather than a guardian appointed by the court.

Nobody is especially anxious to part with any of their hard earned money and hand it over to the tax man. But in spite of the complaining, most people recognize the fact that some taxation is necessary and are perfectly willing to pay their fair share. What people don't want to do is pay taxes multiple times on the same earnings, and this is one of many reasons there is so much support in some quarters for a permanent repeal of the estate tax.
Consider this overly simplified example that demonstrates the logically indefensible nature of the estate tax. Let's say that Elizabeth was an avid saver throughout her life. She socked away a sizable portion of every paycheck that she ever earned in a savings account.
Since she was so frugal it always bothered her to see that she was left holding only about $60 out of every $100 she earned after paying payroll and income taxes, but she was heartened by the fact that she was doing her part as a good citizen.
After saving so diligently for so long she was able to accumulate quite a large sum of money. Every year she paid income taxes on the interest she had earned and then when she died, the estate tax kicked in and her children received just 65% of the savings that she worked so hard to accumulate after paying taxes. And then when her children died and left that money to their children, it was once again taxed at 35% and less than half of the taxable portion of Elizabeth's original bequest was left.
A viable response to this potential scenario is the creation of a legacy trust. With these vehicles you name your grandchildren as the beneficiaries, skipping a generation as it were. Your children can still receive benefits from the trust, but they don't own the assets so they can't be targeted by claimants or former spouses. When your children die, your grandchildren inherit the contents of the trust, and the estate tax is levied only once though two generation enjoyed benefits from the trust. And now, in Nevada, as well as a handful of other states, the tax can be avoided for multiple generations with a properly established trust.

When you start to do some research into the topic of estate planning you will invariably see frequent mention of probate avoidance strategies. For people who deal with these matters professionally the term speaks for itself, but the layperson has no particular reason to know what probate is much less why you might want to avoid it.
Probate is the legal process that an estate must pass through before assets can be distributed according to the will of the deceased. If there is no will, the laws of your state determine how assets will be distributed. In the will you nominate an executor or personal representative. That person, or if there is no will, the person who desires to serve as personal representative, is required to present the court with a petition to be appointed. Once the court makes the appointment, this person is responsible for actually administering the estate, but he or she does so under the supervision of the probate or surrogate court.
The reasons that some people choose to implement strategies that enable probate avoidance are usually twofold. For one, there are a number of expenses that go along with probate. There are court costs, attorney fees, personal representative fees and bond fees. In addition, the final taxes of the deceased must be paid so an accountant is often necessary, and sometimes there are appraisers that must be paid as well as estate liquidators.
The other primary reason why probate avoidance strategies can be attractive is that probate can be time consuming. Depending on the complexity of the estate it can take anywhere from several months to several years for the estate to close. And of course, the heirs do not receive their inheritances until the probate process has been completed.
All of this having been said, probate serves a useful purpose. If anyone wants to contest the will or present an alternate will, they would do so in probate court. Consider a scenario when an octogenarian marries a twenty-something and then passes away three months later with a new will leaving everything to his new spouse. You can see how this person's children might be grateful for the opportunity to address the court.
Plus, even in uncontested cases, the supervision of the probate court ensures the transparency of transactions made on behalf of the estate by the executor. For some families, this additional protection is worth the extra expense and time of the probate process.

The process of estate planning has many aspects. One one level you may plan the transfer of your wealth to your loved ones free of creditor claims and tax liabilities. But on another level, estate planning also involves planning for a time when you are no longer around to provide guidance or support to your loved ones. For many it can be difficult to cope with the fact that you will no longer be able to fulfill your long held sense of responsibility to your loved ones.
An ethical will is an effective way to address this dilemma. The tradition actually dates back to early biblical times when ethical wills were passed down orally, but they are now composed in writing. The writing of ethical wills has been firmly embedded in the Judaic tradition for generations, but the practice is now widely accepted throughout the estate planning community.
In an ethical will you may share your moral and spiritual values. It is a method to convey the lessons you learned in life to your loved ones. An ethical will can be looked at as a heartfelt final letter to your family. You let your loved ones know how you feel about them, share personally acquired wisdom, and get things off your chest if you find that to be necessary. In short, it is a way to transmit to future generations what makes you and your family who they are. People usually find the composition of an ethical a defining time that is as beneficial to the author as the content is to the readers.

As estate and retirement planning attorneys, part of what we do is help our clients prepare for some of the challenges that go along with aging; things like possible incapacitation and addressing long term care costs. Preparing for these contingencies is necessary and prudent, but there is a lot of quality time left after your working years are behind you. Opportunities abound during your retirement years, and the fact is that seniors can use their free time to accomplish some truly amazing things.
One case in point involves a now 68-year-old fellow from Costa Mesa, California named Bill Burke. Bill is an adventurer, and as part of his goal to scale the world's highest peaks he tackled the grandest challenge of them all in 2007 when he attempted to climb Mount Everest in Nepal. He made it to within one hundred yards of the summit when he had to make a decision. He was concerned that he may not have the strength to make it back to the bottom safely if he pushed on those last grueling 300 feet, so he turned back.
Making it to within 100 yards of the top of Mount Everest as a 65-year-old is quite an accomplishment, but Bill was in it to win it. He returned the next year with the added experience under his belt, but he didn't make it as far. After suffering from pulmonary edema he had to be evacuated off the mountain by helicopter.
One might expect that this senior citizen would recognize the limitations of age at that point, but Bill Burke is not set up that way. He went back to Everest for the third consecutive year in 2009, and he reached the summit. It is believed that at 67 years of age he was the oldest American to do so.
The suggestion here is to consider all that is possible, aim high, tune out the naysayers and make the most out of your retirement.

When you are in a position to leave behind inheritances that can have life changing consequences for your loves ones you have a pleasant problem. You may want to make life easier on your family than they were for you, but at the same time you don't want to adversely impact one's motivation and work ethic.
By the time you have reached your twilight years it is likely that your children have become established in their own right. Leaving an inheritance out right to those who have already made it can be done with confidence. But you may have children with creditor problems or you may have younger children or family members that have not yet established themselves. Also, there could be someone in the family with a substance abuse problem, or an individual with a gambling problem. These factors present special planning considerations as you plan your estate.
One way that these types of concerns can be addressed is through the creation of an incentive trust. These instruments involve the naming of a beneficiary and the appointment of a trustee like other trusts, but there is one key difference. You as the grantor of the trust attach stipulations that must be met before distributions from the trust will be made.
If you have a younger heir these may be educational. You could allow for regular monthly distributions as long as the beneficiary remained a student in good standing. Perhaps you could offer an additional lump sum distribution upon attainment of an advanced degree. There are those who take it a step further and stipulate that the trust will match every dollar that the beneficiary earns on the job once he or she enters the workforce to encourage a strong work ethic.
You can include many variations of conditions that you see fit. Incentive trusts can go a long way toward alleviating concerns that you may have about your beneficiaries. It is important however to keep in mind that too many "strings attached" to an inheritance can result in resentment. Compelled behavior may not always be psychologically beneficial. Still incentive trusts are powerful tools and can be effective motivators in many circumstances.

For those Americans who have been able to build some wealth throughout their lifetimes, estate planning has a lot to do with addressing the reality of the estate tax. Many people would suggest that there should be no estate tax at all. Their most convincing argument is that any assets that are left over after you have passed away represent a remainder that you managed to hang on to after paying any number of taxes throughout your life. And the more successful you have been, the more you have been taxed.
Love it or loathe it, however, we will likely always have an estate tax. For the past 10 years, one problem with the tax is uncertainty. If the estate tax was somewhat uniform and adjusted according to market conditions it could be planned for intelligently, but who must pay it and how much must be paid has been all over the place in recent years. In 2008 the exclusion amount was $2 million; in 2009 it was $3.5 million; in 2010 the estate tax was repealed; and in 2011 the estate tax exclusion was scheduled to be just $1 million. In addition to the reduced exclusion, the rate of the tax was scheduled to rise to as much as 55% in 2011 unless there was some 11th hour legislation to alter the law.
Lo and behold, that legislation has in fact been passed and the estate tax burden will be significantly lessened going forward. The bill that is going to extend the Bush era tax cuts and provide all Americans with continued tax savings also contains an estate tax provision. In light of the enactment of this legislation the estate tax exclusion will now be $5 million, and the top rate of taxation has been reduced to 35%.
Once again, however, these changes are only temporary and are scheduled to sunset in two years. What happens on January 1, 2013? You guessed it - back to a $1 million exemption and 55% tax. Uncertainty is still the order of the day.
These changes will impact many estate plans, so you may want to pay your estate planning attorney a visit to discuss how this legislation affects your existing strategy.

A large part of retirement planning involves trying to predict the costs that you will be facing in the future. This is very challenging because there are many variables at play that are totally out of the control of the individual. Things like potential changes in the tax laws, how Medicare will look in ten or twenty years, whether or not health care reform will be repealed or altered, and just how high long-term care costs will rise are all unknowns. All you can do about the things about which you have no control is to make intelligent estimates and be as prepared as you can possibly be financially.
What we want to highlight here is a major financial factor that many people don't see in the proper light, and it is something that is totally within your own control. When you are considering what your future medical expenses and long-term care costs may be, it is important to recognize the fact that for the most your health is by your personal choices. Of course we have all heard about the guy who never smoked a day in his life who got lung cancer, but this is certainly the exception rather than the rule.
As you get older it is statistically more likely that you will have health problems, but to a large extent this is due to an accumulation of damaging lifestyle choices. Too many people depend on their doctors to make them well and kind of pretend that their health problems are a matter of bad luck or an inevitable part of aging when in fact they are making themselves sick.
If you are obese, largely sedentary, eat without any type of plan in mind, and smoke and/or drink to excess you are essentially driving your future medical expenses up by the day. If you do all the right things it is very likely that you are saving yourself a lot of money while you enjoy a higher quality of life. The choice is yours, but the message here is that you do have a great deal of personal control over your future health care costs and it all depends on how well you take care of yourself along the way.

We have all been involved in situations at various points in our lives when we decided to try to fix something on our own. There are times when you can indeed get out your basic tool kit and get the job done, but there are other instances when you learn an important lesson. As you are engaged in the task you see what is necessary, and then you look in your kit and recognize that you don't have the right tool. Knowing the right tools for each job and having access to them is one of the differences between a professional and a dabbler.
Estate planning is one of those jobs that requires the utilization of the proper tools for each circumstance. The one that we would like to take a look at today is the GRAT or grantor retained annuity trust. These vehicles are useful for gaining estate tax efficiency and gifting appreciating assets free of taxation.
The strategy that is employed to make this happen is called the "zeroed out" GRAT. You fund the trust with appreciable assets like securities, real property, or business interests, appoint a trustee, and name a beneficiary. You also decide on the duration of the trust term and the amount of the annuity payments that you would like to receive out of the trust for the term period.
When you fund the GRAT you remove the assets transferred to the trust from your estate for tax purposes, but the IRS does consider the donation to be a taxable gift. However, the taxable value of the gift is calculated using 120% of the federal midterm rate as it stands during the month the trust is created. So, when you set your annuity payments you want them to equal the total taxable value of the trust according to the IRS' valuation methodology. Because your retained interest is 100% of the taxable value, you owe no gift tax on the contribution into the trust. But, any appreciation that exceeds that valuation passes to your beneficiary at the end of the trust term tax-free.
If you have any questions regarding GRATs or other advanced planning techniques, please do not hesitate to contact our firm at any time.

When you are working through your estate planning checklist you may have a lot of ground to cover depending on the size of your estate and the specificity of your wishes. And as we always remind our clients, estate planning is not something that you take care of in a day, a week, or a month. It is an ongoing process that is going to require adjustments because there are changes all around us. Our own lives change, tax laws are subject to revision, interest rates are always fluctuating, and the economy as a whole is largely unpredictable.

We mentioned a checklist in the opening because with so much to consider it would be easy to forget something, and your fine furry friend just might fall through the cracks. Just as your stocks, bonds, cash, real property, and prized possessions are going to need a new home when you pass away, your pet is going to need one too.
Our pets become members of the family and they can really provide senior citizens with a tremendous boost as companions, protectors, and in many cases, master entertainers. The good news is that you may not have to look too far to find a new owner for your pet. You may well have a family member or friend who lets you know that he or she would be more than glad to take care of your dog or cat when you pass away.If you have no volunteers, you can ask around, and when you find a caretaker it is a good idea to make sure that your pet and its future guardian get to know one another so that the transition won't be as hard on the animal. To cover the expenses you can leave a bequest to the new owner-to-be if you so choose.

Another option is to create a pet trust to provide for your dog or cat. You fund the trust, name a trustee to administer it, and select a caretaker for the pet. It is also sometimes possible to develop a relationship with a non-profit animal placement facility and arrange for the people there to find your pet a home while you make a donation in return to show your appreciation. For some valuable information on pet trusts and pet planning in general visit our page on page pet planning.

An integral part of your estate plan is creating documents that express your end of life decisions concerning healthcare. You never know exactly how the latter stages of your life will be spent so it is important to make sure that you are prepared for whatever fate may throw your way.

As medical science makes continual advances patients' lives can be extended through artificial means for long periods of time. The implications of this can be controversial. Some have strong opinions on the subject, which could be drastically different than your own opinions. To make sure that your personal preferences are honored in cases when you are unable to express yourself you can include advance health care directives in your estate plan. Two that are widely utilized are the living will and the durable medical power of attorney. In the living will you state your specific preferences. In the medical power of attorney you authorize your agent to make health care decisions in your behalf in the event you are incapacitated.

There are provisions contained in the Healthcare Insurance Portability and Accountability Act that make it illegal for health care professionals to divulge any personal patient information without the patient's express consent. It is not recommended that you wait until you are admitted in a facility to sign an authorization because you may be unconscious or incapacitated. For this reason your estate plan should also contain an authorization that complies with the requirements of HIPAA. If you have had your directives created over the last several years they may already contain a universal HIPAA authorization. But if your estate plan was drafted prior to 2004 or if it does not include any of the documents discussed it would be a good idea to schedule an appointment with a competent estate planning attorney to review your directives.

You may find yourself with a lot on your plate and when you do, you have to set your priorities. There are some matters that must be revisited every year, or every five or ten years, and there are others that are in your lap every day. When you are managing your investments things are changing by the second, and you are well aware of the need to constantly react to these changing market conditions. If you run your own business, the changes come in rapid-fire fashion as well and priorities can shift radically overnight.

This having been established, estate planning and the long terms plans that you have made for your twilight years are also impacted by the constant ebb and flow of change. When you originally construct your estate plan you have no choice but to work with the various relevant factors as they existed at that time. But things are always in flux, and what made sense in 1990, 2000, or even 2009 may no longer be appropriate in 2011.

This can be due to things that are out of your control like fluctuations in the estate tax rate and exclusion amount, the yield on your retirement investments, property values, and long-term care costs. And the need to review and potentially revise your estate plan can also arise as a result of changing circumstances that are specific to you and your family.

Depending on your age, health, and personal proclivities you may realize that the estate plan that you worked up ten or twenty years ago, or even the one you did last year is indeed outdated, but feel as though you still have plenty of time left to adjust it when you really need to do so. However, it is your loved ones who are in essence being asked to take that risk. Perhaps, it is best to stop procrastinating and have your plan reviewed right away.

There is an old saying that goes something like "Give a man a fish, he eats for a day; teach him to fish, he eats for a lifetime." This is some profound food for thought when you are planning your estate. Passing along the assets that you have accumulated during your lifetime is certainly going to be helpful to your heirs, but if you could impart your knowledge to them you may be able to plant a seed that leads to a pattern of success can continue across the generations.

Any time a high profile, successful person writes his or her autobiography it is usually on the non-fiction best sellers list. Why do you suppose this is? Do you think that most people necessarily find the details of the personal lives of these businesspeople to be all that interesting? The primary reason why people want to read the autobiographies of people who were able to generate wealth is because they want to find out how it was done so that they can implement these strategies themselves.

The fact is that you don't have to be famous to write your autobiography and share the secrets of your success. You too can sit down and write your memoirs and pass them along to your family as part of your legacy, and this is a gift that may be more valuable than anything else you can provide for them. Aside from the pathway to financial success, you can also honestly and earnestly share stories from your youth and give your loved ones, and even future generations, some insight into the family tree.

As much as your family will benefit from having the opportunity to read your life story, it can be cathartic for you as well. And it's a satisfying feeling to look at your finished manuscript and recognize that you did indeed have that book in you after all.