Estate planning involves more than just your cash and personal property. A mistake that some clients make is overlooking family heirlooms which often have more sentimental value than monetary value. Part of determining how to distribute your assets after death includes distributing heirlooms that need to be kept in the family and passed on through the generations. Including your family heirlooms in your estate plan is important and our Reno estate planning attorneys can help.
Even if you have already discussed with your children how they feel about certain personal belongings, their feelings could very easily change in the future. This is especially true when memories fade. While you may not want to specifically bequeath every single personal item to someone in particular, the meaningful bequests should be written down in detail. Preserving your wishes on these matters will be important to you and your heirs later on. Your Reno estate planning attorney can assist you in drafting the proper plan.
The traditional definition of a family heirloom is a specific item that has been passed down through the generations or that you intend to pass down in that way. The first step should be to determine the monetary value of these items by getting the items appraised. Depending on the type of heirlooms you have, there are various dealers available to provide an appraisal. Antique dealers, fine art dealers, historical or rare book dealers; all have the expertise required to provide an accurate appraisal of your property. If you need help finding one, please contact our law firm for referrals.
A personal property memo is one way to avoid a dispute over these prize possessions. A personal property memo is basically a written statement referred to in a last will and testament, which can be used to leave personal property to beneficiaries. A personal property memo can be revised or modified without the need of executing your will again. If you want to explore this option, consult with our Reno estate planning attorney.
When it comes to family heirlooms, there may be some items that have greater value than others. This can make equitable distribution between heirs more challenging. However, there are few strategies that can be useful. Of course, the most direct way is to make specific bequests to your heirs and discuss your decisions with them while you are still living. If your children agree with your choices, then the likelihood of a dispute over these items after your death can be greatly reduced. But, what should be done if there are family heirlooms that are not specifically bequeathed, for whatever reason?
Without your specific instructions, your appointed executor or trustee will be required to determine how to divide the family heirlooms, at his or her own discretion. Another way to avoid family disputes is to allow the beneficiaries to divide the heirlooms amongst themselves by agreement. If there are any specific items about which they cannot agree, the executor or trustee can then make the decision. Your beneficiaries can also choose the heirlooms by drawing lots in equal shares, with any inequalities to be resolved through cash payments. As an alternative, the executor can hold a silent auction. If you have questions about these and other options, talk to a Reno estate planning attorney.
Some states allow you to include a “No-Contest Clause” in your will or trust. This provision effectively discourages family disputes over inheritances. If any of your heirs decide to contest the Will, then they are not entitled to receive any part of the inheritance.
Eventually when you die, your family should not be wasting time fighting over your personal property. Instead, it is a time for them to be supportive to one another and to celebrate your life. If you plan ahead with the assistance of an estate planning attorney, you can avoid many of the potential challenges that come with distributing an estate like family squabbles over your heirlooms.
If you have questions regarding family heirlooms or any other estate planning matters, please contact the experienced attorneys at Anderson, Dorn & Rader, Ltd. for a consultation. You can contact us either online or by calling us at (775) 823-9455. We are here to help!
Probate is the legal process of estate administration. We practice law in Nevada, and in our state, the probate court in the county that the decedent resided in would supervise the process.
In this blog post, we will provide some answers to frequently asked questions about probate.
In an estate planning context, probate exists to provide supervision when an estate is being administered. If the last will is used as a vehicle of asset transfer, an executor would be named to administer the estate. The will would be admitted to probate, and the administration process would get underway.
The court is involved to protect interested parties. To explain by way of example, let’s assume that a friend borrowed $100,000 from you. Unfortunately, he passes away in a car accident before he could pay you. His family does not know about this debt, and they don’t particularly like you.
If there was no supervision, they could just distribute the resources that are contained in your friend’s estate and leave you out in the cold. Probate exists to give creditors a chance to come forward seeking satisfaction. The executor is required to notify creditors about the passing of the decedent.
Another form of protection that is provided by probate is the ability to challenge the validity of a will. There are some instances where challenges are very legitimate, and there would be no window of opportunity if the probate process was not in place.
Intestacy is another situation that can enter the picture when someone passes away without a last will or any other estate planning document. Under these circumstances, the probate court would take control of the situation, and ultimately, the assets in the estate would be distributed under intestate laws of succession.
There are certain types of postmortem asset transfers that are not subject to the probate process. If you have life insurance, the company would deliver the proceeds to the beneficiary directly. The court would have no involvement. This is also true if you have named a beneficiary to assume ownership of the remainder that is left in your individual retirement account after your passing. When you open a bank account, you have the option of adding a beneficiary. This is called a transfer on death or payable on death account. Brokerage accounts also offer this option. When you have this type of account, the beneficiary cannot access the funds while you are alive.
For payable on death accounts, the beneficiary would obtain a death certificate. It would be presented to the bank or brokerage, and the beneficiary would assume ownership of the assets. The court would not be involved.
It is possible to add someone to the title or deed of your home as a co-owner. This is called joint tenancy, and it comes with right of survivorship. If you do this, the person that you add as a joint tenant would become the sole owner of the home after you die. This transfer would not be subject to the probate process.
A revocable living trust is another estate planning tool that is very useful, and it is a good alternative to a last will. You can consolidate assets with this type of trust, and you can instruct the trustee to distribute assets over an extended period of time if you choose to do so. It is also possible to name someone to manage the assets in the trust if you ever become incapacitated.
In addition to these benefits, assets in a living trust can be distributed to the beneficiaries outside of probate. The same thing is true with assets that are in some other type of trust.
There are some drawbacks that go along with the process. It will take close to a year to run its course, and the inheritors do not receive their inheritances during this interim. There are expenses that reduce the amount of the inheritances that will be received, and it is an open proceeding, so privacy is lost.
If you would like to build on your estate planning knowledge, download our worksheet. It is being offered free of charge right now, and you can click this link to gain access to your copy.
Our firm has always been very receptive to the needs of the LGBT community, and there was once a time when legal safeguards were absolutely necessary for committed gay couples. When same-sex marriages were not recognized by the federal government, people in these committed partnerships were not afforded the same inherent rights that married people enjoy.
To provide an example, if you pass away without any state estate planning documents at all, this would be looked upon as the condition of intestacy in a legal context. Under these circumstances, the probate court would enter the picture to supervise the administration of the estate.
Ultimately, the assets would be distributed using the intestate succession laws of the state of Ohio. In our state, if a married person dies intestate without any descendants, the surviving spouse would inherit the intestate property.
However, if there is no valid “piece of paper,” this protection would not exist. Surviving parents would be first in line to assume ownership of the intestate property, and if there were no parents still living, siblings would come next. The line of succession would continue from there with the closest blood relatives.
There is also the matter of health care decision making. If no provisions are made for these contingencies in advance, the next of kin would be contacted by medical professionals. Someone that is in a committed relationship that is not legally married would not have the ability to make decisions on behalf of their partner.
We should emphasize the fact that estate planning has always been quite relevant for people that are legally married. The point is that they do have some basic protections from an estate planning perspective that are built into the laws. Things weren’t the same for couples that could not get married, but all that has changed, and a women named Edith Windsor had a great deal to do with it.
Thea Spyer and the aforementioned Edith Windsor consummated a 30 year romantic relationship with their marriage in Toronto, Ontario in 2007. The following year, the state of New York recognized the marriage as well, but same-sex marriages were not federally recognized.
This was because of Section 3 of the Defense of Marriage Act (DOMA) that defined the institution as something that can only exist between a man and a woman.
There is a federal estate tax marital deduction in the United States that allows for unlimited tax-free transfers between spouses. When Spyer died in 2009, she left a sizable inheritance to her spouse. In spite of the fact that they were married, the IRS demanded over $360,000 to cover the estate tax liability.
Windsor was not prepared to take this lying down, so she filed a lawsuit, and the case ultimately made its way to the docket of the United States Supreme Court. On June 26, 2013, a majority of the Justices found that the section of the DOMA that limited the scope of marriages was unconstitutional.
Since then, same-sex marriages have been recognized by the federal government. As a result, the safeguards that have always been in place for married people are now extended to legally married members of the LBGT community.
As we have stated previously, in spite of the fact that things have changed for the better, estate planning is a must for all married people, regardless of sexual orientation. Plus, there are those that choose not to get married for one reason or another, and inheritance planning is essential for these individuals as well.
Our firm is here to help if you are currently unprepared from an estate planning perspective. We would be more than glad to sit down with you, gain an understanding of your situation, and explain your options. If you decide to go forward, we can craft a personalized estate plan that ideally suits your needs.
You can schedule a consultation right now if you give us a call at 775-823-9455. There is also a contact form on this website that you can use if you would prefer to send us a message.
A lot of people like to roll up their sleeves and embrace do-it-yourself projects, and there is certainly nothing wrong with taking the initiative to get things done on your own. It can save you money, and it can become an enjoyable hobby. This being stated, it is important to know where to draw the line when it comes to the DIY phenomenon.
There are websites on the Internet that sell do-it-yourself legal documents, including last wills and other estate planning devices. Since it doesn’t take any particular acquired skill to fill in the blanks on a worksheet, it can seem as though you can create your own will using tools that you can easily find online.
Is it wise to put an estate plan together on your own without any legal advice? This is a question that the people at the highly respected website and magazine Consumer Reports were interested in answering several years ago. To do just that, they launched an initiative that would give them some insight into the efficacy of DIY estate planning, or the lack thereof.
They assigned staff members to create last wills using downloads and worksheets that were being offered by three of the leading purveyors of do-it-yourself legal documents. In addition to wills, they actually used online tools to produce a few other legal documents that are not related to estate planning. Of course, we will stick to the last wills here.
Once the documents were in their hands, they had to find legal scholars that were qualified to examine them. Gerry Beyer from Texas Tech University School of Law was engaged, along with Norman Silber, a legal expert from Yale University. The third set of experienced eyes belonged to Hofstra University contract specialist Richard K. Neumann.
At the end of the process, they determined that there were unnecessary limitations in these templates. They found that it is unlikely that the DIY products that are on the market would meet your needs unless your intentions are extremely simple, like leaving everything to your spouse.
The fact that you really can’t trust boilerplate documents that you can get online is only one part of the equation when it comes to the shortcomings of do-it-yourself estate planning. As a layperson, how would you know what documents you should use?
And yes, we are using the plural, because a well-constructed estate plan will cover multiple bases.
When it comes to asset transfers, a last will is not your only option, and in fact, it is not the right choice for many people. A will must be admitted to probate, which is a costly and time-consuming process that strips your family of privacy.
If you were to use a revocable living trust instead, the drawbacks of probate would be avoided. There are additional benefits that can be taken advantage of as well, like the ability to instruct the trustee to distribute limited assets over an extended period of time to protect a spendthrift heir.
This is just one of numerous different types of trusts that can be utilized when you are planning your estate. The ideal choice will depend upon the circumstances, and this is why it is important to discuss your unique situation with a licensed estate planning attorney before you make any impetuous decisions.
Getting back to the concept of multiple different objectives to address, end-of-life issues should be confronted when you are planning your estate. A significant percentage of elders become unable to make sound decisions at some point in time due to Alzheimer’s disease or dementia that is triggered by some other underlying condition.
If you have a living trust, you could name a disability trustee to manage the assets if you become unable to do so yourself. You can also add a durable power of attorney for property to give someone the ability to make decisions on your behalf concerning property that is not in the trust.
A durable power of attorney for health care decision-making will also be part of a typical incapacity plan. This is an advance directive for health care, and a living will is another advance directive that should be included. With this type of will, you state your preferences regarding the utilization of artificial life-sustaining measures.
We have prepared a very useful worksheet that you can use to gain some additional insight into the estate planning process. It is being offered free of charge, and you can visit our worksheet download page to get your copy.
People that are serious about their estate planning efforts are interested in attending to every detail. This is wise, because the matter boils down to the final gifts that you will be able to give to the people that you love the most. The simpler and more efficient it is, the better for them, so you would naturally be concerned about the time frame after you are gone.
There is no cookie-cutter, one-size-fits-all estate plan, so the waiting game, as it were, will depend upon the way that you plan your estate. Let’s look at some of the details.
If you use a last will, you name an executor to handle all of the tasks that must be completed to get the assets into the hands of the inheritors. The executor is not allowed to act independently. After your passing, the executor would admit the will to probate, and the court would supervise the estate administration process.
When probate enters the picture, your heirs will not receive their inheritances shortly after your passing. The first order of business for the court would be to determine the validity of the will, and to this end, any party that wants to issue a challenge can take advantage of this window of opportunity.
Creditors must be notified, and they are given a certain amount of time to come forward seeking satisfaction. The executor would have to identify and inventory all the assets that comprise the estate, and appraisals and liquidations are typically going to be necessary.
All in all, the best case scenario would be 6 to 8 months to a year. More complex cases, like a contested estate situation, can take considerably longer. For example, it took well over a decade for the Anna Nicole Smith case to run its course.
It should be noted that this is not the only drawback of probate. Considerable expenses accumulate, and this money reduces the amount of the inheritances that will eventually be passed along to the heirs. There is a loss of privacy as well, because probate records can be accessed by the general public.
A lot of people that do not look into the subject closely assume that a last will is the right asset transfer vehicle to benefit your heirs. They are under the impression that trusts are only utilized by very wealthy people that have estate tax concerns or other complicated situations to address.
While it is true that there are trusts that are beneficial for high net worth individuals, these would be irrevocable trusts. There is another type of trust called a revocable living trust that can be ideal for “the rest of us" and actually benefit your heirs.
When you use a revocable living trust as the centerpiece of your estate plan, you maintain complete control of the assets, because you would act as the trustee and the beneficiary while you are alive and well. You name a successor trustee to take over when the time comes, and you name your heirs as the beneficiaries. After your passing, the trustee would be empowered to distribute assets to the beneficiaries in accordance with your wishes as stated in the trust declaration.
These distributions to beneficiaries would not be subject to the probate process and the undo time consumption that goes along with it. Many of the other drawbacks would be avoided as well, and a living trust would provide additional advantages. For one, you can include a spendthrift clause to protect assets that you are leaving to someone that does not manage money effectively.
Our doors are wide open if you would like to discuss your estate planning objectives with a licensed attorney. You can schedule a consultation right now if you give us a call at 775-823-9455. There is also a contact form on this website that you can use to send us a message.
In some instances, a client will come to us looking for help because of a bad situation that has developed due to a lack of informed planning. We do what we can under these circumstances, and there are damage control strategies that can sometimes be implemented.
These situations are a bit frustrating for us, because we know how easy it could have been to avoid the difficulties. With this in mind, we will look at a handful of common estate planning mistakes that are made in an effort to increase awareness.
If you have been successful enough to be able to leave behind a suitable legacy for your loved ones, a last will may not be the right choice for you as an asset transfer vehicle. The notion that trusts are only for the wealthy is a major misconception that is harbored by far too many individuals that are not well-informed.
As we will look at in another section, there are certain types of trust that can be useful for people that have advanced estate planning concerns, like death tax exposure. This being stated, a revocable living trust is a legal device that can be useful for a wide range of people that are not in the upper financial stratosphere.
A living trust would actually not be the right choice for high net worth individuals. You retain incidents of ownership when you establish this type of trust, because you can in fact revoke the trust, and you can act as the trustee and the beneficiary while you are alive and well.
This is a positive for many people that would not like to surrender control of their assets permanently. It would not be good for those that want to get assets out of their own name for certain reasons.
One of the major benefits that you gain through the creation of a revocable living trust is the avoidance of probate. This is a time-consuming, intrusive, and expensive legal process that would enter the picture if you use a last will to state your final wishes.
All the assets are consolidated in one place, and this is another positive. Plus, with a last will, there is an open forum for disgruntled parties to present estate challenges. It is much more difficult to contest the terms of a revocable living trust.
Unfortunately, countless families find out about the pitfalls of wills and the probate process when it is too late to do anything about it.
Another problem with a last will is the fact that, generally speaking, you would be facilitating lump-sum asset transfers to the people that are named in the document. A spendthrift inheritor could burn through their inheritance much too quickly and have nowhere to turn for assistance later on.
If you use a living trust instead of a will, you could include a spendthrift provision. This would allow the trustee to distribute assets to the beneficiary incrementally in accordance with your wishes. The resources would also be out of the reach of the beneficiary’s creditors.
As we have stated, you can act as the trustee of your living trust while you are alive. In the trust declaration, you name a successor trustee to handle the trust administration tasks after you pass away. Some people choose someone that they know personally that they trust in a broad sense, but this can be a major blunder.
It takes a significant amount of financial acumen to administer a living trust effectively, and there are legal guidelines that must be followed to the letter. The trust administration process can be time intensive, and the trustee could face personal liability issues if mistakes are made.
You can avoid these potential problems if you engage a professional that offers fiduciary services. We would be more than glad to act as the trustee of your living trust or any other type of trust that you create during the estate planning process.
When you have a professional at the helm, you can be certain that your trust will be administered properly.
We are here to help if you would like to consult with a licensed estate planning attorney. You can send us a message to request a consultation appointment, and we can be reached by phone at 775-823-9455.
When you are being introduced to the benefit program at your first “real job,” you typically get initial exposure to a couple of long-term planning concepts that you may have never considered before. Most packages come with a certain level of life insurance, and you can typically participate in a 401(k) plan to save for retirement.
In many instances, the employer will match your contributions up to a certain percentage. This is nothing more or less than free money that you can receive on a sustained basis for decades if you stay with the same job. You absolutely must take advantage of this golden opportunity.
Many people will plan their retirement with the knowledge that they are going to extract money from their retirement savings account to fund their golden years. This is what it’s all about in general, but if you never need the money, an IRA can be quite useful from an estate planning perspective.
Generally speaking, there are two different types of individual retirement accounts that are utilized: traditional accounts, and Roth IRAs. There are some similarities, and there is one major difference between the two of them. First, we will look at the aspects that are the same.
You cannot withdraw money from either type of individual retirement account without being penalized until you are 59 ½ years old. However, there are a handful of exceptions to the rule. If you are buying your first home, you can extract up to $10,000 to assist with the purchase.
Under the rules governing individual retirement accounts, you can pay school tuition with assets in the account without incurring any penalties. If you have non-reimbursed health care expenses that exceed 7.5% of your adjusted gross income, you are not penalized if you pay them with funds from the account.
Now we can get into the differences. The contributions that you make into a traditional account are not taxed, and this reduces your taxable income. This is a positive when you file your returns, but it all comes back around full circle when you take distributions.
The withdrawals are subject to regular income taxes, and you don’t have the luxury of keeping the money in the account untouched for the rest of your life with estate planning in mind. Because the IRS wants to start getting their cut at some point, you are forced to take mandatory minimum distributions when you are 70 ½ years old.
With a Roth IRA, you pay taxes on the income before you contribute into the account. You do have to wait until you are 59 ½ years old to avoid penalties, but the distributions are not taxed.
The Internal Revenue Service does not require you to take mandatory minimum distributions at the age of 70 ½ or any other age, because they don’t have to try to retroactively collect taxes.
Because of the nature of Roth IRAs, they can be used quite effectively in an estate planning context. The beneficiary (assuming it is not your spouse) would be required to take mandatory minimum distributions upon assumption of ownership of the account. This being stated, the word “minimum” is quite operative here.
The minimum that is required would depend upon the age of the beneficiary; a younger beneficiary could take less than someone that is older, because it is about life expectancy.
Assets in the account will grow consistently if the economy is functioning, so it is wise for the beneficiary to take only the minimum to maximize the tax-free growth for as long as possible. Whenever distributions are taken, they would not be subject to taxation.
We have provided a basic explanation of this concept here, and there is another resource that you can access through this website that takes it to another level. Our firm has established a library of special reports that cover many different estate planning topics. One of them is devoted to this topic, and you can click the following link to gain access: Estate Planning With IRAs.
When income is received from any source, you are naturally going to be concerned about taxation. This will enter the picture when it comes to estate planning, and there are some misconceptions out there. In this post, we will take a look at the subject and pass along three facts about taxation that you should understand when you enter the estate planning process.
If someone leaves you an inheritance through the terms of a last will, you would not be required to report it as taxable income. Insurance policy proceeds fit into this category as well. When it comes to trusts, if there are appreciable assets, the earnings would be subject to taxation. Distributions of the principal would not be taxed.
There is also a step up in basis that enters the picture if you inherit the assets that appreciated during the life of the person that passed away. This means that you not be responsible for capital gains taxes on the gains that took place during the life of the deceased individual. However, if you keep the assets, and they appreciate in the future, you would be responsible for capital gains.
Though you do not have to worry about income taxes for the most part, it is important to be aware of the existence of the federal estate tax. This levy carries a maximum rate of 40%, so it is a very big deal if you are exposed. That’s the bad news, but the good news is that most people do not have to pay the tax.
There is a federal estate tax credit or exclusion. This figure represents the amount that can be transferred before the estate tax would become applicable. At the time of this writing in 2019, the federal estate tax exclusion stands at $11.4 million. There are annual adjustments to account for inflation, so you may see a somewhat larger exclusion next year.
To sum it up, the portion of your estate that exceeds $11.4 million could potentially be subject to taxation. However, there is an unlimited marital deduction. If you are married in the eyes of the law, and your spouse is an American citizen, unlimited tax-free transfers are allowed.
Plus, on the subject spouses, the estate tax exclusion is portable. This means that a surviving spouse could use the exclusion that was allotted to his or her deceased spouse.
There are some states in the union have state-level estate taxes, and the exclusions in these states are typically lower than the federal estate tax exclusion. As a result, you could be exposed on the state level even if you are exempt from the federal estate tax. Our practice is in Nevada, and fortunately, we do not have a state-level estate tax to contend with here in the Silver State.
Though there is no estate tax in our state, it is possible that individual that a resident’s estate could be exposed to state-level estate taxes. If you own valuable property in a state that has its own estate tax, the death levy could be applicable on the transfer after your passing.
We are holding a series of Webinars over the coming weeks, and you can obtain a great deal of useful information if you attend the session that fits into your schedule. There Webinars are being offered on a complimentary basis, so you have everything to gain and nothing to lose. This being stated, we do ask that you register in advance so that we can reserve your seat.
There is a Webinars schedule page on this website that you can visit to get all the details. Once you find a date that is right for you, click on the button that you see and follow the simple instructions to register.
When you hear about mistakes that others make that yield negative consequences in the real world, it can really get your attention and impact your own actions. Yes, people can give you advice, but witnessing examples of what can actually happen can be a wake-up call.
This definitely enters the picture when it comes to estate planning. Attorneys will emphasize the importance, but at the end of the day, the majority of people go through life without any estate planning documents at all. Both younger folks and older individuals have failed to plan ahead appropriately.
You rarely hear about errors that are made by ordinary people, but some celebrity estate planning cases become widely publicized. Did you ever wonder why this information becomes available?
The probate court supervises the administration of an estate when a will is used, or when someone dies without a will. These records are available to the general public, and this is why you read about the details.
If you value your privacy you may want to arrange for asset transfers outside of probate through the utilization of a living trust if you value your privacy. Assets in a living trust can be distributed without probate involvement. This is a subject for another post, but it is related to the Aretha Franklin estate case that we will examine here.
The great soul singer Aretha Franklin died in August of 2018, and she was unmarried when she passed away. She is survived by four adult sons. Clearly, her estate is very valuable, and there will always be additional royalty revenues coming in that are generated by her work.
It has been reported that she had an attorney that had been working with her for over 40 years, but for whatever reason, at the time of her death, it was determined that she had no estate plan in place. This is a very unusual for someone with a considerable legacy to pass along.
When there is no will or any other documents directing asset transfers, the condition of intestacy is the result. Under the rules of the state of Michigan where she lived, the probate court is required to review the situation and appoint a personal representative to act as the administrator.
Final debts would be paid, and other issues could arise during the process. After everything is in order, the court will close the estate and order the distribution of the assets according to the intestate succession laws. In this situation, these laws would allow for everything to be transferred to the four sons.
That was the way that it stood until Franklin’s niece, Sabrina Owens, found some keys to a locked cabinet while she was cleaning the late artist’s home. In this cabinet, there were two holographic wills that were apparently written back in 2010. A holographic will is a will that was written out by hand.
Owens subsequently came upon a third handwritten will in a notebook from 2014 that was under a couch cushion. One of them required two of the four sons to complete business school before they could be given all of their inheritances. A judge will make the ultimate decision, and it would appear to be quite a jumbled legal mess.
As you can see, if Aretha had developed a relationship with a solid estate planning firm that has a background handling high net worth clients, all this confusion would have been avoided.
She could have explained her objectives and her concerns, and a custom crafted estate plan could have been created to ideally suit her needs. Instead, a judge that cannot get inside her head will have to do the best that he or she can to make an imperfect determination.
There is no reason to take any chances when a licensed estate planning attorney is just a phone call away. If you would like to schedule a consultation, our doors are open. We can be reached by phone at 775-823-9455, and if you would for her to reach out electronically, send us a message through our contact page.
For a lot of people, estate planning is simply a matter of slicing up a pie. You decide who will have a seat at the dessert table and how large the respective slices will be for each individual. In a very basic sense, there is truth to this, but there is much more to take into consideration if you want to plan your estate effectively.
First, you have to recognize the fact that there are different types of “pies” as it were. The way that assets are distributed if you use a last will is different than the process if you decide to go with a revocable living trust, or another type of trust. You should certainly explore all the options so that you can make fully informed decisions.
Arranging for the asset transfers is a large part of the equation, but you should also consider the estate administration process that will unfold before the assets can be distributed to the heirs. Gaining an understanding of the different possibilities could definitely influence your perspective.
With the above in mind, we will look at the potential for inheritance disputes that can enter the picture after you are gone if some people are not going to be happy with the decisions that you have made.
When a last will is used as an asset transfer vehicle, the executor would be the estate administrator. This person or entity is not permitted to act in a vacuum. Under the laws of the state of Nevada, the probate court must provide supervision during the administration process.
The estate will remain open while it is being probated for the better part of a year. During this interim, anyone that feels as though there must be some problem with the decedent’s will can come forward and contest the validity of the will.
It is not easy to convince the court that something is amiss, but in some instances, compelling evidence is presented. The thing that is relatively simple is the ability to issue the challenge in the first place. This is one of the drawbacks of probate, but there are others.
If you use a living trust instead of a last will, there is no readily available window of opportunity for people that may want to issue challenges. This is something to think about if you do have concerns about how someone will react to your distribution decisions.
A disgruntled party could file a lawsuit under these circumstances, but it would be complicated and expensive. Plus, you can provide a powerful disincentive when you create the trust declaration. A no contest clause can be included, and this would trigger the total disinheritance of any beneficiary that sues to challenge the trust terms.
Most people keep their monetary affairs close to the vest throughout their lives, and they don’t have a conference call with everyone in the family every time they make a financial decision. This is understandable, and you can apply the same principle to your estate planning efforts.
The final decision is yours, but the dynamic is quite a bit different than it is during your life when you are handling your personal affairs. This financial matter involves everyone that would expect to receive an inheritance, so your choices are impacting them quite directly.
If you know that someone is going to be very displeased, you may want to have a conversation with this person in advance. Clearly, this is not always going to be the way to go, but it is something to seriously consider. While it is true that you will not be around to experience the blowback, other family members will be in the crosshairs.
In a perfect world, you would probably like your surviving family members to maintain good relationships with one another and provide support when they can. When someone feels slighted and isolated from the rest, there can be ongoing resentment that never goes away.
We are holding a number of Webinars in the near future, and you can learn a great deal if you attend the session that fits into your schedule. There is no charge at all, and you can see the dates and obtain registration information if you visit our Reno estate planning Webinar page.
They say that the only two certainties of life are death and taxes, and everyone is well aware of the April 15th date that approaches all too rapidly. With few exceptions, most people are diligent about making preparations for tax day. Yet, for some unknown reason, the majority of the same folks totally ignore the other inevitability that we will all face at some point in time.
A while back, a website that is focused on legal matters did some research to get a feel for the estate planning preparedness of Americans. The results were quite surprising, but not in a good way. Overall, 57% of the adults in our country are going through life without any estate planning documents at all.
When you look at this figure, you would naturally assume that people that are younger are going to bolster the statistic, and they do to some extent. A rather eye-popping 92% of individuals under the age of 35 are rolling the dice without a will or a trust or any type of postmortem asset transfer plan.
You can say that people in this age group are rarely going to pass away, and generally speaking, this is true. However, accidents happen every day, and younger individuals are stricken by catastrophic illnesses. It is rather arrogant to assume that you will never be “one of the statistics.”
When you are talking about people in their mid-20s to mid-30s, a significant percentage of them are parents of dependent children. Anyone that is responsible for the well-being of minors should certainly cover all their bases with regard to any eventuality that can come down the pike.
The statistics continue to tell a sad tale when you look at the older age groups. Only 44% of baby boomers, which are people between 45 and 64, have estate plans in place. A mind-boggling 22% of senior citizens over the age of 65 have done nothing to prepare for the inevitable.
If you pass away without any estate planning documents, the condition of intestacy would exist. Interested parties would inform the probate court, and the court would supervise the intestate estate process. A personal representative would be named to serve as the administrator; this role is similar to that of an executor.
There are numerous different circumstances that can come into play that would impact the situation, and the exact details vary on a case-by-case basis. Depending on your true wishes, your family dynamic, and the nature of your assets, the outcome can be disastrous.
When final debts have been paid and the court has made all its determinations, the remaining assets would be distributed in accordance with the intestate succession laws of the state of Nevada.
In fairness, it is possible that this would wind up being consistent with what you would have done, but it is very unlikely. And even if it is, there would be a lot of totally unnecessary expenditures and time consumption during the probate process.
One of the questions that was asked in the survey that we have been looking at is somewhat humorous, but it is instructive at the same time. Right around one third of people said they would rather have a root canal, give up sex for a month, or do their taxes than engage in the estate planning process.
We can say with absolute certainty that the real experience is nothing to dread, and we go the extra mile to make our clients feel comfortable on every level. The reality is, estate planning is one of the core responsibilities of adulthood, and there is no point in running away from it.
Personalized attention is the key to a well-constructed estate plan, because there is no one-size-fits-all approach. This is exactly what you get when you make a connection with our firm. If you are ready to do just that, you can call us at 775-823-9455 to set up a consultation.
You can alternately send us a message through our contact page and we will get back in touch with you promptly.
There are many tools in the estate planning toolkit, so there are various strategies that can be implemented depending on the circumstances. This is one of the reasons why it is important to discuss your situation and your options with an estate planning attorney. If you make assumptions without enough information, you may make mistakes that could have been avoided.
This can apply to people that are partners in small businesses. You may assume that you have no choice but to leave your share in the business to your family in your last will, even if it is problematic for your partner and to some extent, your loved ones. Fortunately, there is a widely embraced solution.
The best way to explain the succession value of a buy-sell agreement is to present a very simple hypothetical example. Let’s say that you and a coworker decide to strike out on your own when you are both relatively young. You start your own business, and over time, it starts to thrive.
After a couple of decades, it generates a great deal of revenue, and you and your partner own the real property and equipment outright. It is worth a lot of money, and your share is by far your most valuable possession. Your partner can say the same thing.
What you do when you decide to put an estate plan in place? A buy-sell agreement can simplify what would appear to be a complicated situation. With the cross purchase plan, you and your partner take out insurance policies with payouts that are equal to the value of a share in the business.
When one partner passes away, per the agreement that both people entered into, the insurance proceeds are used to buy the lead partner’s share from his or her family. In this manner, the surviving partner can conduct business as usual, and the family has liquidity to spread around multiple heirs.
There is another type of agreement that centers around the same concept, but the business itself as an entity takes out the insurance policies. It should be noted that transfers to the surviving partner partners would not be subject to regular income taxes, and this is a great benefit.
While we are on the topic of small business ownership, estate planning, and insurance, we should take a brief look at another scenario that is not uncommon. We will use the same example to assist with the explanation with a few changes.
Instead of going into partnership with a coworker to start your own business, you go it alone. Everything goes the same way with regard to the success of the enterprise and its status as your most valuable possession.
You have two children, a son and a daughter. Your daughter worked in the business with you while she was in high school, but your son was not interested. After college, your son began his career in his chosen field, and your daughter asked if she could help you run the family business.
She works hard and does everything you could possibly ask for and more. Her efforts definitely make the business even more profitable, and you would like to leave it to her when you pass away. Though he never shared the same passion for this particular line of work, you love your son just as much as you love your daughter.
What do you do to balance the inheritances that you will leave to each of your children? The answer is to take out a life insurance policy that is equal to the value of the business and make your son the beneficiary. After your passing, your daughter would be the sole owner, and your son would receive an inheritance of equal value.
We are offering some fantastic learning opportunities over the coming weeks. The attorneys at our firm have scheduled a series of estate planning Webinars, and former attendees give us glowing feedback about the experiences they have had at our sessions.
Best of all, there is no admission charge, so this is an offer that is hard to refuse. If you agree, you can reserve your seat right now if you visit our Webinar schedule page and follow the simple instructions.
Many people that reside in our area have been very successful financially, and we have developed numerous relationships with high net worth families over the years. We continue to build on them, and it is gratifying to help successful people preserve their legacies for the benefit of their loved ones.
One of the most important things to take into consideration when you are engaged in the estate planning process is the potential for taxation. Though there are state-level estate taxes in some states, there is no such levy in Nevada. However, everyone in all 50 states must be concerned about the ravages of the federal estate tax.
This tax carries a 40% top rate, so we are talking about a significant level of asset erosion. It can be applied on transfers to anyone, even immediate family members, with one exception. If you are married to an American citizen, you can use the federal estate tax deduction to transfer any amount of property to your spouse in a tax-free manner.
At the time of this writing in 2019, the federal estate tax exclusion is $11.4 million. This is the amount that you can transfer to anyone other than your spouse before the estate tax would become applicable. Each year there are adjustments to account for inflation (for example, it was $11.18 million last year), so you will probably see a tick upward in 2020.
The first thought that would naturally cross your mind when you digest all the numbers above would be to give gifts to your loved ones while you are still living to avoid the estate tax.
Wealthy folks used to do this right after the estate tax was initially established in 1916. A gift tax was enacted eight years later to close this window, but it was repealed in 1926. The respite was short-lived, because the federal gift tax was reenacted in 1934, and it was unified with the estate tax in 1976.
As a result of this unification, the $11.4 million exclusion is a unified exclusion. It applies to significant gifts that you give while you are alive along with the estate that will be transferred after your death. This is the bad news, but the qualifier “significant” is the good news.
Relatively modest gifts that you give are not subject to taxation, because there is another gift tax exclusion that sits apart from the unified federal gift and estate tax exclusion. This is the annual per person exemption that allows you to give as much as $15,000 to any number of individuals within a calendar year free of transfer taxes.
This may not sound like much if you are exposed to the estate tax, but it can add up considerably when you see a bigger picture.
If you are married, you and your spouse would have a total of $30,000 to give to an unlimited number of recipients each year. Sustained gift giving over an extended period of time to people that would otherwise be inheriting the money can be an effective estate tax efficiency strategy.
Direct gift giving is a possibility, but this exclusion is often used to fund certain types of trusts, and it can be utilized to transfer assets among members of a family limited partnership.
There are two other types of gifts that can be given without incurring any transfer tax liability. One of them is the educational exemption. Under the tax code, you are allowed to pay school tuition for students without incurring any tax liability for your generosity.
This is a tuition only exemption that does not apply to books, fees, and living expenses. This being stated, you could use your annual $15,000 per person gift tax exclusion to provide extra support.
In addition to the educational exclusion, if you choose to pay medical bills for others, including health insurance premiums, there would be no transfer tax liability.
Our attorneys are holding a series of Webinars over the coming weeks, and we urge you to attend the session that fits into your schedule. There is no admission charge to pay, but we ask that you register in advance so we can reserve your seat. To check out the dates and obtain registration information, visit our Webinar schedule page.
The Kiddie Tax can apply to the unearned income of children. Read on to learn if this tax applies to you or your children. Also, learn ways to avoid the Kiddie Tax.
There are certain trusts that can be looked at as asset protection trusts for people that are exposed to the estate tax. These would be irrevocable trust, but there are other trusts that fit into this category that can be useful for other purposes. Since the names of these devices are wordy, they are often reduced to acronyms, and we will provide some decoding in this blog post.
One of these irrevocable trusts that is not exclusively tied to the objective of estate tax efficiency is the supplemental needs trust. Many people with disabilities rely on government benefits like Medicaid and Supplemental Security Income (SSI). The latter program is self-explanatory for the most part, and most people are aware of the fact that Medicaid is a source of health care insurance.
These are need-based benefits, so an applicant cannot gain eligibility with a significant store of assets in his or her name. As a result, if you want to provide for someone that is depending on Medicaid and/or SSI, you have to keep ongoing benefit eligibility in mind. There is a point of bifurcation at this point that we should cover so that you fully understand the lay of the land.
There is a type of trust called a supplemental needs trust that can be utilized under these circumstances. The trustee would be able to use assets in the trust to satisfy certain needs of the beneficiaries without violating any program rules. It would be possible for a parent, a grandparent, a trustee, or a court to establish this type of trust with the beneficiary’s own money.
As a result, it would be possible for you to give someone a direct gift that is used to establish a supplemental needs trust, which would be a first party special needs trust, That’s the good news, but the bad news is that the Medicaid program is required to seek reimbursement from the estates of people that used these benefits during their lives.
Because of this, if you go this route, Medicaid would absorb any remainder that is left in the trust after the passing of the grantor/beneficiary. To prevent this, you could establish the trust initially with your own resources. This would be a third-party trust, and assets that remain in the trust after the death of the beneficiary would be protected.
The estate tax exclusion stands $11.4 million right now, so if your estate is valued at more than this amount, you have to take steps to mitigate the damage. One type of trust that can be of assistance is the qualified personal residence trusts (QPRT).
Since we are covering a number of different devices here, we are providing short explanations. To execute this strategy, you place your home into the trust, and you name a beneficiary to assume ownership of it after the term expires. You are effectively removing your home from your estate for tax purposes, but the transfer would be exposed to the gift tax, which has the same rate.
When you establish the trust agreement, you set forth a term during which you will continue to live in the home as usual (which is called the retained income period). Let’s say that you choose to instruct the trust to allow you to stay in the home for 15 years.
No neutral buyer would pay fair market value for a piece of property that they could not possess for 15 years. The IRS takes this to into account when the taxable value of the gift is being calculated. Because of this, at the end of the process, the tax on the gift would be much less than the estate tax that would be applied on the immediate and direct transfer of the home after your passing.
The estate tax and the gift tax are applicable on transfers to anyone other than your spouse, as long as your spouse is an American citizen. If you are married to someone who is a citizen of another country, you could establish and fund a qualified domestic trust (QDT.)
Your spouse could receive earnings from the trust estate tax-free throughout his or her life if you do in fact die first. Portions of the principal could be distributed as well if you stipulate this in the trust declaration, but the estate tax would be applicable on these transfers.
After the passing of your surviving spouse, your final beneficiaries, presumably your children, would assume ownership of the trust. Transfer taxes would be a factor, but the resources would have earned income for a longer period of time while your surviving spouse was still alive.
We are here to help if you would like to learn more about advanced trusts or any other estate planning matter. You can send us a message to request a consultation appointment, and we can be reached by phone at 775-823-9455.
Trusts can be drafted to be quite flexible. This article examines several ways you can add flexibility to your trust. This added flexibility will increase the usefulness of your trust.
Where you die matters. While you’ll pay the same federal estate tax no matter where you die, 1/3 of the states have a separate estate or inheritance tax. The most populous state, California, is the latest state to consider adding a state estate tax. Read on to learn more.
When and Where You Die Matters
Trusts can be drafted to be quite flexible. This article examines how Trust Protectors can add flexibility to your trust. This added flexibility can increase the usefulness of your trust.
