Back in 1987, Congress recognized March as Women's History Month to celebrate the incredible contributions of women in American history across various fields. From building a strong and prosperous nation to being the backbone of their families, women have been unstoppable. Yet, in the midst of caring for others, women often neglect their own financial and estate planning. It's high time for women to prioritize themselves by crafting a solid plan that caters to their future needs, which may differ from those of their male counterparts and dependents.
Longer life expectancies. According to Social Security Administration data, in 2021, women had an average life expectancy of 79.5 years compared to 74.2 years for men. As a result, it is important for women to create an estate plan that accounts for additional years of living expenses during retirement, healthcare costs, and possibly long-term care costs. As women age, there may be a greater possibility that they could become incapacitated and need someone to act on their behalf to make financial and healthcare decisions. Documents such as financial and healthcare powers of attorney and living wills authorize a person they trust to make decisions or take action for them if they are not able to act for themselves. Some women may not only own their own assets but also inherit wealth from both their parents and a spouse who dies before them, and if so, they need a financial and estate plan to optimally preserve and transfer this wealth. Because women may outlive their spouses, they also may be responsible for administering their spouse’s estate or become the sole surviving trustee of a joint trust. These duties may be difficult for a woman who is experiencing health issues that often occur at an advanced age, and this possibility should be addressed in their estate planning. For example, a woman concerned that she will be unable to handle administering her trust at an advanced age can name a co-trustee or successor trustee to administer it if she is no longer able to do so.
Lower earnings. According to U.S. Census Bureau data, women continue to earn less than men, and the pay gap widens as they age. In addition, because some women have shorter employment histories due to time off to raise children or care for aging parents, they may have less saved for retirement. As a result, it is important for them to take steps to protect their money and property from lawsuits or creditors’ claims. For example, a woman could transfer her money and property to an irrevocable trust. Because she is no longer the legal owner of the property, a creditor cannot reach it to satisfy claims against her so long as the trust is properly drafted to include appropriate distribution standards and administrative and other provisions. The woman may be a discretionary beneficiary of the trust, and the trustee may distribute the funds she needs for living expenses. Additionally, because they have less money and property during their retirement, women need to have a solid plan in place to make sure that they are able to financially provide for their loved ones upon their death and that unnecessary costs and expenses are minimized to the extent possible.
Care for loved ones. Many women are caregivers for minor children, adult children with special needs, or aging parents. As a result, they are often concerned about who will care for their loved ones if they are no longer able to do so. If a spouse or sibling is not available to provide care, they need to make sure that another family member or trusted individual can be the caregiver (sometimes called a guardian of the person) for their loved one. The same individual—or someone else—can serve as the guardian of the loved one’s estate (sometimes called a conservator or guardian of the estate) to manage the inheritance for their benefit. In the case of a child with special needs, if no family member is able to take on the responsibility of their care, a group home or assisted living facility may be the best choice. A special needs trust may need to be established to ensure that funds are available for the child’s care but do not decrease the amount of government benefits they are eligible to receive.
You have accomplished a lot in your life! Celebrate your accomplishments and contributions during Women’s History Month by contacting us to set up an appointment to create an estate plan that provides for your own future needs and those of the people you love. You deserve the peace of mind that comes with knowing your future is secure.
As with all things, there is a time for filing taxes, and it's approaching quickly. As soon as January 31st, you'll begin receiving crucial tax documents. Whether you're submitting as an individual or managing an estate or trust, it's time to begin preparations for the April 18th, 2023 tax deadline.
Form 1040 is the one used by individuals and married couples to file their yearly income taxes. Keep an eye out for forms indicating your overall income for 2022 in your mail and online, as soon as this January. Here are some of the forms you may need to finish your Form 1040:
It's crucial to keep records of items that can lower your taxable income, such as IRA and health savings account contributions, as well as documents that support tax deductions or credits, such as charitable contributions and mortgage interest. These records will assist you in taking advantage of all the possible tax benefits for which you are eligible.
"As an executor of an estate or trustee of a trust, you are responsible for reporting any income over $600 earned by the estate or trust on Form 1041. Even if the income earned is less than $600, if a beneficiary is a nonresident alien, the form must still be filed. However, the beneficiaries, not the estate or trust, are responsible for paying the income tax on the income received. Examples of assets that may generate income for an estate or trust include mutual funds, rental property, savings accounts, stocks, or bonds."
The due date for filing a return for an estate or trust depends on whether it follows a calendar or fiscal year. For those that follow a calendar year, the return must be filed by April 18, 2023. However, for those that follow a fiscal year, the return must be filed by the 15th day of the fourth month after the end of the tax year. The executor or trustee can choose which framework to use. Many opt for a fiscal year, which starts on the date of the grantor’s death and finalizes on the last day of the month prior to the death anniversary. This schedule provides more time for tax planning. If a calendar year is chosen, the tax year starts on the date of death and ends on December 31st of the same year.
Both trustees and executors must report all income distributions given to beneficiaries on the Schedule K-1. You also have to provide a copy of the Schedule K-1 to each respective beneficiary who received an income distribution, and the beneficiaries must report the distribution amount when they file their personal income taxes. The deadlines to submit Schedule K-1 follow the same guidelines as Form 1041 and depend on whether it’s subject to a calendar or fiscal year framework. Since the beneficiaries must report this income on their personal tax returns, it is essential to send them the Schedule K-1 as soon as possible so they have ample time to report the income.
As the trustee or executor, it is important to gather and keep track of your own fees, fees paid to professionals like accountants or lawyers, any administrative expenses, and distributions given to beneficiaries. This way, you can report them on Form 1041, which supports the tax deductions claimed for the trust or estate.
It is important to take into account the impact of income taxes when it comes to estate planning and administration. This is true whether you are an individual creating / updating your own estate plan, or administering a trust or estate on behalf of a loved one. If you have any questions on how income taxes should factor into your planning or administration decisions, please contact the estate planning professionals at Anderson, Dorn & Rader.
One of the most crucial decisions within your life plan is determining who will manage the estate when you aren’t around anymore, or are no longer fit to do so. This individual is called the successor trustee.
A large amount of responsibility comes with being nominated as a successor trustee. Because of the complicated procedures, time they’ll need to dedicate, and risks that the trustee will assume, many people consider hiring a professional fiduciary (like an estate planner) to be their trustee.
When hiring a professional to carry out the duties of trustee, you’ll first need to ensure that a terms of engagement document is signed by both parties to lay out the relationship between parties. This should be a separate document from the one that identified their duties as your estate planner. You’ll also want to look for the following qualifications (and potential red flags) when deciding whether to carry out the relationship.
Even if a professional fiduciary is able to draft a thorough terms of engagement document, that doesn’t necessarily mean that they have all the resources to properly administer your trust. Don’t be afraid to ask questions. You need to make sure that the professional fiduciary takes the trustee role seriously, and that they are well-equipped to take on the job. The below functions should be well within the wheelhouse of a satisfactory candidate for a professional trustee:
Even seasoned estate planners who take on the responsibility of trustee can find it difficult to fit your estate management into their schedule. The professional that you hire should be responsive and accessible. This is especially the case when the trust requires critical decisions related to distributions, beneficiary health, maintenance, education, and support. After you are gone, your beneficiaries will also be in constant contact with your hired fiduciary, and even more so when distributions are made on a reoccurring basis.
For instance, one of your beneficiaries may request an early distribution to cover the expenses of a medical procedure. Or perhaps the period to take advantage of government benefits is drawing to a close on a distribution amount. Will your professional trustee pick up the phone or quickly respond to an email in these instances? Proper communication is paramount to deal with the intricacies of your family’s lives, and your hired trustee must be passionate about providing them service when needed.
No one can work forever, and even your hired trustee must retire at some point. Do they have a plan in place to transfer their responsibilities to another individual or firm? The terms in your trust should outline who will become your successor trustee, but in the case that your trust puts the power of designating the successor in the hands of the trustee, you’ll want to ask your professional fiduciary who will fill their place if something happens to them.
Some instances will require your professional trustee to communicate with the caregivers of your beneficiaries. This could be due to the beneficiaries being minors, or perhaps because they are disabled.
In the case that a beneficiary is not able to manage the assets they’re gifted in the trust, it’s vital that your professional trustee can communicate with caregivers to understand their needs and translate them into actionable estate management duties.
After applying these suggestions when considering a third party trustee, notify them of your decision to nominate them. Even though they won’t assume trustee duties until you are unfit or no longer around, being proactive benefits the planning of your affairs.
Your nominated professional trustee does not necessarily have to accept the position. But by finding out if they’d like to take on the responsibilities sooner than later, you’ll have ample time to make an educated decision if you need to select another individual.
If you have any questions about selecting a professional estate planner to be your trustee, the knowledgeable attorneys at Anderson, Dorn & Rader can help. We offer Trustee Services to help guide you in the process of choosing an adequate trustee to carry out your wishes and preserve your family’s wealth.
Schedule a FREE consultation to discover the benefits of choosing Anderson, Dorn & Rader as your professional corporate trustee. We look forward to serving your needs with a high level of professionalism, experience, and dignity to match the values of your family.
For the Reno snowbirds out there, the first snow of the season often signals that it’s time to move to a second residence with a warmer climate. While this move may seem innocent enough, there are a few legal matters to consider before locking up the house and heading south. One of the matters in question is which state you consider ‘home’.
Your state of domicile is where your permanent, principal residence is located. It affects family law matters, estate planning, and of course taxes. It is possible to be a resident of multiple states, but you can only call one your state of domicile. There are some subtle differences in state domiciliary laws, but usually, it’s were you live a large portion of the time and return to after going elsewhere.
For those who split time between multiple US states, it’s important to review your tax records with an advisor to ensure you are filing them correctly, and are maximizing use of tax laws. For instance, if you pay taxes in Nevada, you already know you’re among the seven states that do not have personal income tax.
Before heading south, take a look at your estate plan documents. It’s easy to glance over life events that may have happened recently, but they can affect how you want your wishes to be carried out. Keeping your estate plan current is a habit everyone should get into, as it ensures a seamless transition of your legacy. Ask yourself the following questions to help:
You may also need help with transactions and other financial matters while away from your domicile. That’s why it is important to determine whether your financial power of attorney is ‘springing’ or ‘immediate’. A springing financial / medical power of attorney means your agent can only step in and take action when you are no longer able to do so. On the other hand, an immediate financial / medical power of attorney means your agent can act on your behalf right away, even if you are able to take action yourself.
The knowledgeable team at Anderson, Dorn & Rader can help you determine which designation your estate specifies, and aid in performing changes if desired.
As you prepare for your upcoming travel, please do not hesitate to give Anderson, Dorn & Rader a call. We are here to answer any questions and to make sure you are properly protected no matter where you may roam. We are available to meet with you in person or via video conference. To schedule a meeting, call us at (775) 823-WILL (9455) or fill out our contact form. We look forward to meeting you!
Let’s examine a scenario all too common for divorced parents and their children. Imagine you just finalized the divorce from your spouse. Your retirement plan from work and your life insurance policy are the largest assets you own, and you have designated your two minor children to receive the money from these accounts when you pass. Your divorce was rather nasty, so of course you do not want your spouse to receive or manage the money in these accounts after you’re gone. They cannot be trusted to pass the money down to your young ones.
You pass away one year later. Both of your kids are still under 18, so in order to receive any assets from your retirement or insurance plan, an adult must be appointed to collect it on their behalf. Of course, the court’s obvious choice of who will take management of the assets is the living parent of your children: your ex-spouse. In Nevada, the caretaker of the money is called a guardian. The guardian has complete control over the funds since your children are not legally able to manage significant assets.
Most often, the loved ones of divorcees bare the brunt of their poor use of estate planning tools. While naming beneficiaries to receive your insurance or retirement assets has good intentions tied to it, these basic tools are often rendered useless by the complexities surrounding dissolved relationships. With the proper planning tools, there are means to fully protect your children’s inheritance against the unknowns.
A trust is a powerful tool that lets you direct and control your estate in ways no other life plan process can. Trusts enable you to manage property while you’re alive, then quickly transfer it upon death. The trust is comprised of a few main players. The person that sets up the trust (you) is often called either the Trustmaker, Grantor, or Settlor. Next is the Trustee, who manages the trust’s owned assets. Usually, you’re the Trustee during your life, then you appoint someone else as trustee to manage the assets when you’re no longer able. Finally, there are the Beneficiaries. These are the people you designate to receive the benefits of the trust (often your children and close loved ones).
A trust protects your children’s inheritance in a few ways:
Gaining full control of how you’d like your legacy to be utilized by you beneficiaries is crucial, especially after divorce. Even if you are wondering whether to update estate plans, Anderson, Dorn & Rader can help to map your trust assets with a comprehensive life plan. We are Reno’s trusted estate planning lawyers. Give us a call or set up an appointment to speak with our knowledgeable staff today.
Trust laws exist not only to safeguard the trust and trustor, but to also set guidelines for trustees to abide by. A trustee has a duty under the law to communicate with beneficiaries and inform them of progress or changes in the trust administration. Some duties of the trustee include giving beneficiaries a copy of trust documents, providing information and timelines of the trust administration, and preparing an annual accounting synopsis of the trust’s income and expenses.
It’s not uncommon for trustees to leave beneficiaries in the dark regarding new trust information. Some trustees are unaware of their duties under the law and believe they can do what they please with the trust. However, this is typically not the case, and if your trustee is unresponsive to your requests for information, you have every right to seek further action. Below are some things for you to consider when wondering how to handle an unresponsive trustee.
How do you try to contact your trustee? Is it through email? Do you try to call? Have you sent a letter through the mail? It could be very possible that your trustee simply isn’t checking in on all of their inboxes all the time. A trustee who simply doesn’t check their email regularly may respond quicker to a phone call or text message. If you’re not getting response through phone or texts, you could try sending them a formal letter.
You should also consider the relationship you and the trustee have with each other. If communication typically escalates into hostility between you two, it’s possible that the trustee may be avoiding you on purpose, even though this goes against their duties to keep all beneficiaries informed. If you cannot speak civilly in person or over the phone, it’s important that you keep all communication in writing. Just be sure to ask your questions very clearly and request information without accusations. If this still doesn’t work and your trustee remains unresponsive, it may be time to seek legal assistance.
An attorney may be involved in trust communication between beneficiaries and trustees in one of two ways. Most trustees have attorneys who represent them. If you’re having a hard time getting a hold of the trustee, try contacting their lawyer instead. If a trustee is oblivious to their duties under law, an attorney can ensure they are made aware of their responsibilities and encourage the trustee to comply. Some trustees may not want to directly communicate with beneficiaries of the trust, in which case their attorney may be the direct point of contact. To get information via a trustee’s attorney, be sure to follow up your initial call or text with the requests you wish to receive and any attempts you have made to contact the trustee.
If you feel a lack of proper representation in a situation like this, you may also seek out your own attorney. They’ll be able to clearly identify your rights as a beneficiary, and will give you the backup you need to enforce them. It’s always a good idea to have an objective intermediary that can assist in getting you the information you are rightfully entitled to.
If you and your attorney are still being met with no response, then your last option is to file a petition with your local court. Before you do this though, you should confirm that your attorney is familiar with trust laws and administration. This can make or break your petition’s success. If the trustee fails to respond to the petition, the court can then remove the trustee from the trust. This might also make the trustee liable for any losses or damages the beneficiaries experienced as a result of their lack of communication and ability to perform their duties. A court petition gives additional resources like subpoenas, depositions, and requests for documents to help you get the information you’re seeking. This should be used as the last method for handling an unresponsive trustee, as it can be costly and emotionally messy.
Trustees can conjure various reasons for being unresponsive, but they are legally obligated to communicate with and provide beneficiaries with certain information regarding the trust. Before you go filing a petition right away, try another method of contacting the trustee. If a phone call isn’t working, try an email or maybe send a letter instead. If this still doesn’t garner any results, involve an attorney. They will help get the ball rolling and will likely encourage the trustee to come forward with their information. Only as a last result should a petition be filed with your local court.
If you have any questions regarding how to contact an unresponsive trustee, be sure to reach out to the reliable and experienced trust attorneys at Anderson, Dorn & Rader. We’re happy to help you get the information from the trust administration that you are entitled to, and are dedicated to providing the highest quality estate planning resources available.
According to recent, prominent studies, nearly two thirds of American adults do not have a formal estate plan set up.
For those in the minority who have prepared a living trust, will, or other estate documents, you’re one step ahead. However, just because you’ve established these initial steps doesn’t necessarily mean your estate plan is settled. A thorough estate plan requires continual updating as circumstances change. Even if you have been good about making updates, there are crucial components you may have overlooked. Designating beneficiaries and decision makers for retirement accounts or life insurance policies are a prime example.
Your designated beneficiaries and decision makers are living people, so it’s important to consider what may also happen to them. Even the most well thought out plans can go awry, but proper consideration of all potential scenarios can play a large role in ensuring your wishes stay intact after you’re gone.
Short answer: Yes. A proper estate plan lines up multiple decision makers to carry out your wishes.
You should put careful thought into determining which individuals to appoint as decision makers. They’ll need to be trusted, as important decisions regarding your affairs will come their way. It’s also possible that at some point, they will no longer have the capacity or willingness to carry out the decisions asked of them. This is where backup individuals are important. We recommend having at least two backups for each of the above positions.
People, and your perception of them, can change over time. Some of these changes will impact their capacity to fulfill your last wishes. For instance, the person you initially designate as trustee might turn out to lack knowledge of finances. This raises a red flag, because they’ll be the one handling your money after you’re gone. And if your designated guardian turns out to be not so great with children, you’d want to reconsider who you appoint to take care of your kids.
There doesn’t need to be any suspicious behavior to influence a decision maker change. Often times, something as predictable as age plays a factor. Somebody who you designated as a guardian when they were in their 40’s may not be as fit for the position in their 60’s. On the same token, someone too young to appoint as a guardian now may be ideal in ten or so years.
A backup decision-maker is also necessary to replace one that dies, becomes disabled, or expresses that they no longer wish to take on the responsibility of a designated position.
The main thing you should takeaway is to continually check in on your choices for designated decision makers and name backups when necessary. Alternatives act as a fail-safe to ensure that people you love and trust – not the courts – end up making decisions on your behalf after you’re gone.
Your furry, feathered, and even scaled friends are part of your family. Often, they require more day-to-day attention and care than children. So who will take care of them when you’re no longer around?
Pets are certainly not overlooked in your daily life. Some sleep on the bed, eat like royalty, and get groomed handsomely. But it’s possible that your pets weren’t given much thought in the midst of planning your estate with an attorney. After all, there’s a lot on your mind during the process.
Believe it or not, you can name a legal guardian for your pets after you’re gone. Similar to other designated positions, it’s helpful to have backups lined up if your first guardian choice doesn’t work out. Additionally, you can include information on how they can find a suitable home or shelter to be surrendered to in the case that no one can care for your pet. Aside from addressing who the caretaker will be, it’s beneficial to write out your wishes for how your pet should be cared for. This way, the designated guardian will know all of the animal’s quirks, medications, allergies, and their favorite spot to be rubbed.
A named beneficiary is the individual within your estate plan who will inherit your monetary and property assets when you die. When you pass and your estate is administered, your assets are distributed or managed by your designated beneficiaries. Some instances require a contingent (backup) beneficiary.
If you do not have a contingent beneficiary in these scenarios, your assets may be dealt with according to state law. This often involves enacting the probate process. This lengthy process can delay asset distribution, lead to increased settling costs, and cause family infighting. To avoid these unfavorable outcomes, it’s best to designate one or more contingent beneficiaries for the benefit of everyone.
It’s not fun to think about, but you should be prepared for the unthinkable situation where all the loved ones you designate as beneficiaries pass away before you.
Yes, it’s highly unlikely, but it’s happened before. In this case, having contingent beneficiaries will not suffice because nobody will legally be able to accept the assets in your estate. Depending on your state of residence, if you have no surviving beneficiaries, the government could obtain all your money and property by default.
Even though it’s uncommon, this scenario could afflict those with few living relatives. By adding a family disaster plan or remote contingent beneficiary to your estate documentation, you are able to designate a charity or organization that will receive your assets.
Unexpected life events can often prompt people to take action on their estate plan. At the very least, one should have a basic will, but many people still put off accounting for their assets once they’re gone. Procrastination, a perceived lack of money and property, and concern for the cost and energy required to implement an estate plan can turn some away from the process.
The estate planning process is not as costly or intensive as you may think, especially when hiring a knowledgeable estate sale lawyer. And considering the cost of NOT having an estate plan, it would be selfish to leave your surviving family with the burden. Not to mention, your hard-earned assets could end up in the government’s hands if not prepared adequately. For those who have already taken steps to secure their estate plan, this is a great start. With effective back-ups to weather the unexpected, your life plan will be able to determine who will make decisions, take care of your pets, and inherit your assets after you have deceased.
No matter where you are in the estate planning process, we encourage you to reach out to our real estate lawyers to ensure that everything you worked for in your life goes to the people you love and trust. Contact Anderson, Dorn, and Rader to begin your journey to peace of mind for you and your family’s future.
Generational wealth is often the means by which families retain economic status and live comfortably over time. Family members before you worked throughout their lives to make a living, care for their assets, and pass some of that down to the next generation: you. In the event that you are expecting an inheritance, do you have the proper measures in place to confidently acquire and manage it?
Estate planning plays an integral roll in maximizing an expected inheritance by laying out how it will be used by your family in the future. Expert research analyses predict that the largest transfer of wealth in history will occur over the next several decades. However, with an uncertain economic climate and a trend towards spending over saving, heirs of inheritances often spend, lose, or donate large portions of what they receive. Planning for inherited wealth can help you anticipate and prepare for these instances, while sill protecting the legacy left to you. With an expertly-crafted inheritance plan, you are helping to ensure financial security for you and your family.
Sometimes, our emotions guide our financial decisions, rather than logic. The feelings surrounding the transfer of an inheritance are often unsettling – grief, guilt, anger, confusion. It’s difficult to consider the facts and hard numbers associated with the passing of a loved one. Not to mention, there are lengthy procedures one has to go through to legally confirm the transfer of wealth. It’s important to stay level-headed during the decisions that could affect you and your family’s financial well-being.
An inheritance can be an unexpected stroke of good fortune in a time of loss. Since our brains often classify them as “found” money rather than “earned” money, inheritances don’t tend to be utilized as conservatively as the money we work for. That’s why most inheritances are drained within just five years. A failure to realize the implications of careless spending can get us accustomed to living a lifestyle above our means, only to have it disappear as quickly as it came.
A sudden acquisition of assets and cash can greatly affect you and your family’s life. When handled correctly, you’ll respect the legacy of your loved ones that came before you. When caught unprepared though, you could be burdened by tax payments, careless spending repercussions, and even creditor issues.
Before any pen & paper planning begins, it’s best to have a conversation with your loved ones while they are still living and mentally fit. It can be awkward to talk about what happens to assets after one passes, but go in with the frame of mind that each party will be helping each other. The benefactor will be giving you vital information and consent, and you will be giving them peace of mind that their legacy will live on. By discussing their hopes of how the inheritance will be used after they pass, you’ll get a better understanding which you can use in the planning process.
Using the conversations with loved ones as your guide, it’s crucial to then meet with a financial planner and an estate planning attorney to discuss the amount and types of assets you anticipate inheriting. There are nuances to the processes in which you’ll handle various types of assets. For example, inherited real estate is handled much differently than inherited stocks and bonds. An estate planning attorney can also help you understand the distribution schedule to receive the assets. It could be all at once, in installments, or custom-configured based on a will. Not to mention, a financial planner can help you navigate the taxes associated with your inheritance.
Life happens, and a legacy left to you by a loved one can alter the vision of your financial picture. Anderson, Dorn, & Rader are your trusted team of estate planning lawyers and financial planners in Reno.
If your family is expecting an inheritance, wants to update estate plans, or has questions about the planning process, give our office a call so we can help you maximize your windfall and honor the loved ones that worked hard to pass on their good fortune to you.
Many Northern Nevadans know the dangers that come along with this time of year. A 2019 statistic showed that 17% of all accidents happen during winter conditions, highlighting an increased chance for individuals to experience an accident due to extreme weather changes. Ultimately, no matter how long you’ve lived in the region, less sunlight, alongside rain, snow, and black ice creates challenges for anyone driving on the road. While no one ever thinks they will fall victim to an accident, knowing what to do after a fender bender is crucial to ensuring a headache-free experience.
Following these guidelines can help you document the incident calmly and efficiently.
While many people believe there is no reason to immediately report minor accidents, following these steps avoids unnecessary complications and significant penalties down the road.
If an accident occurs making you unable to speak or communicate decisions clearly, you will need to have someone talk to medical professionals on your behalf. This should be a previously planned and trusted individual who would be deemed your medical power of attorney. This person will arrange treatment with doctors until you regain consciousness, so it's crucial you've assigned this power to someone. Your medical power of attorney will expedite medical treatment in the case of an emergency. Furthermore, your medical power of attorney should know where to obtain a copy of this documentation to help expedite treatment.
Opting for minimum coverage can be detrimental to your savings and property in the event of a serious lawsuit. You and your car must be fully covered to prevent this from happening. Plus, you should speak to your insurance broker to find out if umbrella insurance makes sense for you. Umbrella insurance is a low-cost way to gain extra liability coverage and protect yourself from damages that may exceed the limits of your car insurance. Umbrella insurance ensures you have access to a bigger pool of money in the event of a car crash lawsuit against you, protecting your savings and future prosperity.
After a car accident with significant property damages and medical injuries, it may feel necessary to protect your assets from excessive lawsuit demands. You may attempt to do this by transferring funds to friends and family, but be careful because this is against the law in some states. These transfers used to protect assets won’t be ignored by the courts. If considered fraudulent, court judges have the full right and power to reverse transfers. This means that these assets can be obtained by the party in the event of a successful lawsuit against you even after being gifted to a friend or family member.
Revocable trusts are used to protect your assets and trust from creditors and lawsuits after your death. Unfortunately, while some people believe that these trusts protect their assets during their life, this is a misconception and not their design. These trusts fail to completely protect your assets because you have complete control of all assets placed in a revocable trust. Your ability to control these trusts means a judge can order you to revoke the trust to pay creditors and lawsuit judgments.
However, with the guidance of an experienced asset protection and estate planning attorney, you can use properly designed strategies to enhance protection for your assets and property. That means taking the time to sit down with an experienced attorney well before an accident occurs offers you the best chance to maximize asset protection for your estates.
SPEAK WITH AN ESTATE PLANNING ATTORNEY
Contact us today to see how AD&R can provide you with the finest legacy and wealth planning advice Northern Nevada has to offer. We help get you the proper insurance and design estate planning to help you overcome unexpected lawsuits after an accident. Give us a call today so that we can help prepare you for the perils winter might bring.
To date, twenty-four states have enacted or introduced model legislation referred to as the Uniform Voidable Transactions Act (Formerly Uniform Fraudulent Transfer Act). The full text is available on the website of the Uniform Law Commission at https://www.uniformlaws.org/committees/community-home?CommunityKey=64ee1ccc-a3ae-4a5e-a18f-a5ba8206bf49.
In the attempt to progress towards a modern US tax system, the Biden administration has proposed a number of changes to the current tax code. According to a publication released by the U.S. Treasury early this year, they hope to push these changes through Congress which is necessary to gain approval for the amendments. It’s true that many Americans are divided on the best methods for stimulating the US economy, however, one fact remains undoubtable - careful estate and tax planning is crucial for the wealth and financial security of American families.
The Greenbook, a publication that provides information regarding the Administration’s revenue proposals, details the proposed changes which will ultimately impact estate planning in numerous ways. Many of the effective estate planning strategies that have been diligently defined by professionals in the industry for decades may be discarded. However, this could also enhance certain processes in estate planning by implementing other key strategies.
Notably, the reduction of estate and gift tax exemption amounts is absent from the list of proposals. While it’s possible that this could change in the future, we know that for now, these tax exemptions remain extremely high. It’s important to understand the law as it is written today so that you can make appropriate decisions with your assets and prepare for other coming changes.
As it stands today, the estate tax laws that were passed under the Trump administration will expire and reset to the prior laws starting in 2026. If there is no action made by Congress to change this, the reset will restore the estate and gift tax exemption amount to $5 million, as it was in 2016. However, the rate of inflation must also be included in this amount which brings the total to roughly $6.6 million by 2026.
With this information in mind, it’s crucial that you do all you can now to determine the expected return on your investments for the future. To do this, you should consider the average rates of return on your current investments, compounded annually. Many people have found that a healthy return of 7% annually could double one’s net worth in just 10 to 12 years. However, if estate tax exemption amounts are reduced by roughly 50% and continue to increase with the inflation rate, you risk having to pay significantly high estate tax rates.
It can be difficult to prepare for the uncertainties that may affect your tax and estate planning strategies. Without knowing what the future holds, how do you determine the best way to protect your assets? To make a more accurate decision, some of the other Greenbook proposals should also be considered, such as:
These changes haven’t been approved yet by Congress, but their consideration could help sway your strategic plans. The following strategies are still effective tools under current tax law, and implementing them now could provide significant tax savings.
A grantor retained annuity trust (GRAT) is an estate planning strategy that allows the grantor to contribute appreciating assets to chosen beneficiaries using little or none of your gift tax exemption. To do this, you would transfer some of your property or accounts to the GRAT in which you will still retain the right to receive an annuity. Following a specified period of time, the beneficiaries will receive the amount remaining in the trust.
Another estate planning strategy that may be beneficial for you is to gift seed capital, typically in the form of cash, to an intentionally defective grantor trust (IDGT). You will then sell appreciating or income-producing property to the IDGT in which they will make installment payments back to you over a period of time. If the account or property increases in value over the period of the sale, the accounts or property in the trust will appreciate outside your taxable estate and will therefore avoid estate taxes. Additionally, the trust does not have to pay income taxes on the income the trust retains since the taxes are already paid on the income generated and accumulated in the trust.
In a spousal lifetime access trust (SLAT), the grantor is to gift property to a trust created for the benefit of their spouse and possibly their beneficiaries. An independent trustee can make discretionary distributions to those beneficiaries, which can also benefit you indirectly. Contrary, an interested trustee should be limited to ascertainable standards when making distributions, such as health and education. With this estate planning strategy, you can take advantage of the high lifetime gift tax exemption amount by making gifts to your spouse. This trust avoids the use of the marital deduction which means the assets in the SLAT will not be included in either your or your spouse’s gross estate for estate tax purposes.
Finally, there are irrevocable life insurance trusts (ILITs). This trust allows leveraging life insurance to ease the burden placed on your estate if it becomes subject to estate tax at your death. This type of trust is established by transferring an existing life insurance policy into the ILIT in which you make annual gifts to the trust in order to pay the premiums on the policy. At your death, the trust receives the insurance death benefit and distributes it according to the trust’s terms. The death benefit and the premiums gifted to the trust are completed gifts, meaning your estate would not include any of the trust’s value.
We are holding a series of webinars over the coming weeks, from which you can obtain a great deal of useful information. Just choose the session that fits into your schedule. The 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.
To sign up for an estate planning webinar, visit Anderson, Dorn & Rader here. Once you find a date that is right for you, click on the button that you see and follow the simple instructions to register. For more information regarding estate tax exemptions and planning, connect with our estate planning attorneys today.
SPEAK WITH AN ESTATE PLANNING ATTORNEY
When we think of estate planning, we often think about preparing our accounts and property to go to our loved ones in a tax-efficient way, protected from probate, disgruntled heirs, beneficiaries’ creditors, divorcing spouses, bankruptcy, and the poor spending habits of children or other beneficiaries. We rarely consider preparing for receiving an inheritance of our own.
Believe it or not, there are some essential things you must consider when you anticipate receiving an inheritance. Understanding these issues can be crucial to protect that inheritance from unnecessary taxes and outside threats like creditors, divorcing spouses, and bankruptcy.
The first way to properly prepare to receive an inheritance is to discover what you will be inheriting. Is it real estate, a 401(k), or an individual retirement account (IRA)? Perhaps it is publicly traded stock, an interest in a family business, or just simply cash from a savings account or life insurance policy.
Whatever it is, there are steps you can take today to plan to receive and manage it properly. For example, if you will receive a large IRA account from a parent, do you understand the new rules associated with inherited IRAs as implemented by the SECURE Act passed in late 2019? If not, you should educate yourself now on how to maximize the tax benefits available under the law regarding required distributions. Without an understanding of these often complicated rules, you could make an irreversible mistake and withdraw all of the IRA funds at one time, thereby substantially increasing your tax liability in the year of withdrawal. There are a variety of nuances to these rules that a tax adviser or attorney can help you understand and navigate properly.
Likewise, if you are receiving rental property as a part of your inheritance, you should consider the business of being a landlord and if you even have an interest in continuing to operate such a venture. If not, you may want to prepare to find a buyer for the property who can offer you a fair price as soon as possible. Or, at the very least, look into hiring a property management company to take over as soon as you inherit the property.
If your loved one has completed trust planning that includes establishing an irrevocable trust for you, such trusts frequently include important features that are generally referred to as powers of appointment. A power of appointment in a trust is a right, often given to the beneficiary of the trust, to gift trust property to someone else or, in some cases, to yourself. These powers are often limited to making gifts to only certain classes of people (such as the descendants of the trust makers), or they may be limited to making gifts only at death (a testamentary power of appointment) or during life (a lifetime power of appointment). Some trusts include both types of powers. These can be powerful planning tools that have been given to you through trust documents. Failure to recognize the existence of these powers can lead to unintended consequences, or at the very least, crucial missed asset protection and tax-planning opportunities.
If you know that you have been granted a power of appointment, you should attempt to obtain a copy of the relevant trust documents to carefully review and determine the nature of these powers. An experienced estate planning attorney can help you with this task. With this information, your professional advisers can properly advise you on the planning opportunities and tax consequences of the powers of appointment that may be available to you.
A common mistake made by married individuals who receive an inheritance is to commingle that inheritance with the property of both spouses. How can this be a mistake? An example may best illustrate the point:
Imagine Robin receives a cash inheritance from her deceased father of $300,000 and she and her spouse Morgan decide to use the inheritance to buy a vacation cabin in the mountains. When purchasing the property, the title company assumes that because they are a married couple, they want to take title to the property as joint tenants with rights of survivorship and the deed gets prepared and recorded accordingly. Further imagine that over the years, they furnish the property together, maintain it, and enjoy many family vacations there. One night, however, Morgan has a little too much to drink at a bar, gets behind the wheel, and causes a deadly accident that results not just in a DUI, but also in a wrongful death lawsuit. Because Morgan’s name is on the title to the property as a joint owner, Robin and Morgan discover that the family cabin is an asset that can be used to satisfy the lawsuit judgment against Morgan. As a result, they are forced to sell the cabin and use half of the proceeds to satisfy the judgment.
This unfortunate circumstance can be the result of Robin’s failure to keep her inheritance as separate property. By commingling her property with Morgan, she made it much easier for the judgment creditor in the lawsuit to reach what otherwise would have been considered Robin’s separate inheritance property.
Commingling inherited property can also lead to a similar result if Robin and Morgan ultimately divorce and the family court judge has to determine how to divide the marital property. Failing to keep the inherited property separate during marriage can often lead to that property being divided between spouses at divorce.
A fourth way for you to prepare to inherit property is by using an inheritor's trust. This is a special type of trust that can be established by the individual who will be leaving an inheritance to you. An inheritor's trust is designed to receive the inheritance that you would otherwise receive directly. It must be carefully designed and implemented to work properly, and an experienced estate planning attorney should most certainly be used in the effort. A properly drafted inheritor's trust includes the following key elements:
An inheritor's trust includes the following benefits:
An inheritor's trust can be a powerful tool to use when you anticipate receiving a large inheritance and would like to make sure that the inheritance is protected from certain tax consequences or threats from creditors.
If you would like to learn more about any of these concepts, give us a call. We would love to discuss these ideas in greater depth with you so we can help you build and protect your wealth more effectively.
During estate planning, the beneficiaries are likely to change over time. It’s common for grandchildren to be added into the plan as they come, which will require several amendments from a licensed estate planning attorney. Estate planning attorneys are often asked about trusts for grandchildren and what the best option is.
Several inheritance methods exist to accommodate grandchildren and there are many factors to consider when determining the best one for you and your family. For most grandparents, the best way to provide for their grandchildren is to leave their accounts and property to the grandchildren’s parents. In some cases, however, it makes better sense for grandparents to give property directly to their grandchildren.
If you’re wondering, “Can I open a trust account for my grandchildren?” the answer is yes. Below are examples of trusts for grandchildren and some of the basic information you need to know about them.
While Estate planning can be complicated, it is essential in protecting yourself and your loved one's financial future. Give Anderson, Dorn & Rader Ltd. a call at 775-823-9455 to make a free consultation with an estate planning attorney and see how we can help protect your legacy and your family.
Regardless of your current situation, it is important to consider the possibilities and options for leaving an inheritance to your grandchildren. Failing to do so can have long-lasting consequences and, in many cases, may result in difficult legal challenges and family complications upon your passing.
Many grandparents decide that the best way to provide for their grandchildren is to leave their assets to the grandchildren’s parents. This typically ensures the financial stability of that family unit, thereby indirectly benefiting the grandchildren. From a practical perspective, the grandchildren’s parents are often in the best position to know how to use the money for the benefit of their children and can spend or invest it appropriately on their behalf.
In a majority of the U.S., default inheritance laws have been set to provide first for children and then for the grandchildren in the event of the grandparent’s death.
In rare instances, grandparents may find that it is in everyone’s best interests to leave their assets directly with the grandchildren. This may occur for a few reasons including cases where the grandparents are untrusting of their own children and are concerned that the money would not be responsibly used for the benefit of the grandchild.
One may also choose to directly leave their assets to the grandchildren if the grandchild’s parents are independently wealthy. This could result in added taxes being tacked onto the estate caused by exposing the property which may be costly.
Lastly, you must consider the possibility of grandchildren inheriting your assets through their parents by default. Although the intent of grandparents may have been to leave everything to their adult children, an inheritance may be given to grandchildren unintentionally. In the event that the adult child who originally inherited the assets prematurely passes away due to an accident or illness, the grandchild could inherit all assets. Arrangements can be made to accommodate these situations in the will or trust.
There are many types of trusts for grandchildren for you to choose from including HEET trusts, Gift trusts, and Generation Skipping trusts. Each has its advantages and disadvantages, therefore, it is important for you to discuss which option is best for you with a licensed trusts attorney.
One of the most preferred ways to leave assets to grandchildren is by naming them as a beneficiary in your will or trust. As the grantor or trustor, you are able to specify a set amount of money or a percentage of your total accounts and property to each grandchild as you see fit. This is an effective method given that all of the grandchildren receiving such gifts are physically and emotionally stable, financially prudent, and have reached adulthood.
However, if the grandchildren are minors at the time of your death, this method leaves the trustee or executor of the estate with more responsibilities to handle before the inheritance can be distributed. In this case, the gift will need to be held in a custodial account for the minor until they have reached the majority age (either 18 or 21). And in some instances, establishing a court-controlled conservatorship over the property may be required.
Regardless of either instance, once the child reaches the age of majority, you or the trustee will not be able to control how that money is used by the grandchild. This could result in the inheritance being spent very poorly by the grandchild or could possibly fall into the hands of a spouse or other person who was not intended to receive the gift.
A trust offers one of the most flexible methods for leaving an inheritance to grandchildren. Not only are you able to amend the trust as you need, but you also have the ability to set the maturity date and control how the inheritance is used. When you leave an inheritance to grandchildren via a trust, you can ensure that the money and property are used appropriately and at appropriate times.
There are a variety of ways to use trusts in your estate planning. Provisions can be added to your will or revocable living trust that give you the freedom to decide how the inheritance is distributed. For example, you can instruct the executor or trustee to hold any property that is payable to a grandchild in a separate trust share rather than making a direct distribution of the accounts or property to them. Also, you can specify in those trust terms how the money is to be used or distributed and when. Such provisions are extremely important to ensure your estate plan follows your specific instructions, regardless of unexpected events impeding on those wishes. Fortunately, a trust can protect and manage the inheritance until it can be distributed to the grandchildren at a more appropriate time.
Another way to use trusts for grandchildren is to have the grandparent create a trust that designates them the trustor and the trustee. Creating the trust during your lifetime and naming yourself as the trustee allows you to transfer some of your property into the trust for the benefit of your grandchildren to use before your passing. From a tax perspective, you can make gifts to this trust using the annual gift tax exemption (currently, $15,000 per beneficiary of the trust per year) to safeguard the gifts from transfer taxes.
If your estate is large enough to potentially be subject to the generation-skipping transfer (GST) tax, then you may consider creating a special trust that may provide additional tax benefits. A health and education exclusion trust (HEET) is one of these special types of trusts. A HEET is designed to be used for the use of paying for health and education expenses directly on behalf of the beneficiaries without being subjected to gift taxes in the future. Furthermore, the distributions to the beneficiaries will be exempt from the GST tax. This benefit is obtained by naming a charitable institution as an additional beneficiary of the trust. As long as the trustee makes regular and reasonably substantial distributions to the charitable beneficiary from the trust, the distributions to the other beneficiaries will be GST tax-exempt.
A HEET is worth considering for several reasons. First, if you would like to help your grandchildren and succeeding generations with their education and medical expenses this is the perfect option for you. And if you have used up your GST tax exemption amount through gifting or other estate planning strategies, a HEET exempts the GST tax. Lastly, a HEET gives you the opportunity to benefit a charitable organization as part of your estate planning.
When planning your estate, generation skipping transfer taxes need to be considered. GST taxes are a unique form of taxation that will undoubtedly affect your grandchildren’s inheritance if what you own is valued at more than the current estate tax exemption amount. For most people with modest accounts and property, the GST tax does not pose any significant plight. However, the GST tax is something that you should be aware of and plan around if you plan to leave any amount of money or property with your grandchildren.
Another point to consider when creating a trust specifically for your grandchildren is the GST tax that is required should you include your grandchildren’s children in the trust. You may need to take certain steps upon creation of such trusts to ensure that the trust is GST tax-exempt which a tax professional can assist with.
Though many grandparents seek to provide their grandchildren with an inheritance with good intentions, gift-giving such large sums of money may not be as appreciated by the parents. While some parents may see the gift as a blessing, others find that such large inheritances may hinder their child’s character development. By taking away the need to become financially independent, some parents worry that their children will miss out on important life lessons about sacrifice and hard work and the value of money in general.
Be sure to speak with your grandchildren’s parents beforehand about how you can best support the development of your grandchildren and provide for them in their early years. This will ensure that your gifts will be appreciated and truly beneficial.
Whether you want to specifically and intentionally include your grandchildren in your estate planning or just want to make sure they are carefully accounted for in the event that they unexpectedly inherit your property, it is critical to examine your estate plan with your attorney to make sure that your plan reflects your wishes and your family’s values. Fortunately, the experts at Anderson, Dorn, and Rader have an exemplary understanding of this type of law and are happy to help you update your estate plan.
Connect with our Reno estate planning attorneys and learn how you can open a trust for your grandchildren.
How to Responsibly Leave an Inheritance to Your Grandchildren, Ortiz Gosalia Attorneys at Law (June 8, 2021)
https://ortizgosalialaw.com/newsletters/client-focused-newsletter/how-to-responsibly-leave-an-inheritance-to-your-grandchildren/
This year has been unprecedented from a political perspective in many ways. President Joe Biden stepped into office facing huge obstacles related to the COVID-19 pandemic, an economy battered by the pandemic, a crumbling national infrastructure in dire need of repair, an ongoing immigration crisis at our southern border, and deep political and social divisions in this country, among other challenges.
As Biden entered office, he named the following issues as his top priorities:
With these issues at the top of Biden’s priority list, it may appear that no real changes are coming down the pipeline that are directly related to the estate plans of most Americans of average means. But if recent history is any guide, although many of us hope that the estate planning landscape will remain settled and predictable, it is unlikely that we will be so lucky. Here’s what we know so far with regard to proposals coming from the White House.
While many of the issues Biden has prioritized have begun to be addressed within his first one hundred days in office, many of them are still in their infancy, with the details of how they will be implemented and funded still to be determined. The following steps have already been implemented or proposed in Biden’s plan.
These large spending bills, both passed and proposed, will need to be funded in some manner.
Some of the possibilities for funding this spending include the following changes to the tax laws
that could have a significant impact on your estate planning: 5
We are living in a time of significant uncertainty when it comes to estate planning and the economy. As a result, it is more important than ever to ensure that your estate plan is designed in a way that enables you to move quickly and take advantage of estate and tax planning opportunities that arise.
Additionally, there remain many non-tax-related reasons to keep your estate plan up-to-date
and relevant to your circumstances:
Keeping abreast of the whirlwind of changes in the law and the economy can be a tall order for anyone when it comes to maintaining your estate planning. That is why having an estate plan with appropriate provisions that allow for flexibility is so important. We are prepared to keep you apprised of the legislative changes that are headed our way and will help you stay informed so you can move quickly if changes to your planning become necessary. We always welcome a call from you to set up an appointment with our office to discuss your estate plan. Together, we can make sure you are prepared for whatever may come.
1 Jacob Pramuk, Biden Signs $1.9 Trillion COVID Relief Bill, Clearing Way for Stimulus Checks, Vaccine
Aid, CNBC (Mar. 11, 2021, 3:03 PM)
https://www.cnbc.com/2021/03/11/biden-1point9-trillion-covid-relief- package-thursday-afternoon.htmlhttps://www.cnbc.com/2021/03/11/biden-1point9-trillion-covid-relief- package-thursday-afternoon.html
3 Barbara Sprunt, Here’s What’s in the American Rescue Plan, NPR News (March 11, 2021),
https://www.npr.org/sections/coronavirus-live-updates/2021/03/09/974841565/heres-whats-in-the- american-rescue-plan-as-it-heads-toward-final-passage
4 Fact Sheet: The American Families Plan, The White House (Apr. 28, 2021),
https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/28/fact-sheet-the-american- families-plan/
5 Blank Rome, LLP, Estate Planning in 2021 and Beyond: The Possible Impact of Democratic Control in
Washington, JD Supra (Mar. 9, 2021)
https://www.jdsupra.com/legalnews/estate-planning-in-2021-and- beyond-the-6514827/
6 See Fact Sheet: The American Families Plan, The White House 14 (Apr. 28, 2021)
https://www.whitehouse.gov/wp-content/uploads/2021/04/American-Families-Plan-Fact-Sheet-FINAL.pdf
In March 2004, the Senate passed Resolution 316, which officially recognized April as National Financial Literacy Month. Both Houses of Congress have passed similar resolutions since then designed to encourage financial literacy so that individuals are better prepared to manage their money, credit, and debt. Nevertheless, in the fourth quarter of 2019, U.S. household debt, which includes student debt, credit card debt, auto debt, mortgages, home equity loans, and other debts, exceeded $14 trillion for the first time ever.1 In addition, forty percent of the respondents of one recent survey indicated that it would be very difficult for them to meet their current financial obligations if their next paycheck were delayed for one week, and another thirty-four percent said it would be somewhat difficult.2 The COVID-19 pandemic has, unfortunately, made this potential difficulty a scary reality for many Americans.
Whether or not you are indeed struggling financially, it is important to do a realistic assessment of your financial situation and how prepared you and your family are for the future. Creating or updating your estate plan is an important part of exercising control over your finances, and ensuring that proper plans are in place can provide substantial peace of mind and security for you and your family.
Take an Inventory
One of the first steps in creating an estate plan is to take an inventory of your money and property. Regardless of whether you are wealthy or just getting by, everything that you own is part of your estate and should be listed--or at least accounted for-- in your inventory. This inventory should include the following:
As you and your estate planning attorney evaluate your inventory, there are several questions you should ask yourself.
Am I saving adequately for retirement? Clearly, the answer to this question will vary for different individuals and circumstances, but many financial advisors recommend saving ten to fifteen percent of your pre-tax income during the entire span of your entire working years. If you have not been saving adequately, consider increasing your contributions to your retirement accounts.
Are sufficient funds available to provide for my spouse and dependents if I pass away? If the answer is no, consider purchasing a life insurance policy large enough to replace your income, as well as pay off any outstanding debts, college for your children, final expenses, and other important expenses, e.g., the cost of your child’s wedding or their first car.
Do I have a lot of debt? If you have substantial debt, your family members generally will not be responsible for paying it if you pass away. However, your estate will have to pay off your creditors before your beneficiaries receive anything. Life insurance can help in this situation as well: You can either purchase life insurance sufficient to pay your debt or you can make family members or loved ones the beneficiaries of your policy (or a trust for their benefit), as the proceeds of the policy never become part of your estate but are transferred directly the beneficiaries of the policy. Similarly, retirement, investment, and brokerage accounts allow you to name one or more beneficiaries, keeping those funds outside of your estate. Real estate or accounts owned jointly will also pass directly to the surviving owner when permitted by state law.
An even better course of action, however, would be to meet with a financial planner who can help you create a budget enabling you to decrease or eliminate your debt so that your loved ones will receive all the money and property you would like them to have.
Protect Your Assets
If you transfer money and property you would like to preserve for your beneficiaries into an irrevocable trust, that is, a trust that cannot be amended, modified, or revoked (except under limited circumstances), those assets will be protected from any of your future creditors or judgments (with time limits). Because the money and property used to fund the trust is no longer yours and you have no control over it, it is not available to pay your creditors. Your family members and loved ones can be named as the beneficiaries of the trust. This strategy can be particularly helpful for individuals working in professions that are at a high risk of lawsuits, e.g., doctors, lawyers, etc.
Warning: An irrevocable trust will not protect money and property from creditors having a claim at the time the trust is created. Courts can rescind transfers to trusts if they are determined to have been made with the intention to defraud current creditors.
Consider the Needs of Your Beneficiaries
Protect their inheritance from their creditors. Even if you take all the steps necessary to ensure that your beneficiaries receive a nice nest egg when you pass away, it can disappear quickly once it is in their hands unless your estate plan is designed to avoid this possibility. Fortunately, you can create a trust with terms that will protect your beneficiaries’ inheritance against claims arising from their creditors, divorcing spouses, or lawsuits. There are a variety of different types of trusts that can protect the money and property from such claims, but the following are among the most commonly used.
Create a trust for a specific purpose(s). You can include terms in your trust authorizing the trustee to make distributions for your children or other loved ones for specific purposes so that even after you have passed away, you are still able to help the trust beneficiaries make certain important purchases or pay for special care.
Let Us Help You and Your Family Move Toward a Secure Future
Celebrate Financial Literacy Month by taking steps to get your financial house in order. Estate planning is an essential part of this process, as it is all about providing you and your family with the peace of mind that comes with knowing that even if the unexpected happens, the future is secure. Please call us today at (775) 823-9455 to set up a meeting so we can create an estate plan that meets all of your needs and goals.
1 Federal Reserve Bank of New York, “Quarterly Report on Household Debt and Credit, February 2020,” accessed March 17, 2020, https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/hhdc_2019q4.pdf
2 American Payroll Association, “Getting Paid in America Survey,” last modified September 10, 2019, https://www.nationalpayrollweek.com/wp-content/uploads/2019GettingPaidInAmericaSurveyResults.pdf
As millennials (born 1981 to 1996), you are well known for your distinctiveness as a group. Your generation has followed paths and set goals that are decidedly different from those chosen by previous generations. You are highly diverse, better educated, more socially conscious, and wait longer to have families than your parents and grandparents. But one thing you have in common with other generational groups is the need for estate planning. Unfortunately, a startling 79% of millennials do not have basic estate plans in place. Your needs and goals may vary, but having an estate plan in place is crucial for every adult, including millennials. You do not know what the future holds, and we can help you make sure that plans are in place that not only provide for your own future needs but also those of your loved ones and pets.
As a millennial, you may not have accumulated as much wealth as members of older generations, but it is important for you to make sure that your money and property will go to the family members or loved ones you have chosen if something happens to you. If you do not have a will or trust, your money and property will pass to the person designated by state law, which may not be the person you would want to inherit your prized possessions and money. In addition, if you are married and have young children, you need to take steps to ensure that your spouse and children are provided for. A trust is often the best solution: If your spouse inherits your money and property outright under a will, and your spouse eventually remarries, your assets could go to the second spouse instead of your children. In addition, the inheritance will be vulnerable to claims made by your spouse’s creditors. A trust can avoid these results by allowing you to choose who receives your property and money, as well as the timing and size of the gifts.
If you are one of many millennials, especially those who live in large urban areas, who chose either to delay having children or to remain childless, you may have adopted pets that you love and dote upon just as you would a child. Especially if you are single, you should consider a pet trust to provide for your pet’s care if something happens to you. The pet trust can allow you to make arrangements for your pet if you die or are physically unable to care for them yourself. The pet trust can not only specify a caregiver for your pet, it can also provide care instructions and set aside funds sufficient to care for your pet’s needs (medical care, grooming, exercise, etc.). You also have the ability to name an additional person to manage the money you have set aside for your pet, if you would rather have someone other than the caregiver in charge of the money.
Millennials are well known for being socially conscious and wanting to make a positive difference in the world. If you want your money and possessions to support a charitable cause when you pass away, you may be interested in establishing a charitable remainder trust, which enables you to benefit from a stream of income for your own life, with the remaining money in the trust going to a charity you have selected upon your death.
As the cost of college tuition continues to increase, the level of debt millennials have begun their adult lives with is startlingly high. The average student loan debt of adults aged 25 to 34 is $33,000 per borrower. Federal student loans typically are forgiven upon the borrower’s death, but the estates of borrowers who obtained private loans can be pursued by those lenders. In addition, high credit card debt is prevalent among millennials. If you have incurred substantial debt, life insurance sufficient to cover income tax on the cancellation of debt in the case of a federal student loan or to cover the debt itself if a student loan is owed to a private lender or money is owed to a credit card company may be a good solution if you are concerned about the burden your debt could place on your loved ones upon your death.
If you are like many millennials, who are the first generation who grew up using the internet, you have likely amassed a much greater quantity of digital assets than members of previous generations. These assets may include social media accounts, blogs, photographs and videos, financial accounts, and email accounts, among many others. A comprehensive list of these of these assets, which may be among your most prized possessions, as well as the accompanying usernames and passwords, and instructions for their management, is essential to ensure that your wishes are honored if you pass away or become too ill to manage them on your own. Depending upon your wishes, you can appoint a separate person to wind up (or continue managing, e.g., in the case of a blog) these assets and accounts, or you can choose to have your executor or trustee handle this aspect of your estate. The list, which can be incorporated by reference into your other estate planning documents, should be stored in a secure place along with your will and/or trust.
If you are a younger millennial, you may not realize that your parents no longer automatically have the right to make medical decisions on your behalf if you become too ill to make them on your own or if you are unable to communicate your wishes. Even if you are married, your spouse may still need to be properly named in a medical power of attorney to make decisions for you when you cannot. It is also important to designate a trusted person to act on your behalf if your spouse is unavailable. If you fail to have a medical power of attorney prepared, a court proceeding may be necessary to appoint someone to fill that role if, e.g., you are in an automobile accident and are unconscious. You should also consider completing a living will spelling out your wishes regarding medical treatment you want--or don’t want--at the end of your life or if you are in a persistent vegetative state.
Another document that is essential for your care if you were to become unconscious or too ill to make your own financial decisions is a financial power of attorney. It allows a person you have named to pay bills, take care of your home, manage your accounts, and make other money-related decisions for you. Even if you are married, a financial power of attorney is important because any bank accounts or other property that are not jointly owned cannot be managed by your spouse without it—unless your spouse goes to court and asks to be appointed as your guardian, causing unnecessary stress in an already distressing situation. A financial power of attorney can also be helpful if you do a lot of international travel and may occasionally need someone to handle your financial matters while you are out of the country.
You may think that estate planning is only for the elderly. However, even if you are young, an estate plan is crucial, regardless of whether you have accumulated much money or property. A properly executed estate plan provides not only for the well-being of your family, loved ones, and pets, but also allows you to put plans in place if you become ill or are severely injured and cannot make medical and financial decisions for yourself. Call us today at 775-823-9455 to learn more about how we can help you prepare for your future.
Weddings are very memorable events - full of anticipation and lots of planning. Once you decide to get married, there is one type of planning that many people overlook – financial planning. Even if you wait to discuss financial planning after the wedding, it is still very important that you get an understanding of your spouse's spending habits and how he or she looks at their financial obligations.
Spender or saver?
If you or your spouse liked to indulge before the wedding, you will probably do the same after the vows have been said. It is good to discuss your views on finances early on to avoid surprises. If you are a serious spendthrift these differences in attitude about money need to be addressed ahead of time, so that hopefully a compromise can be reached. Among the top three most cited reasons for divorce are money issues or arguments, and many times financial planning before (or early in) a marriage can resolve the largest disputes.
Put all of your respective financial obligations on the table
It is important to disclose to each other everything there is to know about your individual, respective financial situations. Be honest about your income, debts, and pre-existing financial issues. Also, do not overlook any existing financial obligations to an ex-spouse or children from a prior marriage or relationship. A marriage should be about honesty, which includes honesty about your financial situation, even if your financial situation may not be pretty.
Who is responsible for what?
Some couples decide right off that everything will be split down the middle, including both income and financial obligations. Others divide the bills between themselves. Whatever arrangement you decide to make, it should be established as soon as possible to prevent any confusion. If you have separate accounts, know which account pays which bill. Also, remember to notify creditors of your any name changes, new addresses, or account changes.
Discuss future goals and realistic expectations
As newlyweds, you will no doubt find yourself sharing your dreams and expectations regarding your new life together. By evaluating your financial situation early on, it will be easier to define your goals as a couple. Some questions to discuss should include whether to purchase a home, start a family, and which large debts you want to pay off first. Thinking long-term, you might also begin discussing work and home responsibilities, and how you plan to save money towards retirement. At this point, putting together a budget and working with a financial planner may help achieve your goals.
Separate or joint bank accounts?
Couples should discuss their preferences with regard to their bank accounts. There can be advantages and disadvantages to having joint accounts or separate accounts. Establishing a joint account could mean fewer fees and less complication, but money put into a joint account will be co-mingled and considered marital assets. Keeping your bank accounts separate can be easier for those who are already used to managing their own finances, but can add some difficulty in dividing income, bills, and expenses. Some couples find that a combination of joint and separate accounts works well, too. For instance, you can have a joint account for shared household expenses and separate accounts for personal spending.
How to handle insurance coverage
When it comes to health insurance, most couples already have their own policies when they marry. The best advice is to perform a cost/benefit analysis for both plans, to determine which policy is the best. You may also consider whether you need a family plan, or whether it would be more cost effective to maintain two individual plans. When looking at insurance policies, also consider whether one spouse plans to move jobs, which may cause problems if you use the former employer's insurance. As far as auto insurance, you may be better off consolidating your auto policies. Another insurance issue newlyweds should consider is life and disability income insurance. Many couples want the peace of mind that these types of policies can provide, ensuring that one spouse will be able to make ends meet without the other in case of unexpected illness or disability.
If you have questions regarding marriage issues, or any other financial planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Most people don’t realize that having a huge net worth is not a requirement for financial planning. Even families with the smallest of budgets can benefit from a proper financial plan. In fact, there are many resources available that allow you to create a financial plan on a limited budget. For a flat fee or a reasonable hourly rate you can develop a savings plan, create a good budget, and pay down your debt. So, if you want assistance managing your own finances in order to start off on the right foot for the new year, consider the following:
What type of financial planning assistance can I afford?
There are various levels of planning assistance that provide a wide range of services. A lower level plan would likely include a customized breakdown of your budget and a financial to-do list. A middle level plan could include a multi-year plan, such as a five-year plan, with a set number of consultations throughout that time period. A higher level plan may include a longer planning period and more comprehensive support.
In-depth investment planning
Some people, with more financial resources, may be looking for more in-depth investment advice. This would include specific advice regarding stocks, bonds, mutual funds, and other investment tools. This type of planning service is often provided at an hourly rate or with a negotiated fee schedule. A basic financial plan is typically included with any in-depth investment plan.
Basic financial planning
There are several areas of financial planning that are considered, where appropriate: net worth, cash flow, insurance, education, retirement, and estate taxes. Your net worth includes your current assets and liabilities; with financial planning, it is important to understand your current financial position and to consider how your net worth will likely grow over your lifetime. Cash flow is your current income and expenses, which will also change over time. Inevitable changes in your cash flow will also have an effect on your retirement and your ability to pay down debts. With basic financial planning, you should assess your existing insurance products and with an eye towards determining whether you have sufficient insurance to take care of your family should you die prematurely. You may also want to consider disability insurance or long term care coverage.
More future planning
Financial planning also includes figuring out how to best save for your children’s college education. It is important to assess how much you need to set aside and which financial instrument is best to do that. Retirement is a crucial part of financial planning and, in fact, many estate planning firms provide in-depth retirement planning as well. As part of your financial plan, you need to estimate what your expenses will be once you retire, and how you can best cover those expenses after you stop working - which can be particularly important with the unsure future of Social Security. It is important to consider the most tax efficient methods for transferring your assets to your family after your death. You will want to avoid estate taxes as much as possible, which is one goal of estate planning in general and which can be accomplished through working with your attorney to ensure your wealth will be preserved for your beneficiaries.
If you have questions regarding budgets, estate planning, or any other financial planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Your oldest son has just informed you that he and his wife want to buy their first home, but they can't afford the down payment. Even with favorable interest rates available for some, bank loans are still hard to come by, especially for younger borrowers. As a result, many young families turn to their parents or other relatives for intra-family loans. Once you understand the tax consequences of intra-family loans, an intra-family loan can not only benefit the recipient, but also serve as a good estate planning tool.
Treatment of the loan as a gift
There is a chance that the IRS will treat the loan as a gift, regardless of the fact that a promissory note was actually given in return for the transfer of funds. The loan may not be considered bona fide debt by the IRS if it seems that the intention was that the loan would not be repaid, despite the note.
How to overcome the gift presumption
The presumption by the IRS that an intra-family loan is a gift can be overcome by making an affirmative showing of a bona fide loan with a “real expectation of repayment and an intention to enforce the debt.” There are several factors that are considered by courts in making this determination:
(1) existence of a note comporting with the substance of the transaction,
(2) payment of reasonable interest,
(3) fixed schedule of repayment,
(4) adequate security,
(5) repayment,
(6) reasonable expectation of repayment in light of the economic realities, and
(7) conduct of the parties indicating a debtor-creditor relationship.
As one court determined “[t]he mere promise to pay a sum of money in the future accompanied by an implied understanding that such promise will not be enforced is not afforded significance." Merely documenting the loan transaction is not sufficient to overcome the gift presumption, for Federal tax purposes.
When is a gift better than a loan?
There may be situations where making a loan to your children may not be the best option. In some cases, making it a gift would be more appropriate. Some situations where a gift may be the preferable choice include the following:
Can I forgive the loan later?
Although the intention to forgive an intra-family loan can result in the IRS treating the loan as a gift at inception, it really depends on when that intention to forgive arises. The main factor in making this determination is whether there was a prearranged plan to forgive the debt, or if that intention did not arise until a later time. If that is the case, the IRS will not consider the loan a gift until the time it is actually forgiven.
If you have questions regarding intra-family loans, or any other financial or estate planning needs, please contact me at Anderson, Dorn & Rader, Ltd., either online or by calling me at (775) 823-9455.
