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.

Understanding the Nature of the Property to Be Inherited

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.

Powers of Appointment

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.

Keeping Inheritance Separate from Marital Property

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.

Inheritor's Trust

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.

Estate Planning with Anderson, Dorn & Rader

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.

Inheritance Options for Grandparents

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.

Leaving Assets with the Grandchild's Parents

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.

Leaving Assets Directly with the Grandchild

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.  

Grandchildren Gain Assets by Default

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. 

Choosing the Proper 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.

Naming Your Grandchild a Beneficiary in Your Trust or Will

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.

Gift Trusts

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.

Health and Education Exclusion Trusts

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.

Generation-Skipping Transfer Taxes

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.

Consider the Parents

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.

Estate Planning with Anderson, Dorn & Rader

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:

  1. Getting past the COVID-19 pandemic through masking, vaccinations, and opening schools
  2. Addressing climate change and alternative energy solutions
  3. Financial regulation and student debt
  4. Anticompetition practices among the leading companies in Big Tech
  5. Revitalizing the economy and employment to recover from the pandemic
  6. Improving international relations
  7. Immigration
  8. Race, gender, and social issues

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.

Action from the First One Hundred Days That Could Affect Your Estate

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.

  1. In early March, Biden signed a $1.9 trillion COVID-19 relief bill (named “The American Rescue Plan”), providing stimulus payments, unemployment benefits, and child tax credits to millions of Americans to help stimulate the economy.
  2. On March 31, through the “American Jobs Plan,” Biden outlined a nearly $2 trillion infrastructure and jobs plan that is to be funded primarily through a corporate tax hike an additional measures designed to discourage U.S. corporations from moving their operations overseas to reduce or eliminate U.S. taxation (i.e., “offshoring”).
  3. The American Rescue Plan also allocates significant funding for providing vaccinations to all Americans at no cost, and additional funds to help the nation’s foodservice industry and K-12 schools survive the financial impacts of the pandemic.
  4. The proposed “American Families Plan” by the White House in late April is also designed to help families cover basic expenses, gain greater access to health care insurance, and reduce child poverty through the use of child tax credits and similar measures.

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

  1. Increase IRS enforcement efforts of wealthy taxpayers.
    The White House has determined that significant tax revenues are being left on the table due to the inability of the
    IRS to enforce current tax laws. Biden has proposed increased funding of the IRS to enforce laws against tax avoidance abuses and increase audits to ensure taxes that are in fact owed are being assessed and collected.
  2. Elimination of the rule of step-up in basis at death.
    This proposed change to the tax code would eliminate the benefit of receiving a step-up in tax basis on inherited property in the hands of a deceased individual’s heirs and beneficiaries for gains in excess of $1 million (or $2.5 million per couple when combined with existing real estate exemptions). This could result in significant capital gains taxes being assessed upon the sale of the property once it has been inherited. However, certain exceptions to this rule for small business owners and farmers would be preserved under the proposed legislation.
  3. Increases in top income tax rate.
    Another Biden proposal under consideration is the increase in the top individual tax rate from 37 percent to 39.6 percent and elimination of the lower capital gains tax rates otherwise available for those earning over $1 million annually. Rather, capital gains would be taxed as ordinary income for those earning over $1 million annually.
  4. Reducing potential benefits of 1031 exchanges.
    The President is calling on Congress to reduce the benefits available with the special tax break that allows real estate investors to defer paying capital gains taxes when they exchange properties.

Flexibility Is Key in These Uncertain Times

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

https://www.usatoday.com/story/news/politics/2021/03/31/president-joe-biden-proposes-2-trillion-infrastructure-jobs-plan/4809290001/

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

In 1984, Congress issued a resolution, signed by President Reagan, establishing March 21st as National Single Parent Day: a day devoted to recognizing the dedication of single parents, who make self-sacrificial efforts to care for their children’s needs, and encouraging family members, friends, and communities to help provide an optimal environment for their children. As a single parent, you should feel proud of your efforts to nurture and care for your children. Here are a few additional things you can do to provide for your children’s future that you may not have considered.

Name a guardian

If your children’s other parent is willing and able to care for them if you pass away unexpectedly, he or she will likely be given physical custody of the children and responsibility for their care. In the case of single parents, however, the other parent often may not be able or willing to take on this role. This is why it is crucial for you to name a guardian who will step into your shoes to provide day-to-day care for your children if something happens to you. If you do not name a person you trust, a court will step in to appoint someone. Because the person the court chooses to be your children’s guardian may not be the person you would have chosen, it is vitally important that you designate this person in advance. You can name a guardian in your will (and in some states, a separate document can be used specifically for this purpose): Although the court will still have to appoint the guardian, the court will typically defer to your wishes.

In making your decision, there are a few factors to keep in mind: Does your chosen guardian share your values and parenting style? Will your chosen guardian require your children to relocate? Does your chosen guardian have the energy and stamina needed to care for your children? Do they have the time to be an involved caregiver? Do you want more than one guardian to care for multiple children, or do you prefer for the children to stay together? It is important to weigh the importance of these considerations in making your decision.

Create a custodial account

If your children are minors, you can establish a custodial account to hold an inheritance under a law called the Uniform Transfer to Minors Act or the Uniform Gifts to Minors Act. If you do not appoint the custodian, the court will appoint someone to control and manage your children’s inheritance until they reach the age of majority. This is necessary because minors legally cannot own money or property on their own. A custodian will manage the funds in the account for the benefit of your children, but the downside is that when they reach the age of majority (18-21 years old depending on applicable state law), the funds will be distributed to them in a lump sum. At that point, they can spend the money as they wish, which may not be optimal for a young person who is not yet mature enough to make prudent financial decisions. In addition, any present or future creditors could try to reach your children’s inheritance to satisfy their claims.

Create a trust

A trust is often preferred over a custodial account because it is more flexible and can be designed to protect the funds against your children’s future creditors and their own imprudent spending. You can name someone who is adept at handling money to manage and disperse the funds for the benefit of your children if you die before they reach adulthood—or the age you have decided to the funds should be distributed to them. This can be the same person who will act as the children’s guardian, or a different person if you do not trust the guardian (e.g., an ex-spouse) to handle the money you have left to your children. 

If you would like to set up a trust that can be used to manage your money and property for your (and your children’s) benefit if you become too ill to do it yourself, you can establish a revocable living trust with yourself as the trustee. This type of trust will remain in effect if you pass away, and the successor trustee you have named can continue to manage the funds and make distributions for the benefit of your children. The successor trustee can also step in to manage and distribute the funds for your benefit if you are unable to do so. An often less preferable option is to include provisions in your will for the establishment of a trust at your death. This type of trust will not help if you become disabled because it will not go into effect until your death. In addition, it will not be funded until your will has been probated, a process that may be expensive and time-consuming. Also, by creating the trust through your will, the management and distribution of funds may also be subject to ongoing oversight by the probate court.

The trust terms can specify the purposes for which the trust funds can be used, how and when the trustee should make distributions, and, if you so choose, the age at which you would like the trust funds to be fully transferred to your children—which does not have to be at the age of majority. You can choose the type of distributions you believe are best for your children: Some parents give the trustee the discretion to make distributions for specific purposes, such as the children’s health, maintenance, education, or support, or even for a down payment on a house or to provide funding for the child to start up a business. Others give the trustee complete discretion in making distributions for the benefit of the children. The timing of distributions, which can be designed to meet your particular goals, can also be spelled out in the trust.

If you have more than one child, you can specify whether the distributions should be for equal amounts or if a greater percentage of the money in the trust should be distributed for the benefit of certain children, e.g., children with special needs or younger children who did not get as much financial assistance from you while you were alive. In addition, you can address specific issues that may be of concern. For example, you can indicate whether you would like a home you own to be sold, or if you prefer for the children’s guardian to move into the home so they will not have to relocate. If your home is not sold, the terms of the trust can also indicate who will be responsible for paying the real estate taxes, utility bills, and maintenance expenses. The home is a particularly complex issue to consider, as there are often emotional ties and memories connected to it, as well as ongoing costs, and frequently, a mortgage. As experienced estate planning attorneys, we can help you think through the best course of action for your family.

Consider writing down your wishes regarding grandparents’ visitation

If you have named someone other than a grandparent (your parent) to be your children’s guardian, it is important to specify in your estate planning documents whether you wish the grandparents to be able to visit with your children. 

While you are living, it is your fundamental constitutional right to determine whether--and how often-- your children will see your parents (their grandparents). However, when you pass away, grandparents may have a right to see your children. Every state has enacted a grandparent visitation statute, and they vary regarding their permissiveness or restrictiveness. Some statutes only allow grandparents to obtain a visitation order when the children’s parents have separated, divorced, or one or both of them have died. Others are less restrictive1 and allow grandparents to obtain a visitation order even if the parents are still married and are both still living. What both types of statutes have in common is that they both require visitation not to interfere in the parent-child relationship and to be in the best interests of the child. 

Reno Estate Planning Attorneys

As a single parent, you can gain substantial peace of mind by creating an estate plan that ensures your children will be properly cared for—both physically and financially—in the unlikely event that something happens to you while they are still too young to take care of themselves. Please call the Anderson, Dorn & Rader office at (775) 823-9455 to schedule a consultation.

1 Some of these less restrictive statutes have been found to be an unconstitutional infringement on the fundamental right of parents to control the upbringing of their children.

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.

Will and/or Trust

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.

Pet Trust

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.

Charitable Remainder Trust

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.

Planning for Student Loans or Credit Card Debt

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.

Digital Assets 

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.

Powers of Attorney

Medical Power of Attorney

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.

Financial Power of Attorney

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. 

Let Us Help You Prepare for the Future

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.

In 2008, Congress recognized the need for the public to understand the importance and benefits of estate planning by passing House Resolution 1499, which designated the third week of October as National Estate Planning Awareness Week. Nevertheless, according to a 2019 survey carried out by Caring.com, 57% of adults in the United States have not prepared any estate planning documents such as a will or trust even though 76% viewed them as necessary. Many of the respondents said this was due to procrastination, but many others mistakenly believed it was unnecessary because they did not have many assets.

Why should you have an estate plan?

An estate plan can provide significant peace of mind by ensuring your assets are protected, plans are in place if you become ill, and your property is passed down according to your wishes.

What key topics should you consider?

● Do you have a last will and testament and/or a trust? If you do not have these important documents, state law will determine who will inherit your property—and thus, it may not occur in the way you would have chosen. In addition, someone appointed by the court, instead of a trusted person of your choosing, will be in charge of caring for any children or pets. Spelling out your wishes in a will or trust will also prevent unnecessary confusion, anxiety, and expense for other family members when you are gone.

● Have the proper powers of attorney been prepared? A financial power of attorney will allow you to designate an individual to make financial and property decisions for you should you become unable to handle your own affairs. A medical power of attorney enables you to designate a person you trust to make medical decisions for you when you are otherwise unable to speak for yourself.

● Ensure that you have an advanced directive, also called a living will, which memorializes your wishes concerning your end of life care, such as whether you would like to receive life support if you are in a vegetative state or terminal condition.

● Do you have insurance? If you become incapacitated or die, it is important that your family or loved ones have information about your insurance (such as life, health, disability, long-term care, etc.) so that claims can be filed.

● Compile a list of all of your accounts and other important information such as; bank and investment accounts, titles to vehicles and homes, credit card accounts or loans, digital accounts (such as Facebook, LinkedIn, and Twitter) and passwords, Social Security cards, passports, and birth certificates. These documents may be needed to manage your property when you are incapacitated or settle your estate once you are gone. This information should be kept in a safe place and shared only with trusted family members or loved ones.

● A list of legal, financial, and medical professionals who have performed services for you is also essential. The list should include their contact information so your family can easily reach them in the event their help is needed if you become disabled or die. If desired, you should also ensure HIPAA authorizations are in place with medical professionals to ensure your family members can obtain the needed information.

How should you encourage your family members to create an estate plan?

Estate Planning Awareness Week is a great opportunity to take steps to make sure your own estate plan is in place and talk to your family members, especially elderly parents, about creating an estate plan. Estate planning is often a difficult topic to broach, as it brings the unpleasant issues of aging and death to the forefront of our minds. Here are a few tips to help you start the conversation.

Be sensitive to your family members’ feelings. Put yourself in their shoes, and keep in mind that few people are eager to dwell on the subject of their own death. One way to begin the conversation is to talk first about the need to plan for illness and provide instructions if they become too ill to communicate with doctors or handle financial matters for themselves. The conversation can then naturally progress to the importance of having an estate plan that will enable their assets to be transferred in the way they wish, provide for the care of any dependents or pets, and minimize any taxes, court costs, and legal fees. Communicate that you are not trying to control their decisions but only want to ensure that their own wishes regarding their medical care and their property are known—and that all their instructions are in writing to guarantee they are carried out. 

Involve other family members in the conversation. If you are planning to speak to your parents about the need for an estate plan, it is important to include any siblings in the discussion to avoid giving the impression that you are trying to influence or control your parents’ choices. You and your siblings should emphasize to your parents that none of you are asking about what you will inherit but just want to make sure that their wishes are carried out if they become ill or pass away.

Consult an estate planning attorney.

An experienced estate planning attorney can help you and your family members create an estate plan tailored to meet each of your unique needs and carry out your wishes—or help you update a pre-existing estate plan. We can provide each family member with guidance and information about the options available to them. We can help each of you put a plan in place to prevent unnecessary stress, legal expenses and taxes, uneven inheritances, disputes between family members, and delays in passing life savings on to loved ones. In addition, it will provide you and your family members with the peace of mind that comes with knowing there are plans in place for your care if any of you become ill and that your wishes will be honored once you pass away. Call us today to set up a meeting.

supplemental needs trustEstate planning can be a very difficult process. While it’s not brain surgery, making the decision to move forward with the planning requires us to face the fact that we will not live forever. This thought can stop many people right in their tracks. Others talk themselves out of seeing a qualified attorney to put together an estate plan based on some of the following common myths:

Myth #1: Only the Rich Need Estate Planning

When we hear about estate planning on the news or read about it on the internet, it is usually in regards to a wealthy businessman or celebrity who made some error, did no planning, or has family members who are angry about the planning that was actually done. The topic catches people’s attention: Rich people have so much that surely they need planning and can afford to have the planning done correctly. By comparison, when the average person thinks about their own property and planning needs, they assume that it is not necessary because they do not have anything close to Bill Gates’ billions.

However, this could not be further from the truth. Estate planning is about more than just the money. While proper planning allows you to determine who gets your money and property upon your death, the planning process also addresses what happens if you become incapacitated and someone has to make decisions on your behalf--a far more likely scenario. If you have not done any planning, the court will have to appoint someone to make your medical and financial decisions for you. This can be very time consuming, expensive, and public. It can also wreak havoc on a family if they disagree about who should be appointed and how decisions should be made.

Even for those of modest means, who gets your hard-earned savings when you die is an important consideration. Without any planning, state law will decide who gets what—and many times, what the government’s best guess as to what you would want is contrary to what you actually want. But, because you did not take the opportunity to formalize your wishes in an estate plan, the state has to step in and do it for you.

Myth #2: I Don’t Have to Plan Because My Spouse Will Get Everything

For many married couples, it is common to own property or bank accounts jointly. If these assets are owned jointly or as tenants by the entirety, when one spouse dies, then the surviving spouse automatically becomes the sole owner. In most cases, this is the desired outcome for married individuals.

However, this approach can be dangerous. While it is convenient for assets to pass automatically to the surviving spouse, this outright distribution offers no protection. What happens if, after your spouse dies, you get into a car accident and are sued? If the assets you owned jointly automatically became yours alone, this money and property are available to satisfy any judgment that could be entered against you resulting from a lawsuit.

Additionally, what if, after you die, your spouse gets remarried? If the brokerage account you owned jointly becomes your spouse’s only, your spouse is now able to spend it all in any way he or she wants without any consideration for your wishes or the next generation. Your spouse’s new spouse could go out and buy a sports car with the money you intended to pass to your children. With blended families being common today, this is a real concern for many people.

Estate planning does not mean that you have to disinherit your spouse. Rather, it means the two of you can sit down and plan out what happens to your joint property and accounts upon either of your deaths, ensuring that the survivor is provided for and that any remaining money and property are gifted in a way that is agreeable to both of you.

Myth #3: A Will Avoids Probate

Many people believe that once they have created a will—whether drafted by an experienced attorney, or using a DIY solution or online form— they have avoided probate. Unfortunately, they are wrong.

While a will is a great way to designate a person to wind up your affairs once you have passed, determine who will get your hard earned savings and property, and, if necessary, appoint a guardian to care for your minor children, this document has to be submitted to the probate court to begin the process of distributing your money and property. The level of involvement by the probate court can vary depending on the circumstances, but this process is not private, as the will becomes a matter of public record.

Summary Proceedings: In some states, if the value of your estate (i.e., what you own at your death) is below a certain monetary threshold, then anyone who is entitled to inherit from the decedent can file a petition and have the property distributed outside of the traditional probate proceedings. The filing may require a court appearance and formal legal notice to anyone who might be interested before allowing your property to be distributed.

Affidavit Procedure: Some states allow for an affidavit to be used to collect and distribute a decedent’s money and property. In some states, this affidavit can be self-executed, while others require that the document be filed with the court. Generally, affidavits require the passing of time from the date of a decedent’s death—ranging from a few days to a few months. After that, a “successor” to the decedent (a spouse or heir) signs the affidavit and presents the affidavit to collect the decedent’s assets for distribution to his or her rightful heirs.

Supervised Probate: With this type of proceeding, the probate judge oversees every step of the administration process and has to approve of the Personal Representative’s actions. During a supervised probate, all pleadings and required documents have to be filed with the probate court and then served on interested persons or parties. This can be a very time consuming and expensive process. Each time the Personal Representative has to take an action, a legal pleading has to be filed and served on the interested party, which, in contentious situations, opens up the possibility for disagreements and attorneys’ fees.

Unsupervised Probate: In cases where there are no controversies and the parties all get along, an unsupervised probate administration may be the best option. In this situation, although the administration is not supervised by a court, there are still actions the Personal Representative needs to take, but the Personal Representative may not be required to file petitions and documents for each of those steps. However, a Personal Representative may be required to file some steps, such as the preparation of the inventory, with the court and the interested parties, but no corresponding hearing is scheduled. While this is less complicated and possibly less expensive than a supervised probate, it can still be time consuming and your financial and personal affairs would become a matter of public record.

We are here to help answer any questions you may have about estate planning, the estate planning process, or probate. Together, we can craft a one-of-a-kind plan to ensure that you and your family are properly protected. Give us a call today.

 

 

Q: Who will decide where I live?
A:A local judge would have to appoint a Guardian who would make that decision. Of course, the judge may not choose the same person you would have chosen.

Q: Who will decide medical treatment issues?
A: Depending on the state, if your family members agree, they can make that decision. However, if family members disagree, you could be back with the local judge getting a Guardian appointed.

Q: If I have no chance of recovery, will I be kept on life support?
A: Unless you have planned properly, you probably will be kept on life support. In most states, you will be kept on life support unless there is clear evidence you expressed wishes to the contrary; usually this requires something in writing.

Q: How will my bills get paid?

A: Your family or friends must go to your local court and have someone appointed your Conservator. Again, this judge probably does not know you and may not appoint the same person you would choose. In the appointment process, people must testify in open court that you do not have the ability to care for yourself. It can be draining financially and emotionally. Your Conservator would have to report to the court for as long as you are disabled.

Q: What happens if my investments need to be changed quickly due to market conditions or to reflect new circumstances and risk tolerance?

A: A court would have to appoint a Conservator. Nobody but the Conservator would be able to act for you.

Q: What happens if my son needs his tuition paid while I’m disabled?

A: Again, if you haven’t planned, nobody can act for you until the court appoints a Guardian and/or Conservator for you. If bills, such as your son’s tuition, need to be paid in the interim, a friend or family member would have to use their savings or borrow to pay the bill.

Q: How will my income tax return get filed?

A: If you are single, only your Conservator would have that authority.

  1. Revocable Living Trust: A device used to avoid probate and provide management of your property, both during life and after death.
  2. Property Power of Attorney: Instrument used to allow an agent you name to manage your property.
  3. Health Care Power of Attorney: Instrument used to allow a person you name to make health care decisions for you should you become incapacitated.
  4. Annual Gift Tax Exclusion: Technique to allow gifts without the imposition of estate or gift taxes and without using lifetime exclusion.
  5. Irrevocable Life Insurance Trust: A trust used to prevent estate taxes on insurance proceeds received at the death of an insured.
  6. Family Limited Partnership: An entity used to:
    1. Provide asset protection for partnership property from the creditors of a partner
    2. Provide protection for limited partners from creditors
    3. Enable gifts to children and parents maintaining management control
    4. Reduce transfer tax value of property.
  7. Children’s or Grandchildren’s Irrevocable Education Trust: A trust used by parents and grandparents for a child’s or grandchild’s education.
  8. Charitable Remainder Interest Trust: A trust whereby donors transfer property to a charitable trust and retain an income stream from the property transferred. The donor receives a charitable contribution income tax deduction, and avoids a capital gains tax on transferred property.
  9. Fractional Interest Gift: Allows a donor to transfer partial interests in real property to donees and obtain fractional interest discounts for estate and gift tax purposes.
  10. Private Foundation: An entity used by higher-wealth families to receive charitable income, gift, or estate tax deduction while allowing the family to retain some control over the assets in the foundation.

By Mary Ann and James P. Emswiler

  1. Are you always irritable, annoyed, intolerant or angry these days?
  2. Do you experience an ongoing sense of numbness or of being isolated from your own self or from others? Do you usually feel that you have no one to talk to about what’s happened?
  3. Since your loved one died, are you highly anxious most of the time about your own death or the death of someone you love? Is it beginning to interfere with your relationships, your ability to concentrate or live as you would like to live?
  4. Do you feel that you are always and continually preoccupied with your loved one, his or her death or certain aspects of it even though it’s been several months since his or her death?
  5. Do you usually feel restless or in “high gear”? Do you feel the need to be constantly busy… beyond what’s normal for you?
  6. Are you afraid of becoming close to new people for fear of losing again?
  7. Do you find yourself acting in ways that might prove harmful to you over time: drinking more than you used to; using more prescription or non-prescription drugs; engaging in sexual activity that is unsafe or unwise; driving in an unsafe or reckless manner (beyond what’s normal for you); or entertaining serious thoughts about suicide?
  8. Are you taking on too much responsibility for surviving family members or close friends? (What’s too much responsibility? That varies greatly and depends on the situation, but if you’re feeling heavily burdened by it, angry or like the situation is “suffocating” you, it might be time to speak with someone.)
  9. Do your grief reactions continue, over time, to be limited in some way? Are you experiencing only a few of the reactions or emotions that usually come with grief? Are you unable to express your thoughts or feelings about your loved one and his or her death in words or in actions? Do you remember only certain aspects of your loved one or your relationship together, for example only the good parts as opposed to a more complete and balanced view of him or her?
  10. Is there some aspect of what you’re experiencing that makes you wonder about whether you’re normal or going crazy? Do you feel stuck in your grief in some way, unable to move on, even though it’s been quite some time since your loved one’s death?

Beyond these ten signs, trust your own judgment. If you think that talking to a professional might help, talk to one or more people to see who you are comfortable with. Take advantage of one who seems helpful to you. After all, grief is painful enough without trying to do it all by yourself.

Upon the death of a loved one, great emotional sadness sets in as family and friends support each other during this time of loss. After finding a firm emotional foundation, it is time to address the task of administering the estate set up by the deceased.

Included below is a brief list of the actions which you or your Personal Representative and Trustee should take immediately upon death. (Many of these actions may similarly be required in the event of incapacity). This is not intended as an exhaustive or detailed explanation of all actions which should be taken. Rather, it is for use as a checklist to help the appointed representatives step in and handle as expeditiously as possible those items which demand immediate attention.

  1. Consider advising any surviving family member who is alone to telephone a friend who can share the next few hours. Shock and trauma due to the death of a relative can take unexpected forms.
  2. Notify a funeral director and clergy, and make an appointment to discuss funeral arrangements. Request several copies of decedent’s death certificate, which you’ll need for his or her employer, life insurance companies, and/or decedent’s attorney for legal procedures.
  3. Contact by phone and notify the immediate family, close friends, business colleagues and employer.
  4. Arrange for care for members of the immediate family, including appropriate child care, having people at the decedent’s house, etc.
  5. Locate the decedent’s important papers. Gather as many of the decedent’s papers as possible, and continue to do so for the next few weeks.
  6. Contact our office for a consultation or notify the attorney who will be handling the decedent’s affairs. Make an appointment immediately because a tax return may be due within nine (9) months of death. This meeting is important to review decedent’s estate planning documents and to discuss state and federal death taxes that may be payable. The attorney will also determine the extent to which it is necessary or advisable to open a probate estate. (In the event of incapacity, the attorney may suggest additional steps which should be taken for estate planning purposes, particularly if death is imminent.)
  7. Telephone decedent’s employee benefits office with the following information: name, Social Security number, date of death (or incapacity); whether the death (or incapacity) was due to accident or illness; and your name and address. The company can begin to process benefits immediately.
  8. If decedent was eligible for Medicare, notify the local program office and provide the same information as in Step # 7.
  9. Notify life, accident or disability insurers of decedent’s death or disability. Give the same information as in Step # 7, and ask what further information is needed to begin processing your claim. Ask which payment option decedent had elected, and select another option if you would so prefer. If there is no payment option, you will be paid in a lump sum.
  10. Notify the decedent’s Social Security office of the death. Claims may be expedited if a surviving family member goes in person to the nearest office to investigate making a claim for survivor’s benefits. Look for the address under U.S. Government in the phone book.
  11. If you need emergency cash before insurance claims are paid, a cash advance may be available from life insurance benefits to which you are entitled.
  12. If decedent was ever in the military service, notify the Veterans’ Administration. Surviving relatives may be eligible for death or disability benefits.
  13. Record in a small ledger all money you or the immediate family spends. These figures may be needed for tax returns.
  14. Remember that a surviving family member may be in a highly emotional state. Therefore, they should avoid entering contracts for anything, and avoid spending or lending large sums of money. For our clients, consult the section of the Portfolio entitled “Other Documents” before proceeding further.
  15. DO NOT CHANGE THE TITLE OF ANY ASSETS! This can create unnecessary problems for you. Please contact our office for a consultation before you start this process.

Upon the death of a loved one, great emotional sadness sets in as family and friends support each other during this time of loss. After finding a firm emotional foundation, it is time to address the task of administering the estate set up by the deceased.

Included below is a brief list of the actions which you or your Personal Representative and Trustee should take immediately upon death. (Many of these actions may similarly be required in the event of incapacity). This is not intended as an exhaustive or detailed explanation of all actions which should be taken. Rather, it is for use as a checklist to help the appointed representatives step in and handle as expeditiously as possible those items which demand immediate attention.

  1. Consider advising any surviving family member who is alone to telephone a friend who can share the next few hours. Shock and trauma due to the death of a relative can take unexpected forms
  2. Notify a funeral director and clergy, and make an appointment to discuss funeral arrangements. For our clients, consult the “Location List” and the “Estate Planning Letter” sections in your Portfolio for the names and phone numbers of the appropriate parties and any special requests of the decedent. Request several copies of decedent’s death certificate, which you’ll need for his or her employer, life insurance companies, and/or decedent’s attorney for legal procedures
  3. Contact by phone and notify the immediate family, close friends, business colleagues and employer (for our clients, see “Location List” section for persons to contact)
  4. Arrange for care for members of the immediate family, including appropriate child care, having people at the decedent’s house, etc
  5. Locate the decedent’s important papers. For our clients, consult the “Location List” section in your Portfolio. Gather as many of the decedent’s papers as possible, and continue to do so for the next few weeks
  6. Contact our office for your consultation or notify the attorney who will be handling the decedent’s affairs. Make an appointment immediately because a tax return may be due within nine (9) months of death. This meeting is important to review decedent’s estate planning documents and to discuss state and federal death taxes that may be payable. The attorney will also determine the extent to which it is necessary or advisable to open a probate estate. (In the event of incapacity, the attorney may suggest additional steps which should be taken for estate planning purposes, particularly if death is imminent.
  7. Telephone decedent’s employee benefits office with the following information: name, Social Security number, date of death (or incapacity); whether the death (or incapacity) was due to accident or illness; and your name and address. The company can begin to process benefits immediately
  8. If decedent was eligible for Medicare, notify the local program office and provide the same information as in Step # 7
  9. Notify life, accident or disability insurers of decedent’s death or disability. Give the same information as in Step # 7, and ask what further information is needed to begin processing your claim. Ask which payment option decedent had elected, and select another option if you would so prefer. If there is no payment option, you will be paid in a lump sum
  10. Notify the decedent’s Social Security office of the death. Claims may be expedited if a surviving family member goes in person to the nearest office to investigate making a claim for survivor’s benefits. Look for the address under U.S. Government in the phone book
  11. If you need emergency cash before insurance claims are paid, a cash advance may be available from life insurance benefits to which you are entitled
  12. If decedent was ever in the military service, notify the Veterans’ Administration. Surviving relatives may be eligible for death or disability benefits
  13. Record in a small ledger all money you or the immediate family spends. These figures may be needed for tax returns
  14. Remember that a surviving family member may be in a highly emotional state. Therefore, they should avoid entering contracts for anything, and avoid spending or lending large sums of money. For our clients, consult the section of the Portfolio entitled “Other Documents” before proceeding further
  15. DO NOT CHANGE THE TITLE OF ANY ASSETS! This can create unnecessary problems for you. Please contact our office for a consultation before starting this process.

Review the questions below to see if it is time for an Estate Plan Check-Up

  1. Has it been more than 3 years since you last conducted Nevada estate planning?
  2. If you have minor children, have there been any changes to the Guardians named for them, or does the plan omit guardianship?
  3. Since creating your estate plan, are your children now adults?
  4. If you have a Trust, are there any assets that you have not transferred into your Trust?
  5. If you become disabled, is your Power of Attorney document for financial decisions older than 5 years?
  6. If you become disabled, is your Power of Attorney document for health care decisions older than 5 years?
  7. Are there any gifts you would like to make to charities at your death that have not been clearly set forth in your planning documents?
  8. Is there any personal property that you would like distributed that have not been clearly set forth in your planning documents, including the care of any surviving pets?
  9. Since you signed your planning documents, have you changed your mind about any aspect of the plan?
  10. Has the value of your assets changed since you signed your planning documents?
  11. Have you added or changed the kind of assets you own since your planning documents were signed?
  12. Have you recently been married, divorced or widowed since your estate planning documents were signed?
  13. Have you had children since your estate planning documents were signed?
  14. Have your children had children?
  15. Have any of your children been married, divorced or died since your planning documents were signed?
  16. Have you, your spouse or child become physically or mentally incapacitated since your planning documents were signed?
  17. Have you bought or sold a house or other piece of property since your planning documents were signed?
  18. Are you contemplating selling stock or other valuable assets with a low cost basis?
  19. Have you moved between states since your planning documents were signed?

If you have answered ‘YES’ to any of these questions, it is a good idea to schedule a Nevada estate planning appointment.

  1. Revocable Living Trust: A device used to avoid probate and provide management of your property, both during life and after death.
  2. Property Power of Attorney: Instrument used to allow an agent you name to manage your property.
  3. Health Care Power of Attorney: Instrument used to allow a person you name to make health care decisions for you should you become incapacitated.
  4. Annual Gift Tax Exclusion: Technique to allow gifts without the imposition of estate or gift taxes and without using lifetime exclusion.
  5. Irrevocable Life Insurance Trust: A trust used to prevent estate taxes on insurance proceeds received at the death of an insured.
  6. Family Limited Partnership: An entity used to:
    1. Provide asset protection for partnership property from the creditors of a partner
    2. Provide protection for limited partners from creditors
    3. Enable gifts to children and parents maintaining management control
    4. Reduce transfer tax value of property.
  7. Children’s or Grandchildren’s Irrevocable Education Trust: A trust used by parents and grandparents for a child’s or grandchild’s education.
  8. Charitable Remainder Interest Trust: A trust whereby donors transfer property to a charitable trust and retain an income stream from the property transferred. The donor receives a charitable contribution income tax deduction, and avoids a capital gains tax on transferred property.
  9. Fractional Interest Gift: Allows a donor to transfer partial interests in real property to donees and obtain fractional interest discounts for estate and gift tax purposes.
  10. Private Foundation: An entity used by higher-wealth families to receive charitable income, gift, or estate tax deduction while allowing the family to retain some control over the assets in the foundation.

Contact Anderson, Dorn & Rader Ltd. to learn about other estate planning techniques. 

Feel free to make an appointment with our firm to review your estate plan.

estate planningWhen 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.

Types of Retirement Accounts

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.

Stretching a Roth Individual Retirement Account

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.

Access Our Special Report!

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.

estate disputeFor 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.

Will Challenges

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.

Living Trusts

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.

The Human Element

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.

Attend a Free Webinar!

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.

 

 

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