What Is a General Power of Appointment?
Estate planning in Nevada requires tools that can adapt to life's unexpected changes. A general power of appointment is one such tool, offering unmatched flexibility to ensure your estate plan aligns with evolving circumstances, even after your death.
The Flexibility of a General Power of Appointment in Nevada Estate Planning
Life is full of surprises—family dynamics, economic shifts, and legal changes can all impact your carefully crafted estate plan. While you can make adjustments while you're alive, what happens after you're gone? This is where a general power of appointment becomes invaluable for Nevada estate planning. By granting this power, you enable a trusted individual to make future decisions about the distribution of your assets based on the situation at that time.
How Does a General Power of Appointment Work in Nevada Estate Planning?
When creating an estate plan in Nevada, you may choose to leave assets directly to beneficiaries or hold them in a trust with specific instructions. A general power of appointment adds another layer of flexibility. It allows the designated person, known as the powerholder, to redirect or reallocate assets within the trust. This can include selecting new beneficiaries or adjusting how and when assets are distributed.
In simpler terms, it's like giving someone the authority to decide the fate of your property after you're no longer around to make those decisions yourself. The powerholder has the discretion to exercise this power or leave the original plan intact.
Key terms to understand include:
A general power of appointment is particularly broad, allowing the powerholder to even direct assets to themselves, their estate, or their creditors.
Why Consider a General Power of Appointment in Nevada Estate Planning?
The main advantage of a general power of appointment in Nevada estate planning is the long-term flexibility it provides. This power allows adjustments to be made after your death, accommodating unforeseen circumstances like changes in beneficiaries' financial situations, tax laws, or personal circumstances. For example, if a beneficiary develops financial issues, the powerholder can modify the distribution to protect the assets.
From a tax planning perspective, a general power of appointment can also offer potential benefits. Assets subject to this power are included in the powerholder's estate, which may allow for a basis adjustment (step-up) in value, potentially reducing capital gains taxes for heirs. However, this inclusion can also increase the estate's value, potentially leading to estate taxes.
Is a General Power of Appointment Right for Your Nevada Estate Plan?
Deciding whether to include a general power of appointment in your Nevada estate plan requires careful consideration. While it provides significant flexibility, it also involves balancing potential tax implications. Our attorneys can help you understand how this powerful tool can be tailored to meet your specific estate planning goals and provide guidance if you have been entrusted with such a power. Contact us today!
Many pet owners in Nevada and across the U.S. overlook including their beloved pets in their estate plans. While some may have plans for their pets after death, few consider what happens if they become incapacitated. Planning for your pets through tools like pet trusts and pet wills can ensure your animal companions are well cared for, even during times of personal incapacity or after your passing.
Incorporating pets into your estate plan isn’t just a loving gesture—it’s essential for ensuring they receive the care they deserve, no matter what happens to you. Whether through temporary arrangements for a caregiver or long-term planning with a trust, protecting your pets legally guarantees they are treated as important members of your family.
Though some pet owners include pets in their wills, a pet trust offers more flexibility and control. A pet trust is a legal document that ensures funds are set aside for your pet’s care, with a trustee overseeing the process. The trust applies not only after your death but also during periods of incapacity. This feature helps protect pets if you become unable to care for them due to illness or disability.
All 50 states, including Nevada, allow pet trusts. In a trust, you can designate caretakers and specify detailed instructions for your pet's care, covering essentials like food, shelter, and veterinary attention. You can also include provisions for multiple pets or different species, ensuring they receive the appropriate resources.
While a pet will allows you to leave your pet to someone as part of your estate, it has several limitations. Wills only take effect after death, so they don’t cover incapacity situations. Furthermore, the person named to care for your pet in a will has the right to refuse, which could leave your pet’s future uncertain.
Naming alternate pet guardians in your will can help, but it’s also vital to recognize that many organizations, like shelters, may not be equipped for long-term care. This makes a pet trust a more reliable tool for securing your pet’s future.
Planning for incapacity is crucial because pets often end up in shelters if their owners become ill or incapacitated. According to reports, millions of pets enter shelters every year, with some facing euthanasia due to a lack of provisions for their care. A properly structured pet trust or pet will ensures that your animal is never left in limbo during such emergencies.
In addition to pet trusts and wills, a pet care power of attorney can help address care during incapacity. This legal document gives someone the authority to make decisions on your behalf regarding your pet. You can specify what types of care your pet should receive and who will oversee that care, ensuring your pet’s needs are met no matter your situation.
As a millennial, your contributions to the workforce are significant, and you're driving positive changes in the world. We recognize that your concerns might differ from those of previous generations, and we're here to help you create an estate plan that addresses your unique needs and priorities. In Reno, planning for potential incapacity is essential to ensure your wishes are honored if you cannot manage your affairs. Here are key steps to help you develop a comprehensive estate plan.
If you become incapacitated due to injury, illness, or other reasons, it's crucial to have legally designated someone to act on your behalf. Without this, no one can step in without court intervention, including making medical decisions or managing your finances. If a court must appoint someone, state law often prioritizes immediate family members over significant others or friends.
To avoid this, appoint an agent under a financial power of attorney to handle financial decisions and a medical power of attorney for healthcare decisions. These roles require different skills, and you can choose the same person or different individuals for each role.
Millennials are a dominant force in the workforce, with many jobs offering life insurance and retirement plans. It's crucial to review and complete beneficiary designations accurately. Incorrect designations can lead to probate and distribute assets according to your will or state rules if you lack a will. We can help you choose the right beneficiaries and determine how best to leave assets to fulfill your wishes.
If you're unmarried, your assets will be distributed according to state laws, which typically prioritize family over significant others. Proactive estate planning ensures your wishes are followed.
Millennials are the largest group of pet owners, so it’s important to designate a caregiver for your pets, allocate funds for their care, and consider compensating the caregiver.
Estate planning can be overwhelming, but we're here to help you navigate the process, ensuring you and your loved ones are well-prepared for the future. Reach out to us to schedule your appointment and gain peace of mind knowing your affairs are in order.
Fewer people are creating estate plans today than in previous years. Research shows that in 2024, less than one-third of Americans have a will. Every adult—regardless of age—should at least have a will, and many could benefit from additional estate planning documents such as trusts, powers of attorney, and advance directives. Even if you have an estate plan, it may no longer align with your current goals if it’s outdated.
As we age, reflecting on our mortality is natural. This can prompt us to take actions to secure our legacy. During the peak of COVID-19, many Americans focused on estate planning, leading to a surge in the creation of wills and trusts. However, this trend has since reversed, with fewer people maintaining up-to-date estate plans.
In 2024, 43% of adults over 55 reported having wills, down from 46% in 2023 and 48% in 2020, according to Caring.com. Additionally, the Center for Retirement Research at Boston College notes that the number of people aged 70 or older with wills declined from 73% in 2000 to 64% in 2020. While more young Americans are creating wills, 75% of those aged 18-54 still don’t have one.
Procrastination, uncertainty about how to start, and concerns about complexity and cost are common reasons for delaying estate planning.
Not having an estate plan, or having an incomplete or outdated one, can lead to significant issues. Without a plan, your family may have to turn to the courts for decisions about your estate, which can be time-consuming, costly, and contentious. Disagreements can lead to legal battles and family discord.
According to "Estate Planning for the Post-Transition Period," 70% of estate settlements result in asset losses or family disharmony due to estate planning failures. Common reasons for failure include lack of follow-through, not informing heirs about the plan, and not keeping the plan updated.
For example, setting up a trust to avoid probate or manage assets for a loved one requires transferring ownership of assets to the trust. Failing to do this means the trust won’t accomplish its purpose. Similarly, creating powers of attorney or medical directives and not informing anyone about them renders these documents useless.
An outdated estate plan can lead to many of the same problems as not having one. Loved ones may not be adequately provided for, assets may go to unintended beneficiaries, and your estate may face unnecessary taxes and probate proceedings.
Estate planning attorneys recommend reviewing your plan every few years or after significant life changes. Here are some signs your estate plan may need updating:
Regularly revisit your estate plan, including agents, beneficiaries, and distribution plans. Ensure you have backup beneficiaries and agents and update provisions to address changing circumstances.
Prepare beneficiaries for their inheritance by discussing how to manage it. If you have doubts about their financial acumen, consider placing the inheritance in a trust with specific usage instructions.
Communicate openly with loved ones about your estate plan’s value and what they can expect. Transparency helps prevent surprises and conflicts. Also, inform them where to find your estate planning documents and ensure they have legal access after your death.
Life is constantly changing, and an outdated estate plan can be nearly as problematic as having no plan at all. While DIY estate planning tools are available, they can lead to significant mistakes. To ensure your estate plan is accurate and effective, contact an estate planning attorney in Reno and schedule an appointment.
It has been said that the only thing harder than being an addict is loving one. It can be particularly difficult for a parent to bring a child into the world, full of hopes and dreams about their future, and then watch them spiral down into addiction. Having someone in your life who struggles with substance abuse is never easy, no matter the circumstances, the relationship, or their age. Estate planning often involves dealing with difficult situations. Putting off thinking about these decisions is not the solution. By delaying making plans for how best to care for an addicted loved one when you are no longer around, you risk losing an opportunity and control that can further complicate matters.
Approximately 17 percent of Americans over the age of 12 had a substance use disorder in 2022, according to the latest National Survey on Drug Use and Health. That is equivalent to 48.7 million people, including 29.5 million who have an alcohol use disorder, 27.2 million who have a drug use disorder, and 8 million who had both alcohol and drug use disorders. Despite these grim statistics, the good news is that life after addiction is not just possible—it is the norm. Most people experiencing alcohol and drug addiction recover, survive, and go on to live full, healthy lives. A study from the Centers for Disease Control and the National Institute on Drug Abuse found that three out of four addicts eventually enter recovery.
Treatment and recovery services are critical to successful addiction recovery. Financial barriers to these services are one reason why people struggling with substance abuse go untreated. Family members of addicts might be in a position to provide them with money and material support but worry that doing so will be counterproductive.
There is not a one-size-fits-all solution for assisting a loved one who is dealing with substance abuse. What most experts agree on, though, is that you cannot force someone to undergo treatment. Family members can encourage recovery, but ultimately, the decision to seek therapy is up to the individual. When considering including an addicted loved one in an estate plan, it is useful to remember that estate planning can be uniquely tailored to the needs of each family and individual. Here are some points to keep in mind as you try to fit a drug- or alcohol-dependent person into your plan:
A trust does not guarantee that an addicted person will be protected from their own bad decisions, but it can be structured in a way that helps ensure that an inheritance is used to their benefit and not to their detriment.
A trust allows you—the trustmaker—to set the terms for how the beneficiaries may use and have access to trust funds. The terms can be as specific as you want and may include provisions specifically designed to tackle addiction. For example, the trust could include the following types of terms:
Selecting a trustee is just as crucial as the provisions of a trust created for a beneficiary who suffers from addiction. The trustee should be somebody who will act in the best interests of the beneficiary while striving to preserve family harmony. When selecting a trustee, consider the following:
A final consideration about planning for an addicted loved one is what can happen if you fail to plan. Without an estate plan, the unknowns can be greater—and more consequential. The court will rely on state law to determine who gets your money and property, how much they will receive, and when they receive it. Your loved one may end up with a lump sum of money and no restrictions. This default plan does not address the underlying addiction problem. And if your loved one is not a family member, they may not receive anything from you at all if you do not put an estate plan in place.
You might feel torn between a desire to help an addict in your life and ensuring that your hard-earned money is put to its best use after you have passed away. Or maybe you have been your loved one’s rock, helping them stay sober and avoid relapse, and want to continue doing everything you can for them for as long as you can. Addiction is often a lifelong struggle. To make a plan that provides addiction assistance for someone you care about, even after you have passed away, contact our estate planning attorneys in Reno.
Moving out is a significant milestone in adulthood. For the first time, you might need to find housing, get insurance, sign up for utilities, and manage your finances independently. This can feel overwhelming as you adapt to a new environment and possibly a new career.
With greater independence comes more responsibility. Your family might offer advice on navigating adulthood, but they may not mention the importance of having your legal affairs in order. This includes creating an up-to-date estate plan with the help of an estate planning attorney in Reno.
Compared to previous generations, today's young adults are less likely to have reached traditional milestones like marriage, financial independence, and living apart from their parents. In 1980, 84% of 25-year-olds lived independently, compared to just 68% in 2021, according to Pew Research. Recent Census data shows that the percentage of 25-to-34-year-olds living with their parents has increased significantly since 1960.
Despite high inflation, rising interest rates, and a challenging housing market, there has been a post-pandemic trend toward independent living among young adults. While the percentage of 25-to-34-year-olds living with parents remains high by historical standards, it dropped to 19% in 2022, the lowest level in a decade.
As a young adult, you might feel invincible and not see the immediate need for an estate plan. However, creating an estate plan with an estate planning attorney in Reno is crucial. Many young people haven't heard of estate planning or only have a vague understanding of it, as it's often a topic parents don't discuss.
An estate plan includes legal tools to manage your assets and address your healthcare preferences if you become incapacitated or pass away. There's a 25% chance that someone in their 20s today will experience a long-term disability before retirement. Despite this, only 24% of 18-to-34-year-olds have a will.
Even if you don't have significant assets, having a will is important to manage your possessions and name a guardian for minor children or pets. A will is just one aspect of an estate plan, which also allows you to designate decision-makers if you're incapacitated.
Financial Power of Attorney: Authorizes someone to handle your finances, such as paying bills, managing accounts, and filing taxes. Medical Power of Attorney: Authorizes someone to make healthcare decisions for you. Living Will: Documents your preferences for end-of-life care. Living Trust: Can complement a financial power of attorney and offer additional benefits.
Without these tools, a court may appoint someone to make decisions for you, which could lead to disputes among family members or someone you wouldn't have chosen gaining control.
Your parents may be natural choices to serve as your agents, but consider their availability and proximity. If they are far away or frequently travel, you might choose someone else. Trusted adults, like friends or professionals, can also serve as agents. Ensure they understand their responsibilities and are willing to serve. It's also wise to designate backup agents.
Moving away from home can be both exciting and nerve-wracking. While you're focusing on new connections and routines, don't forget about your estate plan. Being an adult means facing uncomfortable realities and planning for potential challenges.
Take control of your future by scheduling a meeting with an estate planning attorney in Reno. Contact us to ensure your legal affairs are in order.
The tale of Snow White and the seven dwarfs is a classic, with the central conflict revolving around Snow White's relationship with her stepmother. After the king remarried to provide a motherly figure for Snow White, everything seemed peaceful—until the king's death. The Queen's jealousy drove her to plot against Snow White, a conflict that escalated dramatically. This story, although a fairy tale, highlights the potential family discord that can arise when the head of the family dies without an estate plan. Had the king sought the assistance of an estate planning attorney in Reno, the story could have ended quite differently.
We can only speculate about the king’s wishes, but if he had documented them legally, they would have been clear and enforceable. This would have provided clarity and direction, making it easier for beneficiaries and third parties to honor his intentions.
Revocable Living Trust and Pour-Over Will:
A revocable living trust would have allowed the king to manage his assets during his lifetime and specify how they should be handled after his death. By transferring his assets to the trust or naming the trust as the beneficiary, he could have avoided probate and protected the privacy and inheritance of his loved ones. A pour-over will would ensure any assets not initially placed in the trust would be transferred to it upon his death.
Without a valid estate plan, the law would determine who handles the king’s affairs. This might have placed the stepmother in control due to her status as the surviving spouse. With an estate plan, the king could have designated a trusted friend, advisor, or neutral third party as his personal representative or successor trustee to manage his affairs and protect his daughter's interests.
Snow White, being young, likely needed guidance and oversight for any inheritance. The king could have established a trust for her, either within his will or as part of a revocable living trust, detailing specific instructions for her care and the management of her inheritance. This trust could ensure Snow White received her inheritance at appropriate times and under suitable conditions.
Similarly, the king could have provided for his wife by placing her inheritance in a trust, specifying how and when she would receive it, and ensuring any remaining assets would eventually go to Snow White.
The story of Snow White teaches us valuable lessons about family and inheritance. Ensuring your loved ones are cared for and your wishes are honored requires careful planning. To avoid the pitfalls and ensure a happy ending for your family, contact our estate planning attorneys in Reno. We can help you create a comprehensive plan tailored to your needs and circumstances.
Contemplating the future of our loved ones after we're gone can be tough. While acknowledging our mortality isn't easy, proactive estate planning allows us to ensure our wishes are fulfilled, providing a secure future for those we care about. In Reno, effective estate planning ensures your assets and wishes are properly managed and respected.
The initial step in estate planning is identifying your priorities. Your unique circumstances, the needs of your loved ones, and your philanthropic goals will shape these priorities. Clarifying your goals is essential to work with advisors and ensure sufficient resources to meet your wishes. This teamwork also helps avoid conflicts or issues within your estate plan.
Consider the following common estate planning priorities:
Take the following steps to prepare for creating your estate plan:
Creating a comprehensive estate plan in Reno can be one of the most valuable gifts for your loved ones. By clearly defining your priorities and working with experienced professionals, you can ensure your estate plan reflects your wishes and secures your loved ones' future. Contact us to learn more about how we can help you design a plan tailored to your needs.
When most people think about creating an estate plan, they usually focus on what will happen when they die. They typically do not consider what their wishes would be if they were alive but unable to manage their own affairs (in other words, if they are alive but incapacitated). In many cases, failing to plan for incapacity can result in families having to seek court involvement to manage a loved one’s affairs. It does not matter who you are, how old you are, or how much you have—having a proper plan in place to address your incapacity or death is necessary for everyone. Recently, comedian and late-night talk show host Jay Leno had to seek court involvement to handle his and his wife’s estate planning needs due to his wife’s incapacity. Consulting with Reno estate planning lawyers can help you avoid such situations.
A conservator is a court-appointed person who manages the financial affairs for a person who is unable to manage their affairs themselves (also known as the ward). In Nevada, a conservator is known as a Guardian. The conservator is responsible for managing the ward’s money and property and any other financial or legal matters that may arise. They are also required to periodically file information with the court to prove that they are abiding by their duties. To have a conservator appointed, an interested person must petition the court, attend a hearing, and be appointed by a judge. This can be very time-consuming, and there are court and attorney costs that must be paid along the way. Reno estate planning lawyers can help streamline this process and provide necessary guidance.
In January 2024, Jay Leno petitioned the court to be appointed as the conservator of the estate of his wife, Mavis Leno, so that he could have an estate plan prepared on her behalf and for her benefit. Unfortunately, Mrs. Leno has been diagnosed with dementia and has impaired memory. Her impairment has made it impossible for her to create her own estate plan or participate in the couple’s joint planning. According to court documents, Mr. Leno wanted to set up a living trust and other estate planning documents to ensure that his wife would have “managed assets sufficient to provide for her care” if he were to die before her. Right now, Mr. Leno is managing the couple’s finances, but he wanted to prepare for a time when he is no longer able to do so.
On April 9, 2024, the court granted Mr. Leno’s petition. According to the court documents, the judge determined that a conservatorship was necessary and that Mr. Leno was “suitable and qualified” to be appointed as such. During the proceedings, the judge found “clear and convincing evidence that a Conservatorship of the Estate is necessary and appropriate.”
Although there was a favorable outcome in this particular case, it still took several months for Mr. Leno to be appointed by the court. In addition to the initial filings and court appearances, there will likely be ongoing court filing requirements to ensure that Mrs. Leno’s money is being managed appropriately. Had they prepared an estate plan ahead of time, much of this time and hassle would likely have been avoided. Reno estate planning lawyers can assist in preparing these crucial documents ahead of time to prevent such scenarios.
While many people may dismiss the Lenos’ experience as something that applies only to the rich and famous, the truth is that you could find yourself in the same situation (although with a smaller amount of money and property at play) if you are not careful. Let’s use this opportunity to learn from their mistakes.
We can help you and your loved ones regardless of where you find yourself in the estate planning process. Whether you are looking to proactively plan to ensure that your wishes are carried out during all phases of your life, or if you need assistance with a loved one who can no longer manage their own affairs, give us a call. Our team of Reno estate planning lawyers is here to assist you.
What Is Next for Your Estate Plan?
Having an estate plan is a great way to ensure you and your loved ones are protected today and in the future. When creating an estate plan with our estate planning attorneys in Reno, we look at what is going on in your life at that time. But because life is full of changes, it is important to make sure your plan can change to accommodate whatever life throws your way. Sometimes, we can make your first estate plan flexible to account for potential life changes. Other times, we must change or add to the tools we use to ensure that your ever-evolving wishes will be carried out the way you want.
Life is constantly changing. The following are some important events that may require you to reevaluate your estate plan in Reno:
It is important to know when you create your first estate plan in Reno, that you are not locked into this plan for the rest of your life. The following are common changes we can make to your estate plan to ensure that we adequately address your evolving concerns and wishes.
A will (sometimes referred to as a last will and testament) is a tool that allows you to leave your money and property to anyone you choose. It names a trusted decision-maker (a personal representative or executor) to wind up your affairs at your death, lists how your money and property will be distributed, and appoints a guardian to care for your minor children. If you rely on a will as your primary estate planning tool, the probate court will oversee the entire administration process at your death, but the probate process is expensive, time-consuming, and on the public record.
On the other hand, a revocable living trust is a tool in which a trustee is appointed to hold title to and manage the accounts and property that you transfer to your trust for one or more beneficiaries. Typically, you will serve as the initial trustee and be the primary beneficiary. If you are incapacitated (unable to manage your affairs), the backup trustee will step in and manage the trust for your benefit with little interruption and with less potential for costly court involvement. Upon your death, the backup trustee manages and distributes the money and property according to your instructions in the trust document, again without court involvement.
If your wealth has grown or you have new loved ones to provide for, you may find the privacy, expediency, and potential cost-savings associated with a revocable living trust more appropriate for your situation. Consult with Estate Planning Reno to see if this option is right for you.
At some point, you may decide that you need life insurance—or more of it—to provide for your loved ones sufficiently. If the value of your life insurance is especially high, you may want to consider adding protection for the funds in your estate plan, as well as engaging in estate tax planning. Both goals can be accomplished by using an irrevocable life insurance trust (ILIT). Once you create the ILIT, you fund it either by transferring ownership of an existing life insurance policy into the trust or by having the trust purchase a new life insurance policy. Once the trust owns a policy, you then make cash gifts to the trust to pay for the insurance premiums. These gifts can count against your annual gift tax exclusion, so you likely will not owe taxes at the point of these transfers. Upon your death, the trust receives the death benefit of the policy, and the trustee holds and distributes the money according to your instructions in the trust document. This tool allows you to remove the value of the life insurance policy and the death benefit from your taxable estate while allowing you to control what will happen to the death benefit. An ILIT can also be helpful if you want to name beneficiaries for the trust who differ from the beneficiaries you name in other estate planning tools.
As you accumulate more wealth or become more philanthropically inclined, you may wish to include separate tools to benefit a cause that is near and dear to your heart. Depending on your unique tax situation, using tools such as a charitable remainder or charitable lead trust can allow you to use your accounts or property that are increasing in value to benefit the charity while offering you some potential tax deductions.
A charitable remainder trust (CRT) is a tool designed to potentially reduce both your taxable income during life and estate tax exposure when you die by transferring cash or property out of your name (in other words, you will no longer be the owner). As part of this strategy, you will fund the trust with the money or property of your choosing. The property will then be sold, and the sales proceeds will be invested in a way that will produce a stream of income. The CRT is designed so that when it sells the property, the CRT will not have to pay capital gains tax on the sale of the stocks or real estate. Once the stream of income from the CRT is initiated, you will receive either a set amount of money per year or a fixed percentage of the value of the trust (depending on how the trust is worded) for a term of years. When the term is over, the remaining amount in the trust will be distributed to the charity you have chosen.
A charitable lead trust (CLT) operates in much the same way as the CRT. The major difference is that the charity, rather than you as the trustmaker, receives the income stream for a term of years. Once the term has passed, the individuals you have named in the trust agreement will receive the remainder. This can be an excellent way to benefit a charity while still providing for your loved ones. Also, you may receive a deduction for the value of the charitable gifts that are made periodically over the term. These deductions may offset the gift or estate tax that may be owed when the remaining amount is given to your beneficiaries.
Adding Documents to Care for Your Minor Child
If you have not reviewed your estate plan since having or adopting children, you should consider incorporating some additional tools into your estate plan with estate planning attorneys in Reno. An important tool recognized in Nevada is a document that grants temporary guardianship over your minor child. This can be used if you are traveling without your child or are in a situation where you are unable to quickly respond to your child’s emergency. This document gives a designated individual the authority to make decisions on behalf of the minor child (with the exception of agreeing to the marriage or adoption of the child). This document is usually only effective for six months to a year but can last for a longer or shorter period, depending on your state’s law. You still maintain the ability to make decisions for your child, but you empower another person to have this authority in the event you cannot address the situation immediately.
We are committed to making sure that your wishes are carried out in the way that you want. For us to do our job, we must ensure that your wishes are properly documented and that any relevant changes in your circumstances are accounted for in your estate plan. If you need an estate plan review or update, give us a call. Our expert team at Estate Planning Reno is here to assist you.
Estate planning is a vital step in securing your legacy and ensuring that your assets are distributed according to your wishes. However, one crucial question often derails even the most well-thought-out estate plans: "Are my beneficiary designations up-to-date and accurate?" As estate planning attorneys in Reno, we at Anderson, Dorn & Rader Ltd. are here to help you understand the importance of beneficiary designations and how to ensure they align with your overall estate plan.
Beneficiary designations are instructions you provide to financial institutions, insurance companies, and retirement plan administrators, specifying who should receive the proceeds of your accounts upon your death. These designations override your will and trust, making them a crucial element of your estate plan.
Beneficiary designations ensure that your assets are transferred quickly and directly to the intended recipients without the need for probate. This can save time, reduce legal fees, and provide immediate financial support to your beneficiaries. However, they must be carefully managed to avoid conflicts and ensure they reflect your current wishes.
One of the most common mistakes is failing to update beneficiary information after major life events such as marriage, divorce, the birth of a child, or the death of a loved one. Outdated beneficiary designations can lead to unintended recipients, causing family disputes and legal complications.
Naming minor children as beneficiaries without establishing a trust or appointing a guardian can create legal challenges, as minors cannot legally manage inherited assets. Instead, consider setting up a trust or appointing a guardian to manage the assets until the children reach adulthood.
Failing to name contingent beneficiaries—those who will inherit if the primary beneficiary predeceases you—can result in your assets becoming part of your probate estate, defeating the purpose of having beneficiary designations. Always include contingent beneficiaries to ensure your estate plan is comprehensive.
If your beneficiary designations do not align with your will or trust, the designations will take precedence, potentially leading to outcomes that contradict your estate planning intentions. For example, if your will leaves all assets to your spouse, but your beneficiary designations name a former spouse, the former spouse will receive those assets.
Conflicting information can lead to legal disputes among family members, causing delays and increasing the cost of estate administration. Ensuring that your beneficiary designations are consistent with your overall estate plan helps prevent such conflicts and ensures your wishes are honored.
Take the time to review all your financial accounts, insurance policies, and retirement plans to ensure the beneficiary designations are current and accurately reflect your wishes. This includes checking for primary and contingent beneficiaries.
Working with experienced estate planning attorneys in Reno can help you navigate the complexities of beneficiary designations. An attorney can provide guidance on the best strategies for aligning your designations with your overall estate plan and ensure that all legal requirements are met.
Make it a habit to review and update your estate plan, including beneficiary designations, at least once a year or after significant life events. Regular updates help ensure that your estate plan remains accurate and effective, providing peace of mind for you and your loved ones.
Beneficiary designations play a critical role in your estate plan, but they are often overlooked. By understanding their importance, avoiding common mistakes, and ensuring they are consistent with your overall estate plan, you can safeguard your assets and ensure your legacy is managed according to your wishes.
Contact Anderson, Dorn & Rader Ltd. for a consultation to learn how real estate administration works and how you can properly prepare for it. Let us help you navigate the legal landscape to secure your legacy and provide peace of mind for your loved ones.
When it comes to estate administration, TV shows and movies often take creative liberties, leading to widespread misconceptions. While these portrayals can be entertaining, they rarely reflect the complexities of real-life estate planning and administration. As Reno estate planning lawyers, we at Anderson, Dorn & Rader Ltd. are here to clarify some of the common myths and provide accurate information to help you make informed decisions about your estate.
One of the most common misconceptions perpetuated by TV and movies is the immediate distribution of assets following someone's death. Characters often receive their inheritance instantaneously, with little to no legal proceedings.
In reality, the distribution of assets is far from instantaneous. The estate must go through a series of legal procedures, including probate, which can take several months or even years. During probate, the court oversees the validation of the will, payment of debts and taxes, and distribution of the remaining assets to the beneficiaries. This process ensures that all legal requirements are met, and any disputes are resolved before the assets are distributed.
TV and movies often depict the probate process as a long, drawn-out nightmare filled with endless court battles and legal fees. This portrayal can be misleading and discourages people from engaging in necessary estate planning.
While probate can be complex, it is not always the horror story that entertainment media suggests. With proper estate planning, the process can be streamlined and managed efficiently. Creating a comprehensive estate plan, including a will and possibly a trust, can help minimize the probate process's length and complexity. Working with experienced Reno estate planning lawyers can further ensure a smoother and more manageable probate experience.
Another common misconception is that legal challenges to an estate are rare and easily resolved. In movies, disputes over a will or trust are often quickly settled with a dramatic courtroom revelation.
In reality, legal challenges to an estate can be complex, contentious, and protracted. Disputes over the validity of a will, allegations of undue influence, or conflicts among beneficiaries can lead to lengthy legal battles. These challenges require careful navigation by skilled attorneys to ensure that the deceased's wishes are honored and that the estate is administered fairly. Proper estate planning and clear documentation can help mitigate the risk of such disputes.
TV and movies often depict the resolution of estate matters as happening within a very short timeframe. Characters might resolve all estate issues in a single episode or film, giving the impression that estate administration is a quick process.
In real life, estate administration is a lengthy process that involves multiple steps and can take months or even years to complete. The timeline can vary depending on the estate's complexity, the presence of any disputes, and the efficiency of the probate court. Executors must gather and inventory assets, pay debts and taxes, and distribute the remaining assets to beneficiaries, all while adhering to legal requirements and deadlines.
While TV shows and movies can provide an entertaining glimpse into the world of estate administration, they often fall short of depicting the realities involved. Understanding the true complexities of estate administration is crucial for effective estate planning. By dispelling these common myths and working with knowledgeable Reno estate planning lawyers, you can ensure that your estate is managed according to your wishes and that your beneficiaries are well cared for.
Contact Anderson, Dorn & Rader Ltd. for a consultation to learn how real estate administration works and how you can properly prepare for it. Let us help you navigate the legal landscape to secure your legacy and provide peace of mind for your loved ones.
Generational wealth is an aspiration many families strive to achieve. However, planning for the seamless transfer of wealth across generations can be complex, especially when considering adoption and the use of dynasty trusts. This guide aims to provide clarity on how these tools can be used effectively to build and preserve generational wealth.
Dynasty trusts offer several benefits, including:
Setting up a dynasty trust requires careful legal structuring. This involves:
Adoption can significantly impact estate planning and the transfer of generational wealth. Legally, adopted children have the same rights as biological children in terms of inheritance. This means they can be included as beneficiaries in dynasty trusts and other estate planning instruments.
Adopting children can bring financial benefits beyond the joy of expanding your family. For instance:
To ensure a dynasty trust remains effective, it must be actively managed. This involves:
Life is unpredictable, and estate plans should be flexible enough to adapt to changes. This could involve:
Creating generational wealth through adoption and dynasty trusts requires careful planning and professional guidance. Anderson, Dorn & Rader Ltd. is here to help you navigate this process. Contact us for a personalized consultation to ensure your estate planning goals are effectively met.
As you approach retirement, it's essential to understand how different components of your financial portfolio fit into your estate plan. Pensions and other retirement accounts, such as IRAs and 401(k)s, each have unique characteristics and are treated differently in estate planning. This article will explore these differences to help you make informed decisions and ensure your estate plan is comprehensive and effective. For personalized advice, consider consulting an estate planning attorney in Reno.
A pension is a retirement plan that provides a fixed monthly income to retirees, typically funded by employers. Pensions are often referred to as defined benefit plans because they promise a specified benefit amount upon retirement, usually based on factors such as years of service and salary history.
Retirement accounts, such as IRAs and 401(k)s, are defined contribution plans where employees contribute a portion of their salary, often matched by employers, into investment accounts. The final amount available at retirement depends on the contributions made and the investment performance of the account.
Pensions are generally not directly included in an estate plan because they provide a lifetime income to the retiree and, in some cases, a surviving spouse. Upon the retiree's death, the pension benefits may cease or continue at a reduced rate to the spouse, depending on the plan's provisions.
Many pensions offer survivor benefits, allowing a designated beneficiary, usually a spouse, to receive benefits after the retiree's death. It's crucial to understand the specific terms of your pension plan to ensure your spouse or other beneficiaries are adequately provided for.
Pensions and defined contribution plans like IRAs and 401(k)s fall under different legal frameworks. Pensions are governed by the Employee Retirement Income Security Act (ERISA) and must comply with specific regulations concerning benefit distributions and protections for beneficiaries.
While pensions often bypass the estate process due to their structure, IRAs and 401(k)s can be more directly managed within an estate plan. Beneficiary designations for these accounts can be updated to reflect changes in your estate planning goals, offering greater flexibility in asset distribution.
Pension benefits are generally subject to federal income tax when received by the retiree or surviving spouse. However, these benefits typically do not generate additional estate tax implications because they are not considered part of the retiree's estate.
IRAs and 401(k)s, on the other hand, can have significant tax implications. The value of these accounts is included in the estate and may be subject to estate taxes. Additionally, beneficiaries who inherit these accounts may face income tax on distributions. Proper planning can help mitigate these tax burdens and maximize the benefits to your heirs.
Incorporating pensions and other retirement accounts into your estate plan requires a thorough understanding of their unique characteristics and legal considerations. While pensions provide a steady income stream and often include survivor benefits, IRAs and 401(k)s offer more flexibility in terms of beneficiary designations and estate planning strategies.
To ensure your estate plan is comprehensive and tailored to your needs, contact Anderson, Dorn & Rader Ltd. for personalized advice. We can help you navigate the complexities of estate planning, ensuring your financial legacy is protected and optimized for your beneficiaries. Join our free webinar on estate planning essentials to learn more.
As we look ahead to 2026, the landscape of estate taxes is poised for significant changes that could impact your financial planning. The Tax Cuts and Jobs Act (TCJA) of 2017 brought substantial changes to the federal estate tax exemption, raising it to $13.61 million in 2024. This increased exemption allows individuals to transfer a larger amount of wealth to their heirs without incurring estate tax liabilities. However, this generous exemption is set to sunset at the end of 2025, potentially bringing major implications for estate planning.
The Congressional Budget Office projects that the new exemption amount will decrease to $6.4 million in 2026, adjusting for inflation. This reduction means that what is exempt from estate tax today might not be exempt tomorrow. As such, it's crucial to seek guidance from a professional, like an estate planning attorney in Reno, to navigate these impending changes effectively.
The federal estate tax has a long history, first introduced in 1916 to generate government revenue. Over the years, the exemption limits and rates have seen numerous adjustments. Notably, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) progressively increased the estate tax exemption and lowered the tax rates until the exemption hit zero in 2010. However, without further legislative action, the exemption reverted to the 2001 levels for deaths occurring in 2011, setting the exemption at $5 million.
The TCJA of 2017 was a game-changer, doubling the estate tax exemption from $5.49 million to nearly $11 million, aiming to stimulate economic growth and job creation. This adjustment continues to account for inflation, offering an unprecedented opportunity for individuals to transfer significant wealth free from federal estate taxes.
Embedded within the TCJA is a sunset provision that limits the duration of the higher estate tax exemption. Without legislative intervention, this exemption will be cut in half to $5 million, adjusted for inflation, by 2026. This potential reduction could create an estate planning crisis for individuals with substantial estates as the December 31, 2025, deadline approaches. According to the Congressional Budget Office, the exemption is expected to drop to $6.4 million in 2026.
As we approach 2025, it is vital to reassess your estate planning goals and strategies in light of potential changes to the federal estate tax exemption. Collaborating with trusted advisors, including an estate planning attorney in Reno, is essential to review and potentially adjust your estate plan, investments, and property. This proactive approach ensures that your financial legacy remains protected despite upcoming legislative changes.
An estate planning attorney in Reno can help you navigate these complexities, providing insights and strategies tailored to your specific situation. Whether it involves lifetime gifting, reassessing property values, or developing comprehensive succession plans, professional guidance is crucial to minimize your estate tax liability and safeguard your wealth for future generations.
As the estate tax exemption is set to change in 2026, individuals with significant wealth need to act now to address potential future tax burdens. The Tax Cuts and Jobs Act (TCJA) currently provides a high estate tax exemption, but this is scheduled to decrease in 2026. Preparing for this reduction is essential, and working with an estate planning attorney in Reno can help you develop and implement effective strategies to minimize estate tax liability.
Consider the Andersons, a wealthy family living in a high-cost state. Robert Anderson, a successful entrepreneur, and his wife, Sarah, an accomplished artist, have built a substantial estate worth $16 million. Their assets include business holdings, valuable artwork, life insurance, real estate, and other investments. Their two adult children, James and Emily, are actively involved in the family business
With the current federal estate tax exemption set at $13.61 million per individual, adjusted for inflation, the Andersons have felt secure in their estate planning. This exemption is projected to increase to $13.61 million by 2024. The Andersons have taken initial steps to secure their financial legacy, such as creating a trust, considering a family limited partnership, and exploring gifting strategies. However, if the exemption drops to $6.4 million adjusted for inflation in 2026, they may face significant estate tax challenges. An estate planning attorney in Reno can provide essential guidance in navigating these complexities.
The family business forms a significant part of the Andersons' estate. To ensure its continued viability, they need a comprehensive business valuation and succession plan. This planning will help minimize the estate tax burden and facilitate a smooth ownership transition to their children, James and Emily. Consulting an estate planning attorney in Reno is crucial for developing a robust succession plan.
Given the potential changes in estate tax laws, the Andersons must reassess their financial accounts, retirement investments, life insurance policies, real estate, and artwork. Accurate valuations are essential to determine how these assets will impact their estate tax calculation. This reassessment will help them understand the potential tax liability they face if the exemption amount is reduced.
To reduce their taxable estate while the higher exemption is in place, the Andersons might consider accelerated lifetime gifting strategies. The IRS has clarified that gifts made under the increased exclusion from 2018 to 2025 will not be subject to additional taxes if the exclusion amount drops after 2025. Gifting up to $13.61 million in 2024 can be done without tax liability, but exceeding $6.4 million in 2026 may have significant consequences. An estate planning attorney in Reno can ensure these gifts are managed correctly.
To provide for their loved ones, the Andersons should consider using life insurance. Establishing an irrevocable life insurance trust to own the policy can remove its value from their estate, protecting the death benefit for their beneficiaries. Consulting an estate planning attorney in Reno is vital to ensure this strategy is implemented correctly.
High-net-worth families like the Andersons may benefit from advanced tax planning techniques, such as an AB trust. This approach optimizes each spouse’s estate tax exemption, potentially minimizing their liability. Upon the first spouse's death, an amount equal to the current exemption is placed in a trust, and the remainder goes to a second trust for the surviving spouse, qualifying for the unlimited marital deduction.
Spouses can transfer an unlimited amount to each other without estate or gift tax concerns. However, filing an estate tax return at the first spouse's death can document the unused exemption, allowing the surviving spouse to add it to their own exemption. This portability can be crucial for estate planning, and an estate planning attorney in Reno can guide you through this process.
If the Andersons are inclined towards philanthropy, establishing a charitable remainder trust could be an excellent option. Though setting up such a trust can be complex, it offers significant tax benefits and aligns with their charitable goals.
If your situation resembles the Andersons', seeking expert advice is essential to address estate tax concerns. Understanding how the potential reduction in the estate tax exemption will impact your estate is crucial. Consulting an estate planning attorney in Reno can provide the specialized expertise needed to navigate these challenges, protect your assets, and ensure a smooth transition of wealth.
As we move into 2025, reviewing your estate planning goals and strategies is vital. The TCJA's estate tax exemption, currently set at $13.61 million adjusted for inflation, may revert to pre-2017 levels by the end of 2025. Depending on your assets, including business interests, life insurance, and real estate, you may need to reassess their values to avoid exceeding the lower exemption limit.
Developing a comprehensive business succession plan is critical, particularly if you want your business to continue after you retire or pass away. Strategies like gifting shares to the next generation or creating a family limited partnership can help minimize tax liability. An estate planning attorney in Reno can assist in structuring these plans effectively.
Life insurance can play a crucial role in your estate plan. Reviewing your policies with the federal estate tax exemption in mind is essential. Transferring policy ownership to an irrevocable life insurance trust can protect the death benefit and reduce estate tax liability.
Real estate can present unique challenges in estate planning. Reassessing property values and using trusts, like qualified personal residence trusts (QPRTs), can help transfer real estate to heirs while minimizing estate tax exposure. Creating entities to own real estate may offer additional asset protection.
The estate tax landscape is evolving, making it crucial to keep your estate plan current. Collaborating with trusted financial and tax advisors ensures your plan is customized to your unique circumstances. Consulting an estate planning attorney in Reno can provide the expertise needed to navigate these complex challenges and protect your financial legacy.
In 2017, a significant event brought dynasty trusts into the limelight when NBA team owner Gail Miller transferred ownership of her team, the Utah Jazz, and other assets into a dynasty trust. This move showcased a powerful estate planning tool often associated with preserving vast family wealth across generations.
What is a Dynasty Trust?A dynasty trust, sometimes known as a legacy trust, is a type of irrevocable trust crafted to benefit multiple generations. The trust holds assets indefinitely under state laws that permit such arrangements. While the Rule Against Perpetuities—a law limiting a trust's lifespan—applies in some states, others have abolished this rule, allowing a dynasty trust potentially to last forever.
These trusts are prized for their ability to keep wealth within a family while avoiding substantial estate taxes and the generation-skipping transfer tax. By maintaining assets within the trust rather than distributing them directly to beneficiaries, these trusts can significantly enhance wealth longevity and growth across generations.
However, the strength of a legacy trust—its permanence—also introduces complexities. Since it’s irrevocable, making changes to the trust once established is highly challenging. It necessitates foresight about future changes in family circumstances or asset values, requiring meticulous planning from the outset.
These trusts are most beneficial for families with significant assets that would otherwise face large estate taxes over generations. They protect against taxes, divorces, creditors, and potentially poor financial decisions by future generations. However, they also limit the flexibility of beneficiaries to control their inheritance directly.
If you're considering whether a dynasty trust fits your estate planning needs, understanding both the advantages and limitations is crucial. These trusts are not suitable for everyone, but under the right circumstances, they can be an invaluable tool for preserving family wealth.
To determine if a dynasty trust is the right choice for your family's estate planning needs, consulting with knowledgeable estate planning attorneys in Reno can provide clarity and direction. Contact us today to explore this and other strategies for securing your family's future.
Contact our Reno estate planning office to discuss how a dynasty trust might benefit your legacy planning.
When you pass away, your debts, including your mortgage, do not simply vanish. If your will or trust leaves your property, which still has a loan against it, to a beneficiary, they will inherit both the real estate and the remaining debt. The beneficiary might have the option to assume the mortgage, allowing them to retain ownership of the house, or they could opt to sell the property and use the proceeds to settle the debt. The specific outcomes depend on the terms of the mortgage and the directives laid out in the estate plan. Planning ahead for the transfer of your real estate assets can significantly simplify the process for your heirs, making it a smoother transition during a challenging time.
In recent years, American housing debt has soared to unprecedented levels. According to the US Census Bureau, the homeownership rate was approximately 66 percent in 2022. By the end of September 2023, the Federal Reserve Bank of New York reported that Americans were carrying $12.14 trillion in mortgage balances. This figure represents a significant portion of US consumer debt, emphasizing the crucial role of real estate in personal finance. The increase in mortgage debt highlights the importance of addressing how these obligations are managed after the homeowner's death.
With housing debt constituting a substantial part of consumer debt, it's not surprising that many Americans pass away while still owing on their mortgages. A survey by CreditCards.com revealed that 37 percent of Americans died with unpaid mortgages. This situation poses potential complications for heirs and underscores the need for comprehensive estate planning.
The inclination to leave a home to one's children is strong among American parents, with a 2023 Charles Schwab survey indicating that more than three-quarters of parents intend to do so. However, the reality of inheriting a home is complex, especially given the current real estate market dynamics. Nearly 70 percent of potential heirs express a preference to sell the inherited property, often due to financial considerations or the rising costs of real estate.
When it comes to estate planning, one of the critical concerns is how to handle mortgages on inherited properties. The process varies significantly depending on the decedent's estate plan, the terms of the mortgage, and state laws.
When a property is left to a single beneficiary, whether through a will, trust, or deed, several outcomes are possible. The beneficiary might assume the existing mortgage, pay off the mortgage with other funds, or sell the property and use the proceeds to settle the debt. Some lenders may also allow for the refinancing of the loan under the new owner's name, potentially offering more favorable terms.
In cases where multiple beneficiaries inherit a property, the situation becomes more complex. These beneficiaries must agree on how to manage the inherited mortgage, whether by assuming it jointly, selling the property, or using other funds to pay off the debt. Disagreements can lead to legal challenges, potentially resulting in a court-ordered sale of the property.
For those who die without a will or trust, the probate process determines the distribution of their assets, including real estate. The executor of the estate is responsible for managing the deceased's debts and assets, which may involve using estate funds to maintain mortgage payments until the property can be sold or transferred.
Estate planning goes beyond merely distributing assets; it's about ensuring that your legacy is passed on according to your wishes without imposing undue burdens on your loved ones. For homeowners, this means considering the implications of mortgage debt and making arrangements to ease the financial strain on heirs.
An effective estate plan addresses all aspects of your assets, including your home and any outstanding mortgage. It might include setting aside funds to cover mortgage payments, instructions for the sale of the property, or provisions for refinancing the mortgage to benefit your heirs.
Given the complexities of estate law and the intricacies of mortgages, seeking advice from an estate planning attorney is advisable. They can provide tailored guidance that aligns with your goals and ensures your estate is handled smoothly.
As American housing debt continues to climb, the importance of incorporating real estate into your estate planning cannot be overstated. Understanding how your mortgage debt will be managed after your passing is crucial to ensuring your heirs can navigate their inheritance without undue stress. Through careful planning and professional advice, you can secure your legacy and provide for your loved ones even after you're gone.
If you have significant wealth, you may be exposed to future estate tax burdens that must be acted on before the Tax Cuts and Jobs Act reduces the estate tax exemption in 2026. Developing and implementing the right estate planning and tax strategies takes time. You may need to prepare regardless of whether the estate tax continues at its current level or if it is cut in half. This means strategizing to minimize your estate tax liability now.
Meet the Andersons, a well-off family living in a state with a high cost of living. Robert Anderson, the father, is a successful entrepreneur who built a thriving business over the years. His wife, Sarah, is a high salary earner, and together they have accumulated a substantial estate of $8 million each, for a total of $16 million. Their estate is primarily composed of their business assets, valuable artwork, life insurance, a family residence, a vacation home, and other lucrative investments. They have two adult children, James and Emily, both actively involved in the family business.
With the generous federal estate tax exemption set at $10 million adjusted for inflation per individual in 2017, steadily increasing to $13.61 million in 2024, the Andersons have felt relatively secure about avoiding estate taxes. Their primary concern has been preserving the family legacy and ensuring a smooth transition of their assets (business, accounts, and property) to the next generation. They had taken some initial estate planning steps, such as creating a living trust, discussing the use of a family limited partnership, and exploring gifting strategies to transfer the assets to their children gradually.
If the estate tax exemption drops to $5 million adjusted for inflation, the Andersons may face several estate tax issues that require professional advice and assistance before the end of 2025. The Andersons need to find other ways to protect their money and property.
The family business represents a significant portion of the Andersons’ estate, and the sunsetting of the higher exemption amount could have profound implications for its continued viability. Robert and Sarah need to develop a comprehensive business valuation and succession plan now to minimize the total estate tax burden and ensure a smooth ownership transition to James and Emily later.
Given the potential changes in the estate tax landscape, the Andersons need to revisit the valuation of their financial accounts, retirement and life insurance investments, personal property, real estate, and artwork to ensure accurate assessments. Then they need to determine which items will affect the estate tax calculation and any remaining exemption they have left from prior legacy planning. Depending on their assets’ values, these items can easily put them over the potentially soon-to-be lower estate tax exemption, exposing them to a 40 percent tax rate.
With the uncertainty surrounding the estate tax exemption, the Andersons may want to consider accelerated lifetime gifting strategies to reduce their taxable estate while the higher exemption is in place. The Internal Revenue Service declared in 2019 that individuals who take advantage of the increased gift tax exclusion from 2018 to 2025 will not be negatively impacted after 2025 if the exclusion amount drops.1 Gifting up to $13.61 million in 2024 has a zero tax liability. But gifting over $6.4 million in 2026 may have major consequences.
The Andersons may want to use life insurance to ensure that their loved ones are provided for at their passing. They may want to consider creating an irrevocable life insurance trust to own the life insurance policy and be the recipient of the death benefit. This removes the value of the policy from the Andersons’ estate and protects the death benefit for their chosen beneficiaries.
The significant portfolios of high-net-worth and ultra-high-net-worth families may require advanced tax planning techniques, including an AB trust, to optimize each spouse’s estate tax exemption and potentially minimize their estate tax liability. At the client’s death, an amount equal to the current estate tax exemption amount is placed in one trust, which uses the exemption, and the remainder is placed in a second trust for the surviving spouse’s benefit, which qualifies for the unlimited marital deduction. This results in no estate tax being owed at the death of the first spouse.
Spouses are able to give an unlimited amount of money and property to each other without having to worry about estate or gift tax. Because of this, some clients may not have an estate tax issue at the first spouse’s death because everything (or a substantial portion) went to the surviving spouse. Because they are utilizing the unlimited marital deduction, the deceased spouse’s exemption is not needed. However, even if this is the case, it may be advisable to file an estate tax return at the first spouse’s death to document how much of that deceased spouse’s exemption is being used, if any, and that the remainder is going to the surviving spouse. This will allow the surviving spouse to add the deceased spouse’s unused exclusion (DSUE) to the surviving spouse’s own exemption amount and apply that combined amount against their own estate at the time of death.
If the Andersons are philanthropically inclined, another great option would be to engage in charitable giving through the use of a charitable remainder trust. Setting up this type of trust can be time-consuming—sometimes the process is fairly straightforward but often highly complex, requiring advanced planning and consideration.
If your situation is similar to the Andersons, expert guidance is necessary to address estate tax issues and help you evaluate the impact of the potential sunsetting of the higher estate tax exemption amount on your estate. Contact us to learn more about strategies to protect, preserve, and pass down valuable property.
1 Estate and Gift Tax Facts, IRS.gov, https://www.irs.gov/newsroom/estate-and-gift-tax-faqs# (last updated Dec. 5, 2023).
