The year 2026 is quickly approaching, bringing substantial changes that may affect your estate tax situation. The Tax Cuts and Jobs Act (TCJA) in 2017 significantly increased the federal estate tax exemption to $10 million adjusted for inflation. This is the amount you can gift or leave to your loved ones at your death without incurring a gift or estate tax liability. Any portion of the exemption used during lifetime reduces the total exemption amount available at death for estate tax purposes.
However, the countdown has begun for the potential sunset of this generous exemption by the end of 2025. Adjusting for inflation, the Congressional Budget Office estimates the new exemption amount will be $6.4 million in 2026.1 There are strong arguments for and against the changes in legislation. Whether the current exemption amount remains or is reduced to roughly $6.4 million, valuable insights from professional advisors can prepare you for either scenario. What is not taxable today might be taxable tomorrow.
The federal estate tax was first enacted in 1916 to generate revenue for the government. Over the years, it has undergone various changes in exemption limits and rates.
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) gradually increased the estate tax exemption and reduced the tax rate until it reached zero in 2010.2 However, the estate tax was set to return to the 2001 amounts for deaths occurring in 2011 unless further legislative action was taken.3 In 2011, the estate tax exemption was reinstated at $5.0 million.4
In 2017, the TCJA doubled the estate tax exemption from $5.49 million to nearly $11 million to stimulate economic growth and create jobs.5 The exemption continues to adjust for inflation, offering individuals an unprecedented opportunity to pass on substantial wealth free from federal estate tax. In 2024, the este tax exemption is $3.61 million.
A sunset provision was embedded within the TCJA to limit how long the higher estate tax exemption could continue. Without legislative intervention, it will be cut in half to $5 million adjusted for inflation in 2026, creating a potential estate planning crisis for people with considerable estates on December 31, 2025. Adjusting for inflation, the Congressional Budget Office estimates the exemption amount will be $6.4 million in 2026.6
Maintaining or increasing the already high estate tax exemption amount could be seen as a move that benefits the wealthy, broadening the tax burden for others. It can also be seen as maintaining the status quo. And the current law ensures that most people will not be subject to federal estate taxes.
A higher estate tax exemption was expected to foster economic growth and capital investment by allowing wealthier individuals and families to reinvest in businesses and job creation.7 Yet the federal government relies on estate tax revenue to fund various programs and therefore would not want to reduce a lucrative revenue source. Without the estate tax, other revenue sources would have to foot the bill for these programs and potentially face cuts in the benefits and services provided.
For the estate tax exclusion to remain at the higher amount beyond 2025, Congress will need to take action.
The TCJA was part of a short-term tax cut package. Lawmakers had to make room in the budget for the tax cuts introduced by the legislation.8 They did this by temporarily increasing the estate tax exemption.
Reverting to a lower exemption amount is believed to generate more revenue by increasing the number of people who pay the tax and increasing estate tax exposure to those with net wealth above the current exemption amount. Estate tax revenues are projected to increase sharply after 2025, when the exemption amount is scheduled to drop. From 2021–2031, the combined estate and gift tax revenues are projected to total $372 billion.9
As we move into 2024, it is crucial to review estate planning goals and strategies that may be affected by potential changes in the federal estate tax exemption law. By working together with your other trusted advisors, we can reevaluate your current estate plan to ensure that you are protected and your financial legacy is preserved.
1 Understanding Federal and Gift Taxes, Cong. Budget Off., https://www.cbo.gov/publication/57272 (last visited Jan. 2, 2024).
2 Darien B. Jacobsen et al., The Estate Tax: Ninety Years and Counting, SOI Bull. 124, https://www.irs.gov/pub/irs-soi/ninetyestate.pdf (last visited Jan. 2, 2024).
3 Id.
4 Mark Luscombe, Historical Look at Estate and Gift Tax Rates, Wolters Kluwer (Mar. 9, 2022), https://www.wolterskluwer.com/en/expert-insights/whole-ball-of-tax-historical-estate-and-gift-tax-rates.
5 Tax Cuts and Jobs Act (TCJA), Tax Found., https://taxfoundation.org/taxedu/glossary/tax-cuts-and-jobs-act (last visited Jan. 2, 2024).
6 Understanding Federal Estate and Gift Taxes, supra note 1.
7 Id.
8 How Did the Tax Cuts and Jobs Act Change Personal Taxes?, Tax Pol’y Ctr., https://www.taxpolicycenter.org/briefing-book/how-did-tax-cuts-and-jobs-act-change-personal-taxes (last visited Jan. 2, 2024).
9 Understanding Federal Estate and Gift Taxes, supra note 1.
Often, when embarking on the journey of estate planning, the primary focus tends to shift towards the distribution of financial assets, real estate, and other high-value possessions after one's demise. However, personal belongings, commonly referred to as 'stuff', hold a pivotal place in this process, often embodying both monetary and sentimental value. As you step into or progress through your estate planning voyage, it's essential to ponder upon the following facets concerning your personal belongings.
Evaluating the Worth: Monetary vs Sentimental
The essence of value varies from person to person. Some possessions, like an antique timepiece, might hold substantial monetary value, while others like a family heirloom may carry sentimental worth. The type of value attached to an item dictates the strategy required for its future allocation.
Monetary Value of Personal Belongings:
Establishing the real value of items believed to be of significant worth is crucial. High-value items might necessitate insurance coverage, as standard homeowner’s or renter’s insurance policies may have limitations. Moreover, if an item demands regular maintenance, ensuring the inheritor is well-informed about its upkeep is vital to retain its value.
Sentimental Value of Personal Belongings:
Personal belongings with sentimental value can sometimes stir family disputes. Amid the grief of loss, distributing cherished mementos without clear directives can be emotionally draining. Documentation of your desires regarding the distribution of such items can help maintain harmony among loved ones, making thoughtful consideration and clear communication indispensable.
Desirability of Your Belongings:
Understanding who might cherish your belongings as you do is an essential aspect of estate planning. Engaging with potential inheritors beforehand can provide insight into their willingness, especially if the item involves storage or maintenance responsibilities.
Handling Multiple Claims:
Awareness of multiple interests in a single item is pivotal to preventing discord post your demise. It's wise to contemplate the fair division of items or balancing inheritances if a valuable item is to be inherited by one person.
Unwanted Items:
An item precious to you might not hold the same value for your heirs. Formulating a plan for such scenarios, whether it be selling, donating, or offering it to someone who appreciates it, is advisable.
Incorporating Personal Belongings in Your Estate Plan:
Several mechanisms allow the incorporation of your wishes regarding personal belongings in your estate plan:
Specific Gift: Utilizing a Last Will and Testament or a Revocable Living Trust, you can designate specific items to specific individuals. Amendments, however, require the execution of new documents.
Personal Property Memorandum: Many states acknowledge this document which lists personal belongings along with their designated inheritors. It offers a simpler amendment process compared to a Will or Trust.
The Residuary Clause: This clause addresses the distribution of any unmentioned items in your Will or Trust, ensuring a comprehensive distribution in line with your wishes.
Professional Guidance:
Having a clear inventory, understanding the worth, and knowing the desired allocation of your belongings is the foundation of an effective estate plan. Partnering with seasoned estate planning attorneys can tailor a plan reflecting your unique circumstances. Reach out to schedule a consultation, ensuring your estate plan embodies your wishes comprehensively and lawfully.
Disclaimer: The information provided in this blog is intended for general informational purposes only and should not be construed as legal advice or a substitute for obtaining professional advice from a qualified attorney or estate planning professional based on your individual situation or jurisdiction.
Estate planning is not merely a legal necessity, but a shield to safeguard yourself, your family, and your financial achievements, irrespective of their magnitude. Despite its crucial role, a disheartening number of individuals overlook the value of estate planning. Whether it's about formulating a new estate plan or refining an existing one, procrastination can be a risky game. Below is an insight into some unsettling statistics regarding estate planning among Americans, emphasizing the urgency to address this issue to prevent becoming a part of these grim figures.
A Majority Lack a Will or Trust
Shockingly, only a third of Americans have a will or trust in place. This fact can be attributed to widespread myths and apprehensions surrounding estate planning. A significant number of people without a will or trust feel that their assets are too modest to warrant an estate plan. The misconception that estate planning caters only to the affluent, alongside hurdles like hectic schedules, perceived complexity or cost, or the uncomfortable subject of mortality, often delays this critical task. However, the advantages of proactive planning substantially outweigh the drawbacks of postponement.
Estate Planning Conversations Are Often Avoided
Death is an uncomfortable topic for many, yet discussing it and the accompanying estate planning aspects with family can be incredibly beneficial. It's alarming that 52% of individuals are clueless about where their parents have stored their estate planning documents, and a mere 46% of executors are aware of their nomination in a will. It's pivotal to have open conversations with your family regarding the whereabouts of essential documents and inform those involved in your estate plan about their roles, ensuring clarity and preparedness for the future. Some estate planners facilitate family meetings post the drafting of an estate plan to elucidate the responsibilities entailed.
Family Disputes Are Not Uncommon
A survey by LegalShield revealed that 58% of American adults have either been embroiled in or know someone who has faced family conflicts stemming from inadequate estate planning. Such disputes, often revolving around the distribution of assets post a loved one’s demise, underscore the necessity of meticulous planning. Engaging a proficient estate planning attorney can be instrumental in crafting a plan that minimizes familial discord and the potential for permanent rifts.
Seize the Moment to Plan or Revise Your Estate
The importance of solid planning stands timeless. With American retirees poised to transfer an astounding $36 trillion to heirs, charitable causes, and other beneficiaries over the forthcoming three decades, the call for a thorough financial and estate plan has never been louder. Cast aside apprehensions and kick start or proceed with your planning journey to steer clear of morphing into an unfavorable estate planning statistic. For any inquiries or guidance on initiating or amending your estate plan, we are just a call away.
Much like a well-attended roll call, a robust estate plan needs several legal instruments to ensure its comprehensiveness. The term 'estate planning' might ring a bell, yet the specifics of the legal tools involved may not be as clear. Let's delve into the essential legal tools that constitute a thorough estate plan and explore the protections and advantages each one offers.
Foundation With a Will or Revocable Living Trust:
Establishing a sound foundation is paramount for any structure, and estate planning is no exception. A will or a revocable living trust (RLT) acts as this foundation, guiding the distribution of your assets. While a will operates posthumously, an RLT provides directives both during incapacity and after death, thus making the choice between the two a pivotal decision based on individual circumstances.
Will: A typical choice for a foundational tool, a will necessitates a probate process to distribute your assets, although some assets can bypass probate through beneficiary designations or joint ownership. It's crucial to choose a competent executor to ensure smooth execution of your wishes.
Trust: An RLT, on the other hand, allows for probate avoidance, provided the assets are retitled to the trust. Besides, an RLT offers protection should you become incapacitated, making it a more encompassing tool.
Despite having an RLT, a 'pour-over' will is essential to transfer any assets not titled in the trust at the time of death, also enabling you to nominate guardians for minor children and specify funeral arrangements.
A testamentary trust is another notable tool, created posthumously through provisions stated in a will during one's lifetime, offering a customized distribution plan.
Financial Power of Attorney (POA):
A financial POA is a customizable legal tool, allowing you to appoint an agent to manage your financial affairs. The scope of authority granted can range from specific tasks under a limited POA to almost all financial decisions under a general POA. A Durable POA remains effective even during incapacity, ensuring continued financial management.
Medical Power of Attorney:
Entrusting someone to make medical decisions on your behalf during incapacity is facilitated through a medical POA. This document allows you to appoint a trusted individual, ensuring that your medical preferences are honored even when you cannot communicate them.
Advance Healthcare Directive:
Commonly known as a living will, an advance directive lets you specify your preferences for end-of-life care. It's a critical tool to have, providing clear instructions about life-support measures in terminal or vegetative conditions.
HIPAA Authorizations:
The Health Insurance and Accountability Act (HIPAA) authorizations enable designated individuals to access your medical records. While not granting decision-making authority, these authorizations ensure selected individuals are informed about your medical condition.
Guardianship Provisions:
For parents, securing the future of minor children is paramount. Some states offer separate legal instruments for appointing guardians, whereas others incorporate these provisions within a will. Consultation with an estate planning attorney can provide clarity on the appropriate tools for your state.
Temporary Guardianship or Parental Power Delegation:
Circumstances like extended travel may necessitate the delegation of parental powers to a temporary guardian. Understanding state-specific guidelines regarding the duration and limitations of such delegations is crucial to ensure the well-being of your children during your absence.
Navigating through the legal intricacies of estate planning might seem daunting, but with the right guidance and a well-structured plan, you can secure peace of mind for yourself and your loved ones. Engaging with an experienced estate planning attorney will ensure that the legal tools in your estate planning toolkit are tailored to meet your unique needs and circumstances.
In today's digital age, though a plethora of information is available at our fingertips, certain crucial topics like estate planning often remain overshadowed by myths and misconceptions. Many steer clear from delving into discussions about estate planning in Reno, either due to a lack of awareness or the uneasy feelings associated with contemplating life’s uncertainties. Common misconceptions such as the notion that having a will sidesteps probate, or that marriage automatically transfers all assets to the surviving spouse, often mislead individuals, especially those with modest assets. It's imperative to debunk these myths and highlight the substantial benefits of having a well-thought-out estate plan. Not only does it provide a roadmap for the distribution of your assets posthumously, but it also ensures protection for you and your loved ones in case of incapacitation.
Let's narrow down the discussion to three pivotal reasons why keeping your estate plan updated is non-negotiable:
A Transparent Communication of Your Wishes:
Death and the matters surrounding it are often seen as taboo subjects, avoided in conversations with loved ones. However, it’s these candid discussions that pave the way for clear understanding and preparation for the inevitable. An updated estate plan serves as a comprehensive guide for your family, illuminating your desires regarding asset distribution, the guardianship of minor children and pets, and even your own final arrangements. This clarity can significantly alleviate the stress and confusion that usually follows a family member’s passing, more so if there have been recent significant life changes like a birth or a death.
A Legally Binding Blueprint:
The assumption that verbal agreements with loved ones about asset distribution are sufficient can lead to unexpected and undesired outcomes. When financial strains come into play, even the closest of kin might act contrary to your wishes. For instance, adding a child’s name to the title of your property might seem like a prudent way to avoid probate, yet it opens up a Pandora’s box of potential legal and familial disputes. A meticulously crafted estate plan, forged with the assistance of seasoned estate planning attorneys, ensures that your assets are distributed precisely according to your wishes, minimizing the scope of conflicts.
Your Autonomy in Decision-Making:
Hesitation to consult with an estate planning attorney in Reno often stems from a lack of understanding regarding the repercussions of an outdated or non-existent estate plan. In the absence of a personal estate plan, state laws take over, and these generic intestate statutes might not resonate with your unique familial relationships or financial circumstances. Especially for individuals in blended families, parents with minor children, entrepreneurs, or unmarried couples, the urgency to establish a personalized plan cannot be overstated. Additionally, an estate plan is your safety net against unforeseen incapacitation, allowing you to designate trusted individuals to manage your affairs, thereby circumventing potentially distressing court-supervised conservatorships or guardianships.
The path to ensuring your future and that of your loved ones lies in a well-structured estate plan. Engaging with proficient estate planning attorneys like the team at Anderson Dorn & Rader can empower you to create a robust plan that mirrors your aspirations. Should you or your loved ones harbor any queries regarding initiating or updating an estate plan, the expert counsel at Anderson Dorn & Rader is just a call away, ready to guide you through every step of this vital journey.
As individuals embark on the journey of estate planning, they find themselves engaged in a delicate balancing act. Their objective is to strike a harmonious equilibrium between minimizing income and estate taxes, safeguarding their assets from potential creditors, and ensuring that their loved ones receive the utmost benefit. To achieve this equilibrium, it is necessary to explore the available legal and financial instruments that can bring their estate plan to fruition.
One crucial consideration when creating an estate plan is the reduction of income and estate taxes. These taxes can significantly diminish the amount of wealth and property received by beneficiaries. To minimize estate taxes, various strategies can be employed, such as gifting assets to loved ones or establishing trusts on their behalf. Additionally, leveraging tax-advantaged investment accounts can be an effective means of reducing income taxes. The optimal approach will depend on an individual's unique financial circumstances and the desired outcomes of their estate plan.
For those seeking to reduce the amount of money and property subject to estate tax, making gifts during their lifetime can prove advantageous. The current annual gift tax exclusion for 2023 allows for $17,000 per recipient ($34,000 for married couples making joint gifts), and individuals can give away up to a total of $12.92 million during their lifetime without triggering federal estate tax. By transferring accounts and property, the income tax burden can also be shifted to recipients who may find themselves in lower tax brackets, resulting in reduced tax liabilities on generated income. However, it is important to consider the potential capital gains tax implications for recipients if the value of the assets appreciates significantly. Additionally, once assets are transferred, individuals lose control over how the money is spent or how the property is utilized, and the assets may become vulnerable to the creditors or divorcing spouses of their loved ones.
Creating trusts is another avenue for tax savings. Trusts serve as legal entities that can hold and manage accounts and property on behalf of beneficiaries. By utilizing irrevocable trusts, income taxes on the trust's generated income can be paid by the trust itself as a separate entity, thereby allowing the trust's accounts and property to grow free from estate taxes for the beneficiaries. However, establishing such trusts may necessitate the use of annual gift tax exclusions or lifetime gift and estate tax exclusions. Certain types of irrevocable trusts can also provide asset protection, as the transferred accounts and property are considered separate entities. Nonetheless, relinquishing control over the trust becomes a requirement going forward.
Optimizing tax savings can also be achieved through the utilization of tax-advantaged investment accounts like IRAs and 401(k)s. These accounts offer opportunities to defer taxes on contributions and investment earnings until retirement, potentially resulting in a lower tax bracket during distribution. Roth IRAs and Roth 401(k)s provide an alternative by allowing after-tax contributions and tax-free withdrawals of earnings. By thoughtfully considering and utilizing these diverse investment accounts, individuals can potentially maximize tax savings and increase the overall value of their estate.
In addition to tax considerations, it is crucial to contemplate protecting assets from potential creditors when developing an estate plan. Insufficient asset protection measures may expose accounts and property to seizure for debt repayment or legal judgments against individuals or their beneficiaries.
One way to safeguard your accounts and property from creditors, including potential Nevada estate tax implications, is by establishing a trust with specific provisions. Trusts can be structured to create a level of separation between your assets and any potential creditors. For example, if your loved ones have a history of overspending or face potential creditors, incorporating a spendthrift trust into a revocable or irrevocable trust can be beneficial. This type of trust restricts beneficiary access to the trust's accounts and property, making it more difficult for creditors to seize them.
However, it's important to note that a spendthrift provision alone does not offer adequate protection from creditors. To further enhance creditor protection, a discretionary trust can be utilized. In a discretionary trust, the trustee has the discretion to determine when and how to distribute money and property to the beneficiary, thereby preventing distributions vulnerable to seizure by creditors. The choice of trustee is crucial for the level of creditor protection. An independent trustee, not related to or subservient to the beneficiary, is ideal. A well-drafted discretionary trust limits the beneficiary's access to the trust's accounts, property, and income. If the trust retains the income generated by its assets and doesn't distribute it to the beneficiary, the income may be taxed at the trust's income tax rate, unless the trust is structured in a way that holds the trustmaker responsible for the tax liability. Both provisions can be incorporated into either a revocable or irrevocable trust.
It's worth noting that different tax rules apply to trusts and individuals when it comes to income tax. Individuals are subject to a graduated tax system, with tax rates increasing as income rises. For the tax year 2023, individuals face a maximum marginal tax rate of 37 percent, which is applicable to income surpassing $523,600 for individuals and $628,300 for married couples filing jointly. Conversely, trusts are governed by a compressed tax bracket system, where any income over $13,451 is subject to the top marginal tax rate of 37 percent. Consequently, trusts may face a higher tax rate on the same amount of income compared to individuals in similar tax brackets.
For individuals aiming to safeguard their accounts and property from their own creditors, specific types of irrevocable trusts should be considered. As previously discussed, an irrevocable trust entails surrendering control over the assets held within it, potentially resulting in a higher tax liability on the trust's income if it remains undistributed to beneficiaries or lacks a structure to hold the trustmaker responsible for the income tax obligation.
While saving on taxes and protecting assets from creditors are vital aspects of estate planning, giving beneficiaries maximum access to their inheritance is also important. This is particularly relevant if you want to support their needs and provide flexibility in how they utilize their inheritance. To achieve this, you can structure your estate plan in a way that allows unhindered distributions to beneficiaries. Options include creating a revocable living trust with lenient distribution instructions or outright giving assets to beneficiaries during your lifetime or at your death. However, providing unrestricted access to inheritance carries certain risks. Beneficiaries might be tempted to spend the money unwisely or mishandle the property, potentially making them targets for fraud or manipulation. Moreover, this approach may expose them to creditors and legal claims like divorce. Thus, it's crucial to carefully consider the advantages and disadvantages of granting maximum access to beneficiaries and implement safeguards to mitigate potential risks.
Estate planning requires a thoughtful balance of various factors and interests. Evaluating your goals and priorities and determining the most suitable approach is essential. We are dedicated to assisting you throughout this intricate process, guaranteeing that you achieve the desired equilibrium. Contact us today to begin or review your estate plan, taking into account Nevada estate tax.
Ensuring you have a well-designed strategy to safeguard your valuable assets and property is of utmost importance, and this often requires utilizing tailored tools that suit your unique circumstances. One option to explore within your estate planning is the inclusion of a limited liability company (LLC) to safeguard certain accounts and property.
Understanding a limited liability company (LLC)
A limited liability company (LLC) is a business structure that allows for the ownership of diverse accounts and property. Its ownership rests with the members who contribute either funds or assets to the LLC. The nature of an LLC can vary based on the number of individuals involved, resulting in either a single-member or multi-member configuration. The management of the LLC can be conducted by individual members or by a manager elected by the members.
Expanding the scope of ownership for an LLC
An LLC can own more than just a business. It can also hold various types of accounts and property, such as:
Real estate: Whether it's a second home, rental property, or a property passed down for generations, an LLC can own it.
Investments: An LLC can be used to pool the funds of multiple individuals and invest in assets with a larger volume.
Expensive or high-risk assets: Items like airplanes and boats can be owned by an LLC to provide liability protection.
The advantages of including an LLC in your estate plan
Asset Protection
Including an LLC in your estate plan can offer several benefits, with asset protection being one of the key considerations. As an LLC is considered a separate legal entity, its creditors typically can only pursue the LLC's assets and property, not those of the LLC members. Properly setting up and maintaining the LLC can help prevent personal creditors of the members from accessing the LLC's accounts and property to satisfy their claims. Please keep in mind that certain states may not offer the same degree of protection against personal creditors for single-member LLCs. In such cases, personal creditors may pursue the LLC interests to satisfy their claims, as there are no other members who would be negatively impacted by the seizure of the LLC's assets and property.
Probate Avoidance
When your assets are owned by an LLC, any property or accounts transferred to it during your lifetime, or transferred through operation of law upon your death, can bypass the costly and time-consuming probate process. Probate only handles the transfer of assets that were solely owned by you at the time of your death. By utilizing an LLC, the accounts and property are owned by the LLC, not by you. However, if you hold membership interest in your name, the transfer of this interest at the time of your death may require going through the probate process.
Incorporating an LLC into your estate plan
The process of incorporating an LLC into your estate plan involves creating the LLC during your lifetime and transferring your accounts and property to the LLC or designating it as the beneficiary of your accounts and property upon your death. You can also purchase property or open accounts in the name of the LLC. As the individual establishing the LLC, you will assume the role of a member, and depending on the chosen management structure, you may have the opportunity to oversee the operations of the LLC. If you are married, your spouse can also become a member, and you have the flexibility to include additional members in the LLC at a later stage. However, adding members who don't contribute their money or property may result in gift tax consequences. The LLC will own the accounts and property, and it will operate as a separate entity from its members, providing a level of asset protection. Upon your death, the transfer of ownership interest in the LLC may be the only necessary step, and the accounts and property owned by the LLC will remain under its ownership.
Operating Agreement for LLCs in Estate Planning
LLCs generally have an operating agreement that sets out the rules for managing and transferring a member's interest in the LLC. If you currently own an LLC without an operating agreement or need to update it, it is recommended that you contact an experienced business law attorney with expertise in estate planning as soon as possible. When incorporating estate planning into your operating agreement, consider including the following provisions:
1. The identification of the LLC members.
2. The percentage of ownership each member holds.
3. The procedure for resolving conflicts between members.
4. Any restrictions on a member's ability to transfer their membership interest, including transfers to a trust.
5. The fate of a member's interest if they pass away (in most cases, the terms of the operating agreement govern).
Trust Agreement for LLC Membership Interest
A Trust Agreement can provide an additional layer of protection for your LLC membership interest within your estate plan. By transferring your membership interest to a revocable living trust, you can act as the creator, trustee, and beneficiary of the trust. This arrangement allows you to continue managing the LLC and enjoying its benefits as the trustee of the trust, rather than as an individual. Since the trust becomes the owner of the membership interest, transferring it won't require going through the probate process, as the trust itself doesn't die. Even after your death, the trust can continue to own the membership interest as specified in its instructions. It can include provisions for a successor trustee to manage the LLC on behalf of the trust's beneficiaries. Alternatively, you can instruct the trust to distribute the membership interest to a designated beneficiary at a specified time or upon your death, granting them control over the membership interest. If you're considering creating a trust agreement, it's advisable to seek the assistance of an experienced estate planning attorney to ensure it aligns with your goals and objectives.
Best Practices for Using an LLC in Estate Planning
To fully capitalize on the advantages offered by an LLC in your estate plan, it's crucial to adhere to all the rules and regulations associated with its operation. Since an LLC is a separate legal entity, it should be treated as such. This entails following specific formalities, such as submitting your annual report to the relevant state government office and maintaining distinct records of all transactions and meetings involving the LLC. It's equally important to keep your personal finances and assets separate from those of the LLC. Avoid using the LLC's bank account as your personal fund to maintain clear separation and protect the integrity of the LLC.
Commencing January 1, 2024, reporting companies that are classified as LLCs will need to submit a Beneficial Ownership Information Report to the Financial Crimes Enforcement Network of the Department of the Treasury. This report should include the name, birthdate, address, and unique identification number of all beneficial owners of the LLC, along with an acceptable identification document's image and issuing jurisdiction. A beneficial owner is an individual who possesses or exercises significant control over 25% or more of the ownership interest in the company. For LLCs formed after January 1, 2024, company applicants must provide their name, birthdate, address, unique identification number, issuing jurisdiction, and image of an acceptable identification document. A company applicant refers to the individual who creates the entity or registers it to do business in the United States (for foreign reporting companies) or the person mainly responsible for directing or controlling another individual's submission of the document.
What are your next steps in estate planning?
If you aim to protect your assets and secure your family's future, taking the necessary steps is paramount. Crafting a well-designed estate plan tailored to your unique needs can be instrumental in achieving your objectives. If you're interested in learning more about how incorporating an LLC can assist you in.
When it comes to estate planning and legacy planning, most individuals focus on passing down their assets to their children and heirs. However, for those seeking to establish a legacy that will endure for generations, the concept of a dynasty trust becomes particularly intriguing.
A dynasty trust, an integral part of estate planning, is an irrevocable trust that offers similar tax advantages and asset protection as other trust types, but with a remarkable distinction—it can span multiple generations. Often referred to as perpetual trusts, dynasty trusts are meticulously designed to last indefinitely, as long as the trust's assets remain intact. Given the long-term nature of a dynasty trust, it is imperative to establish it with utmost care and attention to detail. Once the trust is in place, its rules generally cannot be altered, underscoring the importance of getting everything right from the beginning.
Setting up a dynasty trust follows a process akin to that of any other trust. The grantor, who serves as the trust's creator, transfers funds and assets into the trust during their lifetime or, in the case of a testamentary dynasty trust, after their death. Once the trust is funded, it becomes irrevocable, and the rules established by the grantor become fixed. Modifying these rules is only possible under specific state laws that govern trust modifications.
When establishing a dynasty trust, thoughtful consideration must be given to selecting the most suitable trustee. It is common practice to appoint an independent trustee, such as a bank or trust company, to administer the trust throughout its existence. Although a beneficiary can serve as a trustee, this approach may give rise to potential issues concerning taxes and creditor protection. A beneficiary-controlled trust can have significant implications for income and estate taxes, depending on the extent of the beneficiary's powers. It can also impact the level of asset protection provided to the beneficiary and expose family wealth to the risk of misappropriation. On the other hand, a corporate trustee, such as the dynasty trust itself, possesses indefinite legal life and can ensure uninterrupted administration across generations. Corporate trustees typically charge an annual fee based on the value of assets held in the trust.
While trusts are generally beneficial for individuals across various financial backgrounds, there are exceptions, and the dynasty trust is one of them. Establishing a dynasty trust does not necessitate grand dynastic aspirations akin to illustrious families like the Medici or the House of Windsor. However, it is most commonly utilized by families with substantial wealth. While there are no legal requirements regarding the minimum amount of funds needed to establish a dynasty trust, from a practical perspective, it is typically suitable for those with sufficient wealth and assets capable of sustaining multiple generations, taking into account the financial needs and responsibilities of the beneficiaries. Grantors who are concerned about future generations beyond their children often opt for dynasty trusts as part of their estate and legacy planning. Additionally, dynasty trusts can prove invaluable for families that own a family business and desire to maintain its continuity within the family lineage.
Statistics reveal that many family businesses fail to survive beyond the second or third generation, but a dynasty trust can significantly enhance the chances of success. By placing shares of the business into the trust, the grantor can provide for multiple generations of beneficiaries while ensuring the seamless continuation of business operations through professional trustee management. The trustee assumes responsibility for managing the business affairs and maintaining continuity, while the beneficiaries reap financial benefits. Furthermore, the grantor can include specific terms within the trust to guarantee competent business management, such as mandating the trustee to establish an advisory council functioning as a board of directors.
In the realm of estate planning and legacy planning, one of the notable advantages of establishing a dynasty trust is the potential for significant tax benefits. By leveraging the federal estate tax exemption amount (which currently stands at $12.06 million per individual in 2022, or twice that amount for couples) to fund a dynasty trust, you can effectively transfer money and property directly to your grandchildren while avoiding gift or generation-skipping transfer (GST) taxes. To achieve this, you would place accounts and property into the trust and file a gift tax return to allocate appropriate tax exemptions to the trust or pay a portion of the wealth transfer tax. This strategic approach ensures that these assets are not included in your taxable estate, nor in the taxable estates of your beneficiaries, provided that the trust is fully exempt from GST tax.
Furthermore, utilizing trust funds to cover a beneficiary's living expenses or investing in a home for their benefit can also help reduce their taxable estate. Additionally, when a dynasty trust is properly drafted, accounts and property left to your loved ones within the trust can enjoy protection from creditors and divorce courts. In contrast, gifting money outright may not offer these same protective benefits.
It is worth noting that dynasty trusts are not available in every state due to the rule against perpetuities, a common law principle that restricts the duration of controlled property interests, including those established within trusts. This rule, which was not specifically created for trusts, aims to prevent individuals from exerting control over property ownership for an extended period after their demise through legal instruments like deeds and trusts. However, many states have modified or even eliminated this rule, as its interpretation can be complex. With the guidance of an experienced estate planning attorney, you may be able to establish a trust in a state where you do not reside, taking advantage of more favorable laws.
If you are considering the establishment of a dynasty trust, our firm can connect you with a skilled estate planning attorney who can guide you through the process. During your consultation, crucial factors such as selecting a trustee and beneficiaries, implementing tax and creditor protection strategies, understanding state laws pertaining to perpetual trusts, and aligning the dynasty trust with your comprehensive estate plan will be thoroughly discussed. Taking this initial step will enable you to secure your legacy and ensure the preservation of your wealth for future generations. To embark on this journey, please reach out to us, and we will be delighted to assist you.
We extend our warmest congratulations on your new home purchase. Whether this is your first time buying a home or an upgrade/downsize, acquiring a new home is a significant event that brings about change in your life. Properly prepare for the worst by protecting your newest accomplishment. Here are three essential tips to keep in mind now that you have the keys to your new home, including important considerations for estate planning.
1. Make Sure to Update Your Address
After moving into your new home, it is crucial to update your address with the relevant authorities. Start with visiting your local United States Postal Office to obtain a form for change of address. Alternatively, you can update your address online. This step will help the postal service forward your mail to your new address.
It is also a crucial step in protecting your property to update your address with the Internal Revenue Service (IRS) by filling out Form 8822. This will ensure that you receive all important tax notices and refunds. Additionally, make sure to update your address with your local state tax agency.
2. Ensure Consistency Between Your Home Title and Estate Plan
One aspect of new homeownership that often goes overlooked is the need to align your home title with your estate planning objectives. After purchasing your new home, review the deed to confirm how the property is titled. Next, review your estate planning documents to ensure the property has been titled correctly to achieve your estate planning goals.
For instance, if your previous plan included a specific provision for the distribution of your old property, you will need to update this provision to reflect the current status. Similarly, if you have a trust-based estate plan to avoid probate, you will need to confirm that your new property is titled in the name of the trust and not in your individual name. Ensuring consistency between your home title and estate plan will help protect your assets and ensure your wishes are carried out effectively.
3. Review Your Life Insurance Policy and Beneficiary Designations
If you have a mortgage payment to make on your new home, it's likely you'll have a large monthly expense to pay off each month. To safeguard your loved ones, it is important to review your life insurance coverage. Ensure you have adequate life insurance coverage to address the mortgage payment in the event of your passing, particularly if you have a surviving spouse or children who are likely to remain in the home. Even if they decide not to reside in the property, life insurance can offer valuable resources during a potentially emotionally difficult period. Even if they choose not to stay in the home, life insurance can provide valuable assets during what can be an emotionally challenging time.
It's also a good idea to review your beneficiary designations. Life changes can happen quickly, and this may be overlooked. If your designations don't match up with the rest of your estate plan, you might inadvertently disinherit a family member or have the money go directly to an individual without any guidance.
Finally, with your new home comes the need for homeowner's insurance. Contact your insurance agent to confirm that you are receiving all eligible discounts. Many insurance providers offer package discounts when you combine services. By already having car insurance with the same company as your homeowner's insurance, you may qualify for a lower rate compared to purchasing each policy separately. Additionally, homeowners often receive discounts that renters do not.
We understand that buying a new home is a significant milestone, and we are here to assist you. If you need help aligning your new purchase with your estate planning goals, contact us today. We can ensure that your new home and estate planning are aligned to achieve your objectives, including the important aspect of estate planning for homeowners.
May marks not only the end of the academic year and the start of summer, but it also marks the beginning of the busiest season for moving - National Moving Month! When you're moving, there are numerous tasks to tackle, including packing your belongings, managing utilities, forwarding mail, updating voter registration, and more. As you prepare for your next move, there are two major tasks to take into consideration:
In all of the chaos of moving boxes and packing tape, it is easy for things to get lost in the shuffle or even thrown out during a move. Certain important documents, such as birth certificates, social security cards, passports, financial statements and estate planning documents, should not be packed up and put on the moving truck along with your less important belongings. Keep these important documents safe and accessible during your move and ensure that they do not get thrown out by accident.
One idea is to purchase a portable file box with an attached lid and a secure latch. You might consider purchasing a brightly colored one so that it is easily identifiable. Then, place this file box in a secure and easily accessible location. If you are moving locally, a logical place might be at a family member’s or friend’s home. If you are moving a longer distance, that place might be the trunk of your car.
Having electronic backup copies of your important documents is a wise decision, especially during a move. You can take pictures of your documents and save them on your smartphone or a password-protected removable flash or external hard drive. Another option would be to store it in the cloud. This way, you'll always have a copy of these important documents in case you cannot locate the original.
Adding this step to your moving checklist can save you time and from stress. For example, you will not have to run around searching through unpacked boxes for your children's birth certificates to register them for their new school.
When moving, it's important to not only contact the moving company, but also to reach out to your team of advisors. A major consideration is the cost associated with the move, which is influenced by factors like the size of your home, the distance of the move, and your preference for do-it-yourself tasks. To ensure your moving expenses align with your long-term financial objectives, it's advisable to consult your financial advisor and establish a moving budget.
It is recommended to contact your estate planning attorney if you are moving different states. While a will or trust created in one state should generally be valid in another, certain documents such as a financial or medical power of attorney may be state-specific. Due to the variations in estate planning laws across different states, it is strongly advised that you have your estate planning documents examined to ensure their effectiveness in your new state. You can have your attorney review the documents or they can assist you in finding a local attorney who can review them for you in your new state.
If you and your spouse are moving out of or into a community property state, your estate planning may be more complicated. In these states, any property acquired during the marriage is presumed to be owned equally by both spouses, while property brought into the marriage by one spouse or acquired by gift or inheritance is separate property. Moving from a community property state to a common law state or vice versa raises questions about the status of community property. For instance, if a couple purchases a home in California during their marriage and then moves to Nebraska and buys a new home with the proceeds from selling their California home, is the new Nebraska home community property? Your estate planning attorney can answer these questions and help you take necessary steps to maintain any tax benefits.
Moving involves many things to consider, but don't forget to keep your important documents secure and meet with your team of advisers. These are crucial items to add to your moving checklist. If you're planning to move soon, we would be more than happy to help you keep this as smooth as possible.
Every child is a precious gift, and as parents or grandparents, we strive to plan for their future, anticipating their needs and aspirations. However, families with special needs children or grandchildren face additional responsibilities in ensuring their loved one's future is secure, fulfilling, and supported. To ensure a flourishing future for your special needs child or grandchild, estate planning measures focused on their unique circumstances are essential. We recommend the following steps:
When it comes to estate planning, creating a Special or Supplemental Needs Trust (SNT) for your special needs child or grandchild should be a top priority. An SNT is a specialized trust designed to set aside funds and assets for the benefit of a beneficiary who may qualify for public assistance due to their disabilities. It can be established as a standalone trust or added to your existing trust.
It's important to note that government programs providing aid to disabled individuals have strict criteria regarding the amount of money and property a person can own while receiving benefits. Structuring any inheritance your special needs beneficiary may receive in a way that doesn't disqualify them from obtaining government benefits is crucial. Even if they are not currently receiving government benefits, considering the possibility of future needs is essential. To ensure all opportunities are available, it is vital that the trust is meticulously drafted by a lawyer well-versed in the eligibility requirements for government benefits.
An SNT not only provides financial security but also allows you to appoint a care manager or advisory committee. The care manager serves as an advocate for your special needs beneficiary, overseeing their well-being periodically or daily, depending on their level of care requirements. An advisory committee, comprising family members, friends, and professionals, can provide guidance to the trustee on the beneficiary's needs and the best use of the funds.
Additionally, the SNT can include a statement of intent, outlining the trust's purpose and how the funds should be utilized. This section acts as a safety net in case changes in the law make the beneficiary ineligible for government benefits. It allows for modifications to ensure your original intentions are met, even in the face of unforeseen circumstances.
In addition to establishing an SNT, putting your instructions in writing is crucial to ensure your wishes are carried out as intended. Consider creating a letter or memorandum of intent that provides guidance to your trustee on managing the trust after your passing. Although not legally binding, this document offers valuable insights into your true intentions. You can include details on how the funds should be used in accordance with government rules, specific goals you would like the beneficiary to achieve, and the standard of living you envision for them.
Supporting a special needs child or grandchild can be financially demanding, and it's important to consider how to sustain their care once you pass away. Life insurance can be a valuable tool in ensuring there will be sufficient funds for the trustee to use for their benefit. By designating the SNT as the beneficiary, you can provide a lump sum payment that is not subject to the same tax liabilities as retirement accounts.
The SECURE Act has brought changes to how beneficiaries can receive distributions from inherited IRAs, potentially impacting the financial support available to your special needs beneficiary. However, the Act also recognizes "eligible designated beneficiaries," including individuals with disabilities, who can still receive distributions over their life expectancies. Congress has established rules that allow the life expectancy of disabled beneficiaries to be used for certain types of trusts. If you have a substantial retirement account, it is crucial to discuss your distribution options to maximize benefits for all your beneficiaries.
We understand that securing a bright future for your special needs child or grandchild is of utmost importance to you. Our priority is to work with you in developing a comprehensive plan that will guarantee continued care and well-being for your loved ones. Please do not hesitate to reach out to us to schedule an appointment so that we can begin this process together.
When Elvis Presley, the King of Rock and Roll, passed away in 1977, he left behind a complicated legacy, just like his famous dance moves. His estate, including the iconic Graceland, eventually ended up in the hands of his only child, Lisa Marie Presley. However, the future of Elvis's legacy and the fate of his estate face challenges ahead. These challenges involve Lisa Marie's personal financial issues, a significant age gap among her children, and even a legal dispute initiated by her mother, Priscilla Presley. The unfolding of this captivating saga will determine the course of Elvis's rockin' legacy.
From Elvis to Lisa Marie: Inheritance and Financial Legacy
Lisa Marie, born in 1968 to the legendary rock and roll icon Elvis Presley and his wife Priscilla Presley, had to face the tragic loss of her father at a young age. Sadly, Elvis passed away at forty-two due to a heart attack. Fast forward to January 2023, and Lisa Marie herself succumbed to heart problems at the age of fifty-four.
Despite Elvis's untimely departure, his legacy has continued to thrive, with his estate earning an impressive $400 million in the previous year alone. The value of the estate skyrocketed to over $1 billion, thanks in part to the 2022 Elvis biopic movie. This created a substantial financial legacy for Lisa Marie to inherit.
The Elvis Presley Trust
When Elvis Presley passed away, his estate was placed in a trust with Lisa Marie, his grandmother, and his father as beneficiaries. According to the trust, Lisa Marie's inheritance was held in trust until she turned twenty-five in February 1993. After that, the trust dissolved automatically, and Lisa Marie inherited $100 million, including Graceland, her childhood home.
Today, Graceland stands as a museum and popular tourist attraction, generating over $10 million annually. To manage Graceland and the rest of Elvis's estate, which includes Elvis Presley Enterprises, Inc. (EPE), Lisa Marie established the Elvis Presley Trust. Until 2005, Lisa Marie served as the owner and chairperson of EPE's board, but she later sold 85 percent of its assets.
Graceland and the Living Trust
Graceland, the iconic mansion that was once Elvis Presley's residence, has become a symbol of his legacy and a beloved tourist destination. After Lisa Marie inherited it, she made it clear that Graceland would always remain within the family.
Lisa Marie's children, Riley Keough, Harper Lockwood, and Finley Lockwood, are set to inherit her fortune and properties through a living trust. However, Lisa Marie's son, Benjamin Keough, tragically passed away in 2020.
Considering that it's unclear whether Lisa Marie had a separate will in place, the living trust, an estate planning document, will play a significant role in determining the distribution of her assets. Through the living trust, individuals can transfer ownership of accounts and property to a separate entity, the trust, which they control while alive. The trust also names a successor trustee to manage the accounts and property after their passing.
Priscilla Presley's Trust Challenge
A challenge to Lisa Marie's living trust has emerged from an unexpected source—her own mother, Priscilla Presley. The legal dispute revolves around a 2016 amendment to the trust, which removed Priscilla and a former business manager as trustees and replaced them with Lisa Marie's daughter, Riley Keough, and her late son, Benjamin Keough.
Navigating the Challenges: Estate Planning and Protecting Your Legacy
Priscilla's claim challenges the validity of the living trust amendment, citing violations of legal requirements. She highlights the lack of proper notification, absence of witnesses or notarization, and even a misspelling of her name in the document. Adding to her concerns, Priscilla alleges that her daughter's signature appears suspiciously different from her usual signature. Consequently, she has sought the court's intervention to invalidate the amendment that removed her as the trustee.
Lisa Marie's Financial Struggles
Recent legal documents indicate that Lisa Marie faced financial challenges before her passing, despite inheriting $100 million at the age of twenty-five. She held approximately $95,000 in cash and possessed various assets such as bonds and stocks valued at $715,000. Although she earned over $100,000 per month from EPE, she also carried a $1 million tax debt and incurred monthly expenses of $92,000. Furthermore, her ex-husband, Michael Lockwood, reopened a lawsuit seeking $4,600 per month in child support.
By 2016, Lisa Marie's $100 million trust had significantly dwindled to just $14,000 in cash. Her former manager, Barry Siegel, faced allegations of mismanaging her finances, which resulted in a decline of her wealth. Court records reveal that Lisa Marie was burdened with a $16.67 million debt at that time. However, in 2019, Siegel countered the claims and asserted that the sale of her 85 percent stake in EPE helped resolve over $20 million in debts.
Potential Legal Challenges for the Lisa Marie Presley Estate
The legal ambiguity surrounding Lisa Marie's estate gives rise to numerous potential legal issues that will likely require judicial resolution. One such challenge is Priscilla's claim against the living trust amendment. If her challenge is successful, the amendment would be considered void, making Priscilla the successor trustee responsible for managing the trust's assets and funds instead of Lisa Marie's daughter, Riley. This matter would necessitate court intervention for resolution.
Creditor Claims
Although it remains uncertain whether Lisa Marie had outstanding debts, if she did, creditors could make claims against her estate. The estate would need to determine whether to accept or reject these claims. Rejecting them could lead to legal disputes. Creditors hold priority over beneficiaries, which means that Lisa Marie's accounts and property, including Graceland, might need to be sold to satisfy any outstanding debts. Additionally, even after the debts are settled, the estate may still be subject to estate taxes, which could further complicate matters if creditors decide to initiate lawsuits.
Her Daughters' Inheritance
Assuming the estate possesses sufficient funds to settle debts without selling Graceland, Lisa Marie's three daughters, Riley, Harper, and Finley, are poised to inherit the mansion and any remaining property or funds. However, the upkeep and tax costs associated with Graceland surpass $500,000 annually. It remains uncertain whether the daughters would collectively agree to bear these expenses and preserve the Elvis legacy within the family.
The daughters have the option to sell Graceland, but this decision could ignite internal conflicts if even one daughter wishes to pursue a sale. Additionally, crucial details regarding the ages of the daughters and their inheritances remain unknown. Did Lisa Marie establish a trust to hold her twin daughters' inheritances until they reach a specific age, as her father did for her? Or does the trustee possess discretionary power over the funds? Moreover, depending on the outcome of the trust challenge, will the trustee ultimately be Riley or Priscilla?
Furthermore, the question of whether Lisa Marie distributed her estate equally among her daughters remains unclear, as there is no legal requirement for equal distribution.
Control What You Can with an Estate Plan
The sudden and tragic passing of Lisa Marie Presley serves as a reminder that death can come unexpectedly. However, through estate planning, we can exert some control over our legacy.
Crafting a comprehensive estate plan can help alleviate some of the uncertainty and provide peace of mind to both ourselves and our loved ones. If you're ready to start planning for the future, please reach out to our office to schedule a consultation.
Estate planning is an important process that involves making arrangements for the distribution of your assets and property after your passing. While having an estate plan in place is crucial for everyone, people with disabilities need to get in touch with a Reno estate attorney even more.
Disability panels are groups of people who are appointed to oversee the management of an estate plan for an individual with a disability. This group, which may consist of close relatives, dependable friends, financial advisers, and attorneys, works to see that the disabled person's needs and wishes are fulfilled in the event of their incapacitation or passing. This is crucial because people with disabilities could have distinct needs that call for extra care and attention.
Disability panels offer a level of transparency and accountability not often found in conventional estate planning arrangements, which is one of its key advantages. By appointing a panel to manage your estate plan, you can be confident that your wishes are being carried out according to your intentions.
Knowing that there is a plan in place for managing a potential disability, everyone involved can feel more secure and prepared. Also, a disability panel can ensure that, in the event of a handicap, the person's desires are respected and carried out.
It's also worth noting that disability panels can be a valuable tool for estate planning. By including a disability panel in an estate plan, individuals can ensure that their wishes for care and decision-making are respected even if they become disabled. In addition to ensuring that the estate is managed in accordance with their wishes, this can help avoid family disagreements.
Disability panels can help prevent disputes among family members or other parties who may have conflicting interests in your estate. When there is a panel in place to manage your estate, there is less opportunity for disagreements or misunderstandings to arise. This can help ensure that your assets are distributed according to your wishes and can help prevent the unnecessary strain on relationships that can often result from disputes over an estate.
In addition to providing oversight of your estate plan, disability panels can also assist with other aspects of your care. For those with impairments, who might need extra care and attention to preserve their quality of life, this might be particularly crucial.
When choosing members for a disability panel, it is important to consider factors such as trust, competency, and reliability. You want to choose people who will be dedicated to carrying out your intentions and who are capable of administering your estate plan in a competent and ethical manner. This may include family members, close friends, or trusted advisors who have experience with estate planning or disability issues. The correct people must be chosen to serve on the disability panel in order for it to be effective. These people ought to be dependable, aware of the person's requirements and preferences, and capable of cooperating in decision-making. Clear rules and processes for the panel's operation and decision-making should be in place as well.
Disability panels can play a crucial role in estate planning for individuals with disabilities. By designating a panel to manage your estate plan, you can be certain that your wishes are being carried out exactly as you planned and that your assets are being dispersed in a fair and equitable manner. This can provide you and your loved ones peace of mind and help avoid disagreements or misunderstandings that frequently occur in conventional estate planning arrangements. If you or a loved one have a disability, it may be worth considering the benefits of disability panels in managing your estate plan.
For over a quarter of a century, the National Safety Council has designated June as a
month of paramount importance - a time to honor and prioritize safety at a national
level. This annual celebration, known as National Safety Month, serves as a powerful
reminder of the critical role that safety plays in our lives.
The aim of this month-long campaign is to increase public awareness about the most
significant safety and health risks faced by people in the United States. While many
people are aware of common safety hazards, such as physical injuries, they may not
realize that incapacity or death can result in substantial financial and emotional
consequences for themselves and their families. A revocable living trust is a legal tool
that can help protect you and your loved ones from the costs, uncertainty, and chaos
that may arise in the event of your incapacity or death.
Protection by a Revocable Living Trust for Yourself
Just like anyone else, you face the risk of experiencing a catastrophic accident or illness
that could leave you incapable of taking care of yourself or your loved ones. This
incapacity might be temporary, or it could last until your eventual death. The total cost of
incapacity can be difficult to calculate and can include lost wages, as well as the
expenses of required medical care. These expenses may include requiring assistance
with daily activities such as bathing, eating or dressing. However, it can quickly become
very costly - the average cost of assisted living in the United States in 2020 was
approximately $4,300 per month.
A revocable living trust is an essential legal tool that helps protect you and your loved
ones by providing instructions for how you will be financially supported during your
incapacity. With a revocable living trust, you can choose who will manage your finances
when you are no longer able to handle them yourself. There’s no better time than now
to establish a revocable living trust because it is revocable, which means that you can
change it at any time and alter it as your life circumstances change, as long as you have
the mental capacity.
Protection by a Revocable Living Trust for Your Loved Ones
Your loved ones’ financial and emotional well-being is also protected by a revocable
living trust. It ensures that your wishes are clearly outlined for what should happen in
the event of your incapacity or death. This prevents your loved ones from having to speculate
on your desires or worse, having to follow state law to determine who should handle your finances and end-of-life affairs.
Probate fees, which vary significantly by state, can also be very expensive. For
example, in California, attorney and executor fees for probating an $800,000 home
could be as high as $38,000, as set by law. A revocable living trust can help avoid
probate and those high accompanying fees.
Revocable living trusts also offer privacy protection. Without the instructions provided in
these trusts, family members often have to resort to public court proceedings. This
means that the court and other curious individuals may pry into your private affairs.
Furthermore, these types of trusts can provide basic martial deduction planning to
maximize the use of you and your spouse’s estate tax exemptions. This helps to reduce
your loved ones’ estate tax burden, after your death. Finally, by using this legal tool, you
can protect the money you leave to your loved ones from their creditors.
Properly Funding Your Revocable Living Trust
To ensure that a revocable living trust serves its intended purpose, it must be properly
funded. This means that any property you own must be transferred to the trust, or for
certain assets, the trust must be named as the beneficiary. Failure to properly fund your
trust may result in the need for probate. To avoid this, it is essential to review any
correspondence you have received from your attorney regarding which accounts and
properties should be owned by the trust or designated as beneficiaries. It is especially a
good time to do this in the month of June, which is National Safety Month!
Given the importance of the instructions contained in a revocable living trust, it is
advisable to review them annually to ensure that they still align with your final wishes. If
changes are necessary, it is recommended that you seek assistance from a
professional to update your trust accordingly. This will ensure that your trust continues
to serve you and your loved ones during times of incapacity and after your passing.
Prepare to be amazed! May is not just any ordinary month - it's National Home Remodeling Month, the time of year when the National Association of Home Builders officially recognizes the tremendous value of home improvement projects. Springtime comes with spring cleanings and home improvement projects, but can also be a good time to consider updating your estate planning documents.
If you need to make small updates to your estate planning documents, such as changing the names of beneficiaries or decision makers, you may wonder whether you can take care of these changes on your own or if you should seek the assistance of a professional. Here are some things to consider before choosing which option is best for you:
If Your Name Changes
If you've changed your name due to marriage and/or your own personal preference, and your estate planning documents don't need to be changed, you may only need to keep copies of any legal paperwork reflecting the name change. Keep copies of these documents together with your estate planning documents. If you've remarried and want to change your name in your estate planning information, or if a trust you established has your old name in the title, it's best to consult an industry professional, such as an attorney, to ensure that the name change is properly handled.
If a Beneficiary’s Name Changes
Wondering what you should do if your beneficiary's name changes? Whether it is due to marriage and/or personal preference, staying on top of this information can save you from running into issues later down the road. While updating your estate planning documents is not necessarily critical, it may be necessary for your beneficiary to prove their identity with a court order, marriage certificate, or birth certificate. It is important to avoid making changes directly on your estate planning documents, such as crossing out a name and writing in a new one. This has resulted in confusion and has even prompted litigation in the past. Courts have had to weigh in on these types of edits to estate planning documents to determine their validity and intent. Even though it may seem harmless, unforeseen consequences can often arise when attempting to edit legal documents yourself.
Adding or Removing a Beneficiary
When events occur such as the birth of a child or the passing of a beneficiary, you may wonder if you need to update your estate planning documents. The answer is that it depends on the language in your documents. Some estate planning documents are drafted to anticipate future additions or removals of beneficiaries by name. It is highly important to seek legal advice before making any changes to your estate planning documents, as serious legal consequences can result from attempting to do so on your own.
Making changes without legal advice could result in unintentionally cutting off people from receiving an inheritance or having your property go to those who never intended to benefit. For instance, adding a spouse’s name to the list of children in your estate planning documents could lead to unintended consequences if the spouse remarries after the child’s death. The former in-law could become a beneficiary of the family trust and have certain rights regarding the trust’s administration, including the right to demand a copy of the trust documents and any financial accountancy. Once that share is paid out, the former in-law might use it in a way that it was not originally intended for, causing negative consequences from an innocent and well-meaning attempt to provide for an in-law.
Appointing New Trusted Decision Makers
In some cases, you may want to appoint new individuals to make important decisions about your property if you become incapacitated or pass away. However, it’s important to understand that certain legal documents cannot be amended easily. While it may be tempting to simply cross off the names of the people you want to remove and add new preferred decision-makers, this can actually void the document under certain circumstances.
If you need to make such important changes, it’s best to have the documents redrafted and executed with the same formalities used in the original documents, ensuring that you follow the applicable state law. For instance, your state may require multiple unrelated witnesses to the signing of a modified will, even if the change you’re making is a one-sentence amendment. The same is true for a codicil, which is an amendment to your will. Other legal documents, such as a power of attorney, a trust amendment, or restatement, may also require similar formalities, such as having your signature notarized.
Modifying Distribution Provisions
There may be times when you consider altering the distribution provisions of your will or trust by changing the percentage/fraction shares of your estate. It is important to note that this modification should be avoided when attempting to make such changes on your own. It is always advisable to consult an attorney if you wish to modify the distribution provisions of your will or trust. You must consider this amendment very carefully and execute it with strict documentation. Such a change to your estate planning documents carries the risk that a beneficiary who receives less under the amendment may challenge it and use any argument available to invalidate the changes. An experienced estate planning attorney will know the necessary steps to take to ensure that your legal documents will be honored by your beneficiaries and the courts after you pass away.
As you have seen, remodeling your estate plan without the help of a trained and experienced attorney can lead to many potential issues. When handled properly, these changes don’t have to be expensive. Your attorney can quickly and inexpensively fix some of these small issues by drafting an amendment to your estate planning documents. Other changes may require more work because the issues are considerably more complex than you first realized. In either case, with a legal professional guiding you through the process, you can be confident that you will not be leaving your loved ones with a legal mess to sort out after you are gone.
If you are uncertain about whether you need an attorney to help you modify your estate plan, we encourage you to contact us. We are happy to consult with you and help you determine what changes, if any, you may need to make.
Back in 1987, Congress recognized March as Women's History Month to celebrate the incredible contributions of women in American history across various fields. From building a strong and prosperous nation to being the backbone of their families, women have been unstoppable. Yet, in the midst of caring for others, women often neglect their own financial and estate planning. It's high time for women to prioritize themselves by crafting a solid plan that caters to their future needs, which may differ from those of their male counterparts and dependents.
Longer life expectancies. According to Social Security Administration data, in 2021, women had an average life expectancy of 79.5 years compared to 74.2 years for men. As a result, it is important for women to create an estate plan that accounts for additional years of living expenses during retirement, healthcare costs, and possibly long-term care costs. As women age, there may be a greater possibility that they could become incapacitated and need someone to act on their behalf to make financial and healthcare decisions. Documents such as financial and healthcare powers of attorney and living wills authorize a person they trust to make decisions or take action for them if they are not able to act for themselves. Some women may not only own their own assets but also inherit wealth from both their parents and a spouse who dies before them, and if so, they need a financial and estate plan to optimally preserve and transfer this wealth. Because women may outlive their spouses, they also may be responsible for administering their spouse’s estate or become the sole surviving trustee of a joint trust. These duties may be difficult for a woman who is experiencing health issues that often occur at an advanced age, and this possibility should be addressed in their estate planning. For example, a woman concerned that she will be unable to handle administering her trust at an advanced age can name a co-trustee or successor trustee to administer it if she is no longer able to do so.
Lower earnings. According to U.S. Census Bureau data, women continue to earn less than men, and the pay gap widens as they age. In addition, because some women have shorter employment histories due to time off to raise children or care for aging parents, they may have less saved for retirement. As a result, it is important for them to take steps to protect their money and property from lawsuits or creditors’ claims. For example, a woman could transfer her money and property to an irrevocable trust. Because she is no longer the legal owner of the property, a creditor cannot reach it to satisfy claims against her so long as the trust is properly drafted to include appropriate distribution standards and administrative and other provisions. The woman may be a discretionary beneficiary of the trust, and the trustee may distribute the funds she needs for living expenses. Additionally, because they have less money and property during their retirement, women need to have a solid plan in place to make sure that they are able to financially provide for their loved ones upon their death and that unnecessary costs and expenses are minimized to the extent possible.
Care for loved ones. Many women are caregivers for minor children, adult children with special needs, or aging parents. As a result, they are often concerned about who will care for their loved ones if they are no longer able to do so. If a spouse or sibling is not available to provide care, they need to make sure that another family member or trusted individual can be the caregiver (sometimes called a guardian of the person) for their loved one. The same individual—or someone else—can serve as the guardian of the loved one’s estate (sometimes called a conservator or guardian of the estate) to manage the inheritance for their benefit. In the case of a child with special needs, if no family member is able to take on the responsibility of their care, a group home or assisted living facility may be the best choice. A special needs trust may need to be established to ensure that funds are available for the child’s care but do not decrease the amount of government benefits they are eligible to receive.
You have accomplished a lot in your life! Celebrate your accomplishments and contributions during Women’s History Month by contacting us to set up an appointment to create an estate plan that provides for your own future needs and those of the people you love. You deserve the peace of mind that comes with knowing your future is secure.
In October 2022, singer and songwriter Jerry Lee Lewis passed away. He left behind a rock legacy, a big family, and an estate valued in the multi-millions.
We often follow the lives of celebrities and dream of having their lavish lifestyles. Even so, famous folks experience many similar estate planning challenges just like the rest of us. This includes implementing the optimal tax strategy, as well as distributing assets to loved ones when deceased.
Lewis’s passing has prompted many to look back fondly at his music career. Aside from that though, it begs the question: what will shake out with his sizable estate? Let’s play “what if” in the following estate planning scenarios and see which lessons can be learned for celebrities and regular folks alike:
Jerry Lee Lewis lived a long life, passing at the old age of 87. Like other rock icons of the last century (Elvis, Johnny Cash), Lewis’s lifestyle put hard miles on him. Even though he engaged in substance abuse and experienced health problems, he outlived other leading rockers and was deemed “the last man standing from the dawn of rock and roll” by New York Magazine.
You likely have heard his greatest hit, “Great Balls of Fire”, but Lewis had a variety of other hits that earned him four Grammy wins. Lewis was inducted into both the Rock & Roll Hall of Fame and Country Music Hall of Fame. His music career spanned for an astounding seven decades, and he produced over forty albums.
At his death, Lewis left behind his seventh wife, Judith Coglan Lewis, and four of the six surviving children from his marriages. In the years preceding his death, a feud ensued between Lewis and his daughter, Phoebe, and her husband, Ezekiel Loftin. Lewis sued the Phoebe and her husband in 2017 for taking advantage of his financial status. Charges were later dropped.
Lewis had his fair share of financial missteps, filing for bankruptcy in 1988. The filing included more than $3 million in debts. This came from over $2 million in IRS dues, unpaid medical bills, and tens of thousands in attorney fees. Still, his net worth at the time of his death was estimated to be in the range of $10 million and $15.4 million.
As professional estate planning attorneys, we evaluate the life and legacy of Jerry Lee Lewis through the perspective of our field of expertise. While his tumultuous and fast-paced lifestyle may not align with our personal experiences, we recognize the valuable insight it provides in regards to common estate planning issues. In this discourse, we will address several issues related to Lewis's estate that are particularly noteworthy.
Based on what we know about Lewis’s relationship with his daughter, Phoebe, it is likely that he will remove her from any consideration to receive a portion of his assets. Mississippi law permits individuals to disinherit beneficiaries under a legitimate basis. However, it is worth noting that Phoebe has established her own career in the music industry and has done quite well for herself, potentially rendering any inheritance unnecessary.
The distribution of assets for his remaining children is yet to be determined. While most parents opt for equal distribution of assets among their children, the unique circumstances of the Lewis family dynamic require analysis of what is equal versus what is fair.
We can take lessons away from the Lewis family and apply them to our own situation. Each child has financial needs unique to their lives. While some are able to obtain financial freedom, others may struggle. A family’s financial picture can change for better or for worse between the birth of children as well. For instance, a younger child might enjoy a slightly more affluent lifestyle than the older siblings, simply because their parents have worked their way to a better career milestone and are making more money now than they were. This is why dividing assets equally within an estate plan is not always the fairest method for all parties.
Will He Transfer Assets to His Surviving Spouse?
Lewis was married a staggering seven times, and each came with their own controversies. His seventh wife was by his bedside upon his death. Will he distribute assets to her?
In the case that Lewis did not have a will in place, intestate law would take effect. This would automatically make his spouse the primary beneficiary. It’s not a far off scenario – about two thirds of American adults fail to compose a will. Rock icons can fall into this category if they fail to do some basic estate planning before death.
In the case that Lewis did have a will, he still could have left his entire estate, or a portion, to the surviving wife. If he just left a portion, those assets could be given to her as a lump sum, or distributed over time under the management of the estate’s trustee.
Lewis also would have had options deciding the type of trust set up. The pros and cons of these different types are as follows:
Even though death and taxes are certain in life, estate taxes may not fall into this category. It all depends on the breadth of the estate at Lewis’s death, and the amount of the lifetime exemption used.
The lifetime gift and estate tax exemption denotes the maximum amount of wealth that an individual can pass on to their heirs without incurring estate taxes. Such transfers can take place either as gifts throughout a person's lifetime or at the time of their death.
In 2022, the federal lifetime gift and estate tax exemption threshold was $12.06 million, rising to $12.92 million in 2023. Based on the conservative estimate of Lewis's net worth, the value of his estate is lower than the 2022 lifetime exemption limit. Therefore, in the absence of any previous use of his exemption during his lifetime, he may not require workarounds for estate taxes if his spouse does not posses substantial personal assets. It is worth noting that for couples, the exemption amount doubles to $25.84 million in 2023.
Mississippi does not impose an estate tax, so Lewis's estate does not need to worry about such a tax being levied. However, if Lewis had passed away in a state that imposes an estate tax, or if he had owned property in such a state, then his estate might have been subject to an additional tax due to his death. The exemption amount and tax rate for each state's estate tax are determined by that state.
In the case that Lewis's spouse does possesses assets and wealth that surpass the individual gift and estate tax exemption limit, it may behoove her to ask for the deceased spousal unused exclusion (DSUE) amount. The DSUE provision, aimed at helping the surviving spouse, allows the unused exemption amount of the deceased spouse to be transferred to the surviving spouse in case the former did not use up the entire exemption amount. In simpler terms, Lewis's wife would be eligible to receive a DSUE amount of $2.06 million, calculated based on the 2022 exemption of $12.06 million and Lewis's estimated estate value of $10 million.
Based on the 2022 exemption of $12.06 million and an estimated estate value of $10 million, Lewis's wife would be eligible for a DSUE amount of $2.06 million.
It is impossible to know for sure how Jerry Lee Lewis chose to allocate his wealth. His wife and children may be as uninformed as the general public, and there could be unexpected elements in his estate plan that have yet to surface.
The Lewis family requested that instead of sending flowers for his funeral, contributions be made in his name to either the Arthritis Foundation or MusiCares. It raises the question whether Lewis may have chosen to allocate a significant portion of his estate to these or other charitable organizations instead of his family.
Only time will tell how it’ll play out. We may not even get the full story if he left his estate to charity, since it’s common for charity information to stay private.
Ironing out an estate plan is not exclusive to rock-and-roll icons. Regardless of the complexities of your estate, it is essential to develop a plan for the distribution of your assets, settling your debts, and ensuring that your wealth goes to the individuals and causes that matter to you. Contact Anderson, Dorn & Rader’s office today to arrange a consultation with our team of estate planning attorneys and begin planning for the future.
You may have seen the popular ABC TV show, Modern Family, which follows a fictional extended family through life’s ups and downs. It’s a relatable show that addresses many issues life throws our way. Just like the families depicted in the series, it’s crucial to have an estate plan to protect loved ones when someone passes, or becomes unfit to manage their finances. Let’s take a look at some situations that arise in Modern Family episodes and how you can apply the lessons learned to your own estate planning.
Throughout the Modern Family series, various family members start and own businesses. Whether it’s a passion project, investment opportunity, or owner-operator business, it should have a plan for the future as part of your overall estate planning.
The “traditional” lines in familial relationships can get blurred within multi-generational, blended families. For example, Jay often refers to Manny as his son, even though he’s technically his stepson (the child from Gloria’s previous marriage). Though he loves Manny as if he were his own son, the law doesn’t take these emotions into account when it comes to transferring business interests. Legally, stepchildren have no right to inherit a stepparent’s money or property. In situations like these, proper estate planning is essential. Estate planning should include documentation to ensure that assets, including business interests, are left to stepchildren or others outside the traditional inheritance line if that is your wish.
There are several minors within the Modern Family series that would require guardianship in the event that their parents pass away. While Manny expressed a desire to serve as Joe's guardian if Gloria and Jay pass, it is important for them to formally nominate their preferred guardian in their wills. However, it should be noted that such a nomination is not binding and may be contested by others. To mitigate the risk of potential disputes and ensure Joe's wellbeing, it is advisable for Jay and Gloria to have open and candid discussions with both of their families to prevent any possibility of a guardianship dispute.
Rex and Lily would also require guardianship in the event of the passing of their parents. Without a comprehensive estate plan in place, it is possible that a dispute may arise between the families of Cameron and Mitchell. While Lily has spent a significant portion of her life close to Mitchell's family, later in the show, Lily and Rex move to reside with their parents in Missouri, which is closer to Cameron's family. As a result, Rex may develop a stronger bond with Cameron's family as he grows up, which could potentially lead to conflicts between the Pritchett and Tucker families if guardianship for these two children becomes necessary. To avoid such a scenario, it is imperative for Cameron and Mitchell to establish an appropriate estate plan.
Finally, it is important for Poppy and George to have designated guardians in the event that their parents, Haley and Dylan, die. While the family may not possess significant financial assets or property, it is crucial for them to establish basic plans for their children's care, including the appointment of primary and alternate guardians. When the show ends, Haley and Dylan have moved out of Phil and Claire's residence, but still nearby. Furthermore, it is noteworthy that Farah, Dylan's mother, has become increasingly involved in their lives since the announcement of Haley's pregnancy. It is possible that she may express an interest in assuming the role of guardian for the children in the event of the untimely passing of Haley and Dylan.
As a parent of minor children, it is crucial to consider and plan for the potential guardianship of your children should the unexpected occur. While no one can replace a parent's love and care, it is essential to formally nominate a guardian in a last will and testament or through a separate legal document, as permitted by state laws. While the court ultimately makes the final determination, clearly expressing your wishes can provide peace of mind. Furthermore, discussing potential guardianship with your family members in advance can help prevent disputes and ensure that your wishes are respected upon your passing.
As all married couples know, the question of what will happen in the event of the first spouse's death is important to consider. For couples like Phil and Claire, who have built and accumulated their assets during the course of their marriage, it may be natural to consider everything they own as jointly held. Both partners may wish for all assets to pass to the surviving spouse. However, without proper planning, leaving assets outright to a surviving spouse can leave them vulnerable to creditors and predators.
It is important to consider potential scenarios, such as the possibility of a scam artist exploiting a well-intentioned person like Phil, or a successful woman like Claire remarrying and unintentionally disinheriting her children by leaving all assets to her new spouse. To safeguard assets for the surviving spouse, regardless of whether it is their first or third marriage, a qualified terminable interest trust can be an effective solution. This designation of trust allows the surviving spouse to receive annual income from the trust and withdraw principal for specific purposes like health, support, education, and maintenance. It also grants you the power to choose where any remaining assets are allocated upon the death of your spouse.
In blended families, as seen on Modern Family, there are a variety of options for inheritance distribution. As Jay prepares his estate plan, it is important for him to consider how he wishes to divide his assets among his family members. This includes his spouse, two adult children from a previous marriage, a minor son, and an adult stepson, as well as five grandchildren and two great-grandchildren. He will need to make decisions regarding the distribution of assets, including the beneficiaries, the amount, and the timing of the distribution. He will need to consider whether it would be more beneficial to provide for his current spouse, Gloria, through a trust during her lifetime, with the remainder going to his other children, Claire, Mitchell, and Joe upon her death — or if his children should receive their portion of the inheritance while Gloria is still alive. Additionally, he will need to decide if he wants to provide for his stepson, Joe, or leave that responsibility to Gloria if she survives him. With estate planning, this could all be resolved.
When formulating an estate plan, it is crucial to consider the legal requirements for providing for a surviving spouse. In certain jurisdictions, there is a mandated minimum inheritance, known as the elective share, that must be allocated to the surviving spouse. Additionally, in states with community property laws, a surviving spouse may be entitled to a portion of assets acquired during the marriage. While one may assume that their spouse can support themselves without an inheritance, it is essential to have open and thorough discussions about estate planning, and document any agreements to ensure that the surviving spouse's rights and needs are protected. Without proper planning and documentation, a surviving spouse may unhinge the distribution of assets if they have not been taken into consideration within the estate plan, and haven’t waved their minimum inheritance rights.
Phil and Claire will need to evaluate their familial situation and incorporate estate planning to devise a plan for distributing their assets among their children and grandchildren. Given the distinct characteristics of their three children, it is important to consider each of their individual needs. For example, Haley, as a mother of two, may require a larger portion of the inheritance to support her children. Through careful estate planning, Phil and Claire may elect to set aside a specific fund for their grandchildren. Alex, who is very smart, may not require as much financial support due to her education or employment opportunities. Luke, on the other hand, may benefit from estate planning that includes trust money to help him pursue his business ventures and protect him from impulsive decisions.
An estate plan is a valuable tool for ensuring the protection of assets and financial resources for families of all sizes and backgrounds, not only those depicted in television series. The estate planning attorneys at Anderson, Dorn & Rader are dedicated to collaborating with families to develop a personalized plan that reflects the unique characteristics woven into each one. Reach out to our knowledgeable staff to see how we can assist your modern family with a financial plan for the future.
