October 31, 2016

To Leave an Inheritance or Not

Many people struggle with the question whether it is better to leave their children an inheritance or not. It is not an easy question to answer.

Recently, FOX Business reported on a survey that found some 23% of retired Americans would prefer to spend all of their money and not leave their children an inheritance in "Should You Leave Your Kids an Inheritance?"

They asked Dave Ramsey for his opinion on the subject. Ramsey suggested that if you have bad kids, then, leaving an inheritance for them just rewards their misbehavior. He went on to say that if you have good kids, then not leaving them an inheritance teaches them money is evil. However, that is not the entire story.

It is understandable why a parent would not want to leave an inheritance to a child who has an unhealthy lifestyle. No parent wants to give a child money that would just fuel a drug habit, for example.

With good estate planning, however, a parent can actually leave an inheritance that encourages the misbehaving child to straighten up and does not give the child funds for bad behavior.

Another possibility is to skip the child with bad habits or behaviors and instead give the inheritance to grandchildren or other relatives.

There are several options for estate planning around a misbehaving adult child.

Visit an estate planning attorney to learn more about them and how you can use them.

Reference: FOX Business (Oct. 12, 2016) "Should You Leave Your Kids an Inheritance?"

October 28, 2016

Giving Charity to Specific People

If you would like to make a charitable gift to a specific individual, you can. However, you should be aware that there are rules that need to be followed.

There are all kinds of people in the world who are in need of charitable assistance. Fortunately, there are many others with the means and desire to provide that assistance.

The normal method of donating is to give to an established charitable organization and to let them sort through the people requesting assistance and donate to those most worthy. What if you have found a particular individual you would like to help directly? Certainly you can give to him or her. However, if you hope to deduct the donation from your taxes, then you do need to be aware of the rules.

The Wills, Trusts & Estates Prof Blog discussed this issue in "Charitable Giving to Individuals."

If you are hoping to give to someone directly, then they need to have a private foundation pre-approved for the purpose. Furthermore, you need to be able to prove that you chose to give to them in a fair and non-discriminatory way. You cannot, for example, just give to someone who a co-worker knows needs money for educational expenses and deduct it from your taxes.

To best cover yourself you will probably need to have developed a grant application for the person to fill out.

You might consider just using your gift tax exemption to give to specific people as that would be a lot easier. Make sure you talk to an estate planning attorney first because large gifts should only be made with your estate plan in mind.

Reference: Wills, Trusts & Estates Prof Blog (Oct. 5, 2016) "Charitable Giving to Individuals."

October 26, 2016

After Divorce and Remarriage

If you have been divorced and remarried, do not consider yourself done with all of the legalities when your divorce is finalized and your marriage license filed. You still need to do some estate planning.

For most people, getting divorced is a legal headache. There is all sorts of legal and financial paperwork that must be gathered, filled out and filed with the court. You might have to go through multiple meetings with attorneys, formal mediation and several court hearings before the process is over. It can take months and in some cases years.

If you go to get remarried, then you have even more legal and financial paperwork that needs to be filled out and filed. While you might want that to be the end of all the legal things you have to do, it is not.

As Splitopia points out in "Protect Those You Love in Divorce, and Remarriage," there are other details you need to mind or avoid them to your peril.

These other things you still need to do include:

· Change Your Estate Plan – Your estate plan likely had your former spouse receiving much of your property. It should be changed immediately after your divorce is final. It should be changed again to include your new spouse when you get remarried.

· Update Beneficiaries – If you have any life insurance policies, retirement accounts or transfer on death bank accounts, then you need to make sure those are changed as well to make sure your former spouse is a beneficiary on them and to include your new spouse if you want to.

After getting divorced and remarried you probably do not want to deal with attorneys for a while. However, estate planning attorneys are only there to assist you and you need their help at that time. Visit with one.

Reference: Splitopia (Oct. 5, 2016) "Protect Those You Love in Divorce, and Remarriage."

October 25, 2016May 1, 2023

Family Business Succession Planning

If you have a family business that you want to leave behind for your children or grandchildren, it is important that you not only plan ahead, but that you also start easing the way for the transition.

Any estate plan is going to be more effective the more you plan ahead for what might happen and the more you prepare your heirs for what property and responsibility they will receive. However, for most estate plans that is not absolutely necessary.

Most estate plans will still work out fine if you wait to make plans and do not tell your family what will happen. But, estate plans that include a family business are different. They will not work out so fine.

It is vital that you plan ahead for them as the Wills, Trusts & Estates Prof Blog writes in “Preparing the Family Business for Succession.”

For the family business to thrive after the current owner passes away, careful plans must be made for who will be in charge next. Everyone needs to know who will be in charge on day one and, to make that go as smoothly as possible, it is important that the next leader knows what he or she is supposed to do.

Ideally, the next leader should be groomed for the role by taking part in the business on a day-to-day basis and making decisions about it sooner rather than later. Even if all that is done, it is important to plan for any contingencies that might occur. A secondary plan for succession should also be in place.

If you have a family business, do not delay. Talk to an estate planning attorney about how you can make sure it succeeds when you are no longer running it.

Reference: Wills, Trusts & Estates Prof Blog (Oct. 6, 2016) “Preparing the Family Business for Succession.”

October 24, 2016

Step-Family Estate Planning

One of the most difficult things to navigate with estate planning is dealing with blended families. If not done well, then the people you want to inherit your estate could be left out.

Americans are continuing to get divorced and remarried at a high rate. This has led to an increasing number of blended families where the spouses have children from previous marriages.

Despite this new reality the default estate laws have not kept up. They still reflect the general idea that people will get married only once in their lives. That means if you pass away without an estate plan, the laws of intestate succession will presume your spouse is also the parent of all your children.

In most states, the spouse will get everything, but the spouse will be under no legal obligation to pass anything on to his or her step-children.

The Wills, Trusts & Estates Prof Blog recently wrote about this issue in "Estate Planning for your Step-Family."

When attempting to deal with step-families, it is vital that you have some sort of formal estate plan. At a minimum you need a will. Even better would be a more elaborate estate plan that specifically includes the names of everyone you consider to be in your family and precisely what you want them to inherit.

It should also include those people you do not consider a member of your family, such as former step-children.

If you have a blended family, you should see an estate planning attorney without delay to make sure the people you want to inherit your property are those who actually do.

Reference: Wills, Trusts & Estates Prof Blog (Oct. 7, 2016) "Estate Planning for your Step-Family."

Suggested Key Words: Estate Plan, Blended Family

October 21, 2016

Estate Planning Awareness Week

If you are one of the millions of Americans who do not have an estate plan, then the upcoming National Estate Planning Awareness Week is a great time for you to get one.

More than half of American adults do not have a current estate plan. The benefits of having a plan should be obvious.

With an estate plan you can say who gets your property after you pass away. An estate plan is the best way to make sure your family is taken care of after you pass away. An estate plan can help ensure your family is not unnecessarily burdened by estate taxes. And, an estate plan can make sure your end of life care is as you want it.

The Wills, Trusts & Estates Prof Blog reports that National Estate Planning Awareness Week is upon us. The article is appropriately titled "National Estate Planning Awareness Week: October 17-23."

If you are one of the people who does not have an estate plan, then why not get one during estate planning awareness week?

An even better idea would be not to wait for a special week.

Call an estate planning attorney in your area today and schedule an appointment. Getting an estate plan is not a difficult task for most people. You just need to tell the attorney what you want, listen to the options your attorney provides to accomplish your goals and let the attorney do the work of drafting the plan.

There is no reason to wait.

Reference: Wills, Trusts & Estates Prof Blog (Oct. 3, 2016) "National Estate Planning Awareness Week: October 17-23."

October 19, 2016October 25, 2023

Post Death Termination Fees

Families and estate executors have enough to worry about after someone passes away. Should they also have to worry about termination fees for canceling a contract with a utility? One state says no.

If you have ever wanted to move to a different cell phone provider, you are likely to have come across a problem. As long as you signed a contract with your current provider, you either have to continue to pay the contract or pay a termination fee.

Depending on where you live, you might have come across other termination fees for things such as cable, electricity and garbage service. These fees are normally seen as reasonable as long as the person who signed the contract is alive. However, some people have discovered that some companies refuse to waive the fees even if the person who signed the contract has passed away.

These post-death termination fees can put a real strain on many small estates. If the deceased had few assets, even a fee of a couple of hundred dollars can be difficult for the estate to pay.

The state of New York has decided to address this problem and recently passed a law that prohibits utility companies from charging termination fees after the contract holder has passed away.

Fox 5 reported on this new law in “NY: Utilities can’t charge termination fees after death.”

This small law could provide big relief to families who are going through the difficult process of grieving for a deceased loved one. In turn, the new law should not create an undue burden on the companies. It remains to be seen if other states will follow suit.

Reference: Fox 5 (Sept. 28, 2016) “NY: Utilities can’t charge termination fees after death.”

October 18, 2016

Life Insurance Trusts

Life insurance is a great way to provide your family with liquid assets after you pass away, but if the policy benefits would put your estate over the estate tax exemption, then you might consider a trust.

When planning the estate of a family's primary breadwinner one of the biggest concerns is providing the necessary cash assets for the rest of the family to live on while everything else gets settled. This is especially the case if the estate is expected to go through probate or if most of the estate assets are difficult to sell quickly.

One of the best ways around this problem is through the use of life insurance. The policies pay out in cash almost immediately. However, as Forbes points out in "3 Considerations for an Irrevocable Life Insurance Trust" the solution is not always perfect.

One of the problems with life insurance policies is that the benefits can be counted for estate tax purposes. This is especially problematic if the benefits would put your estate over the exemption limit when it would not be otherwise.

One way to get the advantages of life insurance while avoiding the estate tax problem is to create an irrevocable life insurance trust. The trust becomes the owner and the beneficiary of the life insurance policy and keeps the benefits out of the estate tax calculations. However, if you transfer ownership of an existing life insurance policy, then you must live for three years to avoid having the IRS include the death benefit value in your estate anyway.

If you have questions about irrevocable life insurance trusts or other ways to provide liquid assets to your family after you pass away, then speak with an estate planning attorney about the options.

Reference: Forbes (Sept. 19, 2016) in "3 Considerations for an Irrevocable Life Insurance Trust."

October 17, 2016

New Estate Tax Case

In a case of first impression the tax court has broadened when an estate can claim a theft loss.

If the property of an estate is stolen, then the estate can report it as a “theft loss” and not pay estate taxes on the value of the asset. That is not a controversial issue. However, a recent case required the tax court to determine what it really means for property to be stolen from the estate.

In that particular case the deceased owned 99% of the shares in an LLC. All of the assets in that LLC were stolen through a Ponzi scheme. The estate sought to claim this as a theft loss, which the IRS disallowed on the grounds that it was the LLC's loss and not the estate's.

As Forbes reports in "Tax Court Allows Estate a Theft Loss Deduction for Property Held by LLC," the tax court disagreed with the IRS.

The court reasoned that since the Ponzi scheme reduced the value of the LLC to nothing, that it was a loss to the estate. It ruled that the relevant law just requires that there be a sufficient nexus between the estate's loss and the theft.

In this case since the deceased owned 99% of the LLC, it was appropriate to include the loss in the estate.

This was a case of “first impression” and it is unclear how the ruling will apply in other cases. It is also not known if the ruling will be extended to other entities and not just LLCs.

If you have questions about allowable estate losses, consult with an estate attorney.

Reference: Forbes (Sept. 27, 2016) "Tax Court Allows Estate a Theft Loss Deduction for Property Held by LLC."

Building Legacies that Last Estate Planning and Elder Law

Month: October 2016