Building Legacies that Last Estate Planning and Elder Law

Prince Estate Must Sell Property To Pay Estate Tax

Some of the mystery about what will happen to Prince’s property has begun to clear up as his estate has asked for permission to sell some of his real estate holdings.

It has been estimated that the total estate tax bill that Prince’s estate will have to pay will be in the neighborhood of $150 million. The bill is that high because Prince did not have an estate plan that accounted for either the federal estate tax or the Minnesota estate tax.  Like Minnesota, Maryland estate tax is lower than the federal at $2 million.  This estate tax threshold includes the entire value of your house, without regard to the  the size of your mortage. With the high property values for housing in Maryland, life insurance and retirement accounts, many middle class Maryland families, who do not do Maryland estate planning, may force heirs to sell assets, just to make Maryland estate tax payments.

Since Prince died without an estate, there was alot  of speculation that some of the musician’s estate would need to be liquidated to pay the tax, but what portions of his estate would be sold has not been known.

It now appears that some of what will be sold includes the musician’s real estate holdings, as TMZ reports in “Prince Everything Must Go…Estate Ready to Dump Properties.”

The special administrator for the estate has filed a motion with the court seeking permission to sell some of the real estate and says it will not accept an offer that is less than 90% of fair market value. The musician is known to have had real estate holdings in several different states, but which properties might be sold has been sealed.

Ultimately, the judge will have to approve of the plan to sell before the properties are listed.

If the judge approves the plan, it will likely not be the last things of the musician’s that will be sold. The estate tax bill is high enough that much more will likely need to be liquidated in the next few months so the estate can pay the taxes on time and avoid fines and penalties.

Reference: TMZ (Aug. 1, 2016) “Prince Everything Must Go…Estate Ready to Dump Properties.”

2018 Estate Tax Exemption Projections

TaxesThe IRS has not yet announced what the 2018 estate tax exemption will be. However, expert analysts think there will be some slightly good news for wealthy people.

They predict that the exemption should increase to $5.6 million for a single person and more than $11 million for married couples.

At the same time, they predict that the annual gift tax exemption should also increase to about $15,000, as Forbes reported in “Estate Tax Exemption To Top $11 Million Per Couple in 2018.”

This should give wealthy people and their estate planning attorneys a little bit more flexibility, as they attempt to shrink estates to below the threshold.

While most people who might be affected by this exemption increase would prefer to see the estate tax repealed entirely, that is increasingly looking like it will not happen this year.

Congress has turned its attention to tax reform, but getting anything passed could be a long process and will likely continue into next year.

Repealing the estate tax is also controversial. If Democratic votes are needed to pass tax reform legislation, that might take the estate tax off the table.

If you have questions about your estate and how it might have an impact on the estate tax, then you should see an experienced estate planning attorney in your area.

Reference: Forbes (Sep. 15, 2017) “Estate Tax Exemption To Top $11 Million Per Couple in 2018.”

Alan Thicke Estate Battle

MW-FB938_Thicke_ZG_20161214063245Alan Thicke's sons are fighting with their stepmother over their father's estate.

Two of deceased actor Alan Thicke's sons have entered the probate case to settle their father's estate with a unique claim. The have filed a claim suggesting that Thicke's third wife, Tanya Callau, is attempting to get more of the estate than she is entitled to receive and that she has threatened to go to the tabloids, if she does not get her way.

Thicke and Callau had a prenuptial agreement and she is already set to get a sizeable portion of his estate. Her take includes 25% of his personal assets, 40% of the remainder of the estate, a $500,000 life insurance payment and she can stay in the residence for the remainder of her life.

The sons have not stated what else Callau wants and it is not known what she would tell the tabloids, if she went to them.

TMZ reported this story in "Alan Thicke Sons Go To War With His Wife To Protect the Estate."

Other than the celebrity nature of this estate and the alleged threat to get the tabloids involved, this is, of course, not a particularly unusual estate battle.

Adult children are often at odds with a surviving step-parent and that battle often makes its way into probate court to fight over the estate. This is especially true when there are large sums of money involved.

Wealthy people who have remarried and who have children from previous relationships, need to understand how common these types of fight are. They then need to make estate plans with that in mind, if they hope to minimize the problems.

Reference: TMZ (May 16, 2017) "Alan Thicke Sons Go To War With His Wife To Protect the Estate." Estate Administration, Estate Litigation

Protect Your Digital Assets

Bigstock-Young-man-holding-a-trash-bin--26453660[1]Technology is changing so rapidly that people and the law are not keeping up. This creates problems in estate planning.

It was not that long ago when the Internet was new and primarily seen as nothing more than a source of entertainment for most people. That has changed dramatically.

More and more people are now conducting business online and our digital accounts have become a large part of our personal lives.  This has become a problem in estate planning because most people manage their finances online and after death their heirs cannot access these digital files, which are password protected.  A generation ago, heirs could discover financial information relatively easily through paper statements.

Laws have also not kept pace, as Investment News discusses in “Most estate plans aren’t dealing with digital assets properly.”

By default, what happens to digital accounts and assets after we pass away is a patchwork of the individual terms of services of the different websites that we use.

Every website has different rules about the accounts and whether they can be passed to heirs and under what circumstances they can be passed down.  And whether passwords and accounts can be accessed.

Some states have attempted to address this problem by adopting proposed uniform laws, but there is a long way to go for the law to catch up with technology.  Maryland and DC have passed new laws.

If you would like to make sure your heirs can access your digital financial information or have a say in what happens to your digital accounts after you pass away, it is important that you speak with an estate planning attorney about it, so you can make appropriate plans.

Reference: Investment News (May 11, 2017) “Most estate plans aren’t dealing with digital assets properly.”


Why Trusts Are Better Than Wills

Wills-trusts-and-estates-covered[1]Most estate planning attorneys believe that trusts are generally a better way to distribute an estate than wills. It is important to know the reasons why that is.

If you spend any time at all talking to estate planning attorneys or researching estate planning online, it will not be long before you hear that trusts are usually better than wills for estates. This has become such a truism, that even many non-attorneys instinctively suggest a trust when a friend asks them about estate plans.

While it should be noted that trusts are not always better, it is true that they almost always are. Particularly, in Maryland and the District of Columbia, which have Maryland estate taxes and DC estate taxes, which are lower than  federal estate taxes, trusts are especially helpful.

Recently, Wicked Local Norwood listed some reasons why that is the case in “Five Ways in which a trust is better than a will,” including:

  • With a trust you can avoid probate, which can be expensive and time-consuming. Most wills have to go through probate court.
  • A trust can be drafted that protects your beneficiaries from creditors. If you give heirs money outright in a will, then any creditors they have can go after that money. Trusts avoid this problem.
  • Special needs trusts can be used to give assets to people with disabilities without making them ineligible for government benefits.
  • Trusts can be used to reduce estate taxes in ways that are impossible to do with wills.
  • With a trust, you can leave assets for minor children that are managed by a third-party without the unnecessary intervention of probate courts.

All that noted, wills have the benefit of a neutral judge overseeing the process and “testamentary trusts” can be created under wills that accomplish the same ends as those available through a revocable living trust that avoids probate.

Regardless, consult with a qualified estate planning attorney to evaluate the best approach for your unique circumstances.

Reference: Wicked Local Norwood (May 14, 2017) “Five Ways in which a trust is better than a will.”


Estate Tax Uncertainty

Business_meeting[1]President Trump has made an official proposal to repeal the estate tax entirely, as expected. That  raises more questions than it answers.

While campaigning for the Presidency, Donald Trump frequently said that, if elected, he would repeal the estate tax entirely. As with all political campaign promises, that did not necessarily mean he would follow through soon on the promise, if he did at all.

However, President Trump recently released a tax reform proposal that calls for a total repeal of the estate tax, among other things.

That does not mean that anyone should make plans for the end of the estate tax, as Investment News points out in “Trump tax proposal leaves advisers in the dark on estate tax repeal.”  Moreover, the plans of President Trump only cover the federal estate tax, and not the estate taxes imposed by states.  Maryland and DC impose a state estate tax and Virginia does not.  Consult a Maryland estate planning attorney or DC estate planning attorney to consider how those taxes should affect your estate plan.

The biggest issue is how an estate tax repeal will get passed in Congress, if it can be at all.

Ordinary legislation requires 60 votes in the Senate to pass without a filibuster. It is unlikely that any large tax cut on the wealthy will be able to get those votes, since Democrats have vowed to block them.

The budget reconciliation process can be used so that only 50 votes are needed to pass an estate tax repeal, but there are many restrictions on that process. The most important one is that anything passed must be revenue neutral, which means that any cuts have to be offset with tax increases elsewhere.

If the cuts are not revenue neutral, then the law must sunset after 10 years.

The estate tax would come back.

President Trump has previously proposed changing capital gains taxation to offset the estate tax repeal, but it is not known how much support that idea has in Congress.

Both the President and Republicans in Congress, would like to see many more tax cuts that also have to be paid for, which might mean the estate tax repeal could be dropped for other priorities.

Reference: Investment News (April 27, 2017) “Trump tax proposal leaves advisers in the dark on estate tax repeal.”


No Estate Tax Does not Mean no Estate Planning

stacks of coinsWith the release of President Trump’s tax plan and Republican majorities in Congress, it seems inevitable that the estate tax will go away. That does not eliminate the need to do estate planning.

A big part of modern estate planning is planning around the federal estate tax. Many estate planning instruments were designed to help lower the estate tax burden on wealthy estates. Profit Law Firm helps clients reduce federal estate taxes.

Without an estate tax, it might seem that there is not much of a reason to do complex estate planning at all. Some people anticipate that will be the case soon, since President Trump has released a tax proposal that would eliminate the estate tax and Republicans who hold majorities in both houses of Congress agree with the idea.

However, it is not that simple as Financial Advisor recently discussed in “Estate Planning: It’s Not Over.” Some states such as Maryland and DC, have state estate taxes, at $3 million and $2 million, respectively see more information about these estate taxes.  So residents in these states will have to do some extra planning regardless of the federal tax rates and a Maryland estate planning attorney can help.

It still is not clear when, if and how the federal estate tax might be repealed.

Congress could choose to phase it out over a few years or scrap the idea entirely, if they cannot agree on offsetting spending cuts or where to raise revenues from elsewhere. Senate Democrats could also mount a filibuster over any tax plan that Republicans propose, which they are expected to do.

No elimination of the estate tax is permanent, of course. Even if it passed now, it could always be reinstated when Democrats control government again.

While you might be excited about the elimination of the estate tax, do not make the mistake of thinking that means you can make your estate plans with the assumption in mind that it will go away for good, if it does at all.

Reference: Financial Advisor (April 3, 2017) “Estate Planning: It’s Not Over.”


Trump’s Tax Plan

Bigstock-Elder-Couple-With-Bills-3557267[2]After much anticipation, President Trump released his long awaited tax plan. While there is much for wealthy people to cheer in it, including eliminating the estate tax, no one will want to cheer too much or too soon.

Since taking office, President Trump had been promising that he would reveal a plan for tax reform. He gave very few details about it, except that it would contain some of the biggest tax cuts in history, if not the biggest.

Last week, the White House finally released the anticipated plan, although many details are still missing.

The plan, if passed, would be one of the biggest tax cuts in history. Most experts agree that it includes large tax breaks for wealthy people, including eliminating the estate tax and the alternative minimum tax.  His plan would eliminate the federal estate tax.  Maryland residents would still pay Maryland estate taxes and DC residents would still pay DC estate taxes.  The Maryland tax exemption is currently at $3 million and the DC tax exemption is currently at $2 million, learn more about estate tax planning

Income tax rates on the highest earners would be cut dramatically, as would corporate tax rates.

The proposal does not just cut the taxes of the richest. Some middle class and lower income earners would see tax decreases coming from a doubling of the standard deduction.

The New York Times reported on the plan in "White House Proposes Slashing Tax Rates, Significantly Aiding Wealthy."

The President's tax plan has a long way to go before it is passed.

What was released was a one-page list of bullet points without any accompanying details. It will be up to Congress to determine the details of how to implement the plan.

The list did not indicate how the tax cuts should be paid for, which is likely to displease Republican deficit hawks.

Democrats are also likely to oppose the cuts and might filibuster them in the Senate.

Reference: New York Times (April 26, 2017) "White House Proposes Slashing Tax Rates, Significantly Aiding Wealthy."


Absolute Minimal Estate Planning

MP900442211[1]Even if you do not think that you need an estate plan, there are a couple things that you absolutely must do.

You need to do some estate planning. Even if you think that you do not, you do.

Your possessions will not just magically go to whomever you want after you pass away, if you do not make some sort of estate plan.

While you should visit an estate planning attorney and get the most comprehensive estate plan that you can get, you might wonder what the absolute minimal amount of estate planning you can do to make sure that you have everything done that is absolutely necessary.

Recently, Fidelity discussed that in “Estate planning must dos.”

There are really two things that must be done at a minimum.

First, you need to check beneficiaries on documents such as life insurance policies and retirement accounts. These beneficiaries are legally entitled to the proceeds of the accounts after you pass away.

The second thing you absolutely must do is to title any real property you have appropriately. Of course, what is appropriate titling, depends on your individual family situation and is something you should discuss with an attorney.

Those are the two absolute basic minimal estate planning requirements.

If you do not want to do just the minimum and would prefer to do more, talk to an estate planning attorney about what more you can do.  Our site provides information on the basic estate documents you need for fundamental planning.

Reference:  Fidelity (March 27, 2017) “Estate planning must dos.”


What Estate Planning Really Is

MP900309139[1]You can think about estate planning in many different ways. One of the simplest and best approaches is to think of estate planning as a way of telling your family that you love them.

Estate planning is often thought of in cold or detached legal and financial terms. It is a way to decide who will get your assets, after you pass away and what the best legal instruments are for distributing those assets.

Viewed in that way, estate planning might not seem very important to many people, especially if they do not have many assets and do not particularly care about the legal aspects of transferring those assets after they pass away.

There is, however, another way to think about estate planning as Lifezette reports in "Estate Planning: A Love Note to Your Family."

Estate planning is a way to let your family know that you love them.

As the article suggests, it is a love note to your family. You might not care too much about how your assets will be distributed when you are no longer around to worry about it, but it can make a big difference to your family.

Getting a proper estate plan, can spare your family the costs and legal headaches of having to go through the probate process. It can even stop them from fighting over who gets which assets.

When you think about estate planning in those terms, then it should be obvious that everyone should get an estate plan. If you love your family, it is one the best things that you can do for them.

Reference: Lifezette (March 7, 2017) "Estate Planning: A Love Note to Your Family."