Building Legacies that Last Estate Planning and Elder Law

A Bypass Trust Might Still Be Your Best Option

Senior couple standing togetherRelatively recent changes to federal estate tax law have made bypass trusts less popular than they used to be. However, they are still good in many circumstances.

It used to be a complicated process for a married couple to get the most out of the estate tax exemption. When one spouse passed away his or her estate tax exemption could be useless if all of the assets went to the other spouse directly. When the second spouse passed away all of the couple’s assets would be considered part of his or her estate and the individual estate tax exemption would be applied.

To get around this couples had to get a “bypass” trust of which there were many types. Essentially, the surviving spouse was bypassed in the estate plan.

The relatively new federal law of spousal “portability” changed this and made bypass trusts less necessary. Now, if the paperwork is properly filled out, a surviving spouse can elect to carry over the deceased spouse’s estate tax exemption and use it along with his or her own later.

This move essentially doubles the estate tax exemption.

However, there are some situations where a bypass trust is still a good idea as discussed by the Poughkeepsie Journal in “Bypass trust works better for many families.”

Many states have estate taxes of their own and they do not all allow spousal portability. For instance, Maryland has a state estate tax and the District of Columbia has a state estate tax. Thus, in Maryland and the District of Columbia a bypass trust is still necessary to take full advantage of estate tax exemptions. A bypass trust can also be used to protect against a surviving spouse getting remarried and having all of the couple’s property eventually ending up in the new spouse’s family. As a result, bypass trusts are a useful estate tool for blended families, learn more here. They can also be used as a great way to include other family members in the estate plan, especially grandchildren.

If all this sounds a bit confusing, do not worry. That is why there are estate planning attorneys and firms like us.

Tell the attorney what you want done with your possessions after you pass away and let the attorney worry about the best way to accomplish that while minimizing the estate tax burden on your estate.

Reference: Poughkeepsie Journal (Nov. 4, 2016) “Bypass trust works better for many families.”


Convincing Parents to Create Estate Plan

Bigstock-Family-Portrait-At-Christmas-4881212[1]Many children with aging parents know that their parents should do estate planning, but convincing their parents of that can be difficult.

Many elderly people in the U.S. believe estate planning is something only the very wealthy need. If they only have a few major assets and modest back accounts, then they believe estate planning is unnecessary for them.

Many of their adult children know better, however.

The children know estate planning is an important responsibility for everyone regardless of wealth. While those children would like to talk their parents into estate planning they may find it difficult.  In the Washington Metropolitan area, estate planning is very important. Maryland estate planning is critical because Maryland has both a state estate tax and a state inheritance tax. The District of Columbia also has a state estate tax.

This topic was addressed by NJ 101.5 in “Talking to your parents about a will.”

If you find yourself having this problem with your aging parents, there are some steps you can take.

First, explain to your parents that without an estate plan their estates will have to go through probate and everything will be distributed according to state law and not your parents’ wishes. That means if they would like to leave something directly to their grandchildren, they will not be able to do so in most cases.   It also means that they might be subject to Maryland or D.C estate planning axes.

You can also talk to your parents about how costly and time-consuming probate can be and how it could be a burden on the family.

If all else fails and you can afford it, you might offer to pay for your parents to visit an estate planning attorney. They do not have to commit to anything before seeing the attorney, but the attorney can discuss the benefits of estate planning with your parents and give them some options. At Profit Law Firm, we also conduct two generation family planning sessions.  Contact us for a consultation with Maryland estate planning attorneys and DC estate planning attorneys.

Reference: NJ 101.5 (Nov. 1, 2016) “Talking to your parents about a will.”


Estate Planning and the Family Farm

extended family outside of their homeLike any other business owner, farmers need to carefully plan how the farm will be passed on to heirs. However, farmers do have some unique estate planning issues to consider.

In the eyes of the law, a farm is just a type of business. Like any other business, it can be passed to other people when the current owner passes away. However, estate planning for farms often has issues that are not as much of a concern for other types of businesses. Most farms have a lot of valuable assets, such as land and equipment, which could add up to an estate tax liability. However, farms often do not have the liquid assets to easily pay those taxes. Ohio’s County Journal and Ohio Ag Net recently discussed some ways to plan for this problem in “Estate planning for farmers: Providing for liquidity concerns,” including:

  • Develop a plan to build up liquid assets that can be made available to the estate after the farmer passes away. This can be as simple as investing farm income in securities.
  • Life insurance can be purchased to provide cash to beneficiaries.
  • If the farm is held in partnership or as a corporation, then creating buy-sell agreements with other owners to purchase an individual’s ownership stake upon death can provide money for the deceased’s estate.
  • The likelihood of the farm estate having to pay the estate tax can be reduced during the farmer’s life in several different ways, including creating a gifting plan with the help of an attorney and selling off older equipment that is no longer needed.

An experienced estate planning attorney can help you to create a plan specific for your farm.

Reference: Ohio’s County Journal and Ohio Ag Net (July 19, 2016) “Estate planning for farmers: Providing for liquidity concerns

Maryland Estate Planning for the Demographic Shift

Bigstock-Elder-Couple-With-Bills-3557267[1]The next few decades will see a tremendous transfer of wealth from one generation to the next and then to the next. It is important to have an estate plan to make sure that everything goes smoothly within your family.

In the next few years an extraordinary amount of wealth is expected to be transferred to the Baby Boomer generation by their parents. It is then expected that the Baby Boomers will be retiring in ever greater numbers and passing that wealth on to their children as Huffington Post Canada discusses in “Estate Planning For A Significant Demographic Shift.”

While the article is about Canada, the exact same shift is going to occur in the U.S.

This demographic shift and the transfer of wealth it will bring makes estate planning more important than it has even been at any previous point in human history. Americans are more prosperous than any other people in history. Billions of dollars’ worth of real estate and financial instruments will be changing hands between generations.

Families that have not planned regarding how that generational transfer will occur risk losing a lot of wealth, if not all their wealth, as the legal system sorts out who gets what.  In Maryland, in 2016, if you leave more than $2 million to your heirs, without estate planning, you will pay estate taxes on every dollar over that threshold.  And the $2 million includes the total value of your home, regardless of your mortgage.  With the cost of housing, life insurance policies or retirement accounts easily could make you eligible forMaryland estate taxes. Your children may have to sell the family home you leave without careful estate planning. To learn strategies for leaving more to your children and less to Maryland estate taxes contact my office.

Since you know the transfer of wealth will occur, make plans for it. Decide now how your assets will be transferred to your children and other heirs.

Planning for it will take a lot less time and cost a lot less money than not planning for it and letting the next generation sort it out with the assistance of probate courts.

Reference: Huffington Post Canada (July 11, 2016) “Estate Planning For A Significant Demographic Shift