July 3, 2017

Tax Court Rules against Minnesota

The tax court has ruled against the state of Minnesota and declared its income tax statute unconstitutional, as it applies to some trusts created in that state.

Minnesota has an unusual way of taxing trusts. The state's income tax statute makes 100% of a trust's assets taxable in that state, if the trust became irrevocable when the settlor was a resident of Minnesota.

This rule applies regardless where the trust beneficiaries reside or where any trustees reside.

Fortunately, the tax court has decided this method of trust taxation is unconstitutional, according to the Wills, Trusts & Estates Prof Blog in "Tax Refunds for Trusts With Minnesota Grantors? Minnesota Income Tax Statute Ruled Unconstitutional."

The court looked at trusts that had an out-of-state trustee, beneficiaries who lived in Minnesota and beneficiaries who lived in other states.

It determined that these trusts could not be considered resident trusts of Minnesota and, therefore, the state could not tax intangible assets. Presumably, the same logic could be applied to some other trust situations.

This ruling could lead to refunds for some trusts.

However, those refunds may not come in the near future, since it is expected that the state will appeal this ruling to the Supreme Court, which could render a different decision.

Reference: Wills, Trusts & Estates Prof Blog (June 7, 2017) "Tax Refunds for Trusts With Minnesota Grantors? Minnesota Income Tax Statute Ruled Unconstitutional

June 27, 2017February 23, 2026

Protect Your Assets with Estate Planning

There is possibly no greater blow to a person, than losing all of their assets to creditors. It can happen to anyone, but you can protect against it by utilizing estate planning tools that provide asset protection planning for business owners and professionals.

You have probably noticed at some point or another, that the U.S. is a very lawsuit happy country, much more so than most European countries.

The reasons for this have a lot to do with the way that our court system is set up. Anyone can file a lawsuit for almost anything. There is very little to deter someone from doing so, in most cases.

Even if the plaintiff loses, he does not have to pay the defendant’s legal bills, which can be quite high. Consequently, no matter how wealthy a person is, they can be sued and potentially lose everything if the court system rules against them, rightly or wrongly.

Therefore, it is extremely important for the wealthy to protect their assets from potential creditors, as the Wills, Trusts & Estates Prof Blog discussed in “Asset Protection Measures.”

The good news is that protecting assets from potential creditors is not an inherently difficult task.

Estate planning attorneys have many ways to assist clients in doing that.

A trust is typically the best option for doing this. However, there are other ways to protect assets, including utilizing retirement accounts and college savings plans.

As a last resort, insurance can be purchased to protect against creditors.

You should protect your assets, and you should visit with an estate planning attorney to determine the best way to do so.

Reference: Wills, Trusts & Estates Prof Blog (May 31, 2017) “Asset Protection Measures.”

June 21, 2017

Your Debt and Your Demise

Most Americans pass away owing debt. What happens to that debt after they pass away?

It is not a secret that most Americans owe money to someone. The people of the U.S. are used to buying things on credit and, as a consequence, they have debts.

Most people would like to be rid of all that debt by the time they pass away. Unfortunately, the reality is that most of them will not.

Approximately 73% of people in the U.S. pass away while still in debt. The average amount of debt is $61,554, but that average goes down to $12,875, if mortgage debt is not included.

Market Watch discussed this in "What happens to your debt when you die?"

Because you are likely to pass away while still in debt, it is important to understand what will happen to that debt, to make sure it is not a burden on your family.

If it is debt that you alone are responsible for, then your estate will pay the debt out of any available funds before any assets are distributed to your heirs. If you estate does not have enough assets to cover your entire debt, then most types of debt die with you.

However, there are exceptions.

For example, any family member who still lives in a house with a mortgage would be responsible for the mortgage payments, if he or she wishes to stay in the home.

What this means is this: you should not worry about most debt being a burden to your family. However, if you wish to ensure that your debt does not eat up the inheritances of your heirs, then you should do some estate planning to avoid that.

Reference: Market Watch (May 29, 2017) "What happens to your debt when you die?"

June 16, 2017

Leaving A Large Inheritance? Pros & Cons

Many wealthy people are torn between wanting to leave a large inheritance for their children and fears that their children will not be able to handle the wealth.

Wealthy parents whose children do not get independently wealthy on their own, often fear that leaving those children a large inheritance would be a mistake. The children might not be able to handle the money and it might cause them to give up their own careers.

In some cases, the children might also waste all of the money and leave nothing for their own children. Despite this common fear, the wealthy parents do want to leave their children large inheritances.

This tension creates problems for many people as they plan their estates, as the Wills, Trusts & Estates Prof Blog points out in "New Focus for Estate Planning."

The key to resolving this tension is to understand that estate planning can be about more than just transferring a lot of assets to heirs. With a traditional Will, heirs get all of the assets at once, which leaves open the possibility that assets will be misused.

There are many kinds of available estate planning tools that can be used to make sure that heirs do not waste everything.

Many types of trusts will help preserve the assets.

Of course, this can only be done, if an estate planning attorney knows that the client fears his children will waste an inheritance. The attorney needs the client to express these fears, so the attorney can devise the best plans.

Reference: Wills, Trusts & Estates Prof Blog (May 17, 2017) "New Focus for Estate Planning."

June 14, 2017

Consider a SLAT for an Uncertain Future

It is currently difficult to know what the best possible estate planning method might be in the near future, since tax reform is uncertain. A spousal lifetime asset trust can be used as a way to plan around that uncertainty.

Given recent events in Washington, it is understandable if wealthy people are more than a little nervous about their estate plans. Just as it appeared that Congress was about to turn its attention to long-promised tax reform, President Trump has been distracted by ongoing investigations into his campaign.

While a special counsel has been appointed to oversee that investigation, a continuing steady stream of leaks has kept the pressure on lawmakers. This casts doubt over their plans for tax reform, since it is a contentious issue that has many in Congress deeply divided.

It is not clear what the President wants on some of the key items of reform.

All of this makes it difficult for many wealthy people to know how effective their estate plans might be and how to make changes to them.

Recently, Wealth Management offered a solution to the uncertainty in the form of a spousal lifetime asset trust in "SLATs Provide Flexible Plans for Many Clients."

Like any other trust, SLATs do not have to go through probate. They also offer estate tax and capital gains tax benefits.

They key thing about them, is that they are an extremely flexible form of trust. They are more adaptable to changing circumstances than many other trusts.

That makes them a great tool for uncertain times, when no one can be certain what the tax future will look like.

If you are interested in a SLAT or want to know what your other current estate planning options are, talk to an estate planning attorney.

June 2, 2017

Just Living Together After 50

More and more elder Americans are choosing not to get married to their partners. Instead, they are just living together.

The trend over the last few decades has been for people to get remarried late in life. This has created many issues for estate planning and the families of the people who do get remarried.

That trend is starting to reverse, but that does not mean people are not finding companionship in their retirement years.

Today, rather than getting married, many elderly people are just moving in together and foregoing a marriage certificate, according to The New York Times in "More Older Couples Are 'Shacking Up'."

While this might solve some problems, such as getting around the laws of intestate and spousal election to make sure that any assets go to the children and remain in the family, it does not solve all of the problems. Instead, it creates a different set of problems that need to be worked through in an estate plan.

If two elderly people are living together, it becomes important to create estate plans that do not leave one of them in a bad position when the other passes away.

You do not want to create a situation where a partner is unable to afford the rent after you pass away or gets kicked out of the property you own by your heirs.

These do not need to be major problems with proper estate planning, but they can be without that planning.

Reference: New York Times (May 8, 2017) "More Older Couples Are 'Shacking Up'."

May 29, 2017

Treating Your Children Fairly

One of the biggest problems in estate planning is figuring out how to treat children fairly in circumstances when fairly does not necessarily mean equally.

The default estate planning option for people with more than one child is to divide their estates equally between their children. That is the most common thing that is now done in estate planning.

It is easy and simple.

Most of the time it is a fair way to divide a parent's estate and one that the children accept. That does not always work, however, because as every parent eventually learns, treating children fairly does not always mean treating them equally. That holds true in estate planning.

Adult children can wind up in very different life circumstances for a variety of reasons. For example, if one child became wealthy after receiving a large gift from his parents to start a business, it might not be fair to treat that child the same in an estate plan as another child who went into public interest work.

Figuring out how to divide an estate unequally but fairly between children can be difficult, as the Wills, Trusts & Estates Prof Blog discussed in "Dividing Your Wealth Among Your Children."

The biggest problem is figuring out how to make the unequal division without causing any of the children to dispute the estate. Trusts are extraordinarily helpful in these situations, since they are much more difficult to challenge.

Parents can create a trust with an independent trustee and give the trustee the power to make distributions to the children based on their circumstances and needs. It is also important that parents who are leaving unequal inheritances for their children talk to the children and let them know the reasons for doing so.

If you want to leave your children unequal inheritances, you need to seek the advice of an experienced estate planning attorney to make sure you do so in a way that your children will think is fair and not seek to challenge.

Reference: Wills, Trusts & Estates Prof Blog (May 5, 2017) "Dividing Your Wealth Among Your Children."

May 22, 2017

Daughter Sues Mother for Wasting Her Inheritance

A case in New York is a good reminder that it is very important to make sure that trusts details are specific, in order to make the settlor's wishes crystal clear.

The story had a Hollywood beginning. A schoolteacher and a wealthy real estate investor met through a singles ad, fell in love, got married and had a child.

From that beginning, things quickly turned south.

According to court records filed by the child of that marriage, Elizabeth Marcus, her mother refused to sleep with her father after she was born. The two divorced after a few years and the father passed away, when Marcus was nine years old.

The father did not want his ex-wife to receive any of his assets and instead left half his estate in trust to Marcus. Another child from a previous marriage received the other half.

The trust was originally overseen by Citibank, but after fighting for several years, the mother took control of the trust in 2003, according to the Daily Mail in "Daughter sues her 'self-involved' mother for 'frittering away more than $13m of her inheritance – so she could buy cars and a $6m mansion next to Gwyneth Paltrow in the Hamptons'."

Marcus is suing her mother now, claiming that her mother has stolen her inheritance to buy expensive items for herself, including a mansion and fancy cars. Most of the original inheritance is now alleged to be gone.

The mother, of course, denies the accusations.

The missing piece of the puzzle from the reports is how the mother was able to gain control of the trust, if the father did not wish her to have it. He might have neglected to be clearer about his wishes in the trust documents. Profit Law Firm can help make your issues crystal clear in our documents.

Reference: Daily Mail (April 23, 2017) "Daughter sues her 'self-involved' mother for 'frittering away more than $13m of her inheritance – so she could buy cars and a $6m mansion next to Gwyneth Paltrow in the Hamptons'."

May 4, 2017February 23, 2022

Avoiding Probate

One of the most common questions that people have about estate planning, is how to avoid probate. You probably cannot do so entirely, but you can make it quick and painless.

For most people, the word “probate” conjures up nightmare scenarios of protracted estate battles that cost lots of money and tear families apart. It is an ugly word for most people.

As a result, most people generally want to avoid having their estates go through probate.

In fact, one of the most frequently asked questions of estate planning attorneys is how to avoid probate, as Forbes points out in “Probate, Wills, Executors: Your Estate Planning Questions Answered.”

It is important to understand that probate is merely the type of court that a will or an estate without a will has to go through.

Most of the time, it is a relatively simple process, especially with the assistance of an estate attorney. However, there are times when it can be long and expensive, so the desire to want to avoid it are not unjustified.

The key is to have an estate plan that utilizes instruments that do not have to go through probate. The most typical of these are trusts, but there are other more complex legal instruments that can also be used. Find out more about the basics of trust and wills, click here.

However, even the most airtight probate avoidance estate plan might have to go through the probate process briefly.

All estate plans should have at least a simple pour-over will that directs any unaccounted for assets into a previously created trust.

If there are enough unaccounted for assets, they will need to go through probate. However, the process should be quick and easy.

Reference: Forbes (April 7, 2017) “Probate, Wills, Executors: Your Estate Planning Questions Answered.”

May 2, 2017February 23, 2022

Estate Planning Prevents Family Fights

There are many reasons to plan for your estate. The most important is probably that with proper estate planning, you can help to prevent your family from fighting over your estate.

Only the most sadistic people among us, would really want their families to fight over their estates. The goal for almost everyone is for our families to get along with each other, even after we are no longer around.

However, families do often fight over estates.

Some of those fights are unavoidable, since they stem from longstanding family dynamics and family members who do not trust each other or get along with each at all.

Many of those fights are avoidable, as Wealth Management discusses in “How to Prevent Feuds Among Heirs.”

The single most important thing that needs to be done to prevent family fights over an estate, is to get an estate plan. Review the basics of getting an estate plan click here.

Sound estate plans can often cut off any reason for families to fight. Proper planning can ensure that everyone gets their fair share of the estate. The estate plan can set forth reasonable means for resolving any disputes that do come up.

However, just getting an estate plan is not enough.

The next thing that needs to be done, is to communicate with your family about what is in the estate plan. An estate planning lawyer can help you start the process of developing a plan and letting family know about it.

People who know what they are going to get and why that was the choice of the departed, are much less likely to be upset and start fights with other family members over the estate.

If you do not already have an estate plan, get one.

If you do already have one, then make sure that you review and update it regularly to ensure that it will be effective in preventing your family from fighting.

Reference: Wealth Management (April 10, 2017) “How to Prevent Feuds Among Heirs.”

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Category: Trusts