Newsletter Category: Client Focused Newsletter

The 2017 Tax Cuts and Jobs Act doubled the gift and estate tax exclusion amount—i.e., the amount that can either be excluded from your estate when determining if your estate will owe any taxes when you pass away or the amount you can gift to individuals during your lifetime without owing any taxes—which had previously been $5 million (adjusted each year for inflation) per individual. The exclusion amount for 2020, including the adjustment for inflation, is $11.58 million. However, the increase in the exclusion amount is temporary and, unless Congress extends it, will expire on December 31, 2025. This has caused concern that if taxpayers made gifts of the additional $5 million (adjusted for inflation) between January 1, 2018 and December 31, 2025, the benefit could be “clawed back” in the calculation of their estate taxes if they died on or after January 1, 2026—i.e., after the expiration of the increased exclusion amount. This concern arose because gift and estate taxes are calculated together, as a unified calculation. The determination of whether any tax is due is made by applying a credit based on the basic exclusion amount. The credit is first applied against the gift tax, and to the extent that any credit remains at death, it is applied against the estate tax. Some worried that if the exclusion amount at death is lower than the amount of the exclusion when lifetime gifts were made, this could create a difficult situation in which tax could be due at death, but no money would be left to pay it, because it had been given away during the taxpayer’s lifetime.

Special Rule

In November 2019, the Internal Revenue Service (IRS) released final regulations providing that taxpayers who take advantage of the higher gift and tax exemption available between 2018 and 2025 will not lose the tax benefit of the higher exclusion amount upon their subsequent death on or after January 1, 2026, when the exclusion amount is set to decrease to the pre-tax reform level. Instead, the new IRS regulations adopt a special rule allowing an estate to compute its estate tax credit using the greater of the exclusion amount applicable to gifts made during an individual’s lifetime or the exclusion applicable on the date of death.

Use It or Lose It

The IRS also clarified that the increased exclusion amount is a “use or lose” benefit available to an estate only to the extent that a person who dies on or after January 1, 2026 has actually used it by making gifts during the increased exclusion period (between January 1, 2018 and December 31, 2025). In Example 2,[1] the IRS provided an illustration of this situation. If Terry, who has never been married, makes gifts of $4 million between January 1, 2018 and December 31, 2025, and Terry dies after December 31, 2025, during a period when the inflation-adjusted amount of the exclusion has reverted to $6.8 million, the credit to be applied for purposes of computing Terry’s estate tax credit is based upon the $6.8 million exclusion amount applicable as of the date of death: That is, the $4 million dollars actually used is treated as the exclusion amount for the period from January 1, 2018 to December 31, 2025, rather than the higher amount (for example, $11.58 million if the gifts were made during 2020) Terry could have utilized, but did not, during the increased exclusion period. As a result, because Terry, now-deceased, only made lifetime gifts of $4 million, the greater of the two exclusion amounts that should be used to calculate the estate tax credit is $6.8 million.

Application to Spousal Portability

The IRS regulation also addresses how the use by a surviving spouse of a deceased spouse’s unused exclusion amount, otherwise known as the portability option, will apply if the increased exclusion amount sunsets as expected at the end of 2025. The portability option allows an estate to elect to transfer any unused portion of the last deceased spouse’s unused gift and estate tax exclusion (DSUE) to the surviving spouse, who can apply it to cover any gift or estate tax liability arising from later lifetime gifts or transfers at death. The new IRS regulation makes clear that if an estate elects to transfer any DSUE to the surviving spouse between January 1, 2018 and December 31, 2025, when the increased exclusion amount is effective, it will not be reduced as a result of the sunset of the increased exclusion amount.

In Example 3, the IRS illustrates that if Whitney died between January 1, 2018 and December 31, 2025, at a time when the exclusion amount was $11.4 million, and Whitney had not made any taxable gifts and did not have a taxable estate, the executor of Whitney’s estate could elect to allow his surviving spouse, Robin, to use his $11.4 million exclusion amount. If Robin, who does not make any lifetime gifts and does not remarry, dies after the sunset of the increased exclusion amount at a date when the exclusion amount is $6.8 million, the credit to be applied in computing Robin’s estate tax is $18.2 million ($11.4 million, the unused portion of the gift and estate tax exclusion amount applicable on Whitney’s date of death, plus $6.8 million, the exclusion amount applicable on Robin’s date of death). 

Take Advantage of the Tax Savings While You Can

Here are a few of the strategies we can implement to help you take advantage of the higher exclusion amount available until December 31, 2025 (unless Congress decides to either extend the increase or make it permanent), whose application is now clarified by the IRS’s anti-clawback regulations.

Lifetime gifts. You can benefit the most from the higher exclusion amount by making lifetime gifts. Lifetime gifts typically result in transfer tax savings (assuming the assets gifted do not decline in value). Individuals have the opportunity to remove $11.58 million and married couples can remove a combined $23.16 million from their taxable estates by making lifetime gifts in 2020. You can transfer appreciating assets to your children or loved ones—or preferably to a trust for their benefit, which can provide asset protection for your beneficiaries and direction regarding distributions.

Spousal lifetime access trusts. If a gift of $11.58 million is too large for you to comfortably make without retaining some of the benefits of that money, you can make a completed gift to a spousal lifetime access trust (SLAT), based on the temporarily increased exclusion amount. Your spouse can be a beneficiary of the trust, providing you with indirect access to the trust money and property if you need them. A properly drafted SLAT will ensure that the assets of the trust, including any growth of the assets, will not be subject to estate tax liability when you and your spouse pass away.

Grantor trusts. Using a grantor trust, you can make a gift to the trust, taking advantage of your increased exclusion amount, but also pay the income tax, enabling the beneficiaries you have named to eventually receive assets that have grown with no reductions resulting from income tax payments. You can reduce your taxable estate both in the amount of the assets transferred to the trust and the amount of income tax paid on the trust assets.

We Are Here to Help

Let us help you take advantage of the significant tax savings provided by the increased gift and estate tax exclusion amount during the current window of opportunity. We look forward to working with you to create the most advantageous estate plans for you and your family, designed with your unique circumstances in mind. Give us a call today to set up a meeting.

[1] Treasury Decision 9884 (which sets forth the final regulations) states that although the proposed regulations included examples that did not reflect the annual inflation adjustments to the exclusion amount, “the examples in the final regulations reflect hypothetical inflation-adjusted [basic exclusion] amounts.”

As millennials (born 1981 to 1996), you are well known for your distinctiveness as a group. Your generation has followed paths and set goals that are decidedly different from those chosen by previous generations. You are highly diverse, better educated, more socially conscious, and wait longer to have families than your parents and grandparents. But one thing you have in common with other generational groups is the need for estate planning. Unfortunately, a startling 79% of millennials do not have basic estate plans in place. Your needs and goals may vary, but having an estate plan in place is crucial for every adult, including millennials. You do not know what the future holds, and we can help you make sure that plans are in place that not only provide for your own future needs but also those of your loved ones and pets.

Will and/or Trust

As a millennial, you may not have accumulated as much wealth as members of older generations, but it is important for you to make sure that your money and property will go to the family members or loved ones you have chosen if something happens to you. If you do not have a will or trust, your money and property will pass to the person designated by state law, which may not be the person you would want to inherit your prized possessions and money. In addition, if you are married and have young children, you need to take steps to ensure that your spouse and children are provided for. A trust is often the best solution: If your spouse inherits your money and property outright under a will, and your spouse eventually remarries, your assets could go to the second spouse instead of your children. In addition, the inheritance will be vulnerable to claims made by your spouse’s creditors. A trust can avoid these results by allowing you to choose who receives your property and money, as well as the timing and size of the gifts.

Pet trust. If you are one of many millennials, especially those who live in large urban areas, who chose either to delay having children or to remain childless, you may have adopted pets that you love and dote upon just as you would a child. Especially if you are single, you should consider a pet trust to provide for your pet’s care if something happens to you. The pet trust can allow you to make arrangements for your pet if you die or are physically unable to care for them yourself. The pet trust can not only specify a caregiver for your pet, it can also provide care instructions and set aside funds sufficient to care for your pet’s needs (medical care, grooming, exercise, etc.). You also have the ability to name an additional person to manage the money you have set aside for your pet, if you would rather have someone other than the caregiver in charge of the money.

Charitable remainder trust. Millennials are well known for being socially conscious and wanting to make a positive difference in the world. If you want your money and possessions to support a charitable cause when you pass away, you may be interested in establishing a charitable remainder trust, which enables you to benefit from a stream of income for your own life, with the remaining money in the trust going to a charity you have selected upon your death.

Planning for Student Loans or Credit Card Debt

As the cost of college tuition continues to increase, the level of debt millennials have begun their adult lives with is startlingly high. The average student loan debt of adults aged 25 to 34 is $33,000 per borrower. Federal student loans typically are forgiven upon the borrower’s death, but the estates of borrowers who obtained private loans can be pursued by those lenders. In addition, high credit card debt is prevalent among millennials. If you have incurred substantial debt, life insurance sufficient to cover income tax on the cancellation of debt in the case of a federal student loan or to cover the debt itself if a student loan is owed to a private lender or money is owed to a credit card company may be a good solution if you are concerned about the burden your debt could place on your loved ones upon your death.

Digital Assets

If you are like many millennials, who are the first generation who grew up using the internet, you have likely amassed a much greater quantity of digital assets than members of previous generations. These assets may include social media accounts, blogs, photographs and videos, financial accounts, and email accounts, among many others. A comprehensive list of these of these assets, which may be among your most prized possessions, as well as the accompanying usernames and passwords, and instructions for their management, is essential to ensure that your wishes are honored if you pass away or become too ill to manage them on your own. Depending upon your wishes, you can appoint a separate person to wind up (or continue managing, e.g., in the case of a blog) these assets and accounts, or you can choose to have your executor or trustee handle this aspect of your estate. The list, which can be incorporated by reference into your other estate planning documents, should be stored in a secure place along with your will and/or trust.

Powers of Attorney

Medical power of attorney. If you are a younger millennial, you may not realize that your parents no longer automatically have the right to make medical decisions on your behalf if you become too ill to make them on your own or if you are unable to communicate your wishes. Even if you are married, your spouse may still need to be properly named in a medical power of attorney to make decisions for you when you cannot. It is also important to designate a trusted person to act on your behalf if your spouse is unavailable. If you fail to have a medical power of attorney prepared, a court proceeding may be necessary to appoint someone to fill that role if, e.g., you are in an automobile accident and are unconscious. You should also consider completing a living will spelling out your wishes regarding medical treatment you want–or don’t want–at the end of your life or if you are in a persistent vegetative state.

Financial power of attorney. Another document that is essential for your care if you were to become unconscious or too ill to make your own financial decisions is a financial power of attorney. It allows a person you have named to pay bills, take care of your home, manage your accounts, and make other money-related decisions for you. Even if you are married, a financial power of attorney is important because any bank accounts or other property that are not jointly owned cannot be managed by your spouse without it—unless your spouse goes to court and asks to be appointed as your guardian, causing unnecessary stress in an already distressing situation. A financial power of attorney can also be helpful if you do a lot of international travel and may occasionally need someone to handle your financial matters while you are out of the country.

Let Us Help You Prepare for the Future

You may think that estate planning is only for the elderly. However, even if you are young, an estate plan is crucial, regardless of whether you have accumulated much money or property. A properly executed estate plan provides not only for the well-being of your family, loved ones, and pets, but also allows you to put plans in place in case you become ill or are severely injured and cannot make medical and financial decisions for yourself. Call us today to prepare for the future.

As a caregiver, you spend much of your time, money, and energy taking care of the needs of others. Those who have taken on the role of caregivers for ill or disabled spouses, aging parents, children, or other loved ones with special needs are typically selfless and giving individuals who may not stop to consider their own needs.

Your job is invaluable, but it may exact a heavy toll if you do not seek out the help of others. We want you to know that you are not alone: There are resources available that can make your job as a caregiver easier. It is important to seek out the emotional support of others, either family members or other caregivers, who can understand and empathize with both the rewards and the physical, emotional, and financial burdens associated with caregiving. There are also programs that provide respite care or adult daycare that can allow you to take a much-needed and well-deserved break. State or federal aid and tax credits or deductions may be available to help ease your financial burden as well.

Care for Yourself and Your Loved Ones by Creating an Estate Plan

As your estate planning attorneys, we are another resource you can look to for support. If you are caring for aging parents or other family members with disabilities, it is essential to ensure that you not only address your own emotional and financial health, but that you have an estate plan in place that addresses both your needs and the needs of those you care for. We can provide you with the peace of mind that comes from knowing not only that a plan is in place for your future, but also the future of the loved one under your care. Knowing that your loved one will continue to receive loving care, even if something happens to prevent you from continuing to acting in the role of caregiver, will help ease any concerns you have about your loved one’s care.

Name a Guardian

If you are a parent who is acting as a caregiver for a special needs child, you should name a guardian—and more than one alternative—in your will to serve in the role of physical caregiver if you pass away or are no longer able to care for your child. Otherwise, the decision about who will act as a guardian will be left to the court, which may not reflect your wishes.

If the care recipient is an adult, you must ask a court to name you as your loved one’s guardian and/or conservator to be able to make decisions about their health care, living arrangements, and finances. If you are providing day-to-day care, you may want another trusted person who can handle your care recipient’s financial matters to act as conservator.

What happens if you are no longer able to act in the role of guardian for your adult care recipient? State law varies regarding the designation or appointment of a successor guardian for an adult. Some states allow a standby guardian to be appointed at the same time the first caregiver is appointed or to be designated in the initial guardian’s will or in another written document, as long as it is properly witnessed. If anything happens to you, the standby guardian can immediately step in to begin providing care. Some states allow a standby guardian to serve for a brief time but require approval by a court before being appointed as the permanent guardian. Still, other states have laws enabling the court to consider an individual you nominate in your will as a successor guardian when the court is making the decision about who is the best person to take on that role. We can help you determine the best course available for you.

Consider a Special Needs Trust

A will alone is unlikely to adequately address the needs of your care recipient. If you leave money outright to the person for whom you are caring or to another caregiver, it could be spent in a way that is contrary to your wishes, and will now be vulnerable to creditors of the recipient. In addition, it could make your loved one ineligible for government benefits or aid.

A special needs trust is an estate planning tool that may be very beneficial for your care recipient. A special needs trust can help preserve the beneficiary’s eligibility for government benefits, name a well-qualified trustee to manage the trust funds, designate a care manager, and preserve your loved one’s quality of life. Along with your financial advisor, we can help determine which of your resources can be used to fund the special needs trust or if a life insurance policy may be needed to ensure that there are sufficient funds available to provide for the beneficiary’s care. We can help you create a trust that sets aside, protects, effectively manages, and distributes assets for your care recipient’s lifetime, and equally important, designates a trusted individual to act as an advocate for your loved one if you cannot.

We Are Here for You

It is important not only to recognize your own emotional needs and develop the skills needed to deal with the stresses of caregiving, but also to reach out for help when you need it. As a caregiver, it is crucial to ensure not only that your own future is secure, but to also create plans that provide for your family and care recipient if something should happen to you. Take the time to create an estate plan, or if you have a plan in place, to reevaluate it at regular intervals to address changing life circumstances and laws. Please call us today to set up a meeting. We can help put your mind at ease by designing a plan that provides security for you, your family, and your care recipient.

As your estate planning attorneys, we are here to help you when your family member or loved one dies.  If you are simply too overwhelmed to call us during the first couple of weeks after your loved one passes away, it is important to keep in mind that there are several practical and legal considerations that the person named as the executor of the estate or trustee of the trust should address in the initial weeks following the death, prior to the administration of the estate or trust.  During this stressful and emotional period, it is easy to forget about certain tasks which may lead to problems if left undone, as well as important legal considerations you must heed. Here is a list of some important initial steps:

Checklist of Initial Responsibilities

• Make burial arrangements. If some time is likely to pass before burial, for example, if there will be a delay prior to a special ceremony and burial in a veteran’s cemetery, make arrangements with your funeral home to store your loved one’s remains until the service.

• Obtain ten original certified death certificates. After someone passes away, their death should be registered with the local or state vital records office, which can then issue official death certificates. A state-licensed funeral director or coroner typically prepares and files the death certificate with the state. A death certificate is often required to claim life insurance benefits, close bank accounts, transfer titles, and take care of other matters connected to your loved one’s estate.

• Ascertain the immediate needs of beneficiaries and expenses that must soon be paid. Determine which of your loved one’s accounts contains cash that can be accessed for the beneficiaries’ needs and other expenses. The last thing you want is for an item to be repossessed or the electricity turned off due to non-payment.

• Arrange care for animals. If your loved one had pets or other animals, you should immediately arrange care for them. Your loved one’s will or trust may name the person your family member has chosen to care for them, but if there was no will or trust, you may need to arrange for someone to look after the animals until a caretaker can be determined.

• Inspect your loved one’s home to make sure it is secure. If your family member owned a home, walk around the home to make sure any points of entry are locked and that there are no maintenance issues that need to be addressed. Notify the police department that the home will be vacant so police can patrol the area more frequently.

• Change the locks. It is important to change the locks on the home to ensure that neighbors, service providers (maids, dog walkers, etc.), and even family members who had keys are no longer able to enter the home. This is important to ensure that no one prematurely removes any property from the home, even if they are well-intentioned.

• Remove valuables from the home and store them in a secure place. Jewelry, cash, works of art, furs, and other especially valuable property should be kept in a safe place until the estate or trust is administered and the items are transferred to the proper beneficiary. Check on the insurance coverage for these items.

• Secure vehicles. Any cars your family member owned should be locked. No one should drive the car, and the odometer should be checked to determine the mileage at the time your loved one passed away. If the car is parked on the street or in a driveway, you should notify the police to keep a closer eye on it. Insurance on the car should be maintained.

• Arrange for the home and yard to be maintained. Continue lawn care and general home maintenance to ensure that the house does not become an eyesore and a target for thieves.

• Discontinue services that are no longer needed, and hire any new personnel required by a beneficiary or dependent. If your deceased loved one had domestic help, security guards, or assistants that are no longer needed, stop the services after checking any contracts or written agreements. If a beneficiary or dependent now needs the help of an assistant or maid, hire the necessary workers to ensure they receive the proper care.

• Leave the heat or air conditioning on. To prevent any problems that may arise as a result of very high or very low temperatures, it is important to continue to heat and cool the home. In addition, if the home is vacant during cold winter months, a faucet should be turned on to prevent pipes from freezing and bursting.

• If required, alert local officials of the vacant home. In some jurisdictions, a higher tax rate is applied to vacant homes, so in those places it is important to notify the city if the home is vacant and part of an estate administration.

• Contact agencies to cancel benefits. If your family member was receiving Social Security, veterans, or other benefits, notify the relevant agency of the death. Do not cash any benefits checks that arrive after death, and if any benefits are received covering a period after death, they should be returned. Depending on the timing of your family member’s death, the government agency may automatically withdraw the last electronic payment.

• Cancel subscriptions and monthly service agreements. If your loved one was receiving a newspaper, magazine, or other regular subscription or monthly service, it is important to cancel them, and if applicable, request a refund.

• Cancel credit cards and charge accounts. Notify all of your loved one’s credit card companies of the death and close the accounts as soon as possible. It is also important to notify all three major credit bureaus of the death to avoid identity theft.

• Locate insurance policies. Find all your loved one’s insurance policies. Call the homeowner’s insurance company to confirm that there is coverage for fire, flood, and/or other needed items as part of the homeowner’s insurance policy. In addition, locate your family member’s life insurance policies, which may have been issued by alumni associations, travel clubs, credit card companies, trade associations, etc.

• Gather personal records. Locate all bank statements, checkbooks, canceled checks, and at least the past three years of income tax returns.

• Determine if anyone owed money to your loved one. While gathering the needed personal records, check to see if there are any documents reflecting debts owed to the deceased individual. Contact those individuals to collect the amounts owed.

Legal Considerations to Keep in Mind

• Once your loved one has passed away, anyone authorized by a power of attorney to act on his or her behalf is no longer valid. Therefore, if a family member was in charge of paying the deceased person’s bills as an agent under a financial power of attorney, that person should stop paying those bills after the individual has died. The executor of the will or trustee of the trust is now the proper person to handle those matters.

• If your family member made arrangements for his or her funeral in advance utilizing a document such as a Remembrance and Services Memorandum, the deceased person’s written instructions may be legally binding under state law, and thus, the survivors may be obligated to comply with them. It is also possible that your family member prepurchased their funeral arrangements through a local funeral home.

• If any of your loved one’s property or money was not part of his or her trust at the time of death or was not made a part of the trust at the time of death automatically, that money or property must be handled through the probate process. That is, the money or property cannot be distributed to anyone, including the trust, without involvement by the probate court.

• If there is any possibility that you or any other family member may want to disclaim any money or property you will inherit, it is important not to take any action that would be considered an acceptance of the inheritance. For example, if you are one of the beneficiaries of your loved one’s life insurance, but decide that you would like for your share to go to the next beneficiary in line, do not complete any paperwork or accept checks involving the life insurance policy.

• Do not prematurely distribute any of your loved one’s property or funds. The executor of the will or trustee of a trust are the only individuals allowed to distribute your loved one’s money or property and must pay all debts and taxes before transferring any funds or property to the beneficiaries.

Call Us As Soon As Possible

Although you can take care of many of these initial concerns on your own, the administration of your loved one’s estate or trust can be quite complex. Even small mistakes could end up being a major headache. It is important to contact an experienced estate planning attorney to help you with probate or trust settlement and/or administration, as well as any other legal matters that may arise during this difficult and emotional time. Our goal is to provide you with peace of mind by guiding you through the administration and settlement of your family member’s trust or estate, so please call us as soon as you can.

In 2008, Congress recognized the need for the public to understand the importance and benefits of estate planning by passing House Resolution 1499, which designated the third week of October as National Estate Planning Awareness Week. Nevertheless, according to a 2019 survey carried out by Caring.com, 57% of adults in the United States have not prepared any estate planning documents such as a will or trust despite the fact that 76% viewed them as important. Many of the respondents said this was due to procrastination, while many others mistakenly believed that it was not necessary because they did not have many assets.

Estate Planning Awareness Week is a great opportunity not only to take steps to make sure your own estate plan is up to date, but also to talk to your family members–especially elderly parents–about creating an estate plan. Estate planning is often a difficult topic to broach, as it brings the unpleasant topics of aging and death to the forefront of our minds. However, creating a proper estate plan can also provide significant peace of mind for your family members by ensuring their life savings are protected, plans are in place in the event they become ill, and their property is passed down according to their wishes. Here are a few tips to help you start the conversation and important discussion points.

Be sensitive to your family members’ feelings. Put yourself in their shoes, and keep in mind that few people are eager to dwell on the subject of their own mortality. One way to begin the conversation is to talk first about the need to plan for illness and to provide instructions in the event they become too sick to communicate with doctors or manage their own finances. The conversation can then naturally progress to the importance of having an estate plan that will enable their life savings to be transferred in the way that they wish, provide for the care of any children or pets, and minimize any taxes, court costs, and legal fees. Communicate that you are not trying to control their decisions, but only want to ensure that their own wishes regarding their medical care and their property are known—and that all their instructions are in writing to guarantee they are honored.

Involve other family members in the conversation. If you are planning to speak to your parents about the need for an estate plan, it is important to try to include any siblings in the discussion to avoid giving the impression that you are trying to influence or control your parents’ choices. You and your siblings should emphasize to your parents that none of you are asking about what you will inherit, but just want to make sure that their wishes are known and honored if they become ill or pass away.

Address several key topics.

• Ask if your family members have a last will and testament and/or a trust, and explain that if they do not have these important legal documents, state law will determine who will receive their property—and thus it may not occur in the way they would have chosen. In addition, someone appointed by the court, instead of a trusted person of their own choosing, might be in charge of caring for any children or pets. Spelling out their wishes in a will or trust will also prevent confusion and anxiety when they are gone.

• A financial power of attorney will allow them to designate an individual to manage their finances and property if they are unable to manage them. Inquire about your family members’ powers of attorney, and encourage them to decide who would be the best individuals for the job.

• Make sure that your family members have proper medical powers of attorney and advance directives in place. These documents contain their wishes about how they would like their medical care to be handled if they are not able to make decisions for themselves. A medical power of attorney also enables them to designate a trusted person to make medical decisions for them when they are unable to speak themselves.

• Find out whether they have insurance and the location of the insurance policies. If your family member becomes incapacitated or dies, it is important to have information about their insurance so that claims can be filed for benefits in the case of health, disability, long-term care, and life insurance, and that other types of policies, such as homeowner’s or auto insurance, can eventually be modified or terminated.

• Ask them to compile a list of all of their accounts and property and other important personal information, including bank and investment accounts, titles to vehicles. deeds to homes, credit card accounts or loans, digital accounts (such as Facebook, Twitter, Netflix) and passwords, Social Security cards, passports and birth certificates, which will be needed to wind down their affairs once they are gone. This information should be kept in a safe place and shared only with trusted family members or loved ones.

• A list of legal, financial, and medical professionals who have worked with your family members is also important. Be sure they include medical doctors and care providers, financial advisors, insurance agents, CPAs or tax professionals, business partners, care providers, and more.  The list should include the professionals’ contact information so they can be easily reached in the event their help is needed.

Consult an estate planning attorney. Once you have this important conversation with your family members, they might realize it is time to contact an experienced estate planning attorney who can help them create an estate plan tailored to meet their needs and carry out their wishes.  They might also realize they need to update a plan that no longer fits their goals and wishes. We can help them ensure there is a plan in place that will prevent unnecessary stress, legal expenses, taxes, arguments between family members, and delays in passing their property to loved ones when they pass away. An estate plan will also provide them with the peace of mind that comes with knowing there is a plan in place for their care if they become ill. Please call us today to set up a consultation.

Life insurance is often one of the most important parts of an estate plan. People usually purchase life insurance to prevent their spouse, children, or other dependents from suffering financial hardship if they die unexpectedly.

You may think that all you need to do is simply write in the name of the person you would like to receive the proceeds from your life insurance policy on the beneficiary designation section of your paperwork and forget about it. However, there are several important factors you should consider first.

Consider Naming a Trust as the Beneficiary

Many people designate the person they would like to benefit as a direct beneficiary of their life insurance policy. If you want to provide funds for your spouse’s retirement, it may make sense to name him or her as the primary beneficiary. However, depending upon your particular circumstances, goals, and who you are trying to protect, it may be more prudent to name a trust as the beneficiary. For certain individuals, it will be more beneficial if the life insurance proceeds are distributed according to the terms you have established in your trust rather than having a large cash payment made directly to them.

Minor children. Life insurance companies will not pay death benefits to children under the age of 18 (or the age of majority in your particular state). As a result, if you name your child as a primary beneficiary, but die when your child is still a minor, a court-appointed guardian, who may or may not be someone you would have chosen, will likely be put in charge of managing the payout of the insurance proceeds for your child’s benefit. The proceeds may not be managed in the way you would have chosen.  In addition, any remaining proceeds will likely go directly into their pockets when your child becomes a legal adult–whether they are mature enough to handle such a windfall. This can be avoided if a trust is named as the primary beneficiary of the life insurance policy, with your child as a beneficiary of the trust. Then, the life insurance proceeds will be managed by the person you have chosen as the trustee and will be distributed to your child according to your wishes.

Some people may also mistakenly designate the child’s caretaker as the primary beneficiary to avoid the appointment of a guardian. However, this does not guarantee that the funds will actually be used for the child’s benefit, and the proceeds are vulnerable to claims made by the caretaker’s creditors. These problems can be avoided by designating a trust as the primary beneficiary and naming someone you trust as the trustee of that trust.

Recipients of government benefits. Although your intentions may be good, naming someone who is receiving need-based government benefits as a primary beneficiary of your life insurance policy may cause them to lose their eligibility for those benefits. A special needs trust can be created and named as the primary beneficiary of your life insurance policy. In that way, the insurance proceeds will be managed and distributed in a manner that will not compromise the government benefits, but will instead supplement them.

Beneficiaries who may be spendthrifts. If you are concerned that the potential beneficiary of your insurance proceeds is not financially responsible, making them a primary beneficiary may be asking for trouble. The proceeds could quickly be squandered. If you make a trust the primary beneficiary of your life insurance policy, and name the individual as the beneficiary of the trust, you can establish specific conditions for distributions to that person, for example, that the distributions must only be for health, maintenance, or educational purposes.

Think About Asset Protection

Designating a trust as the direct beneficiary of your life insurance policy can also protect its cash value and death benefit from creditors’ claims.

Protection against your creditors. All 50 states and the District of Columbia have statutes that protect the death benefit or cash value of life insurance, and sometimes both, from you and your estate’s creditor claims. In some states, however, the exemptions for cash value life insurance are limited to a specific dollar amount or to the amount reasonably necessary to support a beneficiary. In addition, although typically the death proceeds of the life insurance policy are never available to your creditors because they pass to your beneficiaries without ever becoming part of your estate, some states have laws that limit the exemption only to certain beneficiaries, such as a spouse, children, or other dependents. Designating a special trust called an irrevocable life insurance trust (ILIT) as the primary beneficiary of your policy can be a strategy to protect proceeds that are outside the scope of the statutory exemption.
In addition, keep in mind that it is essential that you actually name a beneficiary or beneficiaries for your life insurance policy, because if you do not and leave this designation blank, the proceeds of the life insurance policy will be payable to your estate by default. Because your estate is responsible for paying off your debts, the life insurance proceeds may be available to satisfy your creditors’ claims, and the individuals you want to benefit may never see a penny of it. On the other hand, you may choose to do this intentionally, to ensure that your estate has sufficient funds to pay off your debts. If your main goal is to provide for the needs of your family, however, you need to name them or a trust created for their benefit as the beneficiary of the policy.

Protection against your loved ones’ creditors. If your spouse is the primary beneficiary of your life insurance policy, the proceeds typically cannot be reached by your individual creditors. However, if your spouse has joint debts or obligations with you, for example, if he or she co-signed a mortgage loan, credit card, or personal loan with you, the proceeds may be available to creditors to satisfy those obligations, depending upon state law.

Also, it is important to keep in mind that although state law provides that the proceeds of your life insurance policy are exempt (at least partially) from your creditors, once those proceeds are in the hands of your direct beneficiaries, they typically are within the reach of their creditors. Even if your children or other loved ones do not currently have any creditors, they may eventually face lawsuits, bankruptcy, or divorce. If they are primary beneficiaries of your life insurance policy, the death benefit you intended for them to receive may be exposed to claims from those creditors.

An ILIT or other trust can also protect the death benefit through the inclusion of a “spendthrift trust” provision that prohibits trust beneficiaries from pledging the trust assets, including life insurance proceeds, as collateral. Their creditors are then only able to reach any distributions made to them from the trust.

Seek Advice About the Amount Your Beneficiaries Will Need

Seek the counsel of your financial advisor to determine the amount of life insurance benefits your loved ones will need for a financially secure future. Many factors should be taken into account, including your current income, other insurance policies, savings and investments, possible college and other future expenses, your total debt, including your mortgage, as well as the number of individuals who are financially dependent on you. It is important to establish a secure safety net, as well as provide financial stability during the transition period after your death, particularly if you are the primary breadwinner, and your spouse is the main caregiver for your children but will need to return to the workforce.

We Can Help

It is important to check with us, as well as your financial advisor, to make sure that you have covered all the bases when it comes to life insurance policies and beneficiary designations. We can help you decide how to best protect your loved ones if you pass away by carefully considering who you should name as your beneficiaries, including whether it would be advantageous for a trust to be the primary beneficiary, and how much insurance to acquire. If you already have a life insurance policy, we can also provide guidance as you review and update your beneficiary designations. We look forward to helping you gain peace of mind by ensuring the financial security of your family.

Just like other important life tasks, your estate plan deserves your time and attention. It’s important that you work with us to review your estate plan at least once a year. Think of this as your estate plan’s annual physical exam, and remember—prevention is the best cure.
 
An annual exam isn’t necessarily the only time we see a doctor. Similarly, an annual planning meeting isn’t the only time you need to consider your estate plan. The occurrence of special life events may mean it is time to pick up the phone and call us.
 
If you experience any of these significant life events, get in touch with us, and we’ll make sure you are up to date.
 
Marriage
Have you recently gotten married? Congratulations! Marriage means new ways of sharing and managing finances and assets. As a result, this is an important time to revisit your estate plan. With this life change, you’ll need to contact us to make any changes to your beneficiary designations, update your will/trust, and update your powers of attorney. This is especially important if this is a second marriage and/or there are children from a previous relationship involved. Proper estate planning is the only way to ensure that you are protecting your loved ones the way you want.
 
New Job
A new job presents an exciting new set of challenges and opportunities to explore. It also brings very real financial changes. You may be receiving new benefits that require new beneficiary designations on your estate plan. When you are filling out these new forms, it is important that the beneficiaries are named appropriately so your estate plan will work as designed. In addition, you’ll need to make sure your estate plan reflects the change to your financial status, whether that’s a pay increase or a pay cut.
 
Loss of a Job
Similarly, leaving employment brings big changes to your financial situation and to your estate plan. It’s important to update your plan to reflect the loss of employer-provided benefits such as life insurance, as well as the change in financial status.
 
Retirement
Welcome to your golden years! Retirement brings lifestyle changes, more time for loved ones, and important financial developments. Your estate planner can help you change your plan to reflect that you’ve stopped earning income and have entered the phase where you will be beginning to use your retirement account. Also, with this new-found freedom, you may find yourself traveling more, making documents such as a Financial Power of Attorney and Health Care Power of Attorney more crucial.
 
Moved
If you have moved across state lines, you’ll need to consult with a local estate planning attorney to make sure that the provisions in your estate planning document are still applicable in your new state. A new home is a new asset, and it is important that this asset is titled appropriately to carry out your overall estate plan.
 
Divorce
Divorce is, of course, a difficult time. But it is critical to look out for your financial health and future if it occurs. You should make any needed updates to the beneficiaries on your estate plan and ensure your beneficiary designations on any life insurance or retirement accounts are changed so that your ex-spouse does not end up with your assets upon your passing.
 
Death
There is so much to take care of after the loss of a loved one. Take some time, but don’t forget that your estate plan will need to be updated to reflect the change that has taken place. You may need to remove the deceased loved one as a beneficiary from any will, trust, life insurance policy, or retirement account and determine what will now happen to that share. It is also important to verify that your deceased loved one was not appointed as a fiduciary, or if so, to make the necessary adjustments to your documents.
 
Received Inheritance
The death of a loved one not only brings a loss but may result in an inheritance. An inheritance can mean property, money, real estate, and more. An increase in assets may necessitate a change in your estate planning strategy. Also, depending on the form of the inheritance you’ve received, there may be additional asset management or asset protection concerns that your estate planner will need to address with you.
 
Birth or Adoption
Welcoming a new child to the family is an unforgettable time. You may feel inspired to look toward the future, and you should! This is a great time to plan to provide for your new family member’s future. Due to the new arrival’s young age, it is important to consider how you would like to provide for the child and who is going to be in charge of handling the assets while he or she is a minor.
 
We’d Be Honored to Help
Whatever life brings you, we are here to help you weather the storms and celebrate the milestones. We’d be honored to help you ensure your estate plan is up to date to reflect these life changes. Give us a call today!

You’re not a carbon copy of your neighbor. Likewise, your estate plan shouldn’t be a carbon copy of theirs.
 
A qualified estate planning team’s approach to counseling will be tailored to your specific needs. As your team works together to produce, tailor, or edit your estate plan, one key tool to consider is the niche trust.
 
What is a trust?
 
Usually when we speak about a trust, we mean an “express trust.” An express trust is a three way relationship between the grantor, the beneficiary or beneficiaries, and the third party, or trustee. The grantor has assets he or she wishes to distribute in a specified way to the beneficiary, and the trustee holds those assets on behalf of the beneficiary.
 
Your assets, financial needs, and wishes are particular to you, so your attorney’s use of trusts needs to be a nuanced strategy. Enter the niche trust. These trusts are designed for very special situations and fulfill certain particular needs. Your attorney can help you decide which of them may be right for you.
 
Health and Education Exclusions Trust (HEET)
This trust is tailored to help you avoid paying gift tax on tuition and medical care expenses for individuals two or more generations younger than you (grandchildren, great-grandchildren, etc.). Tuition payments made from a HEET Trust directly to an educational institution on behalf of one of these beneficiaries are not subject to gift tax.  Similarly, payments made directly to a medical care provider that are not reimbursed by the donee’s insurance are not subject to gift tax. However, in order to qualify for these benefits, at least one beneficiary of the trust must be a charitable organization.
 
These payments, if made on behalf of a “skipped person” from a non-Generation Skipping Transfer Tax (GSTT)-exempt trust are not considered GSTT transfers. This is a great option if you have already used your GST exemption.
 
Pet Trust
This trust can either stand alone or be part of a revocable living trust. Pet trusts are used to provide for the care of pets after you pass or during any period of incapacity, and to appoint someone to care for them. A pet trust also nominates someone to handle disbursement of funds to cover pet care.
 
Gun Trust
A gun trust is used to pass firearms to heirs in compliance with state and federal regulations and outside of probate. Due to the regulations and penalties for violating state and federal firearms regulations, it is crucial that you work with a qualified estate planning attorney when planning for the distribution of firearms.
 
Incentive Trust
With an incentive trust, assets are held for the benefit of a beneficiary who must meet certain requirements before a distribution will be made. These trusts are put in place by you, the grantor, and certain requirements defined by you must be met prior to the distribution of any of the principal or income. For example, you could stipulate the funds be distributed:

• Only when the beneficiary has graduated from college.

• Only if a beneficiary abstains from illegal drug use.

While being able to put stipulations on a beneficiary’s inheritance may sound appealing, it is important to note that conditions for the disbursement of assets cannot be illegal or against public policy.
 
Gifting Trust
Using either the annual gift tax exclusion or lifetime gift tax exemption, a gifting trust holds and invests property for the benefit of family members. This can be a great strategy for transferring family wealth to someone in a lower income bracket.
 
If you want to use the annual gift tax exclusion to shelter gifts to the trust for gift tax purposes, you will need to include a Crummey power. A Crummey power is a technique that allows a person (beneficiary of the trust) to receive a gift that would not usually be eligible for gift tax exclusions, and makes that gift eligible. To accomplish this, after each annual gift is made, the beneficiary will be given the opportunity to withdraw the amount. However, in most cases, the beneficiary will leave the money so as to ensure you will keep making the annual gifts according to the original plan. Because gifts can be made annually, you can stop at any time.
 
Supplemental Needs Trust (3rd Party)
In a supplemental needs trust, assets are set aside for the benefit of a beneficiary whose disabilities may allow that person to receive public assistance for medical and other care expenses. In order to guarantee your beneficiary will not lose government benefits or fail to qualify for those for which they would otherwise be eligible, it is important to consult with an experienced estate planning attorney.
 
Standalone Retirement Trust
This trust is designed to receive “qualified retirement accounts” like IRAs and 401(k)s. Standalone retirement trusts can be set up as either revocable or irrevocable, and provide additional protections for the inherited retirement account. While the future of the lifetime “stretch” for non-spouse beneficiaries is still in question, this type of trust is still a great alternative to allowing a beneficiary to immediately cash out an inherited retirement account. This can be an important consideration when planning for retirement if you anticipate having a large sum remaining upon your death.
 
Qualified Personal Residence Trust (QPRT)
With a QPRT, a personal residence is the main asset of the trust. You keep the right to live in the home for a specified number of years, and after that term ends, the home is transferred to your named beneficiaries. This means if you survive the term of the trust, you must move out or begin paying rent to the trust in order to remain living there. This type of trust can reduce the burden of gift tax that will be incurred when the residence is transferred to the named beneficiary.
 
We Are Here to Help
All of these trusts are tools in building a comprehensive, personalized estate plan that will make your estate’s future a bright one. Estate planning must be a collaboration, taking into account your wants and needs and drawing on the expertise of planners and attorneys. Don’t hesitate to reach out today to work with us. Together, we can make your estate plan dreams a reality.

You’ve packed sunblock and a beach novel. You’ve planned your itinerary and bought plane tickets. But have you ensured that your estate plan is up to date? Don’t leave home without making sure your financial health and the future of your loved ones is provided for. It’s even more crucial than getting a pet sitter and locking the front door. Creating an Estate Plan If you don’t have an estate plan yet, don’t panic. Now is a great time to connect with a qualified estate planning attorney who can sit down with you and get you started with an appropriate plan for your financial future. Here are some questions to begin the process: Do you have a will? An attorney can help you create an accurate and intentional will if you do not already have one. Have you considered using a trust? Trusts have considerable benefits, from keeping assets safe from creditors to dividing an estate equally without worrying about the status of individual assets. Are your children protected? An attorney can help you designate a guardian to care for your minor child in the event you are unable to. An attorney can also help you name an adult who will manage your minor child’s inherited property if you pass away. These may or may not be the same people. Have you considered life insurance? If you anticipate leaving behind significant debt or hefty estate taxes, or if you have small children, you may want to consider a life insurance policy. Knowing your dependents are provided for will give you peace of mind. Is your business protected? If you own a business, have you named a proxy to manage your interest if you cannot? Do you have a business succession plan? If you co-own a business, have you drawn up a buyout agreement? An attorney can help with that as well. Pour-Over Wills: A Useful Tool Considering a trust-based estate plan? It’s a great way to ensure that your assets are divided and protected in exactly the way you want. It can also help your beneficiaries avoid the expensive and lengthy process of probate, when an estate must be organized and distributed through a probate court. But as you may know, gathering the needed documents may be time-consuming. If you need to complete an estate plan before leaving on a vacation and are unable to fully fund your trust, you may want to consider using a pour-over will in the interim. A pour-over will stipulates that all assets that have not yet been funded into your trust will be put there when you pass away. Your trust becomes the beneficiary of any assets that you may not have had time to transfer there. In a crunch, it can serve as a stop-gap measure while your trust-based plan is being funded. Trust, but Verify Have you already created an estate plan? That’s great! It’s still important to verify that all provisions made in the estate plan are exactly as you want them. Here are some items to confirm before leaving town: Are your assets accurately inventoried? Have you left out any important assets or neglected to report changes? Are your beneficiary designations accurate? Are your assets going where you would like them to? When was the last time you reviewed your selection of fiduciaries? Being named as someone’s Personal Representative, Successor Trustee, Agent under a Power of Attorney, etc. can be a time consuming job. It is important that you review your selections periodically to ensure that those people are still the best choice to act on your behalf. Contact Us Today Estate planning with a trusted attorney is an important part of ensuring your financial health and preserving the legacy you’d like to leave to your loved ones. As you’re preparing for summer travel, don’t neglect your estate plan. We can help you put a plan in place that will reassure you and your family. Contact us today to plan for your tomorrow. Archive Advisor Focused Newsletter Estate Planning Pop Quiz Your Role in a Client’s Summertime Family Gathering Helping Clients Protect Themselves and Their Loved Ones This National Safety Month View All Client Focused Newsletter Estate Planning Pop Quiz Include a Family Meeting in Your Next Family Reunion Join Our International Inheritance Planning Round Table Discussion! View All

When you think about the legacy you’ll leave, what comes to mind? Perhaps it’s security for your family or a positive contribution to your community. It could also be a tribute to the arts. Whatever it is, you don’t have to wait until you pass on to actualize your legacy. Now is the time to begin planning and implementing your wishes. It’s Not Too Soon One way to ensure your legacy lives on is through estate planning with a trusted team of advisors and attorneys. Estate planning allows you to make informed, wise decisions about what you’ll leave behind—but it’s not too soon for your legacy to come alive. Additionally, leaving a legacy doesn’t always have to be about money. Being known as a person who donated their time or talent to their favorite organization is just as important. Estate planning can help you focus on what matters most to you and can enable you to begin to build your legacy while you are still living. Imagining Your Legacy Here are some thoughts to consider as you begin this process. Take some time to pause and reflect on what matters to you, what you hope to leave behind, and how you can put your legacy into action today. When you think about the kind of legacy you want to leave, you’ll be more likely to make smarter decisions about your career, your investments, your health, etc. because you have an eye on the future and your role in it. Your legacy can serve as an inspiration and example for others. If you plan wisely and give generously, your children and beneficiaries are more likely to emulate those behaviors. Your example can have a positive and impactful influence on others, perpetuating a living legacy even before you pass on. If you plan your legacy now, you can actually see the benefits of your planning come alive. Donations that you make now, with the advice and support of a trusted estate planning team, can begin to benefit others immediately, while you’re around to witness it. It’s an immensely gratifying way to begin enjoying your legacy. In 2017, the largest source of charitable giving was individuals, at a whopping $281.86 billion. That’s 72% of total giving for 2017. You can be a part of this trend, and with the help of your advisors, you can contribute intelligently and strategically to the causes you care about most. Getting Started with Charitable Giving Giving to charity is one of the most important financial choices you will make during your life. You may choose to contribute to your alma mater, your center of religious worship, or to a charitable organization or foundation. It’s up to you to decide what matters most, but your estate planning team can help you maximize your contributions. We can also advise you on balancing maintenance of your lifestyle with your current charitable giving, so that you’re able to enjoy the act of giving. Of course, because the gift tax does not apply to gifts made to charities, charitable giving can be an important strategy to minimize federal estate and gift taxes. It can be an integral part of a good estate plan. Lifetime gifts to charities may make you eligible for an income tax deduction. Eligibility for these deductions is limited to a percentage of your adjusted gross income. And there’s another yearly limit for gifts of appreciated securities or property. As you can see, due to the complexity of planning charitable giving, it’s best to get qualified advice before making donations. Get in Touch Today With careful planning and strategy, you can create a legacy that will inspire your children, contribute to the causes closest to your heart, and complement your financial and estate plans. We are here to be your trusted partners in this process. Please get in touch today to get started.