Estate Planning Articles

Many older powers of attorney and health care proxies should be reviewed

Many power of attorney and health care proxy documents that were created years ago should be revised now as a result of a federal medical privacy law.

The law, known as HIPAA, generally prevents health care providers from disclosing your personal medical information to anyone but you and someone you’ve named as your “personal representative.”

Medical privacy may be a good thing – but the law can create complications.

For instance, you may have a health care proxy that names someone you want to make medical decisions for you if you’re not able to make them yourself. But if you haven’t also named that person as your “personal representative” under HIPAA, then he or she might not be able to access your medical information in order to make informed decisions. [Read more...]

Retirement Checklist: 5 Steps to Help You Get Back on Track

In order to retire and live comfortably as a senior, you have to start planning now.   Follow these steps and you will be able to achieve your goal.  Here is an excellent checklist to help you, compliments of Scott Shutte from Lightship Wealth Strategies, Inc. in Newton Lower Falls.

 

Presented by Scott Shutte

Although the painful recession may be in our rearview mirror, the aftermath may have you concerned that you won’t have enough money to retire when the time comes. But you can still take control of your retirement, despite market declines and an uncertain economic climate. It all boils down to having a plan—and sticking to it.

Creating a checklist can help improve your chances of attaining retirement readiness. Here are five key steps that can help you jump-start your planning or get you back on track. And, remember, when you participate in your workplace retirement plan, you’ve already taken a step in the right direction. [Read more...]

How to avoid gift tax on hard-to-value gifts

As part of their estate planning, many people want to give away property during their lifetime in order to reduce the size of their taxable estate.

In general, you can give $13,000 a year to anyone you like without having to pay gift tax, and you can make additional gifts over this limit, over the course of your lifetime, up to the amount of your gift tax exemption (although these larger gifts will reduce your estate’s exemption when you eventually pass away). Plus, you can give an unlimited amount to a spouse or charity.

One problem with making gifts for tax purposes is that some types of assets are hard to value. In particular, certain types of real estate, interests in a partnership, and stock in a family-owned business can be very difficult things on which to place a price tag. [Read more...]

New estate tax law affects widows and widowers who have plans to remarry

Widows and widowers who are considering remarriage should be aware that a new federal tax law could potentially make a huge difference in how much of their assets they are able to leave to their heirs after taxes.

In general, anyone who is considering remarriage later in life should talk to an estate planner first in order to avoid possible tax problems. But this new law gives added urgency to this rule, because it potentially could result in huge additional taxes – or tax savings – and planning for this possibility is essential.

Generally, when a person dies, his or her estate can give an unlimited amount to a surviving spouse tax-free. However, if the person’s bequests (plus large lifetime gifts) to other beneficiaries – such as children – total more than a certain “exemption amount,” then an estate tax must be paid. For 2012, the exemption amount is a little over $5 million. [Read more...]

Some states now allow you to ‘win’ a will contest … while you’re still alive

People are sometimes concerned that after they die, a beneficiary (or more likely a non-beneficiary) will go to court to contest their will. Typically, a disgruntled would-be heir might claim that the person who made the will wasn’t mentally competent, or was under undue influence from some other person. These types of will contests can be very expensive, and they can cause a lot of emotional hardship within a family.

Recently, a handful of states have allowed people who make a will to go to court while they’re still alive and have a judge rule that the will is valid – thus preventing a will contest.

These states include Alaska, Arkansas, Nevada, North Dakota and Ohio. Similar legislation is pending in Delaware.

Even if you don’t live in one of those states, you might be able to obtain a court ruling there, such as by putting your assets into a revocable trust and hiring a trustee in that state.

[Read more...]

Many estates can save money by filing tax returns – even if they don’t have to

And people with older wills should have them reviewed now, due to a new law from Congress

A federal estate tax return doesn’t have to be filed every time someone dies. In fact, most estates never have to file one. In 2011 and 2012, a return has to be filed only if the person’s estate (including property, life insurance, taxable gifts, etc.) is worth $5 million or more.

However, even if a return isn’t required, a recent change in the law means there could be big tax savings for many families if they file one anyway.

The change applies to estates of people who die in 2011 or 2012 and are survived by a spouse.

There are strict time limits for filing a return, so if you know of someone whose family could take advantage of these savings, you or they should speak with an attorney right away.

Also, if you have an older will that includes a trust designed to reduce taxes when a surviving spouse later dies, you should have the will reviewed, because under the new law there might now be better alternatives.

[Read more...]

Gifts made in 2012 can reduce state estate taxes

Some 22 states have a state estate tax or a state inheritance tax. These taxes are in addition to the federal tax. For some people, it’s possible to reduce or eliminate these state taxes by making gifts before the end of 2012.

Ordinarily, you can give up to $13,000 each year to as many people as you like without paying gift tax. Through the end of 2012, you can also make total lifetime gifts in addition to these amounts of up to $5 million. You won’t have to pay gift tax on these additional lifetime gifts, although they will reduce your estate tax exemption when you die.

That means that if you make gifts before the end of 2012 of up to $5 million (such as, for instance, gifts to trusts that will benefit your children), it will have a neutral effect on your federal estate tax – your estate won’t owe more or less as a result.

By making lifetime gifts rather than bequests in a will, you may be able to lower or even eliminate the amount of state estate taxes that will be owed.

[Read more...]

Trust property could be tied up by a long-term lease

A Massachusetts man put some ranch property into a trust. The trust was designed to pay regular income from the property to the man’s son. When the son died, the ranch was to go to his grandson.

The trustee (a bank) entered into a long-term lease for the property. The result was that when the son died, the grandson didn’t get the ranch all to himself; instead, he inherited it subject to the lease, which meant he couldn’t immediately sell it.

The grandson sued the bank trustee. But a Massachusetts appeals court sided with the bank. It said there was nothing in state law or in the trust agreement that said the trustee couldn’t enter into a long-term lease, if that was otherwise an appropriate use of the property and a good way to provide income to the son.

The moral of the story is that if you’re setting up a trust and you want the ultimate beneficiary of the assets to have an unlimited right to them when the time comes, you’ll want to limit the power of the trustee to tie up the property in such a way.

[Read more...]

Review your beneficiary designations

Did you know that your will does not determine who gets your IRA or your 401(k) account when you die?

That’s right – these accounts are “non-probate” assets, which means they’re not covered by your will. Instead, they will generally go to whatever person you named as the beneficiary when you set up the account.

Similarly, your will doesn’t determine who gets your life insurance – that will go to the named beneficiary on the policy. And your brokerage account might have a beneficiary as well.

So as part of your estate plan, it’s essential from time to time to review your beneficiary designations.

For example:

  • You’ve remarried, but you want to leave your 401(k) to your children from your prior marriage. Under federal law, even if you name the children as beneficiaries, your account will go to your new spouse – and not your children – unless your new spouse signs a waiver.
  • Is one of your beneficiaries a trust? If so, it’s a good idea to have this reviewed. There have been a lot of developments in the law recently, and you might want to change the way the trust is set up in order to make sure you’re still getting all the possible tax advantages.
  • Is your estate listed as your IRA or 401(k) beneficiary? This is generally a bad idea, because you can often save a lot of taxes by naming individual beneficiaries instead and stretching out payments over time.
  • Is one of your beneficiaries a minor? This could require going to court and setting up a guardianship, which can be time-consuming and expensive. There are better alternatives.
  • Do you plan to leave money to charity? It might be wise to leave IRA or 401(k) assets to charity, rather than other assets. That’s because heirs who receive IRA distributions have to pay income tax on them, whereas they probably won’t have to pay tax on other assets.

[Read more...]

Creating ‘conservation easements’ to save taxes becomes easier

If you own land that you want to pass on to your heirs, but you also want to make sure that some historic, scenic, or agricultural value will be maintained and not destroyed by future development, you might be able to accomplish this with a “conservation easement”…and also save taxes at the same time.

A conservation easement is a restriction on your land that says it can never be developed in certain ways. When you create such an easement, you give it to a charity – usually one that has been created to preserve some historic, scenic or agricultural heritage. In some cases you can also give the easement to a government agency.

After that, the charity or agency has the right to enforce the easement and prevent such future development.

Despite giving away the easement, you still own the land and you can engage in any activities there that aren’t prohibited by it. You or your heirs can also sell the land, although any buyer will be subject to the same easement.

There are two big tax advantages to a conservation easement. The first is that it’s a charitable contribution, so you can take a charitable deduction on your income taxes. Second, the easement reduces the value of your property, because instead of your property being valued based on its potential for development, it has to be valued subject to the easement. So when you pass away, the value of your estate will be smaller, and your family may have to pay less in estate taxes.

[Read more...]

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