Estate Planning Newsletters

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...]

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...]

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...]

Fall 2011 Estate Planning Newsletter (view in PDF)

Before you name someone as an executor or a trustee in your will – or before you agree to be an executor or a trustee – it’s a good idea to review exactly what responsibilities are involved.

These are serious jobs, and sometimes people don’t give enough thought to which person should be chosen.

Often, people simply name a spouse, a child, or a family friend. This might seem like a logical choice, and the person might expect to be given such a role, but that doesn’t mean they’re necessarily the best person for the job – particularly if they’re not detail-oriented, good with figures, and adept at handling money. Many people who quickly agree to act in these roles later come to regret it.

An executor’s job typically lasts about a year, and involves a lot of responsibility. Most executors hire an attorney and sometimes other professionals to help them through the steps and make sure they don’t make any mistakes. However, you’ll still want to pick someone who is willing and responsible enough to handle the often difficult and time-consuming tasks.

These tasks typically include:

• Locating the deceased person’s will (the original, not a copy) and filing it for probate.
• Obtaining a death certificate, obtaining an estate tax ID number from the IRS, and setting up an estate bank account.
• Notifying beneficiaries and other potential heirs.
• Placing an ad in a newspaper to provide information to potential creditors.
• Making a list of all the estate’s assets and liabilities, collecting assets (which may be in other people’s hands), liquidating bank and other accounts, and protecting all assets from loss or harm.
• Obtaining appraisals to determine the value of the property.
• If the property includes a business, making sure the business continues to run successfully.
• Paying valid claims from creditors. If nothing else, it will be necessary to pay funeral expenses, probate fees, professional fees and taxes out of the estate’s funds.
• Filing tax returns on time, including any income tax and estate tax returns.
• Distributing property to heirs. This can include selling property to fund a bequest. It can also include setting up trusts as indicated in the will.
• Keeping detailed records of all expenses, and filing an accounting with a court.

An executor is entitled to be reimbursed for reasonable expenses, and in some cases can receive compensation.

[Read more...]

Summer 2011 Estate Planning Newsletter  (view in PDF)

Congress has created a temporary “window” – between now and the end of 2012 – in which many people can save a lot of money in estate and gift taxes.

You might be able to take advantage of this opportunity by transferring significant assets to a trust. But as they say on TV, hurry – this is a limited-time offer from the federal government.

During 2011 and 2012, the federal estate tax exemption will be $5 million, meaning the tax will be applied only to estates that are larger than that. Importantly, the lifetime exemption from the federal gift tax has also been raised, from $1 million to $5 million.

The gift tax applies to transfers of assets. In general, any person can give any person up to $13,000 a year without there being any gift tax. If you give someone more than $13,000 in a calendar year, then the excess is subject to gift tax.

[Read more...]