Spring cleaning, in a way, is the final hurdle you have to get over before you can fully enjoy summer. Whether you’re excited or not, it’s here, and it doesn’t just apply to the nooks and crannies of your house. Estate planning is a way to ensure your assets are transferred and distributed the way you want. There are many different documents and tools you can use to safeguard your family after you pass on, but all of them have a similar characteristic: they need to be updated regularly to make sure they’re covering what you want them to cover.
In this article, we’ll discuss the various ways in which your estate plan can be updated. You should look at your plan to see if you need to make these changes. If so, consult your estate planner today.
New Season, New People
Families change, and your estate plan should reflect this. Perhaps new people have come into your life that you want to include in your plans. Or, conversely, maybe there have been changes in your family that require you to consider dropping people from your estate plans and substituting others in their place.
For example, let’s say you have a living trust. (For reference, a living trust is a three-party fiduciary relationship between you, the donor, a trustee, which is the person who takes nominal ownership of your assets, and the beneficiary, who gets the assets when you tell the trustee to transfer them). Your trustee is a relative, and your beneficiary is one of your children. Assume that your relative passes away before you. You then, at that point, need to ensure that you have a new trustee to take the person’s place. Or maybe your trustee is fine, and you want to add more beneficiaries.
These examples are just some of the many ways new circumstances can require new people. Don’t wait to add them in—the sooner the better.
New Season, New Documents
There is a wide range of documents that can go into your estate plan. Don’t settle for what you have now, as situations can arise that lend themselves to the opportunity to add new tools to the mix.
One of the best things about estate planning is the opportunity to adjust and individualize what you need. An example of such a change is your kids and college. There are tools in the estate plan toolkit that allow you to pass on college savings to help your kids pay for college, should they decide to go. Adjusting your estate plan to encompass new plans like this is easy and very valuable to your family.
Changes in the law can also mean opportunities to adjust your estate plan. Recently, the gift tax exemption has increased, along with the estate tax exemption. These two can be grouped together, which means you can lessen your tax burden through certain financial maneuvers (i.e. gifting more money now instead of waiting until you pass away).
As you can see, there are many reasons to update your estate plan this spring. Spring cleaning is here! Take advantage of it by making changes wherever you need to.
The Redcoats are coming! And they’re coming for all you own, too. That scary pronouncement refers to something called “probate court,” which may not sound intimidating on its face, but is actually quite scary in and of itself. Probate court and the IRS go hand in hand, and if you want to avoid your estate getting snatched up, you should consult an estate planner immediately.
In this article, we’ll tell you how to remain Redcoat-free through an estate plan that keeps your assets and your family out of probate court. First, though, you might be wondering: what’s so scary about probate?
Probate Court 101
If you die without giving instructions on how you want your assets distributed after your death, your estate will go to probate court. This court manages peoples’ debts and property after they pass away. The court is state, not federal, as the state is considered the system best in position to manage its own citizens’ affairs.
But in this case, is it? The evidence would say that the person in the best position to manage your affairs is you. Probate court has two goals: pay off your debts and distribute what’s left. After someone files a petition for probate, the probate court appoints an administrator or executor to execute the process. There are a lot of fees associated with this process, ranging from administrative to legal fees, and all of your business becomes public record. The distribution of your assets is not the only thing that the public gets to know: the nature and extent of your debts are also on the record. Your financial situation becomes common knowledge. The process can take six months if you’re lucky. Often, it can take more than a year.
And, of course, you can’t forget about the taxes.
When the IRS Comes to Visit
The IRS wants its cut. Taxes are nothing new any law-abiding citizen, but it’s a pretty common assumption that, if there is a tax loophole, you want to take advantage of it.
When you’re in probate court, the chance to avoid taxes goes out the window. There is a tax on the value of your probate estate. This is called an estate tax, though it is sometimes known as an inheritance tax. In some states, if your estate is over a certain value, that is when the tax is triggered.
Through financial planning, you can often lessen your tax burden to some degree. Gifting money, putting your assets in a trust, and taking advantage of exemptions are just some of the ways to avoid getting hit with a huge bill. If you just go straight to probate with no plan, however, your estate is going to be taxed as is, and your loved ones will merely get what’s left.
How to Avoid This
As mentioned above, placing your assets in a living trust is a very, very beneficial option if you want to stay out of probate. A common misconception is that a last will and testament will keep you out of court—it won’t. The will still must go to probate to be executed by the court. The process is still time-consuming and costly.
A living trust is a fiduciary relationship that puts your possessions in a trust. When you die, your assets are given by the trustee to your beneficiaries, who you designate. This tool allows you to avoid probate and your beneficiaries to receive their assets immediately. Consult an estate planner to discuss this option and many others that will protect your property.
Tax season, happily, is ending soon, and if you haven’t used your exemptions, you should probably do so now. Tax returns are due April 17, while filing began on January 29, which means that the American people have had four months to either procrastinate on their taxes (or get them done).
If you haven’t used your tax exemptions, do it now, particularly when it comes to the estate tax and gift tax. The estate and gift tax exemptions work together, so it makes sense, in this article, to talk about them together with estate planning in mind.
The Estate Tax Exemption
An estate tax is a tax levied on a deceased person’s estate based on the estate’s net value. On an estate, there are two types of taxes that you need to be aware of: one on the income generated from the estate’s assets and another on the transfer of assets to the beneficiaries of the estate.
The estate tax exemption has been raised to $11 million per individual, which equals $22 million for a married couple electing portability. Before 2018, the estate tax exemption was maybe half of what the individual person could get. So, if you fall within this exclusionary amount, you can dodge the estate tax altogether.
Similarly, the gift tax has undergone some changes in 2018.
The Gift Tax Exemption
The gift tax exemption (also known as the gift tax exclusion) has increased in 2018. Before 2018, the limit was $14,000. But now, in 2018, the limit is $15,000. For married couples who split their gifts, the limit ends up being $30,000.
This gift tax exemption is especially valuable for families who are gifting money to help pay for college education. There is a special type of plan for gift money that is used to pay for college: the § 529 plan. A 529 plan allows you to gift five times the gift tax exemption limit in a single year and still be covered by the exclusion. So, if you were to give a gift of $75,000, you would not be taxed on it because it would be considered five gifts of $15,000. Were the limit still $14,000, the 529 would exempt $5,000 less.
The gift tax and estate tax exemptions have both gone up, and the increase in these exemptions will benefit the savvy filer who knows how to use them.
How the Two Work Together
Known as the “unified tax,” the gift and estate tax are the same rate and applied in the same way. The gift tax occurs when you’re alive, and the estate tax comes when you are dead. You can gift during your lifetime in order to avoid paying estate taxes when you are deceased. If you give gifts throughout your life and meet the exemption, you can reduce the amount of taxes that you will have to pay on your estate.
The other benefit to this idea of “gifting while you live to save on taxes when you die” is that even if you are taxed on your gifts, you have the option of paying those, because you’ll be alive. The estate tax will just take out a chunk of what your beneficiary will inherit.
Use it or lose it! Tax season is coming to an end, and if you are able to claim either of these exemptions, you should.
Pretty much everyone has heard of Bitcoin, but, for the few who haven’t, Bitcoin is a digital currency that, in order to get, you have to “mine.” You mine Bitcoin by running software that finds the key to open the digital Bitcoin lockbox, so to speak. When your software finds the key, you get twenty-five Bitcoins. This unusual process isn’t the only way to get the coins, however; you can also trade them for fiat (domestic) currency.
Bitcoin is super volatile, but it can be very profitable given the right circumstances. Its price can soar or drop, making it one of the more exciting assets out there. If you’re a Bitcoin investor, first of all, congratulations on being brave. Second, if you consider Bitcoin a part of your assets that you want to hang on to, you can protect them through estate planning.
Bitcoin in Your Estate Plan?
You’ve mined your gold and now want to protect it. Luckily, estate planning is a field that has kept up with this technological advancement, and you are able to protect your Bitcoin the way you would any other, more conventional, asset.
People tend to talk about Bitcoin’s price, not about what you do with it after you die. You store Bitcoin on a computer, whether in cold vault storage, a digital wallet, USB port, or some other digital means. This makes it different than, say, real property, which is held in the corporeal world.
Bitcoin does differ when it comes to trading, as you’re not asked to name a beneficiary when you buy or sell through an exchange, a practice that is common when trading other assets. The anonymity of Bitcoin (no identification required to buy or sell) is another problem, as there’s no information attached to this form of property. Your Bitcoin is just floating around in the computer world, and it needs to be tethered down somehow.
To make sure you’ve got your gold protected, you need to update your documents to include your digital currency, what you want done with it after you die (buy, sell, keep, etc.), and how to access it. If you don’t, this property will end up in probate court, where a judge will distribute it.
Things to Consider
One of the most important things to consider is making sure that your beneficiaries have the ability to access your bitcoin. Give them the private key, password, and whatever else they need to get to your bitcoin. List the different digital holdings you have and how to electronically get to them. If you have your currency locked up and die without giving people instructions on accessing it, it will be gone forever.
Secondly, make sure your beneficiary understands how to manage Bitcoin. Bitcoin, as stated above, is volatile, with tons of swings in price. It’s not for the faint of heart. You can lose or gain a lot of money, depending on what the market decides to do (true, that’s common with many assets, but it’s more pronounced with Bitcoin). Ensure that your beneficiary knows how to handle this currency, and leave them detailed instructions.
Bitcoin is an exciting new currency, and, like any other asset, it needs to be protected and maintained via documents in your estate plan. Consult an attorney today to find out how to best manage your Bitcoin.
March Madness is upon us! This is the most exciting season for college basketball fans, and everyone is waiting with bated breath to see how their brackets will turn out (for some of us, our answer came disappointingly early).
March Madness involves picking the right people to carry out a common goal, and, in that sense, planning your estate can be viewed a lot like picking your bracket. You need to have the right people in the right positions to carry out the goal of distributing your assets fairly after you die.
The Different Spots to Fill
There are many different spots to fill when it comes to your estate plan. There are different documents, appointees, and other means by which you can control your asset distribution.
Here are a few of these positions that you need to consider filling.
- Beneficiaries are people you designate to receive your assets. You want your things to go to people you trust. Select beneficiaries who will be able to handle the assets you transfer to them. For example, the cryptocurrency Bitcoin has been making the headlines lately. It is a digital currency that is volatile, tradeable and an asset that only experienced people should handle. If you’re selecting a beneficiary to get your Bitcoin, you want to make sure that they are knowledgeable about the currency and able to handle it. Think this carefully about all your assets.
- If you create a living trust, you will have a trustor (you), trustee, and beneficiary. You, the trustor, transfer property to the trustee, who becomes the nominal owner until they grant the property to the beneficiary. They grant the property to the beneficiary at your instruction, whether it’s when the beneficiary reaches 18 or at some other point. Pick a trustee that you know will follow your instructions down to the letter.
- In an estate plan, you can also include instructions on who will be the guardian of your minor children. We don’t need to tell you how important it is to pick the right person—you already know. This is another reason why estate planning is so important. If you have kids, you need to make sure that you have peace of mind on what will happen to them if you die.
- Power of attorney. Your power of attorney makes financial decisions for you in the event you are too incapacitated to make them yourself. In your estate plan, you can choose who this important person will be. After you pick the person, you can work with them to ensure they know your wishes and how to carry them out if something happens.
- Healthcare directive. This isn’t necessarily a position so much as it is a set of instructions. A healthcare directive details what a hospital should do for your medical care if you’re too sick to voice your own wishes. This way, you get the care you desire when you need it most.
Much like your March Madness bracket, you need to make sure that the people you choose are able to make the cut. Pick individuals who are responsible and able to handle the duties you give them and follow your directions precisely.
You’ve probably, at some point or another, seen those ads that offer DIY-legal services. These ads claim that, by using their site, you’ll be able to create your own will in less time, with far less expense. Or perhaps you’ve decided to buy a book on estate planning and go for it yourself. While it’s true that you’ll create something, and you’ll probably do it cheaply, do-it-yourself estate planning is a move that will cost you more in the long run.
See, while self-produced legal services may seem tempting, they have a lot of negatives. You won’t get lucky and make the perfect estate plan—luck’s got nothing to do with it. You need a qualified estate planning attorney to get the job done right. In this article, we’ll talk about the dangers and downsides of DIY-estate planning.
Mistakes are Easy to Make and Hard to Fix
Lawyers go to law school for years. Estate planners train in the specific field of estate planning law, and even they check their documents over once, twice, three times or more before finalizing them. Typos, confusion with the legal terms, and problems with the signing are all major areas where DIY wills go wrong.
Requirements can seem nitpicky when it comes to estate planning, but these requirements serve an important state interest: preventing fraud. When it comes to witnesses, things get a little tricky. For example, some state laws dictate that a witness to the will cannot be a beneficiary of anything in it, while other laws require witnesses to all sign in one another’s presence. DIY will-making sites, which often service all 50 states with a boilerplate form, are unlikely to tell you that.
The problem isn’t the screw-up, it’s the fact that the error won’t be caught until after you’ve passed on. That’s when your document will have to go through court because it was handled improperly. The court process will be long and difficult, and it’s unlikely that your plan will be carried out the way you wanted it. And, again, this witnessing slipup is just one example of many pitfalls that accompany estate planning.
The “One-Size-Fits-All” Misconception
DIY services are often one-size-fits-all, meaning that they are not specific to your particular estate. Every estate is different, and attempting to standardize it all into a “one hour or less” planning session just isn’t realistic.
For example, you may want to pass on savings bonds to your beneficiaries, or some other similar asset. These assets, however, do not generally pass through a will or living trust. If you try to designate them through those documents, it will become very messy. Coordinating the different assets with the right documents is something an experienced lawyer will be able to do.
Also, DIY estate planners often leave too much up to their family, simply trusting that their family members will “do the right thing” and intuit what the writers mean in their self-made will. However, if family members always cooperated all the time, there would likely be no needed for estate planning altogether. You want to make sure you have, in clear, precise, correct terms what you want done after you die. That will shield against family fights or schisms that could lead to your will be interpreted in a way you did not intend.
Basically, while a DIY service might be cheaper, it actually costs you more in the long run, as slipups and errors, as well as problems coordinating the documents, can lead to major issues with executing your estate plan after you die. The best course of action is to schedule an estate planning consultation.
St. Patrick’s Day is fast approaching, and, as we all know, everyone’s trying to get the pot of gold at the end of the rainbow. However, what you may not realize is you’re already sitting on a pot of gold: your estate. And, not only do you have this gold, you also need to protect it. Estate planning is the process by which you decide where your assets will go after you die. But, that’s not all that an estate plan protects. It also helps with medical care and property while you’re still alive.
In this article, we will look at the many ways your estate plan can protect your pot of gold, both before and after you die.
Before You Go
If you were to ask people on the street what they think estate planning entails, you’d probably get a lot of answers about a last will and testament. But after death isn’t the only time your estate plan comes in handy. With it, you can protect, while still living:
- Your medical needs.
If you are in incapacitated or unconscious, that doesn’t mean that you won’t need medical care, and it also doesn’t mean that your medical care has to become depersonalized. Through estate planning, you can have what is known as an advanced healthcare directive, where you dictate details about your medical care that you wish to receive during this period. This is also called a living will. Your medical needs and wishes will be protected through this estate planning document.
- Your financial needs.
Similarly, if you are incapacitated, you will want someone to make your financial decisions for you and keep your finances in good order. Through a power of attorney, you can select someone you trust to make these decisions, providing protection for your finances.
Protecting Your Pot of Gold After You Pass
Estate planning also allows you to make arrangements after you’ve passed on. By having a living trust, you can avoid probate court and have your assets moved to the correct places as quickly as possible. Here are the things that estate planning can protect after you have passed on:
Obviously, estate planning through documents such as a living trust will ensure that your money and property will go where you want them to when you’re not around. A living trust is a three-party fiduciary relationship between a donor (the person giving the asset), trustee (the person the donor gives it to temporarily), and the beneficiary (the asset’s eventual destination. You can ensure your estate is wrapped up as quickly as possible using these types of tools.
- Your beneficiaries
If you plan your estate properly, you won’t have to go through probate court, which is a long, difficult process your family will not want to experience. Estate planning can also shield your estate from certain liabilities and taxes, saving your family money.
Estate planning can help you protect your pot of gold, distributing it where you want it and saving your family a lot of time and hassle in the future.
It’s the season of love; Even after Valentine’s Day there’s still plenty of leftover decorations to go around. However, you don’t just spell love “L-O-V-E”; there’s another way to spell it: T-R-U-S-T.
We’re talking about estate planning. While setting up a trust for your kids, grandkids, and relatives might not be as flashy of a gift as a new Ferrari, it actually will have even more value in the long run. There are some common misconceptions about trusts—or, rather, about last wills being better than trusts—so, in this article, we will clarify what a trust is and why it’s beneficial.
What is a trust?
A trust is a three-party relationship. The relationship consists of the trustor, trustee, and beneficiary. The trustor, also known as a donor, conveys property or assets to the trustee. The trustee acts as a receiver. After the property is transferred to the trustee, the trustee acts as a nominal owner of the assets. At the moment the trustor specifies (usually upon said trustor’s death), the trustee conveys the property to the beneficiary, who then becomes the property’s owner.
Lastly, you should know what the term “trust agreement” means. A trust agreement specifies the rules of the trust and manner in which the trust should be followed. There are also federal and state law rules that must be followed in conjunction with the provisions of the trust agreement.
There are many different reasons to get a trust, including reducing your estate tax, protecting your assets after you die, and avoiding probate court. There are many different types of trusts, so consult with your estate planner to find out which one is best for your circumstances.
Why not just get a last will and testament?
A last will and testament goes into effect after you die. It also must go through probate court, and you are often subject to more taxes than you would be with a trust. Probate court is a long, arduous process, and your beneficiaries do not receive their gifts immediately. Though a will is cheaper to set up, it does not pay off as well in the long run.
What are the benefits of a trust?
There are several benefits of a trust. First, you can avoid probate court, as stated above. Second, a trust is effectively immediately and can be changed if something happens. When you set up your trust, it is known as an inter vivos trust. You then decide if it is revocable or irrevocable. Revocable trusts allow you to change your mind. This flexibility is beneficial. Thirdly, you can shield your estate from certain taxes through a trust, and, lastly, you are able to decide the manner in which your assets are distributed, as well as the timing. These four benefits are just some of the many that make a trust a great idea.
Because of the safety and reliability a trust provides, it’s clear that there’s more than just one way to spell “love.”
As the saying goes around this office, “First comes love, then comes marriage, then comes Michael Wild in a baby carriage!”
While estate planning might not seem romantic, and you probably don’t usually finish that rhyme with Michael Wild, there is something to be said for estate planning as a romantic gesture. It certainly indicates a lot of commitment to your spouse, family, and the people who mean the most to you. No Valentine? No problem. Estate planning is still vitally important for you, even if you’re a bachelor or bachelorette.
Estate Planning & Marriage
If you’re getting married or are currently married, you should definitely be creating or updating your estate plan. An estate plan decides where your assets will be transferred when you die. Here are some things to consider when including your spouse in your future.
- Marital property. Marital property is jointly owned between you and your spouse. It is property that you purchased using marital assets. You and your spouse will have to decide where you want it to go in the event of your death. Because it is marital property, it needs to be a decision made that involves the two of you.
- If you die, you will probably want to make your spouse a beneficiary of at least some of your assets. In an estate plan, you can specify your spouse as the beneficiary through a living trust, which sets up a three-party relationship whereby the trustee grants your spouse the assets upon your death. You can also make your spouse the trustee for your children, who you can make beneficiaries.
- Decision-making in emergencies. An advance directive allows you to delineate the healthcare choices you want in case you sink into a coma or are otherwise too incapacitated to make these decisions. You can also name your spouse as a decisionmaker, if you choose. You can name them Power of Attorney, which gives them the authority to make financial decisions on your behalf if you are unable to make them yourself.
- Money is pretty romantic, and the tax cuts that estate planning can get you and your spouse will be pretty significant, particularly since the estate tax will soon be dissipating in a few years’ time.
Don’t Forget the Kids
Your “baby carriage” probably won’t have Michael Wild in it, but he definitely can help you figure out how to best take care of your kids via estate planning. If you have minor children, you definitely need to make sure that you assign guardianship to them in the event of your death. You can also put aside money for your kids’ colleges and name them as beneficiaries or your Power of Attorney. Your children will benefit highly from your estate plan.
No Kids, No Spouse, No Problem
If you’re single and childless, you should still have an estate plan. You likely have assets and property and, if you die, you don’t want to drag your relatives through probate court. Estate planning can divide up your property and transfer it quickly, with as little hassle as possible.
This Valentine’s Day, show your loved ones commitment and care by creating an estate plan or updating a currently existing one. No matter what your status in life, everyone can benefit from estate planning.
February isn’t just the month of Valentines, it’s also a month where you acknowledge your physical heart too. February is American Heart Month, recognizing the fact that heart disease, stroke, and similar ailments are huge problems in America. For a not-so-fun fact, heart disease is actually the leading cause of death for both men and women. So, don’t just take care of your heart by sending Valentines—make sure you’re going to the doctor and checking on your physical health as well.
Have a heart in another way too—write a will. If you want to give the best Valentine to your loved ones, you can help them prepare for the future.
What is a will?
A will isn’t exactly wrapped with a red bow with candy hearts attached to it, but it is sentimental in its own way. There are two types of wills you should know about: a living will and a last will and testament. Chances are, you probably have heard of the second one more than the first.
A living will is a document that details what you want to do in the event you become incapacitated (you’re in a coma or so sick you cannot make your own decisions with a clear head). The living will is effective once you’re unable to communicate. It tells doctors and nurses what they should do in terms of your medical care. It is all about medical care—usually refusing or requesting medical treatment. If you’re unconscious and have no living will, hospitals may perform procedures they consider legally obligatory. If you don’t want that, you should specify that in your will. A living will is also known as an advance directive.
Your last will and testament provides instructions on what to do with your property, assets, and guardianship after you pass away. It is legally effective upon your death. You can name your kids’ guardian if something happens to you, making this an extremely important document for parents of minor children. The person who carries out your last will is your executor. If you die without a will, you are considered intestate, and the state’s intestacy laws will control how your assets are divided.
Which should you get?
You should always have a living will, as you never know if something will happen. Secondly, a last will and testament isn’t the be-all, end-all of estate planning. A living trust is actually preferable to a last will. A living trust constructs a three-party fiduciary relationship. It is legally effective immediately and can be changed easily, if you want to change your beneficiary.
A last will requires your executor to go through probate court, a long, arduous process that takes up time and resources. A living trust doesn’t require that court visit, making it easier to have than a last will. Schedule an estate planning consultation today to help you decide.