Spring Cleaning: Don’t Forget to Update Your Estate Plan

Posted by on Apr 25, 2018 in estate planning, Trusts, Wills |

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.

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Patriot’s Day And Probate

Posted by on Apr 16, 2018 in Legal News |

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.

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Tax Season: Use It Or Lose It

Posted by on Apr 10, 2018 in asset protection, estate planning, tax |

Calculator on the beach

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.

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Digging For Digital Gold – You’ve Mined Your Bitcoin, Now What?

Posted by on Apr 3, 2018 in asset protection, Misc. |

         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.

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