Michigan Estate Planning Blog

What College Did Not Teach You: Grads Need Estate Plans

Young people also should plan how their assets will be distributed in case something were to happen to them. Estate planning is more than just deciding how your assets will be distributed. That is a large part of it, but there are other documents every good estate plan should include. Regardless of your age, you might not think you have very much – but you probably have enough to want to have a say in who gets what. A recent article in the National Law Review, titled “Five Estate Planning Documents Every Young Professional Should Have,” lists the documents that every recent college graduate will want to include as part of his or her estate plan: • General Durable Power of Attorney – This is a simple document that lets you choose who will handle your finances in case you are in an accident or get ill and cannot do it yourself. • Health Care Power of Attorney – This document allows you to choose who will make medical decisions for you, if you are incapacitated and cannot make them for yourself. • Will – Your will does not have to be complicated. However, if you want your property or any piece of it to go to someone in particular, then you need a will to make that happen. • Beneficiary Designation – On many of your financial accounts, such as the retirement account and life insurance your first employer gives you, designating a beneficiary allows you to decide who gets the assets of the account after you pass away. • Beneficiary Deed – If you have an interest in real property, you might want to consider a beneficiary deed as they allow you to say who gets that interest after you pass away. However, these are not always appropriate so speak to an experienced estate planning attorney to see if a beneficiary deed is right for you. Estate planning is for everyone, recent graduates included.

Reference: National Law Review (July 7, 2014) “Five Estate Planning Documents Every Young Professional Should Have”

For more information, see www.jerryreiflawyer.com

Legal Mistakes, Cut-Corners, And The Inheritance Of Litigation

Sometimes even a good estate plan can run into dire straits when the universe throws you a curveball. On the other hand, more often than not, when an estate plan fails and litigation follows it is because the estate plan was not a good plan at all. Legal mistakes and cut-corners are liabilities not worth keeping on the books, as a growing body of case law goes to show. Do not let a legal mistake haunt your estate, your assets or your family after you are gone. When it comes to estate planning, the liability of legal mistakes and cut-corners has a special kind of edge to it since it is so often the family or your partners who end up feeling the burden or even winding up in litigation. What do these cases look like and what terrible mistakes have been made? Forbes recently compiled a quick list of recent litigation and legal cautionary tales worth perusing in an article titled “Legal Mistakes That Haunt After Death: Three Cases.” Consider the following: • Selzer v. Dunn, or, ‘why you should always ensure that an entire plan is in writing and in place before you rely upon it.’ This was the case of two business partners who took out life insurance policies on one another ostensibly to fund a buy-sell agreement, but no buy-sell agreement was ever drafted. The family of the deceased was stuck with the shares to the company rather than the life insurance money intended to buy them out. • Aldrich v. Basile, or, ‘why DIY will writing and fill-in forms can get you into hot water.’ Here is the case where a do-it-yourself will writing kit could not properly account for state law, leading part of the family to argue the intent of a codicil to change the will was clear while the other half of the family argued it was unenforceable. • PHL Variable Insurance Company v. Bank of Utah, or, ‘why lying on legal documents is just a bad idea and maybe outright fraud.’ Here, the deceased had lied extensively on his life insurance application (inflating his value to at least ten times what could truthfully be underwritten) and naturally the discovery of this fact led the insurer to cancel the payout altogether by reason of fraud. Sometimes it is obvious what can go wrong, and sometimes it just takes a practiced mind to understand the issues that can arise. Regardless, never is a simple (or grand) legal mistake a worthy gift to your inheritors. If it is important enough to plan, then it is important enough and even necessary to plan well.

Reference: Forbes (May 13, 2014) “Legal Mistakes That Haunt After Death: Three Cases”

The Keys to the Castle and the Control of the Trust

You can build the greatest and strongest castle in all the land. However, if you leave it to a guard who forgets to lock the gate, then those strong walls won’t do you much good. Trusts work pretty much the same way. Even the most carefully crafted trust is hobbled, counterproductive or even broken by leaving the wrong trustee in charge. How do you make sure you leave the trust in the right hands? Picking a trustee can be a very difficult task. It is not the same as crafting words to paper – ink is cheap in a certain sense – because picking a trustee means picking the right person. You have to read people well and know the right people (or financial institutions) to pick. Financial Planning recently offered a few principals well worth mulling over if you’re in the process of creating a trust in an article titled “Selecting a Trustee? 3 Factors to Consider.” Factors one and two are useful foils: “think twice before naming children” and “consider using a professional.” There are definite trade-offs to read into this because a family member turned trustee is certainly wedded to the project and the well-being of the family. On the other hand, a professional is detached. Of course, a professional is detached for good reason. Depending upon the complexity of the assets in a trust, correctly managing them can require a special skillset. Finally, and regardless who you put in charge, remember that the trust itself can always be built to include a power to remove a trustee. Depending upon whom you choose and who your beneficiaries are, this may be more and more important to strengthen, either to protect the trustee or to ensure that the trustee can be kicked out. Finding a trustee is always a bit of a balancing act, but it is a necessary one. The purpose of the trust itself is to ensure there is a legal device carrying out your wishes, to hold your assets and protect your beneficiaries as you would do so yourself. So when you build the castle, with whom will you leave the keys?

Reference: Financial Planning (May 29, 2014) “Selecting a Trustee? 3 Factors to Consider”

Caring For All Of The Family Members: Pet Trusts

Pets tend to have a firm and well-established role within the family. Sometimes, they have full membership. In the eyes of the law, however, pets enjoy a far lesser standing. This can make planning for the care of your pet difficult after you’re gone. While you can’t leave an “inheritance” to a pet, when including a “pet trust” as part of your estate plan you can provide for their care when you’re not there to provide it yourself. “Pet trusts” have a decidedly less serious ring about them than a “Grantor Retained Annuity Trust.” Legal jargon aside, pet trusts can be plenty useful little devices for a common problem, especially amongst elderly pet lovers. In fact, a recent article in the Millionaire Corner considers a pet trust an estate planning basic. The article, titled “Estate Planning Basics: Creating a Pet Trust,” offers some practical pointers to consider. Pets are family members to some, but to the law they are just another form of property. Nonetheless, this living, breathing “property” sometimes outlives its master and this fact of life is worthy of proper legal attention. What happens when there isn’t a family member or friend to step up and take the animal? What if there is a potential caretaker, but that person simply cannot afford to care for your pet? By establishing a pet trust as part of your estate plan, you can set aside funds exclusively for the care of your pet, the caretaker and your own peace of mind. Setting up a trust doesn’t need to be too difficult, but it does take some preparation and foresight to keep it running efficiently when needed. You’ll want an experience estate planning attorney to create a pet trust as part of your estate plan.

Reference: Millionaire Corner (April 28, 2014) “Estate Planning Basics: Creating a Pet Trust”

Crucial Conversations: The End-of-Life Plan Talk Saginaw, MI

There are certain discussions that are just too important not to have. Unfortunately, these are also often the most difficult conversations to think about. As many planners will know well, talking with your adult children about your end-of-life wishes may be the hardest conversation of all. Back when the kids were kids, it seemed like the “birds and the bees” talk was tricky. However, according to a recent article in The Washington Post, the “aging talk” is far more difficult to grasp. Why is that? Be sure to read (and share) this article titled “Having ‘the other talk’ with your kids — not storks, but aging.” More to the point: what do you have to say? End-of-life planning these days has so much to do with medical and financial planning. You and your loved ones have to understand what health crises may arise, how to handle them or even how to receive the needed care. In fact, nearly 70 percent of people over the age of 65 will need long-term care services late in life. This is itself a financially uncomfortable prospect to think about, let alone discuss. So what is there to think and talk about? The original article has a helpful list of the bare essentials. At this point in life – more than ever – all of your planning is related. How does your end-of-life plan relate to your overall plan for your life, your family, and for your estate?

Reference: The Washington Post (March 29, 2014) “Having ‘the other talk’ with your kids — not storks, but aging”

For more information, see www.jerryreiflawyer.com

Thinking Beyond Your Last Will Saginaw, MI

So, you prepared your Last Will and Testament. However, that does not mean your Will is the final word on the distribution of all of your assets. For instance, your IRA likely will be governed by that common beneficiary form you may have completed without thinking through the consequences. Warning: do not designate your “estate” as the beneficiary of your IRA. This severely limits the distribution (and taxation) options available to your heirs. This matter was explored in a recent article in The Slott Report titled “IRAs and Wills Don’t Mix.” While your “estate” can be the beneficiary of your IRA and your Will thereafter determines the distribution of the retirement funds, this might not be best idea tax-wise. IRAs are very specific and peculiar assets with very specific inheritance rules. If your “estate” is the beneficiary of your IRA, then very “unfavorable” withdrawal rules apply. Instead of the IRA being withdrawn over the life expectancy of the beneficiary (typically younger than the plan owner), the funds must be withdrawn within five years or perhaps over your remaining life expectancy. Yes, this can get rather complicated. Make sure you consult with competent legal counsel when coordinating the distributions from your Last Will and from your IRA.

Reference: The Slott Report (July 29, 2013) “IRAs and Wills Don’t Mix”

For more information, see www.jerryreiflawyer.com

 

Watch Out for State Death Taxes

The federal death tax has all but disappeared from the radar screen of most taxpayers. Why? The fiscal cliff-bridging budget set and made “permanent” the estate tax at a generous $5.25 million exemption amount. Unfortunately, there are still some states with their own death taxes.

Consider Connecticut, a state that enjoyed a bumper year for death taxes. As reported by The Hartford Courant in an article titled “Inheritance Windfall: Record-Breaking Year For Estate Taxes Helps Fuel Budget Surplus,” the tiny Nutmeg State raked in an unprecedented $428 million in inheritance taxes.

A good portion of this windfall is due to budget timing and estate planning, since this figure includes any gift taxes collected in 2012. Remember, that was a year of great gifting before the American Taxpayer Relief Act (ATRA), and Connecticut counts all transfer/inheritance taxes as one and the same. Then again, there were some notable deaths in Greenwich, CT, the richest little town in the U.S.

If you do not reside in one of the states with its own death tax, watch out. As state budgets continue to squeeze, death taxes may become more appealing to your state legislators.

Reference: The Hartford Courant (May 11, 2013) “Inheritance Windfall: Record-Breaking Year For Estate Taxes Helps Fuel Budget Surplus”

For more informtion, see www.jerryreiflawyer.com

 

Appraisals and Gift Taxes

If you are gifting to family this year and want to survive IRS challenges, then contact a professional appraiser promptly for the real worth of those assets! With the $5.12 million lifetime gift exclusion set to expire on December 31, 2012, many families will be looking to make significant wealth transfers this year, especially of family business interests. Accordingly, if your plans involve giving things rather than money, then the IRS will want to know the “value” of the gift itself. That’s why a professional appraisal is essential. A recent article by Reuters, titled Appraisers are your gatekeepers to gift tax deadline, shed more light on why this step is so important for gifting. Don’t let the increasing demand for appraisal services leave you short of getting your gifts assessed! If you want to take advantage of the generous gift tax laws, then there’s no time to waste.

Reference: Reuters (August 8, 2012) “Appraisers are your gatekeepers to gift tax deadline”

The Power of A Will – 351 Years Later

Wills and trusts are actually some pretty powerful devices, not just arcane legal concepts. As you consider formulating your will or using a trust, or as you actually put one to paper and sign it into being, it’s important to remember the unforseen consequences. Consider the case of William Payne. For a recent lesson on the power of, and the potentially powerful problems caused by, far-sighted estate planning, consider this story regarding the dying wish of William Payne. It was 351 years ago, and with only eight days left to live, Bill Payne put to paper his will and the spectacular bequest of some 35 acres of seafront property to the benefit of the schoolchildren of Ipswich, Massachussetts. In his will, Payne specifically ordered that such land ought never be sold or wasted. The years rolled on and a village of summer cottages sprang up, with the rent money going to the public fund for the schools. Then, the years rolled on some more and the present trustees hope to undo the will and convert the property and those homey cottages into condominiums. As you might expect, this has raised the ire of citizens, lawyers, and historians alike. It’s a complicated story, more so than I’ve related here, but there are a few important facts. First and foremost, William Payne put something to paper that lasted 351 years and benefitted generations of people – an entire town and maybe an entire state – and he did so with careful consideration, a plan, and a pen. Second, the more ambitious the plans for an estate or an assets, all the more reason for a carefully considered plan. The future has a funny way of unmaking the past, it seems. Nevertheless, if something is important enough to plan for it, then it’s important enough to consider all the way through. This is true, even when you aren’t looking 351 years in the future.

Reference: Yahoo News (February 24, 2012) “351-year-old will sparks bitter dispute in Mass.”