Salt Lake City Estate Planning

Get That Estate Plan Completed Today!

Your estate plan will instruct how your assets are distributed when you pass away.

If you don’t have an estate plan, then you still sort of have one. However, it’s the one everyone else who doesn’t take the time to do it right has: it’s written into the intestacy laws of the state. These may not be in the same as your wishes, but death will trigger a transfer of assets—regardless of whether it is professionally planned or not, and regardless of what your wishes may have been.

A recent article, “Why Continuous Estate Planning Is Essential For The Rich And Super-Rich,” from Forbes reminds us that estate plans should be updated regularly to address changes. These could be changes in our lives or changes in tax and estate laws. New laws and regulations can bring with them obstacles and opportunities.

The larger your estate, especially for the rich and super-rich, the more important it is to stay current. Those with complex business structures and international investments are always going to be required to adjust their financial and estate plans more often than those with smaller, simpler assets.

The more investments you have, the more important it is to be on top of the situation to be certain that your wishes are carried out at death.

Updating estate plans for everyone is a wise move. However, many fail to stay current. About 90% of highly accomplished business owners have estate plans that are more than five years old. These people are ignoring ways to maximize their wealth, but more importantly, they may also be setting up their wealth to be distributed in a manner that doesn't reflect their current wishes.

The statistics are similar for many of the super-rich. They, too, have outdated plans. Research shows that the estate plans for the exceptionally wealthy families are also more than five years old.

An estate plan that’s more than a few years old should be reviewed and adjusted as needed, with the help of a qualified and experienced estate planning attorney.

This potentially severe mistake of failing to ensure that estate plans are current is a mistake that is easy to fix, if you act rather than wait until it’s too late.

Reference: Forbes (September 6, 2017) “Why Continuous Estate Planning Is Essential For The Rich And Super-Rich”

Call our office to get your free Estate Planning Consulting done, 801-438-7120!

What if You’re “Suddenly Single”?

Death or divorce are two of the top five financial challenges women face, according to a report by Key Private Bank. Right next to these on the list were estate planning, investment decisions and legacy planning, according to a story from CNBC, “How to prepare for being 'suddenly single.'”

Although traditional gender roles are changing, experts say that many couples still adhere to them. Men typically oversee the finances. But the average age of widowhood is 59, according to the U.S. Census Bureau. Many women live another decade or longer after their husband's death. Women may have a passive role in money and investing and hardly ever talk about money or investing. They don’t discuss these topics with their friends or co-workers and perhaps not even with their spouse. Just 3% of married female clients lead wealth conversations, according to Key Private Bank's advisor poll.

A “Lifebook” can help women successfully take control of their finances. This book is a collection of important documents and data, such as a balance sheet, an investment summary and a will. It should also include contact information for attorneys, financial advisors, bankers, insurance agencies and accountants. Many of the professionals surveyed—about 80%—said very few of their married female clients have these types of plans in place, in case they are suddenly single, according to Key Private Bank. This is even though there are often critical financial decisions that must be made immediately after the death of a spouse.

It’s important to have a strategy because navigating finances after the death of or divorce from a spouse can be confusing. The top three steps married women should take are the following:

1.       Identifying and documenting sources of income;

2.       Meeting with a financial advisor; and

3.       Determining the financial decisions that must be made immediately.

Those who’ve lost a spouse and those divorcing may also find themselves with less money for their budget. Considering this, you should also identify expenses in your discretionary pool, like vacations, memberships, and services that can be stopped immediately to reinstate your cash flow. If you are not aware that those are discretionary activities, you could drain your emergency fund in a hurry.

Reference: CNBC (September 5, 2017) “How to prepare for being 'suddenly single'”

If you want help getting your Estate Plan set up give our office a call for a free consult, 801-438-7120!

Do I Need a Trust Instead of a Will?

WealthAdvisor’s recent article asks, “Do Living Trusts Save Money Or Just Heartache?” The article explains that many “living trust” seminars stress that you can use living trusts to save on probate costs, estate taxes and much more. After one of these professional presentations, you may wonder why everyone doesn’t have a living trust, instead of a will.

Watch for seminars that are put on by people who aren’t lawyers.  You should also remember that there’s no one right answer that works for everyone. Consult with an experienced estate planning attorney to see if a trust fits into your estate plan.

In reality, a living trust may be able to avoid probate costs in some situations.  However, probate costs include the costs of internment, medical bills, costs relating to your death, costs of a service attending your death, any income or estate taxes due and legal fees for the settlement of your estate. Some seminars advertise that you can save on all these by using a living trust.  However, the only thing that could be mitigated by having a living trust instead of a will, is the legal fee in settling your estate. 

When you die, particularly when it’s the second death between spouses, liquid assets are placed into an account called an estate account. Your attorney’s office usually will set up an account for you, so your personal representatives can access these funds, when needed. But with a living trust, the individual you name as your trustee would need to do these same things, so they would eliminate some of the legal fees.

It’s very important to know in advance if your trustee is okay with all of these duties that are normally handled by an attorney. One way to find out is to get a sample document from the attorney of the living trust in its entirety. You should be prepared, because it is a long document. Ask your trustee to take some time to look through this document. If he or she has more questions than answers, it’s a red flag. If you can’t answer those questions, you’ll need to tell your trustee to speak to the attorney who drafted the document and see if he or she can explain all the duties of the trustee.

If your potential trustee still doesn’t understand his or her duties or feels uncomfortable handling these tasks, you may want to opt for another trustee or just go with a will.  However, if your trustee is fairly competent at reading this document, understands their duties and doesn’t have any issues, then this could save some money for your estate.

In most cases, the smart money is to find a qualified estate planning attorney who will review your entire situation and prepare all of the documents legally and to your specific needs and desires.

Reference: WealthAdvisor (September 18, 2017) “Do Living Trusts Save Money or Just Heartache?”

Update Your Outdated Beneficiary Designations

 

 

It’s easy to overlook this important detail.  However, an outdated beneficiary designation can completely wreck your intentions.

As Wilmington Business Insights notes in its recent article, “Incorrect Beneficiary Designations Can Undermine Estate Planning,” experienced attorneys tailor estate plans to make sure the individual’s assets are disposed of exactly as they wish.

 It is common, however, for folks to gum up the works by inadvertently changing or neglecting to change a beneficiary designation. A simple mistake can wipe out the whole purpose of the estate plan.

For example, many people believe that putting someone else’s name on an account can give them needed access to help pay bills and balance the checkbook, but don’t realize this change could remove that account from the estate. Rather than being distributed pursuant to the person’s will, that money could instead become the property of the relative whose name was on the account. This is true for a bank account, investment account or insurance policy. People frequently designate beneficiaries and then forget about it. For example, divorced persons often fail to remove their ex-spouses as beneficiaries. 

It’s smart to review beneficiary designations regularly to ensure that everything is up to date. Any important life event, like a birth, marriage, or divorce, should precipitate a review of all beneficiary designations to be certain they’re still what the owner intends. Remember: regardless of what’s written into a will or trust, it will be superseded by whatever beneficiary designations are on file.

Some types of assets or accounts receive special treatment, if the spouse is named beneficiary. These include ERISA retirement accounts like 401(k) plans and profit-sharing plans. Therefore, if the marriage is sound, and there’s no other reason not to do so, it’s a good idea to name the spouse as the primary beneficiary.

A word about contingent beneficiaries: in the event the persons you name do not survive you, designate who would be next in line to avoid any guesswork or uncertainty. If any of your beneficiaries are minors, you should be sure to specify who will be handling the money for them.

Reference: Wilmington Business Insights (September 1, 2017) “Incorrect Beneficiary Designations Can Undermine Estate Planning”

More Good Reasons to Review Your Estate Plan

It’s not that tough for your estate plan to easily outdate itself. Given the changing tax laws, regulations, and situations in life, estate plans should be looked at as fluid documents, not as unchanging set-in-concrete plans.

AZ Big Media’s recent article, “Here are 8 reasons to revisit your estate plan,” provides some common reasons to make this important review:

Changes in Tax Laws. One needs only look back to 2001, when Congress passed broad tax legislation that started a dramatic shift in estate planning. Are you one of those whose estate plan was created before these changes were enacted? Without a review by a qualified estate planning attorney, you may be facing higher exemption amounts that may unintentionally impact married couples relying on traditional marital-non-marital trusts.

Changes in Marital Laws. Since 2013, federal law has recognized same-sex marriage. In 2015, the recognition of same-sex marriage became mandatory in all 50 states, which means potential new planning opportunities for these couples.

Different Family Dynamics. There are going to be marriages, divorces, new children and grandchildren, as well as family members passing away or adding responsibility for an individual with special needs. Any change in circumstances should trigger a review of your estate plan—especially when a person needs to be removed from a plan because of death or divorce.

Moving Out-of-State. Moving can affect tax rates, tax types, probate laws and even the availability of certain types of trust. Some states are also community property states. There has also been the expansion of decanting, which is the amending of an irrevocable trust by pouring it into a new trust document, which should necessitate a review of these issues.

Beneficiary Designations Need a Review. Beneficiary designations must be reviewed periodically to  ensure that they are consistent with the overall estate plan.

The Up-to-Date Financial Picture. Your investment portfolio is dynamic and changes over time. For instance, the addition of real estate or a business to a portfolio requires being sure that a trustee, durable power of attorney, or a personal representative knows and is authorized to carry out the wishes regarding succession or sale.

Changes in Views on Charitable Giving. Perhaps you want to add a charitable gift or a new cause to the plan. You should do this and make sure that all charitable beneficiaries are properly identified.

Review your estate plan to make sure it meets your current wishes, is properly funded, the assets are properly titled and any necessary changes have been made. An updated estate plan is the best way to be sure that your wishes are clearly stated and executed when the time comes.

Reference: AZ Big Media (September 1, 2017) “Here are 8 reasons to revisit your estate plan”

If you need help updating your estate plan, give our office a call for a free consultation, 801-438-7120!

Fact Checking Death Tax Impact on Farmers

 

President Trump recently said he’d get rid of the federal estate tax, calling it a "tremendous burden" on family farmers.

“We’ll also protect small businesses and family farmers here in North Dakota and across the country by ending the death tax,” Trump said.

“Tremendous burden for the family farmer, tremendous burden. We are not going to allow the death tax or the inheritance tax or the whatever-you-want-to-call-it to crush the American Dream,” Trump is quoted saying in a recent article in The Washington Post, “Trump called the estate tax a ‘tremendous burden’ on family farmers. Here’s the truth.”

According to the U.S. Department of Agriculture, just 0.4% or 153 farms out of 38,328 farm estates, paid any estate tax in 2016. If that is rounded to the nearest whole percent, it is zero. Under the estate tax, estates valued below $5.45 million don't pay any estate tax or even need to file an estate tax return.

Most estates above the threshold don't actually end up paying any estate taxes. The USDA says that 1.7% of farm estates were valued at more than $5.45 million, so they had to file an estate tax return.

However, there are write-offs and other strategies like alternative land valuation methods, which result in less than a quarter of the estates that filed for the estate tax paying anything.

However, for a few small farms, the estate tax can create hardship. In 2016, the typical small family farm subject to the estate tax had to pay 11% of the value of the farm estate, or about $600,000. That’s like getting a tax bill that's double your annual income.

These extreme cases drive opposition to the estate tax.  A total of 48% of Americans responded that they'd like it to be repealed, according to a May 2017 Quinnipiac poll. However, these cases aren’t typical. In 2016, estate taxes on all farm estates brought in roughly $344 million in revenue, according to the USDA. That $344 million amounts to less than 2% of total annual estate tax revenue, estimated to be about $20 billion.

Therefore, exempting farm assets from the estate tax would have little impact on the Treasury Department's financial outlook—a bit more complicated an argument to make than just “end the death tax.” It is not something that’s likely to appeal to wealthy political donors, who aren’t farmers.

Reference: The Washington Post (September 7, 2017) “Trump called the estate tax a ‘tremendous burden’ on family farmers. Here’s the truth”

Call our office for a free consultation, 801-438-7120!

 

A Lesson on Estate Planning from the Delaware Supreme Court

The Delaware Supreme Court recently decided a case that stresses the importance of carefully reviewing your estate planning documents every year to be certain that the documents are still accurate and do not inadvertently allow your testamentary plans to be changed.

The Delaware Supreme Court’s August 2017 decision in the case, “In the Matter of the Estate of Edward J. Burke,” ruled that the decedent should have made better plans to ensure that his wishes were effected upon his death.

Edward named his wife of then 13 years, Mildred, as his Power of Attorney on March 17, 1998. On the same date, he executed his will. In the will, he left his Virginia property to the Trustee of the Trust that was created in his will. Edward instructed the Trustee to let his daughter live on the property for three years and then sell it. The proceeds from the sale were to go to Mildred for life and after her death, the remaining sum was to be distributed to his four children. Edward left the residue of his estate to Mildred.

However, in 2012, Edward sold the Virginia property for $150,000 and deposited the proceeds into a separate and new bank account in just his name. His son Kevin said that Edward had repeatedly told his children these funds were being held for them in accordance with the 1998 will. Testimony was given to show that Edward had repeatedly denied Mildred’s request to gain access to this account, because he wanted the funds to go to his children.

Edward became sick and Mildred added her name as a joint owner to the account, using the Durable Power of Attorney, which Kevin said was done without Edward’s knowledge or consent. Edward died in 2013, and was survived by Mildred and his four children from his first marriage, including Kevin.

There was nothing left in Edward’s name alone when he died, so Mildred didn’t probate his estate and—because she retitled Edward’s account (which held the proceeds from the sale of the Virginia property)—the Virginia sale proceeds passed to Mildred.

Kevin sued Mildred, claiming that Edward had purposefully divided the proceeds from the sale of the Virginia property with the desire to preserve the funds for his children. Mildred responded that Edward changed his testamentary plan when he sold the Virginia property under the doctrine of ademption. That means the failure of a bequest from a will, because the property is no longer in the estate.

The Court also held that even if Edward hadn’t known about or approved of Mildred’s adding herself to the account, and even if the Court held that Mildred had to return the money from the account to the estate, the money would have still flowed under the Will into the residuary clause and ended up in Mildred’s hands anyway, because she was the sole remainder beneficiary.

The Court quoted the Hobson decision that held that “in Delaware the rule of ademption is not dependent on the apparent intention of the testator. In fact, the application of the rule may, in many instances, defeat the intention of the testator.”

So, even if Kevin could have shown that his father intended to leave this money to his children, it wouldn’t have been enough for the children to inherit the sales proceeds because Edward’s Durable Personal Power of Attorney was broad enough to let Mildred to retitle the funds jointly, thereby defeating Edward’s intent. In addition, Edward didn’t change his will after the sale of the Virginia property. Since his wife was the residuary beneficiary, the money from the sale would have flowed through to the residue to her, not to the children.

If Edward wanted this money to go to his children, he should have modified his will after the sale of the Virginia property and left the proceeds from the sale to his children. He should have also revised his Durable Power of Attorney to stop Mildred’s right to add her name to this account.

As you can see from this case, a Durable Power of Attorney is a powerful document. With this document, it’s possible to totally change a person’s testamentary strategy.

This case presents a very good reason for why it is very important to review estate planning documents annually to be sure they still work for you and your family.

Reference: Delaware Supreme Court (August 24, 2017) “In the Matter of the Estate of Edward J. Burke”

If you need help planning your Estate, please give our office a call for a free consultation, 801-438-7120!

Guardians for Minor Children a Must in Estate Planning

Estate planning is a part of good parenting.  It means trying to make things a bit easier on the family we leave behind. Those of us with any accumulated assets or minor children really must do some estate planning.

The more complicated your life, the more involved your planning needs to be.

A caring.com survey found that just 42% of adults currently have estate planning documents, including a will or living trust. For those with children under 18 living at home, that number is an astonishing 36% with an end-of-life plan in place.

Parents do their best to keep their children from harm.  However, as the numbers show, many don’t do the same when it comes to keeping them safe, if the parents should die. At a minimum, a parent should have a will that designates guardians for minor children in the event something happens to both parents. Without a will, there will be a messy situation for the individual appointed by the court.

If there’s life insurance involved with a decent amount of money, even your no-good, irresponsible younger brother will gladly offer to take the kids.

It’s convenient to delay estate planning when you’re unsure who to name as guardian for the kids and, if we don’t talk about dying, maybe it won’t happen!

Unfortunately, no one gets out of this life alive, so the smart move is to make these important plans now. Life can be complex, and it gets even more complicated when you throw in blended families. That can make the decision as to who will rear your minor children a lot tougher.

A wise choice for the guardian may be an adult brother or sister, a close cousin, or your best friend who lives nearby. However, these may not be options in every case. Grandparents might seem like a good selection, but because of their age they may be too old to rear young children.  However, if they’re fairly young, don’t rule them out. Speak with those members of your family and your friends about the possibility of caring for your kids.

Life will go on, if nothing happens to you soon. However, estate planning on your part now can make things a lot easier for those you leave behind, if something should happen to you.

Reference: CBS Boston (August 24, 2017) “Catastrophe Planning: Where There’s A Will There’s A Way!”

If you need help with your Estate Plan, please call our office for a free consultation, 801-438-7120!

Most Wealthy People Are Over 80

Six of the 25 richest Americans are over 80, says the Bloomberg Billionaires Index. Bloomberg’s recent article, “Octogenarians Rule the Rich,” says new IRS data shows the age of the top millionaires and billionaires in the U.S. People over 80 years of age make up only 3.7% of the population, but the IRS estimates that they control a larger share of the nation's top fortunes than people under 50.

The wealthy have most likely always been older than the general population, because it typically takes some time to amass great wealth. Facebook’s Mark Zuckerberg, the world's fifth-richest person at age 33, is the exception to the rule.

The IRS regularly analyzes the wealth of the richest Americans in its Personal Wealth Study. This research looks at those potentially subject to the estate tax, which is imposed on individual fortunes of $5.5 million or more. The most recent study estimated personal wealth in 2013. It found that 584,000 Americans, or about 0.2% of the U.S. population, have a combined net worth of $6.9 trillion. People in their 80s and 90s control $1.2 trillion of that wealth. Adults under 50 (about 43% of the population), have only $1 trillion.

Research from the University of California-Berkeley found that the share of U.S. wealth held by the top 0.1% has more than tripled from 1978 to 2012. That’s an increase of 7% to 22%.

Wealthy people in their 80s have the highest average net worth of any age bracket in the U.S.  These richest Americans may be far wealthier than the IRS estimates. This is because wealth managers and estate planning attorneys use strategies like trusts to help the rich pass money to their heirs tax-free before they die.

The IRS research provides a unique insight into the portfolios of the wealthiest Americans. For example, the richest Americans invest heavily in businesses and non-public stock. Their personal residences also make up a small part of their wealth—just a little more than their art collections.

One reason why so many wealthy people are living and prospering into their 80s and 90s is that they're staying much healthier than other Americans. The wealthiest men are outliving poorer Americans by a widening margin. As recently as the early 1980s, the death rates of the rich and the general population were about the same. At ages 65 to 79, men in the top 1% were 12% less likely to die than the average American man in any year in that range. In the most recent estimates, the richest men in that age range had mortality rates 40% lower than average.

Reference: Bloomberg (August 23, 2017) “Octogenarians Rule the Rich”

If you want helping learning how to plan for your future, please give our office a call for a free consultation 801-438-7120!

What to Do With Your Money before a Baby Arrives

The Business Insider’s recent article, “The first 3 things to do with your money before you have a baby are easy to overlook,” discusses the most important things to do with your money, when you're preparing to have a baby.

1. Understand your health insurance. Pregnancy and birth are major medical events and result in big bills. With a high-deductible compared to a more traditional group plan, there could be a wide range in your share versus what the insurance company covers.
2. Access to cash. You need liquidity, and should plan on keeping 12 months of anticipated spending in a checking, savings, or money market account you can access easily, without unnecessary risk.
3. Guardianship. There are some other things that many expectant parents fail to think about with kids. This includes insurance, wills, and guardianships. New flash: you're now responsible for someone other than yourself! If something unfortunate were to happen to you, you now have the added responsibility providing for the care of your children.
4. Estate Planning. It’s common for those without significant assets to overlook their will and estate planning. This includes establishing who will raise your child should something happen to you and your spouse and how that care will be paid for. People forget about the guardianship of their children.

Guardianship is now an important part of your total estate plan. Talk with an experienced estate planning attorney and be certain that all the right pieces are in pace for your family’s sake.

Reference: Business Insider (August 22, 2017) “The first 3 things to do with your money before you have a baby are easy to overlook”

If you want help figuring out the best plan for your family, contact our office for a free consultation, 801-438-7120!