Salt Lake City Estate Planning

Which States Will Tax Your Estate the Most in 2018?

The big numbers are because many states have linked their state estate taxes to the federal amount. Since the GOP tax bill doubles the base federal estate tax exemption amount to a little over $11 million, indexed for inflation for tax years 2018 through 2025, those states will also increase their thresholds.

Forbes notes in its recent article, “Where Not To Die In 2018,” that along with this news, there are two states that are eliminating estate taxes in 2018: New Jersey and Delaware. New York is set to match the current federal exemption amount—a base of just over $5 million indexed for inflation—in 2019. Massachusetts and Oregon now tie for the lowest estate tax exemptions at $1 million per person.

The federal estate tax is 40% on assets above $11.2 million. This tax affects just 1,800 estates in the US next year. However, many more taxpayers pay state estate taxes. The number of state taxable estate tax returns in the state of Oregon alone was 1,563 in 2015. That state’s exemption is just $1 million.

The amount of money you can leave to your heirs without any state death tax depends on where you live and own property, to whom you’re leaving the money and whether your estate planning is current. The highest rates are about 16%, and for inheritance tax states, the tax can apply to the first dollar of assets, meaning there’s no credit like there is on federal estate taxes.

Seventeen states and Washington, D.C. will impose an estate tax or inheritance tax (Maryland has both) in 2018. Eight of these states and DC are making changes for 2018.

New Jersey has repealed its estate tax, but there’s a separate state inheritance tax that hits non-lineal heirs like siblings, nieces, and nephews. The Garden State now is in the group of other inheritance-tax only states: Nebraska, Iowa, Kentucky, and Pennsylvania.

Minnesota and Maryland have scheduled increases to their exemption amounts, and Connecticut just made scheduled changes to its exemption in its 2018 state budget. Washington and Rhode Island made minor upward adjustments in their exemption amounts, due to inflation indexing.

You should not believe that you don’t need to do estate planning because of these larger exemptions. There are plenty of non-tax reasons to plan, including designating a guardian for your minor children and naming someone to act on your behalf with a financial power of attorney, if you become incapacitated.

Speak with a qualified estate planning attorney to be sure your estate plan is up-to-date and addresses any tax law changes in your state.

Reference: Forbes (December 21, 2017) “Where Not To Die In 2018”

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Here's a New Year’s Resolution You Must Keep

Many of us will set resolutions of general wellness, such as eating more healthily, exercising more or getting out of debt.  However, the most impactful resolution you can make—and keep—for 2018 is completing your estate plan.

Birmingham Business Journal’s recent article, titled “Why an estate plan should be a resolution for 2018,” says that planning for your family’s future once you’re no longer living, or unable to make choices for yourself, will have a serious impact on your entire family.

Once you sign your last will and testament and living will, you immediately eliminate a lot of stress for your family because no one will need to guess about your final health care wishes or where you wanted your assets to go.

As we move into 2018, make the resolution to remove the guess work from these extremely important decisions and plan for your and your family’s future. Preparation now can avoid unnecessary expenses and family squabbles.

When you create an estate plan, you can achieve your long-term goals and preserve your legacy for your children and grandchildren. You can also give to the charity of your choice.

If you don’t have a plan for your estate, the state’s plan may not align with what you would have wanted. If you die without a last will and testament—known as “intestate”—the laws of the state will dictate how your assets will be distributed.

Your estate doesn’t need to be large and taxable to necessitate an estate plan.

Take care of your estate planning, and your family will thank you.

Reference: Birmingham Business Journal (December 14, 2017) “Why an estate plan should be a resolution for 2018”

If you would like to set up your Estate Plan, give our office a call for your free consultation 801.438.7120!

Have You Conducted Your “Dostadning?”

“Death cleaning” is the literal translation of the Swedish word dostadning, which means an uncluttering process that begins as people age. There’s even a new book called “The Gentle Art of Swedish Death Cleaning,” by Margareta Magnusson.

Santa Fe New Mexican’s recent article, “How to ‘death clean’ your finances,” says the focus should be on jettisoning junk. However, most senior’s finances could also use a good death cleaning. Simplifying and organizing our financial lives can make things easier for us while we’re alive and for our family after we’re gone.

This task becomes more pressing when we’re in our 50s. Our financial decision-making abilities generally peak around age 53, researchers say, while rates of cognitive decline and dementia start to increase at age 60. As we get older, we may become more vulnerable to fraud, scams, unethical advisers and bad judgment. Here are some steps you can take:

Consolidate financial accounts. Fewer accounts are easier to watch for suspicious transactions and overlapping investments. You also may save on account fees. See if your employer will let you transfer old 401(k) and IRA accounts into its plan or consolidate them into one IRA. Think about exchanging individual stocks and bonds for professionally managed mutual funds or exchange-traded funds (investigate prior to selling any investments held outside of retirement funds). Move scattered bank accounts into one account, but note that FDIC insurance is generally limited to $250,000 per depositor per institution.

Automate payments. Memory lapses can cause missed payments, late fees, and credit score damage. This can drive up the cost of borrowing and insurance. Set up regular recurring payments in your bank’s bill payment system, have bills charged to a credit card and set up an automatic payment, so the card balance is paid in full each month.

Scale back on credit cards. Keep just two credit cards: one for everyday purchases and another for automatic bill payments. Closing accounts may hurt credit scores, so wait until you’re sure you won’t need to apply for a loan before you start cutting down on the plastic.

Assign a watchdog. Identify the person you want to make decisions for you, if you’re incapacitated. Ask your attorney to create two durable powers of attorney — one for finances and another for health care. You don’t have to designate the same person for both, but name backups if your first choice can’t serve. Consider naming someone younger, because someone your age or older could become impaired at the same time you do. Discuss where your agent can find the information and access.

Your emergency file. Create “in case of emergency” files that your trusted agent or heirs will need. The file can include the following:

• Estate planning documents, such as your will, trust, healthcare directives, powers of attorney, and living will;
• Birth, death and marriage certificates;
• Military records;
• Social Security cards;
• Car titles, property deeds and other ownership documents;
• Insurance policies;
• A list of your financial accounts;
• Contact info for your attorney, CPA, financial adviser, and insurance agent; and
• Photocopies of passports, driver’s licenses, and credit cards.

A safe deposit box isn’t the best spot because your agent may need access outside of bank hours. A fireproof safe or a locked file cabinet may be better, but share the combination or key (or its location) with your trusted person. Scan important papers and retain an encrypted copy in the cloud to help you or someone else recreate your financial life, if the originals are lost or destroyed.

Reference: Santa Fe New Mexican (December 18, 2017) “How to ‘death clean’ your finances”

If you would like more information, please call our office for a FREE consultation 801.438.7120!

Do You Still Need to Make Some Big Decisions?

The Almanac’s recent article, “Five mistakes to avoid when planning your estate,” reminds us that you still have to consider your estate, even after all of your other careful planning. 

You should be certain that your assets will be distributed exactly the way you want, to the people or organizations you want and that the government won’t take any more than is necessary. To help with this task, here are some of the top estate planning mistakes you need to avoid.

No estate plan at all.  You at least need a last will, financial power of attorney and health care directive. These should be updated with any major life event. You might also look at a trust that will govern how your assets will be managed for your beneficiaries. If you have no estate plan, the state will default your assets to your spouse or closest blood relatives. This may not be what you really wanted, and it can be time consuming, costly and result in large tax liabilities.

Not updating beneficiaries or listing contingent beneficiaries. All of your IRAs, 401(k)s, annuities, and life insurance policies should accurately designate the person or persons you want to receive the proceeds.

Investing lifestyle and legacy assets in the same way. There are plenty of retirees who spend well below their means and can live comfortably on a much smaller investment portfolio than what they’ve accumulated. You should consider dividing your investment portfolio into a “lifestyle” portfolio, invested conservatively, with a focus on producing retirement income, and a “legacy” portfolio, invested more aggressively, with a focus on maximizing your retiree’s legacy.

Not reviewing life insurance policies. It’s crucial to review your life insurance policies to be certain the policy is performing as expected, and that it’s going to be there when you need it. Your policies should be up to date, reflect your current needs and the accounts must be properly integrated with your overall financial goals.

Reference: The Almanac (December 26, 2017) “Five mistakes to avoid when planning your estate”

If you would like to get your Estate Plan set up, give our office a call for a FREE consultation, 801.438.7120!

Link Found Between Premature Death and Premature Retirement

The Daily Mail reports in its recent article, "Retiring early could kill you – especially if you're a man,” that US Census figures show a strong correlation between premature death and premature retirement. The analysis was conducted by Cornell University.

The link between premature death and premature retirement is stronger among men. They have a 20% higher mortality risk. They have a 20% higher mortality risk if they start claiming Social Security benefits at 62, which is three years premature. Researchers believe it could be due to workers forced to take early retirement, due to underlying health issues.

However, there’s no data to show that people who retire early die sooner than those who keep working past 65.

The research was conducted by economists Maria Fitzpatrick and Timothy Moore and entailed analysis of birth and death records for the entire US population. This was compared to data on claims for pensions, looking at each claimant's gender and age, and subsequent mortality.

The researchers found that a third of Americans start taking Social Security benefits at 62, which is thought to be early retirement for most employees. For those whose retirement technically started at 62 or earlier, retiring at 62 didn’t have an effect on their health.

 However, the study found that those who retired early at 62, had a significantly higher mortality rate than workers who retired on time.

Fitzpatrick and Moore concluded that early retirement “may have an immediate, negative impact” on health.

This isn’t the first study to find this connection. In 2016, researchers at Oregon State University found that those who work past age 65 could add more years to their life. That group of individuals was 11% in the study. But those termed unhealthy who also worked another year longer had a 9% lower mortality risk.

Reference: Daily Mail (December 19, 2017)”Retiring early could kill you – especially if you're a man”

If you would like more information, please give our office for a free consultation 801.438.7120!

Estate Planning for Your Pets

 

Don’t just say offhand, “Pops, can you take Fluffy, if something happens?” and hope that Fluffy will have a nice long life with dad.

As MarketWatch reports in its recent article, “How to provide for your pet in your estate plan,” many  people do just that: ask a relative and hope for the best. But others set up a formal estate plan for pets to ensure that they get continuing quality care, if their owner dies before they do. Most importantly, a pet estate plan could keep them from the shelter, which happens to many pets after their owners die. These items should be considered when pondering the best future for your pets.

1. Designate a caregiver. When considering a caregiver for your pets, evaluate whether that person is willing, capable and responsible enough to have the pet long-term. In addition, to be safe, name a contingent caregiver.
2. Earmark funds. Pet owners should list all their pet-care costs, and consider the pet’s expected lifespan. One pet owner added up the annual expenses for veterinary care for her two dogs, as well as their medications, monthly grooming, food, toys and a contingency for unanticipated expenses. She multiplied the annual total by what she thought to be the average life expectancy for the dogs and arrived at a budget of $25,000 for lifetime care. Determine how the funds should be set aside. You could create a trust, a bank account controlled by an executor (or by the guardian) or life insurance. Note that the beneficiary of a life-insurance policy can’t be a pet, but it can be a trust that includes provisions for a pet’s care or a trust specifically created for the benefit of the pet.
3. Draft a care plan. Set out clear, detailed instructions on how to care for your pet. That will make it easier for future caregivers to comply with your wishes. Your list may include the food your pet eats, how often he’s fed and his veterinarian.
4. Formalize your agreement. After you have made the basic decisions about your pet’s care, legally document them to help ensure that your wishes are executed. In fact, you can create a pet trust. This legal arrangement is available in all 50 states, but the specifics can vary. A pet trust can stipulate very specific directions for the care and funding of such care for your pet, after you pass away. Talk to an experienced estate planning attorney about creating this arrangement. You can also provide for your pets in your will. If you go this route, make sure that someone can step in immediately to care for your pet, because executing a will takes time. After the administration of an estate is completed, the will’s executor doesn’t have any continuing obligation to ensure the pet’s well-being.

Formalizing and funding a plan are critical, if you want to be certain that your wishes will be executed and that your beloved pet will have a comfortable life, if you die before your pet.

Reference: MarketWatch (November 30, 2017) “How to provide for your pet in your estate plan”

If you would like more information, give our office a call for a free consultation 801.438.7120!

Do I Need a Will and a Living Trust?

The Washington Post answered a question in a recent article, “How a will and living trust will affect your survivors’ ability to sell your home when you’re gone,” about whether you need a living trust if you already have a will.

Assume that a husband and wife are both retired and hold the house as joint tenants with rights of survivorship. If they’d like to eventually downsize, they don’t want a trust to interfere with their ability to sell the home.

It’s good to have a will in place. Why? Because when the couple owns their home in joint tenancy with rights of survivorship, no probate is required when one spouse dies. The other continues to own the home through the rights of survivorship. However, when that surviving spouse dies, then the will kicks in and probate is required.

Depending on the size of a couple’s estate, using the will to go through probate can be expensive. After the surviving spouse dies, the executor of that will would go to court and be recognized by the court as the representative of the estate. He or she would then be able to sell the home and other assets as needed. The executor of the estate would then present an accounting to the court of all distributions made by the executor to close the estate.

To avoid probate, many people place their properties in a living trust. With this approach, you would transfer the title of your real estate and other property to the trust. Upon the death of the owner of the trust, a successor trustee is appointed, avoiding probate.

A power of attorney is also a useful tool to take care of financial matters, should one or the other spouse become incapacitated. Powers of attorney for financial matters can save  stress and headaches.

Reference: Washington Post (September 18, 2017) “How a will and living trust will affect your survivors’ ability to sell your home when you’re gone”

If you would like help getting your Estate Plan set up, give our office a call for a free consultation, 801.438.7120!

Bobby Brown Sues to Stop 'Bobbi Kristina' TV Movie

Bobby Brown filed a lawsuit claiming that the film titled “Bobbi Kristina”—which will soon air on cable—falsely paints him as a neglectful father.

The New York Post reported in its recent article, “Bobbi Kristina estate joins Bobby Brown in $2M suit over biopic,” that Brown claims he hasn’t seen the script, despite his requests.

“The movie contains defamatory scenes about the life of Bobbi Kristina Brown” and also “contains defamatory and untrue depictions of Robert Brown being violent towards Whitney Houston … and [there are] scenes suggesting that Robert Brown does not love his daughter or is [not] committed to Bobbi Kristina Brown,” the amended lawsuit states.

Twenty-two-year-old Bobbi Kristina was found by her husband, Nick Gordon, unconscious in a bathtub in Georgia in July 2015. She lapsed into a coma and was declared brain dead a few months later.

Bobby Brown also claims that he’s sold the rights to a movie about his life to BET, and the TV One film jeopardizes that project. Brown was suing for $1 million, but then amended his claim for $2 million.

Brown is portrayed in the movie as a “hard drug user”, who neglects his fatherly duties after Houston’s 2012 death—in which she was also found unconscious in a bathtub.

Gordon wasn’t criminally charged in Bobbi Kristina’s death, but in 2016 he was found legally responsible by a Georgia civil judge. He was hit with a $36 million judgment, after Brown filed a wrongful death suit against him.

Brown alleges that the producers of the TV One project unfairly took advantage of their previous work with Brown to make the movie. They used footage from a 2004 TV reality show, “Being Bobby Brown,” without his consent, his complaint states. However, TV One says it is standing by the film and its representation of this period in Bobbi Kristina’s life. Its producers have already begun promoting the film.

Reference: New York Post (September 12, 2017) “Bobbi Kristina estate joins Bobby Brown in $2M suit over bio

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Be Honest with Your Doctor and Your Heirs

 

Vanguard advised in a recent article, “The final keys to successful wealth transfer,” that you should communicate honestly with your health care provider for the sake of maintaining your health, and you have to speak honestly with your heirs to preserve your wealth.

It’s hard for many of us to easily disclose personal details about our finances. That’s because money can represent a variety of complex feelings and concepts, like security, control, comfort, selfishness and power. However, it’s imperative to have this important conversation.

You can start by relaying stories about your successes and losses (financial and otherwise). That way, your heirs can learn from your experiences. In addition, even if you detail specific conditions regarding when and how heirs can use their inheritance, you should look at the wealth transfer process with trust and an open mind. You should educate your heirs to make smart financial decisions after you’re gone, by showing them materials to prepare them for the future now.

Have the talk with your heirs when it’s right. If information about a future inheritance might distract them from making wise decisions about their future, you don’t have to disclose specific dollar amounts. Every family is unique, so there’s no one-size-fits-all solution to the question of when you should have “the talk.”

You should also use the counsel of an experienced estate planning attorney who doesn’t have a stake in your legacy and can facilitate the wealth transfer discussion. That will take some pressure off and ensure that all topics are discussed.

A final key to a successful wealth transfer is philanthropy. All family members should be able to participate in the giving process. Finding a charity that matches up well with your family’s values can help your heirs learn how to make decisions, motivate others and develop confidence. These are attributes that will help them be respected stewards of your wealth, when the time arrives.

In summary, to enjoy a successful wealth transfer: (i) identify what’s important to you and your family; (ii) communicate honestly; (iii) stay organized; (iv) get your heirs prepared; and (v) explore philanthropy.

Reference: Vanguard (September 26, 2017) “The final keys to successful wealth transfer”

If you would like more information, give our office a call for a free consultation, 801.438.7120!

Here's How to Leave a Legacy

The Northwest Herald’s recent article, “4 Ways of Leaving a Legacy” says that after toiling hard for many years in a career to accumulate wealth, you want to make certain that, at your death, your assets are properly distributed.

You need to have a Will. It’s essential. Even if you have other estate planning strategies and documents, a Will lets you direct specific assets to a particular person or to make a general bequest. A Will names an executor to settle the estate, a guardian for minor children and instructions to distribute property, according to your instructions.

A Trust is an option preferred by many experienced estate planning professionals. You should work with a veteran trust lawyer to create one. A Revocable Living Trust is flexible and can be changed at any time. It can protect your property, if you become incapacitated. An Irrevocable Trust can’t be modified. However, it can reduce estate taxes and offer protection from potential creditors. The key advantage of using a trust is that it avoids probate and eliminates the need for a financial guardian in the event of physical or mental incapacity.

A Beneficiary Designation is important for contractual-type property, like life insurance policies, annuities and retirement accounts. You need to make sure that you have updated primary and contingent beneficiaries. Re-evaluate your choices regularly, as circumstances change and life events occur. Beneficiaries can only be changed by signing a new beneficiary designation form. Your will or trust have no impact on them.

Joint Ownership arrangements transfer property to the co-owner, in the event of the other owner’s death. This is common with the family home and it’s appropriate for some types of property. Speak with your attorney about how to use this approach.

Although leaving a legacy can be complex, consult with a qualified estate planning attorney to guide you in the right direction.

Reference: Northwest Herald (November 28, 2017) “4 Ways of Leaving a Legacy”

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