Salt Lake City Estate Planning

What “Getting Your Affairs in Order” Really Means

 

Part of estate planning is making the situation after your death as palatable as possible for those dealing with your estate. You should consult with an experienced estate planning attorney today: you don’t know what lies ahead.

A recent article in The (Prescott) Daily Courier asks “I’m dead. Now what?” The article advises you to act now and get your affairs in order, just to be safe. Take a look at a few of the things you’ll need to get started.

Collect all of your important papers in one place and tell someone where they are, preferably a trusted family member. These might include things such as:

• Your Social Security card, living will, military records and other legal documents;
• Contact information for your estate planning attorney, accountant, banks, investment firms and life insurance company;
• Bank account info, safe deposit box key, vehicle titles, the deed to the house and last year’s tax return. You may want to avoid probate by adding another person to titles and property—ask your attorney how to do this correctly;
• Monthly bills, property tax bills, credit card companies, passwords for online billing, as well as passwords for PCs and electronic devices.

Go through your home with family members and/or friends and inventory the items they would want to receive after your death. Put your list with your important papers.

Part of your planning must include taking steps for incapacitation. Give permission in advance through a durable power of attorney for health care and a regular durable power of attorney to someone you trust. Without your authority, your caregiver won’t be able to access information, consult with your doctor or pay your bills. An advance directive is used when you get sick. If you know what kind of care you want or don’t want, draft a living will so that your family won’t have to make the difficult decision to take you off life support. You will have made that decision in this document long before the situation arises. A durable power of attorney for health care gives your designated agent the power to make medical decisions for you, if you are unable to do so.

Make your own funeral and burial arrangements, to alleviate the burden on your family and to be certain that your wishes will be followed after death. Pre-pay your burial and funeral expenses to lock in today’s cost.

Talk to a knowledgeable estate planning attorney about setting up your will, and other important documents in estate planning.

Reference: The (Prescott) Daily Courier (January 11, 2018) “I’m dead. Now what?”

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Court Decision Cautions Against Net Gifting

Even with a solid estate plan, fluctuating family relationships or unexpected illness or death can hamper an estate plan and result in undesirable transfer tax consequences, reports BNA Bloomberg in its recent article “Net Gifts: When Estate Planning Goes Wrong.”

In Estate of Sommers, the decedent made lifetime gifts to his three nieces by transferring artwork to an LLC and then membership interests to the nieces over a two-year period to take advantage of valuation discounts and annual exclusion amounts. The nieces signed an agreement stating that they’d be responsible for any gift taxes on the gifts of membership interests (otherwise known as a net gift).  The decedent then remarried his ex-wife and died five months later.

Before his death, the decedent started a lawsuit against his nieces arguing that the gifts were not completed gifts. After the court held that the decedent made completed gifts, the nieces paid the gift tax liability of $274,000. Because he gifted the membership interests within three years of his death, both the value of the membership interests and the $274,000 gift tax payment was included in the value of the decedent’s gross estate. But the executor of the decedent’s estate, the surviving spouse, claimed that the gift tax payment was deductible.

The court held that the gift tax payment wasn’t deductible because “an estate is entitled to deduct a claim under §2053(a)(3) only to the extent that the amount owed exceeds any right to reimbursement to which payment of the claim would give rise.” The court found that the estate would have had an enforceable right to reimbursement from the nieces, if they hadn’t paid the gift tax. The court found that the nieces served only as conduits, and the decedent was the ultimate gift tax payer. If not for the three-year claw back, the decedent would’ve withdrawn from his potential estate, the value of the taxable gifts and the amount of tax on the gifts. The gross-up rule is necessary to prevent such excess value (the gift tax on the net gift) from escaping, and, therefore, the decedent’s estate from circumventing, the transfer tax system.

Net gifting can be a very valuable and effective estate planning tool, if done correctly. Talk with your estate planning attorney to understand the potential for risks involved in making net gifts.

Reference: BNA Bloomberg (September 14, 2017) “Net Gifts: When Estate Planning Goes Wrong”

If you need help establishing your Estate Plan, 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!

Retirement Planning Takes More Than Guesswork

Even if you’ve saved, invested and paid down debts, if you’re using traditional strategies, you still might find yourself coming up short in retirement.

Kiplinger’s recent article, “1 Critical Mistake to Avoid When You Retire,” explains that preparing for your financial future means thinking about things that aren’t always within your control. While it’s not that difficult to choose your target retirement date or to budget what you’ll need for monthly income, projecting portfolio returns, life expectancy, taxes, inflation and health care needs requires some strategic guesswork. The thing that creates the most problems is the assumed average rate of return on your investments.

Some financial plans will create a false picture in relying on average rates of return. A solid plan needs to take into account market volatility. Your retirement strategy is most sensitive to market swings during the five years before and after your target retirement date. That’s because your savings are at their height and most susceptible to a market correction. If you take on losses near your target retirement date, it can have significant consequences. Even though people are aware of this fact, they will still rely on “age-appropriate” mixes of stocks and bonds to attempt to mitigate this risk.  However, this solution, which is designed to deliver an average target rate of return over time, may not be effective if the market doesn’t follow your projection and delivers an actual negative return when timing is crucial.

Market volatility can be a consequence based almost exclusively on timing. If you’re working, a market drop can be an issue, but you don’t need that money immediately. You have the time to ride it out, and your contributions will help your recovery. But when you’re close to or in retirement, it’s different. A market drop directly impacts your primary sources of income, and you’re not adding to those accounts. You’re using them to pay for living expenses.

A wise retirement plan needs to be designed to withstand volatility and to provide desired income when needed, regardless of market conditions. Mitigating this volatility risk is a must to keep your plan on track and on time.

There’s no need to exit the market entirely, but you should consider allocating some of your portfolio to assets that are linked less to the market, like bonds.

Look at the potential impact that a market reversal may have on your plan, and determine the rate of return your portfolio needs to provide sustainable income during retirement. That’ll help you see how much risk exposure is necessary to achieve that goal.

Reference: Kiplinger (August 2017) “1 Critical Mistake to Avoid When You Retire”

If you want help preparing for retirement, give our office a call for a Free Consultation, 801-438-7120 

Georgia Supreme Court Opines on Revocation of Former Will

The Georgia Supreme Court recently heard an appeal of a battle between the daughter and sister of decedent Edison Milbourne ("Edison"). In Milbourne v. Milbourne, the daughter, Janay, asked the court to invalidate Edison's January 2013 will, because he revoked it and because it had been improperly executed.

Edison had a work-related brain injury, so he couldn’t care for himself. He lived in rehabilitation facilities and his sister Vashti was appointed as guardian in 2009. This was about 10 years after his brain injury and a month after his $726,000 workers' compensation settlement was finalized. He didn’t have a will when his sister became his guardian, but said he wanted one thereafter. After Edison's conservator refused to write the will, an attorney hired by Vashti wrote a will. However, nine months later, he executed a second will.

After his death in 2014, Vashti submitted the October will to probate. Janay opposed this, claiming that the October will was procured through undue influence. A jury denied probate of the October will and said that Edison failed to properly execute the document.

The fight was because of the different terms in the two wills. The January will gave most of Edison's property to Vashti, except for gifts of $50,000 to his daughter and niece, Tiffany (Vashti's daughter). The January will stated that if Vashti predeceased Edison, Janay would take Vashti's place as devisee. The October will gave all of Edison's property to Vashti. If Vashti predeceased Edison, Tiffany would take Vashti's place as devisee.

After the jury verdict on the October will, Tiffany petitioned to probate the January will, but again opposed this, arguing a lack of testamentary capacity, fraud, undue influence and revocation barred probate. Vashti joined Tiffany's petition to probate the January will and filed a motion for summary judgment, arguing that Janay's contention was without merit, and that they were entitled to probate the January will. The probate judge called for a hearing on the issue.

Janay argued that the probate court erred in concluding that Edison didn’t revoke the January will. She claimed that he explicitly told Vashti that he didn’t want the January will, and that Vashti then breached the fiduciary duty she owed to Edison as his legal guardian, by not destroying the January will.

Janay argued that the statement was an express revocation that Vashti had an obligation to execute. Janay contended that a guardian has a duty to destroy a ward's will upon the ward's request—even when the guardian hasn’t been granted testamentary powers by the court—and even where the ward has testamentary capacity. However, Justice Britt C. Grant of the Georgia Supreme Court disagreed.

Justice Grant wrote that Edison's statement that he no longer wanted the January will was an insufficient revocatory act in and of itself. “Revocation of a will cannot be established by proof of parol declarations by the testator,” the justice wrote. Instead, Georgia law states there are only two ways to expressly revoke a will: (i) by stating so in a subsequent will or legal document; or (ii) by "destruction or obliteration of the will done by the testator with an intent to revoke, or by another at the testator's direction."

In this case, neither party argued that the subsequent (and rejected) October will had the legal effect of revoking the January will, and they also agreed that neither Edison nor Vashti destroyed the January will or took any steps to obliterate it. This is the kind of act that is required under Georgia law. While the justice found that Janay was correct that the law doesn’t require that the testator perform a particular act of destruction to validly revoke a will, it does require that someone perform the act of destruction.

Janay relied heavily on Vashti's status as guardian, but Justice Grant found that the appointment of a guardian didn’t offer an exception to the physical destruction rule or a determination that the ward lacked testamentary capacity. In fact, Janay's argument was because Edison retained testamentary capacity, or else any statement that he wanted to revoke the January will would be without legal effect. Even so, Georgia law specifically bars a guardian from disposing of a ward's property, without the involvement of a conservator. Edison's conservator, not his guardian, would’ve been responsible for estate planning matters, if he lacked testamentary capacity.  However, the Court found no suggestion that Edison or his conservator destroyed or obliterated the January will, after it was executed. The probate court found that Edison retained testamentary capacity, and this wasn’t challenged on appeal.

As a result, even assuming that Edison stated that he no longer wanted the January will to be in effect, that statement was insufficient to revoke the will or to require his guardian to do so. The Supreme Court held that the probate court didn’t err when it granted Vashti's motion for summary judgment on the revocation issue.

Reference: Leagle (May 1, 2017) Milbourne v. Milbourne, 301 Ga. 111; 799 S.E.2d 785; 2017 Ga. LEXIS 329 (Ga. May 1, 2017)

New Law in New Jersey to Aid Facility Workers in Reporting Suspected Elder Abuse or Exploitation

McKnight’s Senior Living recently published an article, “NJ law increases requirements, decreases some fines in reporting of suspected abuse cases” that explains how “Peggy's Law” was created and named for a former assisted living resident.

The law requires caregivers, social workers, physicians, nurses and other assisted care facility workers to report suspected abuse or exploitation of residents to local law enforcement and the state ombudsman. The law imposes time limits based on the type of suspected abuse.

The law is named for Peggy Marzolla. In 2010, Peggy was a 93-year-old resident of a facility in New Jersey. She was taken to the hospital after the senior living community's staff reported that she’d slipped on powder. Her injuries reportedly included bruises and several broken bones. She died two months later.

Her daughter, Maureen, didn't believe the explanation given by the facility and began a campaign to tighten state laws against elder abuse. A lawsuit filed by Maureen against the care facility was settled out of court.

Long-term care facilities, skilled nursing care centers and assisted living communities must report incidents to the state’s Department of Health, and crimes must also be reported to law enforcement, especially when the potential for harm or actual serious bodily injury occurs.

Law enforcement must be notified of serious injuries within two hours and other crimes within 24 hours. Facilities where reporting doesn’t happen on time, are subject to a maximum fine of $2,500 under the new law.

Senators Jim Holzapfel and Diane Allen are two of the bill's seven primary sponsors.

However, elder advocates are concerned that the maximum penalty for individuals who don’t report suspected abuse or exploitation is decreased. The old law subjected them to a potential $5,000 fine, but the new law was amended to reduce it to a maximum of $500.

Reference: McKnight’s Senior Living (August 8, 2017) “NJ law increases requirements, decreases some fines in reporting of suspected abuse cases”

If you want help protecting those who you love, call our office for a free consultation 801-438-7120

Consider a Trust to Protect Your Assets

There’s a misconception that trusts are just for the uber rich. This is not so.

If you've ever listed your spouse or child as a beneficiary on a bank account, in theory, you've just created a simple trust. This is an important point made by Madison.com in the recent article, “3 Types of Trusts That Can Cover Your Assets.” They describe three types of trusts that can help you protect your assets.

A trust is simply a device used to divide ownership of property between its legal title and its beneficial enjoyment. The trustee is responsible for managing the property and the terms of the trust will state directions for the benefit of the named beneficiary. A trust can be revocable, meaning that you can change your mind about the beneficiaries or you can even cancel the trust entirely.  However, an irrevocable trust doesn't let you modify the terms, once the trust has been established. The distinction is important, because some types of trusts won't work, if you set them up with the wrong kind of revocability.

Asset Protection Trust. This trust is designed to protect money from creditors. The trust creator transfers ownership of cash or property to a trustee. The property is now owned by someone else and creditors arguably can't reach it. This type of trust must be irrevocable. Work with a trust attorney to set it up exactly the way you want before you execute it.  Since not every state permits asset protection trusts, ask your attorney if this applies to your situation.

Bypass Trust. This trust is designed to help married couples avoid unnecessary estate tax liability. Each spouse creates their estate planning documents to leave property (up to the threshold of the estate tax exclusion) to the bypass trust. They then bequeath everything else that they own to the other spouse. Any property left to a spouse qualifies for a marital deduction to the estate tax. Thus, when one spouse dies, the other gets the bequeathed property tax-free. The property in the trust is covered by the estate tax exclusion, but is not subject to estate tax in the surviving spouse's estate. Therefore, as the property increases in value, it can safely grow above the exclusion amount without any estate tax at the death of the surviving spouse.

Totten Trust. The bank account set up with a beneficiary is a Totten trust. It’s used to avoid probate. Totten trusts won’t work for real property, like a house. That calls for a specialized trust.

There are also other, more specialized types of trusts that can be helpful in some situations. A spendthrift trust, for instance, can help protect money for a financially irresponsible beneficiary. A charitable trust can allow you to make charitable gifts and keep an income stream flowing to the donor. A special needs trusts lets you provide for the support of a family member receiving government benefits (like Medicaid) without disqualifying him or her based on income.

If you think that a trust might help you and your family, consult with a qualified estate planning and trust attorney.

Reference: Madison.com (August 1, 2017) “3 Types of Trusts That Can Cover Your Assets”

If you need helping deciding what trust is right for you and your family, give our office a call for a free consultation 80101-438-7120 

Don’t Delay with Thorough Estate and Farm Succession Planning

Farmers need to have the right legal documents in place to ensure that the ownership of their assets pass to the next generation, as desired. It can even determine whether a family farm stays in the family. There are several mistakes that estate planning attorneys frequently see with their clients

The Minnesota Farm Guide, in the recent article, “Four common mistakes in estate and succession planning,” says one mistake is having no estate or farm succession planning at all. Many families don’t do anything. Experienced estate planning attorneys see many difficult situations where individuals have made mistakes in their planning, leaving the successors to pay the price for those unforeseen consequences.

In farm families, it’s common for one or many children to stay and work the farm with the parents, while the other kids leave to start their own careers. The parents must try to figure out a fair plan for the other kids, while allowing the farming child to have the continued opportunity to farm the family land.

A farmer’s assets usually consist of farm equipment, machinery, grain inventory, and the land. If they want the child who’s farming to keep farming, they may decide to create a structure to get that child the machinery and equipment. However, they can get stuck because if they also want to give them the land, there’s nothing left to give the non-farming children.

Another issue is waiting too long to start estate or farm succession planning. It’s beneficial to everyone to begin early. A parent can buy a life insurance policy to pay out to the non-farming children with the value of the policy equal to the assets being passed on. If it is set up correctly, the policy’s proceeds can also be used to pay any estate tax. Waiting to start planning, makes it too difficult or too expensive to get such insurance.

A third mistake is not working with an attorney who specializes in estate and succession planning.

Finally, it’s a mistake to think the only way to give the farming children the opportunity to continue to farm would be to not only give them all of the farm equipment, machinery, and inventory but also all the farmland. This would be very unfair to the other children.

If you work with an estate planning attorney, you can devise a strategy that will make it easy for the farming child to continue farming and carry on the legacy, but also to be fair to all the children. This may involve transferring land ownership into a partnership, which then governs how the land is managed, rented, and sold, as well as the way in which partnership interests can be sold. The beneficiaries don’t get land ownership outright, only an interest in the partnership that owns the land. This way all the children get a benefit from the land, and the farming child can continue to farm.

Reference: The Minnesota Farm Guide (August 2, 2017) “Four common mistakes in estate and succession planning” 

What Do I Tackle First: Estate Planning or Exit Planning?

The recent article from Wilmington Insights titled “Which Comes First - Estate Planning Or Exit Planning?” notes that a successful business exit plan accomplishes three important goals

• Financial security, where the business sale or transfer provides the income the owner and her family need after her exit;
• A successor selected by the owner, such as children, key employees, co-owners or a third-party; and
• Income tax minimization, giving the owner more cash in her pocket.

 A successful estate plan also achieves three important personal goals:

• Financial security for the decedent’s heirs and family;
• Control by the decedent to choose who receives her estate assets; and
• Estate tax minimization to reduce the government’s share and give more to the decedent’s heirs.

If you look at exit planning and estate planning together, you can ask relevant questions in order to see the big picture:

• If you fail to exit the business as planned, how do you provide your family with the same income they’d have enjoyed if you had?
• Can you be sure your business retains its previously determined value?
• Does your estate plan reflect and implement your wishes, if you don’t survive after the exit?
• If you die before exiting the business, will your family still receive the full value of the business?

Business owners should determine if their estate plans address these issues.

Another goal is minimizing creditor risk for you and your heirs, which can be done with both exit and estate plans.

Remember: estate taxes are easier to avoid than income taxes, and estate planning can frequently involve funding from life insurance proceeds, which pay in cash upon death.  However, exit planning often involves the owner’s own accumulated assets. There no correct answer to the estate or exit planning question. You need to do both. Failure to act in either case, brings about lasting problems for you, your business and your family.

Reference: Wilmington Insights (August 1, 2017) “Which Comes First - Estate Planning Or Exit Planning?” 

If you would like more information on how to develop the best plan for you, please give us a call for your free consultation, 801-438-7120 

Charitable Giving 101

Roughly $400 billion was donated by Americans to charitable causes last year. That’s about 2% of the U.S. gross domestic product. These donations came in many forms, like personal checks and distributions from trusts. 

According to Morningstar’s recent article, “7 Tips for Better Charitable Giving,” creating a long-term charitable or philanthropic plan means careful consideration with your family, as well as professionals. You want to develop the right giving strategies that address estate, tax, and investing issues. Here are a few ideas to make certain that your money is donated wisely.

Make a Plan. Some donors feel they should leave large, one-time gifts to colleges, hospitals, or other charitable institutions. Others divide their donations among multiple causes over a period of time. Start with a "goals analysis" of your charitable strategy and implement a basic financial plan. Write down your charitable priorities and look at which have the most immediate need and where a donation can do the most good.

Research Your Causes. Look at how much the charity spends donor funds on marketing and administrative expenses.  It is important to see the percentage of donations that actually goes to the programs. Some charities have very high administrative costs, while others run lean operations.

Determine the Timing. Some people choose to leave some of their estate to specific causes after they die and others donate while they're still alive. How might this impact your retirement income?  You should also consider whether you want to make ongoing contributions or a lump sum.

Work with Professionals. An experienced estate planning attorney can help you with your charitable-giving strategy. An attorney will analyze how your donations impact your estate and heirs, potential tax benefits during your lifetime and the types of donations you can make. Your charitable giving should be a component of your overall estate planning strategy.

There are many ways to donate, depending on when you want to give and how. Work with your attorney to develop a plan that makes sense from a tax and philanthropic perspective.

Reference: Morningstar (July 29, 2017) “7 Tips for Better Charitable Giving”

If you need help finding out safe and financial safe ways to charitably give, call our office for a free consultation, 8801-438-7120.