Shawn McCammon (Liberty Law, A.P.C.) was just named Best Attorney in the annual “Best of” Tehama County, which is voted on by the readers of the Daily News. We would like to thank our friends, family, and clients for all their support! We are truly blessed, and we look forward to serving you for many years to come. Look for our thank you in the annual Best Of publication due out in the next week or two.Tweet
Here is a nice article from Ahmed Shaikh, a certified estate planning specialist, on the classic tale of Cinderella!
An Estate Plan for Cinderella’s Parents
Fiscal Cliff Update: Whether you approve or disapprove of the Fiscal Cliff deal made by President Obama, the Senate, and the Congress, as of the date of this blog post it is the law of the land. While folks on either side of the aisle may argue about income tax cuts or increases for certain income brackets, you can take some comfort in the fact that the Fiscal Cliff deal will have few negative effects on your current estate plans. In fact, you may be surprised to find that the Fiscal Cliff deal was an overall good deal with regards to estate planning.
Without the fiscal cliff deal in place, the federal estate tax exclusion limit (the amount you could transfer tax-free during your lifetime or after your death) would automatically have dropped significantly from $5,120,000.00 to $1,000,000.00. Estates that were worth more than $1,000,000.00 would have been taxed at the rate of 55%. The Fiscal Cliff deal prevented this from occurring. If your estate is worth more than $5,120,000.00, then your estate will be taxed at a rate of 40% rather than the 55%. Admittedly, the 40% rate is still higher than the maximum rate of 35% which large estates were taxed at last year, but overall, we can be thankful that there was no major drop in the federal state tax limit.
Furthermore, the Fiscal Cliff deal made the portability law passed in 2010 a permanent feature in estate taxes. For those unfamiliar with the portability concept, the law allows a married couple to combine their federal estate tax exclusions so that they may transfer during or after their lifetime up to $10,240,000.00 tax-free.
Finally, the Fiscal Cliff deal increases the annual gift tax exclusion. The limit in 2012 was $13,000.00, and it will increase slightly to $14,000.00. This means that each spouse may give a gift valued at $14,000.00 in a single year without that amount counting against the spouse’s federal estate tax exclusion. This yearly amount may also be combined so that both spouses together can grant a gift to a single person worth $28,000.00 without the gift counting against their federal estate tax exclusion. The couple may make gifts to as many people as they choose, and so long as the gift does not exceed $28,000.00, it will not count against the couple’s federal estate tax exclusion.
While the Fiscal Cliff deal makes more changes beyond those discussed above, these are the issues most people were likely concerned about. Overall, with regards to estate planning, the Fiscal Cliff’s positives outweigh its negatives. For those interested in looking deeper into the Fiscal Cliff deal’s effects on estate planning, I would encourage you to read the article posted at the link below.
Choosing a guardian for a child is one of the most difficult things a parent may ever have to do. From parenting style to living situation to your gut feeling about this or that person’s ability to love your children as well as you do—there are endless issues to consider before you make the final decision.
What follows is a list of only some of the important questions parents may want to ask themselves as they consider their options for guardian of their minor children:
1. Where does your potential guardian live? Will your child be able to stay in a familiar environment during the emotional transition, or will he or she have to move to another city or state?
2. How well does your child know the potential guardian? A familiar parenting style is important, but just as important is how well your child knows the potential guardian and what level of trust he or she feels. If you’re choosing a sibling who lives far away, you may want to make an effort to foster a close relationship between your child and the person you’re nominating as guardian.
3. Is your potential guardian emotionally, physically and financially prepared to care for your child or children? An aging grandparent may love your children without reservation, but may not by physically able to care for a high energy youngster. Likewise, a beloved aunt in her early twenties simply may not have the financial ability to provide for a young quartet of siblings.
4. Does one or more of your children have special needs that will require special knowledge or care? The sudden responsibilities of parenthood would be difficult for anyone, but sudden responsibility for a special-needs child can be overwhelmingly so. Make sure you’ve prepared your potential guardian, and provided for whatever your children may need.
5. Have you discussed your decision with your potential guardian? Before you name someone as your child’s guardian, you’ll want to have a frank and open discussion with them about your mutual hopes and concerns. Make sure your guardian knows that he or she can say no if they are unable to take on the responsibility for any reason—and ensure that you have a backup nomination (or two or three) just in case your first choice does have to decline.
Having children means always planning ahead and thinking about the future, even as you try to live in the present and appreciate the small moments in every day. Nominating a guardian for your children makes it that much easier to focus on the here and now, because in the back of your mind you’ll know that your children will be protected if something happens to you. Let our firm help you achieve that peace of mind.
The following five myths continually frustrate estate planners. This is not only because we know that not only are they patently untrue, but because their continued circulation can be actually be harmful to your family and your estate.
1. Estate Planning is only for rich people. This is probably the single most common estate planning myth there is—and it is a myth. If you were to add up the value of your home, your life insurance, savings, retirement account, etc., etc., etc. you will likely find that you are much closer to being a “rich person” than you thought. Not only this, but as we’ll get into in more detail below, estate planning is not only about saving on estate taxes, it’s also about controlling your wealth and protecting your own needs when the unexpected occurs.
2. “I have plenty of time.” (AKA: Only old people need estate plans.) First of all, just because you’re young doesn’t mean bad things can’t happen to you. Unexpected tragedies aside, an estate plan is useful even when you’re young because an estate plan is not just about death. A good estate plan will include not only a will, but also a healthcare directive and HIPAA Authorization (both of which are useful if you find yourself facing a surprise stay in the hospital), Power of Attorney documents (which you may need if you ever travel outside the country or are otherwise unable to sign for yourself on financial or legal documents), and legal documents relating to minor children (such as medical authorizations—an essential document if you leave your minor child with a babysitter for any extended period of time.)
3. Married people don’t need estate plans. You may think you don’t need an estate plan because under normal circumstances, any jointly held property will pass automatically to your surviving spouse… But what happens if your surviving spouse gets re-married? What about the property you would specifically like to go to your children, or to your parents or siblings? And what if both you and your spouse die together? These are the reasons why even married people should consider drawing up a simple plan.
4. All I need is a quick will and I’m done. A quick will is certainly better than no will. But there is a saying that “anything worth doing is worth doing well,” and we believe that this goes for wills (or any other legal document) as well. If you want the basics you can have the basics. But if you want the best, you’re going to need to spend a little more time on it.
5. Estate Planning is only about money. While money is one of the main motivating factors behind the creation of an estate plan, money is absolutely not what estate planning is all about. Estate planning is about people. It’s about your family and doing what’s right for them. A well thought-out will or trust saves them from a lengthy probate process, and reassures siblings that they are doing what mom or dad really would have wanted. An estate plan is full of documents designed not just to save you or your heirs money, but to allow you to express your wishes and values even after your death. Estate Planning is about more than just money—it’s about family, legacy, and love.
Gender equality has come a long way in the past few decades and years, but still, when most people think of estate planning they think of wealthy older men along the lines of Joe Kennedy or John Rockefeller. The truth is, however, that estate planning is a subject which has a significant impact on women. Why? Here are just a few reasons:
* Older women (65+) outnumber older men by 22.4 million to 16.5 million.
* Poverty rates tend to be higher among older women than older men.
* On average, it is the woman of the family who will end up putting her career on hold for caregiving duties at various times in her life (either to care for young children or aging parents.)
* Not to mention that women’s longer life expectancy, combined with their tendency to marry older mates and their lower lifetime earnings means they are far more likely to see their living standards compromised in retirement if proper estate planning isn’t done.
How can women ensure that this doesn’t happen to them? The best answer is for every woman to take an active part in planning her estate—not just the typical “women’s issue” of guardianship of the children, but the financial issues as well. If you are married, talk to your partner about what will happen to your assets if your spouse passes away first, leaving you a widow.
Most modern women have some assets in their name only (and if you don’t have assets in your own name you will if your spouse is the first to pass away) and it’s important not only to create a will for these assets, but also to talk to your family about how these assets should be distributed upon your death. Because estate planning is all about the details, be sure to bring your estate planner into the conversation so you can discuss the issue in specifics, not just generalities.
There are many reasons for being reluctant to start planning your estate: You don’t have time, your partner or spouse generally takes care of the finances, you’re just not “a numbers person.” But there’s one overwhelming reason to take the plunge: to protect your assets and your future. This isn’t a job any woman should leave to someone else. Taking charge of your estate means taking charge of your life. If you can get the ball rolling, our firm can help with everything else.
As summer comes to an end and kids and parents both start getting ready for back-to-school week, estate planning may be the last thing on anybody’s mind; but the beginning of a new school year can actually be the perfect time to give your estate planner a call. Whether your baby is heading off to preschool or college, our office can help you plan for the future and ensure he or she is protected as the school year unwinds.
Any parent of a grade-, middle-, or high-school student knows that the first thing sent home during back-to-school week is the emergency contact forms. These are the forms on which you list who the school should call in case of an emergency when parents can’t be reached, and who might be authorized to make medical decisions for your child if the parents are unavailable. The names you put on these forms can be a perfect starting point for considering who you (and your children) love and trust enough to serve as guardians of your minor children should anything happen to you.
Parents of college-age students (currently or soon to be 18) have a whole different set of legal issues to consider. Although you may still think of your 18 year as your baby, he or she is looked upon as an adult under the law. This means that hospitals and medical personnel are no longer required to ask the parent’s permission before performing medical procedures. In fact, once your child is 18 health care providers are no longer required to share information with the parents at all.
Most college students (and parents) are unaware of this side-effect of turning 18, and parents and children alike can run into frustrating roadblocks should an accident occur. You can avoid these roadblocks by simply having your young adult execute two documents before heading off to school: a healthcare directive nominating you as his or her healthcare agent, and a HIPPA Authorization Form listing you as one of the people who have permission to receive information about his or her medical records and status.
Back-to-school is an exciting time for both parents and children. Taking care of legal and estate-planning business at this time can lift a heavy burden of stress from both parents and children, leaving you all free to enjoy the new year together.
The past few years have seen a number of significant changes in estate tax law; so much so that estate planners—as well as anyone with a will, trust, or estate plan themselves—have had to stay on their toes! The most significant event in recent estate tax history was the lapse of the estate tax in 2010. This lack of tax was so momentous, and was such a surprise, that we are still seeing the effects of it two years later.
A recent article from Reuters describes the ongoing saga of the Tweten family of California, and how the disappearance of the federal estate tax in 2010 caused (and may still be causing) a lengthy legal battle between father and daughters. Leonard Tweten and his wife of 58 years, Eileen, founders of Magnolia Audio Video, established a trust in 2008 which utilized a common formula clause to help minimize estate taxes.
“The formula clause typically divides the estate so that children get the amount of assets in the federal estate tax exclusion (currently $5 million per person), with the rest going to a marital trust for the surviving spouse. This allows the full amount of the exclusion to pass to the heirs tax-free.”
This formula clause is a wonderful tool when the estate tax exclusion amount hovers around $2 million, exactly the amount it was in 2008 when the Twetens set up their trust. Unfortunately, “in 2010, the exclusion was unlimited, because there was no estate tax. So when Eileen died in April of that year, her whole estate, rather a few million dollars, would have gone to the kids, leaving Leonard out of the money.”
The Twetens were not unaware of the exclusion, and made an eleventh hour change to their trust only 12 days before Eileen Tweten’s death. Unfortunately, their efforts were not enough. “The couple’s adult daughters, Nancy Crowe and Janet Houston, petitioned the court to invalidate that amendment on grounds of forgery and incapacity, while their father petitioned to allow the trust’s modification.”
The court eventually had to throw out the amendment, “noting that it had not been notarized as required by the trust”, but sided with Leonard Tweten in spite of this, letting the original intent of the Tweten’s estate plan stand. The Tweten’s daughters, however, plan to appeal the court’s decision.
The lesson we can all take away from the Tweten’s experience is that no matter how safe you may feel with your current estate plan, it is absolutely essential to review your trust regularly, and consult your estate planning attorney about any changes to estate tax law that may have been enacted since your last review. Contact our office for more information.
Married couples take note: Congress passed a law in 2010 that can significantly reduce the amount your estate pays in estate taxes. Unfortunately, most couples are either completely unaware of this opportunity for savings, or they find out about it too late to take advantage of it.
This recent article in the Wall Street Journal gives an example to explain the law both under the previous law and the newer, 2010 law: “A husband and wife together have $7.5 million of assets, $6 million of it in a business owned by him and the rest owned by her. Under prior law, if they died and each partner left everything to the other (with no trusts), the estate of the second-to-die partner would owe federal tax on $2.5 million—even though the law gave each spouse a $5 million exemption. Under the new rules, when the first partner dies—say it’s the wife—the executor files an estate-tax return preserving the value of her $5 million exemption. The result: At the husband’s death, the wife’s exemption is added to his, and the entire $7.5 million passes to heirs tax-free.”
Taking advantage of this opportunity isn’t difficult to do… but only if married couples (or their financial/legal advisors) are aware of the law. And in this case it’s not enough to be simply aware of the law, couples will need to be made aware of the law in time to take advantage of it within the limited time frame. “An estate-tax return must be filed soon after the first partner’s death—usually within nine months—in order for a couple to get this new benefit.”
For more information about this beneficial tax law, or to find out how to take advantage of it before it’s too late, please contact our office.
The thought that your child may have to survive on his or her own before they are ready is every parent’s worst fear; it’s what keeps many parents up at night, and what brings many parents into our offices asking about trusts, guardians, and estate plans. For parents of children with special needs that fear of leaving their child unprepared is magnified, because parents of children with special needs don’t know if their child will ever be able to fully support themselves—even when they are well into adulthood.
One way to help ensure that your special needs child will be taken care of—even when you can’t be there anymore—is to create a special needs trust. In fact, a special needs trust is almost essential for any child (or adult) who will rely on government assistance for much of his or her life. As this article in the Wall Street Journal points out, the sooner you get a financial plan (and a special needs trust) in place, the better for your child.
A special needs trust (or SNT) “typically will hold funds to be used solely for the child, usually to cover out-of-pocket costs related to the child’s care and living expenses, but the money won’t be in his or her name… This is important because if a child has more than $2,000 in assets, he or she typically won’t qualify for benefits such as Supplemental Security Income or Medicaid. (For this reason, many parents use a trust while they’re alive if the special-needs child inherits any assets or receives other monetary gifts.)”
In the hands of an experienced estate planning/special needs attorney the process of creating an SNT can be a great opportunity to anticipate your child’s lifetime needs, review your current (and potential future) assets, and plan not only for your child, but also for yourselves in the coming years. Every child and ever family will have different needs, and no two trusts will be the same. Please contact us for more information about protecting your special needs child and how we can help.