Blog - Jayde Law PLLC

Estate Planning: An Overview

jds@jaydelaw.com (James Saintvil) — Wed, 15 Feb 2023 22:56:11 GMT

Estate planning entails preparing your affairs for the future, including death and other life events. While older adults might give more thought to estate planning, it is an essential tool at any age.

WHY IT’S IMPORTANT

With estate planning, individuals and families can protect their interests during incapacity or after death.

You can provide for a spouse, children, and dependent family members when you pass away.
You can arrange your care and financial affairs should you suffer a severe accident or illness that renders you incapacitated.
If you are a parent, you can appoint a guardian to care for and manage the inheritance of your minor children.
If you own a business, you can prepare to transfer it to family members, colleagues, or other trusted individuals.
You can make arrangements for your long-term care when you can no longer live on your own.
You can also make funeral preparations, determine what happens to your body when you pass, and prepay for your funeral, all of which can help lessen the burden on your family members.

WHAT IS AN ESTATE?

Legacy planning entails passing on your estate. Your estate is everything you own, including:

Savings and checking accounts
Retirement accounts
Investments
Life insurance
Annuities
Houses and other real estate
Cars
Personal possessions, such as jewelry, furniture, and sentimental items

When you die, your estate encompasses all your property upon death. If you sold or gave away property before death, it is no longer part of your estate, and you cannot transfer it upon death.

Items you own with another person are also part of your estate. Depending on the type of asset, it might automatically pass to the other owner. For instance, if you own a home with your spouse as tenants by the entirety, it will pass to your spouse upon your death.

WHAT IS AN ESTATE PLAN?

An estate plan consists of legal documents and arrangements that determine the distribution of your assets when you die or outline your care if you become incapacitated.

While a will can be a central component of an estate plan, a solid plan encompasses more than a will. It can also include legal tools that allow assets to pass outside of a will and probate (the process by which a court oversees the distribution of assets in a will).

ESTATE PLANNING TOOLS

In addition to your will, your estate plan could include the following:

Purchasing jointly owned property or adding a joint owner to your property
Designating a beneficiary on a pay-on-death bank account, retirement account, or annuity
Buying life insurance to benefit your family should you pass away
Creating a trust for a child
Obtaining long-term care insurance to cover future nursing home or assisted living fees
Executing power of attorney documents, naming health care and financial agents
Making a living will, providing instructions for care should you become incapacitated
Preparing a transfer on death instrument to pass ownership of your property to a beneficiary upon death

WHAT IS AN ESTATE PLANNER?

As professionals helping people make future arrangements, estate planners are attorneys who focus on end-of-life preparations. Estate planning attorneys assist people with drafting legal documents and understanding laws and taxes that could affect them and the loved ones they will leave behind.

When creating estate plans, individuals may need to consult attorneys as well as other experts, including financial planners, accountants, life insurance advisors, bankers, and real estate brokers.

WHAT DOES THE FINAL DISTRIBUTION OF ASSETS INVOLVE?

The final distribution of assets is a conclusory step in the probate process before the court closes probate. When an estate goes through probate, the personal representative or executor must satisfy all debts, and the court must resolve all disputes before allowing the beneficiaries to receive the assets. At the end of the probate process, ownership of the assets of the estate is transferred to the beneficiaries.

DO I NEED A LAWYER FOR ESTATE PLANNING?

Although the law does not require that individuals secure legal representation to make estate plans, many find the support and guidance of estate planning attorneys invaluable. An estate planning attorney can help you identify the legal tools and strategies that suit your needs, as well as draft the necessary documents, such as wills, trusts, and powers of attorney.

In addition to addressing tax concerns and drafting documents, these attorneys can help you avoid probate. Probate, the process by which the court oversees the distribution of assets in a will, can be expensive and time-consuming for surviving family members. It also opens the door for disgruntled people to challenge the validity of the testamentary document, further complicating asset distribution. An estate planning attorney could help you organize your assets to transfer outside of probate to make the transfers simpler, easier, and less vulnerable to challenges.

When you are ready to create an estate plan, contact Jayde Law PLLC.

Three Things to Know About Being an Executor

jds@jaydelaw.com (James Saintvil) — Wed, 01 Feb 2023 22:56:58 GMT

An executor (or personal representative) is a person or entity you choose to carry out your last wishes outlined in your will. Your executor should be someone you trust is responsible enough to manage your estate after you pass away.

Choosing an executor is a big decision when it comes to estate planning. So, what should you know about an executor? What should you consider before naming an executor? Here are answers to three common questions about executors.

Can an Executor Decide Who Gets What?
No. In most circumstances, an executor cannot decide who gets what property. Executors are responsible for carrying out the decedent’s wishes as outlined in the will.

However, if the decedent did not distribute all their assets in their will, in some circumstances, the executor may be able to decide how to distribute the unassigned property.

Can an Executor of a Will Be a Beneficiary?

Yes. An executor can also be a beneficiary of the will. It is common for people to have their surviving spouse or children act as the executor of their estate. This choice can be cost-effective if you have a small or simple estate.
Another benefit of having a family member act as the executor of your estate is they are familiar with your wishes. They know you, and they understand how you want your assets divided. If you forget to state where property goes in your will, an executor that knows you well is more likely to give those assets to the correct beneficiaries.

How Long Does the Executor Have to Pay the Beneficiaries?

The short answer is: It depends. The executor should work diligently to get each beneficiary paid as soon as possible.

While the executor is responsible for ensuring beneficiaries receive the money or property they were left in the will, the probate process may delay beneficiaries from receiving a payout. Depending on the size of the estate and the debts and taxes the estate owes, it may take anywhere from six months to more than one year for a beneficiary to receive an inheritance.

The probate process varies depending on the state, but the typical process goes like this:

Submit the Will for Probate — Part of the executor’s responsibility to the estate is to file the will with the probate court. Filing the will begins the probate process. Once completed, the beneficiaries are one step closer to receiving their inheritance. The time executors have to file a will with the probate court varies by state.
File an Inventory — An inventory of estate assets is required. As part of an inventory, the executor determines the total value of all estate property, money, and other assets. A completed inventory can then be used by the executor to determine whether federal or state taxes apply, or whether assets will be used to settle debts.
Pay Taxes and Debts — Before the executor can distribute any assets to beneficiaries, estate debts and taxes must be paid. The executor is responsible for ensuring these payments are made.

Creating a complete estate plan can be overwhelming. With the help of an experienced estate planning attorney, you can ease some of the anxieties you may be facing in thinking about estate planning. If you are ready to start the estate planning process give Jayde Law PLLC a call..

Overriding a Power of Attorney

jds@jaydelaw.com (James Saintvil) — Wed, 18 Jan 2023 22:57:43 GMT

A power of attorney is a legal agreement that gives a person (“attorney-in-fact” or “agent”) the ability to act on behalf of another person (“principal”). A common question asked about a power of attorney is under what circumstances one be overridden.

A power of attorney can be overridden. However, the “who” and “how” depends on whether the principal is of sound mind.

First and foremost, the principal can override a power of attorney at any time as long as they are of sound mind. The term “sound mind” refers to the state of mind and memory a person has at the time in question. So, as principal, you could override your power of attorney if you have sufficient mental capacity to understand what you are doing.

WHAT IS REVOCATION?

The act of overriding a power of attorney is called revocation. Every state’s laws specify how revocation can occur, but typically, it is required to be in writing and must clearly express the principal’s intention to revoke a specific power of attorney.

As the principal, you can revoke a power of attorney in many different ways, such as:

Executing a new power of attorney, which states that you are revoking a prior power of attorney;
Putting provisions in a power of attorney that state it will terminate or become ineffective under certain circumstances, such as your incapacity;
Sending a written notice of the revocation to the agent and any monitor, secondary agent, successor agent, and any other relevant parties; or
A power of attorney can also naturally terminate upon the conclusion of a specific event, such as in a situation where the principal had entered into a power of attorney solely to close a particular real estate transaction.

OVERRIDING A POWER OF ATTORNEY THROUGH A COURT

A second way a power of attorney can be overridden is through court intervention. For example, if you, as an agent, are no longer of sound mind, a court can remove you for acting improperly or acting in a manner that abuses your responsibilities as set forth in the power of attorney.

If family members or friends are concerned about this situation, they can seek to have you removed as well. They would have to file a formal request with the applicable court to remove an agent and replace them with a new one. This request is made pursuant to the applicable state’s law governing powers of attorney.

A third option is when a concerned party seeks guardianship or conservatorship of the principal through the local court system. If a guardian or conservator is subsequently appointed, they can then request the termination of a particular agent’s authority.

CAN YOUR AGENT REFUSE TO FULFILL THEIR DUTIES?

An agent can in fact decline to fulfill their duties. When choosing an agent under a power of attorney, it is best to have discussed the responsibilities with of the role before appointing them so that you can do your best to avoid such a situation.

Even if your agent had agreed to act in this role, they can still resign after they have been appointed. This is one reason it may be a good idea to consider naming a successor agent.

SEEK OUT A LOCAL PROFESSIONAL

If you have questions about revoking a power of attorney or creating a new power of attorney that overrides a prior one, it is best to speak with a professional in your area. Each state’s laws are quite specific regarding the power of attorney process. A professional can help you understand how to comply with applicable requirements.

Does Power of Attorney End at Death?

jds@jaydelaw.com (James Saintvil) — Wed, 04 Jan 2023 22:58:48 GMT

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A power of attorney is a powerful planning document that enables you (the principal) to give another person (the agent or attorney-in-fact) the power to act for you while you are alive.

Because powers of attorney are often prepared in the context of estate planning, many believe they give their agents the power to continue acting after their death.

Although every state’s laws and forms vary, most power of attorney forms specify that the agency relationship created by a power of attorney ends upon a person’s death.

WHAT DOES A POWER OF ATTORNEY DO?

A power of attorney (POA) can convey a significant range of power to the person you appoint. This includes the ability to do the following on your behalf:

Enter into real estate transactions;
Enter into leases and purchase personal property;
Buy bonds or other securities;
Engage in banking transactions;
Engage in business operating transactions;
Handle insurance transactions;
Engage in estate transactions;
Make decisions concerning any claims you have or in which you may be involved;
Make gifts or charitable donations;
Manage any benefits you receive or are entitled to;
Manage the financial aspects of your health care;
Manage your retirement accounts;
Handle your tax matters; and/or
Delegate any of the above responsibilities to a third party.

POWER OF ATTORNEY FORMS

Most POA forms allow you to choose how specific or broad you would like the powers you give to be so that you can tailor a power of attorney to suit your needs. An agent can also update a power of attorney over time as a principal’s needs change.

In many states, these powers, once delegated, remain in place even in the event of your incapacity. People frequently execute a power of attorney for this reason. They do not want to worry about what may happen should they become incapacitated or whether a loved one will have the ability to handle their affairs if they are no longer able to do so.

POWER OF ATTORNEY AFTER DEATH

That being said, a power of attorney expires upon your death. So, if you have entrusted a particular person with carrying out certain functions on your behalf while you were alive, those abilities cease when you pass away.

If you wish for the same person to continue handling your affairs after you die, you would need to specify they serve as the executor or personal representative of your will or trustee of your trust.

If you are concerned about maintaining continuity or making sure a particular person oversees your affairs upon your passing, be sure speak with an estate planning attorney. Every person’s situation and needs are different, and state laws also vary.

ESTATE SALES

jds@jaydelaw.com (James Saintvil) — Wed, 21 Dec 2022 23:00:01 GMT

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Following the death of a family member, you may find yourself needing to sort through many possessions accumulated over the deceased’s lifetime. An estate sale is one way to distribute those items that you do not want or need quickly and efficiently.

While selling someone’s furniture, jewelry, artwork, antiques, and other belongings yourself can mean a great deal of time and effort on your part, there are companies that help families sell items. An estate sale company will do all the work in exchange for a percentage of the proceeds—typically anywhere between 25% and 50%. The company usually handles organizing the inventory, staging the house, appraising the value of items and setting prices, promoting the sale to the public, and hiring workers to run the sale. You may need to pay a separate fee to the liquidator for cleaning up following the sale, including donating or disposing of any goods that do not sell.

Keep the following in mind when getting ready for an estate sale:

First ensure that you have the legal right to sell the property. There cannot be any unresolved estate issues. Companies may request legal documentation showing that you have the right to dispose of the property.
Remove from the house anything you want to keep before calling in the liquidators, but avoid throwing too much away.
There is no regulatory body that oversees the estimated 15,000 estate sale companies in the United States, so before hiring one of them, rely on a referral from a trusted friend or family member and do some research. You can search the website of the American Society of Estate Liquidators, a trade association that requires its members to meet certain requirements and abide by an ethics code.
Check your local Better Business Bureau and Yelp for complaints about companies you are considering, or attend a sale run by the company.
Make sure your liquidator carries insurance in case there are any accidents while buyers are at the estate sale.
Ensure the company offers a written contract.
Ask any prospective liquidating company how it handles security, what happens to goods that do not sell, and what type of clean-up is included.
Note that many companies discourage families from being present during the actual sale.

2023 Annual Gift and Estate Tax Exclusions

Wed, 07 Dec 2022 12:15:00 GMT

Although inflation is generally nothing to be pleased about, the IRS recently announced inflation-adjusted changes to the annual gift tax annual and estate tax exclusions for 2023.

If you are considering wealth transfer tax planning, these are welcome increases.

Gift Tax Annual Exclusion

Effective January 1, 2023, the gift tax annual exclusion will increase from $16,000 (2022 number) to $17,000 per recipient. This means you can gift this amount to as many people as you wish in 2023 without using up your lifetime gift and estate tax exemption or paying gift tax. Married couples who gift-split may gift a combined $34,000 per person in 2023 without making a taxable gift.

Combined Gift and Estate Tax Exemption

Another significant change, effective January 1, 2023, is the combined gift and estate tax exclusion increase. It is currently $12.06 million, increasing to $12.92 million ($25.84 million for a married couple). The combined gift and estate tax exemption is the total amount of gifts a person may make during their lifetime, including transfers made at death, before being on the hook for gift or estate tax.

Those who have used up their lifetime exclusions as of December 31, 2022, will now be able to gift another $860,000 tax-free starting January 1, 2023. Married couples in this situation may make additional gifts of $1.72 million.

Generation-Skipping Transfer Tax Exemption

Another significant inflation-related change to be aware of: The generation-skipping transfer tax exemption is also going up. It will be $12.92 million, up from $10 million.

This may be useful for an individual who wishes to place assets in a trust for the benefit of future generations. In doing so, they may allocate their generation-skipping transfer tax exemption to this trust. The result is that these assets can remain in the trust for multiple generations without any gift, estate, or generation-skipping tax due on distributions or upon the trust’s termination.

Looking Ahead

However, readers should remember that these figures will revert to much lower amounts when the current Tax Cuts and Job Act expires on December 31, 2025, if Congress does not extend it or make it permanent. These exclusions will be reduced by approximately 50% to 2017 levels upon expiration, as adjusted for inflation.

There are a variety of planning strategies available to take advantage of these more significant exemption amounts before they are no longer available. If you have questions about how you can benefit from the increased tax exclusions, contact Jayde Law.

Required Minimum Distributions: What You Should Know

Wed, 23 Nov 2022 12:15:00 GMT

Required Minimum Distributions (RMDs) are the minimum amounts a retirement plan account owner must take out each year. RMDs begin when a person reaches either age 72, 70½ if they reached this age before January 1, 2020, or the year in which a person retires (if after age 72).

There are some exceptions. In the case of an IRA or where a person is a 5% owner of the business that sponsored a retirement plan, the RMDs start at age 72 (or 70½). There is no option to defer RMDs to a later age, even if the individual is still working.

It is the responsibility of each retiree to take out the correct RMD from their retirement account each year. If a retiree does not do so, they can face penalties. Furthermore, upon a person’s death, there are special rules regarding how the remaining funds must be distributed to beneficiaries. These death rules are currently in flux, as explained below.

RMD rules apply to all profit-sharing plans, 401(k) plans (including Roth 401(k) plans), 403(b) plans, 457(b) plans, traditional IRAs, SEP IRAs, SARSEPs, and SIMPLE IRAs. Roth IRAs are presently excluded from the RMD requirement while the account owner is still alive.

How RMD Rules May Affect You

As mentioned above, the onus is on you to ensure you take the correct RMD when you retire or reach a certain age. The amount of the RMD is calculated for each retirement account by dividing the account’s balance as of December 31 of the prior year by a life expectancy factor outlined in IRS tables .

Many retirement administrators or plan managers can help you with these calculations. Still, you should also try to understand on your own what you are required to withdraw, as you are ultimately responsible for any penalties or taxes that you may incur for incorrect withdrawals.

Unfortunately, you cannot keep amounts in your traditional retirement accounts indefinitely, even if you don’t need the income. If you take out less than the RMD for a particular year, you may be subject to a 50% excise tax on the amount you didn’t take out but were required to withdraw. However, in some circumstances, if you made an error in calculations but are in the process of taking corrective action, you may be able to request a waiver of the excise taxes.

Changes in RMD Rules

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) changed the RMD rules regarding how quickly beneficiaries must receive retirement benefits upon the account owner’s death. These new rules will apply to persons who passed away after December 31, 2019. In addition, the SECURE Act increases the RMD beginning age from 70½ to 72.

Before the SECURE Act, RMD rules required distributions after a person’s death to be made in one of two ways. If the owner died before RMD rules applied to them, their interest had to be distributed as follows:

1. within five years of their death, or

2. over the life or life expectancy of the beneficiary, with distributions beginning no later than one year after the date of the owner’s death (subject to an exception for a surviving spouse).

If the owner died after the RMD applied to them, the beneficiary had to receive payments at least as quickly as the owner had been receiving them.

The SECURE Act has changed these RMD rules in several ways:

1. It lengthens the five-year rule to 10 years.

2. The new 10-year rule applies regardless of whether the owner dies before the required RMD beginning date.

3. The option to distribute the retirement funds over the life or life expectancy of the beneficiary applies only to specific qualifying persons.

4. For a beneficiary who is a minor at the date of death, the 10 years begin to run when that child reaches the age of majority.

5. For persons who paid excise taxes for insufficient RMDs for 2021 and 2022, they may be able to request a refund.

The IRS has also stated it will not assert that an excise tax is due for persons who did not take an RMD under the prior rules for 2021 and 2022. The IRS final regulations related to these changes will not apply sooner than 2023.

The changes to these RMD rules are complex, and there are more details not fully covered by this article. If you have questions about RMDs and how they may affect you, contact Jayde Law PLLC.

3 Tips When Including Caregivers in Your Estate Planning

Wed, 09 Nov 2022 12:15:00 GMT

November is National Family Caregivers Month. You may have a caregiver in your life to whom you wish to bestow your gratitude by designating them as an heir in your estate plan. Whether your caregiver is your own child—or a niece, nephew, grandchild, godchild, stepchild, or even a caregiver who is not related to you—how can you ensure your wishes are fulfilled?

It is your prerogative to leave your property and assets to anyone you would like. Often, the best way to do this is through a will or estate planning. However, you should be aware that in many instances, money or assets left to a caregiver can be viewed with suspicion and potentially subject your planning to legal challenges. To avoid this, consider the following tips:

1. Make your family aware of your plans.

If you would like to leave a financial or other gift to a caregiver, inform your family of your wishes and reasons for your decision. This is especially important if your children or loved ones who don’t live close by cannot witness in person the impact a caregiver may have on your day-to-day life. Without this familiarity, they may be suspicious about a caretaker’s sway over you and believe that person improperly influenced your decisions.

In some states, there are laws that set forth that property exceeding a particular value left to a nonrelative caregiver is presumed to be fraudulent if a will or trust is challenged. If your family is unaware of your wishes, they may assume foul play. Your estate may be subject to an expensive and unnecessary will contest.

2. Don’t wait until the last minute to make changes to your will.

If you wish to give a financial gift to a caregiver who improved the quality of your life, it is best to make any changes or updates or prepare a will when you are not ill or in cognitive decline. Family members who may not be happy with your choice may try to object to your will and use these circumstances to argue you were not of sound mind or there was undue influence on your choices. The earlier in your estate planning journey you make any decisions regarding inheritance to caregivers, the better.

Another item to consider is getting a letter of competency from a physician that certifies you can make informed decisions about your health care, finances, and other matters. It is best to do so contemporaneously with the execution of a will, estate plan, or any revisions to existing documents.

3. Gift money or assets during your lifetime.

You may wish to consider gifting money or assets while you are alive if it would not negatively impact your needs or care. Currently, there is a federal gift and estate tax exclusion of $12.06 million ($24.12 million for married couples). A person can give away — during their lifetime or at death — up to this amount, tax-free. However, there are some items that you should consider before making any significant gifts.

One issue is that many states have their own gift tax rules. For example, New York does not have a gift tax, but it does have a three-year clawback rule. So, any gifts a person made three years before their passing could be “clawed back” and included in calculating the value of a person’s estate for purposes of estate taxes. This could financially affect heirs in your will.

Gifting or transferring assets may also affect your Medicaid eligibility for nursing home or at-home care. Some states allow certain assets to be transferred to caregivers who meet specific criteria without these transfers affecting eligibility. However, do not assume this is applicable in your state without consulting with an attorney.

If you are thinking about bestowing a gift or inheritance on a caregiver, give us a call at Jayde Law to ensure that your plan is completed properly.

What Not to Include in Your Will

Wed, 26 Oct 2022 11:15:00 GMT

If you are considering preparing a will, this is a great first step in planning for the future. After reflecting on the basics, such as whom you want to be in charge of administering your wishes, you may wonder if there’s anything you should not include in your will. The answer is yes. There are a few things that you should avoid.

Personal Preferences or Desires

Sometimes it is best not to state personal or specific feelings in your will. To simplify the administration of your will, you should not make very specific requests or engage in discussions about your feelings.

For example, you may wish for a certain religious ceremony to be performed at your funeral or you want a celebration of life event. However, it is best not to address this in your will.

A will goes through a public, court-supervised, probate process. This often occurs well after someone is laid to rest. An executor will not necessarily be able to implement these wishes after the fact.

A better option may be to provide your family with a letter of instruction containing these details or to include them in a medical directive. If you want your burial to be done in a particular way, you can pre-purchase a burial plot and, in some areas, prepay for specific arrangements. Alternatively, you can create a fund for any event you would like, with a payable-on-death designation to someone you trust.

It is also probably best not to elaborate on personal feelings about others in your will, as this can set the tone for the administration of your estate. For example, your executor may feel some trepidation about being part of a situation where there appears to be hurt feelings or potential conflict from the outset.

Organ Donation

If you wish to be an organ donor, you should not use your will as a place to specify this wish. In most states, there are specific ways to document your desire, such as listing it on your driver’s license. Again, by the time your will is reviewed, it will be too late to do anything about your organ donation wishes.

Health Care or End-of-Life Decisions

Your will is not the right place to document what you would like to happen if you have suffered a substantial and irreversible loss of mental capacity or have an incurable or irreversible condition. You should do this in your medical directives (sometimes referred to as a “living will”).

You should also have a document that designates an agent to be able to speak with your doctors and make health care decisions on your behalf should you temporarily become unable to do so.

Be Careful About Leaving Inheritance to a Person With Special Needs

If you wish to provide for a person who has special needs upon your death, it is not a good idea to leave them an outright bequest in your will.

This may disqualify them from critical health and other benefits they need to manage their day-to-day life. It can also put them in a situation where they are forced to place your generous gift in a special needs trust that goes to the government upon their death if not used up. Instead, consider creating a first-party supplemental or special needs trust now or through your will.

Non-Probate Property

Another consideration of what not to include in your will is “non-probate” property. This can encompass many things, but some of the most common examples are:

The above examples are not exhaustive. There may be more items pertaining to your situation that should not be in your will. Since every estate plan is unique, when you are prepare to begin the process of creating your will contact Jayde Law PLLC.

Alternatives to Traditional Funeral Arrangements

Wed, 12 Oct 2022 11:15:00 GMT

After losing a loved one, consider the best way to honor them and their life. Sometimes, a traditional funeral is not the best fit. Today, there are many alternatives to a traditional funeral service and burial.

If you are seeking to lay your loved one to rest in a nontraditional way, the following are some modern alternatives to traditional funeral arrangements:

Cremation

Perhaps the most recognizable alternative to a traditional funeral service is cremation. Cremation is a good option for families with loved ones in various areas across the country. Unlike traditional burial, cremation does not require the family to take immediate steps to embalm, clean, dress, and bury the body.

Cremation can also give family members who may not be local more time to plan gathering in honor of your deceased loved one.

Celebration of Life

If having a traditional funeral service for your loved one does not feel right, or if you do not want their memory honored by a funeral service, planning a celebration of life might be a good option for you.

A celebration of life is an alternative memorial service that sets a different tone than a funeral. Celebrations of life are usually less formal and are held at nontraditional locations, such as a park or banquet hall. The deceased’s loved ones may release balloons, play music or a photo slideshow, or participate in an activity that the deceased enjoyed.

Natural Burial

Natural burials are becoming more popular across the country. Loved ones place the deceased in a green burial site and mark the location with a plaque or another marker with their name. Some states don’t even require that a funeral director be involved in the natural burial process.

Alternatives That Do Not Involve a Ceremony

Sometimes a ceremony does not feel like the right way to honor your loved one. If that is the case, there are numerous nontraditional ways to honor them without a ceremony.

There are many ways to honor the life of someone you love after they die. Today, you are not bound to the traditional funeral service. You can observe your loved one’s life in a way that is as unique and special as the individual you lost, creating a memory you can carry with you as long as you live.

Estate Planning Myths

Wed, 28 Sep 2022 11:15:00 GMT

There are many misconceptions about estate planning, and any one of them can result in costly mistakes. Understanding who needs an estate plan and what it should cover is key to creating a plan that is right for you.

A properly crafted estate plan allows you, while you are still living, to ensure that your property will go to the people you want, in the way you want, and when you want. It permits you to save as much as possible on taxes, court costs, and attorneys’ fees; and it affords the comfort that your loved ones can mourn your loss without being simultaneously burdened with unnecessary red tape and financial confusion.

The following are some common myths that people have about estate planning:

If you need help getting started on an estate plan. contact Jayde Law PLLC.

Parties to an Estate

Wed, 14 Sep 2022 11:15:00 GMT

When people pass away, typically, their assets go through probate — a legal process that distributes the person’s assets after death. The parties to an estate are the people involved in the probate process.

Although not technically a party to the estate, the deceased person — called the testator or decedent — is essential. When people make wills, they can choose beneficiaries, selecting people who have an interest in their estate. In the case of those who die without having made a will, state law often dictates who inherits the estate and determines the parties involved.

Parties to an estate include:

In specific cases, there might be other parties to an estate:

For more information or to create an estate plan, contact Jayde Law PLLC for a consultation.

Springing vs Non-Springing Power of Attorney

Wed, 31 Aug 2022 11:15:00 GMT

A power of attorney is a document that grants various powers and responsibilities to a trusted third party (typically referred to as an “attorney-in-fact” or “agent”) who can act on your behalf. This document usually only allows an agent to make non-medical decisions on your behalf. A power of attorney can be a valuable planning tool that lets you decide in advance who will manage your affairs should you become unable to do so. It can also be a way to avoid expensive guardianship or conservatorship proceedings if you become disabled or incapacitated.

The way a power of attorney is formalized varies from state to state. Some states have particular requirements and wording that must be in a power of attorney for it to be valid and accepted. You may have heard of the terms “springing” and “non-springing” power of attorney and wonder what they mean.

Springing Power of Attorney

A springing power of attorney is a document executed now, but that does not take effect until the occurrence of a specified event (e.g., incapacitation). This type of power of attorney is contingent on something specific happening before it comes into force. If the event or incapacity never occurs, an agent will not be empowered to act on behalf of the principal.

Many people want a springing power of attorney because they feel more comfortable knowing their agent can only exercise powers if a triggering event occurs. This can alleviate any concern that the agent may try to misuse a power of attorney.

A springing power of attorney is not always easy to use. Depending on your jurisdiction, it may be necessary to have a medical professional such as a doctor certify that a triggering condition has occurred.

Let’s say you become medically incapacitated. Where required, the professional will likely have to complete an affidavit attesting to your condition or that certain events occurred. Often, a medical professional will not be comfortable signing an affidavit or may require their own attorney to advise them on how to proceed. This can cause delays that can frustrate an agent’s ability to act, especially in time-sensitive situations.

Additionally, financial institutions may be reluctant to accept this type of power of attorney because it is difficult for them to judge whether you truly are incapacitated or if a triggering event has in fact occurred. A certain amount of caution on the part of financial institutions is understandable: When someone steps forward claiming to represent the account holder, the financial institution wants to verify that the individual indeed has the authority to act for the principal.

Non-Springing Power of Attorney

With a non-springing (also know as “immediately effective”) power of attorney, the agent has the powers granted in the document the moment it is signed by you and the agent(s) you designate. So, even if you are capable of signing for yourself or handling certain transactions, your agent could still sign for you without your involvement.

How Some States Approach Powers of Attorney

Many states have taken steps to address some of these problems. Some states have implemented statutory forms that, if filled out and executed correctly, financial and other institutions will be more likely to accept. In particular, many of these forms have a provision where the agent agrees to reimburse the third party for any claims that may arise against the third party because of reliance on a power of attorney.

To help limit the potential for abuse by an agent, some state statutory forms also allow a power of attorney to be narrowly tailored to a specific purpose.

The laws of each state will vary when it comes to powers of attorney. For guidance on a springing or non-springing power of attorney, contact Jayde Law PLLC for a consultation.

Estate Planning After Divorce

Wed, 17 Aug 2022 11:15:00 GMT

So, you’re officially divorced. In starting this new chapter of life, you should update your estate planning documents as soon as possible. You may no longer be legally married, but, depending on where you reside, divorce may not automatically remove your prior spouse from your will, trust, or beneficiary designations. Here are some items to consider updating:

Medical Directives

When you engage in estate planning, it is standard to complete forms such as a health care proxy or living will. Often, spouses will choose each other as their agents for making health care decisions if they become incapacitated. After a divorce, your ex may be the last person you want handling these matters. Change your documents to appoint someone you trust.

Power of Attorney

Another document you may have previously executed is a power of attorney. This can give another person a great deal of control over your assets and personal and financial affairs. If your current power of attorney names your prior spouse as your agent, you can revoke it and sign a new one choosing a different person to act as your agent.

Will and/or Trust

Many couples designate their partner as the executor or personal representative of their estate under their will. Your ex-spouse may also be listed as a beneficiary of your estate. If you do not want your former spouse to have a say over how your assets are handled or to receive any inheritance, it is important to review and amend your will now to remove them. The same goes for any trust you may have created where your ex is the trustee or a beneficiary.

Guardianship of Your Minor Children

If you have concerns about your prior spouse’s ability to be a guardian to your minor children, there may be steps you can take to mitigate any instability a divorce may have brought to the situation.

One option is to set up a trust for your children that will protect assets from being irresponsibly depleted. Life insurance amounts or other assets placed in a trust will be managed by a person whom you can name as trustee. This will prevent the other parent, who could otherwise be in control of minor children’s finances, from accessing certain funds.

Be Aware of What Insurance You Are Required to Maintain

Many divorce settlements set forth that one spouse maintains life insurance and specifies who shall be a beneficiary of the policy. You should ensure your current life insurance policies not only comply with your divorce agreement, but also are not in danger of lapsing.

The same goes for medical insurance. If you are required to maintain medical insurance in a certain manner, review your plan to ensure the correct parties are covered and that it is in good standing.

Failure to comply with your divorce agreement can cause you to wind up back in court.

Beneficiary Designations

If you are not required to maintain your ex-spouse as a beneficiary on your life insurance or retirement accounts, now is the time to update your designations. You should contact your insurance company or retirement administrator to make these changes. Upon your passing, the funds will go to whomever is listed as a beneficiary, regardless of a divorce proceeding.

Consult a New Estate Planner

The best thing you can do after your divorce is work with an estate planner to review your current documents and update them appropriately. Ideally, this person should have no connection to your prior spouse. Keep a copy of your divorce decree and settlement agreement handy. An estate planner will need to review it to evaluate what you need going forward.

To understand the consequences of a divorce on your estate plan and/or if you are recently divorced and looking to update your estate plan, contact Jayde Law PLLC for a consultation.

Portability of the Estate Tax Exemption

Wed, 03 Aug 2022 11:15:00 GMT

On July 8, 2022, the Internal Revenue Service (“IRS”) issued new guidance that allows a deceased person’s estate to elect “portability” of their unused gift and estate tax exemption for up to five years after their death. If your spouse passed away less than five years ago, you may be able to file an estate tax return to transfer their unused estate tax exclusion to yourself.

What Is Portability, and How Does One Get It?

Portability is a way of transferring the amount of the gift and estate tax exemption that a deceased spouse did not use to the surviving spouse. It is only available to married couples.

To get the benefit of portability, the executor of an estate must file a federal estate tax return. Previously, this return had to be filed within two years of a person’s date of death, assuming an estate tax return was not required sooner. Because so many estates kept missing this window, the IRS decided to extend it to five years.

Example: your spouse has passed away, and you are the executor of their estate. If the total value of your spouse’s assets in their estate is below the threshold for federal estate taxation, you may assume that no estate tax return needs to be filed. While this is technically correct, if you do not file an estate tax return, there is no way to transfer your spouse’s unused estate tax exclusion to yourself.

The federal gift and estate tax exclusion as of 2022 is $12.06 million per person ($24.12 million for married couples). A person can give away — either during their lifetime or at death — up to this amount, tax-free.

In the above example, if your spouse’s estate were worth $2 million, that would leave an unused exemption of $10.06 million, which you could add to your own $12.06 million exemption, should you ever need it. But you must file an estate tax return for your spouse and complete the section of Form 706 currently entitled “portability of deceased spousal unused exclusion.”

Now Is a Good Time to Consider If You Could Benefit From Portability

The current federal gift and estate tax exemption will be reduced by half in 2026. If you have a spouse who died in the past five years, you should consider whether electing portability makes sense.

To be eligible, the deceased spouse must have been a U.S. citizen or permanent resident on the date of their death, and the executor must not have been otherwise required to file an estate tax return based on the value of the total estate and any taxable gifts. If an estate tax return was filed within nine months after the spouse’s death or an extended filing deadline, the portability option may also not be available.

Declining to Act as an Agent Under a Power of Attorney

Wed, 20 Jul 2022 11:15:00 GMT

Acting as an agent under a power of attorney is a big responsibility and it isn’t something everyone can take on. It is possible to resign or refuse the position.

There are two main types of powers of attorney – financial and medical. As the agent under a power of attorney, you act in place of the “principal”—the person executing the power of attorney—to make financial or medical decisions when and if that person ever becomes incapacitated. This can be a big job, depending on the person whom you are acting on behalf of.

With a financial power of attorney, you are responsible for taking whatever investment and spending measures the principal would take himself or herself. Unless limitations have been placed in the power of attorney document itself, you can open bank accounts, withdraw funds from bank accounts, trade stock, pay bills, and cash checks. In addition, you need to keep good records of all your dealings.

With a medical power of attorney, you must step in and make medical decisions for the principal that you believe the principal would have wanted. For example, you may have to make decisions about whether to start or stop a particular treatment, which doctors or specialists to choose, or whether to continue or stop life support.

While an agent under a power of attorney isn’t personally liable for the principal’s bills, it is still a huge responsibility that takes time and effort. Before agreeing to be an agent under a power of attorney, consider whether you are able to devote the time and energy to the job and whether you can emotionally handle making the decisions. In addition, think about whether there are family issues, such as constant disagreements among siblings, that would make serving difficult.

If you do not want to serve as an agent under a power of attorney, the best thing to do is have an honest discussion with the person executing the power of attorney. You can simply tell them that you are not the best person to act in this role. If you have already been appointed and you decide you want to resign, the power of attorney document may specify the steps necessary. If these steps aren’t spelled out, the best thing to do is write a letter tendering your resignation, and send it via certified mail to the person who executed the power of attorney and any co- or successor agents.

If the person who executed the power of attorney is incapacitated already, it is a little more complicated. Ideally, the power of attorney document has named successor agents. In that case, you can refuse the job and the successor agent can take over. If there are no successor agents, a guardian may need to be appointed for the principal. An interested party—another family member or friend—could petition the court for guardianship or, if no one is available to take on the job, the principal may become a ward of the state.

If you are named as agent under a power of attorney and want to refuse or resign, consult with an attorney to find out the best way to do that in your state.

Community Property and Estate Planning

Wed, 06 Jul 2022 11:15:00 GMT

In most states, spouses can purchase and own property separately from one another. However, in certain states – called community property states – if one spouse purchases property, it is considered the property of both spouses. How marital property is owned has implications for both estate and tax planning.

There are currently nine community property states. They are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. A few other states (for example, Alaska) allow couples to opt into community property arrangements.

Community property is property acquired by a husband and wife during marriage. In community property states, property held in only one spouse’s name can still be community property. For example, the paycheck that a spouse brings home every week is community property even though only one spouse’s name is on the check. If that check is used to buy an asset, then that asset is community property, regardless of whose name is on the account or the asset.

Property that is not community property is property that one spouse brings to the marriage, inherits, or is gifted. A spouse can turn separate property into community property by putting an asset owned by one spouse into both spouses’ names.

Depending on the state, partners may be able to change whether property is separate or community via pre-nuptial agreement, post-nuptial agreement, or exceptions in the law. Changing community property into separate property may be appropriate in second marriages or when one spouse is bringing significant separate property into the marriage. For example, if, at the time of the marriage, one spouse receives significant income from owning a business, the spouses may decide that it is appropriate that the business remain that spouse’s separate property and the income from that property will remain that spouse’s separate property.

One advantage of community property is with regard to capital gains taxes. If one spouse dies, the cost basis of the community property gets “stepped up.” The current value of the property becomes the cost basis. This means that if, for example, the couples’ house was purchased years ago for $150,000 and it is now worth $600,000. The surviving spouse will receive a step up from the original cost basis from $150,000 to $600,000. If the spouse sells the property right away, he or she will not owe any capital gains taxes. In non-community property states, if one spouse dies, only the deceased spouse’s interest (usually 50% of the value) is stepped up.

When estate planning in a community property state, it is important to fully review assets to determine which assets are community property and which are separate property. A surviving spouse in a community property state is entitled by law to half of the community property, regardless of what the spouses may have wanted to do with the property (such as pass it on to children). Community property can be a factor even in non-community property states if the couple owns property in a community property state.

If spouses move from one type of state to another, it is especially important that they have their estate plan reviewed by an attorney in the new state to make sure the plan still does what they want.

Planning for an Estranged Child

Wed, 22 Jun 2022 11:15:00 GMT

Unfortunately, not all families get along. If you are having problems with one of your children, you may not want them to benefit from your estate. There are several strategies for dealing with an estranged child in your estate plan.

Depending on the level of estrangement and the reasons for the estrangement, the following are the main approaches for treating a child differently in your estate plan:

Disinheriting a child comes with a risk: He or she may contest the will in court, which can cost your estate time and money. There are steps you can take to try preventing a will contest, including making sure your will is properly executed, writing a letter to the estranged child to explain your reasoning, and removing any appearance of undue influence. Keep in mind, however, that nothing is foolproof.

Figuring out how to treat an estranged child in your estate plan is complicated and emotional. Call Jayde Law to discuss the best strategy for you.

When to Avoid Naming a Trust as Beneficiary of Your Retirement Plan

Wed, 08 Jun 2022 11:15:00 GMT

Naming a trust as a beneficiary of your retirement plan can be a good idea in some circumstances, but it can be dangerous if you are worried about creditors of your estate.

There are a lot of good reasons to name a trust as beneficiary of a retirement plan, whether it is a 401(k), a 403(b), or an IRA. If the IRA beneficiaries are young, disabled, or for other reasons shouldn’t be managing the asset themselves, the trust provides that management. People in a second marriage or relationship may want their spouse or partner to benefit from the funds, but not be able to deplete them entirely, and trusts provide protection from the beneficiary’s creditors. However, the trust may not protect your retirement funds from your own creditors.

Creditor Protection for Retirement Plans

IRAs enjoy substantial creditor protection during your life. If you get sued, your IRA will be subject to claim, but you can protect it by declaring bankruptcy. Under the federal bankruptcy code, the first $1,362,800 of retirement assets are protected from having to be paid to creditors. Most cases settle, so you can generally get this protection without having to go through the bankruptcy process, but it’s there if necessary.

But Only During Life

However, the creditor protection afforded during your life ends at death. This protection also does not apply to inherited IRAs (those you leave to others or that you have inherited from others). Inherited IRAs are subject to creditor claims. However, your heirs are not liable for your debts. So, if your retirement plans pass directly to them, the plan assets will be protected from your debts.

By way of example, let’s assume an individual dies owing $400,000 to various creditors, with a total estate of $500,000 divided between a house with a market value of $250,000, savings of $100,000, and retirement plans holding $150,000. If the retirement plans are paid directly to this individual’s heirs, they will not be subject to the person’s debts. The rest of the assets will have to go to pay off debts, leaving nothing in the estate for the heirs, but also leaving the creditors short $50,000.

Revocable Trusts Subject to Claim

But what if the IRAs were payable to the individual’s revocable trust? Then the funds may be subject to creditor claims. If there are not enough funds in the decedent’s probate estate to pay his or her debts, states often allow the creditors to go after a revocable trust. In at least one case in Kansas (which like 34 other states and the District of Columbia has adopted the Uniform Trust Code), the court ruled that this right of creditors to go after the decedent’s revocable trust applied to an IRA payable to the trust. There’s no reason to think that other courts would not come to a similar conclusion.

If your debts exceed your non-retirement plan assets, it may be best to avoid making your revocable trust the beneficiary of your retirement assets. Either make the retirement assets payable directly to beneficiaries or, if a trust is necessary, to an irrevocable trust.

Leaving Unequal Shares to Your Children

Wed, 25 May 2022 11:15:00 GMT

Parents usually want to leave their children equal shares of their estate, but equal isn’t always fair. If you plan to provide more (or less) for one child in your estate plan, preparation is important.

It is natural for parents to want to treat their children equally in their estate plan, but there are some circumstances in which a parent might want to leave children unequal shares. If one child is providing all the caregiving, the parent might want to reward that child. If one child is substantially better off than another child, then the parent might want to provide more for the child who has a greater need for the funds.

Several other factors that can influence how much a parent chooses to give each child, such as: is if one child has special needs; if there is a family business that only one child wants to run; or , if the parents have already provided more for one child during their lifetime, maybe by paying for graduate school or helping them buy a house.

Whatever the reason for leaving your children unequal shares, the important thing is to discuss your reasoning with the children. Sit down with them and explain your decision-making process at some point prior to your death. If you feel like the conversation could be difficult and contentious, you could hire a mediator to help facilitate the discussion.

Your children may be understanding of your decision, but if you are worried about one child challenging your will after you die, you may want to take additional steps:

To understand the tax consequences of leaving unequal share to your children and to properly plan, contact Jayde Law PLLC for a consultation.

Small Business Owners and Estate Planning

Wed, 11 May 2022 11:15:00 GMT

Running a small business can keep you busy, but it should not keep you from creating an estate plan. Not having a plan in place can cause problems for your business and your family after you are gone.

While an estate plan is important for everyone, it is especially important for small business owners. Planning allows you to dictate what will happen with your business after you die or are no longer able to manage it. In addition, planning can help you avoid excess taxes and debts and facilitate your business’s continued success.

Before sitting down to start the estate planning process, you should think about your goals for the business. What do you want to have happen if you die or become incapacitated? Should the business continue with current partners or be sold to new owners? Should your family take over? Should the business be shut down? Consider your family dynamics when thinking about these questions. Once you have come up with your goals, you can create a plan to meet them.

The basic building blocks of any estate plan include a will, power of attorney, and medical directives. A will allows you to direct who will receive your property at your death while a power of attorney and medical directives dictate who can act in your place for financial and health care purposes during life.

Following are some additional things a small business owner should consider as part of an estate plan:

To create a plan that meets your goals and the needs of your business, contact Jayde Law PLLC for a consultation..

Selling a Home After the Death of a Spouse

Wed, 27 Apr 2022 11:15:00 GMT

If your spouse dies, you may have to decide whether or when to sell your house. There are some tax considerations that go into that decision.

The biggest concern when selling property is capital gains taxes. A capital gain is the difference between the "basis" in property and its selling price. The basis is usually the purchase price of property. So, if you purchased a house several years ago for $250,000 and sold it for $500,000 you would have $250,000 of gain ($500,000 - $250,000 = $250,000).

Couples who are married and file taxes jointly can sell their main residence and exclude up to $500,000 of the gain from the sale from their gross income. Single individuals can exclude only $250,000. Surviving spouses get the full $500,000 exclusion if they sell their house within two years of the date of the spouse's death, and if other ownership and use requirements have been met. The result is that widows or widowers who sell within two years may not have to pay any capital gains tax on the sale of the home.

If it has been more than two years after the spouse’s death, the surviving spouse can exclude only $250,000 of capital gains. However, the surviving spouse does not automatically owe taxes on the rest of any gain.

When a property owner dies, the cost basis of the property is "stepped up." This means the current value of the property becomes the basis. When a joint owner dies, half of the value of the property is stepped up. For example, suppose a husband and wife buy property for $250,000; several years later, the husband dies when the property has a fair market value of $1,000,000. The new cost basis of the property for the wife will be $625,000 ($125,000 for the wife's original 50 percent interest and $500,000 for the other half passed to her at the husband's death). In community property states, where property acquired during marriage is the community property of both spouses, the property’s entire basis is stepped up when one spouse dies.

To understand the tax consequences of selling property after the death of a spouse and to properly protect your assets contact Jayde Law PLLC for a consultation.

Grantor or Non-Grantor: A Question of Trust

Wed, 13 Apr 2022 11:15:00 GMT

One of the many factors to consider when setting up a trust is whether to make it a grantor trust or a non-grantor trust. While a grantor trust is more common, a non-grantor trust can be useful in certain circumstances.

A grantor trust is any trust in which the person setting up the trust (the “grantor”) retains some control over the trust. This could mean the grantor has the power to revoke the trust, change trust beneficiaries, change trust assets, or distribute income from the trust to the grantor or the grantor’s spouse, among other things. Including any provision that gives the grantor power over the trust will make a trust a grantor trust. Many trusts set up for estate planning purposes fall into this category. A non-grantor trust is any trust that is not a grantor trust, meaning the person who set up the trust retains no rights, interests, or powers over trust assets.

That said, why should you care? The main difference between grantor and non-grantor trusts is how they are taxed. With a grantor trust, the grantor is responsible for paying tax on any income generated by the trust. Grantor trusts are often set up with the grantor’s Social Security number, so the income is reported directly on the grantor’s tax return. A non-grantor trust is taxed as a separate entity, so the trustee is responsible for filing a tax return for the trust. If the trust pays income to a beneficiary, the income is included in the beneficiary’s taxable earnings.

The structure of the non-grantor trust has tax benefits in some circumstances and it may be useful in the following situations:

Non-grantor trusts also have their downsides. They are much more expensive to set up and maintain. In addition, the grantor loses all control of the assets in the trust. Taxes can also be steeper for a non-grantor trust.

To find out if a non-grantor trust is right for you, call Jayde Law PLLC for a consultation.

Who Gets My Season Tickets?

Wed, 30 Mar 2022 11:15:00 GMT

Sports fans with season tickets may want their families to enjoy the tickets after they are gone but passing on these tickets may not be simple.

Getting season tickets to your favorite sport is not always an easy task. Season tickets for some teams can be a significant investment. It makes sense that you may want family or friends to be able to take advantage of tickets that are still available for use after you pass away. However, most teams place limits on how you can transfer the tickets both during life and after death.

A season ticket is a contract between the purchaser and the team, so the team may implement any restrictions it wishes in the contract. This includes setting limits on when and how the tickets can be transferred to someone else. Teams may explicitly state that the tickets cannot be transferred by will or trust, restrict transfers to certain individuals (i.e., only to a spouse or close family members), or require that ticket holders follow certain procedures in order to transfer the tickets.

For example, some teams have a form that must be completed, designating a beneficiary to inherit your tickets. Other teams state that only a spouse can use a deceased fan’s season tickets. Still others allow transfers only to a parent, spouse, child, or sibling. If there is no surviving family member who is eligible to receive the tickets, the tickets go back to the team.

Note that some teams require fans to purchase a seat license before buying season tickets. This means the fan pays a large fee to buy a license for particular seats and then has the right to buy season tickets for those seats. A seat license, unlike season tickets, is transferable using a will or trust.

If you own season tickets, be sure to include them in your estate planning.

For help with you estate planning needs, contact Jayde Law, PLLC.

How Long Does an Executor’s Job Take?

Wed, 16 Mar 2022 11:15:00 GMT

Being the executor of an estate can be a time-consuming job, depending on the size and complexity of the estate. While a simple estate can take a few months and not require a huge time commitment, if there are problems, the job can drag on for years.

An executor is the person responsible for managing the administration of a deceased individual's estate. Although the time and effort involved will vary with the size of the estate, even if you are the executor of a small estate you will have important duties that must be performed correctly or you may be liable to the estate or the beneficiaries.

The first thing an executor should do is to consult with an attorney to learn the deadlines in the state where the decedent lived. To start the probate process, the executor must file the will for probate. Some states have strict time limits on how long after a decedent dies the executor has to file the will with the court, while others have no time limits. In addition, there may be deadlines for the executor to prepare a list of all of the deceased's assets and file this inventory with the court. It is important that the executor understand what is required and when.

While executors must adhere to deadlines set by the state, other factors can make the estate administration go faster or slower. The following are the issues that can increase or decrease time:

Every family situation is unique, so there is no set time that an executor can expect to work. If you are named as an executor, check with an attorney in the decedent’s state to find out what to expect.

IRA Distributions as Charitable Donations

jds@jaydelaw.com (James Saintvil) — Wed, 02 Mar 2022 22:52:03 GMT

Not everyone wants to take required minimum distributions from their retirement accounts right away. If you do not want to take your distribution, one option is to donate it to charity and get a tax deduction.

You are required to begin taking distributions from your tax-deferred IRA when you reach age 72 (70 ½ if you turned 70 ½ in 2019 or before) even if you do not need the money. The distributions are included in your taxable income for the year and taxed at the your standard tax rate. In fact, the additional income from a distribution may push you into a higher tax bracket, especially if you are still working.

If you do not want a distribution, you may want to consider donating the distribution directly to charity through a qualified charitable donation . By donating your required minimum distribution, the distribution will not be included in your gross income, which means lower taxes overall.

A qualified charitable donation can also be a good way to get a tax deduction after the 2017 tax law doubled the standard deduction, making it harder to get a deduction for a direct charitable contribution. If your charitable contributions along with any other itemized deductions are less than $12,950 a year (in 2022), the standard deduction will lower your tax bill more than itemizing your deductions, which can be a disincentive to donate to charity. A qualified charitable donation is a way to make a donation and receive a tax benefit from it.

In order for the donation to count as a required minimum distribution, the donation must be made directly from the IRA to the charity. The funds cannot be distributed directly to you then subsequently donated to charity. The charity must be approved by the IRS, and different IRAs have different rules about how to make the distributions. If you make a qualified charitable donation, you cannot also itemize the deduction. The maximum amount you can donate is $100,000. If you donate less than your required minimum distribution, you will need to take the remainder as a distribution.

For more information from the IRS about distributions, click here .

Trustee Compensation

jds@jaydelaw.com (James Saintvil) — Wed, 16 Feb 2022 22:50:53 GMT

Serving as a trustee of a trust can be a huge responsibility, so trustees are entitled to compensation for their work. The amount of compensation depends on the type of trustee and the complexity of the trust.

Depending on the trust, a trustee’s duties can include managing trust assets, making distributions to beneficiaries, paying taxes, and creating an annual report of all income and distributions. Performing these tasks can involve a lot of work, so it makes sense that trustees are compensated for their time.

The terms of the trust may explain exactly what compensation the trustee is entitled to, but many trusts don’t provide specifics. With no guidance from the trust document, the laws in most states usually require that trustee compensation be “reasonable,” without giving more details. What is considered reasonable is going to depend on the type of trust. Things to consider include the following:

The amount of time needed to administer the trust.
The complexity of the trust.
The number of beneficiaries involved.
The types of assets that need to be managed.

Often family members and friends serve as trustees without compensation. If their duties are modest—simply distributing trust assets, for example—that might be fine. With a more complicated trust, however, some compensation is expected.

Professionals usually charge an annual fee of between 1 percent to 2 percent of assets in the trust. For example, the annual fee for a trust holding $1 million could be between $10,000 and $20,000. Often, professionals charge a higher percentage of smaller trusts and a lower percentage of larger trusts.

A non-professional trustee usually charges less than a professional. However, if the non-professional trustee is doing all of the work for a trust, including investments, distributions and accounting, it may be appropriate to charge a similar fee. On the other hand, if the non-professional trustee is paying others to perform these functions or is acting as co-trustee with a professional trustee, charging this much may be seen as inappropriate. If taking a percentage of the trust assets would deplete the trust, non-professional trustees may also charge an hourly rate for their work.

In addition to compensation for their work, trustees are also entitled to reimbursement for any expenses that they might incur in the course of performing their duties, including travel, storage, insurance, or taxes.

If the beneficiaries are unhappy with the fees the trustee receives, they can challenge them in court. On the other hand, if trustees think they are entitled to more compensation, they can also appeal to court to receive higher payment.

Disclaimer: What to Do About an Unwanted Inheritance

jds@jaydelaw.com (James Saintvil) — Wed, 02 Feb 2022 22:49:37 GMT

While an inheritance is usually desired, there are some circumstances in which it might be unwelcome. If you don’t want an inheritance, you must disclaim it.

Most people who receive an inheritance are honored, but for some, it can be more of a burden than a blessing. The following are some reasons why an inheritance may be unwanted:

Taxes. If the inheritance would bump your estate above the estate tax exemption amount, when you die, your estate may be subject to estate tax.
Income. If the inheritance is income producing, it could push you into a higher income tax bracket.
Litigation or bankruptcy. You are in a position to be sued or you think you will soon be going through bankruptcy and are likely to lose the inheritance anyway. Note that if you are currently going through bankruptcy, you may not be able to disclaim an inheritance.
Inability to maintain. The inheritance involves a piece of property or something else that you would be required to maintain and you are not in a position to do so.
Honoring the decedent’s wishes. Circumstances may have changed since the drafting of the will that mean that keeping the inheritance does not honor the decedent’s wishes. For example, a parent may have meant to leave assets of equal value to each of their children, but the assets may have increased or decreased in value, making the inheritance unequal.

In order to officially disclaim an inheritance, the IRS sets the following requirements:

You must provide written notice to the executor or administrator of the estate (or trustee of a trust) that includes a statement that you are disclaiming the assets and that the decision is irrevocable.
The statement must be provided within nine (9) months of the decedent’s death (minors have until they reach the age of majority).
You cannot benefit from the disclaimed property, directly or indirectly.

You have no say in who gets the inheritance once you disclaim. The inheritance would be treated as if you died before receiving it. It would go to the contingent beneficiary named in the will or trust. If there is no will or trust, it would go to the next person in line under state law.

Disclaiming may not be the best option for Medicaid beneficiaries. If you are receiving Medicaid benefits and disclaim an inheritance, that disclaimer may be considered a transfer of assets and make you ineligible for Medicaid for a period of time.

What Makes a Will Valid?

jds@jaydelaw.com (James Saintvil) — Wed, 19 Jan 2022 22:47:51 GMT

Movies, television, and books like to present wills in dramatic ways—handwritten notes, videos, deathbed utterances—but what actually makes a will valid? The law varies depending on what state you live in, but there are some basic rules.

The legal requirements for a will are fairly simple. In order for your will to be valid, you must know what property you have and what it means to leave it to someone, then sign and date the document and have it witnessed according to the laws of your state. Most states require two witnesses to watch you sign the will and then sign as witnesses. Usually one of the witnesses can be the lawyer who drafted the will. Most states do not allow beneficiaries under the will to be witnesses.

Some states allow you to make a handwritten will, called a "holographic" will. This will does not need to be witnessed, but it is much more likely to be challenged after you die. Some states require that the entire will be in your handwriting; others call for just the important portions to be in your handwriting. The writing must indicate your intent to make a will and clearly describe the property being given away. Some states require the will to be dated and signed.

Very few states allow an "oral" will (called a "nuncupative" will). The states that allow this type of will have very specific requirements for when it is valid. For example, Indiana only accepts an oral will if it is made by someone in imminent peril of death who then dies as a result of the peril. States may require two witnesses and that the will be reduced to writing soon after the declaration. There also may be a limit to the amount of property someone can dispose of with an oral will.

Video wills are not recognized as a form of will in any state. States may recognize a video will as a valid oral will if it meets all the requirements, but a video will, by itself, is not a valid will. However, using video to record a will signing can be a good method to prevent a will contest. A video recording of the will signing allows your family members and the court to see that you are freely signing the will and makes it more difficult to argue that you did not have the requisite mental capacity to agree to the will.

The best way to make sure your will is considered valid is to speak with an attorney. Contact Jayde Law PLLC for a consultation.

Annual Gift Tax and Estate Tax Exclusions in 2022

jds@jaydelaw.com (James Saintvil) — Wed, 05 Jan 2022 22:46:53 GMT

The amount you can gift to any one person without filing a gift tax form has increased to $16,000 for 2022, the first increase since 2018. The federal estate tax exclusion has climbed to more than $12 million per individual.

The increase of the annual gift exclusion means that any person who gives away $16,000 or less to any one individual (anyone other than their spouse) does not have to report the gift or gifts to the IRS. Any person who gives away more than $16,000 to any one person is required to file IRS Form 709, the gift tax return.

The basic federal estate tax exclusion amount for the estates of decedents dying during calendar year 2022 is $12,060,000 for individuals and $24,120,000 for couples, up from $11.7 million and $23.4 million for calendar year 2021. This increase in the estate tax exclusion means that the lifetime tax exclusion for gifts should also rise to $12,060,000, as should the generation-skipping transfer tax exemption.

This $12,060,000 million lifetime gift tax exclusion means that even if you are required to file Form 709 because you gave away more than $16,000 to any one person during the year, you will owe taxes only if you have given away more than a total of $12,060,000 million during your lifetime thus far. As a result, under current rules the filing of Form 709 is irrelevant for most people because the vast majority of individuals do not have $12,060,000 million to give away. Still, Congress could change the exclusion limit, and the lifetime exclusion is slated to drop in half in 2026, causing some additional estates to be taxable. To stay within the IRS's rules without the bother of filing a gift tax return or the (small) risk of a much lower threshold, consider gifting up to the $16,000 limit to multiple family members or other individuals.

Intrafamily Loans as Part of Your Estate Plan

jds@jaydelaw.com (James Saintvil) — Wed, 22 Dec 2021 22:43:27 GMT

When interest rates are low, intrafamily loans can be a great way to assist a relative (usually a child) with purchasing a house or a family business, and in certain circumstances they can be used to gift money to the next generation.

An intrafamily loan allows family members to borrow money from each other at a special rate, but it must be structured properly so that the loan is not considered a gift. This means the loan must consist of a written promissory note, require repayment, and charge interest (if the loan is for more than $10,000). The IRS sets the Applicable Federal Rate (AFR) each month, and the interest on the intrafamily loan must be equal to or greater than the AFR. The rate is different, depending on the term of the loan, which can be a short-term loan (0-3 years), a mid-term loan (3-9 years), or a long-term loan (9 or more years). The AFR is typically lower than the interest rate a bank would charge, and the borrower’s credit doesn’t affect the loan, so someone with bad credit can still get a loan.

When structured properly, intrafamily loans can assist children with purchases and pass on assets. The following are some of the ways intrafamily loans can be used:

Pay for a house. An intrafamily loan can be used to fund a mortgage for children or grandchildren. Because the interest rates are lower, the children will pay less overall than going through a traditional mortgage lender.
Pass on a family business. Depending on how large the business is, giving away a business could exceed the prevailing gift tax exemption. Instead, parents can loan money to a child to purchase the family business. Parents who are financially able could use the annual gift limit ($15,000 in 2021) to give children money to repay the loan. Alternatively, if the family business produces income, the child can use the income to pay back the loan. Even if the business doesn’t exceed the gift tax exemption, this can be a good strategy for parents who want to pass on the business, but still need a steady income stream.
Pass on assets. Intrafamily loans can be used as a method of passing on assets provided the borrower can invest the money in a way that brings in a higher rate of return than the interest rate on the loan. Given the low interest rate on intrafamily loans, this can be a successful strategy. If the loan is a large one, it may be wise to loan the money to a family trust. The trust invests the money and repays the loan. After the loan is repaid, the remaining assets are protected by the trust and can be distributed to beneficiaries as dictated by the trust terms.

The downside of an intrafamily loan is the same as with any loan: The loan must be repaid. If the child defaults on the loan, it could trigger a gift tax for the person making the loan. It is also important to have the correct paperwork and documentation. Intrafamily loans should only be set up in consultation with your attorney.

Why You May Need a Trust in Addition to Your Power of Attorney

jds@jaydelaw.com (James Saintvil) — Wed, 08 Dec 2021 22:42:37 GMT

While everyone should have a durable power of attorney that appoints someone to act for them if they become incapacitated, in some circumstances it is not enough. In these cases, a revocable trust may help.

A durable power of attorney allows you to empower someone you trust to step in to handle financial and legal matters on your behalf if you become incapacitated. We all are at risk of incapacity from illness or injury, whether temporary or permanent. Of course, this risk increases as we age. Without someone in place to handle legal and financial matters, bills can go unpaid, contracts can't be signed, homes can't be refinanced, leases can't be terminated, investments can go unmonitored and unadjusted, and families often fight over who should be in charge. The remedy of seeking court-appointed conservatorship is expensive, cumbersome, and time-consuming. It is best that you pick your own person or people for this role.

Nevertheless, however important taking this step can be, it's not always enough. There are two reasons for this: sometimes financial institutions refuse to honor older powers of attorney and agents sometimes don't step in until it is too late. Both problems can be remedied through the use of a revocable trust.

Powers of Attorney Can Be Rejected
Financial institutions often reject older powers of attorney, claiming that they cannot know whether the document has been revoked since first signed. Sometimes the institution will require the drafting attorney to attest to the fact that the document has not been revoked, even though the attorney may not have met with the client for many years and, of course, cannot know everything the client did during that time.

Financial institutions are uncomfortable honoring powers of attorney because they do not want to be held liable for any malfeasance by the agent appointed under the document. In the opinion of most estate planning attorneys, such institutional rejection is contrary to law, but there is no good remedy when this occurs since any lawsuit against a large financial institution will be expensive and time consuming.

Fortunately, there are three ways to avoid this institutional intransigence:

Refresh your documents periodically . Financial institutions are more accepting of newer documents than older ones, so it's a good idea to execute new durable powers of attorney every five years or so. Of course, this is perverse. If the power of attorney is being used because of your incapacity due to dementia, you are more likely to have been experiencing cognitive challenges a year prior to its use than ten years earlier.
Use the financial institution's forms. Most banks and investment companies have developed their own durable power of attorney forms that they are more comfortable accepting than general ones your attorney prepared. Contact each financial institution where you have an account and ask whether it has a durable power of attorney form. You'll still need a general durable power of attorney, since the financial institution's form only governs accounts held at that institution, but using the institution’s form should prevent any problems with its acceptance.
Create a revocable trust. Financial institutions seem to accept revocable trusts more readily than durable powers of attorney. Revocable trusts have the added advantage that you can appoint a co-trustee to serve with you, so that if you become incapacitated, the co-trustee can continue to act.

A Trust Provides Financial Protection
As we age, we all become increasingly susceptible to making financial mistakes and falling victim to scammers. Having a financial advocate in place can help avoid both. An important step is to name an agent under a durable power of attorney. However, such agents often don't step in until it is too late and the senior has already lost a significant amount of money.

A co-trustee on a revocable trust, however, is already authorized to control the accounts in trust. Even if the co-trustee does not take an active role, he or she can monitor the accounts to make sure nothing untoward is occurring. Further, when it becomes necessary to step in, the co-trustee can do so immediately and seamlessly. In contrast, an agent under a durable power of attorney must present credentials to the financial institutions and go through the institution’s vetting procedure, delaying access to accounts and prohibiting the agent from protecting the accounts or being able to pay bills on behalf of the grantor.

Conclusion
For these reasons, revocable trusts often work better than durable powers of attorney. However, two caveats are in order: First, trusts only control the accounts actually held by them. So, for the trust to work, you must properly fund your trust .

Second, even if you have a revocable trust, you still need a durable power of attorney. This is for two reasons: First, you may not have transferred all your accounts into the trust and will need to give your agent control over those accounts and the ability to transfer them into the trust. Second, the trust only governs financial matters. Your agent under your durable power of attorney can also handle legal ones on your behalf, including signing your income tax returns.

Contact Jayde Law PLLC to discuss your planning goals and if a revocable trust is right for you.

Preserving the Current Estate Tax Exemption

jds@jaydelaw.com (James Saintvil) — Wed, 24 Nov 2021 22:41:44 GMT

With the current uncertainty surrounding the fate of the estate tax exemption, you may want to use the current large exemption to transfer assets to a trust for the benefit of your spouse. A spousal lifetime access trust (“SLAT”) can help transfer assets outside of your estate.

The current federal estate tax exemption is $11.7 million for individuals and $23.4 million for couples (set to increase to $12.06 million for individuals and $24.12 for couples in 2022). That means that as long as your estate is valued at under the exemption amount, it will not pay any federal estate taxes. The current lifetime gift tax exemption – the amount you can give away without incurring a tax – is also $11.7 million. However, if no action is taken in the meantime, in 2026 the exemption is set to drop back to the previous exemption amount of $5.49 million (adjusted for inflation).

Now may be a good time to take advantage of the large exemption by moving money from your estate into a trust. A SLAT is an irrevocable trust where one spouse (the donor) makes a gift to a trust for the benefit of the other spouse (the beneficiary). There can also be additional beneficiaries, such as children or grandchildren. While a gift to a trust would normally be taxed, the donor spouse can use the federal gift and estate tax exemptions to transfer the funds to the trust tax-free. Once the funds are transferred to the trust, they are no longer in the donor spouse’s taxable estate, and the SLAT is also excluded from the beneficiary spouse’s taxable estate as well.

One of the benefits of a SLAT is that the funds in the trust can appreciate over time without the appreciation being included in your estate. While a SLAT is designed to let assets appreciate, the beneficiary spouse can take distributions from the trust as necessary, allowing some indirect access to the funds. Because a SLAT is irrevocable, it also protects the funds from your creditors, and, depending on how the SLAT is set up, it may protect the funds from your spouse’s creditors as well.

A disadvantage to a SLAT is that once the funds are transferred, they are out of your control. If your spouse dies or you get divorced, you will no longer have any access to the funds. The funds will also not receive a “step-up” in basis when the donor spouse dies. In addition, a SLAT is a grantor trust, which means the donor spouse must pay income tax on any appreciation of the funds in the trust.

In order to take advantage of the benefits of a SLAT, it must be set up properly. Care must be taken when choosing a trustee—the donor spouse cannot be the trustee, and the beneficiary spouse can only serve as trustee if his or her power to make distributions is limited. If both spouses want SLATs, the trusts have to be structured to avoid being reciprocal trusts, which would make them includable in the spouses’ taxable estates.

If you are interested in determining if a SLAT is a smart estate planning tool for your family, contact Jayde Law, PLLC.

Who Makes Health Care Decisions When You Can't?

jds@jaydelaw.com (James Saintvil) — Wed, 10 Nov 2021 22:41:03 GMT

Being able to make health care decisions for ourselves is so important to us, but what happens if you become incapacitated and are unable to voice your opinion? If you don’t have a health care proxy or guardian in place, state law chooses who can make those decisions.

In an emergency, medical providers can take measures to keep us alive, but once the emergency has passed, the medical providers will look for someone to make the important medical decisions. If you are unable to make your own health care decisions, either temporarily or permanently, and you have nothing in place to allow someone else to make those decisions for you, then most state laws dictate who has the right to act on your behalf.

The list of surrogates who can make medical decisions for you usually goes in order of priority, starting with your spouse and adult children. Parents, siblings, grandchildren, and close friends may also be surrogates. These may not be the people you want making decisions for you, and not having your wishes spelled out can cause dissension among your family and confusion for medical professionals.

A few states (Massachusetts, Missouri, Nebraska, and New Jersey) do not have laws dictating who can act in an incapacitated person’s place. In those states, your family may have to go to court to get a guardian appointed. Even in states with surrogate laws, family members on the surrogate list may disagree over treatment and end up in court, asking the court to appoint a guardian. Guardianship is a legal relationship between a competent adult (the "guardian") and a person who because of incapacity is no longer able to take care of his or her own affairs (the "ward"). The guardian can be authorized to make legal, financial, and health care decisions for the ward. The guardianship process is expensive, time consuming, and very restrictive, so it is almost always a last resort.

The best way to avoid the state choosing who acts for you or the difficulty of guardianship is to have a health care proxy (also referred to as a health care power of attorney or advance health care directive) in place. A health care proxy is a document that allows you to appoint someone you trust to act as your agent for medical decisions. By executing a health care proxy, you are authorizing your agent to carry out your wishes. Doctors and other medical professionals will defer to the person named in the document to act on your behalf.

If you need to discuss and establish a health care proxy, contact us.

Protecting Your Documents From Disasters

jds@jaydelaw.com (James Saintvil) — Wed, 27 Oct 2021 22:40:09 GMT

It’s an unfortunate reality that with the increasing number of natural disasters across the country, including fires, floods, and hurricanes, the chance that you could lose your house and possessions has become more likely. In the event of such a calamity, it is important that your estate planning and other important documents are beyond reach and easily retrievable.

If your home is destroyed by a natural disaster or another event, you will want to be able to access important information quickly. First, you need to assemble all your crucial documents and information, including the following:

Account numbers and passwords. Keep a list of your bank and e-mail accounts and securely store your passwords.
Contact information. Make sure you know how to contact your attorney, advisors, and insurance company.
Legal documents. You should have copies of all your legal documents, including your will, trust, power of attorney, and health care proxy. You also need to know where any deeds and insurance contracts are kept.
Tax returns. It is recommended that you have three years worth of tax returns stored.
Medical information. You need to keep track of any prescription medicine and health insurance information.

Once you have all your documents and information, you need to store them in a safe and secure location that will survive a natural disaster. A fireproof and floodproof safe or filing cabinet in your house is one way to safeguard documents; a safe deposit box at a bank is also an option.* Your attorney may be able to store your legal documents for you. Some law firms will store your original signed documents for you.

Another option is online storage. There are online cloud storage systems that ensure your documents are available to you just by logging on. Dropbox, idrive, and Microsoft OneDrive are some online storage options. If you use online storage, make sure you know your passwords. If your information is on a hard drive or thumb drive, store the drives in a secure location, not just in a desk drawer.

Regardless of which storage option you use, be sure your loved ones know where the information is and how to access it so that they can easily access the information when needed.

To make certain you have all the pieces of your estate plan in place and stored properly, contact your estate panning attorney.

*If you do use a safe deposit box, you may want to have a joint owner on the account.

New Tax Proposals and Your Estate Plan

jds@jaydelaw.com (James Saintvil) — Wed, 13 Oct 2021 22:39:15 GMT

A number of tax proposals being considered in Congress could significantly affect gifting and estate plans for those with larger estates (over $3.5 million). If you are in that category, you might want to meet with your estate planner to take advantage of gifting opportunities that are available under the current law.

Under Senator Bernie Sanders’ For the 99.5 Percent Act, the estate tax exemption would be reduced from the current $11.7 million per individual to $3.5 million per individual. Any estate that is valued at under the exemption amount will not pay any federal estate taxes, while those exceeding the exemption threshold would be subject to a progressively increasing tax rate that starts at 45 percent. The Act would also slash the lifetime gift tax exemption from $11.7 million to $1 million, although individuals would still be able to give away $15,000 a year without the gift counting toward the lifetime limit.

Another proposal in the Senate is the Sensible Tax and Equity Promotion (STEP) Act, which would eliminate the step-up in basis that beneficiaries receive when they inherit property. The proposal would require an estate to pay tax on all previously untaxed gains. This means that if an estate includes property that has increased in value, the estate would have to pay taxes on that increase. However, the Act would allow the first $1 million of appreciated assets to pass without taxation. In addition, families that inherit a farm or business would be able to pay the tax in installments over a 15-year period. Any taxes paid under the bill would be deductible from the estate tax.

President Biden has also introduced his tax proposals, which include an increase of the capital gains tax rate to 40 percent. This would apply only to filers with income over $1 million. Biden’s proposal also contains a similar elimination of the step up in basis as the STEP Act. In addition, the proposal targets dynasty trusts. The income that has appreciated in a dynasty trust may be subject to capital gains if it has not been subject to recognition in the past 90 years. There would also be no valuation discounts when calculating capital gains.

It isn’t clear which, if any, of these proposals will make it all the way through Congress and get signed into law, but some changes are very likely.

If you are concerned about these rules changing, give us a call to discuss what you can do now to protect your estate from future tax changes. We will work with you to mitigate any adverse tax implications and to protect your assets for your loved ones.

Rules for Gifts or Inheritance from a Foreign National

jds@jaydelaw.com (James Saintvil) — Wed, 29 Sep 2021 22:30:35 GMT

If you have close relatives who are citizens of another country, you might receive a gift or inheritance from them at some point. While you usually do not have to pay taxes to the IRS for the gift or inheritance, you may need to report it.

The United States government does not impose a tax on the recipient of gift or inheritance, and that holds true for gifts from foreign nationals. However, there are special rules involved with money or property coming from abroad:

If you receive more than $100,000 from a foreign estate or non-resident alien in one year, you must file a special tax form. This includes gifts from more than one person that may be for less than $100,000 individually but add up to more than that in total. Further, if the total of the gifts you receive exceed $100,000, you must separately identify each gift in excess of $5,000. For example, if you receive, $20,000 from your grandmother’s foreign estate and $90,000 from your non-citizen mother, you need report each of the gifts.
If you receive more than $16,649 (in 2020) from a foreign corporation or partnership, you must report the gift and the identity of the donor.

You can report these gifts by filing IRS Form 3520. The form is filed separately from your personal income tax filing but shares the filing deadline of April 15th of the year following the receipt of the gift or bequest. If you fail to file the form, the IRS can enforce a 35% penalty.

If you put your foreign inheritance in a foreign bank account, you may also need to file a Foreign Bank Account Report (FBAR) with the U.S. Treasury Department.

Note that some states also impose an inheritance tax, so you should check with your state to make sure you do not owe taxes there.**

To determine the best way to handle your gift or inheritance, give us a call.

** Currently only 6 states in the United States have an inheritance tax: Maryland; Iowa; Kentucky; Nebraska; New Jersey; and Pennsylvania.

How an Irrevocable Life Insurance Trust Can Be Used to Avoid the Estate Tax

jds@jaydelaw.com (James Saintvil) — Wed, 15 Sep 2021 22:29:11 GMT

With the federal estate tax exemption possibly about to be lowered, it may be time to think about steps you can take to keep your estate from being taxed. An irrevocable life insurance trust allows you to pass on money to your heirs while avoiding both the federal estate tax, as well as any applicable state estate tax.

Senate Democrats have proposed lowering the current estate tax exemption from $11.7 million for individuals and $23.4 million for couples to $3.5 million for individuals and $7 million for couples. While it is unclear if anything will come of this proposal, it is likely that some change to the estate tax is coming. Even if Congress does not take any action, the current rate will sunset in 2025 and in 2026 the rate will essentially be cut in half, to approximately $5.5 million for individuals.

One way to make up for any estate tax your estate may have to pay is by setting up an irrevocable life insurance trust and funding it with a policy that has a death benefit that would pay your heirs some or all of the amount your estate will be taxed. If you purchased such a life insurance policy directly, it could end up being taxed as part of your estate. But if a trust owned the policy, it could pass outside your estate. While a life insurance trust can be highly beneficial, it is also complicated to set up and maintain properly.
The following are some of the requirements:

Trustee. If you are setting up the trust, you cannot also serve as a trustee. If you are the trustee, you have control of the trust, which could lead to the trust being included in your estate. You will need to name another trusted person or financial institution to act as trustee.
Policy ownership. The trust must own the life insurance policy. If you transfer an existing policy to the trust and die within three years, the policy will still be considered as part of your estate. To avoid this risk, the trust can purchase a policy directly rather than receive an existing policy.
Premiums. You need to transfer funds to the trust to pay the policy premiums, which may create a gift tax issues. A transfer to a trust is usually not subject to the $15,000 yearly gift tax exclusion. In order for a gift to qualify for the exclusion, the recipient must have a “present interest” in the money. Because a promise to give someone money later does not count as a present interest, most gifts to trusts are not excluded from the gift tax. To avoid this, you can use something called a “Crummey” power which gives beneficiaries the right to withdraw the funds transferred to the trust for up to 30 days. As part of the process, the trustee needs to send them a letter, known as a Crummey letter, letting them know about the trust funding and their right to withdraw the funds. After the 30 days have passed, the trustee can use the funds to pay the annual insurance premium. You run the risk of the beneficiaries withdrawing the funds, but if they know that by allowing the money to stay in the trust they will receive more money later, it shouldn’t be a problem.
Beneficiaries. The beneficiary of the life insurance policy is usually the trust. Once the funds are deposited in the trust, the trustee can distribute the assets to the beneficiaries in the way specified by the trust. For example, if your beneficiaries are minors, you can wait to have the trustee distribute the assets. Keeping the assets in the trust will also protect them from any creditors of the beneficiaries.

The downside of an irrevocable life insurance trust is that you do not have the ability to change it once it is set up, although the policy would effectively be canceled if you stopped paying the premiums.

If you are considering setting up an irrevocable life insurance trust, give us a call.

What Happens to Your Business When You Die

jds@jaydelaw.com (James Saintvil) — Wed, 01 Sep 2021 22:26:08 GMT

You spend a significant part of your life building your business, and it becomes a major part of your legacy. But when you die, everything you have built could fall apart if you have not taken the time to create a business succession plan. Without a plan in place, your business’s fate may be decided by a court instead of according to your wishes. You can take actions now to position your business for continued success—even when you are no longer around to run it. Depending on the type of business entity you have formed, a business succession plan can be addressed in your last will and testament, the business’ operating agreement, or in a buy-sell agreement.

Before you create a succession plan for your business, keep in mind the following key steps:

Determine the type of business entity. Is your business a sole proprietorship, partnership, limited liability company, or corporation? The type of business entity affects more than just taxes and day-to-day operations. It can also affect the succession planning options available to you. If you own your business as a sole proprietor, for instance, no one else has an ownership interest, so you are free to pass the business on to your chosen successor (or successors). But if co-owners are involved, your share of the ownership could be distributed to the other co-owners per the terms of an operating agreement or other legal document.
Determine who gets the business. Some owners want to pass their business on to their family, and it may make sense to do so in a will upon the owner’s death. Other owners may want to have the business sold after they die so that the proceeds can be distributed to their beneficiaries. Business owners can also leave their businesses to non-family members, such as employees or charity. Still, some owners may prefer that the business continue to operate while they leave their interest to one or more co-owners. In this case, a buy-sell agreement can ensure that the decedent’s beneficiaries do not unintentionally become owners.
Plan for management and ownership. Your business succession plan must do more than simply name who receives your business. A succession plan should address issues such as training and supporting successors; delegating duties to successors; naming outside directors, advisors, and professionals; designating who will own the business versus who will manage the business; and retaining key employees. Thinking ahead about such issues will improve the odds that ownership and management changes won’t cause the business to fail.
Get creative. Wills, operating agreements, and buy-sell agreements are common legal documents used to specify what happens to your business when you pass away. There are some other solutions that might work well, however, depending upon your particular situation. One solution is gifting the business to a successor while you are still alive. Another is to create a living trust and transfer the business into the trust during your lifetime, with the person you want to succeed you named as the successor trustee who will step into your shoes at the time of your death.

Not having a business succession plan could lead to headaches and disputes for your heirs and damage the company you spent years building. Understanding business succession and creating a comprehensive plan can allow your company to thrive in your absence.

Don’t leave your legacy to chance. Talk with experienced business law, tax, and estate planning professionals about how to protect the future of your business.

Preserving A Vacation Home For Future Generations

jds@jaydelaw.com (James Saintvil) — Wed, 18 Aug 2021 22:24:58 GMT

Summer is winding down and if you are lucky, you got to spend some time at a family vacation home. How do you make sure your children and grandchildren can enjoy that second home as much as you did?

The question for owners of vacation homes in planning their estates is the vision they have for the property. Do you see the property as binding the family together for generations to come as they continue to vacation together? Or are you more concerned about the issue of equity, in that some children are unlikely to ever use the property while others may use it heavily? There is no wrong answer—it’s just a question of your values and goals.

One option for passing on a vacation home is to leave it to your children in your will. The problem with this is that if the children own the house equally as joint tenants or tenants in common and if one sibling wants to sell, that sibling can demand to be bought out. If the other siblings can’t come up with the money to buy out the sibling, the sibling who wants out can force the sale of the house.

Before you decide to leave your vacation house to your children outright, you should have a discussion with your family to find out whether all the children actually want the house. If they do, you should discuss who will be responsible for maintenance and property taxes, and who has the right to use the property, among other issues. Putting a plan in writing can help prevent or resolve disputes down the road. The plan can also include a buyout option if any heirs decide they no longer want to own the property. The buyout price can be less than if the property is sold to a third party and payment terms can extend over several years.

Rather than giving the property to your children outright, you can also put it in a trust or a Limited Liability Company (LLC). LLCs have become a popular estate planning tool for vacation homes. Using an LLC allows parents to transfer interest in the LLC to their children while still retaining control. Parents can use the annual gift tax exclusion to slowly gift their children additional interest in the LLC each year. The LLC agreement can designate a property manager, provide instructions on maintenance costs and property taxes, and include buyout options. Property in an LLC is also protected from creditors.

Still another option is to put property into a qualified personal residence trust (QPRT). A QPRT allows the parents to live in the home for a certain number of years and at the end of the term, the children own the home. The main purpose of a QPRT is to reduce taxes on property, but QPRTs are tricky and must be set up just right or there will be no tax savings.

To determine the best way to protect your vacation home and how to best include the property under your estate plan, give us a call.

Minors as Beneficiaries

jds@jaydelaw.com (James Saintvil) — Wed, 04 Aug 2021 22:22:56 GMT

Most people want to pass their assets to their children or grandchildren, but naming a minor as a beneficiary can have unintended consequences. It is important to make a plan that doesn’t involve leaving assets directly to a minor.

There are two main problems with naming a minor as the beneficiary of your estate plan, life insurance policy, or retirement account. The first is that a large sum of money cannot be left directly to a minor. Instead, a court will likely have to appoint a conservator to hold and manage the money. The court proceedings will cost your estate, and the conservator may not be someone you want to oversee your children’s money. Depending on the state, the conservator may have to file annual accountings with the court, generating more costs and fees.

The other problem with naming a minor as a beneficiary is that the minor will be entitled to the funds from the conservator when he or she reaches the age of majority (which depends on state law). There are no limitations on what the money can be used for, so while you may have wanted the money to go toward college or a down payment on a house, the beneficiary may have other ideas.

The way to get around these problems is to create a trust and name the minor as beneficiary of the trust. A trust ensures that the funds are protected by the trustee until a time when it makes sense to distribute them. Trusts are also flexible in terms of how they are drafted. The trust can state any number of specifics on who receives property and when, including allowing you to distribute the funds at a specific age or based on a specific event, such as graduating from college. You can also spread out distributions over time to children and grandchildren.

If you do create a trust, remember to name the trust as beneficiary of any life insurance policies and discuss with your attorney whether you should designate the trust as beneficiary of any retirement plans. If you forget to take that step, the money will be distributed directly to the minor, negating the work of creating the trust.

If you have any questions about or would like to create a trust under your estate plan, give us a call.

Completed an Estate Plan... Now What?

jds@jaydelaw.com (James Saintvil) — Wed, 21 Jul 2021 22:21:55 GMT

Creating and executing estate planning documents is just the first step. Once you have completed the documents, you need to know what to do with them.

All estate plans should include, at minimum, two important planning instruments: a power of attorney and a will. A trust can also be useful to avoid probate and to manage your estate both during your life and after you are gone. In addition, medical directives allow you to appoint someone to make medical decisions on your behalf. Once you have all these essential estate planning documents, you need to make sure they are stored properly and get to the right people.

Store the Documents Properly
Your estate planning documents should be stored in a safe, secure location that is accessible to your personal representative (the person you appoint to handle your estate’s affairs after your passing; also known as an executor). Some law firms will store your original signed documents for you. If you want to keep your original documents at home, you should use a water- and fire-proof safe or filing cabinet. Many people use a safe deposit box in a bank, but these can be hard for your personal representative to access. Often the documents giving your personal representative the right to access the safe deposit box at a bank are themselves in the box. If you do use a safe deposit box, you may want to have a joint owner on the account. If an original document is lost, the court may accept a copy in some circumstances.

Spread the Word
It is critical that you tell your personal representative where the documents are located so that he or she can easily access them when needed. If the documents are locked away, your representative needs to know the combination or where the key is located.

You should also talk to other people who might be affected — such as your agent under a power of attorney or an agent under a medical directive — about what you want if you are unable to communicate your wishes yourself. Doing this ahead of time will help them execute your wishes when the time comes.

Avoid Confusion
Make sure you destroy any old estate planning documents that are no longer valid. Old documents can cause confusion among family members and could lead to litigation.

In addition, do not write on your current documents. If you want to make a change, contact your attorney to formally change the document. Handwritten additions are usually not valid and could raise questions about the document.

Grandchildren and Generation-Skipping Trusts

jds@jaydelaw.com (James Saintvil) — Wed, 07 Jul 2021 22:20:12 GMT

Passing assets to your grandchildren can be a great way to ensure their future is provided for, and a generation-skipping trust can help you accomplish this goal while reducing estate taxes and also providing for your children.

A generation-skipping trust allows you to “skip” over the generation directly below you and pass assets to the succeeding generation. While this type of trust is most commonly used for family, you can designate anyone who is at least 37.5 younger than you as the beneficiary (except a spouse or ex-spouse).

One purpose of a generation-skipping trust is to minimize estate taxes. Estates worth more than $11.7 (in 2021) have to pay a federal estate tax. Twelve states also impose their own state estate tax, which in some states applies to smaller estates. When someone passes on an estate to their child and the child then passes the estate to their children, the estate taxes could be assessed twice—each time the estate is passed down. The generation-skipping trust avoids one of these transfers and estate tax assessments.

While your children should not utilize the assets in the trust, they can receive any income generated by the trust. The trust can also be set up to allow them to have some say in the rights and interests of future beneficiaries. Once your children pass, the beneficiaries will have access to the assets.

Note however, that a generation-skipping trust is subject to the generation-skipping transfer (GST) tax. This tax applies to transfers from grandparents to grandchildren, even in a trust. The GST tax has tracked the estate tax rate and exemption amounts, so the current GST exemption amount is $11.7 million (in 2021). If you transfer more than that, you may encounter the high 40% tax rate.

The trust can be structured to take advantage of the GST tax exemption by transferring assets to the trust that fall under the exemption amount. If the assets increase in value, the proceeds can be allocated to the beneficiaries of the trust. in addition, because the trust is irrevocable, your estate will not have to pay the GST tax even if the value of the assets increases over the exemption amount.

Generation-skipping trusts are complicated documents. Give us a call to determine if one would be right for your family.

Moving? Your Estate Plan and Your New State

jds@jaydelaw.com (James Saintvil) — Wed, 23 Jun 2021 22:18:58 GMT

While legally you may not need all-new estate planning documents if you move to a different state, you should have your documents reviewed by a local attorney in your new home.

The Constitution of the United States requires that states give “full faith and credit” to the laws of other states. This means that your will, trust, power of attorney, and medical directives executed in one state should be honored in every other state. While that’s the law, the practical realties are different and depend on the document.

Your will should still be valid in the new state, but there may be differences in the new state’s laws that make certain provisions of the will invalid. The same can be true of revocable trusts.

This is less true of powers of attorney and medical directives. While these documents should be honored from state to state, sometimes banks, medical professionals, and financial and health care institutions don't accept documents and forms with which they are not familiar. In addition, the execution requirements may be different depending on the state. Some states require witnesses on powers of attorney and others do not. A state requiring witnesses may not allow a power of attorney without them to be used to convey real estate even though the document is perfectly valid in the state in which it was executed. In the case of medical directive, other states may use different terms for the document, such as “durable power of attorney for health care” or “advance directive.” (The people reviewing your power of attorney or medical directive may not be well versed in constitutional law.)

Moving is a good excuse to consult an attorney to make sure your estate plan in general is up to date. Other changes in circumstances such as a change in income or marital status can also affect your estate plan. In addition, there may be practical changes you will want to make. For example, you may want to change your trustee or attorney-in-fact under a power of attorney based on which family members are closer in proximity.

For all these reasons, when moving out of state it’s wise to have an attorney in the new state review your estate planning documents.

5 Estate Planning Tips for the Non-Traditional Family

jds@jaydelaw.com (James Saintvil) — Wed, 09 Jun 2021 22:18:06 GMT

Is your family of the “Leave It to Beaver” variety — opposite-gender parents, the first marriage for each, one or more kids, all healthy and thriving? If so, your estate plan will probably be pretty straightforward. But if not, it's not as simple and you have a lot of company.

The percentage of married households in the United States fell from 55 percent in 1990 to 48 percent in 2010. Perhaps this number will begin to rise again with same-sex couples getting married. About 40 percent of all marriages end in divorce. Three quarters of people who divorce remarry — accounting for a pretty large proportion of the 48 percent of American households that are married.

Nearly 1.5 million babies a year are born to unmarried women, more than a third of all births. This can complicate matters, especially when the father is not identified or, in the case of donated sperm, does not exist. It also can mean a greater need for planning when there is no obvious back-up parent if something happens to the mother.

If you are in a relationship, but not married , been married more than once, have children by more than one partner, or have beneficiaries who cannot manage funds for one reason or another, then it’s more important that you do estate planning.

Here are a few tips to consider:

Give Your Partner Rights. There are laws in place empowering spouses and governing the distribution of property in the event of death. Most intestacy statutes provide that property will pass to spouses and children, or to parents if someone dies without a spouse or children. But no laws protect unmarried partners or unadopted children. There have been many cases of parents pushing aside the same-sex partners of their children upon death or incapacity. We can all use wills , trusts , durable powers of attorney, and medical directives , to choose who should step in for us when needed and who should receive our property.
But Don’t Give the New Spouse Too Many Rights. All too often, despite the best of intentions and good will, when parents remarry the new family doesn’t bond. The children from prior marriages or relationships don’t become friends with one another or with the new spouse of their father or mother. Frequently, the death of one spouse means that all of the assets of both families end up with the surviving spouse and ultimately pass to his or her children and grandchildren. Frank discussions about what the new couple wants and planning to make sure it plays out as planned can prevent a lot of misunderstanding and resentment. Again, wills, trusts, durable powers of attorney and medical directives can permit the new couple to choose the outcome they prefer, rather than just let life (and death) happen and the chips fall where they may.
Don’t Be Afraid to Talk Pre-Nup. While most people entering a first marriage have no children and few assets, this is not the case with a second or third marriage. Before getting married again, the couple needs to talk about what they have in mind in terms of mutual financial support of one another and of their children from prior marriages and relationships. Then they need to put their understanding in writing so that down the road there are no misunderstandings or different memories of what they agreed. If memorialized in a prenuptial agreement, it will also be legally enforceable. If circumstances change, the couple can always modify their agreement.
Use Trusts. Wills are generally straight forward and blunt instruments. When you pass away, your property passes to the people you name. Wills do not easily permit more flexible planning. For instance, you may want to permit your new spouse to live in your home for as long as he wants, but for it to ultimately pass to your children and grandchildren. A trust permits you to plan for this scenario, giving your spouse rights, but someone else — the trustee — the power to manage the property and protect it for the next generation. Or a couple could pool all of their resources in a single joint trust for their benefit during their lives, with the funds remaining after they have both passed away to be distributed equally to the children they each bring to the new relationship or marriage.
Goals First, Planning Second. No planning can take place in a vacuum or based on assumptions without asking questions. Anyone considering planning for themselves and for loved ones, whether in a traditional or non-traditional relationship, needs to start by listing his or her goals. Is the primary concern providing for his or herself? Leaving an inheritance to children? Protecting a spouse or partner? Or a pet? Making sure children are independent, but have a safety net if necessary? Of course, most of us don’t have just one goal, but we should start by writing them all down. Then we can see if it’s possible to achieve all of them, or if we need to prioritize. Ultimately, the estate plan should reflect these goals and priorities. While this is true of anyone doing estate planning, it is more important the more family and non-family bonds one has because the plan will have to balance and prioritize more interests.

The bottom line is that our laws for distribution of property and rights in the event of incapacity are based on a vision of a marriage between one woman and one man with one or more children. However standard this ever was in reality, it is much less the norm today, almost certainly applying to fewer than half of American adults. For those who don’t fit the one nuclear family mold, planning is both more important and more interesting. Don’t put it off.

If you have any questions about estate planning or would like to consult an estate planning professional to help you determine the estate plan that is right for you and your loved ones, give us a call. We can make sure you have a comprehensive plan that is tailored to your unique needs and goals.

Danger In An Online Power of Attorney Form

jds@jaydelaw.com (James Saintvil) — Fri, 21 May 2021 22:17:07 GMT

A previous post discussed the dangers of DIY estate planning . A recent court case** involving a power of attorney demonstrates the problem with using online estate planning forms instead of hiring an attorney who can make sure your documents are tailored to your needs.

Mercedes Goosley owned a home in Pennsylvania. In 2013, she named one of her six children, Joseph, as her attorney-in-fact under a power of attorney using a boilerplate form that Joseph downloaded from the internet. Unbeknownst to Mercedes and Joseph, the online power of attorney form required Mercedes to be declared incompetent for Joseph to act on her behalf.

Powers of attorney can be immediately effective or “springing.” An immediately effective power of attorney allows the designated attorney-in-fact to begin to exercise his or her power upon the principal’s signing of the power of attorney. Conversely, a "springing" power of attorney only takes effect upon the the occurrence of a triggering event designated within the power of attorney; typically the triggering event is when the principal becomes incapacitated. The problem is that springing powers of attorney create a hurdle in order for the attorney-in-fact to use the document and can lead to delays when there may be a need for immediate action. For example, if a power of attorney requires a principal to be incapacitated in order to take effect, when presented with that springing power of attorney, a financial institution will require proof that the incapacity has occurred, often in the form of a letter from a doctor.

In the immediate case, Joseph began acting for Mercedes without getting a declaration of her incompetency. After she moved into a nursing home, Joseph listed her home for sale and accepted a purchase offer as attorney-in-fact for his mother under the power of attorney. At the time, Joseph’s brother, William, was living in the home, and Joseph instructed William to move out. This resulted in a dispute that ended up in court, with William arguing that Joseph did not have authority to act as his mother’s attorney-in-fact. A Pennsylvania appeals court eventually determined that Mercedes had intended to execute an immediately effective power of attorney as evidenced by the fact that Joseph had held himself out as Mercedes’ attorney-in-fact since 2013 and routinely conducted affairs on her behalf without Mercedes restricting or objecting to his agency.

While the court ultimately ruled in Joseph’s favor, Joseph and Mercedes could have saved time and money by consulting with an attorney before signing the power of attorney. In addition, there is no guarantee that another court would have come to the same conclusion. An attorney would have been able to explain the difference between an immediate effective and springing power of attorney and tailor the power of attorney to Mercedes’ needs.

What Your Will Can’t Do

jds@jaydelaw.com (James Saintvil) — Wed, 12 May 2021 22:15:44 GMT

While a will is one of the most important estate planning documents you can have, there are things that it won’t cover. A will is just one part of a comprehensive estate plan.

A will is a legally-binding statement directing who will receive your property at your death. It is also the way you appoint a legal representative to carry out your bequests and that you name a guardian for your minor children. Without a will, your estate is distributed according to state law, rather than your wishes. Property distributed via a will goes through probate, which is the formal process through which a court validates a will (which means verifying that the will is legal) and confirms the deceased person’s intentions are carried out; or the court determines how to distribute your property, in the case of intestacy.

Although a will is one main way to transfer property on death, it does not cover all property. The following are examples of property you can’t distribute through a will:

Jointly held property. Property that is co-owned, with rights of survivorship, with another person is not distributed through your will. Joint tenants each have an equal ownership interest in the property. If one joint tenant dies, his or her interest immediately ceases to exist and the other joint tenant owns the entire property.
Property in trust. If you place property into a trust, the property passes to the beneficiaries of the trust, not according to your will.
Pay on death accounts. With a pay on death account, the account owner names a beneficiary (or beneficiaries) to whom the account assets pass to automatically when the owner dies.
Life insurance. Life insurance passes to the beneficiary (or beneficiaries) you name in the life insurance policy, typically on a beneficiary designation form, and isn’t affected by your will.
Retirement plan. Similar to life insurance, money in a retirement account (e.g., an IRA or 401(k)) passes to the named beneficiary. Under federal law, a surviving spouse is usually the automatic beneficiary of a 401(k), although there are some exceptions. With an IRA, you can name your preferred beneficiary.
Investments in transfer on death accounts. Some stocks and bonds are held in accounts that transfer on death to a named beneficiary. These accounts will bypass probate and go directly to the beneficiary.

In addition to not being able to transfer certain types of property with a will, there are other things that you should be wary of using a basic will for. The following are examples of items that may not be best included in a will:

Funeral instructions. Wills are often not found until days or weeks after death. In many cases, the decedent is buried or cremated prior to the will being read. It is better to include these instructions in a medical directive or to leave a separate letter of instruction that is located in an easily accessible location.
A provision for a child with special needs. If you are leaving money to a child with special needs, a will may not the best instrument. Receiving an inheritance directly can make the child ineligible for benefits. It is usually better to set up a special needs trust to provide for the child.
A provision for a pet. You cannot leave money directly to a pet in a will. You can name a caregiver for a pet and provide money to them to care for the pet, but the caregiver is not legally obligated to use the money on the pet. A pet trust is the most secure way to provide for a pet.
Certain conditions on gifts. You may be tempted to make gifts conditional on the recipient’s behavior or actions. However, there are certain conditions that are not allowed. The condition cannot be illegal, and the gift cannot be contingent on the marriage, divorce, or change of religion of the heir.

A will is not the only component of an estate plan. To make sure your estate plan covers all your needs, give Jayde Law a call and we will help guide you through the estate planning process.

Unmarried Couples and Estate Planning

jds@jaydelaw.com (James Saintvil) — Wed, 28 Apr 2021 22:04:02 GMT

While estate planning is important for married couples, it is arguably even more necessary for couples that live together without getting married. Without an estate plan unmarried couples won’t be able to make end-of-life decisions or inherit from each other.

Two main functions of estate planning are determining who can make decisions for you if you become incapacitated and who gets your assets when you die. There are laws in place to protect spouses that have failed to plan for the distribution of property in the event of death (typically, if spouses do not have wills, property will pass to the surviving spouse, children, parents, or some combination of thereof).

However, there are no laws in place to protect unmarried partners. Without a solid estate plan, your partner may be shut out of the decision making and any inheritance. The following are the essential estate planning steps that can help unmarried couples:

Joint Ownership. One way to make sure property passes to an unmarried partner is to own the property jointly, with right of survivorship. If one joint tenant dies, his or her interest immediately ceases to exist and the remaining joint tenants own the entire property. This is also a good way to avoid probate.
Beneficiary Designations. Make sure to review the beneficiary designations on bank accounts, retirement funds, and life insurance to make sure your partner is named as the beneficiary (if that is what you want). Your partner will not have access to any of those accounts without a specific beneficiary designation.
Durable Power of Attorney. This appoints one or more people to act for you on financial and legal matters in the event of your incapacity. Without it, if you become disabled or even unable to manage your affairs for a period of time, your finances could become disordered and your bills not paid, and this would place a greater burden on your partner. Your partner might have to go to court to seek the appointment of a conservator, which takes time and money, all of which can be avoided through a simple document.
Medical Directives. Similar to a durable power of attorney, a medical directive (e.g., Advance Health Care Directive or Living Will) appoints an agent to make health care decisions for you when you can't do so for yourself, whether permanently or temporarily. Again, without this document in place, your partner might be shut out by other family members or forced to go to court to be appointed guardian. If it is important for all of your family members to be able to communicate with health care providers, a broad HIPAA release authorization—named for the Health Insurance Portability and Accountability Act (HIPAA) of 1996—will permit medical personnel to share information with anyone and everyone you name, not limiting this function to your health care agent.
Will. Your will says who will get your property after your death. However, it's increasingly irrelevant for this purpose as most property passes outside of probate through joint ownership, beneficiary designations, and trusts. Yet your will is still important for two other reasons. First, if you have minor children, it permits you to name their guardians in the event you are not there to continue your parental role. Second, it allows you to pick your personal representative (also called an executor or executrix) to take care of everything having to do with your estate, including distributing your possessions, paying your final bills, filing your final tax return, and closing out your accounts. It's best that you choose who serves in this role.
Revocable Trust. A revocable trust can be especially important for unmarried couples. It permits the person or people you name to manage your financial affairs for you as well as to avoid probate. You can name one or more people to serve as co-trustee with you so that you can work together on your finances. This allows them to seamlessly take over in the event of your incapacity.

If you have questions or need help determining the estate plan that is right for you and your partner, give us a call.

Six Huge Estate Planning Mistakes

jds@jaydelaw.com (James Saintvil) — Wed, 14 Apr 2021 22:01:26 GMT

If you are like most people, you have the best of intentions with regard to how you want your estate distributed when you die or how your affairs handled should you become incapacitated. Unfortunately, without proper planning, your best intentions may not be enough. Here are six of the most common estate planning mistakes people make:

Failing to plan. The biggest mistake is failing to create a plan in the first place. Without an estate plan, your assets will be distributed according to the law in the state where you live. Usually, if you are married, your spouse is entitled to a portion of your estate and the rest is divided among other relatives. If you are single, your estate may go to your children, parents, or siblings. If you have absolutely no living relatives, then your estate will go to the state. This is probably not what you want to happen to your assets. In addition, without an estate plan, you have no way to name who will be the guardian of your children or who will act for you if you become incapacitated.
Doing it yourself. As we have discussed in a previous article ( “Don’t DIY Your Family’s Future” ), it is tempting to try to save money by using a do-it-yourself online will service or just writing something up yourself, but these poorly drafted documents may only cost you or your heirs additional money in the end. It is impossible to know, without a legal education and years of experience, what the right legal solution is to any particular situation and what planning opportunities are available. If there is anything about a family situation that is not commonplace, using a DIY estate planning program means taking a large risk that can affect one’s family for generations to come. Only an experienced attorney can determine whether a particular situation qualifies as commonplace. The problems created by not obtaining competent legal advice probably won’t be borne by the person creating the will, but they may well be shouldered by the person’s children, grandchildren, and/or other beneficiaries.
Not planning for disability. A properly drafted estate plan not only specifies what will happen to your assets when you die; it also plans for what happens if you become incapacitated. It is important to have documents, such as a power of attorney and medical directives, that appoint someone you trust to act on your behalf if you are unable act for yourself.
Failing to fund a trust. Once you draft an estate plan, you aren't done. If your estate plan includes a trust, you need to actually fund the trust or the trust will be useless (see “The Importance of Funding Your Trust” ).
Not checking your beneficiary designations. You should periodically review your retirement plan and life insurance policy beneficiary designations to make sure they are not outdated and that they comport with your current estate planning objectives (see “Beneficiary Designations: The Overlooked Piece of the Puzzle” ). Retirement accounts and life insurance policies do not follow your will or trust—they are distributed according to the forms you fill out with the your employer, the retirement account holder, or the insurance company, as the case may be. You need to make sure you have named a beneficiary and the each beneficiary designation is consistent with your overall estate plan.
Not reviewing the plan. Once you’ve got an estate plan in place, it is important to keep it up to date. Circumstances change over time and your estate plan needs to keep up with these changes. Major changes that may affect your plan include getting married or divorced, having children, or experiencing an increase or decrease in assets. Even if you don’t have any major changes, you should review your plan periodically to make sure it still expresses your wishes.

To ensure that you are not making these and other common estate planning mistakes, contact us for a free consultation.

Beneficiary Designations: The Overlooked Piece of the Puzzle

jds@jaydelaw.com (James Saintvil) — Wed, 31 Mar 2021 21:59:30 GMT

Do all of the pieces of your estate plan fit together? Some assets (e.g., retirement accounts and life insurance policies) pass outside of probate and allow you to designate who will receive them after your death. It is important that these designations are kept up to date and are consistent with the rest of your estate plan.

When you open up an investment account, retirement plan, or purchase life insurance, the company encourages you to name beneficiaries who will inherit the property on your death. The choice you made at the time may not have taken your estate plan into consideration. To review your beneficiaries, get a copy of all of your beneficiary designation forms. Check to make sure that your beneficiaries are consistent with the rest of your estate plan or, if they are different, that the difference is intentional. If you made these designations online, print a copy of the page so that you also have a paper record. Once you have collected all of these forms, put them in a folder with your other estate-planning documents so that you and your heirs can quickly and easily find them in the future.

In determining how to make your beneficiary designations, the following are the considerations for each type of account:

Bank and investment accounts. If you have a revocable trust as part of your estate plan, you can make the trust the owner of all of your bank and investment accounts. This way you avoid the need to name anyone as beneficiary and you still avoid probate. Then, all of the protections provided in the trust—for instance, that children do not receive their inheritance until a certain age or provisions for who receives the funds if a beneficiary predeceases you—will apply to the accounts. If you are not using a revocable trust, simply name those who will receive your estate under the terms of your will. Or you have the option to name no one. If you do not designate a beneficiary, the account will pass according to the terms of your will and, while you won’t avoid probate, you’ll make sure that the people you want will receive the assets, that your personal representative will be in charge, and that any changes you make in the future—such as disinheriting your wayward nephew—will apply to the accounts.
Life insurance. Unlike bank and investment accounts, the ownership of many life insurance policies—especially those that come as an employment benefit—cannot be transferred to your revocable trust. And there is really no benefit to doing so in any case (although there might be some tax and long-term care planning reasons to transfer property to irrevocable trusts). Instead, the beneficiary designation is the most important decision. If you have a revocable trust, you may name it as the beneficiary for the reasons mentioned above. Or you can name particular individuals. The beneficiary designation form will permit you to name alternates in the event that the first person or people you name predecease you.
Retirement plans. First, don’t transfer your retirement plans to your revocable trust. The only way to do so is to liquidate the plan first, which would be a taxable event. Second, don’t name your revocable trust as a beneficiary of your retirement funds without consulting an estate planning attorney. In most instances, if your spouse is not the beneficiary, the retirement plan will have to be liquidated and the taxes paid within 10 years of your death. On the other hand, if you have a relatively small amount of funds in retirement accounts, this might not be a big problem. It is much more important with retirement plans than with life insurance or other investments that you designate a beneficiary, because there are different rules for different beneficiaries. If your spouse inherits your IRA, your spouse can treat the IRA as his or her own. Your spouse can either put the IRA in his or her name or roll it over into a new IRA. The rules for a child or grandchild (or other non-spouse) who inherits an IRA are somewhat different than those for a spouse. The beneficiary must withdraw all of the assets in the inherited account within 10 years. There are no required distributions during those 10 years, but it must all be distributed by the 10th year.

To be sure that your beneficiary designations align with your estate plan and are as beneficial to your intended heirs as possible, do not hesitate to contact us at Jayde Law PLLC.

The Importance of Funding Your Revocable Trust

jds@jaydelaw.com (James Saintvil) — Wed, 17 Mar 2021 21:57:15 GMT

Revocable trusts are a very popular and useful estate planning tool. But the trust will be ineffective if you do not actually place your assets in the trust.

As noted in our previous article, “ Revocable Trusts: The Basics ,” revocable trusts are an effective way to avoid probate and provide for asset management in the event of incapacity. In addition, revocable trusts are incredibly flexible and can achieve many other goals, including tax, long-term care, and asset-protection.

However, you can’t take advantage of what the trust has to offer if you don’t place your assets into it. If you do not fund the trust, your assets may have to go through a costly probate proceeding or be distributed to beneficiaries you did not intend. Not funding your trust can undermine your whole estate plan.

To transfer assets to the trust, whether real estate, bank accounts, or investment accounts, you need to retitle the assets in the name of the trust.

Before taking the following actions, you should consult an attorney:

placing real estate into the trust (you want to ensure it is done correctly, particularly for real estate that has been owned for a long period of time);
placing life insurance or annuities into a revocable trust; and
naming the trust as the beneficiary of your IRAs or 401(k) (because this could result in undesirable tax consequences).

Once your trust is fully funded, don’t forget about it. When you acquire new assets, do not forget to title them in the name of your trust. You should review your trust annually to make sure everything is titled properly.

If you are interested in creating a revocable trust or need assistance funding your trust, do not hesitate to contact us at Jayde Law PLLC.

Revocable Trusts: The Basics

jds@jaydelaw.com (James Saintvil) — Sun, 07 Mar 2021 21:55:49 GMT

Revocable trusts are a will substitute; they are an effective way to avoid probate and can provide for asset management in the event of incapacity. In addition, revocable trusts—sometimes referred to as “living trusts” or “revocable living trusts”—are incredibly flexible and can achieve many other goals, including tax, long-term care, and asset-protection planning.

A trust is a legal arrangement through which one person (a “trustee”) holds legal title to property for another person (the “beneficiary”). As the creator of a revocable trust you would be referred to as the “grantor,” “settlor,” or the “donor.” While you are alive, you are a beneficiary of the trust and can also serve as either the sole trustee or as one of a number of co-trustees. The trustee manages the assets in the trust, which can include real estate, bank accounts, investments, and tangible property (such as fine art) under the terms set forth in the trust document.

Whatever you place into trust during your life will pass to your beneficiaries at your death without going through probate, avoiding the cost, delay and publicity of probate. In addition, in the event of incapacity, a co-trustee can step in and manage the trust property without any fuss. While you can also accomplish this through a durable power of attorney, banks and other financial institutions are much more comfortable with trusts. They have been known to reject durable powers of attorney that are more than a few years old or to require that the drafting attorney certify that the power of attorney has not been revoked.

The secret to making revocable trusts work is to fund them. This means retitling assets, whether real estate, bank accounts, or investment accounts, in the name of the trust. All too often, attorneys draw up estate planning documents, advise clients to fund their trusts, and then nothing happens. Trusts have no relation to assets that are not retitled. However, executing a “pour-over” will along with your trust, saying that at your death all of your assets will be distributed to your trust, your wishes as to the ultimate distribution of your estate will be carried out. You just won’t avoid probate and will not have as strong protection in case of incapacity.

Your bank and or financial advisor can assist you with retitling your accounts into your trust. Depending on the institution, you might be able to change the name on an existing account. Otherwise you will need to open a new account in the name of the trust and then transfer the funds. The financial institution will probably require a copy of the trust; however, if you prefer more privacy, many states require financial institutions to accept a certification of trust (a short document, typically signed by the trustee, that details the trust’s essential terms and certifies the trustee’s authority without revealing private details of the trust). As long as you are serving as your own trustee or co-trustee, you can use your Social Security number for the trust. If you are not a trustee, the trust will have to obtain a separate tax identification number and file a separate 1041 tax return each year. You will still be taxed on all of the income and the trust will pay no separate tax.

You will need to execute a deed to transfer real estate into the trust. If you intend to refinance your property or take out a line of credit, do so before deeding the real estate into your trust. In most instances, banks and other lenders require that you remove the property from the trust and put it back in your name before signing any new mortgage papers. Depending on your state, you might also need to redo a homestead declaration after transferring property into a revocable trust.

The following are some of the issues revocable trust documents cover, as well as decisions you might need to make:

When does the successor trustee take over?
How do you define the incapacity of a trustee?
What can the trust invest in?
May the trust pay the debts of your estate?
If there’s an absence of trustees for any reason and you are not available, who appoints the new trustee? Do you want to require that new trustees have any particular qualifications?
Do you want to give anyone else the right to remove trustees?
What accounts or statements, if any, must the trustee provide to beneficiaries?
Do you want distributions to be made to beneficiaries under age 18, or just made on their behalf? Would you prefer the trustee to continue managing the funds until your children or other beneficiaries reach, say 25 or 30? You can also provide for partial distributions at various ages.
What powers should the trustees have?

These and more issues need to be decided for all trusts. More complex trusts designed for tax and asset protection purposes present even more choices and get even longer and more complex.

If you are interested creating a revocable trust, Jayde Law can help. We enjoy helping our clients create estate plans that protect the people they love and the legacy they have created. Give us a call today to schedule an appointment, to learn about our process, and to receive answers to any questions you may have.

Estate Planning Under the Biden Administration

jds@jaydelaw.com (James Saintvil) — Wed, 17 Feb 2021 21:39:21 GMT

A new administration usually means that tax code changes may be looming. While it remains unclear exactly what tax changes President Biden’s administration will usher in, two possibilities that may be proposed are (1) lowering the estate tax exemption and (2) eliminating the stepped-up basis on assets at death. The first would affect only multi-millionaires, but the second could have an impact on more modest estates and their heirs.

In 2017, the Tax Cuts and Jobs Act doubled the federal estate tax exemption from $5 million dollars to $10 million (both indexed for inflation). Currently, the federal estate tax exemption is $11.7 million for individuals (up from $11.58 million in 2020) and $23.4 for married couples (up from $23.16 million in 2020). As long as an estate is valued at under the exemption amount, there will not be federal estate taxes due. In the United States, the vast majority of estates do not owe any federal estate tax. President Biden has expressed an interest in repealing the Tax Cuts and Jobs Act, which would have the effect of reducing the estate tax exemption to the 2017 federal exemption amount (adjusted for inflation) of approximately $5.6 million for individuals and $11.2 million for married couples.

Another possible tax change is to how property is valued when it is passed on at death. “Cost basis“ is the original value or purchase price of an asset or investment for tax purposes. When determining whether a capital gains tax is owed on property, the basis is used to determine whether an asset has increased or decreased in value. For example, if you purchase a stock for $10,000, that is the cost basis. If you later sell it for $50,000, you will have to pay taxes on the $40,000 increase in value.

Under current law, when an individual dies, the cost basis of the property owned by the decedent receives a “step-up” in basis. This means the current or fair market value of the property as of the date of the decedent’s death (absent any alternative valuation) becomes the basis to the recipient(s) of the property. For example, suppose you inherit a house that was purchased years ago for $50,000 and it is now worth $250,000. You will receive a step up from the original cost basis from $50,000 to $250,000. If you sell the property right away, you will not owe any capital gains taxes.

According to an article in the New York Times , the current administration may propose to eliminate the basis step-up rule. In the past it was difficult to determine the original cost basis of some property, but in the digital age that information is more easily gathered. This change could result in tax increases for many who inherit property that has risen significantly in value (i.e, a family home that has been passed down from generation to generation).

An open question is whether either of these changes will be made retroactively. It is unlikely, but possible, that if Congress changes these rules later this year, they could be made retroactive to the January 1st of this year.

Tax experts agree that while changes to the tax code are likely, they probably will not happen right away. The coronavirus pandemic and the recession it has triggered mean that Congress has other priorities at the moment. However, now is the time to be proactive to protect your assets from the potential tax changes.

If you are concerned about these rules changing, give us a call to discuss the potential tax implications on your current estate plan or, if you have not already, to create an estate plan. We will work with you to best protect your assets for your loved ones and to mitigate any adverse tax implications.

The Intersection of Real Estate and Estate Planning

jds@jaydelaw.com (James Saintvil) — Thu, 14 Jan 2021 21:38:04 GMT

Real estate encompasses not only your primary residence but also other real estate you own such as vacation homes or rental properties. The ideal form of ownership varies depending on the type of real estate you own. Below, we take a look at the different types of real estate and offer some guidance on the best form of ownership for each.

Primary Residence

Because a primary residence can receive special tax treatment, it would be wise to carefully consider how your primary residence is owned. In many states, tenancy by the entirety offers married couples creditor protection from the creditors of one of the spouses (with a possible exception for federal tax liens) while still preserving relevant tax benefits. This form of ownership also allows automatic transfer of ownership to the surviving spouse upon the death of the first spouse without court involvement. Transferring ownership of the primary residence to separate spousal revocable trusts or a joint revocable trust may also be an option if you live in a jurisdiction that allows the tenancy by the entirety protection to transfer to the separate revocable trusts or a joint revocable trust. Ownership by a trust also means that the real estate will not go through the lengthy, expensive, and public probate process but will instead be handled according to the grantor’s wishes as specified in the trust document.

If you are single, owning property in your name allows you to take advantage of tax benefits for primary residences. Transferring ownership to a revocable trust may also allow you to retain the applicable tax benefits with the added benefit of avoiding the probate process. If asset protection is a major concern during your lifetime, certain types of irrevocable trusts are best suited for your needs but may require you to give up some control of your property.

The bankruptcy code may provide additional protections for a primary residence (e.g., your state may have a homestead exemption). However, in some states, transferring your primary residence to a trust may eliminate the homestead exemption because the trust, rather than you, will be deemed to be the owner of the residence. If this situation could apply to you, it is important that you meet with a knowledgeable estate planning attorney before transferring your primary residence to a trust.

Vacation Home

For some families, their vacation home has not only high monetary value but also significant emotional value. Ownership of a vacation home by a trust or limited liability company (LLC) can be advantageous because it addresses two main priorities: ease of transfer to the next generation and asset protection.

With a trust or LLC, you are able to establish rules for how the vacation home is to be used and maintained, as well as designate what is to happen to the property once you pass away. This can be a great solution if you want to ensure that the vacation home stays in the family for generations with minimal family conflicts.

An additional benefit of having an LLC own your vacation home is that it provides limited liability from outside claims. If a judgment is entered against the LLC, the creditor is limited to the accounts or property owned by the LLC to satisfy the creditor’s claims and cannot look to your personal accounts or property or those of the other members. On the other hand, if a judgment is entered against you or another member for a claim unrelated to the LLC, it will be harder for a creditor to force a sale of the vacation home. This can be incredibly helpful if you wish to pass the vacation home on to the next generation without worrying about the individual financial situation of each new member. Note that, in some states, a single-member LLC (an LLC in which you are the only member) does not enjoy the same protection from your personal creditors. The rationale of these laws is that your creditors should be able to seek relief through your LLC interests to satisfy their claims because there are no other members that will be negatively impacted by seizure of money and property owned by the LLC.

If the vacation home has been in the family for many years, it is important to consult with an estate planning attorney and your tax advisor to make sure that transferring your vacation home to a trust or LLC will not cause an increase in your property taxes or any other unintended consequences.

Rental Property

Because rental property is an income stream rather than a residence, asset protection is usually the primary concern. As a landlord and owner of rental property, you face a higher probability of lawsuits arising in connection with the property because the occupants can change over time. Transferring ownership of the rental property to an LLC is a great option. If a renter gets injured on the property, sues the LLC that owns the property, and obtains a judgment that exceeds any property insurance you have, the renter can seek satisfaction of any claims only from the accounts and property owned by the LLC, not from your personal accounts and property or those of any other owners of the LLC.

In addition, ownership by the LLC may protect the rental property from your personal creditors. However, if you are forming a single-member LLC, it is important to check state law to be sure that creditor protection is available.

Whether you are concerned about your primary residence, vacation home, or rental property, we are here to assist you in protecting your property. Given the various considerations for selecting a form of ownership, it is important to have the right advisors helping you along the way. Give us a call to discuss your current and future real estate ventures and the best way to protect them for your loved ones.

Plan Your Legacy: Five Reasons Business Owners Need Estate Plans

jds@jaydelaw.com (James Saintvil) — Tue, 01 Dec 2020 21:35:16 GMT

Business owners are notorious for engrossing themselves in the day-to-day management and functions of their businesses. As a business owner, you are likely the heart and soul of your company. Your clients trust you, and you have built unique relationships with other parties such as: accountants; attorneys; contractors; and suppliers.

Suppose, however, that tragedy strikes: You, as the business owner, are in a car accident and are severely injured or killed, leaving you unable to make decisions or care for yourself and your family. What will happen to your business in such a situation? Circumstances like this can happen to anyone at any time. Consequently, business owners must proactively

develop robust estate plans. Here are five reasons why business owners need an estate plan:

1. To ensure the continuity of your business. When there is no estate plan in place for a business owner, there is no plan for addressing how the business will continue without its key employee. In many instances, the business owner’s company is a primary source of income for the owner’s family. The absence of that income could be devastating for the individuals dependent upon the business. The impact could be far-reaching, as the business may also have employees who rely on its continuity. Without an estate plan and proper business planning documents, there is no clear indication as to whether the company should continue to operate, and if it does continue to operate, how it should function. Create an estate plan so that you, your family members, your employees, and your clients will not be severely impacted by the disruption that is likely to occur in your absence.

2. To protect the wealth you have created. A business owner’s endeavors are often extremely lucrative, resulting in significant wealth creation. If there is little to no estate planning in place, that wealth is exposed and becomes vulnerable to creditors and predators. If the business owner dies and leaves a simple will or, even worse, no will at all, the owner’s money and property will have to go through a probate court process. During the probate process, a decedent’s will or intestacy laws decide how the deceased’s assets should be divided and distributed. Probate is a public process that is reflected in court records that are accessible to anyone. This means that information about the money and property you own will become public information.

Additionally, without proper estate planning, what you have left to your loved ones could be exposed to creditors trying to satisfy debts or to predators interested in benefiting from the wealth you created. For example, a disgruntled spouse of your child could attempt to take portions of your child’s inherited wealth in divorce proceedings. A well-thought-out estate plan employs tools to protect against these situations. While a will can record your decisions, legal documents that are not available to the public such as trusts, buy-sell agreements, and personal and company agreements are often more beneficial for business owners.

3. To avoid default state laws. Particularly when it comes to limited liability companies (LLCs), there are default rules about what happens to a business in the event of a business owner’s death or incapacity that may not align with your goals. For example, under some states’ statutes, an LLC must be dissolved when the last surviving member of the LLC passes away. Some state laws allow a business owner’s economic rights to pass to the owner’s family members without management or decision-making authority. If a business owner does not want surviving family members to be hamstrung in this way, the owner can leave instructions for handling these situations in the owner’s estate and business planning documents.

4. To minimize estate and gift taxes. You may be subject to substantial estate and gift taxes if your business endeavors have produced a significant amount of wealth. Without a proper estate plan, your family members could lose out on a substantial portion of your wealth to satisfy these taxes. Business owners who have put a carefully considered estate plan into place can avoid this. The tax-saving strategies you employ will help you leave your wealth to the people you love without subjecting them to a significant tax burden.

5. To provide guidance and establish your legacy. Arguably the most important reason to complete your estate plan is to firmly establish your legacy for your loved ones by leaving guidance about how to run your business. For years, you built your business and guided your team by providing insight and inspiration. That guidance is what makes the real difference. The process of creating your estate plan can help you answer the following questions:

What are the core principles and values that drive you?
What is the business's mission?
Who will lead the charge next?
What will happen to your clients?
What will happen to your employees?
Can the business be bought out?

Jim Collins, author of Good to Great , asserts that “core values are essential for enduring greatness.” If you are a business owner who desires to leave an enduring legacy, you must have an estate plan put in place.

If you would like to create an estate plan, Jayde Law is here to help. We enjoy helping our clients create estate plans that protect the people they love and the legacy they have created. Give us a call today to schedule an appointment, to learn about our process, and to receive answers to any questions you may have.

Coronavirus; "Second Wave" Ready? The Legal Document Every Adult Needs

jds@jaydelaw.com (James Saintvil) — Wed, 14 Oct 2020 21:33:07 GMT

As coronavirus continues to disrupt daily life, leaving Americans uncertain of the future, you don’t have to feel helpless during this pandemic. In fact, now is a great time to be proactive and plan ahead should you or a loved one fall ill. One of the most important and relatively easy things you can do is to select a healthcare agent and prepare an advance health care directive.

What is a healthcare agent?

A healthcare agent (also referred to as a healthcare surrogate, a healthcare proxy, a medical agent, or a medical proxy) is a person you authorize in an advance health care directive or a medical power of attorney to make decisions regarding your medical care if you should become unable to communicate your wishes yourself.

Why is it important to choose a healthcare agent now?

As of October 13th, in the United States, there are approximately 8+ million total cases of coronavirus and nearly 220,000+ deaths. Even if contract the virus, you will most likely have mild symptoms and recover. However, no one knows exactly how they will be affected by the virus, or any illness for that matter, therefore it is best to plan for the worst and hope for the best. Part of that planning is making sure someone can make healthcare decisions for you if you fall ill and are unable to make those decisions for yourself.

Factors to Consider in Choosing Your Healthcare Agent

Healthcare agents serve an important purpose. The person you choose will have the power to make critical healthcare decisions such as: consenting to a treatment plan; deciding whether to accept or refuse medical treatment; and which healthcare providers or hospitals to use for your care. As a result, it is crucial to think carefully about who you appoint to this role. Many people simply assume that their spouse or oldest child should take on this role, but these individuals may not always the best suited.

Here are some factors to consider when selecting an agent:

1. Emotional maturity . People handle stress differently, and not everyone is able to set aside their emotions and make level-headed decisions when someone they love is suffering. In addition, some people are simply not assertive enough to act as a strong advocate in the face of differing opinions of other family members—or even health care providers—who suggest a treatment plan you have informed your healthcare agent you do not want. You should appoint someone who is able to think rationally in emotionally difficult circumstances, even if that means you must look outside of your family to find the best person for the job.

2. Location/Proximity . The person you appoint to act as your healthcare agent should be someone who lives close by and is able to act on your behalf very quickly in the event of a medical emergency or if you need your advocate to serve in that role for an extended time period. In current times, many people might be under a mandatory or recommended stay-at-home order, or may not be available or willing to travel to another city or state. Consider naming alternate agents to account for someone’s potential unavailability.

3. Willingness to serve . Acting as a healthcare agent can be a time-consuming and emotionally draining job. Make sure that the person you appoint is willing and able to set aside the time necessary to serve as your patient advocate. Don’t just assume the person you want to be your healthcare agent is willing. Be proactive and ask if he or she is willing to take on that role. Keep in mind that if you are elderly, you may want to avoid naming a friend or family member who also is older, as there is a greater chance that they will experience mental or physical decline before or at the same time as you, which could impede their ability to serve as your agent when the time comes.

4. Will honor your wishes no matter what . Your healthcare agent has a duty to make decisions on your behalf that you would have made to the extent that he or she is aware of your wishes. This is the case even if your healthcare agent disagrees with your choices. As a result, your healthcare agent needs to be someone who is willing to set aside his or her own opinions and wishes to carry out yours. It may be prudent to appoint someone who has values and religious beliefs that are similar to yours to reduce the instances in which your agent’s opinions may differ significantly from yours. DO NOT appoint anyone that you do not trust to carry out your wishes.

People You Should Not Choose

Many states have laws prohibiting certain people from acting as your healthcare agent, even if they are otherwise well-qualified to act in the role:

1. Minors . Many states have laws expressly prohibiting a minor from being a patient advocate. The age of majority in most states is 18.** Some states have exceptions to this prohibition for married or emancipated minors.

2. Your health care providers . Some states not only prohibit your health care providers from acting as your healthcare agent, but also preclude the owner, operator, or any employee of any facility in which you are a patient or resident from acting in that role. Some states that have adopted this prohibition make an exception for individuals who are related to you. A few states, such as Kansas, Missouri, and Kentucky, also have an exception if that person is an active member of the same religious organization as you.

Advance health care directives may be among the most important legal documents you prepare—especially in light of the current pandemic. Picking a healthcare agent can be tricky and you should think through your choice carefully.

We can help guide you through the process of choosing a healthcare agent and assist with any of your other estate planning needs—whether you need to create or update a financial power of attorney, last will and testament, or a trust. Give us a call today to discuss how we can help you and your family be prepared and maintain some peace of mind.

** The age of majority in Alabama and Nebraska is 19 and in Mississippi the age of majority is 21.

Thirteen Estate Planning Terms You Need to Know

jds@jaydelaw.com (James Saintvil) — Wed, 07 Oct 2020 21:31:27 GMT

Estate planning—it is an incredibly important tool, not just for the wealthy or those thinking about retirement. On the contrary, estate planning is something every adult should do. Estate planning includes the creation of wills, trusts, financial and healthcare powers of attorney, among other important documents necessary to guide your loved ones through your incapacitation or death. Estate planning can help you accomplish any number of goals, including appointing guardians for minor children, choosing healthcare agents to make decisions for you should you become ill, minimizing taxes so you can pass more wealth onto your family members, and stating how and to whom you would like to pass your estate on to when you pass away.

While it should be at the top of everyone’s to-do list, it can be an overwhelming topic to dive into. To help you get situated, below are some important terms you should know as you think about your own estate plan.

Assets

Generally, anything a person owns, including a home and other real estate, bank accounts, life insurance, investments, furniture, jewelry, art, clothing, and collectibles.

Beneficiary

A person or entity (such as a charity) that receives a beneficial interest in something, such as an estate, trust, account, or insurance policy.

Distribution

A payment in cash or asset(s) to the beneficiary, individual, or entity who is entitled to receive it.

Estate

All assets and debts left by an individual at death.

Fiduciary

A person with a legal obligation/duty to act primarily for another person’s benefit, (e.g., a trustee or an agent acting under a power of attorney). “Fiduciary” implies great confidence and trust, and a high degree of good faith.

Funding

The process of transferring (re-titling) assets to a revocable trust (sometimes referred to as a “living trust”). A revocable trust will only avoid probate at the trust-maker’s death if it is fully funded, meaning it contains all of the decedent’s assets.

Incapacitated/Incompetent

Unable to manage one’s own affairs, either temporarily or permanently; often involves a lack of mental capacity.

Inheritance

The assets received from someone who has died.

Living probate

The court-supervised process of managing the assets of an incapacitated person. Conservatorship is another term used for this process.

Marital deduction

A deduction on the federal estate tax return, it lets the first spouse to die leave an unlimited amount of assets to the surviving spouse free of estate taxes. However, if no other tax planning tools are used and the surviving spouse’s estate is more than the amount of the federal estate tax exemption in effect at the time of the surviving spouse’s death, estate taxes will be due at that time.

Settle an estate

The process of winding down the final affairs (valuation of assets, payment of debts and taxes, distribution of assets to beneficiaries) after someone dies. This is also known as “Probate” or “Estate Administration.”

Trust

A fiduciary relationship in which one party, the grantor (also known as the “settlor” or “trust-maker”), gives another party, the trustee, the right to hold property or assets for the benefit of another party, the beneficiary. The trust should be memorialized by a written trust agreement, outlining how the trust assets will be distributed to the beneficiary.

Will

A written document with instructions for: payment of debts and expenses; burial or cremation and funeral preferences; and the disposition of assets after death. A Will can only be enforced through a probate court. A Will can also contain the nomination of guardian(s) for minor children.

If you have any questions about estate planning, or would like to consult an estate planning professional, please contact Jayde Law. We can make sure you have a comprehensive plan that is tailored to your unique needs and goals.

The Importance of Having a Will

jds@jaydelaw.com (James Saintvil) — Thu, 11 Jun 2020 21:29:20 GMT

For some people, a will feels like a plot hook in a movie instead of a necessary document in their own lives. People often look at their existing debts – student loans, mortgage, credit cards, etc. – and think that they won’t really have much to leave behind, so they see no point in going through the estate planning process. In many instances, people have more than they think, but many have not taken the time to contemplate the totality of the assets they have accumulated (i.e., real property, life insurance, retirement plans, etc.). In fact, a well drafted will contains many important provisions that can make a huge difference to the loved ones left behind. Below are some key issues that can be addressed by having a will.

1. Keep the Probate Costs Down

When an individual dies, the law requires that (in, most instances) the decedent’s estate goes through a legal process to make sure that all debts, expenses, and taxes are paid and subsequently, that the right people inherit the remaining assets. The legal term for this process is “probate,” and it is done through the authority of the courts. While a will does not provide for the avoidance of probate, it can reduce the cost of the probate process. The provisions of a will should include the designation of fiduciaries (i.e., personal representative(s), trustee(s), guardian(s), etc.) and provisions waiving the statutory limitation on funeral expenses. Absent a will, these designations are determined by the law of the decedent’s jurisdiction at the time of his or her death and a judge. The cost in terms of attorney hours can be substantially reduced if these issues are included in a will.

2. Designating a Personal Representative

When an individual dies, someone needs to take responsibility for the issues that need to be addressed. In addition to the probate process, funeral and burial arrangements need to be made, and physical and legal transfer of assets need to happen. A well drafted will designates a personal representative or executor to accomplish these and other tasks. Otherwise, a combination of law and judge-made decisions that will control these aspects of the process. Depending on the composition of the family left behind, this can lead to significant issues. For example, imagine a man married again, and, at the time of his passing, there are three children from the first marriage, and the children do not have an amicable relationship with the widow. The tense relationship between the children and the surviving spouse can lead to the probate process being adversarial which can contribute to additional costs.

3. Waiver of Bond

Under probate law in most jurisdictions, a personal representative has to answer to the court and to the heirs and creditors of the estate for their actions. As part of the legal process, most jurisdictions require the personal representative to obtain a bond to protect against the potential fiduciary breaches by the personal representative and against possible mismanagement of the estate. For example, in the District of Columbia the bond has to cover the entire value of the estate, and bonding companies generally charge a premium that is a percentage of the total value of the bond (i.e., the estate). If a person owns real estate, has significant investment accounts and retirement plans, among other assets, the total estate can be hundreds of thousands to millions of dollars, which can potentially cause the required bond to be a significant financial burden to the personal representative. However, most wills drafted by an estate planning attorney waive the bond requirement for the personal representative, proactively preventing this issue.

4. Planning the Funeral

Typically, when an individual dies, their loved ones are left to plan the funeral and final disposition of the decedent’s remains. Imagine being in a state of grief and/or shock at the death of your loved one and having no idea what the decedent would prefer with regards to burial or cremation and the associated ceremony. Grief does strange things to people; it is not unheard of for arguments to break out between loved ones over how best to honor the decedent. A will can contain specific provisions for the type of ceremony, celebration, and disposition of remains desired. This can offer some solace to the loved ones making the plans, giving them confidence that they are fulfilling explicit wishes.

5. Planning for Young Children

Under the Uniform Trust for Minors Act, which has been adopted in some form in most jurisdictions, an inheritance left to minor children must be placed in a custodial account until the beneficiary reaches the age of majority (age 18 in most jurisdictions). As with other legal issues, if there is no will, the court will make a determination about who will serve as custodian of such account. Most parents do not want to leave this decision to the courts, nor do they want to have a sizable inheritance distributed in a lump sum to their child at the age of 18. Instead, parents can create a testamentary trust for any minor children under their wills; this allows the parents to appoint a trusted individual or institution to act as trustee and an appropriate provision for distributions to the children. In addition, a will can designate a guardian for minor children, which is of critical importance if both parents have died. While the court will still have to approve the designation, a well-crafted will has enormous sway over the court’s decision.

6. Control Over Inheritance

If a person dies without a will, there are strict rules for inheritance that cannot be bypassed by the court. Family dynamics and the decedent’s intent do not always align perfectly with the beneficiaries dictated by law. An unmarried couple, a family with a special needs child, family estrangement, or any number of other factors can have ramifications. Only a will, providing for the inheritance as a person truly desires can resolve this issue.

For financial, logistical, and emotional reasons, the benefits of having a will in place are clear. At Jayde Law PLLC, we specialize in helping people plan for their future, including the preparation of a detailed, legally enforceable will. Contact us for a free consultation.

Don’t DIY Your Family’s Future

jds@jaydelaw.com (James Saintvil) — Wed, 08 Apr 2020 21:25:15 GMT

In today’s world, almost anything can be purchased online. Many individuals turn to the internet to find tutorials that assist in their do-it-yourself (“DIY”) projects – a phrase that evokes images of venturing to a craft or hardware store to purchase supplies, and the feeling of satisfaction that comes from the completion of a project that was often long overdue. However, even DIY proponents frequently remind us not to attempt certain projects that are best left to licensed experts. A home improvement project is one thing, but you should never take a chance trying to DIY your estate plan.

In recent years, DIY providers have emerged in many fields, from income tax preparation to estate planning. We have all encountered ads promoting estate planning at a fraction of the cost of working with an attorney. For example, LegalZoom promotes “quick and easy wills” starting at $89. Wills drafted by an experienced estate planning attorney will certainly cost more than $89, but why is this the case? It is important to remember the adage, “if it seems too good to be true, it likely is.” Any perceived savings gained from the use of an online DIY service for estate planning may be nullified, or even counteracted, by the inadequacy of the forms provided by the DIY service or by user error. Unfortunately, by the time any issues arise, it may be too late.

Although we cannot cover every possible issue that may arise from DIY estate planning, let’s cover some of the most common.

Laws - Federal and State estate laws change over time. Estate planning attorneys monitor changes in estate planning laws (and other laws that may be of consequence to an estate plan) and ensure that your estate planning documents reflect these changes appropriately. Most estate planning attorneys draft documents with sufficient flexibility to endure changes in the law. When major legal changes arise, a skilled attorney will assess the potential implications to your estate plan, communicate their findings, and discuss potential courses of action. DIY services cannot guarantee this same attention to detail and personalized response.

In addition, most online DIY services do not take into account state-specific laws. Only an attorney practicing law in your state can advise you regarding the various state-specific issues that may affect your estate planning decisions. States have varying execution requirements; failure to meet such requirements can result in a will being deemed invalid. If a will is invalid, the decedent is said to have died intestate. When an individual dies intestate, the decedent’s property will be distributed in accordance with the intestacy laws of the state where he or she resided, which may lead to an undesired result. An experienced estate planning attorney can ensure that your wishes and intentions are honored.

Probate – A will must meet the requirements for probate (i.e. address payment of debts, taxes, and expenses; properly make dispositions of estate assets; and appoint fiduciaries to administer the estate). When drafting your own will, you must keep in mind that the validity of the will will be determined after your death. At that point, you can no longer communicate your intentions beyond what is included in your documents. A typo or an incorrect word or clause can dramatically transform the meaning of the will, negating the very intent and purpose of its creation.

Trusts – Trusts are often used as a means of avoiding probate and/or as a tool to avoid or reduce estate taxes. There are various types of trusts (i.e. revocable, irrevocable, marital, life insurance, special needs trusts, etc.) and only an experienced estate planning attorney has the understanding to advise you on the most appropriate and effective use of trusts to satisfy your particular needs and financial situation. Most online DIY services are not equipped to provide you with such advice or to determine which type of trust is most advisable to meet your needs.

There are plenty of other potential issues with DIY estate planning tools. Such services cannot account for the plethora of related financial, tax, and personal issues that should be identified and thoroughly considered in an estate plan.

Wills and trusts are one of the few acts that survive your death. One mistake can alter a document’s meaning and legality, which is why you should not attempt to draft your own estate planning documents and why you should work with a lawyer who specializes in this area of law. Estate planning mistakes can be expensive to fix — assuming the specific mistake can be fixed at all. Mistakes can lead to irreparable damage, impair familial relationships, leave family members confused and disappointed, and lead to hostile litigation causing financial and emotional stress to the very family you were looking to protect and provide for.