How Do I Transfer Vehicle Ownership of a Deceased Relative?

The way to transfer a vehicle after death can depend on several factors. These include whether the automobile was owned by one person or several individuals and whether any provision was made in a will for its transfer.

If the title to the vehicle has more than one name on it, then the surviving owner may inherit the vehicle by operation of law.

That person can change the title to put in their name only, without further intervention from the executor.

When the vehicle is titled in joint tenancy, and the owners are living, the signatures of all owners are necessary to transfer ownership. Joint tenancy is when the names of two or more owners listed on the title are joined with the word “OR,” “AND” or “AND/OR.” These words note the right of survivorship.

Yahoo Finance’s recent article, “What Happens If the Executor of My Will Dies?” explains that when the title is in the name of the deceased owner only, the title will have to be changed to whoever will assume ownership.

Suppose the motor vehicle is included in probate because there is no surviving joint owner or it hasn’t been transferred to a trust. In that case, a title change likely won’t be able to be completed until probate ends and ownership of the car is assigned to one of the decedent’s heirs.

There are three documents that you will typically need to transfer a vehicle title after death:

A copy of the owner’s death certificate
The original title; and
Probate court documents allowing the transfer.

Transferring vehicle ownership after someone passes away can vary from state to state. It’s a good idea to review the probate laws and contact the local Department of Motor Vehicles (DMV) to see what’s required to complete the transfer.

Reference: Yahoo Finance (May 15, 2023) “What Happens If the Executor of My Will Dies?”

Ever Wonder How the Very, Very Rich Pass Wealth to Their Children?

When making plans to pass assets on to family members, it’s important to consider how estate planning can help manage the taxes associated with inheritances, says a recent article, “Here’s How the Ultra Rich Pass Wealth Tax Free to Their Heirs” from yahoo! finance. The very rich have used many strategies to pass on wealth with limited or no taxes owed, and some of these strategies can be used by regular people too.

The annual gift tax exclusion. Transferring wealth during your lifetime, rather than after your death, allows you to gift any number of people up to $17,000 each in a single year without incurring a taxable gift and having no impact on your estate and gift tax exemption. Married couples may give up to $34,000. People often use this annual exclusion for cash gifts and deposits into 529 education savings plans. These plans permit “frontloading” of up to five years’ worth of gifts into one year, which results in longer and more significant compounded growth.

Paying directly for medical care or tuition. If you wish to help a loved one pay for healthcare needs or education costs, the way to do this is to pay the institution directly. You may make unlimited payments to medical providers or educational institutions on behalf of others for qualified expenses without incurring a taxable gift or impacting your $17,000 individual gift exclusion. In addition, qualified medical expenses would be considered deductible for income tax purposes. Educational expenses are tuition, not living expenses or dorm fees. However, educational expenses aren’t limited to college and could be for a private school at the primary or high school level. Even certain daycare and afterschool activities might qualify.

Using the lifetime gift and estate tax exemption. One of the best estate planning tax strategies is to gift assets you expect to have significant appreciation in the future. For example, you have a $100,000 investment in a tech start-up you believe will appreciate ten times over the next five years. Of course, gifting the $100,000 investment today makes you eat slightly into your gift and estate tax exemption. All the future appreciation of the investment is still out of your taxable estate and into the hands of your heirs—estate and gift-tax free.

Converting IRAs to Roth IRAs. The SECURE Act’s 10-year rule eliminated the ability to ‘stretch’ inherited IRAs over most beneficiary’s lifetimes. A way to preclude the tax burden on your heirs from an inherited IRA is to convert it to a Roth IRA. You’ll pay the taxes at the time of conversion, but they won’t have to pay taxes upon inheriting the IRA or any future appreciation in the account.

Implementing discount strategies. This is a complex strategy used for transferring family businesses or real estate. Discount strategies reduce the value of an interest before its transfer to its value for gift tax purposes is reduced. You maintain some control or benefit from the asset after the transfer. Examples are FLPs (Family Limited Partnerships), Limited Liability Companies (LLPs) and Qualified Personal Residence Trusts (QPRTs).

Reference: yahoo! Finance (May 25, 2023) “Here’s How the Ultra Rich Pass Wealth Tax Free to Their Heirs”

Estate Planning Lessons from Elvis’ Mistakes

So far, part of the Presley legacy appears to be the failure to create effective estate plans, says a recent article from Kiplinger, “Five Estate Planning Lessons We Can Learn From Elvis’ Mistakes.” An effective estate plan transfers assets and legacy to the right people at the right time, while keeping the wrong people out.

In this case, the right people would be the people whom Elvis and Lisa Marie wanted to benefit, and a good estate plan would have ensured that their desired beneficiaries or heirs received their inheritance. The right time would be to give control of assets to loved ones when they are mature enough to benefit for a lifetime. Keeping the wrong people out would mean minimizing tax and administrative costs and protecting heirs from lawsuits, divorce, creditors and a second level of estate taxes upon their own death.

Most recently, Priscilla Presley challenged a 2016 amendment to Lisa Marie’s trust which would have removed Pricilla as co-trustee from serving alongside Lisa Marie’s former business manager, Barry Siegel. This may have been her intent. However, the amendment didn’t include basic legal formalities. A confidential settlement was recently reached on this issue.

Priscilla had grown Elvis’ estate after his death. Despite his fame, he left an illiquid estate worth $5 million in 1977—adjusted for inflation, roughly $20 million in today’s dollars. The IRS successfully asserted that the estate was worth far more and asserted $10 million in estate taxes.

The estate didn’t include as much royalty income as expected because Elvis’ business manager, Colonel Tom Parker, sold the music catalog to RCA for $5.4 million, of which only $1.35 million went to the estate. Priscilla then assumed control of the estate. From her wise use of Graceland profits, merchandising and royalties for music recorded after the RCA deal, Priscilla grew the estate to $100 million.

In 1993, Lisa Marie turned 25 and was eligible to receive and control her inheritance. She established a revocable trust to hold her inheritance, then appointed a businessman as her co-trustee with primary control over her assets. In two years, he sold 85% of her interests in Elvis Presley Enterprises, an entity The Elvis Presley Trust created to conduct business, including Graceland and worldwide licensing of Elvis Presley Products.

The deal was worth $100 million but brought the estate only $40 million after taxes, plus $25 million in stock in a future holding company of American Idol, later made worthless due to bankruptcy by its parent company.

Careful planning could have avoided substantial income tax on the sale and provided the family a much better financial return. Siegal was removed as trustee in 2015 when lawsuits between Siegel and Lisa Marie began, which were pending when she died unexpectedly in 2023.

The lessons from the Elvis estate:

Use a trust, not a will. The trust removes delays, and higher costs and keeps private details private.

Make sure that your estate plan addresses estate tax issues. The goal is to reduce the value of the taxable estate and increase the value of your legacy to family and loved ones. The estate tax must be paid in cash within nine months from the date of death. This often requires a sale of estate or trust assets to pay the tax and can lead to heirs getting less than the full value of assets because of the need to come up with the cash. A simple testamentary charitable lead annuity trust (TCLAT) could have prevented the estate tax assessed after Elvis’ death and provided substantial benefits to Lisa Marie.

Plan for a lifetime legacy. Lisa Marie gained complete control over her inheritance at age 25. First, however, she needed to prepare for the complexity of the business and other assets she inherited and learn how to maintain a lifetime of living within her means.

Plan for estate taxes on the sale of the family business. Careful planning can almost always reduce the tax triggered by the sale of appreciated property. Unfortunately, no tax mitigation planning was taken before the $100 million sale of Elvis Presley Enterprises. As a result, the maximum capital gains tax, federal and estate combined, can be more than 40%.

Carefully choose the successor trustee or executor and provide at least two alternatives. Elvis appointed his father Vernon as the executor. Elvis died tragically in 1977 when Vernon was elderly and not well. Appointing a business manager as a trustee creates an inherent conflict of interest due to the business manager’s ability to profit from decisions made. A professional trustee would have been a better choice due to the complexity of the estate and Lisa Marie’s age.

Reference: Kiplinger (May 18, 2023) “Five Estate Planning Lessons We Can Learn From Elvis’ Mistakes”

What Should I Know About Wills?

A valid last will lets you do the following:

Leave assets to people that would be excluded by the laws controlling property distribution after you die;
Change how your assets would be distributed to family members;
Establish caretakers for your children; and
Create requirements for inheriting.

Forbes’ recent article entitled, “Last Will And Testament: Everything You Need To Know,” explains that a will is a legal document created in anticipation of your death. The best known function of a last will is to determine who gets property. However, a last will can also control other things about your property and responsibilities. It’s an important tool in estate planning and one that almost everyone should create.

There are different kinds of last wills that you can create to take control of your legacy. Let’s look at some of the most common types.

Simple Will. With this last will, assets are left directly to beneficiaries. Simple wills are easy to write in most cases, and you can amend them as needed over time. They are a sound choice for those who don’t have children from a prior marriage, who do not have a lot of assets and who do not have concerns about anyone challenging their last will and testament.

Complex Will. This will is used if you have more specialized needs, such as creating a testamentary trust, which is created within your last will. You create the testamentary trust to transfer ownership of assets into a trust instead of directly to beneficiaries. A complex last will can also be used to create a special needs trust (to leave assets to a person with disabilities who relies on means-tested government benefits) or to create a protective trust for your child.

Holographic Will. A holographic will is handwritten by the creator of the last will (known as the testator). This type of last will isn’t recognized in all states. A holographic last will must also often meet specific requirements, such as the last will being signed by witnesses present when the testator signed the document.

Living Will. This is much different from the other kinds of wills. A living will does not specify who inherits assets, but rather is aimed at making advanced decisions about medical care. When you create a living will, you specify what kinds of medical care you do and do not want if decisions must be made while incapacitated.

Reference: Forbes (May 18, 2023) “Last Will And Testament: Everything You Need To Know”

What Does “Power of Attorney” Mean?

A power of attorney is a legal document giving one person—the “agent”—the legal power to make legal, financial, or medical decisions for another person. According to a recent article from Nerd Wallet, “What is a Power of Attorney (POA)? Types, How, When to Use,” the POA lets someone act on your behalf if you are traveling, too sick to act on your own behalf or can’t be present to sign legal documents.

You may name any adult, including your spouse, adult child, sibling, or a trusted friend, to act as your agent under power of attorney. It can be granted to anyone who is a legal adult and of sound mind. Ordinary power of attorney designations dissolve if you become incapacitated. However, durable power of attorney designations remain intact, even upon incapacity.

You can give one person power of attorney or divide the responsibilities among multiple people.

Most people don’t know that power of authority authorizations can be very specific or general, depending on your needs. When having an experienced estate planning attorney draft a power of attorney, review the desired scope of your agent’s authority, when it should take effect and the desired duration.

If you don’t have a power of attorney and become incapacitated, a court can appoint someone to act on your behalf. However, court intervention turns a private matter into a public proceeding, and you cannot know if the appointed conservator will follow your wishes.

There are several types of power of attorney. The durable power of attorney remains intact, even when you are incapacitated. The ordinary power of attorney becomes moot once you are incapacitated. A dual power of attorney gives power to two people and requires both individuals to sign off on any decisions.

A dual power of attorney may be useful if you have two children, for instance, and you’d like them to make joint decisions for you. Regardless of how many powers of attorney you appoint, you should always name successor agents for each power of attorney, in case the primary person is unable or unwilling to serve when needed.

A medical power of attorney, also called a health care proxy, is a type of advance directive giving another person to make all health care decisions for you in accordance with your wishes when you are unable to do so. Health care proxy decisions generally cover any type of medical treatment or procedure to diagnose and treat your health. Make sure the person you grant medical power of attorney to is familiar with your wishes and knows what decisions you would want in treatment or for life—supporting measures.

Reference: Nerd Wallet (May 10, 2023) “What is a Power of Attorney (POA)? Types, How, When to Use”

Who is Legally Able to Amend a Trust?

Procrastination is the most common mistake in estate planning when people don’t create a will and trusts and when documents are not updated. For one family, a revocable trust created when both parents are living presents some complex problems now, when the surviving wife wants to make changes but is suffering from serious health issues.

As described in the article “Estate Planning: Who can amend the trust” from NWI Times, this scenario requires a careful review of the trust document, which should contain instructions about how it can be amended and who has the authority to do so. An estate planning attorney must review the trust to ensure it can be amended.

If the trust allows the surviving settlor to amend the trust, the authority to amend it may only be given to the surviving settlor. The mother may be permitted to amend the trust. However, it can’t be anyone acting on her behalf.

If the language in the trust makes the power to amend personal, a guardian or an attorney-in-fact likely won’t be able to amend the trust. Likewise, if the mother is incapacitated and cannot do this herself, the trust may not be amendable while she is ill or disabled.

However, if the trust allows the surviving settlor to amend the trust and the power is not personal, a legal representative, such as a guardian or an attorney-in-fact, may be able to amend the trust for her, if they have the authority to do so under the terms of the trust.

Anyone contemplating this amendment must be aware of any “self-dealing” issues. The legal representative will be restricted to making changes only for the benefit of the beneficiaries and should be mindful before attempting to amend the trust.

Suppose the authority to amend doesn’t exist or other restrictions make it impossible, depending on the state’s laws. In that case, it may be possible to docket the trust with the court and obtain a court order authorizing the trustee to depart from the terms of the trust or even amend the document.

Accomplishing this is far easier if all involved agree with the changes to be made. Unfortunately, if any interested parties object, it may lead to litigation.

Depending upon the desired change, entering into a family settlement agreement may be possible after the mother dies. If everyone is willing to sign off, an agreement can be written authorizing the trustee to deviate from the terms of the trust. This will also require the guidance of an estate planning attorney to ensure that the agreement follows the state’s laws.

If family members disagree with the change, the trustee can refuse to accept the settlement agreement to protect themselves from potential liability.

Reference: NWI Times (May 7, 2023) “Estate Planning: Who can amend the trust”

What Are Estate Taxes?

As the baby boom generation members age, they will eventually pass on their wealth to the next generation. When this occurs, millennials must be prepared to pay taxes on their inheritances, says a recent article, “Millennials May Inherit $68 Trillion: Here’s What to Know About Estate and Inheritance Taxes,” from The Motley Fool.

Estate taxes are imposed on the transfer of assets after someone dies. Not every estate in the U.S. is subject to federal estate tax. Only estates valued above a certain threshold are subject to taxes. This is currently $12.92 million for singles and $25.84 for married couples. No federal estate tax is due if the estate is below this amount.

Estate taxes are paid by the decedent’s estate, not the person who inherits the wealth. When a person dies, their executor is responsible for completing the estate tax return and paying any taxes owed. The estate of the decedent person will only pay taxes on the amount over this threshold.

Estate taxes are levied on all assets a person owns at their death, including real estate, stocks, bonds, jewelry, cash and other valuables. The percentage of estate tax charged ranges from 18% to 40% of the estate’s total value. For example, an estate is valued at $15.5 million in 2023, and the expenses incurred before death—medical, funeral costs, etc., cost $500,000. You’d subtract this amount from the estate’s total value ($15.5 million—$500,000—$12.92 million threshold). Since the taxable amount is over $1 million, it will be subject to a 40% tax rate—making the taxes owed $832,000. The after-tax for heirs would be $14,168,000.

In addition, some states levy their own estate taxes. Twelve states have an estate tax: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington and the District of Columbia. Five states have only an inheritance tax—Iowa, Kentucky, Nebraska, New Jersey, Pennsylvania, and Maryland have a state estate tax plus an inheritance tax.

Can you protect your heirs from estate taxes? In a word, yes!

There are many ways to avoid federal and state estate taxes. One is to gift money and assets to loved ones while living, taking advantage of the annual gift tax exclusion, which lets you give up to $17,000 per person without incurring any taxes.

Another is to place assets in a trust. Your estate planning attorney will advise you on what kind of trust works best for your situation. For example, charitable trusts donate portions of your estate to a charity while taking the assets out of your taxable estate.

Once the Tax Cuts and Jobs Act of 2017 expires, the federal estate tax exemption will return to the $5.49 million exemption, around $6.2 million when adjusted for inflation. Therefore, it is essential for anyone whose estate may exceed this considerably lower threshold to plan now to avoid having to pay estate taxes after December 31, 2025.

Reference: The Motley Fool (May 2, 2023) “Millennials May Inherit $68 Trillion: Here’s What to Know About Estate and Inheritance Taxes”

How Do I Talk to My Parents About Estate Planning?

The best time to have this conversation is today. If you’re unsure how to broach the subject, you might ask a trusted family friend to help you navigate the conversation with compassion.

JP Morgan’s recent article, “How to talk to loved ones about estate planning,” says that if your loved ones have already started this process, ask which documents they have and see if any need to be updated. You may need to consult an experienced estate planning attorney to see what’s required.

Discussing estate planning with aging parents can be challenging, since both sides may hesitate to broach tricky topics involving end-of-life care and related decisions. However, the probate process becomes much more difficult if your parent dies without an estate plan.

Delaying this conversation won’t make it any easier. It’s important to stay calm and address the topics gently and openly. You may have to initiate a conversation several times before your mom or dad is willing to open up—another reason to broach the topic sooner.

If you’re having difficulty getting through to them, you could bring in another family member or a trusted family friend who can help you approach this conversation with the needed compassion. You may also consult an estate planning attorney to help plan and frame the conversation itself.

If your parents haven’t started planning their estate yet, think about some of the critical matters you want to discuss, like health issues, medical insurance, help with making decisions in case of incapacity, help to pay bills and keeping finances in order.

You should also ask about a plan if they need help managing daily tasks like walking, dressing, preparing meals and bathing.

Decision-making can also become a challenge for some as they get older. Therefore, having a valid power of attorney, living will and health care proxy is critical.

As tough as this can be, you must ask these questions when helping your parents plan their estate and future.

Reference: JP Morgan (April 26, 2023) “How to talk to loved ones about estate planning”

Why Would I Put My Home in a Trust?

Putting property in a trust can make managing and distributing your assets — including your home — easier after your death. It can also have legal and tax benefits.

Bankrate’s recent article entitled, “How, and why, to put your home in a trust,” says that a real estate trust is a legal arrangement in which the owner of a home, known as the “grantor” or “settlor,” transfers ownership of the property to another entity or individual, known as the “trustee.” The trustee manages the property for the benefit of the grantor and any named beneficiaries of the grantor’s estate.

You can place your home into a trust by signing a deed that names the trustee as the property’s new owner. The deed must be recorded with the local county recording office, and then the trust is the legal owner of the property.

The home’s original owner will usually name him- or herself as the trustee, so they can maintain control of the property. However, the original owner can name someone else as the trustee. This can be helpful in case the original owner passes away. Trustees are frequently adult children of the homeowner, who will inherit the property upon the homeowner’s death.

Trusts are often used for tax, estate planning, or asset protection purposes, as — depending on the type of trust — the property can be protected from creditors and transferred directly to the beneficiaries without going through probate. Two primary types of trusts pertain to real estate: revocable and irrevocable.

Also called a living trust, a revocable trust can be changed or dissolved at any time by the grantor (creator) of the trust. A revocable trust lets a grantor control the property and make changes to the trust during their lifetime. The grantor retains the right to modify or dissolve the trust. The grantor can act as a trustee, manage the property, or appoint someone else.

A revocable/living trust states the original homeowner’s wishes upon death. When the grantor passes away, the property in the revocable trust is distributed to the grantor’s beneficiaries according to the terms of the trust agreement.

An irrevocable trust, as the name implies, is more permanent and can’t be terminated or modified by the grantor after it’s been created, unless the beneficiaries agree to the change.

Reference: Bankrate (February 21, 2023) “How, and why, to put your home in a trust”

Use Estate Planning to Prepare for Cognitive Decline

Since 2000, the national median age in the U.S. has increased by 3.4 years, with the largest single year gain of 0.3 years in 2021, when the median age reached 38.8 years. This may seem young compared to the life expectancies of older Americans. However, the median age in 1960 was significantly lower, at 29.5 years, according to the article “Don’t Let Cognitive Decline Derail Well-Laid Financial Plans” from Think Advisor.

An aging population brings many challenges to estate planning attorneys, who are mindful of the challenges of aging, both mental, physical and financial. Experienced estate planning attorneys are in the best position to help clients prepare for these challenges by taking concrete steps to protect themselves.

Individuals with cognitive decline become more vulnerable to potentially negative influences at the same time their network of trusted friends and family members begins to shrink. As people become older, they are often more isolated, making them increasingly susceptible to scams. The current scam-rich environment is yet another reason to use estate planning.

When a person is diagnosed with Alzheimer’s or any other form of dementia, an estate plan must be put into place as soon as possible, as long as the person is still able express their wishes. A diagnosis can lead to profound distress. However, there is no time to delay.

While typically, the person may state they wish their spouse to be entrusted with everything, this has to be properly documented and is only part of the solution. This is especially the case if the couple is close in age. A secondary and even tertiary agent needs to be made part of the plan for incapacity.

The documents needed to protect the individual and the family are a will, financial power of attorney, durable power of attorney and health care documentation. In addition, for families with more sophisticated finances and legacy goals, trusts and other estate and tax planning strategies are needed.

A common challenge occurs when parents cannot entrust their children to be named as their primary or secondary agents. For example, suppose no immediate family members can be trusted to manage their affairs. In that case, it may be necessary to appoint a family friend or the child of a family friend known to be responsible and trustworthy.

The creation of power of attorney documents by an estate planning attorney is critical. This is because if no one is named, the court will need to step in and name a professional guardian. This person won’t know the person or their family dynamics and may not put their ward’s best interests first, even though they are legally bound to do so. There have been many reports of financial and emotional abuse by court-appointed guardians, so this is something to avoid if possible.

Reference: Think Advisor (April 21, 2023) “Don’t Let Cognitive Decline Derail Well-Laid Financial Plans”

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Estate & Business Planning Law Firm Serving the Providence & Cranston, RI Areas

How Do I Transfer Vehicle Ownership of a Deceased Relative?

Ever Wonder How the Very, Very Rich Pass Wealth to Their Children?