When Should I Hire an Estate Planning Attorney?

Kiplinger’s recent article entitled “Should I Hire an Estate Planning Attorney Now That I Am a Widow?” describes some situations where an experienced estate planning attorney is really required:

Estates with many types of complicated assets. Hiring an experienced estate planning attorney is a must for more complicated estates. These are estates with multiple investments, numerous assets, cryptocurrency, hedge funds, private equity, or a business. Some estates also include significant real estate, including vacation homes, commercial properties and timeshares. Managing, appraising and selling a business, real estate and complex investments are all jobs that require some expertise and experience. In addition, valuing private equity investments and certain hedge funds is also not straightforward and can require the services of an expert.

The estate might owe federal or state estate tax. In some estates, there are time-sensitive decisions that require somewhat immediate attention. Even if all assets were held jointly and court involvement is unnecessary, hiring a knowledgeable trust and estate lawyer may have real tax benefits. There are many planning strategies from which testators and their heirs can benefit. For example, the will or an estate tax return may need to be filed to transfer the deceased spouse’s unused Federal Estate Unified Tax Credit to the surviving spouse. The decision whether to transfer to an unused unified tax credit to the surviving spouse is not obvious and requires guidance from an experienced estate planning attorney.

Many states also impose their own estate taxes, and many of these states impose taxes on an estate valued at $1 million or more. Therefore, when you add the value of a home, investments and life insurance proceeds, many Americans will find themselves on the wrong side of the state exemption and owe estate taxes.

The family is fighting. Family disputes often emerge after the death of a parent. It’s stressful, and emotions run high. No one is really operating at their best. If unhappy family members want to contest the will or are threatening a lawsuit, you’ll also need guidance from an experienced estate planning attorney. These fights can result in time-intensive and costly lawsuits. The sooner you get legal advice from a probate attorney, the better chance you have of avoiding this.

Complicated beneficiary plans. Some wills have tricky beneficiary designations that leave assets to one child but nothing to another. Others could include charitable bequests or leave assets to many beneficiaries.

Talk to an experienced attorney, whose primary focus is estate and trust law.

Reference: Kiplinger (July 5, 2022) “Should I Hire an Estate Planning Attorney Now That I Am a Widow?”

Did Former NFL Tackle and Fox Sports Commentator Tony Siragusa have an Estate Plan?

In June 2022, former NFL tackle and Fox Sports commentator Tony “The Goose” Siragusa died at the age of 55. The death of the popular athlete was confirmed to TMZ Sports by Siragusa’s former teammate Jamal Lewis. Lewis also played on the Baltimore Ravens Super Bowl winning team in 2001.

MSN’s recent article entitled “What Was NFL Legend Tony Siragusa’s Net Worth When He Died?” says that no cause of death was included with the announcement of Siragusa’s passing.

Siragusa was first drafted by Indianapolis and played a dozen years in the NFL before working more than 10 years on the sidelines for Fox Sports.

In a 2012 interview with Howard Stern, he revealed that his father died young from a heart attack at the age of 48, and that heart disease runs in the Siragusa family.

As a success both before and after his playing career, Tony left behind a sizable net worth when he died.

At the time that Siragusa died in 2022 his net worth was $6 million, according to Celebrity Net Worth. He also earned a $500,000 annual salary for his on-camera work with “Fox on Sunday.”

In addition to the money Siragusa made through football both in the game and on the sidelines, he was also an actor. Siragusa had a role in the hit HBO TV series “The Sopranos,” as well as other parts. Siragusa also hosted “Man Caves” on the DIY Network, as well as other TV appearances.

As news of Siragusa’s death spread, Indianapolis Colts owner Jim Irsay tweeted that Siragusa was the strongest player he’d ever seen in Irsay’s’ half-century in football. Siragusa was drafted by Indianapolis in 1990.

“I’m heartbroken as is all of Colts Nation,” Irsay also tweeted.

Siragusa is survived by his wife, Kathy Siragusa, and their three children.

Referring to the death of his former teammate, Jamal Lewis said, “It’s a sad day to be a Raven.”

Reference: MSN (June 22, 2022) “What Was NFL Legend Tony Siragusa’s Net Worth When He Died?”

Do I Need All Insurance after 65?

Seniors should be cautious about canceling their insurance policies. Consider your future insurability and your individual circumstances and life goals. There’s no one answer that fits everyone.

The primary purpose of life insurance is to replace lost income. Retirees may still want to keep their coverage because it can be an important tool in wealth transfer to the next generation.

US News’ recent article entitled “The Only Insurance Policies You Need After Retirement” advises that these guidelines can help determine which policies are essential and which could be a waste of money. Let’s look at how to decide which policies you need and which you can skip after age 65.

Must-Have Policies for Seniors. These two types of insurance are necessary for seniors.

Medical Insurance. The increasing cost of health care that comes with advanced age is a big reason to buy medical insurance. The Affordable Care Act requires everyone to maintain coverage. Most seniors 65+ are eligible for Medicare, and those still working may have benefits through their job. Note that Medicare doesn’t cover all medical costs, so look at buying a supplemental plan, such as Medigap and Part D coverage, to help pay for services not fully covered by Original Medicare. A Medicare Advantage Plan offered by private insurers is another way to fill in coverage gaps.
Homeowners or Renters Insurance. Seniors with valuable jewelry or other items may need to add a rider to their policy to fully insure these possessions. Mortgage lenders require homeowners to maintain coverage, but once the loan is paid off, it’s not required. It may be tempting to save money by canceling the policy, but that could be a costly mistake. That’s because a big loss would have to be replaced with savings.

Some Smart Options. There are other types of insurance that could be helpful to seniors.

Travel Insurance. Those who plan to travel extensively may want to buy travel insurance. Find a policy that includes features, such as emergency medical and medical evacuation services along with trip delay or cancellation insurance.
Auto Insurance. Auto insurance is required in almost every state. Any senior who is still driving and owns a vehicle should insure it properly.
Umbrella Insurance. This insurance provides additional liability coverage above and beyond what’s included in homeowner and car insurance. Your volunteer activities could put you at risk for a liability claim and warrant added insurance coverage.
An immediate annuity can help guard against outliving savings by providing a guaranteed source of income. Annuities can be purchased for a lump sum amount and provide monthly payments that are based on a person’s age and the purchase price.
Long-Term Care Insurance. Medicare won’t pay for ongoing custodial care in a nursing home or assisted living facility, and Medicaid is only available after a person has depleted almost all their assets.

One Type of Insurance to Cancel. Seniors who aren’t working don’t have a need for disability insurance.

Reference: US News (Feb. 27, 2020) “The Only Insurance Policies You Need After Retirement”

How to Plan in a Time of Uncertainty

There’s a saying in estate planning circles that the only people who pay estate taxes are those who don’t plan not to pay estate taxes. While this doesn’t cover every situation, there is a lot of truth to it. A recent article from Financial Advisor entitled “Estate Planning In This Particular Time of Uncertainty” offers strategies and estate planning techniques to be considered during these volatile times.

Gifting Assets into Irrevocable Trusts to Benefit Family Members. If done correctly, this serves to remove the current value and all future appreciation of these assets from your estate. With the federal estate tax exemption ending at the end of 2025, the exemption will drop from $12.06 million per person to nearly half that amount.

Combine this with a time of volatile asset prices and it becomes fairly obvious: this would be a good time to take investments with a lowered value out of the individual owner’s hands and gift them into an irrevocable trust. The lower the value of the asset at the time of the gift, the less the amount of the lifetime exemption that needs to be used. If assets are expected to recover and appreciate, this strategy makes even more sense.

Spousal Limited Access Trust (SLAT). This may be a good time for a related technique, the SLAT, an irrevocable trust created by one spouse to benefit the other and often, the couple’s children. Access to income and principal is created during the spouse’s lifetime. It can even be drafted as a dynasty trust. Assets can be gifted out of the estate to the trust and while the grantor (the person creating the trust) cannot be a beneficiary, their family can. Couples may also create reciprocating SLATs, where each is the beneficiary of the other’s trust, as long as they are careful not to create duplicate trusts, which have been found invalid by courts. Talk with an experienced estate planning attorney about how a SLAT may work for you and your spouse.

What about interest rates? A Grantor Retained Annuity Trust (GRAT), where the grantor contributes assets and enjoys a fixed annuity stream for the life of the trust, may be advantageous now. At the end of the trust term, remaining assets are distributed to family members or a trust for their benefit. To avoid a gift tax on the calculated remainder, due when the trust is created, most GRATs are “zeroed out,” that is, the present value of the annuity stream to the grantor is equal to the amount of the initial funding of the trust. Since you get back what’s been put in, no taxable gift occurs. The lower the interest rate, the higher the value of the income stream. The grantor can take a lower annuity amount and with decent appreciation of assets in the trust, there will be a larger amount as a remainder for heirs. Interest rates need to be considered when looking into GRATs.

Qualified Personal Residence Trust (QPRT) is a trust used to transfer a primary residence to beneficiaries with minimal gift tax consequences. The grantor retains the right to live in the house at no charge for a certain period of time. After the time period ends, the property and any appreciation in value passes to beneficiaries. The valuation for the value of the initial transfer into the trust for gift tax purposes is determined by a calculation relying heavily on interest rates. In this case, a higher interest rate results in a lower present value of the remainder and a lower gift value when the trust is created.

Reference: Financial Advisor (July 8, 2022) “Estate Planning In This Particular Time of Uncertainty”

How to Make Home Caregiving Easier

New tools and techniques can improve the safety of a home, which can make caregiving a little easier. AARP’s recent article entitled “9 Items That Make Home Caregiving Easier” provides us with some tools designed to help caregivers ease the burden of daily challenges.

Sit-to-stand toilet. A quarter of falls happen in the bathroom, so assistive toilet seats with adjustable handlebars and seat heights — for safe and stable toilet transfers — are great for those with weakness and instability issues.
Adjustable beds. Although pricey, they’re a real investment in helping to adjust comfort levels with the push of a button. These beds can help create an upright position for eating and are a good tool for preventing bedsores. They also allow for fast repositioning, and safer and faster transfers in and out of bed.
Walk-in shower with handrails. These make it easier for caregivers to get someone with dementia or other challenges to bathe. Walk-in showers have more room for a seat or bench and grab bars. Anti-slip flooring and faucets that regulate water flow and temperature to prevent scalding should also be added.
Motion-sensor lights. Wireless motion-sensor lights can illuminate dim areas, such as stairs and long hallways. These lights are battery-operated, have built-in magnets and double-sided adhesives and shut off after a short amount of inactive time, usually from 15 to 30 seconds.
In-home cameras. Cameras can prevent a loved one from leaving a home or wandering off without a caregiver’s knowledge.
GPS trackers. These devices let loved ones live an independent life, while letting caregivers know exactly where they are. This technology allows for real-time tracking, the setup of safe zones and custom alerts to let caregivers know someone has wandered off. They also may have two-way communication and the ability to give others, like additional family members, access to the same information.
Monitoring apps. There are many digital apps that can be used as monitors, reminders and providers of useful information.
Customizable digital clocks. Choose clocks with large, easy-to-read displays, or voice capabilities. Some clocks let caregivers set reminders, such as “It is now Saturday afternoon.” Caregivers can program alarms, events, birthdays and holidays. Models with personalized voice reminders — for medication, appointments, and tasks — let the person being cared for hear the comforting voice of the caregiver.
Large erasable whiteboards and calendars. Place these in commonly frequented parts of the house, like the kitchen and family room. These can be easier to use and more legible for people with dementia.

Reference: AARP (Dec. 21, 2021) “9 Items That Make Home Caregiving Easier”

Suggested Key Terms: Disability, Caregiving, Dementia, Senior Health, Aging at Home

Addressing Vacation Home in Another State in Estate Planning

Many families have an out-of-state cabin or vacation home that’s passed down by putting the property in a will. While that’s an option, this strategy might not make it as easy as you think for your family to inherit this home in the future.

Florida Today’s recent article entitled “Avoiding probate: What is the best option for my out-of-state vacation home?” explains the reason to look into a more comprehensive plan. While you could just leave an out-of-state vacation home in your will, you might consider protecting your loved ones from the often expensive, overwhelming and complicated process of dealing both an in-state probate and an out-of-state probate.

There are options to help avoid probate on an out-of-state vacation home that can save your family headaches in the future. Let’s take a look:

Revocable trust: This type of trust can be altered while you’re still living, especially as your assets or beneficiaries change. You can place all your assets into this trust, but at the very least, put the vacation home in the trust to avoid the property going through probate. Another benefit of a revocable trust is you could set aside money in the trust specifically for the management and upkeep of the property, and you can leave instructions on how the vacation home should be managed upon your death.
Irrevocable trust: similar to the revocable trust, assets can be put into an irrevocable trust, including your vacation home. You can leave instructions and money for the management of the vacation home. However, once an irrevocable trust is established, you can’t amend or terminate it.
Limited liability company (LLC): You can also create an LLC and list your home as an asset of the company to eliminate probate and save you or your family from the risk of losing any other assets outside of the vacation home, if sued. You can protect yourself if renting out a vacation home and the renter decides to sue. The most you could then lose is that property, rather than possibly losing any other assets. Having beneficiaries rent the home will help keep out-of-pocket expenses low for future beneficiaries. With the creation of an LLC, you’re also able to create a plan to help with the future management of the vacation home.
Transfer via a deed: When you have multiple children, issues may arise when making decisions surrounding the home. This is usually because your wishes for the management of the house are not explicitly detailed in writing.
Joint ownership: You can hold the title to the property with another that’s given the right of survivorship. However, like with the deed, this can lead to miscommunication as to how the house should be cared for and used.

Plan for the future to help make certain that the property continues to be a place where cherished memories can be made for years to come. Talk to a qualified estate planning attorney for expert legal advice for your specific situation.

Reference: Florida Today (July 2, 2022) “Avoiding probate: What is the best option for my out-of-state vacation home?”

What Happens to Stock Options when Someone Dies?

Once your business grows, so does the pressure to make good financial decisions in the short and long term. When you think about the future, estate and succession planning emerge as two major concerns. You’re not just considering balance sheets, profits and losses, but your family and what will happen to them and your business when you’re not around. This thinking leads to what seems like a great idea: transferring stock or LLC membership units to one or more of your adult children.

There are benefits, especially the ability to avoid a 40% estate tax and other benefits. However, there are also lots of ways this can go sideways, fast.

Executing due diligence and creating an exit plan to minimize taxes and successfully transfer the business takes planning and, even harder, removing emotions from the plan to make a good decision.

An outright transfer of stock or ownership units can expose you and your business to risk. Even if your children are Ivy-league MBA grads, with track records of great decision making and caring for you and your spouse, this transaction offers zero protection and all risk for you. What could go wrong?

An in-law (one you may not have even met yet) could try to place a claim on the business and move it away from the family.
Creditors could seize assets from the children, entirely likely if their future holds legal or financial problems—or if they have such problems now and haven’t shared them with you.
Assets could go into your children’s estates, which reintroduces exposure to estate taxes.

No family is immune from any of these situations, and if you ask your estate planning attorney, you’ll hear as many horror stories as you can tolerate.

Trusts are a solution. Thoughtfully crafted for your unique situation, a trust can help avoid exposure to some estate and other taxes, allocating effective ownership to your children, in a protected manner. Your ultimate goal: keeping ownership in the family and minimizing tax exposure.

A Beneficiary Defective Inheritance Trust (BDIT) may be appropriate for you. If you’ve already executed an outright transfer of the stock, it’s not too late to fix things. The BDIT is a grantor trust serving to enable protection of stock and eliminate any “residue” in your childrens’ estates.

If you haven’t yet transferred stock to children, don’t do it. The risk is very high. If you’ve already completed the transfer, speak with an experienced estate planning attorney about how to reverse the transfer and create a plan to protect the business and your family.

Bottom line: business interests are better protected when they are held not by individuals, but by trusts for the benefit of individuals. Your estate planning attorney can draft trusts to achieve goals, minimize estate taxes and, in some situations, even minimize state income taxes.

Reference: The Street (June 27, 2022) “Should I Transfer Company Stock to My Kids?”

Can Estate Planning Reduce Taxes?

The estate tax exemption won’t always be so high. The runup in housing prices may mean capital gains taxes become a serious issue for many people. There are solutions to be found in estate planning, including one known as an “Upstream Power of Appointment” Trust, as explained in the article “How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!” from Kiplinger.

The strategy isn’t for everyone. It requires a completely trustworthy, elderly and less wealthy relative, such as a parent, aunt, or uncle, to serve as an additional trust beneficiary. First, here is some background information:

Basis: This is the amount by which a price is reduced to determine the taxable gain. This is often the historical cost of an asset, which may be adjusted for depreciation or other items. Estate planning attorneys are familiar with these terms.

Step-up (in-basis): If you bought a house for $100,000 and sold it for $400,000, your taxable gain would be $300,000. However, if the house had belonged to your father and was being sold to distribute assets between you and your siblings, the basis (cost) would be increased to the fair market value at the date of your father’s passing. This increase is known as the “step-up in basis” and here’s the benefit: there would be no capital gain on the sale and no taxes owed.

Lifetime estate tax exemption: This is currently at $12.06 million per person or $24.12 for married couples. This is the amount of assets which can be passed to children or others free of any federal estate tax. However, the number will take a deep dive on January 1, 2026, when it reverts back to just under $6 million, adjusted for inflation. Plan for the change now, because 2026 will be here before you know it!

Upstream planning involves transferring certain appreciated assets to older or other family members with shorter life expectancies. Since the person is expected to die sooner, the basis step-up is triggered sooner. When the named person dies, you obtain a basis step-up on the asset, saving income taxes on depreciation and saving capital gains on a future sale of the property.

Most Americans aren’t worried about paying estate taxes now, but no one wants to pay too much in income taxes or capital gains taxes.

To make this happen, your estate planning attorney will need to give an elderly person (let’s say Aunt Rose) the general power of appointment over the asset. Section 2041 of the Internal Revenue Code says you may give your Aunt Rose a power to appoint the asset to her estate, creditors, or the creditors of her estate. Providing the power will include the value of the property in her estate, not yours, ensuring the basis step-up and income tax savings.

Don’t do this lightly, as a general power of appointment also gives Aunt Rose ownership and the right to give the property to herself or anyone she wishes. Can you protect yourself, if Aunt Rose goes rogue?

While the IRC rule doesn’t require Aunt Rose to get your permission to control or change distribution of the property, a trust can be crafted with a provision to effectuate the desired result. The IRC doesn’t require Aunt Rose to know about this provision. This is why the best person for this role is someone who you know and trust without question and who understands your wishes and the desired outcome.

Proper planning with an experienced estate planning attorney is a must for this kind of transaction. All the provisions need to be right: the beneficiary need not survive for any stated period of time, you should not lose access to the assets receiving the basis increase, you want a formula clause to prevent a basis step down if the property or asset values fall and you want to be sure that assets are not exposed to creditor claims or any other liabilities of the person holding this broad power.

Reference: Kiplinger (July 3, 2022) “How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!”

What Happens to Investment Accounts when Someone Dies?

Taking responsibility for a decedent’s probate or trust estate often involves managing significant amounts of wealth, whether they are brokerage accounts or cash assets. Today’s volatile markets add another level of complexity to this responsibility. The article “Estate Planning: Investments during administration of decedent’s estate” from Lake County News explains what estate administrators, executors and trustees need to know as they take on these tasks.

Investment account values are in a constant state of change and may include assets now considered too risky because they are owned by the estate and not the individual. The administrator will need to evaluate the accounts in light of debts owed by the decedent, the costs in administering the estate and any gifts to be made before the estate will be closed.

At the same time, too much cash on hand could mean unproductive assets earning less than they could, losing value to inflation. If there is a long time between the death of the owner and the date of distribution, depending on markets and interest rates, having too much cash could be detrimental to the beneficiaries.

The personal representative or trustee, as relevant, may determine that the cash should be invested, shift how existing investments are managed, or decide to sell investments to generate cash needed for debts, expenses and distributions to beneficiaries.

A personal representative is not expected or required to be a stock market expert. Their duties are to manage estate assets as a person making prudent decisions for the betterment of the estate and heirs. They must put the interest of the estate above their own and not make any speculative investments. With the exception of checking accounts, the expectation is for estate accounts to earn something, even if it is only interest.

If the personal representative has the authority to do so, they may invest in very low-risk debt assets. If the will includes investment powers and if certain conditions safeguarding payment of the decedent’s debts and expenses are satisfied, the personal representatives may invest using those powers. In some instances, a court order may be needed. An estate planning attorney will be able to advise based on the laws of the state in which the decedent resided.

For a trust, the trustee has a fiduciary duty to invest and manage trust assets for beneficiaries. Assets should be made productive, unless the trust includes specific directions for the use of assets prior to distribution. The longer the trust administration takes and the larger the value of the trust, the more important this becomes.

In all scenarios, investment decisions, including balancing risk and reward, must be made in the context of an overall investment strategy for the benefit of heirs. Investments may be delegated to a professional investment advisor, but the selection of the advisor must be made cautiously. The advisor must be selected prudently and the scope and terms of the selection of the advisor must be consistent with the purposes and terms of the trust. The trustee or executor must personally monitor the advisor’s performance and compliance with the overall strategy.

Reference: Lake County News (June 11, 2022) “Estate Planning: Investments during administration of decedent’s estate”

When Should I Revise My Will?

Just as your life changes, so should your will. You may need to replace an executor, update accounts, or adjust heirs. If you have an estate plan with greater wealth or need more complex arrangements, such as trusts or guardianship provisions, may want to work with an experienced estate planning attorney, says US News’ March 2018 article entitled “4 Times It Makes Sense to Revise Your Will.” Let’s look at the four events:

You’ve experienced a significant life event. This may be a marriage, a divorce, the birth of a child, remarriage or the death of a loved one. These changes may require that new heirs be added to a will or others removed. These life events may also influence how assets are divided in the will. In addition, if you move to a new state, update your will to ensure it adheres to the laws there.
A person in your will has experienced a significant life event. Wills also include executors, trustees and guardians. These individuals may move, get married or become sick or disabled, all of which could change whether they are appropriate for the role listed in your will.
The tax laws have changed. A will may be written to minimize the effects of estate taxes. When laws change, the provisions of the will may need to be updated. For example, in 2017, $5.49 million of a person’s estate was exempt from the 40% federal estate tax. Under the Tax Cuts and Jobs Act, $12.06 million of an estate is currently exempt from the tax in 2022. This could mean that some families no longer need to worry about paying an estate tax and could eliminate the need for some trusts or other provisions in a will.
If it’s been three to five years. It’s smart to review a will at least every three to five years and ensure that all provisions are still in line with your wishes.

While you’re reviewing your will, don’t forget to also review beneficiaries on bank accounts, retirement funds and life insurance. Remember that a named beneficiary trumps the will.

Make sure that all that hard work on your will does not go to waste, by reviewing and updating the document periodically to make sure it reflects the changing landscape of your life.

When you have the will updated, be sure to store it in a secure location, like a fire-proof safe, and let your executor know where to find it. If an attorney drew up your will, they’ll be happy to store at least a digital copy for you.

Reference: US News (March 30, 2018) “4 Times It Makes Sense to Revise Your Will”

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When Should I Hire an Estate Planning Attorney?