Facebook-f Twitter Linkedin-in Youtube Rss
estate planning and elder law
Book Your Free Call

Estate Planning Blog Articles

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

Are You Ready for 2026?

You may not be thinking about Jan. 1, 2026. Any New Year’s Eve celebrations being planned now are more likely to concern Jan. 1, 2023. However, if your estate is worth $5 million or more when the first day of 2026 arrives, your estate planning should begin now. According to a recent article from Forbes, “Is 2026 An Important Year For Your Wealth?,” the reduction in the estate tax exemption will revert to the 2010 level of $5 million adjusted for inflation. It could go even lower. With federal tax rates on estates over the exemption level set at 40%, plus any state estate or inheritance taxes, planning needs to be done in advance.

Considering the record levels of national debt and government spending, it’s unlikely these exemptions will remain the same. Now is the time to maximize today’s high estate tax exemption levels to minimize federal estate taxes and maximize what will be left to heirs.

Your estate planning attorney will have many different strategies and tools to achieve these goals. One is the Spousal Lifetime Access Trust (SLAT). This is an irrevocable trust created by each spouse, known as the grantors, for the benefit of the other spouse. Important note: to avoid scrutiny, the trusts must not be identical.

Each trust is funded by the grantor in an amount up to the current available tax exemption. Today, this is $12.06 million each (or a total of $24.12 million) without incurring a gift tax.

This serves several purposes. One is removing the gifted assets from the grantor’s estate. The assets and their future growth are protected from estate taxes.

The spousal beneficiary has access to the trust income and/or principal, depending upon how the trust is created, if they need to tap the trust.

The trust income may be taxed back to the grantor instead of the trust. This allows the assets in the trust to grow tax-free.

Remainder beneficiaries, who are typically the grantor’s children, receive the assets at the termination of the SLAT, usually when the beneficiary spouse passes away.

The SLAT can be used as a generation-skipping trust, if this is the goal.

The SLAT is a useful tool for blended families to avoid accidentally disinheriting children from first (or subsequent) marriage. Reminder assets can be distributed to named beneficiaries upon the death of the spouse.

The SLAT is an irrevocable trust, so some control needs to be given up when the SLATs are created. Couples using this strategy need to have enough assets to live comfortably after funding the SLATS.

Why do this now, when 2026 is so far away? The SLAT strategy takes time to implement, and it also takes time for people to get comfortable with the idea of taking a significant amount of wealth out of their control to place in an irrevocable trust. For a large SLAT, estate planning attorneys, CPAs and financial advisors generally need to work together to create the proper structure. Executing this estate planning strategy takes time and should not be left for the year before this large change in federal estate taxes occurs.

Reference: Forbes (Oct. 4, 2022) “Is 2026 An Important Year For Your Wealth?”

What Is Upstream Planning?

Estate planning with an eye to a future inheritance, known as “upstream planning,” can be especially important where families pass significant wealth from generation to generation. Knowing these details in advance can have a big impact on deciding on how to manage the heir’s own assets, as explained in the article “Expecting an Inheritance? Consider Coordinating Your Estate Plan with Your Parents’” from Kiplinger.

What happens when information is kept private? In one example, a patriarch refused to share any details, despite having children who had succeeded on their own and didn’t really need their inheritances. The family was left with an eight figure estate tax bill.

Clear and open discussions make sense. If a person has an estate large enough to need to pay federal estate taxes, inheriting more will add to their heir’s tax burdens. Parents may choose to leave assets to heirs through a trust. Money in a trust belongs to the trust, so in addition to tax benefits, the trust is a good way to protect assets from creditors, litigation, or divorce.

Trusts are also used to take advantage of the GST—generation skipping tax exemption. The executor of the parents’ estates can apply their GST exemption to the trust, which will not be taxed when they are distributed or passed to grandchildren, even if the grandchild is a beneficiary of the trust.

Business considerations also come into play. If a couple built and grew a business now being run by their granddaughter, and the grandsons have had little or no involvement, their wishes should be clarified: do they want their granddaughter to be the sole heir? Or do they want the grandsons to receive cash or other assets or any shares of the business?

Talking about multigenerational wealth early and often provides benefits to all concerned. The more money a family has, the more it makes sense to have those conversations and not only from an estate tax perspective. Those who created the wealth can use upstream planning as a way to start conversations about their success, family values and hopes for how heirs and future generations will benefit.

In some families, these conversations won’t happen because they think it’s too private or don’t want their children and grandchildren to feel they don’t need to work hard to become responsible citizens.

Communicating and coordinating are vital to success. Your estate planning attorney will be able to provide guidance, having seen what happens when upstream planning occurs and when it does not.

Reference: Kiplinger (Oct. 4, 2022) “Expecting an Inheritance? Consider Coordinating Your Estate Plan with Your Parents’”

Top 10 Success Tips for Estate Planning

Unless you’ve done the planning, assets may not be distributed according to your wishes and loved ones may not be taken care of after your death. These are just two reasons to make sure you have an estate plan, according to the recent article titled “Estate Planning 101: 10 Tips for Success” from the Maryland Reporter.

Create a list of your assets. This should include all of your property, real estate, liquid assets, investments and personal possessions. With this list, consider what you would like to happen to each item after your death. If you have many assets, this process will take longer—consider this a good thing. Don’t neglect digital assets. The goal of a careful detailed list is to avoid any room for interpretation—or misinterpretation—by the courts or by heirs.

Meet with an estate planning attorney to create wills and trusts. These documents dictate how your assets are distributed after your death. Without them, the laws of your state may be used to distribute assets. You also need a will to name an executor, the person responsible for carrying out your instructions.

Your will is also used to name a guardian, the person who will raise your children if they are orphaned minors.

Who is the named beneficiary on your life insurance policy? This is the person who will receive the death benefit from your policy upon your death. Will this person be the guardian of your minor children? Do you prefer to have the proceeds from the policy used to fund a trust for the benefit of your children? These are important decisions to be made and memorialized in your estate plan.

Make your wishes crystal clear. Legal documents are often challenged if they are not prepared by an experienced estate planning attorney or if they are vaguely worded. You want to be sure there are no ambiguities in your will or trust documents. Consider the use of “if, then” statements. For example, “If my husband predeceases me, then I leave my house to my children.”

Consider creating a letter of intent or instruction to supplement your will and trusts. Use this document to give more detailed information about your wishes, from funeral arrangements to who you want to receive a specific item. Note this document is not legally binding, but it may avoid confusion and can be used to support the instructions in your will.

Trusts may be more important than you think in estate planning. Trusts allow you to take assets out of your probate estate and have these assets managed by a trustee of your choice, who distributes assets directly to beneficiaries. You don’t have to have millions to benefit from a trust.

List your debts. This is not as much fun as listing assets, but still important for your executor and heirs. Mortgage payments, car payments, credit cards and personal loans are to be paid first out of estate accounts before funds can be distributed to heirs. Having this information will make your executor’s tasks easier.

Plan for digital assets. If you want your social media accounts to be deleted or emails available to a designated person after you die, you’ll need to start with a list of the accounts, usernames, passwords, whether the platform allows you to designate another person to have access to your accounts and how you want your digital assets handled after death. This plan should be in place in case of incapacity as well.

How will estate taxes be paid? Without tax planning properly done, your legacy could shrink considerably. In addition to federal estate taxes, some states have state estate taxes and inheritance taxes. Talk with your estate planning attorney to find out what your estate tax obligations will be and how to plan strategically to pay the taxes.

Plan for Long Term Care. The Department of Health and Human Services estimates that about 70% of Americans will need some type of long-term care during their lifetimes. Some options are private LTC insurance, government programs and self-funding.

The more planning done in advance, the more likely your loved ones will know what to do if you become incapacitated and know what you wanted when you die.

Resource: Maryland Reporter (Sep. 27, 2022) “Estate Planning 101: 10 Tips for Success”

Estate Planning Considerations for Minor Children

Creating an estate plan with minor children in mind has a host of variables quite different than one where all heirs are adults. If the intention is for the minor children to be beneficiaries, or if there is a remote chance a minor child might become an unintended beneficiary, different provisions will be needed. A recent article titled “Children need special attention in estate planning” from The News-Enterprise explains how these situations might be addressed.

Does the person creating the will—aka, the testator—want property to be distributed to a minor child? If so, how is the distribution is to occur, tax consequences and safeguards need to be put into place. Much depends upon the relationship of the testator to the minor child. An older individual may want to leave specific dollar bequests for minor children or great-grandchildren, while people with younger children generally leave their entire estate in fractional shares to their own minor children as primary beneficiaries.

While minor children and grandchildren beneficiaries are excluded from inheritance taxes in certain states, great- grandchildren are not. Your estate planning attorney will be able to provide details on who is subject to inheritance, federal and state estate taxes. This needs to be part of your estate plan.

If minor children are the intended beneficiaries of a fractional share of the estate in its entirety, distributions may be held in a common trust or divided into separate share for each minor child. A common trust is used to hold all property to benefit all of the children, until the youngest child reaches a determined age. When this occurs, the trust is split into separate shares according to the trust directions, when each share is managed for the individual beneficiary.

Instructions to the trustee as to how much of the income and principal each beneficiary is to receive and when, at what age or intervals each beneficiary may exercise full control over the assets and what purposes the trust property is intended for until the beneficiary reaches a certain age are details which need to be clearly explained in the trust.

Trusts for minor children are often specifically to be used for health, education, maintenance, or support needs of the beneficiary, within the discretion of the trustee. This has to be outlined in the trust document.

Even if the intention is not to make minor children beneficiaries, care must be taken to include provisions if they are family members. The will or trust must be clear on how property passed to minor child beneficiaries is to be distributed. This may be done through a requirement to put distributions into a trust or may leave a list of options for the executor.

Testators need to keep in mind the public nature of probate. Whatever is left to a minor child will be a matter of public record, which could make the child vulnerable to scammers or predatory family members. Consider using a revocable living trust as an alternative to safeguard the child and the assets.

Regardless of whether a will or trust is used, there should be a person named to act as the child’s guardian and their conservator or trustee, who manages their finances. The money manager does not have to be a parent or relative but must be a trustworthy person.

Review your specific situation with your estate planning attorney to create a plan to protect your minor children, ensuing their financial and lifestyle stability.

Reference: The News-Enterprise (Sep. 10, 2022) “Children need special attention in estate planning”

How Does Probate Court Work?

Probate court is where wills are examined to be sure they have been prepared according to the laws of the state and according to the wishes of the person who has died. It is also the jurisdiction where the executor is approved, their activities are approved and all debts are paid and assets are distributed properly. According to a recent article from Investopedia “What is Probate Court?,” this is also where the court determines how to distribute the decedent’s assets if there is no will.

Probate courts handle matters like estates, guardianships and wills. Estate planning lawyers often manage probate matters and navigate the courts to avoid unnecessary complications. The probate court process begins when the estate planning attorney files a petition for probate, the will and a copy of the death certificate.

The probate court process is completed when the executor completes all required tasks, provides a full accounting statement to the court and the court approves the statement.

Probate is the term used to describe the legal process of handling the estate of a recently deceased person. The role of the court is to make sure that all debts are paid and assets distributed to the correct beneficiaries as detailed in their last will and testament.

Probate has many different aspects. In addition to dealing with the decedent’s assets and debts, it includes the court managing the process and the actual distribution of assets.

Probate and probate court rules and terms vary from state to state. Some states don’t even use the term probate, but instead refer to a surrogate’s court, orphan’s court, or chancery court. Your estate planning attorney will know the laws regarding probate in the state where the will is to be probated before death if you’re having an estate plan created, or after death if you are the beneficiary or the executor.

Probate is usually necessary when property is only titled in the name of the decedent. It could include real property or cars. There are some assets which do not go through probate and pass directly to beneficiaries. A partial list includes:

  • Life insurance policies with designated beneficiaries
  • Pension plan distribution
  • IRA or 401(k) retirement accounts with designated beneficiaries
  • Assets owned by a trust
  • Securities owned as Transfer on Death (TOD)
  • Wages, salary, or commissions owed to the decedent (up to the set limits)
  • Vehicles intended for the immediate family (this depends on state law)
  • Household goods and other items intended for the immediate family (also depending upon state law).

Many people seek to avoid or at least minimize the probate process. This needs to be done in advance by an experienced estate planning attorney. They can create trusts, assign assets to the trust and designate beneficiaries for those assets. Another means of minimizing probate is to gift assets during your lifetime.

Reference: Investopedia (Sep. 21, 2022) “What is Probate Court?”

How Not to Build a Family Football Dynasty

Pat Bowlen did everything right when planning for his NFL team to be transferred to new owners. He created a succession plan and filed it with the NFL, as required by the organization’s bylaws. He notified heirs of developments as they occurred. Despite this, for years before and after Bowlen died in 2019, the battle over his estate and ownership of the team was fiercer than any on the playing field, according to a recent article from Variety, “Broncos’ Fumbled Handoff Reveals Perils of NFL Estate Planning.”

With an average age of 72, National Football League owners are facing inheritance and estate planning challenges familiar to any family embarked upon planning for distribution of their possessions. However, it is on a gigantic scale. The average NFL franchise is worth around $4.14 billion, and ownership transfers must address not only taxes and estate law, but rules and restrictions of the NFL.

Trust and estate attorneys believe the NFL teams are ripe for succession problems. The value of the team, plus the scarcity—there are a limited number of teams, after all—is expected to lead to property disputes that can’t be easily resolved simply by selling the property and splitting the proceeds.

This past spring, a group led by Rob Walton, 77-year-old steward of the Walmart fortune and father of three, purchased the Broncos for $4.65 billion. The deal marked the conclusion of several years of high- profile legal battles where Bowlen family members went at it in court and in the media and underscores the unpredictable nature of succession planning.

What happened to the Bowlen family?

As Bowlen started to experience Alzheimer’s disease in the late 2000s, he started planning. In 2009, he revoked one trust to create a new one to be overseen by three trustees, who were each either a team executive or attorneys he’d known for many years. None was a member of the family.

The trust was created to manage a complex structure of the team’s ownership. The team was owned by PDB Sports, a limited partnership owned itself by Bowlen Sports Inc., which was owned by Patrick Bowlen and his brother John Bowlen. The trust would also operate other family-owned team properties, including Stadium Management Company, which operated Denver’s famous Mile High Stadium.

If the structure of the business wasn’t complex enough, the family’s internal relations were equally complicated. Seven children from two marriages, along with three siblings had been co-owners at various points in time and all had children of their own. No one agreed about the future of the team. They also disagreed about the competency and objectivity of the trustees.

Bowlen was the scion of a wealthy Canadian oil man. He and two brothers and one sister bought most of the Broncos in 1984 and the remainder of the team two years later. Each sibling owned about 25% of the team in 1986. The set up wasn’t sustainable because the NFL requires each team to identify one controlling owner. Over time, Pat Bowlen purchased equity from his siblings and gained control of the franchise. At the time of his death, he owned 76% of the team, and his brother John owned the other 24%.

Bowlen wanted the family to own the team just like the Rooney family, owners of the Pittsburgh Steelers. Selling the team was never part of his plan. However, his wishes were not expressed in his estate planning documents or trusts. The trustees declined a different succession plan from two daughters from his first marriage. When his second wife learned one of the daughters from the first marriage had attended an owner’s meeting in 2021, things got hotter. The second wife threatened to fire a trustee if the daughter from the first marriage began ascending as a controlling owner and the battles continued. The following years were filled with lawsuits and accusations.

There were many factors in this epic estate battle. However, it’s pretty likely having so many families embroiled in a high stakes battle would have undone any estate plan. A complex ownership structure, multiple families and a big price tag all contributed to the sale of the team, undermining Bowlen’s wishes to create a football family dynasty.

For most families, the stakes are not as high. However, the emotions can be just as intense. An estate plan created by an experienced estate planning attorney plus a plan for communication between all family members more often than not will achieve the desired goals.

Reference: Variety (Sep. 10, 2022) “Broncos’ Fumbled Handoff Reveals Perils of NFL Estate Planning”

Problems Created When No Will Is Available

Ask any estate planning attorney how much material they have for a book, or a movie based on the drama they see from family squabbles when someone dies without a will. There’s plenty—but a legal requirement of confidentiality and professionalism keeps those stories from circulating as widely as they might. This may be why more people aren’t as aware as they should be of how badly things go for loved ones when there’s no will, or the will is improperly drafted.

Disputes range from one parent favoring one child or children engaged in fierce fighting over personal possessions when there’s no will specifying who should get what, or providing a system for distribution, according to a recent article titled “Estate planning: 68% of Americans lack a will” from New Orleans City Business.

People don’t consider estate planning as an urgent matter. The pace of life has become so hectic as to push estate planning appointments to the next week, and the next. They also don’t believe their estates have enough value to need to have a will, but without a will, a modest estate could evaporate far faster than if an estate plan were in place.

The number of people having a will has actually decreased in the last twenty years. A few sources report the number keeps dipping from 50% in 2005, 44% in 2016 and 32% in 2022. In 2020, more Americans searched the term “online will” than in any other time since 2011.

Younger people seem to be making changes. Before the pandemic, only 16% of Americans ages 18-34 had a will. Today caring.com reports 24% of these young adults have a will. Maybe they know something their elders don’t!

One thing to be considered when having a will drafted is the “no contest clause.” Anyone who challenges the will is immediately cut out of the will. While this may not deter the person who is bound and determined to fight, it presents a reason to think twice before engaging in litigation.

Many people don’t know they can include trust provisions in their wills to manage family inheritances. Trusts are not just for super wealthy families but are good planning tools used to protect assets. They are used to control distributions, including setting terms and conditions for when heirs receive bequests.

Today’s will must also address digital assets. The transfer and administration of digital assets includes emails, electronic access to bank accounts, retirement accounts, credit cards, cryptocurrency, reward program accounts, streaming services and more. Even if the executor has access to log-in information, they may be precluded from accessing digital accounts because of federal or state laws. Wills are evolving to address these concerns and plan for the practicalities of digital assets.

Reference: New Orleans City Business (Sep. 8, 2022) “Estate planning: 68% of Americans lack a will”

How Can I Minimize My Probate Estate?

Having a properly prepared estate plan is especially important if you have minor children who would need a guardian, are part of a blended family, are unmarried in a committed relationship or have complicated family dynamics—especially those with drama. There are things you can do to protect yourself and your loved ones, as described in the article “Try these steps to minimize your probate estate” from the Indianapolis Business Journal.

Probate is the process through which debts are paid and assets are divided after a person passes away. There will be probate of an estate whether or not a will and estate plan was done, but with no careful planning, there will be added emotional strain, costs and challenges left to your family.

Dying with no will, known as “intestacy,” means the state’s laws will determine who inherits your possessions subject to probate. Depending on where you live, your spouse could inherit everything, or half of everything, with the rest equally divided among your children. If you have no children and no spouse, your parents may inherit everything. If you have no children, spouse or living parents, the next of kin might be your heir. An estate planning attorney can make sure your will directs the distribution of your property.

Probate is the process giving someone you designate in your will—the executor—the authority to inventory your assets, pay debts and taxes and eventually transfer assets to heirs. In an estate, there are two types of assets—probate and non-probate. Only assets subject to the probate process need go through probate. All other assets pass directly to new owners, without involvement of the court or becoming part of the public record.

Many people embark on estate planning to avoid having their assets pass through probate. This may be because they don’t want anyone to know what they own, they don’t want creditors or estranged family members to know what they own, or they simply want to enhance their privacy. An estate plan is used to take assets out of the estate and place them under ownership to retain privacy.

Some of the ways to remove assets from the probate process are:

Living trusts. Assets are moved into the trust, which means the title of ownership must change. There are pros and cons to using a living trust, which your estate planning attorney can review with you.

Beneficiary designations. Retirement accounts, investment accounts and insurance policies are among the assets with a named beneficiary. These assets can go directly to beneficiaries upon your death. Make sure your named beneficiaries are current.

Payable on Death (POD) or Transferable on Death (TOD) accounts. It sounds like a simple solution to own many accounts and assets jointly. However, it has its own challenges. If you wished any of the assets in a POD or TOD account to go to anyone else but the co-owner, there’s no way to enforce your wishes.

An experienced, local estate planning attorney will be the best resource to prepare your estate for probate. If there is no estate plan, an administrator may be appointed by the court and the entire distribution of your assets will be done under court supervision. This takes longer and will include higher court costs.

Reference: Indianapolis Business Journal (Aug. 26,2022) “Try these steps to minimize your probate estate”

Why Is a Will So Important?

A 2020 Gallup poll found that less than half of Americans have a will or have made plans regarding how they would like their money and estate handled in the case of their death. The poll also showed that Americans ages 65 and up are the most likely to have a will.

Yahoo News’ recent article entitled “How To Write A Will: The Importance Of A Will And Living Will” says that no matter your age, it’s important to have a will to be in control of what happens with your own assets. A will is a legal document that establishes a person’s wishes regarding the distribution of their assets — money, real estate, etc. — and the care of any minor children.

Without a will, state law may control who gets your “probate” assets and when. Having a will can save an enormous amount of time and money in estate administration and the process of having a guardian appointed for your minor children, if needed.

There’s a big difference between a will and a living will. A living will is a document that lets you state in advance how you want to be treated under certain medical situations, if you’re unable to make those decisions for yourself at a later time.

These differ by state law. However, they generally cover end-of-life decision-making and treatment options. General medical decisions unrelated to end of life care are typically covered in a health care power of attorney. Some states combine these two documents into one directive.

Unlike a living will, which specifically provides instructions for medical care during your lifetime, a will lets you to decide in advance who you want to receive your assets upon your death, and who you want to be in charge of handling the administration of your estate. If you have minor children, a will also allows you to nominate a guardian for them.

When creating a will, think about the “what,” the “who” and the “how.” To do so, ask yourself the following questions:

  • What assets do you have?
  • To whom do you want to leave them?
  • Who do you want to be in charge of making sure that happens?
  • Who do you want to be responsible for your minor children?
  • How do you want the assets transferred?

Reference: Yahoo News (Aug. 17, 2022) “How To Write A Will: The Importance Of A Will And Living Will”

What Jackie Kennedy Knew about CLATs and Estate Planning

What most people don’t know about Jackie Kennedy was her role as an innovative steward of her family’s wealth and philanthropic legacy, reports a recent article from Forbes titled “Elevating Your Estate And Legacy: A Lesson From Jackie Kennedy.” After her husband’s assassination, she was in charge of a $44 million plus estate and her actions spoke volumes about her values and view for the future.

Jackie Kennedy initiated a Charitable Lead Annuity Trust (CLAT), which today many refer to as the Jackie Onassis Trust.

She created a CLAT receptacle through her will, so her children could elect to transfer some or all of their inherited assets in exchange for significant charitable, tax and non-tax benefits. They were not required to do this. However, it was an option for assets including stock, real estate and other capital. The CLAT offered her children three possible benefits: avoiding federal estate tax on all and any assets transferred to the CLAT, tax-efficient philanthropic giving for a limited number of years and continued investment of CLAT assets, which could be ultimately returned to the child or gifted to future generations at the end of the CLAT’s charitable period.

In addition, during the charitable term, the annual payments required to be distributed via the CLAT to charities would have created income tax deductions against the CLAT’s taxable income.

Despite their mother’s recommendations, the first lady’s children opted against funding the CLAT.

According to an article from The New York Times in 1996, if the Jackie Onassis Trust was worth $100 million and if the beneficiaries had executed the CLAT, the family would have inherited approximately $98 million tax-free in 2018, with charities receiving $192 million.

Instead, the children paid $23 million in estate taxes, leaving the estate with $18 million.

Besides the clear adage of “Mother knows best,” this is an example of the potential power of a CLAT to satisfy the charitable and family wealth transfer of the trust creator and individual beneficiaries. Since the 1960s, more sophisticated trust variants have been created to improve on the original CLAT.

One of these is the Optimized CLAT, a tax-planning trust which accomplishes four goals. It generates a dollar-for-dollar tax deduction in the year of funding, returns an expected 1x-5x of the initial contribution back to the contributor, immediately exempts contributed assets from the 40% federal gift and estate tax and exempts the transferred assets from the contributor’s personal creditors.

These complex estate planning strategies will become increasingly popular as federal estate taxes return to lower levels in near future. Your estate planning attorney will guide you as to which type of trust works best for you and your family, for now and for generations to follow.

Reference: Forbes (Aug. 19, 2022) “Elevating Your Estate And Legacy: A Lesson From Jackie Kennedy”

Search
Join Our eNewsletter

Recent Posts
Categories
estate planning and elder law
Email/Social Media
Facebook-square Twitter-square Linkedin Youtube Blog
Quick Links
Powered By

Copyright © Lambros Law Office LLC. All rights reserved. Some artwork provided under license agreement.