Estate Planning Blog Articles

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

Can I Write a Perfect Will?

The Good Men Project’s recent article entitled “10 Tips to Writing the Perfect Will” says that writing a perfect will is hard but not impossible. The article provides some tips to keep in mind:

  1. Include Everything. If you have items that are very important to you, make sure they are in the right hands after your death.
  2. Consult an Experienced Estate Planning Attorney. It is a challenge to write a will, especially when you do not know all the legal processes that will take place after your death. An estate planning lawyer can educate you on how your estate is being distributed after your death and how to address specific circumstances.
  3. Name an Executor. An executor will manage and distribute your assets after you die. Select a trustworthy person and be sure it is someone who will respect you and your will.
  4. Name the Beneficiaries. These people will get your assets after you pass away. Name them all and include their full names, so there is no confusion.
  5. Say Where Everything Can Be Found. Your executor should know where all of your property and assets can be found. If there is any safe place where you keep things, add it to your will.
  6. Describe Residual Legacies. This is what remains in your estate, once all the other legacies and bequests are completed. If you fail to do this, it will be a partial intestacy. No matter that the legacies would be distributed according to the will, the intestacy laws will control the residue, which may not be to your liking.
  7. Name Guardians for Your Minor Children. Appoint a guardian to take care of any minor children or the court will appoint their guardians, again this may not be to your liking.
  8. Be Specific. An ambiguous will creates issues for the executor and may require court intervention. Be specific and include heirs’ full names. Account numbers, security boxes and anything of the sort should also be included in your will for easy access.
  9. Keep it Updated. If you experience a major life event, update your will accordingly.
  10. Get Signatures from Witnesses. Once your will is completed, you need witnesses who are at least 18 and are not beneficiaries. Sign and date the will in front of these witnesses, and then ask them to date and sign it too.

If you have any questions about wills, speak to an experienced estate planning attorney.

Reference: The Good Men Project (May 28, 2021) “10 Tips to Writing the Perfect Will”

If I Buy a House, Should I have an Estate Plan?

There’s been an unprecedented surge in home sales during the pandemic. A recent National Association of Realtors report revealed that since July, existing home sales have increased year over year reaching a pandemic high of over 25% in October. Forbes’s recent article entitled “Pandemic Home Buyers: Have You Set Up Your Estate Plan?” asks the important question: How has this past year’s surge in home sales impacted estate planning?

Estate planning is a way to protect your assets and your loved ones, no matter your age or income level. If you place your home into a trust, you ensure that the ownership of your home will be properly and efficiently transferred to a loved one, if anything happens to you unexpectedly. If your home isn’t included in your estate plan, it will go through probate. However, consider the potential pitfalls of a trust:

  1. Creating a trust, when you really only need a will. If you have less than $150,000 in assets and you don’t own a home, a trust likely isn’t really needed.
  2. Thinking that you automatically have asset protection. A trust can help to avoid probate. So, an irrevocable trust may be the right option for people who really need true asset protection.
  3. Not taking trust administration into account. The trustee must do many tasks when the creator of the trust dies. These aren’t much different from what an executor does, but it can be extra work.

If you already have an estate plan, you should review your estate planning documents every three to five years. Moreover, purchasing a home should also make you revisit your documents. When doing a review, take a look at the terms of the trust. Make certain that you have your house referenced by address and that you transfer the house to your spouse by name.

Most mortgages have a “due on sale” clause. This means if you terminate your ownership of your home, you have to immediately pay back the mortgage proceeds to the bank. If you place your home in a revocable trust, it lets you smoothly transfer ownership to your beneficiary. This prevents the bank from demanding payment, and your beneficiary would keep making the mortgage payments after you’re gone. However, it may be prudent to contact the lender in advance of the transfer, if you want to be sure.

If you bought a home in the pandemic and have not placed it in a trust yet, talk to an experienced estate planning attorney sooner rather than later.

Reference: Forbes (June 2, 2021) “Pandemic Home Buyers: Have You Set Up Your Estate Plan?”

What to do If Someone Wants to Buy Your Business

Forbes’ recent article entitled, “What Should You Do When You Receive An Unsolicited Offer For Your Company?” suggests that it’s important to follow a structured three-step process to make certain you make the right decision and get the most successful outcome.

Is it the right time to sell? You need to see if this is the right time to sell your business. Examine your company and your personal readiness. Determine if the business is performing at a high level and is poised for rapid future growth. Look for any unaddressed issues that might harm value. On the personal side, think about whether you know how much you need to receive to fulfill your financial obligations and secure your future. It is also important to make sure that you have done needed tax and estate planning, so that you do not overpay taxes.

Is it the right buyer? If you are still thinking about selling, next determine if this is the right buyer. Think about what they will do with your company after the acquisition, and whether they will retain your staff or combine it with other operations. Will you have an ongoing role? You must also determine if the buyer will pay the best price and whether it is all cash or if you will retain equity in your company or the buyer’s company.  You should also ask if there are earn-outs that depend on the future performance.

Do you have a strong advisory team? Some business owners prefer to use their business attorney but consider using an experienced mergers and acquisitions attorney who knows “market” terms, where to advocate strongly and when to agree to the other side’s requirements to move the deal ahead. An inexperienced deal lawyer may negotiate hard on terms to “prove value,” which may, in effect, only obstruct the deal. The deal might go south, if an inexperienced lawyer makes you hold fast on terms the buyer needs to get the deal done. An experienced M&A attorney can also frequently move to a good deal in less time, by clearly setting parameters and getting buy-in on early drafts rather than a continuing series of drafts back and forth.

Reference: Forbes (May 11, 2021) “What Should You Do When You Receive An Unsolicited Offer For Your Company?”

Tell Me again Why Estate Planning Is So Important

The Legal Reader’s recent article entitled “The Importance of Estate Planning” explains that estate planning is not just for the rich.

If you don’t have a comprehensive estate plan, it could mean headaches for your family left to manage things after you die, and it can be expensive and have long-lasting impact.

Here are four reasons why estate planning is critical, and you need the help of an experienced estate planning attorney.

Estate plan beneficiaries. Middle-class families must plan in the event something happens to the bread earner. You might be only leaving behind one second home, but if you don’t decide who is to receive it, things might become complicated. The main purpose of estate planning is to allocate heirs to the assets. If you have no estate plan when you die, the court decides who gets the assets.

Protection for minor children. If you have small children, you must prepare for the worst. To be certain that your children receive proper care if they are orphaned, you must name their guardians in your last will. If you don’t, the court will do it!

It can save on taxes. Estate planning can protect your loved ones from the IRS. A critical aspect of estate planning is the process of transferring assets to the heirs to generate the smallest tax burden for them. Estate planning can minimize estate taxes and state inheritance taxes.

Avoid fighting and headaches in the family. No one wants fighting when a loved one dies. There might be siblings who might think they deserve much more than the other children. The other siblings might also believe that they should be given the charge for financial matters, despite the fact that they aren’t good with debts and finances. These types of disagreements can get ugly and lead to court. Estate planning will help in creating individualized plans.

Work with an experienced estate planning attorney and see how estate planning can help your specific situation.

Reference: The Legal Reader (May 10, 2021) “The Importance of Estate Planning”

How to Simplify Estate Planning

For most people, estate planning and preparation doesn’t rank very high on their “to do” list. There are a number of reasons, but frequently it comes down these three: (i) cost; (ii) they believe it’s just for the rich; and (iii) it’s too complicated.

Fort Worth’s recent article entitled “3 Tips to Help Simplify Estate Planning,” explains that an estate plan really is not about you. It’s about taking care of your loved ones and charities.

Without an estate plan or last will, state intestacy law determines who gets your assets. You lose control of how your wealth will be distributed.

Let’s look at three tips to make it easier and to help you prepare for the future:

  1. Work with an experienced estate planning attorney. Estate planning is not something you ask your buddy to do. “Hey, Jimmy, help me write my will.” No way. Partner with an experienced estate planning attorney, so you are confident your documents comply with state law and that the plan’s language clearly details how your wealth should be managed.
  2. Review your estate planning documents regularly. We all have planned and unexpected events in our lives, like new grandchildren, illnesses, or significant increases or decreases in your net worth that could impact wealth and how it should be distributed. Meet regularly with your estate planning attorney and review your plan to make sure it still meets your needs and intentions.
  3. Organize important documents. Make certain important documents have been created and can be located quickly, if something happens to you. Here is a list of documents you should have on file that can be accessed by your spouse or family members in case of an emergency:
  • Wills, trusts, and other important estate planning documents
  • A list of tangible and intangible property
  • A list of financial accounts and insurance policies; and
  • Email accounts, logins, or other log-in information to your PC and phone.

Estate planning is not a DIY project. You need the expertise of an experienced estate planning attorney to make certain that your wishes are carried out and that your estate plan can withstand any legal challenge.

Reference: Fort Worth (May 6, 2021) “3 Tips To Help Simplify Estate Planning”

Does My State have Inheritance Tax?

There are several states with an inheritance tax. They include Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. Maryland is the only state to impose both an inheritance tax and a state estate tax.

Forbes’s recent article entitled “Is There a California Estate Tax?” says that even if you live outside these states, it does not necessarily mean that your inheritance will be tax-free.

Twelve states and DC impose estate taxes. These include Hawaii, Washington, Massachusetts, Oregon, New York, Minnesota, Illinois, Vermont, Maine, Rhode Island, Connecticut and Maryland.

There may be other taxes due at the state level for those inheriting assets, investments, retirement accounts, or real estate.

The estate tax is a tax levied on the estate, when a person dies before the estate is passed on to the heirs and beneficiaries. Federal estate tax only applies to large estates, regardless of which state you live in. Estate taxes vary from state to state.

There is one state that imposes a gift tax: Connecticut. That state’s Department of Revenue Services says that all transfers of real or personal property by gift, whether tangible (like a car or jewelry) or intangible (such as cash) that are made by you (the donor) to someone else (the donee) are subject to tax, if the fair market value of the property exceeds the amount received for the property.

The federal gift tax applies to all states. For 2021, the annual gift-tax exclusion is $15,000 per donor, per recipient. A giver can give anyone else—such as a relative, friend, or even a stranger—up to $15,000 in assets a year, free of federal gift taxes.

Even if your state doesn’t have a state estate tax, there’s still a federal estate tax. This goes into effect for estates valued at $11.7 million and up, in 2021, for singles. The estate tax exemption is $23.4 million per couple in 2021.

With proper tax planning and estate planning, you have the ability to pass an estate much larger than this without being subject to the federal estate tax. The estate tax starts at 18% and goes up to 40% for those anything over the $23.4 million threshold.

Talk to an experienced estate planning attorney for questions about taxes and estate planning.

Reference: Forbes (May 4, 2021) “Is There a California Estate Tax?”

Should Parent Transfer House to Kid?

Let us say the parent is 90 and has a will bequeathing a home to a child, a son. The house was purchased 20 years ago for $300,000 and is now worth about $400,000.

The child stays there occasionally to help care for the parent, but he doesn’t live there. The parents’ estate is otherwise worth less than $1 million.

Nj.com’s recent article entitled “What are the pros and cons of transferring a home’s title?” explains that there are two primary reasons why parents want to transfer their home to their children.

First, they think they will be able to protect the house, in the event the parent needs to move to a nursing home. Second, they want to avoid probate.

Because many states now have a simple probate process for smaller estates, probate avoidance alone isn’t a worthwhile rationale to transfer the house to a child.

The transfer of the house to a child who doesn’t live there will be subject to the look-back rule for Medicaid, which in most states is now five years. As a result, if a parent transfers the house to the child within five years of applying for Medicaid, the transfer will trigger a penalty which will begin when the Medicaid application is submitted. The length of the penalty period depends on the value of the house. Therefore, if the parent might require nursing home care in the next five years, the parent should have enough other assets to cover the penalty period or wait five years before applying for Medicaid.

In addition, the transfer of the house may also cause a significant capital gains tax liability to the child when the house is sold. That’s because the child will receive the house with the carryover basis of the parent. However, if the child inherits the house, the child will get a step-up in basis—the basis will be the value of the house at the date of the parent’s death.

If the parent transferring the house retains a life estate—the right to live in the house until he or she passes away—the property will get a step-up in basis to the value of the house at the date of death.  In the event that the house is sold while the parent is still alive, the value of the life estate interest will be excluded from income tax but the value of the child’s remainder interest in the house may be subject to capital gain taxes.

Last, if the house is transferred to a child who has financial troubles, the child’s creditors may be able to force the child to sell the house to pay his debts.

Reference: nj.com (April 20, 2021) “What are the pros and cons of transferring a home’s title?”

What Is the Purpose of an Estate Plan?

No one wants to think about becoming seriously ill or dying, but scrambling to get an estate plan and healthcare documents done while in the hospital or nursing home is a bad alternative, says a recent article titled “The Essentials You Need for an Estate Plan” from Kiplinger. Not having an estate plan in place can create enormous costs for the estate, including taxes, and delay the transfer of assets to heirs.

If you would like to avoid the cost, stress and possibility of your spouse or children having to go to court to get all of this done while you are incapacitated, it is time to have an estate plan created. Here are the basics:

A Will, a Living Will, Power of Attorney and a Beneficiary Check-Up. People think of a will when they think of an estate plan, but that’s only part of the plan. The will gives instructions for what you want to happen to assets, who will be in charge of your estate—the executor—and who will be in charge of any minor children—the guardian. No will? This is known as dying intestate, and probate courts will make all of these decisions for you, based on state law.

However, a will is not enough. Beneficiary designations determine who receives assets from certain types of property. This includes life insurance policies, qualified retirement accounts, annuities, and any account that provides the opportunity to name a beneficiary. These instructions supersede the will, so make sure that they are up to date. If you fail to name a beneficiary, then the asset is considered part of your estate. If you fail to update your beneficiaries, then the person you may have wanted to receive the assets forty years ago will receive it.

Some banks and brokerage accounts may have an option of a Transfer on Death (TOD) agreement. This allows you to plan out asset distribution outside of the will, speeding the distribution of assets.

A Living Will or Advance Directive is used to communicate in advance what you would want to happen if you are alive but unable to make decisions for yourself. It names an agent to make serious medical decisions on your behalf, like being kept on life support or having surgery. Not having the right to make medical decisions for a loved one requires petitioning the court.

Financial Power of Attorney names an attorney in fact to manage finances, paying bills and overseeing investments. Without a POA, your family can’t take action on your financial matters, like paying bills, overseeing the maintenance of your home, etc. If the court appoints a non-family member to manage this task, the family may see the estate evaporate.

Creating a trust is part of most people’s estate plan. A trust is a means of leaving assets for a minor child, or someone who cannot be trusted to manage money. The trust is a legal entity that inherits money when you pass, and a trustee, who you name in the trust documents, manages everything, according to the terms of the trust.

Today’s estate plan needs to include digital assets. You need to give someone legal authority to manage social media accounts, websites, email and any other digital property you own.

The time to create an estate plan, or review and update an existing estate plan, is now. COVID has awakened many people to the inevitability of severe illness and death. Planning for the future today protects the ones you love tomorrow.

Reference: Kiplinger (April 21, 2021) “The Essentials You Need for an Estate Plan”

What Emergency Documents Do I Need in Pandemic?

With the threat of COVID-19, we’ve all come face-to-face with our mortality. However, are you prepared for the worst?, asks KSAT in its January 23 article entitled, “Important documents you need to have handy in case of an emergency.”

A consumer report recently found that just 7% of those ages 19 to 29 have an advance directive for health care emergencies, and even fewer have a will. Estate planning is one of the most worthwhile things we could do for ourselves or our loved ones.

The article explains that your estate is everything you own, and if it’s not protected, it could be taken away from your loved ones.

An extremely important document to have, in addition to a will, is a living will and a healthcare proxy or power of attorney. These documents let you designate the individual who will make decisions on your behalf, if you cannot speak for yourself.

In addition, a HIPAA authorization permits an individual you trust to speak with your healthcare staff and receive your personal medical information.

Another key document is a financial power of attorney. This empowers you to designate an agent to handle your debts, contracts and assets. A financial power of attorney must be signed and notarized.

You should also consider payable on death and transfer on death designations, which transfer assets to designated beneficiaries without probate.

It is important to conduct a digital asset inventory to list your entire online presence and include all accounts, logins, passwords, social media, and professional profiles, and most importantly, a list of everything you have on autopay.

Last, you need a last will and testament. This lets you to name an executor or personal representative to handle your postmortem affairs. However, a last will does not keep assets out of probate.

One last note: you can prepare a personal property memorandum to list the beneficiaries of any sentimental, non-monetary items.

Reference: KSAT (San Antonio) (Jan. 23, 2021) “Important documents you need to have handy in case of an emergency”