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How Do I Write My Will?

Remember that if you don’t write your will correctly, your wishes could end up going unfulfilled, says Claremont Portside’s article entitled “A Guide for Writing Your Will: Steps You Need to Take.”

While there are a lot of tools online, your best bet is working with an experienced estate planning attorney.

Schedule a meeting with an estate planning attorney to discuss your final wishes. The process of writing a will is relatively straightforward:

  • Decide who you want to inherit your assets
  • Remember to include your favorite charities, if you want
  • Note if any of your heirs has special needs or requires extra planning (e.g., if they’re not good with money)
  • Note if you have minor children who will need a guardian and can’t inherit outright at their age
  • List the specific items or assets you want each person to inherit
  • List any debts or liabilities
  • Designate an executor or personal representative
  • Determine how your estate should be managed, until it is distributed; and
  • Ask your attorney about tax implications.

Once prepared, retain a copy in a safe place and make copies for your executor, your spouse or partner, children older than 18 years old and any other heirs who live in another state.

When you begin this process, create a list of what you own and how much it’s worth. This can help ensure that your estate is distributed according to your wishes.

The executor of your will is responsible for ensuring that everything goes according to plan, so choose someone you trust.

Reference: Claremont Portside “A Guide for Writing Your Will: Steps You Need to Take”

What Is Elder Law?

WAGM’s recent article entitled “A Closer Look at Elder Law“ takes a look at what goes into estate planning and elder law.

Wills and estate planning may not be the most exciting things to talk about. However, in this day and age, they can be one of the most vital tools to ensure your wishes are carried out after you’re gone.

People often don’t know what they should do, or what direction they should take.

The earlier you get going and consider your senior years, the better off you’re going to be. For many, it seems to be around 55 when it comes to starting to think about long term care issues.

However, you can start your homework long before that.

Elder law attorneys focus their practice on issues that concern older people. However, it’s not exclusively for older people, since these lawyers counsel other family members of the elderly about their concerns.

A big concern for many families is how do I get started and how much planning do I have to do ahead of time?

If you’re talking about an estate plan, what’s stored just in your head is usually enough preparation to get the ball rolling and speak with an experienced estate planning or elder law attorney.

They can create an estate plan that may consists of a basic will, a financial power of attorney, a medical power of attorney and a living will.

For long term care planning, people will frequently wait too long to start their preparations, and they’re faced with a crisis. That can entail finding care for a loved one immediately, either at home or in a facility, such as an assisted living home or nursing home. Waiting until a crisis also makes it harder to find specific information about financial holdings.

Some people also have concerns about the estate or death taxes with which their families may be saddled with after they pass away. For the most part, that’s not an issue because the federal estate tax only applies if your estate is worth more than $12.06 million in 2022. However, you should know that a number of states have their own estate tax. This includes Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington, plus Washington, D.C.

Iowa, Kentucky, Nebraska, New Jersey, and Pennsylvania have only an inheritance tax, which is a tax on what you receive as the beneficiary of an estate. Maryland has both.

Therefore, the first thing to do is to recognize that we have two stages. The first is where we may need care during life, and the second is to distribute our assets after death. Make certain that you have both in place.

Reference: WAGM (Dec. 8, 2021) “A Closer Look at Elder Law“

Will Moving to a New State Impact My Estate Planning?

Since the coronavirus pandemic hit the U.S., baby boomers have been speeding up their retirement plans. Many Americans have also been moving to new states. For retirees, the non-financial considerations often revolve around weather, proximity to grandchildren and access to quality healthcare and other services.

Forbes’ recent article entitled “Thinking of Retiring and Moving? Consider the Financial Implications First” provides some considerations for retirees who may set off on a move.

  1. Income tax rates. Before moving to a new state, you should know how much income you’re likely to be generating in retirement. It’s equally essential to understand what type of income you’re going to generate. Your income as well as the type of income you receive could significantly influence your economic health as a retiree, after you make your move. Before moving to a new state, look into the tax code of your prospective new state. Many states have flat income tax rates, such as Massachusetts at 5%. The states that have no income tax include Alaska, Florida, Nevada, Texas, Washington, South Dakota and Wyoming. Other states that don’t have flat income tax rates may be attractive or unattractive, based on your level of income. Another important consideration is the tax treatment of Social Security income, pension income and retirement plan income. Some states treat this income just like any other source of income, while others offer preferential treatment to the income that retirees typically enjoy.
  2. Housing costs. The cost of housing varies dramatically from state to state and from city to city, so understand how your housing costs are likely to change. You should also consider the cost of buying a home, maintenance costs, insurance and property taxes. Property taxes may vary by state and also by county. Insurance costs can also vary.
  3. Sales taxes. Some states (New Hampshire, Oregon, Montana, Delaware and Alaska) have no sales taxes. However, most states have a sales tax of some kind, which generally adds to the cost of living. California has the highest sales tax, currently at 7.5%, then comes Tennessee, Rhode Island, New Jersey, Mississippi and Indiana, each with a sales tax of 7%. Many other places also have a county sales tax and a city sales tax. You should also research those taxes.
  4. The state’s financial health. Examine the health of the state pension systems where you are thinking about moving. The states with the highest level of unfunded pension debts include Connecticut, Illinois, Alaska, New Jersey and Hawaii. They each have unfunded state pensions at a level of more than 20% of their state GDP. If you’re thinking about moving to one of those states, you’re more apt to see tax increases in the future because of the huge financial obligations of these states.
  5. The overall cost of living. Examine your budget to see the extent to which your annual living expenses might increase or decrease in your new location because food, healthcare and transportation costs can vary by location. If your costs are going to go up, that should be all right, provided you have the financial resources to fund a larger expense budget. Be sure that you’ve accounted for the differences before you move.
  6. Estate planning considerations. If this is going to be your last move, it’s likely that the laws of your new state will apply to your estate after you die. Many states don’t have an estate or gift tax, which means your estate and gifts will only be subject to federal tax laws. However, a number of states, such as Maryland and Iowa, have a state estate tax.

You should talk to an experienced estate planning attorney about the estate and gift tax implications of your move.

Reference: Forbes (Nov. 30, 2021) “Thinking of Retiring and Moving? Consider the Financial Implications First”

Does My State Have an Inheritance Tax?

Real Simple’s recent article entitled “Here’s Which States Collect Zero Estate or Inheritance Taxes” explains that inheritance taxes are levies paid by the living beneficiary who gets the inheritance. And both federal and state governments can apply estate taxes, which are levied against the assets that are bequeathed.

Just five states apply an inheritance tax: New Jersey, Nebraska, Iowa, Kentucky and Pennsylvania. There are 12 states that have an estate tax: Washington, Oregon, Minnesota, Illinois, New York, Maine, Vermont, Rhode Island, Massachusetts, Connecticut, Hawaii and the District of Columbia. Maryland collects both. As a result, there are 32 states that don’t collect death-related taxes: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Kansas, Louisiana, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin and Wyoming.

To better estimate and project the possible outcomes, you should consider an intergenerational planning meeting. There are some families that like the transparency of establishing a trust. This can minimize fighting and avoid probate. Trusts are also taxed differently than individuals. There’s more certainty about who will bear the costs.

There are families that gift assets, while an elderly or chronically ill person is still alive. These gifts can be subject to taxation, but there are exceptions for tuition and medical expenses. Gifts to children may also be excluded.

There’s no one-size-fits-all approach to transferring valuable or sentimental assets. You can list the most important people and causes in your life. If that list has people in other states, it will be even more important to prepare everyone for their role and responsibilities with the help of an experienced estate planning attorney.

If inheritance tax sounds intimidating, start small with updating the beneficiary forms on your bank accounts and employer-led retirement accounts. Organize documents, such as insurance information and house titles and deeds. Make them secure but accessible to those who might need them, if you’re unavailable.

Even if you’re socially distancing, many estate planning attorneys offer consultations via video conferencing. There’s no reason to delay another year to clarify your inheritance and estate plans.

Reference: Real Simple (Nov. 24, 2021) “Here’s Which States Collect Zero Estate or Inheritance Taxes”

Why Do I Need an Estate Planning Attorney?

Pennsylvania News Today’s recent article entitled “Top 7 Reasons You Need An Estate Lawyer says that when you think about hiring a real estate lawyer, it might seem a little unsettling. However, let’s look at these reasons and why you might require them.

Estate Planning. You might want to consider this, but everyone passes away. It’s important that your family is ready for this. An experienced estate planning attorney can help you through this process and make certain everything is prepared. You should have a will. This document says what should happen with your assets when you pass away.

Trusts. A trust helps manage assets before someone dies. If you only have one or two assets you want given to someone, a will is adequate. However, if you own extensive property, ask an experienced estate planning attorney about setting up a trust. This will help your family keep living in your home, even after you’re gone without worrying about it being sold out from under them.

Probate. The probate court oversees the distribution of a person’s estate according to the instructions in their will. Probate can be a lengthy and expensive process, depending on where you live and the complexity of your assets or family situation. An estate planning attorney can help you with strategies to avoid it. A probate attorney can help you, so your family doesn’t have to worry about dealing with that stress or spending a vast amount of money necessary to do this correctly.

Guardianship. Guardianships are used when parents pass away and leave minor children behind. You can designate a guardian for your minor children in your will.

Elder Law Services. Seniors frequently need help managing finances and health care decisions. An experienced estate planning attorney or elder law attorney can help your loved ones through these complicated matters.

Estate Investments. An experienced attorney can also advise you on how to make smart investments for your family and can make certain that the transaction goes smoothly, and that any moves work with your estate planning objectives.

Tax Issues. Taxes may be owed on estates worth more than five million dollars. This can make it hard for heirs who don’t have access to this much money upfront. An estate planning attorney can help you avoid taxes, so your family doesn’t have to deal with this problem.

Estate planning is a process that should be started as soon as possible. You’ll need an estate planning lawyer who is knowledgeable and experienced to help.

Reference: Pennsylvania News Today (Nov. 11, 2021) “Top 7 Reasons You Need An Estate Lawyer”

How Do I Give My Children the Summer Home?

There are many ways to pass property on to children, such as gifting a home to them while you are still alive, bequeathing it to the children at your death, or selling the home to your heirs. Each has legal and tax implications, so consider the possibilities and consult with an experienced estate planning attorney.

According to USA Today’s recent article entitled “How estate planning can help you pass down a house to your kids and give them a financial leg up,” as you put a plan in place, here are three options to review.

Gifting the property to children. One idea for a landlord with rental properties is to set up a revocable trust, where a trustee is responsible for liquidating houses as they became vacant, as long as the tenants were in good standing. This type of plan is built around the idea of maximizing the value to our children as beneficiaries and minimizing the impact on the trustee, while compensating them for their troubles. In addition, there may be tax implications. When you give a house or any other capital asset to your children while you’re alive, there’s significant capital gains tax issues because of the carryover cost basis. The use of a revocable trust avoids probate. It gives the children a step-up in basis and allows them to avoid capital gains tax.

Bequeathing a house to heirs. You can gift the family home to the children while you’re still alive, bequeath it to them at your death, or sell the residence to your heirs. A will is the standard way to bequeath property to children. Parents have the ownership and benefit of the property during their lifetime and when the last parent dies, the children get the home with the stepped-up basis (the increased value of the property when it passes to the inheritors). A revocable trust is another option to bequeath property. Placing a house into a trust avoids probate court and saves on estate taxes. You can say who gets the property and set guidelines on how they get the property. If one child wants the property, for example, you can state they have to buy out the other siblings. Note that adding the children to the deed of the house means they will each own the house. Therefore, if one child wants to live in the home, the others won’t be able to sell because that child won’t be in agreement. A revocable trust can prevent this from happening.

Selling the home to the children. Selling a home to an adult child may be wise, if the parents can no longer afford to maintain the property. However, there can also be pitfalls if the agreement isn’t well thought out. Parents should think about ways to save money when selling to their children, such as deeding the property to the kids and having them refinance the property and cash the parents out. If parents sell the home below fair market value to their children, they’re restricting their ability to have a retirement. This leaves little to help with retirement, since many people don’t have pensions and are only living on Social Security. There are also taxable gains consequences, if parents sell the home for more than they paid. The sale may result in higher property taxes to the purchaser in some situations.

Reference: USA Today (Dec. 7, 2021) “How estate planning can help you pass down a house to your kids and give them a financial leg up”

Where Do You Score on Estate Planning Checklist?

Make sure that you review your estate plan at least once every few years to be certain that all the information is accurate and updated. It’s even more necessary if you experienced a significant change, such as marriage, divorce, children, a move, or a new child or grandchild. If laws have changed, or if your wishes have changed and you need to make substantial changes to the documents, you should visit an experienced estate planning attorney.

Kiplinger’s recent article “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?” gives us a few things to keep in mind when updating your estate plan:

Moving to Another State. Note that if you’ve recently moved to a new state, the estate laws vary in different states. Therefore, it’s wise to review your estate plan to make sure it complies with local laws and regulations.

Changes in Probate or Tax Laws. Review your estate plan with an experienced estate planning attorney to see if it’s been impacted by changes to any state or federal laws.

Powers of Attorney. A power of attorney is a document in which you authorize an agent to act on your behalf to make business, personal, legal, or financial decisions, if you become incapacitated.  It must be accurate and up to date. You should also review and update your health care power of attorney. Make your wishes clear about do-not-resuscitate (DNR) provisions and tell your health care providers about your decisions. It is also important to affirm any clearly expressed wishes as to your end-of-life treatment options.

A Will. Review the details of your will, including your executor, the allocation of your estate and the potential estate tax burden. If you have minor children, you should also designate guardians for them.

Trusts. If you have a revocable living trust, look at the trustee and successor appointments. You should also check your estate and inheritance tax burden with an estate planning attorney. If you have an irrevocable trust, confirm that the trustee properly carries out the trustee duties like administration, management and annual tax returns.

Gifting Opportunities. The laws concerning gifts can change over time, so you should review any gifts and update them accordingly. You may also want to change specific gifts or recipients.

Regularly updating your estate plan can help you to avoid simple estate planning mistakes. You can also ensure that your estate plan is entirely up to date and in compliance with any state and federal laws.

Reference: Kiplinger (July 28, 2021) “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?”

Should I Try Do-It-Yourself Estate Planning?

US News & World Report’s recent article entitled “6 Common Myths About Estate Planning explains that the coronavirus pandemic has made many people face decisions about estate planning. Many will use a do-it-yourself solution. Internet DIY websites make it easy to download forms. However, there are mistakes people make when they try do-it-yourself estate planning.

Here are some issues with do-it-yourself that estate planning attorneys regularly see:

You need to know what to ask. If you’re trying to complete a specific form, you may be able to do it on your own. However, the challenge is sometimes not knowing what to ask. If you want a more comprehensive end-of-life plan and aren’t sure about what you need in addition to a will, work with an experienced estate planning attorney. If you want to cover everything, and are not sure what everything is, that’s why you see them.

More complex issues require professional help. Take a more holistic look at your estate plan and look at estate planning, tax planning and financial planning together, since they’re all interrelated. If you only look at one of these areas at a time, you may create complications in another. This could unintentionally increase your expenses or taxes. Your situation might also include special issues or circumstances. A do-it-yourself website might not be able to tell you how to account for your specific situation in the best possible way. It will just give you a blanket list, and it will all be cookie cutter. You won’t have the individual attention to your goals and priorities you get by sitting down and talking to an experienced estate planning attorney.

Estate laws vary from state to state. Every state may have different rules for estate planning, such as for powers of attorney or a health care proxy. There are also 17 states and the District of Columbia that tax your estate, inheritance, or both. These tax laws can impact your estate planning. Eleven states and DC only have an estate tax (CT, HI, IL, ME, MA, MN, NY, OR, RI, VT and WA). Iowa, Kentucky, Nebraska, New Jersey and Pennsylvania have only an inheritance tax. Maryland has both an inheritance tax and an estate tax.

Setting up health care directives and making end-of-life decisions can be very involved. It’s too important to try to do it yourself. If you make a mistake, it could impact the ability of your family to take care of financial expenses or manage health care issues. Don’t do it yourself.

Reference: US News & World Report (July 5, 2021) “6 Common Myths About Estate Planning”

What Taxes are Due When Children Inherit Home?

The first issue to address is whether the will addresses how inheritance taxes will be paid, says nj.com recent article entitled “My adult kids inherited a home. What taxes are due?” The mortgage may say the estate itself will pay it before anything is paid out to beneficiaries, or it may not mention anything.

Iowa, Kentucky, Nebraska, New Jersey, and Pennsylvania are the only states that impose an inheritance tax, which is a tax on what you receive as the beneficiary of an estate.

Maryland is the one state that has both an inheritance tax and an estate tax. Its inheritance tax is up to 10%. As to the others, Nebraska’s inheritance tax can be as high as 18%. Kentucky and New Jersey both taxes inheritances at up to 16%. Iowa’s inheritance tax is up to 15%, as is Pennsylvania’s.

Spouses and certain other heirs are usually excluded by the state from paying inheritance taxes.

A child may have an issue if there’s not enough liquidity in the estate, separate from the house to pay the taxes. If the beneficiaries plan to keep the home, they’d need to take an additional mortgage.  They’d also need to find enough cash to pay the inheritance taxes due.

In the example above, if the deed is transferred to a niece and nephew, the executor should hire a licensed real estate appraiser and pay for a date of death appraisal on the property. That appraisal will determine how much capital gains was exempted at the sister’s passing. It will also establish a new basis for capital gains purposes for the niece and nephew.

If the heirs simply do nothing and move into the house, the inheritance tax will come due. In New Jersey, it’s due eight months from the date of death.

If the inheritance tax isn’t paid, liability for the unpaid tax will attach to the executor personally, often in the form of a certificate of debt attached to some asset belonging to the executor, like his or her house.

To make sure this is handled correctly, consider speaking to an experienced estate planning attorney, who can walk you through the process.

Reference: nj.com (June 14, 2021) “My adult kids inherited a home. What taxes are due?”

What Is Elder Law?

With medical advancements, the average age of both males and females has increased incredibly.  The issue of a growing age population is also deemed to be an issue legally. That is why there are elder law attorneys.

Recently Heard’s recent article entitled “What Are the Major Categories That Make Up Elder Law?” explains that the practice of elder law has three major categories:

  • Estate planning and administration, including tax issues
  • Medicaid, disability, and long-term care issues; and
  • Guardianship, conservatorship, and commitment issues.

Estate Planning and Administration. Estate planning is the process of knowing who gets what. With a will in place, you can make certain that the process is completed smoothly. You can be relieved to know that your estate will be distributed as you intended. Work with an experienced estate planning attorney to help with all the legalities, including taxes.

Medicaid, Disability, and Long-Term Care Issues. Elder law evolved as a special area of practice because of the aging population. As people grow older, they have more medically-related issues. Medicaid is a state-funded program that supports those with little or no income. The disability and long-term care issues are plans for those who need around-the-clock care. Elder law attorneys help coordinate all aspects of elder care, such as Medicare eligibility, special trust creation and choosing long-term care options.

Guardianship, Conservatorship, and Commitment Matters. This category is fairly straightforward. When a person ages, a disability or mental impairment may mean that he or she cannot act rationally or make decisions on his or her own. A court may appoint an individual to serve as the guardian over the person or as the conservator the estate, when it determines that it is required. The most common form of disability requiring conservatorship is Alzheimer’s, and a court may appoint an attorney to be the conservator, if there is no appropriate relative available.

Reference: Recently Heard (May 26, 2021) “What Are the Major Categories That Make Up Elder Law?”

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