Estate Planning Blog Articles

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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?”

Some Seniors Getting Estate Plans Completed More Quickly after COVID

Indiana Lawyer’s recent article entitled “New urgency: COVID prompts seniors to be more proactive with estate planning” says that, after roughly two years, many Americans appear to finally be emerging from the strictest phases of the pandemic.

As many middle-aged and young people move back into what somewhat resembles a pre-pandemic normalcy, older citizens continue to feel the heavy impact of the virus.

As COVID’s threat to the elderly quickly became apparent, some estate planning attorneys have seen a major increase in older clients scrambling to get their affairs in order.

People aged 65 and older account for nearly 75% of U.S. COVID-related deaths. More often than not, estate planning lawyers say people don’t have their end-of-life and estate planning documents together until it’s too late.

For some, estate planning is almost taboo in the sense that if someone gets their affairs taken care of, older generations tend to think they’ll die the next day. As if, “I’m going to have an impending death sometime soon if I do this.”

However, by doing the estate planning, it helps that stigma to be diminished.

Some say people had to die, in order to motivate people to do what they needed to do.

However, more people seem willing to get up and get an estate plan because of COVID.

Visit an estate planning attorney and set up your plan right away. Ask about the basic documents:

  • A will
  • Powers of Attorney
  • A Living Will
  • An Advance Medical Directive; and perhaps
  • A Revocable Living Trust

Everyone’s situation is different, so you should sit down with an experienced attorney who can customize an estate plan to your family and situation.

Reference: Indiana Lawyer (May 25, 2022) “New urgency: COVID prompts seniors to be more proactive with estate planning”

Can I Split My Inheritance with My Sibling?

Let’s say that you are the beneficiary of your brother’s IRA.

All of his assets were supposed to be split between you and your sister according to a living trust. However, the IRA administrator says the IRA only has one beneficiary… you. How can you spilt this equally?

Can you sell half and give your other sibling her money?

What is the effect on taxes and the cost basis?

nj.com’s recent article entitled “Can I give my brother half of my inheritance?” says that it’s important to review beneficiary designations to make sure they reflect your wishes.

In this case, you would essentially be making a gift to your sister from the IRA account that you inherited.

To do this, you would have to liquidate some of the account and pay the taxes on the liquidated amount, if it is a traditional IRA.

You would also have to file a federal gift tax return for the amount gifted above the $16,000 annual exclusion amount. However, no gift tax should be due if you have less than $12.06 million in your estate and/or lifetime gifts made above the annual exclusion amounts.

The unified tax credit provides a set dollar amount that a person can gift during their lifetime before any estate or gift taxes apply. This tax credit unifies both the gift and estate taxes into one tax system that decreases the tax bill of the individual or estate, dollar to dollar.

As of 2021, the federal estate tax is 40% of the inheritance amount. However, the unified tax credit has a set amount that a person can gift during his or her lifetime before any estate or gift taxes are due. The 2021 federal tax law applies the estate tax to any amount above $11.7 million. This year’s amount is $12.06 million.

While you would receive a step-up in basis, the cost basis of your brother’s gifted share would be the value at the time the gift is made.

Another thought is that if there are other assets in the estate, perhaps your sister could have a greater share of those, so you could keep the IRA intact to avoid paying taxes at this time.

Reference: nj.com (Feb. 23, 2022) “Can I give my brother half of my inheritance?”

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?”

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?”

Is the Pandemic Making Young People Think About Estate Planning?

A 2021 study from caring.com shows the coronavirus pandemic’s impact on estate planning and the change in viewpoints among specific groups. The survey generated responses from 2,500 Americans and is a continuing effort to create greater awareness and understanding about the estate planning process.

Insurance News Net’s recent article entitled “Study: Young Adults More Likely To Do Estate Planning Due To COVID-19” reports that, based on results from last year, the number of young adults with a will increased by 63%.

For the first time, adults under 35 are more likely to have a will than those ages 35-54. About 50% of all younger adults surveyed also said that COVID-19 prompted their interest in estate planning. Despite the growing interest among younger adults, most Americans still do not have a will. They fail to take any action, except for speaking to loved ones about estate planning. About ⅔ or 67% overall still don’t have a will.

Most of those who responded to the survey said that procrastination was the main reason for not having a will. However, the number of Americans who expressed a lack of understanding increased by 90% since 2017.

The survey also shows a significant increase among Hispanic and Black Americans with a will. The number of Hispanics with a will increased by 12% and by 6.2% among Blacks, since the 2020 report.

“In comparison to previous years, the 2021 study indicates that Americans see a greater need for estate planning due to the pandemic,” says caring.com CEO, Jim Rosenthal. “Unfortunately, many people haven’t begun the estate planning process – even with the increased availability of remote and online services.”

Income level is also a significant factor among people who do in estate planning. The survey’s respondents making under $40,000 a year were less likely to have a will.

The percentage of Americans with a will and annual income of $40,000 to $80,000 increased 6% to 39% in one year.

Caring.com has conducted its Wills and Estate Planning Study since 2015 to raise awareness of the importance of estate planning, especially among people who may not feel they have the money or know-how needed to create a will or living trust.

Reference: Insurance News Net (Feb. 23, 2021) “Study: Young Adults More Likely To Do Estate Planning Due To COVID-19”

Why Is Family of a Texas Governor Fighting over His Estate?

Dolph Briscoe Jr. was a Texas rancher and businessman and was the 41st Governor of Texas between 1973 and 1979. His oldest child, Janey Briscoe Marmion, established the foundation with her father to honor her only child, Kate, who died in 2008 at the age of 20.

The Uvalde Leader-News’ recent article entitled “Briscoe family lawsuit targets Marmion’s will” reports that Marmion’s original will filed in 2011 directed her assets to be placed in a revocable trust.

The foundation was to have received income from half of her wealth for 22 years. The rest was directed to the children of her brother Chip Briscoe and those of her sister Cele Carpenter of Dallas.

However, a second will executed by Marmion in 2014 and admitted to probate in the County Court in December 2018— a month and a day after her death—calls for three trusts, including two child’s trusts created by her father and a generation-skipping trust (GST). A GST is a type of trust agreement in which the contributed assets are transferred to the grantor’s grandchildren, “skipping” the next generation (the grantor’s children).

Marmion created the Janey Marmion Briscoe GST Trust, dated November 1, 2012, in which she gave a third of her assets to the foundation and the other two-thirds to be divided equally between Chip Briscoe’s sons.

Carpenter’s three children filed suit in Dallas and in Uvalde County last year challenging the validity of the 2014 will and contesting the probate.

Their complaint alleges that Marmion intended to include the three as beneficiaries, in addition to Chip’s two sons, and that the situation creates a disproportionate inheritance in favor of the Briscoe men.

The amount in question is more than $500 million, since the former Texas governor’s estate was estimated by Forbes to be worth as much as $1.3 billion in 2015. Governor Briscoe died in Uvalde in 2010 at the age of 87.

Reference: Uvalde (TX) Leader-News (March 11, 2021) “Briscoe family lawsuit targets Marmion’s will”

real estate investments

Can I Add Real Estate Investments in My Will?

Motley Fool’s recent article entitled “How to Include Real Estate Investments in Your Will” details some options that might make sense for you and your intended beneficiaries.

A living trust. A revocable living trust allows you to transfer any deeds into the trust’s name. While you’re still living, you’d be the trustee and be able to change the trust in whatever way you wanted. Trusts are a little more costly and time consuming to set up than wills, so you’ll need to hire an experienced estate planning attorney to help. Once it’s done, the trust will let your trustee transfer any trust assets quickly and easily, while avoiding the probate process.

A beneficiary deed. This is also known as a “transfer-on-death deed.” It’s a process that involves getting a second deed to each property that you own. The beneficiary deed won’t impact your ownership of the property while you’re alive, but it will let you to make a specific beneficiary designation for each property in your portfolio. After your death, the individual executing your estate plan will be able to transfer ownership of each asset to its designated beneficiary. However, not all states allow for this method of transferring ownership. Talk to an experienced estate planning attorney about the laws in your state.

Co-ownership. You can also pass along real estate assets without probate, if you co-own the property with your designated beneficiary. You’d change the title for the property to list your beneficiary as a joint tenant with right of survivorship. The property will then automatically by law pass directly to your beneficiary when you die. Note that any intended beneficiaries will have an ownership interest in the property from the day you put them on the deed. This means that you’ll have to consult with them, if you want to sell the property.

Wills and estate plans can feel like a ghoulish topic that requires considerable effort. However, it is worth doing the work now to avoid having your estate go through the probate process once you die. The probate process can be expensive and lengthy. It’s even more so, when real estate is involved.

Reference: Motley Fool (June 22, 2020) “How to Include Real Estate Investments in Your Will”

Here’s Why You Need an Estate Plan

It’s always the right time to do your estate planning, but it’s most critical when you have beneficiaries who are minors or with special needs, says the Capital Press in the recent article, “Ag Finance: Why you need to do estate planning.”

While it’s likely that most adult children can work things out, even if it’s costly and time-consuming in probate, minor young children must have protections in place. Wills are frequently written, so the estate goes to the child when he reaches age 18. However, few teens can manage big property at that age. A trust can help, by directing that the property will be held for him by a trustee or executor until a set age, like 25 or 30.

Probate is the default process to administer an estate after someone’s death, when a will or other documents are presented in court and an executor is appointed to manage it. It also gives creditors a chance to present claims for money owed to them. Distribution of assets will occur only after all proper notices have been issued, and all outstanding bills have been paid.

Probate can be expensive. However, wise estate planning can help most families avoid this and ensure the transition of wealth and property in a smooth manner. Talk to an experienced estate planning attorney about establishing a trust. Farmers can name themselves as the beneficiaries during their lifetime, and instruct to whom it will pass after their death. A living trust can be amended or revoked at any time, if circumstances change.

The title of the farm is transferred to the trust with the farm’s former owner as trustee. With a trust, it makes it easier to avoid probate because nothing’s in his name, and the property can transition to the beneficiaries without having to go to court. Living trusts also help in the event of incapacity or a disease, like Alzheimer’s, to avoid conservatorship (guardianship of an adult who loses capacity). It can also help to decrease capital gains taxes, since the property transfers before their death.

If you have several children, but only two work with you on the farm, an attorney can help you with how to divide an estate that is land rich and cash poor.

Reference: Capital Press (December 20, 2018) “Ag Finance: Why you need to do estate planning”