Written by Robert Nickerson
When we get to that point of creating an estate plan, we tend to figure out the collective feeling. What I mean exactly is the overall emotion everyone has about the situation. We might feel happy, sad, or even angry at the person whose estate is being represented. Usually the feeling is going to be mutual with everyone else. The circumstance on wealth and relationships are going to be a factor when thinking about the future. Though it's one thing to get an understanding on how everyone as a whole feels, its another when an individual has another opinion.
Every family is bound to have one person whose personal situation is questionable. Are they mentally capable of making their own decisions? Are they in a financially secure place? Do they have a substance abuse problem? Are they irresponsible with money? The good news is that all of these factors can be acknowledged within an estate plan.
I'll bet before you clicked on this link to read the article, you've already done a web search about those issues and might have even come across statements that you weren’t sure were fact or a hundred percent true. I'm going to go through a couple of myths surrounding "black sheep" family members and estate plans.
Myth 1: You have to divide your estate plan equally amongst your beneficiaries
This is NOT true. In fact, this is something I encourage depending on the family. Just because your want more of your assets to go to someone over the other doesn't mean your don't love that other person. A good example would be if you have someone in the family who is mentally disabled. They may require a larger share if they need a more secure position with their medical and caregiver expenses covered. Or there may be a situation you want to disinherit a beneficiary. That doesn't mean you don't agree with their choices. But perhaps someone in the family is starting a new business and needs the extra assets to get things moving.
Regardless of the reason for anything, dividing assets unequally should be explained before anything is set in motion. Though it also helps to have a documents that explains your decision.
This is also why I highly recommend checking your estate plan sporadically to see if you still want you beneficiaries to receive assets as you planned when the document was laid out.
Myth 2: I can't change my mind once I set up to have a beneficiary disinherited
This is NOT true. Like I said before, I recommend going back to your estate plan every couple of yours and thinking about everyone's position. Are they in a better place? Has something come up? Life is full of surprises and one of them may force a chance in how things are distributed.
Myth 3: You can't control things once your dead
This is NOT true….sort of. Once You've passed on, unless there's a new way to resurrect the dead, you yourself are gone from direct control. However, your estate plan gives the ability to see your wishes carried out. Does someone in the family need an incentive before they receive their distributed assets? You have the ability to create a distribution contingent (a clause that says they can receive something after they done something). This can range from unlocking funds after finishing college, and allowance if proven to be in rehab.
This goes back to the idea that not all distribution has to be equal. What this does do, is ensure that something needs to be done in order to receive an asset.
Myth 4: Trusts are complicated and a pain to control
As long as you have everything set with a good lawyer…then this is NOT true. Let's say that someone in your family has special needs and requires someone to look after his well being. A special trust can be created with someone being appointed a trustee that'll take charge of the responsibility. But if naming someone is too much of a burden, then naming a professional trustee is also an option. Yes, there are costs to a corporate trustee, but you also have to debate at what cost are you willing to stick to with that family member.
Though let's be honest, making these kinds of decisions are never easy. Just the thought of speaking to a lawyer about the future of someone's passing can make you uneasy and even depressed. But I can tell you now that its better to do this as soon as possible then wait until it's too late. Our law office can help guide you through this subject with ease and determine what action is best for your family. Click on the button below for more information or to contact us.
Written by Jill Roamer, J.D.
The disabled population likely experiences an amplified sense of vulnerability during disastrous happenings. The compounded risks encountered by the disabled during a catastrophic event are a real, and very serious, concern. A 2019 Act focuses on this hinderance and will attempt to bridge the accessibility gap for disaster response and preparedness for those living with disabling conditions.
Congressional Response to Potential Disasters
Earlier this year, the Pandemic and All-Hazards Preparedness and Advancing Innovation Actwas signed into law. Building upon the 2006 Pandemic and All-Hazards Preparedness Act, Congress introduced the new bill with a subset committee focused on disability inclusion. It addresses the important issue of how to ensure the elderly and disabled populations are best cared for in a disaster, whether it be a natural disaster, a public health emergency, or a man-made disaster. In addition to creating a committee focused on how to best care for those with a disability during a disaster, the Act also enables military trauma care providers to train their civilian counterparts, creates a regional system of trauma care centers, and increases funding for a program that enables the health care system to plan for and respond to medical surge events.
The National Advisory Committee on Individuals with Disabilities and Disasters focuses on disability accessibility and inclusion for disaster preparedness and response efforts. The committee refers to the ADA definition of disability and is armed with a variety of critical members, amongst which are a minimum of two members being “non-Federal health care professionals with expertise in disability accessibility” in disaster scenarios; at least two “representatives from State, local, Tribal, or territorial agencies with expertise in disaster… [scenarios] …for individuals with disabilities”; and no less than two members generally experienced in disaster preparedness and response for those with disabilities.
The committee enhances the previous law’s section on At-Risk Individuals. Its goal is to “align preparedness and response programs or activities to address similar, dual, or overlapping needs of children, seniors, and individuals with disabilities, and any challenges in preparing for and responding to such needs.” The committee intends to provide advice and tactics for state preparedness and response to disaster scenarios.
Effects of a Disability on Disaster Preparedness and Response
Historically, the disabled population has experienced compounded hardships in response to disastrous occurrences. Socioeconomic status, accessibility hurdles, and complex medical needs have prevented many from receiving adequate aid during disasters. Providing access to disaster response efforts for the disabled population – an estimated 19.4% in the United States – is a real concern.
Thoughtful consideration must be made regarding accessibility obstacles. Consider the following:
Consider, too, that disasters are bound to cause significant, and disabling, injuries to a variety of individuals in affected regions – subsequently causing an upsurge in the disabled population. The sudden onset of a disabling condition is likely unfathomably shocking. Imagine how terrified an able-bodied person might be if they were to suddenly become paralyzed during a hurricane. Not only are these newly disabled individuals trying to cope with their new circumstances, they are also fighting the real possibility that they may be unable to reach or access services rendering aid.
Tips for Those with Disabilities to Mitigate Disaster HurdlesWhat can seniors and those with disabilities do to mitigate the potential hurdles and pitfalls associated with a disaster?
The implementation of the Pandemic and All-Hazards Preparedness and Advancing Innovation Act is very important for our disabled population. Preparing for the unknown is a difficult endeavor, and all people should be included in the plan. The array of committee members strengthens the likelihood that all individuals will benefit from emergency preparedness and response efforts in the future, dread the thought, when or if disaster strikes.
Written by Jill Roamer J.D.
November brought with it changes to California’s real property taxation laws. Proposition 19 passed narrowly and modified laws which were already on the books. Let’s take a look at the old rules and then how the new rules will work.
In many places in California, real property has been sky-rocketing in price in the last several decades. Having real property reassessed with regard to taxes could bring with it hefty tax bills; laws were put into place to curtail the rising tax issues.
Proposition 13 has been law in California since 1978, as an amendment to their Constitution. Proposition 13 dictated that the rate of increase of property assessments would be tied to an inflation factor and could not be greater than 2% each year. Also, it provided a limit on property taxes to 1% of the assessed value. Finally, it prohibited a reassessment on real property unless there was a change in ownership or the home was new construction.
Proposition 58 came later, in 1986, also via Constitutional amendment. It dictated that certain transfers between parents and their children would not trigger a property tax reassessment. So, when the child inherits the property from the parent, the child’s property taxes are calculated on the factored base year value and not the current fair market value at the time of the parent’s death. (Proposition 193 in 1996 excludes transfers from grandparents to grandchildren from reassessment.)
CA Rev & Tax Code § 69.5 gives certain tax breaks to anyone over the age of 55, or those who are severely and permanently disabled. Such individuals can have a transfer of the base year value from their old home to a new home of equal or lesser value. In most instances, one can only take advantage of this law once in their lifetime. And, the new home must be in the same county as the old home, unless the old and new counties have reciprocity agreements amongst themselves.
Along comes November of 2020 and Proposition 19, promulgated by the California Association of Realtors. The Proposition, in some form, was already proposed in years prior. However, it passed in 2020 with a narrow margin of the vote (51.1%) partly because the increase in revenue was promised to go towards combating the devastating California wildfires.
There are two main changes that will be upcoming in 2021 due to Proposition 19:
The good news is that you don't have to do this alone. We, at the Law Offices of Jeffrey C. Nickerson can help. Click on the button below to contact us for more information.
Many Americans don’t have a will. Why not? Well, the reason may be that they don’t want to think about death. Maybe they balk at the idea of attorney fees. Or, maybe they simply don’t want to risk getting COVID-19 by traveling to do business. As quarantining, social distancing, and Zoom meetings become the new norm, will electronic wills also become a new norm? Four states (Arizona, Indiana, Florida, and Nevada) currently have electronic will statutes, and some states have temporarily authorized them during COVID-19. At the end of August, Utah became the first state to pass the Uniform Electronic Wills Act. This law became effective immediately, meaning that citizens of Utah have had a few months to take advantage of it.
Of the laws that authorize electronic wills, Utah’s is the broadest. Arizona’s followed the traditional rules for witnesses, which meant that although they could digitally sign the document, they had to be physically present with the testator. And all four states that have so far authorized electronic wills required someone to take custody of the electronic file after signing. All four of these states adopted laws expressly authorizing electronic wills prior to the Uniform Law Commission’s completion of its model electronic wills proposal. Utah, however, waited until after the proposal was complete, and therefore adopted some of its more liberal qualities. Among these is the obviation of “qualified custodians” of the digital will. The Uniform Electronic Wills Act also allows for remote witnessing! Additionally, it recognizes that a digital signature might become a paper document, and seems to recognize that a will might be partially electronic and partially paper. Finally, the Act codifies its previous recognition of “harmless error.”
While all of these qualities serve to make it easier for Utah’s citizens to execute their wills, there remain some snags. Although the Uniform Electronic Wills Act recognizes electronic wills executed in other states, the reverse likely isn’t the case. A will executed under this Act in Utah may therefore fail to comply with the laws for electronic wills in Arizona, Nevada, Indiana, and Florida, not to mention in states that have no such law. Furthermore, while this electronic method of will execution has hopefully made it easier for Utah residents to execute wills, some fear that it also creates new opportunities for bad actors to take advantage of the elderly and will thus increase fraud, abuse, exploitation, and therefore probate litigation too. But time will reveal the risks, and hopefully the solutions, too.
Now that the Uniform Electronic Wills Act has been completed and subsequently adopted by Utah, will other states follow suit? In light of the restrictions we now face due to COVID-19, will states that previously wouldn’t have considered enacting such a statute now be more open to the idea? Of course, time will tell but it wouldn’t be surprising if more states begin to follow Utah’s lead.
The law offices of Jeffery C. Nickerson is dedicates to helping all people and families with their wills, trusts, and estate plans. Contact us for more information and how we create something to give your family peace of mind.
Written by Robert Nickerson
Within the 2020 election, proposition 19, a constitutional amendment for property tax transfers and exemptions was approved. This is the biggest change to property taxes in California since prop 13 in 1978. For obvious reasons, home owners need to understand the new consequences of it and what it's going to do for families in the Golden State.
What Proposition 19 does is targets two groups: it provides a tax break for homeowners over the age of 55, disabled people or victims of wildfire or natural disaster. Those following people, if they relocate in California, may transfer their primary residences taxable value to a replacement residence to equal or less value.
If the new primary home is worth more the original residence, then the taxable value of the replacement is increased by the difference between a cash value of the new property and the old one. And the ability to transfer the taxable value can be done up to three times.
Now what about the second group? The tax advantage is where this unfortunately comes in; The children (or grandchildren who qualify) who receive real estate through bequest or gift. Before Prop 19 was passed, it was common for a property's taxable value to be reassessed based it's current market value at the time of it's transfer, though that wasn't the case between a parent and a child. What the law allowed was a parent to transfer a primary residence of an unlimited tax value, plus up to $1 million for other real estate, so the children to keep the low tax value that was used by the parents. It also allowed the child the use the property as they wished, as a residence, vacation rental, a rental property or something else.
With Prop 19, it is now severely limited. In order for the child to be exempt from the taxable reassessment, they need to use the primary residence as a… primary residence and they have to claim it within one year.
Transferred homes that were not used as primary residences (like a rental property or a vacation home), will automatically be reassessed at the current fair market value to calculate a new annual property tax.
Even if the primary residence qualifies for a reassessment exemption, if the market value is more then $1 million, then there will still be a reassessment to recalculate.
So if parents with vacation homes or rental properties want to transfer their real estate assets to their child, then they may want to do so before February 16, 2021, the day in which Prop 19 takes effect.
There is an approaching window coming and now may be the time to think about all of this. The Law Offices of Jeffrey C. Nickerson can help out with all of that. Contact us for more information regarding the transfers of real estate within an estate plan.
November is National Alzheimer’s Disease Awareness Month. Alzheimer’s Disease is a degenerative brain disease caused by brain cell damage. Early symptoms include not being able to remember new information. Cognitive ability continues to decline, and eventually seemingly simple tasks like speaking and walking are troublesome. Every 65 seconds, someone in the United States develops Alzheimer’s Disease. About 5.7 million Americans currently suffer from this devastating disease. Currently, there is no cure.
After someone receives an Alzheimer’s Disease diagnosis, it can be very overwhelming. Many questions will arise, such as:
Powers of Attorney
A Power of Attorney is a legal document that names someone, an “agent”, to act on behalf of another person, the “principal”. A Healthcare Power of Attorney names an agent to make medical decisions for the principal. The agent can also access medical records and talk with doctors. A Financial Power of Attorney names an agent to act on the principal’s behalf regarding finances. Depending upon the terms of the Power of Attorney, this could include accessing bank accounts, paying creditors, selling or purchasing real property, accessing online or digital accounts, changing beneficiary designations on retirement assets or life insurance policies, and many more various powers.
A Power of Attorney can be effective immediately, meaning the agent has the powers described in the document even while the principal is competent. Or, the power can be springing, which means the agent’s powers are only effective when the principal is unable to make those decisions on their own behalf. It is important for someone who has recently had an Alzheimer’s diagnosis to have these documents in place. Alzheimer’s Disease will eventually leave the individual unable to make healthcare and financial decisions on their own. Having these documents in place will allow the designated agent to take care of these decisions when the time comes.
Once the Powers of Attorney are in place, the principal should discuss their desires for care with their agent. The agent’s job is to carry out tasks on behalf of the principal so they will need to know how the principal would prefer things to go. What type of care is desired? In what setting? Are there any actions that the principal would be opposed to? Are there religious preferences the agent should take into account?
The principal must have capacity to sign a Power of Attorney. Legal capacity means understanding the consequences of one’s actions. This is why acting early is important. Alzheimer’s Disease can be swift in effecting one’s ability to have legal capacity. If Powers of Attorney are not in place and the principal’s condition deteriorates to the point that the principal no longer has legal capacity, the principal’s family would have to seek court intervention to have the principal declared incompetent. Then, the court would name someone who can legally act on behalf of the principal. The court process and be costly and time-consuming, and the principal’s wishes may not be carried out. Having Powers of Attorney in place is an important step after an Alzheimer’s diagnosis.
Planning for Long-term Care
Roughly 48% of nursing home residents have some form of dementia, including Alzheimer’s Disease. The disease is such that one’s ability to care for themselves declines to the point of potentially needing around-the-clock care. But before nursing home care becomes necessary, it is likely that the Alzheimer’s patient will need home care or assisted living care. The average nursing home in the United States costs $8,365 per month. The Alzheimer’s Association estimates that end-of-life care for a patient can span $233,000 and $367,000. Planning for how to pay for this care is crucial.
Long-term care is not covered under standard medical insurance policies. An elder law attorney may help a client explore long-term care insurance products. A traditional long-term care insurance policy will pay for care when the policy holder can no longer perform two activities of daily living, including dressing, grooming, eating, contingence management, ambulating, and bathing. However, policies can be very expensive any may only cover a few years of care. Another type of long-term care policy is called a hybrid plan. This type of plan allows the policy holder to access the death benefit while alive. So, the policy holder would use the death-benefit funds to pay for their long-term care and any remaining amount would be paid to beneficiaries upon the policy holder’s death. However, hybrid plans are usually even more expensive than traditional plans.
As an alternative to long-term care insurance, an elder law attorney may help a client become eligible for Medicaid. In order for Medicaid to pay for long-term care services, the applicant must meet strict financial criteria. Most folks are over this resource limit, but legal planning can be done so that the client can protect assets while still qualifying for Medicaid. This planning can include the use of trusts, making exempt transfers, utilizing Caregiver Agreements, and more. For eligible Veterans, the attorney would also likely seek Veterans benefits.
An elder law attorney may refer their client to a care coordinator. This is someone who assess the home and make recommended changes to better accommodate an Alzheimer’s patient. The care coordinator can also help navigate care options and help put a care plan in place. Having this advocate in place to help navigate care options can be crucial for helping family and friends care for their loved one with Alzheimer’s Disease.
Receiving an Alzheimer’s diagnosis can be devastating for the patient, as well as for their family and friends. Having competent help in navigating through the new normal is key. If there is a plan in place, especially a plan that the one suffering from Alzheimer’s helped form, then the family can focus on each other and have less stress. Elder law attorneys are an integral part of setting up this plan and setting up the family for success on their new path.
Written by Robert T. Nickerson
I hate to bring up another sad issue that’s unfortunately common with families, but it has to do with funerals. I'm not talking about them in general, but rather how the arraignments are planned. Chances are various family members are going to disagree with how a funeral and a burial are set for a loved one.
Wills typically have the wishes of one if they want to be buried, cremated, or however they see appropriate. The problem is that they're not always legally binding. In fact, a lot believe that the "next of kin" has the authority on the funeral and burial.
Not every family is going to want a funeral, but there is a responsibility to dispose of the body. Now I'm not encouraging you to take your loved one to the dump, but again, you want to think about who will be likely to follow through on ones wishes. If not one person is set in stone within an estate plan, then the law provides a list of people who would be in line.
As of 2020, the law states that the following people would have to take the position of a funeral and burial arrangements (if one is not setup before hand)
If a burial dispute happens, then it's possible for the court to step in to help decide what happens to the loved one.
My advice would be to go above a will and get an estate plan. This is more set in stone with the wishes of the family member on your mind. This is unlikely to be challenged in court. Even is a family member was going to challenge this, it would have little chance of changing anything.
I can certainty go into more detail on what an estate plan can do for you and your family. Contact our office for more detail.
By Jill Roamer J.D.
With National Special Needs Law Month coming to a close, let’s take a look at recent final regulations issued by the Internal Revenue Service (IRS). The new regulations clarify rules regarding ABLE accounts.
ABLE accounts were authorized by the Achieving a Better Life Experience Act of 2014. To be eligible to open an ABLE account, you must be an individual with a significant disability that began before age twenty-six. Such accounts allow those with disabilities and their families to save money in a tax-beneficial way. Contributions to an ABLE account are not tax deductible and are done with post-tax earnings, but withdrawals and investment income earned will not be taxed.
Possibly the best advantage of an ABLE account is that the balance therein will not be a countable resource when applying for needs-based public benefits, such as Supplemental Security Income. There are limits on how much can be deposited into an ABLE account – for 2020, the annual limit for each contributor is $15,000. There are also lifetime caps, set by individual states. Many such lifetime limits are as much as $300,000. Withdraws from the account can be used for any expense that related to living with a disability, including healthcare costs, living expenses, and education.
The final regulations issued by the IRS this month amends 26 CFR parts 1, 25, 26 and 301. The purpose of the new regulations is to provide guidance under section 529A of the Internal Revenue Code, which authorized states to create ABLE account programs. These new regulations finalize two proposed regulations, the first proposed in 2015 and the other proposed in 2019. Here are some key take-aways from the new final regulations:
ABLE accounts can be a great resource for folks who are disabled, and a great way for their families to be able to contribute in a meaningful way. And with this new guidance, practitioners can be more confident when advising clients about the ins-and-outs of ABLE accounts. Practicing with those who have special needs and their families can be very rewarding. Happy National Special Needs Law Month!
Written by Robert T. Nickerson
How often do your get a checkup? Most people would give you different answer depending on their situation. Some might go for a checkup once a month while others might take years in between visits. For those that take their time, it might seem careless, but they're probably in a position where their health is the least of their concerns. The truth of the matter is that nothing is ever set in stone. These people should be going more often, especially if they have health insurance. In fact, there are a lot of things you should checkup more then you realize.
One such thing is your estate plan. Most assume that once you've had one created that you can leave everything alone for a while. That is a hundred percent wrong. While I'm not saying you need to look at it every day, it wouldn't hurt to set aside time once a year to reflect on both the estate plan and the people involved with it. The goal is to see if your plan is still reflective of your values and if the goals for your legacy are something you still want. Even if things are the same, personal events and changing tax laws can affect your future.
My solution is to have a "yearly test" with your attorney who helped create your estate plan. Here are some things that should go along with the test.
1. Has your life changed in a way that you need to reconsider your decisions?
- Has anyone gotten married? Any new kids? Serious illness?
- Has any laws changed? In light of the SECURE Act and the elimination of the lifetime stretch of Required Minimum Distributions (RMDs) for non-spouse beneficiaries, it is important to discuss any retirement accounts you may own prior to changing the beneficiary designation.
2. How are your personal assets (bank accounts, real estate, retirement accounts, life insurance, etc…)?
- Has there been any recent deaths in the family? Then you need to speak with your financial institutions to change the designated beneficiaries.
- How has your personal relationships been? If there have been a change in which one person or both may no longer be the right decision makers.
3. Has your financial situation changed?
- This can be a big one. Have you paid off debt? Taken a new job? Bought new real estate? Made new investments? Any of these things needs to be reflected in your estate plan.
- If you have a trust, then you need to ensure it stays out of probate. This is done by making sure that accounts and assets are properly reflected within the name on that trust.
The law offices of Jeffery C. Nickerson is more then happy to help create an estate plan. Click below for more information.
Written by Robert Nickerson
I'm not here to play favorites. 2020 has proven to be a year of strong opinions, especially with the Covid-19 virus. It's certain that a lot of people are eyeing the soon to be election of the next president. Whether Donald Trump will see another four years or Joe Biden will be the next president is anyone's guess.
What I'm here for is to discuss some proposals that could be put into place should Joe Biden win the election. A lot of it will also depend on which party controls congress, but I wanted to address it because it would effect wealth transfer planning and overall estate planning. Here are three things that could change.
1.Reducing the Estate and Gift Tax Exemption. Currently, you can transfer up to $11,580,000 ($23,160,000 per married couple) during life or at death without incurring federal gift or estate tax. Transfers in excess of that exemption amount are subject to gift or estate tax at a rate of up to 40%. Biden has proposed retuning estate tax levels to “historical norms.” This could mean that, effective as of January 1, 2021, the estate tax exemption amount could be reduced to $3,500,000 ($7,000,000 per married couple), the gift tax exemption amount could be reduced to $1,000,000 ($2,000,000 per married couple), and the top gift and estate tax rate could be increased to 45%. Accordingly, your currently remaining gift tax exemption amount that is not used before yearend might not only be lost, but your future gifts might be subject to a higher tax rate.
2.Eliminating Basis Step-Up at Death. Currently, for federal income tax purposes, the basis of inherited property is “stepped-up” to the property’s fair market value on the decedent’s date of death, effectively eliminating all capital gains on predeath appreciation. Biden has endorsed eliminating this benefit, however, it is unclear whether his proposal is to impose a tax on unrealized appreciation at the decedent’s death or to simply eliminate the basis step-up, so that inherited property would retain the basis that it had in the hands of the decedent.
3.Increasing Tax Rate on Long-Term Capital Gains and Qualified Dividends for High Earners. Currently, the maximum federal tax rate on long-term capital gains and qualified dividends is 20%. Biden proposes to increase the top federal tax rate on long-term capital gains and qualified dividends to 39.6% on income above $1,000,000.
As we approach Election Night closer, we can only conclude that anything is possible. But what we do have is today. Today and the time we have now is the moment where we can act upon something before the law is changed. I highly recommend looking into your estate plan to act upon current strategies as soon as you can. If you want assistance, then we are more then happy to help. Please contact our office for more information.
Jeffrey C. Nickerson - Estate Planning Attorney - My Passion is Special Needs Planning!