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.
Written by Robert T. Nickerson
In my line of work, I've seen a lot of remarried people, especially among seniors. It's only natural that people are going to want a second chance at marriage. Or perhaps a third, or a fourth, or a fifth. The point I'm making is that I get a lot of couples that have people who were married before. A question I always bring up is about an estate plan they've set up with a previous marriage.
A previous estate plan doesn't become void in the event a new one being created. In fact, this can create some missteps and bad communication. Though the circumstance can affect everyone, I've seen the worst effects happen to children if they come from a previous marriage. They may have a certain inheritance or special instructions from one estate plan, but something else put down in another.
Here are some things that go wrong and what can be done to fix them.
Not Protecting your Current Spouse. This happens a lot. Couples might marry but forget to update their will. In some states, this can result in your assets being handed down to your firstborn children rather then your spouse. I would certainly hope that the children would want to have a conversation with the spouse, but if they decline to provide, this the spouse will left with little they can do.
It's important to open all the channels of communication and a lawyer to ensure a proper estate plan is crafted.
Not Protecting your Children from a Prior Marriage. This can also work the other way around where the spouse receives everything but nothing is left for the children. Some might wonder why such a thing could happen, but what I usually witness is the idea of an "understanding" is formed in which the spouse will care for the children. While "understandings" are common, it's better to be on the safe side an have something planed.
A common thing to do is having a revocable trust created that can benefit most parties. Having an independent marital trust to set aside specifically to your spouse is also common.
Not Protecting Against Depletion of Assets. Someone could leave their assets in a marital trust with the assumption that the trust will pass along to the children once the spouse passes away. But one problem I also see a lot is that spouse facing some sort of medical dilemma in which they'll continue to take money from the trust to fund. If that goes on for a while, then the children may be left with little left.
To avoid this, I would highly recommend a life insurance policy so that when such a person passes away, the family will have a cash source available to them in which depleting from the trust wouldn't be necessary.
Not Protecting Your Estate From Your First Spouse. Just because you signed the divorce papers doesn’t mean your out of the woods. A signed document that certifies the divorce may automatically disinherit an ex-spouse from your estate, but that all it can do. You still need to speak to your bank about getting the name removed from retirement accounts and life insurance plans so that such things don't pass on to those people.
I highly recommend updating your financial documents and powers of attorney to reflect your current family, so that your ex-spouse doesn’t have unauthorized access to your finances. If you want more information or are interested preventing yourselves from a financial, click on the button below to contact us.
Jeffrey C. Nickerson - Estate Planning Attorney - My Passion is Special Needs Planning!