Articles Posted in Estate Planning

What happens if you have an accident or an illness whereby you are unable to handle your legal and financial affairs?  Many people incorrectly believe their spouse is legally able to handle their affairs. Similarly, a parent has no legal authority to handle the affairs of a child, once the child attains the age of majority – eighteen years.

Without a power of attorney, you would have to apply to a court to be named a legal guardian.  These proceedings are expensive, time-consuming and fraught with peril.  The judge has no obligation to name the spouse or parent as legal guardian and may appoint a stranger.  For example, the judge may feel that the spouse or parent has a conflict in that they are the beneficiary of the incapacitated person’s assets, or the judge may decide that someone else has more knowledge and experience in handling such matters.

Who should you choose as your “agent”?  In our experience, the vast majority of powers of attorney name the spouse first and one or more of the children second.  While on its face this seems reasonable, experience has shown it may not be a good idea.  We often need to use the power of attorney when the client is quite elderly and infirm.  Often, so is the spouse at that time.  Son or daughter wants to step in and help out with bill paying, etc. only to find they are unable to use the power of attorney for dad unless they can prove that mom can’t.

The Secure Act governs distributions from IRA’s and other retirement plans. After the death of the account holder, most named beneficiaries are required to take the funds out over ten years.

While the IRS has not finalized the regulations, the safest approach is to take minimum distributions for the first nine years, based on the life expectancy of the beneficiary. More may be taken, and taxes will be based on that amount. The way the minimum distribution works is as follows. Let’s say the beneficiary has a life expectancy of forty years when the account holder dies. In the year following the account holder’s death they must take one-fortieth, the following year one-thirty-ninth, and so on until year ten when they are required to take the retirement account balance in full.

There are a few exceptions to the ten year rule. Spouses may roll the inherited IRA into an IRA of their own and continue it for their own lifetime — generally waiting until they are 72 to start taking required minimum distributions (RMD’s) unless they need the funds earlier.

For the ever-increasing number of those who become legally incapacitated later in life (i.e. unable to handle their legal and financial affairs) having a legal guardian appointed looms as a distinct possibility.

A guardianship proceeding may be commenced by a hospital, nursing home, assisted living residence, family member or a professional involved in the affairs of the “alleged incapacitated person” or “AIP”. These proceedings arise for various reasons such as the facility looking to secure payment or a family member or professional finding that the AIP is either not handling their affairs well or is being taken advantage of financially.

Once the proceeding is commenced a vast bureaucratic process begins to unfold. Notice of the proceeding and of the date and location of any hearings are sent to all interested parties, including all immediate family members.

In the event of their death, many people wish to provide for the adequate care and feeding of their beloved dog, cat, bird or other pet. Here is an abridged version of New York’s statute authorizing a trust for your pet;

  1. The intended use of the principal or income, of a trust for the care of a designated domestic or pet animal, may be enforced by an individual designated for that purpose in     the trust instrument. Such trust shall terminate when no living animal is covered by the trust.
  2. No portion of the principal or income may be converted to the use of the trustee or to any use other than for the benefit of a covered animal.

You should strive to review your estate plans every few years. While it might not seem like it, many events can occur during this period that impacts your estate planning goals. Besides personal changes, the country also experiences national elections every four years which often lead to changes in estate taxes.

Consider Role Appointments

One of the most critical parts of estate planning is appointing who among your friends and family members will act in the role of executor, power of attorney, and other estate planning positions. You should also question whether the parties you nominate to act in such a role remain fit and willing to act in these positions. It’s also important to remember that the suitability of appointments can change. While a person might seem like a good executor, they might not be a suitable executor a decade from now. 

After a person is named an executor, the individual takes on the obligation to adequately and promptly complete the estate’s administration in addition to distributing an estate’s assets to anyone listed as a beneficiary. Assuming that the executor appreciates the duty that he or she owes to the estate and pursues appropriate assistance, an estate’s administration can be performed in a timely manner, and assets are distributed appropriately.

It’s not unique for new challenges to appear during estate administration. This article highlights some situations where a court might remove an executor after paperwork is filed by an estate beneficiary.

A common issue faced by beneficiaries is when executors do not timely administer an estate. Even though estate administration is nuanced, executors have a duty to administer estates in a timely manner. Unfortunately, executors sometimes do not expediently process how an estate should be administered. Instead, executors sometimes take too long to complete estate planning processes. 

When participating in estate planning, many people focus solely on large assets like real estate or retirement accounts. This often means that people end up downplaying the value of personal property planning. People who make this mistake often overlook the point that personal items can have a value that far surpasses anything measured by monetary value. As a result, everyone should spend adequate time planning for personal assets. Certain items require special focus. Firearms are one of these unique items. Making matters even more complex, firearms are one of the unique items of personal value that carry a distinct risk of danger including liability for accidents that might result. As a result, a person should be cautious but deliberate when it comes to estate planning and firearms. 

Be Careful to Whom You Give a Firearm

A personal representative or trustee is the individual that you select to function in a fiduciary role or administer your estate in reflection of your wishes. Transferring your favorite firearm to a relative can end up being a complex issue if the person is a prohibited individual. The Gun Control Act of 1968 made it against the law for certain types of individuals to not just ship but also receive, transport, or possess firearms. Some categories of individuals prohibited by the Act include individuals who have been convicted of felonies, users of illicit drugs, people with mental illnesses, and people who have been convicted of domestic violence. Simply transferring a firearm to a prohibited individual can create a wide range of complex issues. 

Although it was long predicted, the country is currently in the middle of the biggest transfer of assets in current history. The Federal Reserve reports that at the end of 2021’s first quarter, people in the United States who are 70 years of age and older had net worths of approximately $35 trillion.

The question of whether people in the United States will prepare to transfer assets depends on the extent of funds that pass on to attorneys, courts of love, and needy loved ones.

When someone you love passes away, assets are ideally passed to people and organizations chosen by the deceased individual. Many people are not adequately prepared to pass on assets, though. One study reveals that approximately 46% of Americans own wills, which are vital estate planning documents. Estate planning helps a person appoint who will take care of loved ones and determine how assets will be assigned after you pass away. While some people make the mistake of thinking that only the wealthiest individuals need estate plans, everyone including people of modest means need estate plans to achieve their estate planning goals.

The estate tax exemption is slated to return to $5 million in 2026. For married individuals, the exemption is considered portable”, which means that the estate of the second spouse to pass away can benefit from the unused amount of the exemption that was available to the first spouse who passed away.

This change in tax law means that wealthy individuals’ estates can be protected from the claw of federal law through a $10 estate tax exemption. The indexed amount is $12.06 million for people who pass away in 2022. Meanwhile, transfers among spouses remain exempt from taxation due to the unlimited marital deduction. Consequently, many people do not need to be concerned about the federal estate tax.

The portability election, which has been titled by legislatures the “deceased spouse unused exemption” (DSUE) is an election utilized by an estate’s executor.

Many adults with special needs children routinely worry about how the child will survive when the parent can no longer support them. Often, leaving money directly to a special needs child can end up jeopardizing that child’s ability to receive any support from government-funded programs including Medicaid and Supplemental Social Security Income. To receive funds from these programs, beneficiaries often must have below a few thousand dollars in assets.

In these situations, special needs trusts can help to provide for the beneficiary once the parent or loved one is no longer around. Because the special needs trusts are viewed as owning assets, they are exempt from asset limit tests associated with government programs. Special needs trusts can meanwhile help to support quality-of-life improvements for a beneficiary. Special needs trusts also help to avoid situations where a family member receives funds and the other relatives are left to face the burden of this responsibility as well as the cost of care.

Due to the interest in special needs trusts, the number of these trusts has been growing substantially. Despite these benefits, special needs trusts come with certain regulations regarding who can qualify to use them as well as how earnings are taxed, which can end up influencing situations that warrant using these trusts.

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