Articles Posted in Estate Planning

When you hear about Medicare taxes, you probably do not also consider how it affects investments. However, these new taxes can impose higher costs both on wages and net invested income. If you are concerned about how the Medicare tax may affect your estate or retirement plan, speak with an experienced estate planning attorney today.

Medicare Tax and Payroll Income

Medicare tax on payroll income is 2.9%. It applies to all earned income, which includes payroll from your employer in addition to any tips. Half of the tax is paid by you, and the other half is paid by your employer. For high wage earners, Medicare tax imposes an additional 0.9% tax on individuals who make over $200,000, $250,000 for couples filing taxes together, or $125,000 for spouses filing separately. Your employer is required to withhold the 0.9% from your paycheck once you exceed the $200,000 limit.

A lot of people assume that estate planning is just for the old and the wealthy; however, that is not the case. As a Daily Finance article discusses, when you are in your thirties, planning for your eventual passing is not usually a top priority, but most estate planning experts agree that this is the best time to begin to create an estate plan that will protect you and your family in case the unexpected occurs.

Sometimes it can be even more important for people in their thirties to create an estate plan because they have just as much to lose, sometimes more, than their parents and elders. A lot of people entering this decade are settling down, getting married, buying their first home, and having children – all of which needs to be protected.

An estate planning attorney can help you start to draft your estate plan, and here are the basic documents that you should consider putting into place:

Prenuptial agreements, or prenups, are almost always associated with marriage and divorce; however, they can also be a powerful tool for estate planning. This type of agreement can be used to clarify the rights and responsibilities of both spouses if one suddenly passes away. A prenuptial agreement can be used in estate planning to reduce family in-fighting and other legal issues by predetermining what the spouse is entitled to in the estate.

Using a Prenup to Prevent Estate Nullification

Most prenuptial agreements are made when one or both spouses come into the marriage with significant assets, land, or wealth, if one or both spouses have been previously married, or if children from a previous relationship are involved. One of the biggest advantages to a prenup for the purposes of estate planning in these situations is that the agreement prevents the spouse from nullifying the existing estate plan.

According to the Pew Research Center, the number of never married Americans is at an all-time high. In 2012, almost twenty percent of all adults over the age of 25 had never been married, compared to only nine percent in the same age bracket back in 1960. The research center cites shifting public attitudes towards marriage as one of the top reasons why Americans are putting off marriage or never marrying at all. Half of all never married adults do not wish to ever walk down the aisle and are perfectly comfortable just remaining in a committed relationship.

But for a committed couple, there are estate planning benefits that come with marriage that you do not receive with a domestic partnership. Here are some of the few financial and legal benefits that come with a marriage certificate:

Qualifying for an estate tax marital deduction

In a major victory for art collectors, the Fifth Circuit court recently gave a $14.4 million estate tax refund and affirmed the use of fractional interest discounts for artworks to reduce estate taxes. Rejecting the government’s random assessment of a 10% discount on the valuation of the art, the Fifth Circuit instead agreed that the estate’s assessment of 47.5% should be used. This ruling opens the door for art collectors to greatly reduce the taxable amount of their estates.

Art Collecting and Estate Plans

Prior to this ruling, there have been major issues for art collectors and estate planning. If wealthy families sell their art while they are alive, a 28% capital gains tax is added to any appreciation in the value of the art. If they keep the artwork in the estate after they die, the full value of the art is included in the estate at the full fair market value on the date of death.

All across the country there are cemeteries for people and cemeteries for pets. Virginia has become the third state in the nation to pass a law allowing pet owners to be buried with man’s best friend. Joining New York and Pennsylvania, Virginia’s new law went into effect in July and could affect many pet owners’ estate planning options.

New Burial Law

In Virginia, a new state law allows cemeteries to set aside parts of their property to create sections where pets and humans can be buried next to one another. Most states do not allow for pets and humans to be buried together or their laws do not address it. This law was introduced by Republican member of the House of Delegates, Israel O’Quinn, and was passed in April.

According to estate planning professionals, almost 65% of Americans do not have a basic will or estate documents drafted. Although it is nice to think that your family will be able to take care of your estate and know your wishes, the truth is that if you do not have your estate plan in place there could be fighting about what your final wishes truly were. Leaving a comprehensive estate plan with clear instructions to your heirs is the best defense against family discord after you are gone. Here are some of the most common estate planning blunders and how to avoid them in your planning process.

Mistake #1: Assuming Estate Plans are Only for the Wealthy

One of the most common misconceptions about estate planning is that it is only for the wealthy. The truth is that anyone who wants a say in their end-of-life medical decisions, assets, heirs’ well-being, or general private affairs should have some kind of estate plan in place. If you want control over your life and drastically reduce the burden on your family after you are gone you need to draft an estate plan.

There are a lot of benefits to establishing a trust in your estate plan. It can eliminate the need for probate, keep your affairs private, and reduce the chances of issues arising among your heirs regarding their inherited share. However, creating a trust is a big investment that involves a considerable amount of time and legal fees that should not be taken lightly. Here are some factors to consider when deciding whether or not to establish a trust in your estate plan.

Factors in Establishing a Trust

· How much of your estate can you shield from probate?

One of the most common estate planning mistakes comes in the handling of beneficiary designations. Many people do not understand that inheriting retirement accounts, life insurance, and other assets that involve a beneficiary designation are different than inheriting from a will. Here are some of the most common mistakes that occur with beneficiary designations as well as steps that you can take to ensure that the retirement money that has been diligently saved will be passed on to the person you intend.

Common Mistakes in Beneficiary Designations

While many people go to an estate planning attorney for help drafting wills and trusts, most do not rely on their expertise for beneficiary designations. As a result, those that you wished would inherit your retirement accounts and life insurance receive less while creditors, former spouses, and miscellaneous relatives could get it all. Here are some of the most common mistakes and misconceptions that lead to problems with beneficiary designations:

A lot of people who have not started estate planning often ask if they really need a will, or if any estate planning is really necessary? Usually, it is followed with a statement about how the children will take care of it, or that the situation is pretty straight forward, so why deal with it. The truth is if you have no children, no spouse, no heirs, and few worldly possessions then you can probably get away with not needing a will. Otherwise, a will and other estate planning documents are very important for your wellbeing and for your loved ones.

Why You Need a Will

One of the most basic tasks a will accomplishes is naming an executor or executrix of your estate. This is the person who will handle all of your affairs after you pass on. This includes gathering all assets of your estate, paying debts or taxes owed, and distributing the remaining property to your heirs. If you do not have a will the court will appoint an executor to your estate. That person may not be aware of what your final wishes were for your property or know what you wanted your heirs to receive.