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Don't Shy Away from These Estate Planning Questions!

Establishing a will is a vital part of protecting your financial legacy and there is no benefit in delaying it. Here are six often-avoided questions to help you get over your fear of wills and establish one for your family.

There are no silly questions when it comes to your estate plans!

A recent Forbes article, titled "6 Questions About Wills You Were Afraid To Ask," gives us some answers to several often-avoided questions to help alleviate some trepidation over wills and to motivate you into creating one for your family. Here are a few of them:

What's a will? A will is a basic estate planning document that details exactly where you want your assets distributed when you die.

Why should I draft a will?  There's really no bona fide financial, social, emotional, or any other reason to not draft a will. This sometimes can be difficult for parents to think about, but creating a will allows you peace of mind in knowing that your wishes will be heeded. Without a will, there's a much greater chance of hard feelings and disputes among your family. Along with a will, an experienced estate planning attorney can help you determine if other planning documents, such as a living will, power of attorney, durable power of attorney (with health care), and a living trust are necessary.

How are assets distributed? If you identified specific gifts you want distributed (like Grandma's broach) or a conditional gift ($X to your daughter when she reaches a certain age), you can apportion the rest of your estate in shares among your heirs. This can be divided equally or in percentages. The original article also recommends that you select two executors in case your first choice is unable to fulfill an obligation.

What about the children? An extremely critical task in creating a will is selecting a guardian for your minor children. If you die and fail to do so, the court will decide who takes care of your children. You should make sure beforehand that he or she is able and willing to take on this responsibility.

You can ask your Sacramento Estate Planning lawyer, Robert A. Gordon any questions when it comes to wills and trusts.  A free consultation is available for clients interested in drafting their estate plan.

Reference: Forbes (October 30, 2014) "6 Questions About Wills You Were Afraid To Ask"

Five Estate Planning Don'ts

To prevent you and your family members from enduring more stress, misery or confusion than necessary, here are five estate-planning booboos to avoid ...

Think you have the right ideas when it comes to your estate? You may want to watch out for some common "don'ts" in the estate planning world.  Please contact your Amador and Calaveras County estate planning attorney at Redkey Gordon P.C. if you have any questions

The Financial Post's recent article, titled "‘Your grandfather’s dead. It’s my money now': Five estate-planning mistakes to avoid," discusses some typical estate planning mistakes.

Here they are:

Leaving everything to someone with private instructions to donate to charity. Yeah, that's going to work.  Well, who's going to make them? Even though your daughter swore she’d donate a portion of your estate to a specific charity, there's no guarantee she'll do that after you pass. If there’s a charity that you want to give to, spell it out in your will.

Create your will based on today’s situation and forget it. Not good.  The original article says to plan ahead and review your will regularly. For example, you shouldn't say in your will that you’re leaving your current house on Rockford Street to your niece—if you move before you die and don’t update your will, your niece might not get a thing. The original article also cautions against leaving one child more money than another because you believe that one is in better financial shape—you might not know the real situation.

Give up control of your finances to your children. Simply put, if you give up control, you may not get it back.

Expect your children to give some of their inheritance to your grandchildren. It's quite possible that if you leave your assets to your children, that money may well be spent before it gets to the grandchildren. You can avoid this by leaving something to your grandchildren as a separate entity or give them money while you’re still around. 

Trust a homemade will. If you’ve made your own will, you may have issues that you didn't even know about. If you’ve downloaded the will from the internet, is it from your state? When was the will form last updated?

 Reference: Financial Post (October 29, 2014) "‘Your grandfather’s dead. It’s my money now': Five estate-planning mistakes to avoid"

Get The Latest on Grantor Trusts

“Income-tax rates are going up so it becomes more expensive for a grantor to maintain the grantor trust status of a trust they’ve set up,” says Lynn Halpern Lederman, managing director and senior fiduciary counsel – Northeast Region at Bessemer Trust, a New York firm that oversees $97.5 billion.

A Wall Street Journal article, titled "Rethinking Some Grantor Trusts," says that the latest bull market created potentially substantial taxable gains for individuals—and with the top federal rate on long-term capital gains at nearly 24%, as compared to 15% in 2012—there's a concern that some people may have a harder time paying that income tax bill.

How does this affect grantor trusts?

Intentionally defective grantor trusts ("IDGTs") have become very popular in estate planning because they allow the grantor to move assets out of his or her taxable estate. This lowers their potential estate taxes, while remaining responsible for the income taxes, so that the income tax burden isn’t transferred to heirs.

However, increasing income tax rates means that it becomes more expensive for a grantor to maintain the grantor trust status of a trust they’ve set up. One way around this is a clause that allows grantors to essentially turn off the grantor status of the trust. This means the trust must pay its own income taxes going forward. But this election can only be made once—the grantor can’t switch back and forth from paying to not paying the income taxes—so there needs to be some careful consideration of this decision.

Higher income taxes have prompted some to take a closer look at the assets held in grantor-retained annuity trusts ("GRATs"), which allow individuals to put some of an asset’s future profits to heirs free of gift or estate tax. Most of this planning revolves around the “step-up” in cost basis, which helps eliminate the long-term capital-gains tax on assets that are held until death by raising the owner’s cost basis for these assets to the full market value. However, in a GRAT, the assets transferred to beneficiaries usually doesn’t receive that step-up at death, so to cut down on capital-gains taxes, the original article says that it's better to have higher basis assets in the GRAT because those assets won’t get a step-up in basis.

In addition, the original article suggests swapping out low-basis assets that have recorded gains in the trust with high-basis assets, like cash, and this swapping can also be implemented with IDGTs that still have their grantor status.

Sound a little tricky? Your Northern California estate planning attorney, Robert A. Gordon can help you sort through this and find the best strategies for your situation.

Reference: Wall Street Journal (October 29, 2014) "Rethinking Some Grantor Trusts"

Estate Planning Document List - Time to Get Organized!

A well-planned estate is a wonderful legacy you can leave your heirs — instead of untangling a messy estate, they can follow concrete steps, allowing them to take care of business while mourning their loved one.

Document gathering can be overwhelming when it come to a loved one's passing. What about when you are no longer here? Will your loved ones be able to gather the appropriate information for your estate?

Newsday's recent article, titled "Estate planning: Putting affairs in order before death," lists the basic documents you will need prior to passing away.

Here they are:

LEGAL DOCUMENTS

• Will
• Letter of instruction
• Power of attorney
• Health care proxy
• Trusts (These are not necessary, but some people have a revocable or irrevocable trust.)
• A DNR or "do not resuscitate" order, which may need to be completed at each new admission to a hospital or nursing home.

 

ACCOUNTS

• List of bank accounts
• List of usernames and passwords
• List of automatic pay accounts with name and contact information of each payee
• List of safe deposit boxes
• 401(k) accounts, IRAs, and Roth IRAs
• Pension documents and Annuity contracts
• Brokerage account information
• A list of savings bonds and copies of actual bonds
• Life insurance policies (private and through employer)
• Long-term care insurance policies

 

OTHER ASSORTED DOCUMENTS

• Housing, land, and cemetery deeds
• Mortgage accounts
• Proof of loans made
• Vehicle titles
• Partnership and corporate operating agreements
• Previous three years' tax returns
• Marriage license
• Divorce papers
• Military discharge information

You should also create a list of contact information: contacts on accounts, names, current addresses and Social Security numbers of all people named in your legal documents. After completing all of this, you need to inform your executor where this information is stored. After death, things get complicated, because you have to shift between grieving and doing.

The original article also says to request numerous death certificates, as some institutions want originals, not copies, and it's easier to make the request from the funeral home, instead of after from government. You should also keep track of all bills attributable to the estate, such as funeral and memorial arrangements, death notices, and other expenses. The estate can reimburse individuals for these costs.

When you are ready, meet with your estate planning attorney. He or she will advise you to gather documents and to get a date of death valuation for all accounts to which the deceased held title. If there is a surviving spouse, you should itemize what is in both the living and deceased spouse's names. Even if there are no estate taxes due, it may still be necessary to file an estate tax return.

Work with your Sacramento estate planning attorney and ease the burden that all of this information gathering entails.

Reference: Newsday (October 29, 2014) "Estate planning: Putting affairs in order before death"