Redkey Gordon P.C.

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Estate Reduction Options for High-Wealth Individuals

Some high-net worth families still face the challenge of reducing their estate to minimize or eliminate estate taxes, although the federal estate tax exclusion is currently larger than it has ever been. The portability of unused exclusion amounts are at $5.43 million for individuals and $10.86 million for couples. But a 40 percent top estate tax rate on amounts above the exemption concerns those with large estates.

High-net worth individuals managing their estates are better off working with an experienced estate planning attorney, The Marietta Daily Journal confirms in a recent article, titled “Estate reduction ensuring wealth transfer to heirs.”  With the changes in estate and gift tax laws, have an expert on your side to ensure your documentation is drafted properly and work with your financial advisor to plan asset transfers to heirs.

An easy move for wealthy families is gifting. Individuals can gift up to $14,000 per year, per individual without incurring a gift tax. The amount doubles for spouses. There’s an informational gift tax return to be filed, but there’s no tax due if the gift is under the annual exclusion limit.

Another option is paying for medical care, insurance premiums, and education costs. These do not count against the $14,000 limit, but must be paid directly to the institution or service provider.

You can also “power-fund” a 529 College Savings Plan. The Plans allow you to contribute a lump sum (up to $70,000 per beneficiary) and then elect to treat the contribution as if it were made over five years for gift tax purposes. Those assets immediately leave your estate.

Older heirs might do well with a Grantor Retained Annuity Trust. You’ll need to work with an estate planning attorney to set this up.

A GRAT allows you to transfer rapidly appreciating or income-producing property to heirs while retaining an interest in the property over a set term, from two to 20 years. As the grantor, you are making an irrevocable, taxable gift to the beneficiaries, and the gift’s value is discounted by your retained interest.

Taxes owed on the gift to a GRAT can be partially or fully offset by the grantor’s applicable lifetime gift tax exclusion amount.

The trust pays the grantor a taxable income from the assets, based on an interest rate set by the IRS. The assets in the trust hopefully will grow at a higher rate than the annuity stream, and the excess growth will pass to the remainder beneficiaries without any gift taxes.

Robert A. Gordon of Redkey Gordon Law Corp, an estate planning attorney can create strategies that will work best for your circumstances and should be able to accommodate any changes in law.

Reference: The Marietta Daily Journal (June 5, 2015) “Estate reduction ensuring wealth transfer to heirs”

Estate Planning Transparency

What can you do to push past the emotional aspects of estate planning to make sure your surviving family members can successfully deal with issues that may arise after you pass away?

Start early. Patrick Severo is the senior vice president and financial advisor at RBC Wealth Management. He also has three kids and knew he needed a plan to take care of them after he is gone. Severo recently told Forbes in the article titled, “Don't Let Emotion Sabotage Your Estate Plan,”that, although the discussion about what happens after you pass away feels uncomfortable, the earlier you can begin, the better off you’ll be because these things take time – maybe even years!

To help the people you care about handle the financial, administrative and familial consequences of your eventual passing, be as transparent as possible about what they can expect from your estate. Mismatched expectations can often cause trouble that could’ve easily been avoided if the news wasn’t coming as such a surprise.

An inheritance can be life-changing, so it’s important to discuss it with your loved ones upfront so they can be mentally, emotionally, and financially prepared.

Discussing your estate plans with your loved ones can also help eliminate some potentially difficult situations, like when one sibling is inheriting more than another. Hopefully the family members receiving less will be okay as long as they are forewarned.

A good estate plan can become outdated or irrelevant easily, “if it sits on a shelf.” A three-year time line for estate planning is a good rule. This means a regular review of your trust to make sure it accurately reflects your current situation and your wishes.

Being very transparent about what your beneficiaries may receive from your estate can help ensure that the dispersal of your estate goes smoothly, and your wishes are successfully fulfilled.

Working with Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney can help guide you through this process.

Reference: Forbes (May 15, 2015) “Don't Let Emotion Sabotage Your Estate Plan”

Wealth Transfer for Widows

For the last several decades, you’ve always made these kinds of decisions together. What can already be an emotional task of drafting a will is even more so after the loss of a lifelong partner. Even in the event of a terminal illness diagnosis with time to prepare in advance, Senior Vice President and Financial Advisor Cinda J. Collins of RBC Wealth Management often felt overwhelmed during the settlement of her husband’s estate after he passed away from leukemia.

While the best course of action is always to plan together ahead of time, Forbes published estate planning advice for surviving spouses in “The Widow's Guide To Estate Planning And Wealth Transfer.”

Make Sure You Have a Professionally Drafted Will. To be as prepared as possible in the event of a spouse’s passing, talk to Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate attorney together as a couple to ensure all your affairs are in order. If a spouse passes away unexpectedly without planning, the surviving partner will have headaches.

Typically an estate attorney will give a couple an information packet outlining all the topics to consider and documents to bring to the initial meeting. Bring your life insurance policy and any net-worth statements that tell how different properties are titled.

Another important part of estate planning for couples with young children: think about guardianship before talking with your estate planning attorney. This will be more cost effective and make the meeting more meaningful.

Open Your Own Bank Account. A big surprise for widows is that joint accounts are frozen when a spouse passes away. A separate account in your own name can be used for immediate expenses. You can also put the couple’s joint account in a trust before the spouse passes with the proviso that, in the event of his death, the assets would transfer allowing quick access to the funds.

Lean on a Friend. The complexities of estate planning make it important to rely on a qualified estate planning attorney. Just as it’s critical to rely on an expert for legal support in the estate planning process, a bereaved spouse may also turn to a third-party expert, such as a grief counselor or clergy for emotional support. Also, a recently bereaved individual might find it helpful to bring a friend to any estate-related meetings. In a state of grieving, you can miss stuff. Bring someone along to take notes and remind you of things you need to do.

Reference: Forbes (June 2, 2015) “The Widow's Guide To Estate Planning And Wealth Transfer”

Do You Know What Will Happen If You Don’t Make a Will?

In some parts of the U.S., like West Virginia, without a will, your estate is first distributed according to your marital status and children, including those of previous marriages. However, if you have no spouse or children, you may want to pull out your family tree to see who could be in the running.

When there is no will in place, commonly in West Virginia, the current spouse of a married couple with or without one or more descendants receives the full estate. However, your spouse would receive only 60% of the estate if he or she had children with you and also a previous marriage. Your children would then receive the remaining 40% of the estate. But if you were the spouse with kids from a previous marriage(s), then all your children will inherit one-half of your estate, and the other half to your current spouse.

Confused yet? That’s what The (Huntington, WV) Herald-Dispatch asks us in its recent article titled “Planning ahead: What happens if you don't have a will.”

If you don’t have a surviving spouse, your estate will be divided among your descendants (children, grandchildren, nieces and nephews…). If you don’t have any descendants, it will be inherited in this order:

(1)    your parents;

(2)    your brothers and sisters;

(3)    nephews and nieces;

(4)    grandparents or their descendants; and then finally,

(5)    the State.

So if your parents are alive, they get it all. No one in the later groups will receive anything.

That's the basic structure of intestacy, which means “without a will.”

In intestacy, there are no special provisions to cover unique situations, no gifts to favorite non-profit organizations, and no special strategies to lower estate taxes.

Intestacy can be the most expensive version of estate "planning."

Talk with Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney and create a will to transfer your hard-earned assets to those who can best use them and protect those assets from taxes.

Reference: The (Huntington, WV) Herald-Dispatch (June 05, 2015) “Planning ahead: What happens if you don't have a will”

Ailing Parent Visitation: Potential New Laws for Adult Children Rights

Can you imagine not being notified if your parent had been injured, fell ill or had even passed away? With a recently increasing occurrence across the country, state representatives are proposing changes to ensure children have visitation rights to ailing parents.

Fox News shared Catherine Falk’s story in an article titled“'Columbo' daughter pushes for bill that protects the right to visit sick parents.” The daughter of Peter Falk, a five-time Emmy Award winner as Lt. Columbo, laughs as she recalls memories about her funny father, like forgetting about Christmas presents they had given him after he had put them in the trunk of his car, only to find them all there still the next year. But when he got sick, it was no laughing matter. Catherine claims she was kept out of the details of her father’s condition, including being able to see or talk to him. Thousands of adult children in America are finding themselves going through a similar experience.

In Falk’s case, she and her stepmother were locked in a court battle over conservatorship and access to Peter for years. In 2008, he became completely incapacitated from his advanced dementia. Catherine then decided to create the Catherine Falk Organization, which advocates for the rights of adult children to see their sick parents.

Catherine was able to get an order for visitation from a court that was made at the complete discretion of the judge. Conservators in California currently don’t have to inform family members on the health, hospitalization or death of a relative. Part of the problem, California Assemblyman Mike Gatto said is the frequent tension between the second or third spouse and the children of the first marriage. That conflict often gets worse when a parent becomes sick. (Remember Casey Kasem?)

Current California law gives the rights relating to the care of loves ones to the spouse. Children have no legal way to arrange visitation with their ailing parents, to receive notice of hospitalization or even the death of their mom or dad. Children also have no access to information on the funeral arrangements.

Gatto’s bill, if passed, seeks to reverse the law and create a new legal process for adult children to ask the court to visit a parent under care who is not in a conservatorship. The Assemblyman thinks it will pass and hopes this law will be a blueprint for other states considering similar measures to help ailing seniors.

Contact Robert A. Gordon of Redkey Gordon Law Corp, an experienced elder law attorney who can help make arrangements to keep the family peace should that time come for your family.

Reference: Fox News (June 7, 2015) “'Columbo' daughter pushes for bill that protects the right to visit sick parents”