St. Petersburg Estate Planning Attorney

Leaving a Legacy Isn’t Just About Money

A legacy is not necessarily about money, says a survey that was conducted by Bank of America/Merrill Lynch Ave Wave. More than 3,000 adults (2,600 of them were 50 and older) were surveyed and focus groups were asked about end-of-life planning and leaving a legacy. The article, “How to leave a legacy no matter how much money you have” from The Voice, shared a number of the participant’s responses.

Leaving a Legacy
Most people would rather be remembered for how they lived their life instead of how much money they made.

A total of 94% of those surveyed said that a life well-lived, is about “having friends and family that love me.” 75% said that a life well-lived is about having a positive impact on society. A mere 10% said that a life well-lived is about accumulating a lot of wealth.

People want to be remembered for how they lived, not what they did at work or how much money they saved. Nearly 70% said they most wanted to be remembered for the memories they shared with loved ones. And only nine percent said career success was something they wanted to be remembered for.

While everyone needs to have their affairs in order, especially people over age 55, only 55% of those surveyed reported having a will. Only 18% have what are considered the three key essentials for leaving a legacy: a will, a health care directive and a durable power of attorney.

The will addresses how property is to be distributed, names a personal representative of the estate and, if there are minor children, names who should be their guardian. The health care directive gives specific directions as to end-of-life preferences and designates someone to make health care decisions for you, if you can’t speak for yourself. A power of attorney designates an agent to make financial decisions on your behalf if you’re unable to do so, because of illness or incapacity.

An estate plan is often only considered when a trigger event occurs, like a loved one dying without the proper documents in place. That is a wake-up call for the family, once they see how difficult it is when there is no estate plan.

Parents age 55 and older had interesting views on leaving inheritances and who should receive their estate. Only about a third of boomers surveyed and 44% of Gen Xers said that it’s a parent’s duty to leave some kind of inheritance to their children. A higher percentage of millennials surveyed—55%–said that this was a duty of parents to their children.

The biggest surprise of the survey: 65% of people 55 and older reported that they would prefer to give away some of their money, while they are still alive. A mere 8% wanted to give away all their assets, before they died. Only 27% wanted to give away all their money after they died.

Reference: The Voice (June 16, 2019) “How to leave a legacy no matter how much money you have”

Which Debts Must Be Paid Before and After Probate?

Everything that has to be addressed in settling an estate becomes more complicated when there is no will and no estate planning has taken place before someone passes away. Debts are a particular area of concern for the estate and the personal representative. What has to be paid, and who gets paid first? These are explained in the article “Dealing with Debts and Mortgages in Probate” from The Balance.

probate
Knowing which debts have to be paid before and after probate is important.

Probate is the process of gaining court approval of the estate and paying off final bills and expenses, before property can be transferred to beneficiaries. The process of paying the debts of a deceased person can typically begin before probate officially starts.

Making a list of all of the decedent’s liabilities and looking for the following bills or statements is the best way to begin:

  • Mortgages (and reverse mortgages)
  • Home equity loans
  • Lines of credit
  • Condo fees
  • Property taxes
  • Federal and state income taxes
  • Car and boat loans
  • Personal loans
  • Loans against life insurance policies
  • Loans against retirement accounts
  • Credit card bills
  • Utility bills
  • Cell phone bills

Next, divide those items into two categories: those that will be ongoing during probate—consider them administrative expenses—and those that can be paid off after the probate estate is opened. These are considered “final bills.” Administrative bills include things like mortgages, condo fees, property taxes and utility bills. They must be kept current. Final bills include income taxes, personal loans, credit card bills, cell phone bills and loans against retirement accounts and/or life insurance policies.

The personal representative and heirs should not pay any bills out of their own pockets. The personal representative deals with all of these liabilities in the process of settling the estate.

For some of the liabilities, heirs may have a decision to make about whether to keep the assets with loans. If the beneficiary wants to keep the house or a car, they may, but they have to keep paying down the debt. Otherwise, these payments should be made only by the estate.

The personal representative decides which bills to pay and which assets should be liquidated to pay final bills.

A far better plan for your beneficiaries, is to create a comprehensive estate plan that includes a will that details how you want your assets distributed and addresses what your wishes are. If you want to leave a house to a loved one, your estate planning attorney will be able to explain how to make that happen, while minimizing taxes on your estate.

Reference: The Balance (March 21, 2019) “Dealing with Debts and Mortgages in Probate”

How Do I Choose a Guardian in My Estate Plan?

Selecting a guardian to care for your minor child after you die isn’t a lot of fun. Who wants to think about a situation where their young children are left without their parents and live with friends or relatives? However, choosing a guardian in your estate plan to raise your children and manage their inheritance is crucial. If you don’t do it, the courts will make the decision for you.

choose a guardian in my estate plan
Choosing a guardian for your children is one of the most important decisions a parent will ever make.

U.S. News and World Report’s recent article “How to Choose a Guardian for Your Child” says that, at worst, forgetting to name a guardian can mean a long court proceeding. This can be expensive, cause stress in family relationships and put your children in guardianship limbo.

There are two types of guardianship to consider when deciding who will care for your children: guardian of the estate and guardian of the person.  The guardian of the estate is a person who’ll manage the minor child’s inheritance on their behalf. It’s a fiduciary responsibility, and this guardian must make sure he or she carefully and appropriately manages accounts, keeps receipts, reports back to the court and doesn’t comingle the child’s assets with his or her own. Another option is for a parent is to set up a trust and have a trustee manage the funds for the child. This can allow the parent more control over how and when money is distributed, especially if you anticipate leaving a substantial inheritance.

The guardian of the person is the daily caretaker who’ll make sure your child gets health care, educational, housing and has all other needs met.

These two guardians can be the same person or different people, depending on the skills and abilities of your family members and friends. A separate person managing the estate can provide a series of checks and balances that can help, if you are concerned about the misuse of your child’s funds.

You may want the guardian of the estate to have good money-management skills. The guardian of the person may be someone who shares your same values, has the energy to raise a child, and is close by so that your child doesn’t have to lose the familiar comforts of their school and neighborhood.

You should also name backup guardians, in the event that the primary guardian is unable or unwilling to take on the responsibility. You should also be sure to speak with your guardians ahead of time and make certain they understand the responsibility and are willing to take on the task of helping care for your children, if you pass away.

In most states, you’ll need to name your guardian or guardians as part of your will.

Talk to an experienced estate planning attorney with any questions and draft a legal will with the terms of guardianship included, along with a power of attorney and health care proxy. If you need to create a trust for your child(ren), don’t forget to fund it.

Reference: U.S. News and World Report (June 4, 2019) “How to Choose a Guardian for Your Child”

Here’s Why a Basic Form Doesn’t Work for Estate Planning

It’s true that an effective estate plan should be simple and straightforward, if your life is simple and straightforward. However, few of us have those kinds of lives. For many families, the discovery that a will that was created using a basic form is invalid leads to all kinds of expenses and problems, says The Daily Sentinel in an article that asks “What is wrong with using a form for my will or trust?”  

Basic Estate Planning Forms
Online estate planning forms often lead to more problems and expense that they’re worth.

If the cost of an estate plan is measured only by the cost of a document, a basic form will, of course, be the least expensive option — on the front end. On the surface, it seems simple enough. What would be wrong with using a basic estate planning form like a will or a power of attorney?

Actually, a lot is wrong. The same things that make a do-it-yourself, basic form seem to be attractive, are also the things that make it very dangerous for your family. A basic estate planning form does not take into account the special circumstances of your life. If your estate is worth several hundreds of thousands of dollars, that form could end up putting your estate in the wrong hands. That’s not what you had intended.

Another issue: any form that is valid in all 50 states is probably not going to serve your purposes. If it works in all 50 states (and that’s highly unlikely), then it is extremely general, so much so that it won’t reflect your personal situation. It’s a great sales strategy, but it’s not good for an estate plan.

If you take into consideration the amount of money to be spent on the back end after you’ve passed, that $100 will becomes a lot more expensive than what you would have invested in having a proper estate plan created by an estate planning attorney.

What you can’t put into dollars and cents, is the peace of mind that comes with knowing that your estate plan, including a will, power of attorney, and health care power of attorney, has been properly prepared, that your assets will go to the individuals or charities that you want them to go to, and that your family is protected from the stress, cost and struggle that can result when wills are deemed invalid.

Here’s one of many examples of how the basic, inexpensive estate planning form created chaos for one family. After the father died, the will was unclear, because it was not prepared by a professional. The father had properly filled in the blanks but used language that one of his beneficiaries felt left him the right to significant assets. The family became embroiled in expensive litigation, and became divided. The litigation has ended, but the family is still fractured. This couldn’t have been what their father had intended.

Other issues that are created when basic estate planning forms are used: naming the proper executor, guardians and conservators, caring for companion animals, dealing with blended families, addressing Payable-on-Death (POD) accounts and end-of-life instructions, to name just a few.

Avoid the “repair” costs and meet with an experienced estate planning attorney in your state to create an estate plan that will suit your needs.

Reference: The Daily Sentinel (May 25, 2019) “What is wrong with using a form for my will or trust?”

Are Inheritances Taxable?

Inheritances come in all sizes and shapes. People inherit financial accounts, real estate, jewelry and personal items. However, whatever kind of inheritance you have, you’ll want to understand exactly what, if any, taxes might be due, advises the article “Will I Pay Taxes on My Inheritance” from Orange Town News. An inheritance might have an impact on Medicare premiums, or financial aid eligibility for a college age child. Let’s look at the different assets and how they may impact a family’s tax liability.

Bank Savings Accounts or CDs. As long as the cash inherited is not from a retirement account, there are no federal taxes due. The IRS does not impose a federal inheritance tax. However, there are some states, including Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania, that do have an inheritance tax. Speak with an estate planning attorney about this tax.

Primary Residence or Other Real Estate. Inheriting a home is not a taxable event. However, once you take ownership and sell the home or other property, there will be taxes due on any gains. The value of the home or property is established on the day of death. If you inherit a home valued at death at $250,000 and you sell it a year later for $275,000, you’ll have to declare a long-term capital gain and pay taxes on the $25,000 gain. The cost-basis is determined, when you take ownership.

Life Insurance Proceeds. Life insurance proceeds are not taxable, nor are they reported as income by the beneficiaries. There are exceptions: if interest is earned, which can happen when receipt of the proceeds is delayed, that is reportable. The beneficiary will receive a Form 1099-INT and that interest is taxable by the state and federal tax agencies. If the proceeds from the life insurance policy are transferred to an individual as part of an arrangement before the insured’s death, they are also fully taxable.

Retirement Accounts: 401(k) and IRA. Distributions from an inherited traditional IRA are taxable, just as they are for non-inherited IRAs. Distributions from an inherited Roth IRA are not taxable, unless the Roth was established within the past five years.

There are some changes coming to retirement accounts because of pending legislation, so it will be important to check on this with your estate planning attorney. Inherited 401(k) plans are or eventually will be taxable, but the tax rate depends upon the rules of the 401(k) plan. Many 401(k) plans require a lump-sum distribution upon the death of the owner. The surviving spouse is permitted to roll the 401(k) into an IRA, but if the beneficiary is not a spouse, they may have to take the lump-sum payment and pay the resulting taxes.

Stocks. Generally, when stocks or funds are sold, capital gains taxes are paid on any gains that occurred during the period of ownership. When stock is inherited, the cost basis is based on the fair market value of the stock or fund at the date of death.

Artwork and Jewelry. Collectibles, artwork, or jewelry that is inherited and sold, will incur a tax on the net gain of the sale. There is a 28% capital gains tax rate, compared to a 15% to 20% capital gains tax rate that applies to most capital assets. The value is based on the value at the date of death or the alternate valuation date. This asset class includes anything that is considered an item worth collecting: rare stamps, books, fine art, antiques and coin collections fall into this category.

Speak with an estate planning attorney before signing and accepting an inheritance, so you’ll know what kind of tax liability comes with the inheritance. Take your time. Most people are advised to wait about a year before making any big financial decisions after a loss.

Reference: Orange Town News (May 29, 2019) “Will I Pay Taxes on My Inheritance”

Stan Lee’s Former Manager Arrested on Elder Abuse Charges

District Attorney of Los Angeles County Jackie Lacey has leveled elder abuse charges against Stan Lee’s former business manager, Keya Morgan.

Lee, the creator of Spiderman, the Black Panther, and other comic book heroes.

MSN’s recent article, “Stan Lee’s Ex-Manager Hit With Elder Abuse Charges; Arrest Warrant Issued” reports that Morgan is facing one felony count of false imprisonment of an elder adult, three felony counts of theft, embezzlement, and forgery or fraud against an elder adult, as well as the initial elder abuse misdemeanor count.

Morgan took control of Lee’s business affairs and personal life in February 2018. Lee, the creator of Spiderman, the Black Panther, and other comic book heroes, had assets of more than $50 million in the last years of his life. Lee passed away on November 12, 2018. Morgan is said to have isolated his client from family and friends. Morgan also embezzled or misappropriated $5 million of assets, according to documents filed in Los Angeles Superior Court in 2018.

The five counts of elder abuse filed on May 10 could put Morgan in prison for 10 years, if he’s found guilty.

The public first learned of the troublesome relationship between Morgan and Lee last summer, when the then 95-year old Marvel comic book legend sought a restraining order against his ex-aide over elder abuse. The request was made just three days after Lee put out a June 10, 2018 video on social media insisting that he and Morgan were working “together and are conquering the world side-by-side.”

Because of the video and the elder abuse filing, Lee’s financial advisor was arrested by the Los Angeles Police Department on suspicion of filing a false police report, allegedly concerning a supposed break-in incident at Lee’s residence.

A three-year restraining order against Morgan was granted by a county judge last August. He was found guilty of the false police report misdemeanor charge in April 2019 and was ordered to stay away from Lee’s family and residence among other conditions.

After years of making cameos in all the Marvel blockbuster movies, Lee’s last appearance was in the record smashing Avengers: Endgame, which was released last month.

Reference: MSN (May 15, 2019) “Stan Lee’s Ex-Manager Hit With Elder Abuse Charges; Arrest Warrant Issued”

Will the RMD Age Be Raised by New Legislation?

RMD Age
The new retirement bill may boost the RMD age to 75.

Senator Ben Cardin and Rob Portman’s Retirement Security and Savings Act of 2019 overlaps with some provisions in the Retirement Enhancement and Savings Act (RESA) of 2019. That bill was introduced on April 1, but RESA only raised the RMD age to 72.

Think Advisor reports in the article “New Retirement Bill Would Boost RMD Age to 75” that the RESA bill, which was introduced by Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and ranking member Ron Wyden, D-Ore., is similar to H.R. 1994, the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. The latter bill is expected to get a vote on the House floor very soon.

The Portman-Cardin bill phases in the RMD age increase over several years. The bill would also update mortality tables to reflect longer life expectancies.

The bill would also broaden the ability of employer-sponsored 403(b) plans to offer collective investment trusts (CITs). A CIT is a mutual fund-like vehicle used in some 401(k)s and pension plans that can help plan sponsors save on expenses.

The Insured Retirement Institute, a lobbying group for the annuity industry, added its support for the bill.

“Section 117 [of the bill] would level the playing field, by providing insurance products with the same exemptions as CITs,” the group said in a letter to senators, sparking “a robust and competitive marketplace which is vital to ensure Americans have access to the appropriate savings option for their financial situation.”

The bill would also let those with Roth accounts in 457(b), 401(k), 401(a), and 403(b) plans roll Roth IRA assets into these plans. It would also allow 457(b), 401(a), 401(k) and 403(b) plan participants to make qualifying charitable distributions. Right now they are only allowed from IRAs.

Reference: Think Advisor (May 14, 2019) “New Retirement Bill Would Boost RMD Age to 75”

Power of Attorney: Why You’re Never Too Young

When that time comes, having a power of attorney is a critical document to have. The power of attorney is among a handful of estate planning documents that help with decision making, when a person is too ill, injured or lacks the mental capacity to make their own decisions. The article, “Why you’re never too young for a power of attorney” from Lancaster Online, explains what these documents are, and what purpose they serve.

Everyone over the age of 18 needs to have a Power of Attorney in place.

There are three basic power of attorney documents: financial, limited and health care.

You’re never too young or too old to have a power of attorney. If you don’t, a guardian must be appointed in a court proceeding, and they will make decisions for you. If the guardian who is appointed does not know you or your family, they may make decisions that you would not have wanted. Everyone over the age of 18 should have a power of attorney.

It’s never too early, but it could be too late. If you become incapacitated, you cannot sign a POA. Then your family is faced with needing to pursue a guardianship and will not have the ability to make decisions on your behalf, until that’s in place.

You’ll want to name someone you trust implicitly and who is also going to be available to make decisions when time is an issue.

For a medical or healthcare power of attorney, it is a great help if the person lives nearby and knows you well. For a financial power of attorney, the person may not need to live nearby, but they must be trustworthy and financially competent.

Always have back-up agents, so if your primary agent is unavailable or declines to serve, you have someone who can step in on your behalf.

You should also work with an estate planning attorney to create the power of attorney you need. You may want to assign select powers to a POA, like managing certain bank accounts but not the sale of your home, for instance. An estate planning attorney will be able to tailor the POA to your exact needs. They will also make sure to create a document that gives proper powers to the people you select. You want to ensure that you don’t create a POA that gives someone the ability to exploit you.

Any of the POAs you have created should be updated on a fairly regular basis. Over time, laws change, or your personal situation may change. Review the documents at least annually to be sure that the people you have selected are still the people you want taking care of matters for you.

Most important of all, don’t wait to have a POA created. It’s an essential part of your estate plan, along with your last will and testament.

Reference: Lancaster Online (May 15, 2019) “Why you’re never too young for a power of attorney”

What You Need to Know about Trusts for Estate Planning

There are many different kinds of trusts used to accomplish a wide variety of purposes in creating an estate plan. Some are created by the operation of a will, and they are known as testamentary trusts—meaning that they came to be via the last will and testament. That’s just the start of a thorough look at trusts for estate planning offered in the article “ON THE MONEY: A look at different types of trusts” from the Aiken Standard.

trusts for estate planning
The two most common types of trusts for estate planning are revocable trusts and irrevocable trusts.

Another way to view trusts for estate planning is in two categories: revocable or irrevocable. As the names imply, the revocable trust can be changed, amended or revoked entirely, and the irrevocable trust usually cannot be changed.

A testamentary trust is a type of revocable trust, since it may be changed during the life of the testator. However, upon the death of the testator, it becomes irrevocable.

In most instances, a revocable trust is managed for the benefit of the grantor, although the grantor also retains important rights over the trust during her or his lifetime. The rights of the grantor include the ability to instruct the trustee to distribute any of the assets in the trust to someone, the right to make changes to the trust and the right to terminate the trust at any time.

If the grantor becomes incapacitated, however, and cannot manage her or his finances, then the provisions in the trust document usually give the trustee the power to make discretionary distributions of income and principal to the grantor and, depending upon how the trust is created, to the grantor’s family.

Note that distributions from a revocable trust to a beneficiary other than the grantor, may be subject to gift taxes. Those are paid by the grantor. In 2019, the annual gift tax exclusion is $15,000. Therefore, if the distribution is under that level, no gift taxes need to be filed or paid.

When the grantor dies, the trust property is distributed to beneficiaries, as directed by the trust agreement.

Irrevocable trusts are established by a grantor and cannot be amended without the approval of the trustee and the beneficiaries of the trust. The major reason for creating such a trust in the past was to create estate and income tax advantages. However, the increase in the federal estate tax exemption means that a single individual’s estate won’t have to pay taxes, if the value of their assets is less than $11.4 million ($22.8 million for a married couple).

Once an irrevocable trust is established and assets are placed in it, those assets are not part of the grantor’s taxable estate, and trust earnings are not reported as income to the grantor.

The downside of using irrevocable trusts for estate planning is that the transfer of assets into the trust may be subject to gift taxes, if the amount that is transferred is greater than $15,000 multiplied by the number of trust beneficiaries. However, depending upon the size of the grantor’s estate, larger amounts may be transferred into an irrevocable trust without any gift tax liability to the grantor, if the synchronization between gift taxes and estate taxes is properly done. This is a complex strategy that requires an experienced trust and estate attorney.

Trusts for estate planning are also used to address charitable giving and generating current income. These trusts are known as Charitable Remainder Trusts and are irrevocable in nature. In this type of trust there is a current beneficiary who is either the donor or another named individual and a remainder beneficiary, which is a qualified charitable organization. The trust document provides that the named beneficiary receives an income stream from the income produced by the trust assets during the grantor’s lifetime, and when the grantor dies, the remaining assets of the trust pass to the charity.

Speak with your estate planning attorney about how trusts might be a valuable part of your estate plan. If your estate plan has not been reviewed since the new tax law was passed, there may be certain opportunities that you are missing.

Reference: Aiken Standard (May 17, 2019) “ON THE MONEY: A look at different types of trusts”

Do I Need to Update My Estate Plan if I Relocate for Retirement?

Update my estate plan when I relocate
Anytime you relocate to another state you should have your estate planning documents reviewed to make sure they comply with the law in the state you’ve moved to.

Anyone who moves to another state, for retirement, a new job or to be closer to family, needs to have a look at their estate plan to make sure it is valid in their new state, advises the Boca Newspaper in the recent article “I’ve Relocated To Florida…Should I Update My Estate Plan?”  

If an estate plan hasn’t been created, a relocation is the perfect opportunity to get this important task done. Think of it as preparation for your new life in your new home.

Because so many retirees do relocate to Florida, there are some general rules that make this easier. For one thing, most wills that are valid in another state are recognized in Florida. There’s a specific law in the Florida statutes that confirms that “other than a holographic or nuncupative will, executed by a nonresident of Florida… is valid as a will in this state if valid under the laws of the state or country where the will was executed.”

In other words, if the estate plan was prepared by an estate planning attorney and is legally valid in the prior state, it will be valid in Florida. Exceptions are a holographic will, which is a handwritten will that is signed by the person with no witnesses, or a nuncupative will, which is a verbal statement made in front of witnesses.

However, just because your will is recognized in Florida, does not mean that it doesn’t need a review.

There are distinctions in Florida law that may make certain provisions invalid or change their meaning. In one well-known case, a will was missing one sentence—known as a “residual clause,” a catch-all that distributes assets that are otherwise not specified. The maker of the will wanted everything to go to her brother. However, without that one clause, property acquired after the will was created was not included. The court determined that the property that was acquired after the will was created, would go to other relatives, despite the wishes of the decedent.

Little details mean a lot when it comes to estate plans.

It’s important to ensure that the last will and testament properly expresses intentions under the laws of your new home state. As you review or begin the process, this might be the time to speak with your estate planning attorney about whether any trusts are applicable to your estate. A revocable living trust, for example, would avoid the assets placed in the trust having to go through probate.

This is also the time to review your Durable Power of Attorney, designation of a Health Care Surrogate, Living Will and nomination of a pre-need Guardian.

Estate planning gives peace of mind, knowing that the legal side of your life is all taken care of. It avoids stress and unnecessary costs and delays to your family. It should be reviewed and updated, if needed, at big events in your life, including a relocation, the sale or purchase of a home or when you retire.

Reference: Boca Newspaper (May 1, 2019) “I’ve Relocated To Florida…Should I Update My Estate Plan?”

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