St. Petersburg Estate Planning Attorney

How do I Settle an Estate if I’m Named Executor?

If you are the named executor of an estate, you should learn some of the basics of the job before any work will need to be completed. An executor is the individual named to distribute a decedent’s property that passes under his or her will. The executor also arranges for the payment of debts and expenses.

named executor
Working with an experienced probate attorney makes the job of a named executor much easier

WMUR’s recent article entitled “Settling an estate” explains that if the named executor is not willing or able to do the job, there’s usually an alternate executor appointed in the will. If there’s no alternate, the court will designate an executor for the estate.

Depending on the estate, it can be a consuming and stressful task to address all of the issues. Sometimes, a decedent will leave a letter of instruction which can make the process easier. This letter may address things like the decedent’s important documents, contact info, a list of creditors, login information for important web sites and final burial wishes.

One of the key documents is a will. The executor must get a hold of a copy and review it. You can work with an estate planning attorney to determine the type of probate (a process that begins with getting a court to approve the validity of the will) is needed.

The named executor should conduct an inventory of the decedent’s assets, some of which may need to be appraised. If the decedent had a safe deposit box, the contents must be secured. Once the inventory of assets has been compiled, assets then may be sold or distributed according to the will.

Asset protection is critical and may mean changing the locks on property. The named executor may be required to pay mortgages, utility bills and maintenance costs on any property. Any brokerage accounts will need to be re-titled. The final expenses also need to be paid.

The funeral home or coroner will provide death certificates that will be needed in the probate process, and for filing life insurance claims.

If the decedent was collecting benefits, such as Social Security, the named executor will need to notify the agency of the decedent’s death so they can stop benefits. Any checks received after death must be returned. The executor will file a final federal and state tax return for the decedent, if necessary. There also may be an estate and gift tax return to be filed.

There’s a lot for a named executor to do. It can be made easier with the help an estate planning attorney.

Reference: WMUR (Dec. 23, 2020) “Settling an estate”

Which States Make You Pay an Inheritance Tax?

Let’s start by defining “inheritance tax.” The answer depends on the laws of each state, so you’ll need to speak with an estate planning attorney to learn exactly how your inheritance will be taxed, says the article “States with Inheritance Tax” from yahoo! finance. There are six states that still have inheritance taxes: Iowa, Kentucky, Nebraska, New Jersey, Maryland and Pennsylvania.

inheritance tax
Not all states have an inheritance tax

In Iowa, you’ll need to pay the tax within nine months after the person dies, and the amount will depend upon how you are related to the decedent.

In Kentucky, spouse, parents, children, siblings and half-siblings do not have to pay inheritance taxes. Others need to act within 18 months after death but may be eligible for a 5% discount, if they make the payment within 9 months.

Timeframes are different county-by-county in Maryland, and the Registrar of Wills of the county where the decedent lived, or owned property determines when the taxes are due.

Only a spouse is exempt from inheritance taxes in Nebraska, and it has to be paid with a year of the decedent’s passing.

New Jersey gets very complicated, with a large number of people being exempted, as well as qualified religious institutions and charitable organizations.

In Pennsylvania, rates range from 4.5% to 15%, depending upon the relationship to the decedent. There’s a 5% discount if the tax is paid within three months of the death, otherwise the tax must be paid within nine months of the death.

As you can tell, there are many variations, from who is exempt to how much is paid. Pennsylvania exempts transfers to spouses and charities, but also to children under 21 years old. If one sibling is 20 and the other is 22, the older sibling would have to pay the tax, but the younger sibling does not.

There’s also a difference as to which property is subject to inheritance taxes. In Nebraska, the first $40,000 inherited is exempt. Pennsylvania exempts certain transfers of farmland and agricultural property. All six states exempt life insurance proceeds when they are paid to a named beneficiary, but if the policies are paid to the estate in Iowa, the proceeds are subject to the tax.

Note that an inheritance tax is different than an estate tax. Both taxes are paid upon death, but the difference is in who pays the tax. For an inheritance tax, the tax is paid by heirs and the tax rate is determined by the beneficiary’s relationship to the deceased.

Estate tax is paid by the estate itself before any assets are distributed to beneficiaries. Estate taxes are the same, regardless of who the heirs are.

There are twelve states and the District of Columbia (Washington D.C.) that have their own estate taxes (in addition to the federal estate tax). Note that Maryland has an inheritance, state and federal estate taxes. The rest of the states with an estate tax are Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Washington and Vermont.

The large variations on estate and inheritance taxes are another reason why it is so important to work with an experienced estate planning lawyer who knows the estate laws in your state.

Reference: yahoo! finance (Jan. 6, 2021) “States with Inheritance Tax”

How Much Should We Tell the Children About Our Estate Plan?

Congratulations, if you have finished your estate plan. You and your estate planning attorney created a plan that is suited for your family, you have checked on beneficiary designations, signed all of the necessary documents and named an executor to carry out your directions when you pass away. However, have you talked about your estate plan with your adult children? That is the issue explored in the recent article entitled “What to tell your adult kids when planning your estate” from CNBC. It can be a tricky one.

There are certain parts of estate plans that should be shared with adult children, even if money is not among them. Family conflict is common, whether the estate is worth $50,000 or $50 million. So, even if your estate plan is perfect, it might hold a number of surprises for your children, if you don’t speak with them about your plan while you are living.

Even the best estate plan can bequeath resentment and family conflicts, if family members don’t have a head’s up about what you’ve planned and why.

If you die without a will, there can be even more problems for the family. With no will—called dying “intestate”—it is up to the courts in your state to decide who inherits what. This is a public process, so your life’s work is on display for all to see. If your heirs have a history of arguing (especially over who deserves what), dying without a will can make a bad family situation worse.

Not everything about an estate plan has to do with distribution of possessions. Much of an estate plan is concerned with protecting you, while you are alive.

For starters, your estate planning attorney can help you with a Power of Attorney. You’ll name a person who will handle your finances, if you become unable to do so because of illness or injury. A Healthcare Power of Attorney is used to empower a trusted person to act as a surrogate and make medical decisions for you, if you are incapacitated. Some estate planning attorneys recommend having a Living Will, also called an Advance Healthcare Directive, to convey end-of-life wishes, if you don’t want to be kept alive through artificial means.

These documents do not require you to name a family member. A friend or colleague you trust and know to be responsible can carry out your wishes and can be named to any of these positions.

All of these matters should be discussed with your children. Even if you don’t want them to know about the assets in your estate, they should be told who will be responsible for making decisions on your finances and health care.

Consider if you want your children to learn about your finances during your lifetime, when you are able to discuss your choices with them, or if they will learn about them after you have passed, possibly from a stranger or from reading court documents.

Many of these decisions depend upon your family’s dynamics. Do your children work well together, or are there deep-seated hostilities that will lead to endless battles? You know your own children best, so this is a decision only you can make.

It is also important to take into consideration that an unexpected large inheritance can create emotional turbulence for many people. If heirs have never handled any sizable finances before, or if they have a marriage on shaky ground, an unexpected inheritance could create very real problems—and a divorce could put their inheritance at risk.

Talk with your children, if at all possible. Erring on the side of over-communicating might be a better mistake than leaving them in the dark.

Reference: CNBC (Nov. 11, 2020) “What to tell your adult kids when planning your estate”

Taking a Look at the Estate of Late Soccer Star Diego Maradona

Similar to soccer star Diego Maradona’s life, the inheritance process is likely to be a mess with his big family that includes eight children from six different partners as heirs to his assets, plus his intangible heritage.

Reuters’ recent article entitled “Image rights, fast cars and a ‘tank’: Maradona’s death triggers complex inheritance” explains that Maradona, who died recently at 60 from cardiac arrest, had four children in Argentina, one in Italy, and three in Cuba, when he went there for treatment to recover from his addictions, his lawyer Matías Morla said.

02 July 1982 – FIFA World Cup – Argentina v Brazil (photo by Mark Leech/Offside/Getty Images)

“In the specific case of Maradona, he is divorced and has eight children, so the estate is divided by eight in an inheritance trial,” Buenos Aires-based soccer lawyer Martín Apolo told Reuters. “It will be a complex process.”

The probate process can last 90 days in a normal case. However, Apolo said it could be much longer with the prospect of “internal disputes” and opportunists seeking a payout from Maradona’s estate. The estate of the World Cup champion, who at the time of his death was coach of the Argentine club Gimnasia y Esgrima, includes properties, cars, investments and jewels that he was given throughout his career. He played and coached in Argentina, Spain, Italy, the United Arab Emirates, Belarus and Mexico.

There is no established value of Diego Maradona’s fortune. Celebrity Net Worth estimates his net worth at the time of his death at $500,000 but said he had earned millions during his career from contracts with the different teams and sponsorship with brands, such as Coca-Cola.

Called “Dios” for his godlike skills on the soccer pitch and “Pelusa” for his prominent mane of hair. Maradona will be valuable for his image, even after death.

“The most important patrimony here could be the image rights, and also all his shirts,” said Apolo. “How much is the one he used in the World Cup final worth? How much could you pay at auction?”

The soccer star’s family has been through several legal battles in recent years, including a trial with his ex-partner Claudia Villafañe for tax evasion, procedural fraud and misappropriation of 458 objects from his past as a soccer player. However, Maradona’s family has asked for unity in the recent weeks before his death, after he underwent brain surgery to remove a blood clot, from which he was recovering when he died.

Reference: Reuters (Nov. 27, 2020) “Image rights, fast cars and a ‘tank’: Maradona’s death triggers complex inheritance”

What Do I Need to Know about Creating a Will?

Creating a will is a simple way to lay out the way in which you want your assets to be distributed among your beneficiaries after your death. This can be a good starting point for creating a comprehensive estate plan because you may need more than just a basic will. Creating a Will

KAKE’s recent article entitled “What Is a Simple Will and How Do You Make One?” explains that a last will and testament is a legal document that states what you want to happen to your property and “worldly goods” when you die. A simple will can be used to designate an executor for the will and a legal guardian for minor children and specify who (or which organizations) should inherit your assets when you die.

A will must be approved in the probate process when you pass away. After the probate court reviews the will to make sure it’s valid, your executor will take care of the collection and distribution of assets listed in the will. Your executor would also be responsible for paying any debts owed by your estate.

Creating a will can be a good starting point for estate planning. However, deciding if it should be simple or complex can depend on a number of factors, such as:

  • The size of your estate
  • The amount of estate tax you expect to owe
  • The type of assets and property you own
  • Whether you own a business
  • The number of beneficiaries you want to name
  • Whether the beneficiaries are individuals or organizations (like charities)
  • Any significant life changes you anticipate, like marriages, divorces, or having more children; and
  • Whether any of your children or beneficiaries have special needs.

With these situations, you may need a more detailed will to plan how you want your assets to be distributed. In any event, work with an experienced estate planning attorney. With life or financial changes, you may need to create a more complex will or consider a trust. It is smart to speak with an estate planning attorney, who can help you determine which components to include in your plan and help you keep it updated.

Reference: KAKE (Nov. 23, 2020) “What Is a Simple Will and How Do You Make One?”

How to Use Joint Accounts and Beneficiary Designations

A will is a very important part of your estate plan, but it’s not the only tool in your estate planning toolbox, explains the article “Protecting Your Assets: Joint Accounts and Beneficiary Designations” from The Street. Because the will goes through probate, wills control assets that are in your name only, and if you don’t have a will, the laws of your state will determine who receives your assets. Beneficiary Designations

As an alternative to a will and probate, some people name their children as beneficiaries for assets. Sometimes this can work, but it’s not always the best solution.

Here’s an example. A family includes two spouses and three children. They own a house, a bank account, IRAs and life insurance policies. The spouses have individual wills, leaving everything to each other and equally to their children upon both of their deaths.

The wills also state that, if a child predeceases them, that child’s share goes to the child’s children. This is known as “per stirpes,” and means that the child’s share of the parent’s estate is passed to the next generation. The spouses also list each other as joint owners and beneficiaries and then their children as contingent beneficiaries on all of their financial accounts. Then the husband dies.

His will does not come into play, because his wife was listed on everything as a joint owner, so all of the assets pass to her. Then the wife dies. The will won’t come into play here either, since all of her living children were named as beneficiaries. If the wife had signed a quit claim deed, giving the children ownership of the family home, before she died, the will and probate are bypassed altogether.

However, it’s never so simple. What if the adult daughter was on the bank account and she is sued? The assets are now vulnerable to the party suing her. If she files for bankruptcy, the assets could be attached by the bankruptcy court. If she gets divorced, they are marital assets and could be taken by her spouse.

This arrangement becomes more complicated when people attempt workarounds, like putting the good son who isn’t yet married and takes excellent care of his finances as the sole beneficiary. If the parents die and the son is the only beneficiary, there’s no law that says he has to share his inheritance with his siblings. This scenario is likely to lead to litigation and lasting family discord.

If you need another situation to convince you of the perils of alternatives to using a will, try remarriage.

If the wife dies and the husband remarries, he may want to leave his assets to his new wife. However, then when she dies, he wants his estate to go to his children. What if he dies and she decides she doesn’t want to name his children as beneficiaries on the accounts that she now owns? She is well within her legal rights to put her own children on the accounts, and when she dies, the husband’s children will get nothing.

People with the best intentions often create terrible financial and legal situations for loved ones that could easily be avoided, by simply working with an estate planning attorney to create an estate plan and making sure beneficiary designations have not been overlooked.

Reference: The Street (Oct. 30, 2020) “Protecting Your Assets: Joint Accounts and Beneficiary Designations”

Zappos CEO had No Will and That Is a Mistake

Former Zappos CEO Tony Hsieh, who built the giant online retailer Zappos based on “delivering happiness,” died at age 46 from complications of smoke inhalation from a house fire. He left an estate worth an estimated $840 million and no will, according to the article “Former Zappos CEO Tony Hsieh died without a will, reports say. Here’s why you should plan for your own death” from CNBC. Zappos CEO

Without a will or an estate plan, his family will never know exactly how he wanted his estate to be distributed. The family has asked a judge to name Hsieh’s father and brother as special administrators of his estate.

How can someone with so much wealth not have an estate plan? Hsieh probably thought he had plenty of time to “get around to it.” However, we never know when we are going to pass away, and unexpected accidents and illnesses happen all the time.

Why would someone who is not wealthy need to have an estate plan? It is even more important when there are fewer assets to be distributed. When a person dies with no will, the family may be faced with unexpected and overwhelming expenses.

Putting an estate plan in place, including a will, power of attorney and health care proxy, makes it far easier for a family that might otherwise become ensnared in fights about what their loved one might have wanted.

An estate plan is about making things easier for your loved ones, as much as it is about distributing your assets.

What Does a Will Do? A will is the document that explains who you want to receive your assets when you die. It can be extremely specific, detailing what items you wish to leave to an individual, or more general, saying that your surviving spouse should get everything.

If you have no will, state statutes determine who receives your assets, and if you have minor children, the court will decide who will be appointed as the guardian to raise your children.

Some assets pass outside the will, including accounts with beneficiary designations. That can include tax deferred retirement accounts, life insurance policies and property owned jointly. The person named as the beneficiary will receive the assets in the accounts, regardless of what your will says. The law requires your current spouse to receive the assets in your 401(k) account, unless your spouse has signed a document that agrees otherwise.

If there are no beneficiaries listed on these non-will items, or if the beneficiary is deceased and there is no contingent beneficiary, then those assets automatically go into probate. The process can take months or a year or more under state law, depending on how complicated your estate is.

Naming an Executor. Part of making a will includes selecting a person who will carry out your instructions—the executor. This can be a big responsibility, depending upon the size and complexity of the estate. They are in charge of making sure assets go to beneficiaries, paying outstanding debts, paying taxes for you and your estate and even selling your home if necessary. Select someone who is trustworthy, reliable and good with finances.

Your estate plan should also include a power of attorney for someone to handle financial and legal affairs, if you become incapacitated. An advance health-care directive, or living will, is used to explain your wishes, if you are being kept alive by life support. Otherwise, your loved ones will not know if you want to be kept alive or if you would prefer to be allowed to pass away.

Having an estate plan is a kindness to your family. Don’t wait until it’s too late to take care of it.

Reference: CNBC (Dec. 3, 2020) “Former Zappos CEO Tony Hsieh died without a will, reports say. Here’s why you should plan for your own death”

Is Probate Required If There Is a Surviving Spouse?

Probate, also called “estate administration,” is the management and final settlement of a person’s estate after they pass away. It is conducted by an executor, also known as a personal representative, who is nominated in the will and approved by the court. Estate administration needs to be done when there are assets subject to probate, regardless of whether there is a will, says the article “Probating your spouse’s will” from The Huntsville Item.

Probate is the formal process of administering a person’s estate. In the absence of a will, probate also establishes heirship. In some regions, this is a quick and easy process, while in others it is a lengthy, complex and expensive process. The complexity depends upon the size and value of the estate, whether a proper estate plan was prepared by the decedent prior to death and if there are family members or others who might contest the will.

Family dynamics can cause a tremendous amount of complications and delays, especially if the family has blended children from prior marriages or if a child has predeceased their parents.

There are some exceptions, when the estate is extremely small and when probate is not required. However, in most cases, it is required.

A recent District Court case ruled that a will not admitted to probate is not effective for proving title and thereby ownership, to real estate. A title company was sued for defamation after the title company issued a title report that included the statement that the decedent had died intestate, that is, without a will.

The decedent’s son, who was her executor, sued the title company because his mother did indeed have a will and the title report was defamatory. The court rejected this theory, and the case was brought to the Appellate Court to seek relief for the family. The Appellate Court ruled that until a will has been admitted to probate, it is not effective for the purpose of proving title to real property.

If a person owns real estate, they must have an estate plan to ensure that their property can be successfully transferred to heirs. When there is no estate plan, heirs find out how big a problem this can be when someone decides they want to sell the property or divide it up among family members.

Problems also arise when the family finds that they must pay taxes on the property or that there are expenses that must be paid to maintain the property. Without a will, the disposition of the property is determined by the state’s estate law. Things can become complicated quickly, when there is no will.

If the deceased spouse has children from outside the most recent marriage, those children may have rights to the property and end up owning a portion of the property along with the surviving spouse. However, neither the children nor the surviving spouse can sell the property without each other’s approval. This is a common occurrence.

An estate planning attorney can help the family move through the probate process more efficiently when there is no will. A better situation would be for the family to speak with their parents about having a will and estate plan created before it’s too late.

Reference: The Huntsville Item (Nov. 22, 2020) “Probating your spouse’s will”

How can I Avoid Taxes on Social Security Income?

You may be aware that if you work while collecting benefits prior to hitting your full retirement age, it can mean you’ll get a reduced benefit. However, if you earn too much money, just by making withdrawals from some types of retirement plans, you also can also wind up owing income taxes on your Social Security benefits.

Avoid taxes on Social Security
Earning too much money while receiving social security may result in owed taxes.

Money Talk News’s article from last December entitled “5 Ways to Avoid Taxes on Social Security Income,” reported that according to the Social Security Administration (SSA):

“Some of you have to pay federal income taxes on your Social Security benefits. This usually happens only if you have other substantial income in addition to your benefits (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return).”

Whether you owe taxes on these benefits depends on your “combined income.” The SSA defines this as the sum of your:

  • Adjusted gross income
  • Non-taxable interest; and
  • Half of your Social Security benefits.

If you file an individual tax return and your income is between $25,000 and $34,000, you may owe income taxes on up to 50% of your Social Security benefits. If you make more, up to 85% of your benefits could be subject to taxes. If you file a joint return, and your combined income is between $32,000 and $44,000, you may owe taxes on up to 50% of your benefits. Go over, and up to 85% could be taxable. However, there are ways to reduce your income and lower — or even avoid paying — taxes owed on your Social Security benefits:

  1. Delay collecting benefits. If you wait to collect your Social Security benefits until your full retirement age (or beyond), it may be the simplest way to avoid paying taxes on your Social Security benefits—at least for a while. Waiting to file for benefits also means you will get a larger check each month once you finally do start receiving benefits.
  2. Don’t work or work less in retirement. Every dollar you earn doing part-time work can inch you a bit closer to owing taxes on your Social Security benefits. Don’t quit a job you enjoy or need, just to cut your tax bill. However, if it’s a low-paying job that’s no fun, you might be better off quittin,g so you can reduce your income in exchange for lowering or eliminating taxes on your Social Security benefits.
  3. Avoid municipal bonds. Many people buy municipal bonds to lower their tax bill because the interest earned from these types of bonds typically isn’t taxable. However, municipal bond interest is included in the formula that determines whether you pay taxes on your Social Security benefits.
  4. Withdraw money from a Roth. If you’ve saved money in a traditional IRA or 401(k), the IRS will want some of that during your retirement. After years of deferring taxes on those contributions, the bill is due when you start making withdrawals. The withdrawals will increase your combined income, which could make the difference in whether or to what extent your benefits are taxed. To avoid taxes, withdraw only as much money as the government requires you to take each year (the required minimum distribution or RMD) and take any additional cash that you need from a Roth IRA or Roth 401(k), if you have one. No taxes are due on Roth distributions, and these withdrawals won’t affect your combined income. Keep in mind that RMDs don’t apply to Roth IRAs.
  5. Distribute your RMD to a charity. Giving money to charity can lower the chances that your Social Security benefit will be taxed. If you’re at least 70½, you can take up to $100,000 of your annual RMD, give it to a charity and avoid income taxes on the money. It’s called a qualified charitable distribution. Because this money isn’t taxed, it won’t boost your adjusted gross income. However, you must direct the money to a qualified 501(c)(3) organization, and you can’t use funds from a 401(k) or other employer-sponsored plan to make this type of distribution. There are workarounds but speak with an attorney.

Reference: Money Talk News (Dec. 22, 2019) “5 Ways to Avoid Taxes on Social Security Income”

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