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estate tax, estate planning, probate

Will the Estate Tax Apply to You?

There are very few certainties in life, yet the cliche of 'death and taxes' seems to be more true with time. After the death of a loved one, many family members are concerned about taxes that may be due; it is not an accident that the disparaging term 'death tax' has caught on with such fervor. This is a real issue for very few, but seems to concern nearly everyone1)As to why, is a pregnant inquiry not relevant to this discussion.

 

Who is affected by the estate tax, and why?

There is a misconception in the United States that every estate will be taxed. The reality is that less than 0.2% of estates actually owe any “death taxes.” The government implemented the estate tax to prohibit wealthy families from continuing to hand down vast amounts of wealth, mostly from unrealized gains on property or equities, to family members for generations without incurring any tax liability.

When property is inherited, it is worth the fair market value at the time of the decedent’s death. Without an estate tax affecting property, the heir could sell the homestead and avoid tax liability. Congress decided that this was an acceptable outcome for many, but truly wealthy families need to pay for this gain in value prior to the transfer of ownership to the heirs or beneficiaries by way of the estate tax.

Congress clearly defines “wealthy” families as those having more than $5.43 million per person (effectively $10.86 million per couple). This means that any individual with more than $5.43 million, or a couple with more than $10.86 million, will incur the estate tax. The amount of the tax is 40% of any amount that exceeds $5.43 million for an individual, or exceeds $10.86 million for a couple.

 

Two examples of estate tax law

Parent A dies with $5 million estate in 2014. Parent B dies with $5 million estate in 2015. The heirs or beneficiaries of the estate for parent A and for parent B would not incur any estate tax.

But the reality is that most married couples own their property as joint owners.

For example, Parent A and B own all property as joint owners and the value of the assets is $10 million. Again, Parent A dies in 2014 and Parent B dies in 2015. The heirs or beneficiaries for Parent A would not owe any estate tax in 2014. Likewise, the heirs or beneficiaries for Parent B would not owe any tax in 2015, even though Parent B’s estate exceeds the individual $5.43 million exemption. Congress allows the exemption from the first Parent A to transfer to Parent B allowing the surviving member of the couple to use the entire $10.86 million exemption.

As indicated above, and as you might have suspected, there are very few families in the United States that have accumulated that amount of wealth during his or her life. However, for those fortunate families that have been blessed with such wealth, there are several large loopholes that have enabled many of the largest estates to avoid or significantly decrease estate tax liability.

Footnotes

Footnotes
1 As to why, is a pregnant inquiry not relevant to this discussion
no contest, will provision, estate planning

What a "No Contest" Provision of a Will Really Means

Occasionally, I receive phone calls from individuals who are dealing with problems with the executor of the loved one’s estate. Sometimes the executor is refusing to divide the deceased’s personal possessions fairly; sometimes the executor is refusing to communicate with the individual or to share information about the deceased’s estate; and sometimes, in a worst case scenario, the executor is blatantly refusing to follow the deceased’s last will and testament. Often, the individual informs me that she hadn’t yet called an attorney because the executor had told her that if she did so she would be “contesting the will” and the executor would make sure she receives nothing from the estate. “Is that true?” she asks. “Can he really cut me out of the will?”

 

What is a No Contest Provision?

First, it is important to know that Nevada law does allow a testator (a person who creates a will) to include a “no contest” provision in the person’s will. Specifically, the law states that the testator may make a gift in a will “conditional … upon the occurrence or nonoccurrence of one or more specified events.” NRS 133.065(1). In other words, the testator can require that if the beneficiary ever claims that the will is invalid for some reason (i.e., “contests” the will) then that beneficiary would lose any gift given to the beneficiary in the will. In fact, Nevada law specifically states that “a no-contest clause in a will must be enforced by the court.” NRS 137.005(1).

Unfortunately, uninformed and sometimes malicious executors too often use the “no contest” provision in the will improperly as a way to scare beneficiaries into not raising valid questions regarding the executor’s handling of the estate. Such scare tactics may be employed by uninformed executors who feel that they are “just doing what dad told me to do before he died,” even though it wasn’t written into the will. In worst case scenarios, these scare tactics are used to cover the executor’s tracks of wrongdoing and sometimes actual theft of estate assets.

 

How to Raise Concerns

Fortunately, Nevada law protects beneficiaries who have legitimate concerns about what is happening with their loved one’s estate and allows the beneficiaries to raise legitimate concerns without being considered to be “contesting the will”.

First, a beneficiary will not be considered to be contesting the will if the beneficiary “seeks only to enforce the terms of the will.” NRS 137.005(3)(a). For instance, if the will states that a beneficiary is supposed to receive dad’s car, but the executor insists that dad told him to give the car to the beneficiary’s sister, the beneficiary can bring an action in court to ask the court to enforce the gift of the car to the beneficiary.

Second, a beneficiary will not be considered to be contesting the will if the beneficiary “seeks only to enforce the [beneficiary’s] legal rights in the probate proceeding.” NRS 137.005(3)(b). A common problem in probate proceedings is an executor that refuses to provide a required inventory or accounting of the estate’s assets to the beneficiaries. If a beneficiary files an action in court asking the court to require the executor to report and account for the assets of the estate, the beneficiary is not contesting the will by asking for the accounting that the beneficiary is legally entitled to receive.

Third, a beneficiary will not be considered to be contesting the will if the beneficiary “seeks only to obtain a court ruling with respect to the construction or legal effect of the will.” NRS 137.005(3)(c). Sometimes there are provisions in a will that simply are not clear because the will was poorly written. A beneficiary is entitled to ask the court to interpret the will and determine what the will means without being at risk of having contested the will.

Fourth, and most importantly, Nevada law protects beneficiaries even if the beneficiary actually does file a court action asking the court to invalidate a will if the action is filed in “good faith” and with “probable cause that would have led a reasonable person, properly informed and advised, to conclude that the will is invalid.” NRS 137.005(4).

The Nevada Supreme Court protected a beneficiary from a no-contest clause even though the beneficiary asked the court to invalidate a will because the beneficiary had a good faith belief and probable cause to believe that the testator was legally incompetent at the time that the will was signed. The Supreme Court refused to enforce the will’s no contest clause even though the beneficiary lost his challenge of the validity of the will when the court determined that the testator actually did have proper mental capacity to sign the will. Hannam v. Brown, 956 P.2d 794, 114 Nev. 350 (1998).

 

Do not be Intimidated

If you are a beneficiary of a will and the executor (or anyone else) has told you that you are contesting the will and you are going to lose your inheritance if you continue, the best thing you can do is speak with an experienced probate attorney. The worst thing you can do is to give in to these improper scare tactics by not consulting an attorney. More often than not, you will be protected in seeking to enforce your rights under the will and under Nevada law while it is the executor that faces serious problems with the court for employing these scare tactics to hide improper and sometimes illegal actions by the executor.

estate planning attorney

What Does an Estate Planning Attorney Do?

Most of us prefer not to think about death, or the its implications for our possessions and finances. However, it happens to everyone eventually, and if you are not prepared, you could find that your belongings and wealth go to the state, rather than to your loved ones. One of the best ways to ensure that this does not happen is to work with an estate planning attorney. What do these lawyers do? Actually, they can provide a very broad range of services depending on your situation, your needs, and how diverse your assets are.

 

Services Offered by an Estate Planning Attorney

While most estate planning attorneys will provide the services discussed below, all do not, necessarily. You will need to consult with individual lawyers in your area on the services offered, and how they can help you plan your estate.

 

Estate Tax

One of the most important reasons to work with a competent estate planning attorney is to mitigate or even eliminate the estate tax. This is the money due from your estate at your death to the state and federal governments. With the proper planning and smart decisions in terms of estate vehicles, you can limit your tax liability, or even eliminate it completely in some instances. A qualified attorney will be able to explain your options, as well as the limits of tax liability mitigation.

 

Accounts and Plans

Chances are good that you have an IRA, a 401(k), or some other type of retirement plan. You may also have a brokerage account, a valuable insurance policy and other assets. These can and should be put into trusts or other entities so that they can be transferred to your beneficiaries with the least amount of difficulty. The right structure is required, and a qualified attorney will be able to explain what is necessary and create the best trust for your situation.

 

Property Disbursement

An estate planning attorney can help create the right plan for distributing your property to those you care most about. If you do not have a plan in place, this will be left to a probate attorney, and there is no guarantee that the distribution will be equitable or in line with your final wishes.

 

Specialty Trusts

There is no one-size-fits-all solution when it comes to trusts, and you may need to create any number of special forms, from irrevocable trusts to many others. Your attorney can explain the benefits of each type and help craft the best estate plan for your specific situation.

Meet State Guidelines

All estates must meet specific state guidelines and regulations. If they do not, then you will incur additional costs and additional time will be needed to disburse your estate. It is even possible that your estate will end up in probate. A skilled estate planning attorney can help ensure that all government regulations and requirements are met to avoid these pitfalls.

These are just a few of the areas that a skilled estate planning attorney can assist you. The most important takeaway is to find a qualified, understanding lawyer that can best assist you in getting that estate plan in order.

Pet trust, estate planning, dog trust

Is a Pet Trust Right for You?

 

According to news reports, hundreds of thousands of pets each year are left homeless after their owner dies without specifying how the pet should be cared for.  Certainly, this omission is not a product of pet owners not loving their little, fury family members. Often, it is because pet owners overlooked the matter during estate planning.  Do not let this happen to you! More than forty-five states permit pet trusts (including Nevada), making this a great option for you and your family.

 

Elements of a Pet Trust

A pet trust requires these four elements:

The trustee: The person responsible for the trust.  It is best to select a trustee that will be vigilant in ensuring that the money is being spent responsibly.

The caretaker: The person assigned by the trust to care for your animal(s).  The trustee and the caretaker can be the same person; however, it is advisable for each position to be separate person (for increased accountability, see below).  It is best to designate a second caregiver just in case the first person is unable to care for your pet.  To be even more thorough, you may want to designate an organization, like the SPCA, to care for your pet in case the caretakers selected are unable to carry out their functions.

The pet(s): You will want to be specific in stating if the trust applies to one or all of your animals.  If you want more than one animal included, it is best to describe each and not use broad phrases like “all my pets.”

The remainder beneficiary: The person that will inherit the remaining amount of money once the pet has passed away.  A pet trust may not be extended to cover the living expenses of the offspring of your pet, so this is an important element.

 

How Much Money Needs to Be Allocated?

To determine how much money needs to left in the trust, you will need two estimates:

  1. The approximate life-span of your pet.
  2. The amount of money it costs each year to care for your pet.

An animal healthcare provider can assist you in estimating these amounts, although it is fairly probable that you know better than anyone exactly what your pet’s dietary needs are.  Once you have an estimate of each of these amounts, just multiply to determine the total.   It is best to be conservative in your estimates as you do not want your pet’s living expenses to be underfunded.

 

A Pet Trust Creates a Binding Obligation

If you were to leave instructions with a family member or friend stating how to care for your pet, there would be no legal recourse to ensure that your pet receives the care you desire.  However, with a pet trust, you are creating a legal obligation for the caretaker to follow the terms dictated by the trust.  If the caretaker does not abide by these terms, he or she may be taken to court, where a judge might enforce the terms of the trust, or transfer responsibility of your pet to the other caretaker listed in the trust.

 

Should You Create a Living Trust?

Yes! And here are five good reasons why:

 

  1. Control

With a revocable living trust, you will retain control over your assets while alive and after you are deceased.  Other estate-planning documents, such as wills, only come into effect once you are deceased.  With a living trust, you control your assets now and in the future.  If, unfortunately, something were to happen to you that left you in a state where you could no longer control your own affairs (sickness for example), the living trust would direct a trustee (of your choosing) to speak and act on your behalf.  Without the living trust, there may be complicated court proceedings to determine who will be in control of your livelihood and affairs.  Worse, a court may appoint a person you do not want to control your health, assets, and affairs.

 

  1. Saving Money

Less of your hard-earned money will go toward paying court and attorney fees.  The state charges a fee for having to settle estates through the probate courts (there are additional fees as well).  You can avoid paying these higher fees by planning ahead and working with a trusted attorney to establish a living trust for a fraction of the cost.

 

  1. No Delays

Distribution of the estate assets to your beneficiaries (those heirs you have left the assets to) will occur upon your death without delay.  If you decide to use a will, (or worse, allow the state probate system to settle your estate), to distribute your assets, it could take as long as two years for the beneficiaries to receive their assets.  Again, by using a living trust, you can avoid the wait-time that usually occurs while the courts settle your affairs.  If you have a will, for example, that is disputed, there is no telling how long the court proceedings may take to settle the estate; those whom you care about most will have to wait in limbo without access to any of the assets until the courts have worked through the matter.

 

  1. Investment Flexibility

The trustee (the person you designate to take care of your affairs) will have the maximum flexibility to take the necessary action with your assets.  If there are potential investment opportunities that will increase the value of your portfolio, the trustee will have the necessary authority to buy or sell assets to get the most out of your money.  Other estate documents do not provide the same flexibility and you may lose potential money-making opportunities just because your estate document will not permit the trustee to make a timely investment.

 

  1. Easily Make Changes

A living trust provides you with the maximum flexibility to make desired changes to your estate plan.  If you decide you want to add or remove assets, or determine that you no longer desire your assets to be held in the trust, this can easily be done.  To amend or revoke a will, (or other estate instruments), is a more complicated process.  There is no telling what challenges life may throw your way next, the living trust will be your best tool to meet those challenges and secure what matters most.

Estate Planning Word Cloud

Wills – What They Cannot Do

Wills ensure that your wishes are known concerning how your estate is handled after your death. While they allow you to name beneficiaries, (among other functions), there are also matters that should not be included in your will.  Below are a few potential issues to be aware.

Property Matters

There are rules restricting the types of property that may be bequeathed in your will:

Joint Tenancy – If you own property jointly with someone else, you may not leave your part of it to a third party in the will. Your share automatically goes to the remaining joint tenant if s/he is still alive.

Life Insurance – Any proceeds of life insurance policies you have automatically go to the individual listed as the beneficiary. You may not leave those proceeds to another party in your will if the person is not named in the policy.

• Living Trust Property – If you have property already included in a living trust, you may not leave it to someone else in the will. If you want to change the beneficiaries of the living trust, you must alter the trust.

• Retirement Plans – IRAs, pensions, and 401(k)s generally have named beneficiaries. If you want to change this, you have to do it through the proper forms, not in your will.

• Other Beneficiary Property – If you have bank accounts, investments such as stocks and bonds, or any other property for which you have already named a beneficiary, you may not leave the property to a different person in the will.

Funeral Instructions

You may include your wishes or instructions for your funeral in the will; however, in some cases, the planning and burial occur before the will is read, meaning your wishes may not be known until after the ceremony. The best option is to discuss your wishes with your spouse or loved one and/or create a document especially for that purpose. This will ensure that your wishes are followed.

Gift Conditions

When you leave gifts in your will, you will want to avoid placing illegal conditions on them. For example, providing stipulations concerning marriage or divorce, or requiring a change in religious affiliation is illegal, and will not be honored by the courts. You may, however, place stipulations requiring college attendance, or how a particular property must be used, but these conditions must be specific and reasonable.

Special Needs Care

You should not leave instructions for the care of someone with special needs in your will. These instructions should be left in a trust to ensure that the person’s needs and management are handled properly. There are specific trusts designed to address these situations.

Pets

You may not leave property or money to a pet in your will, because animals are considered property under the law. Instead, choose a person to care for your pet and leave a corresponding amount to him or her. Many states allow trusts to be set up for animals, making the pet trust a good option.

Estate-Planning-and-Bitcoin

Estate Planning and Bitcoin

It’s still hard to say what will happen with bitcoin, the trendy digital currency that has been in the news the last few years. While it was getting a lot of media attention, it saw incredible increases in value, but eventually the market came crashing down, and now it’s difficult to predict how significant bitcoins will be in ten or twenty years. Whether or not bitcoin becomes the currency of the future like its supporters hope, the fact remains that bitcoins have value, and it may be useful to know how bitcoins would play into estate planning. Though this is still a new field, there are some general strategies and concepts we can rely on when integrating bitcoin into estate planning.

What is Bitcoin?

It may first be helpful if you know what bitcoin is. Though it was in and out of the news, many people still have a very bad understanding of it. Bitcoins are digital currency that can easily be converted to many real currencies including U.S. dollars and euros. Bitcoins are actually incredibly complex–encrypted code that is generated by computers. You can transfer real currency to an owner of a bitcoin, and then he will make a transfer of the code to your bitcoin wallet which has its own private key and address. All bitcoin exchanges are publicly recorded, which brings transparency to the system, but the system only records transactions. There is no way to track the senders and receivers of bitcoins, which has made it an interesting currency for those trafficking in illegal goods.

Though it is called a virtual currency, the truth is that there are very few companies that will accept bitcoin. Instead it must usually be converted into real currency if you want to use it. That is why many people consider it as more of a commodity and why the IRS now considers bitcoin as property.

Bitcoin and Estate Planning

Bitcoins like other assets are included in the owner’s estate, and if you’d like to distribute your bitcoins to a specific person, that should be arranged in a trust or a will. Bitcoins were designed to give users total anonymity and security, so unless you share the details with your family or financial advisors, it may become impossible for the inheritors to access your bitcoins. There is no bank that your family can call or visit, so it is very important that you inform others about your bitcoin investments and provide them with the details to access them after you’ve passed away. Bitcoin is unlike all other types of currencies, and if you decide to invest in bitcoin, you will need to make sure that your estate planning properly accounts for the differences between bitcoin and real currency.

Our attorneys are estate planning experts and can help you make arrangements, so that your family and loved ones are properly supported after you pass away. If you need help or have questions about estate planning, please feel free to call our office and schedule a consultation.

digital-estate-planning

Estate Planning and Digital Estates

One of the newest areas of estate planning is the distribution and management of the digital estate. This is actually so new that many people completely forget to include their digital estate into their estate planning, and this can create complications after they pass away. The digital estate includes all of your online accounts and activities. Though accounts to social media and forums may not be as useful or important, many people also maintain several financial accounts online, and if these are not properly transferred, it can be very difficult to get them transferred after death.

What is included in the Digital Estate?

Automatic Payments

: Many individuals pay for utilities, credit cards, loans, and other services completely online. If information and access to these online accounts isn’t shared, this can create financial problems and legal situations when payments stop being sent.

Social Media

: Facebook, Twitter, and Tumblr are just a few of the social media sites that people use. Family members may want to delete or deactivate these accounts once their loved one has passed away.

Emails

: A lot of important and private information is stored on email accounts. It’s important that these accounts can be secured and deleted.

Financial Services

: Many people have online accounts for their banks and credit cards. It could be a security risk to keep these accounts open and not monitor them regularly.

Medical Sites

: Some people may have accounts with their health insurance and doctors. These sites could store very private information over the web, and beneficiaries may want to get these accounts deleted or closed.

Other Online Content Sharing

: The deceased person may also have his own websites, Youtube and other video accounts, online storage of pictures, and storage of writing and other documents. If beneficiaries want access to this information, they need to make arrangements before the person dies.

What are the Benefits to Including the Digital Estate in Estate Planning?

One benefit is that it will give complete control over your digital accounts and information to someone. If accounts need to be deleted, or if the information needs to be accessed, it’s important that your beneficiaries know the usernames and passwords.

Arranging your digital estate can also be important for security reasons. All of this personal information online may be susceptible to identity theft or fraud. Removing private financial and medical records from the internet is a good way to minimize that risk. If you have to make several payments online, it is important that your beneficiaries can either continue to pay them or end the services. Otherwise this could create new problems.

Finally, if you don’t keep a record of your online accounts, it will be next to impossible for your beneficiaries to find them and access them. By putting this information in writing, you can be sure that they will know about all of your important online accounts.

If you are currently interested in estate planning, give us a call or schedule an appointment. Our firm can help you make arrangements, so that your loved ones are well taken care of after you have passed away.

Estate Planning Horror Stories

Most people don’t spend enough time thinking about estate planning, or think they are too young to worry about estate planning, so they never get around to it. The truth is that estate planning is an essential tool to help you distribute your assets and reduce disputes among your family once you have passed away. Not providing legal arrangements can become a devastating and painful mistake for your spouse and children afterwards. Here are some common and famous examples of what can happen when you don’t arrange proper estate planning.

Example #1: Second Wife Doesn’t Get Along With Sons

The father wants to pass on everything to his sons and creates a living trust for his sons but does not transfer his new residence into the trust. After he dies, the wife takes the residence as the surviving joint tenant. The wife also takes possession of bank accounts and retirement accounts for which he forgot to change the name of the beneficiary. The sons and the wife are now fighting over control of assets. Some of the property within the residence was explicitly given to the sons, but the wife will not allow them on the property. This situation creates a costly legal dispute.

Example #2: Mother and Disabled Daughter

The mother dies and does not create any type of trust or will. The disabled daughter receives all of her assets, including retirement accounts, because she is named as the beneficiary. These assets make the daughter ineligible for her disability and government healthcare benefits. The daughter does not know what to do, doesn’t take the required disbursements from the retirement accounts, and starts accumulating government tax penalties. Her attorney has to petition the court to set up a special needs trust to help her manage the assets.

Example #3: Chief Justice Warren Burger Writes His Own Will

The chief justice makes several mistakes in his will, and his estate ends up having to go to probate. During the lengthy probate process, his family pays additional taxes and fees that add up to hundreds of thousands of dollars.

Example #4: Elvis Presley Does Not Establish an Estate Plan

This is actually one of the most famous celebrity estate planning failures. He does not make proper legal arrangements to distribute his estate, so that a large amount of his assets must go through a probate process. Because of the lengthy and expensive process, his estate is reduced by over 70%. His family pays millions of dollars in taxes, fees, and legal costs.

Even if you think it is too early to set up your estate plan, you should start looking into your options now. As you can see, there are countless examples of what can happen if you don’t make the proper arrangements while you still have time. Our attorneys can help explain the common ways to distribute your estate and can help you write your estate planning documents. If you are interested in creating a will or establishing a trust, give us a call today.

How-to-Conduct-Estate-Planning-in-Blended-Families

How to Conduct Estate Planning in Blended Families

As you probably already know, divorce is no longer rare and almost a norm for American families. Often after divorces, one or both of the spouses will remarry. In some cases, they marry people who have also been divorced and have children from previous marriages. These new families–consisting of children from past marriages, also known as blended families–are becoming more and more common. Although estate planning is recommended for all types of families when there are significant assets to distribute, it is perhaps most important for blended families.

Every situation is different, but it can sometimes be awkward when dividing resources between your biological children and your spouse’s children from another marriage. It’s best to be clear and open with everyone about how assets will be divided, and to have it all in writing, so that everyone can be on the same page.

In addition, you should take extra care in how assets will be distributed after you die. Though some estate plan arrangements distribute assets first to the spouse and then later to the children, if you have a blended family, you may want to do it differently. It could cause anxiety among your biological children if they are afraid that your spouse will amend the estate plan after you die to distribute the assets to his or her children instead. Like many estate planning concerns, the best way to address this is to plan ahead. Here are a few tips to help you arrange your estate in blended families.

Establish Trusts

Like mentioned, if you leave your spouse completely in control of assets, this may create anxiety in your children and difficult situations later on. It is better to establish trusts, so that your children and your spouse understand how assets will be divided after your death. You might want to establish separate trusts for your children or other chosen beneficiaries. You can make your spouse the beneficiary until they come of age, or you can distribute the trusts directly.

Share Financial Information

When you come from separate marriages, both of you have probably already amassed a fair amount of assets, including IRAs, properties, and other types of investments. It’s a good idea to share information about all your financial investments, so that if something happens to you, your new spouse will be able to track and manage everything.

Check Beneficiary Names

When you enter into a new marriage, you should double check beneficiary names on all your insurance policies and retirement accounts. Some may still be in the name of your former spouse. This is a good opportunity to designate assets to your adult children, or you can make your new spouse the beneficiary.

Plan Ahead

It can be really helpful to get trusts and other arrangements in order before the wedding. This way both spouses can guarantee that their assets will be distributed correctly.
If you need assistance with estate planning, our attorneys can help. Give us a call today to schedule a meeting.

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