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Recent Blog Posts
Estate Planning is Especially Important for Parents
Unexpected accidents and deaths happen all too frequently. While it may seem morbid to plan for death while there's no apparent reason, doing so can help to save your family from headaches and money-aches later on. It doesn't matter your financial status—estate planning isn't just for the wealthy. An estate refers to all the property that a person, or couple, owns. This includes, but is not limited to: property, cars, businesses and stock holdings, and insurance contracts and pension benefits. If you have a claim pending against someone, such as a worker's compensation claim or a claim against a negligent driver in a car accident, that also counts as part of your estate.
The most important thing to remember about estate planning is that it can't be done after your death, or after you're impaired with some other disability affecting your capacity to wade through legal documents. The importance of having an estate plan if you have children can't be stressed enough. According to the Northwest Indiana Times, "when planning for a new child, a will is one of those things that is often overlooked." A will can sometimes make a great baby shower gift if the parents haven't yet considered executing a will.
Make Estate Planning Part of Your New Year's Resolutions
Many people make the new year the start of their new resolutions, whether they want to lose weight, save more money, or improve other parts of their lives. A recent Press & Guide article points out that one often-overlooked aspect of life is estate planning. As we move through the first part of 2013, take some time and make one of your resolutions to engage in some estate planning that will help carry out your wishes and save your surviving family members from some headaches in the long run.
You may think it is sufficient to avoid formal estate planning if you have listed another person as beneficiary on your bank accounts, life insurance policies, and 401(k) and other investment accounts. The major problem with using the beneficiary designation as an estate planning tool is the risk that a beneficiary predeceases you. If there is no beneficiary designated, and you have no will or other estate planning document in place, then state law will dictate how the proceeds of your account or other asset is divided among your heirs, whether that is what you intended or not. The bottom line is that if you want to be certain that your assets are distributed according to your wishes, then you need to take all necessary steps to ensure that your plans are carried out.
Highlights of ATRA Benefits
The online publication Financial Planning recently reported on the benefits of the new American Taxpayer Relief Act of 2012 (ATRA), which have now gone into effect.
The first benefit highlighted by the report is the provisions for estate and gift tax. Unlike the prior law, which relied on sunset provisions with constant uncertainty surrounding federal tax policy, the new law's provisions are permanent.
Permanence of portability of the federal estate tax exemption for married couples is also offered under ATRA. This means that if the first spouse dies and the value of his or her estate does not require the use all of his or her federal exemption from estate taxes, then the amount of the exemption that was not used for the deceased spouse's estate may be transferred to the surviving spouse's exemption so that he or she can use the deceased spouse's unused exemption plus his or her own exemption when the surviving spouse later dies.
Defining Your Basic Estate Planning Documents
As a recent Chicago Tribune article points out, there is no time like the present to update your basic estate plan. Now that Congress has spoken, albeit at the last minute, on the issue of estate and gift taxes in passing the American Taxpayer Relief Act, it is essential that you execute basic estate planning documents or update your old documents to suit your current situation.
There are a number of very basic documents that can clearly express your wishes in terms of your property and your children following your death. If you fail to complete these documents and you should pass away, then your state's law will determine the disposition of your property and the care and custody of your minor children. As a result, it is essential to complete the following documents if you wish to have any say in the resolution of these important issues.
- Will - Perhaps the most basic estate planning document, a will is a legal document that directs how your assets are divided amongst your chosen beneficiaries. You can go into great detail as to how to divide your possessions, or you can simply divide up your estate as a whole in predetermined percentages between various people. Additionally, a will often expresses your wishes for a guardian for your minor children.
Enjoy Giving Now!
Birthdays. Christmas. Showers. What do all three have in common? The ability for the giver of a gift to enjoy seeing the receiver's reaction and joy to the gift given to them and knowing what they just gave made someone else happy. What a feeling. It is true that it is better to give than to receive in that regard.
If your love language is gift-giving, look into giving your financial contributions and gifts NOW instead of after your death. Wills are great and so is making sure people and organizations get what you worked a lifetime for, but, there are opportunities for you to see your hard earned money bless others today.
There are two veryeasy ways to go about this. First, is to pay either medical or educational bills - unlimited expenses! Just make sure you give directly to the institution on behalf of the person you wish to help. That means college, doctors, hospitals, medication - expenses anyone would appreciate the help with! Second, is to give $13,000 per person per year. Yes! That means you can select as many people you would like to give each $13,000 a year to! Just remember that you do have a lifetime to give $1 million without paying taxes.
Changes to Estate Planning in 2013
At the end of 2012, people were worried that the fiscal cliff would bring a lot of tax increases to investments, income, and will see the end to unemployment benefits extensions for people who have been hit the hardest by the economic downturn. The reason that the issues have not been rectified is because the US states government has been running a deficit. A little talked about aspect of the fiscal cliff is the changes to estate tax and how that will affect estate planning in years to come.
Current estate taxes until the end of 2012 take 35 percent of the assets which are passed onto successors. That is after a limit of $5 million for individuals or $10 million for couples is met as the current exemption. If Republicans and Democrats are unable to agree to new measures, then that rate will increase up to 55 percent after the first million. Obama has proposed a tax of 45 percent and a middle ground of a $3.5 million exemption.
Estate Planning Needed at All Ages
Many people think that estate planning is just for old people, but that is not necessarily true. An article is Forbes magazine stated that there are way too many people of all ages and situations that not only do not have an estate plan, but they have not even drawn up the very basics for the documents.
A 2011 survey found that 64 percent of baby boomers do not have living wills. That is a document that anyone over the age of 18 should have. These documents allow a person in advance to decide on what type of care they will get if he or she will become ill and incapable of making his or her own decisions.
Even young and broke people should have a will.
In most states, parents do not have the authority to make health care decisions or manage the money of their children over the age of 18. If these young people were to get in a serious accident, his or her parents might have to go to court to get approval to make life or death or financial decisions on their child's behalf.
Estate Planning Checklist
Most Americans do not have a will, and especially not a revocable living trust. And yet, anyone that has had to deal with the estate of a deceased family member who did not have solid plans in place will tell you how frustrating, time consuming, and expensive it is to sort everything out.
If a person dies with no will or trust in place, the courts will follow state law to disperse the assets, regardless of verbal promises. If someone dies with only a will in place, the courts will have to give the document a stamp of approval before dividing up the estate. This is known as probate, and the cost of this necessary judicial step can cost more than 5 percent of the estate's value and can trap the heirs for a year or more in a legal twist to get the estate sorted out.
An easy way to avoid all that hassle that your family will have to go through by setting up the essential documents. That way, all of your assets will go exactly where you want quickly and with the least amount of expense.
What to Consider When Appointing a Trustee
Estate planning isn't easy, no matter what level of assets you have. It's important for every family to have a plan of what to do with assets upon death, no matter what level of income or the closeness of family relationships. A trustee is a person (or a member of a board) who is given control of powers of administration of property. This is usually a trusted family member or child. Hiring a competent estate-planning attorney is the most important step to planning your estate, but there are many factors to consider when appointing a trustee. The first, according to Probate & Property, a publication of the American Bar Association, is to consider the legal capacity of whomever you'd be interested in appointing as your trustee. It should go without saying that only competent adults can be appointed as trustee—a child cannot be appointed until he or she is of legal age. Laws vary slightly from state to state, especially if the trustee you're interested in appointing is a charitable organization or other financial institution. This is something to discuss with an Illinois estate-planning attorney.On a more personal level, according to Probate & Property, is to consider the specific personalities and skills of the individual who you're interested in appointing. These characteristics include "judgment, experience, impartiality, investment sophistication and track record, availability, accounting and record-keeping ability, and potential conflicts of interest." Appointing a trustee who understands capital gains is important, considering the recent Uniform Principal and Income Act, which "gives the trustee the ability to allocate some or all capital gains in a particular year to trust income." Family drama and relationships need to be taken into consideration as well—will one child create conflict for the other if he or she is named trustee (or not).
Some People Have No Will, Some Have Too Many
Some people still consider wills to be for the wealthy and rich, although there are many reasons to get a will made even if you are not a millionaire. On the flip side of that coin we have Thomas Kinkade, a millionaire, whose estate is being fought over, because he left more than one will. Forbes reported a story on this legal battle earlier this year.
Kinkade, who was a painter, died last April from an accidental overdose of alcohol and Valium. The 54-year-old was separated from his wife of 30 years, and he also had a new girlfriend, who he was living with. This is where the story gets interesting, because both the wife and the girlfriend have made claims for the estate.
Kinkade's girlfriend, Amy Pinto, has said she is entitled to the former family home in Monte Sereno, $10 million in cash, and some of the artist's work. To add fuel to the fire, Pinto was excluded from Kinkade's funeral because of the court battle, making the case all the more dramatic in court.
