New Tax Law Could Tremendous Windfall for Your Children

The new federal exemption amount has increased as a result of the new tax law, which means that the amount you or your estate can pass on to your heirs free of taxes has increased to approximately $11 million this year from $5.49 million in 2017. 

An existing will that already includes a reference to the federal exemption amount rather than a specific amount for calculating children’s inheritance could mean that more is going to the children and less to your spouse than intended. If you intend to pass on significant wealth to your children and your spouse, you may need to consider reevaluating estate plan based on the wording inside your will. Your spouse could end up with a smaller portion of your estate than you intended due to the new estate tax rules if you have unclear wording in your will.

For wealthy individuals who have wills drawn up prior to 2018, there’s a chance that no specific dollar amount is included directly inside the will. This means that it may not be clear how much money goes into a trust for your children. Rather, the will might refer to the current federal estate tax exemption amount which has changed since you put together the original will. This is why it is worth scheduling a consultation with an experienced estate planning lawyer as soon as possible to give you the clarity you need to restructure your will or include new wording that is clear.

 

Things You Can’t Ignore in the Family-Owned Business Succession Planning Process

A company that you started with your spouse decades ago may hold sentimental value for you but it also has significant financial value and possible future value if your children or other heirs intend to take it over. There are multiple different things you need to consider in the process of business succession planning for a family-owned business. 

Often the emotions and conflicts that are present in a family owned business may be more difficult to deal with, highlighting the importance for an experienced business succession planning attorney. First of all, you must consider exit strategies. You must evaluate whether or not your children have the desire and the qualifications to take it over and to outline the appropriate exit strategy for the family from a financial perspective. Transferring a business can generate major tax implications if you don’t do advance planning. You might lose 30% or more to taxes which could impact the departing business owner’s retirement.

Communication with key employees and family members is another crucial component of business succession planning. Discussing the plan helps remove uncertainty about the business’s future and involving advisors to help with the streamlined process can keep everyone informed and confident. Business succession planning should also coordinate with individual estate planning tools. Transferring assets to children is a common concern for people in this situation but this needs to be done carefully and with the guidance of a lawyer who has worked in this field for many years.      

James Brown’s Estate Is Still Unsettled

Eleven years after the death of James Brown, his estate planning has fallen short in the plan to distribute his wealth efficiently. None of the beneficiaries in the will have received even a dime of the money. This includes underprivileged children in South Carolina and Georgia. Mr. Brown intended to donate significant amounts of money to these entities, however, a number of legal disputes have emerged and kept the estate dispute alive for more than 10 years. A dozen separate lawsuits related to the estate were initially filed after Mr. Brown passed away in 2006 on Christmas Day. The most recent of these was filed last month in California. 

Nine of the children and grandchildren of Mr. Brown are suing the widow and the estate administrator, arguing that copyright deals made by the widow were improper and illegal. Another lawsuit alleges that the widow was not actually ever James Brown’s wife. His will initially set aside $2 million to underwrite scholarships for his grandchildren and it gave his household effects and costumes to the six children he did recognize, a bequest that was estimated approximately $2 million.

The will was challenged, however, and an initial settlement was proposed that would give the children and grandchildren a quarter of the estate and the widow another quarter. However, that was overturned by the Supreme Court due to asset distribution that did not appear to be in line with James Brown’s original goals.

Why Do Wills Need to Be Recorded?

 

You may not need to necessarily record a trust although an important component of your trust strategy is to fund it after you have put it together. Far too many people stop after the establishment of a trust and fail to follow through with the funding. There are many different estate planning concepts included in the answer to the question about why a will needs to be recorded or filed. When you leave a will, you leave a clear set of instructions that help to determine how your property is distributed to your heirs after you pass away. estate plan and legacy

Someone must have the authority to transfer this property and this authority is granted by a court after the will is appropriately filed. The process of presenting the official will triggers the beginning of the probate process. A trust, however, is an entity that is generated when a trustee and a settlor enter into a trust agreement. A person who does not control the trust may have more challenges than a person who establishes themselves as a key player in the trust. Although you can’t touch or see a trust as you would a printed will, this is a legally recognizable entity that contains some distribution instructions after you pass away.

However, the court does not have the authority to grant the settlor’s final instructions included in a trust. This is a major departure from a will. Since the trust can survive the settlor and the trustee is granted the authority in such an agreement under state law, no court involvement may be required. Schedule a consultation today with an experienced estate planning attorney to learn more about your options with regard to estate planning.

Documents to Keep Indefinitely in Your Estate and Financial Planning Process

Although in the previous three blogs, we’ve discussed getting rid of unnecessary paperwork and clutter after three months, one year and seven years, some documents should be kept on hand forever. 

This is because they are so important that you may need to reference them at any point in time and it may be a good idea to keep copies and backups. These should always be stored in a safe location, such as a box that is safe from a fire. These documents should be maintained forever:

  • Personal identification documents like your social security card or birth certificate.
  • Income tax returns.
  • Legal documents such as lawsuit settlements, divorce and marriage certificates, and estate planning materials, unless they have been replaced by amended materials.
  • Loans for your car and vehicle titles. These should be kept for at least three years from the date the transaction is finalized. This information can prove helpful long after the transaction is finished, however, so you may wish to keep it forever.
  • Educational records such as transcripts, degrees and diplomas.
  • All major receipt purchases.
  • Any relevant financial planning documents and records, like pension plan documents, power of attorney designations, burial information, medical details, and living trusts and wills.

Talk to your estate planning lawyer to learn more about how to safely store these items.

 

Documents to Keep For At Least Seven Years in Your Financial and Estate Planning Process

 

It can be difficult to figure out which documents you’ll need to have on hand, which ones should be stored in a safe deposit box and have a copy at your lawyer’s office, and those that you can eventually get rid of after some time. 

This is because there are so many different periods of time associated with holding on to particular documents, and in an effort to clear out clutter and ensure that you are legally protected in the event of a problem, you’ll need to be mindful of both. Some documents need to be kept for at least seven years before you can dispose of them safely. These include:

  • 1099 and W2 forms that can be used for tax audits and prove your income for loans
  • Tax related receipts which can become helpful if the IRS comes asking questions
  • Bank statements which should be kept for at least a year in electronic or printed form. These can be helpful if you have issues of identity theft, fraud or other challenges with your account.
  • Cancelled checks for mortgage, home improvement, business and tax purposes. Some people like to keep all of their cancelled checks, but this is an unnecessary process if you want to cut down on clutter.
  • Disability records or unemployment income stubs. Any paperwork you receive that is directly from the government related to an income source should be kept.

Consulting with an experienced estate planning lawyer in addition to other professionals on your team can be valuable for ensuring that you have the appropriate paperwork, and drafting the paperwork for your estate planning purposes when you don’t have it yet.

Documents to Keep for One Year: What You Should Know About Estate and Financial Planning

 Some documents need to be kept longer than the three-month period as discussed in yesterday’s blog. These should be stored in a safe location so that they can be accessed quickly in the event of a sudden problem, or in the event that your financial power of attorney agent needs to step in and make critical administrative or financial decisions on your behalf. 

These documents can be disposed of safely such as using a shredding service after a one-year period. These include:

  • Paycheck stubs
  • Monthly mortgage statements
  • Investment account statements
  • Insurance records and statements
  • Undisputed medical receipts and bills
  • Checkbook ledgers

Only hold on to these documents if you currently have a case dealing with the insurance company or a personal injury case.

After you receive your annual W2, there’s no reason to hold on to your paycheck stubs and your annual tax statements can be used in lieu of monthly mortgage statements. Investment account statements can include trade confirmations and monthly statements, but these materials don’t need to be kept longer than one year

Will Less Planning Occur Because Of High Estate Tax Exemptions?

Do you think you don’t need estate planning?

Perhaps you did estate planning in the past, but you think that new high estate tax exemptions mean that it doesn’t make sense to engage in this process. 

Many estate planning attorneys and clients alike, were interested in how the most recent tax bill will play out. Although plenty of people are still digging into the mechanics of what this tax bill will actually mean for people planning on the ground, the high estate tax exemption is the subject of the most commonly asked question.

Taxes are at the front of many people’s minds these days, even more so than usual. The Tax Cuts and Jobs Act will double the gift tax exemption and the estate tax exemption. However, many estate planning attorneys expect to still find themselves helping clients of all types to put together an appropriate estate plan. The biggest anticipated growth in coming years is likely to be with income tax planning, with more than 45% of those attorneys expecting to see more work.

Just over one-quarter of estate tax planning attorneys expected to see less of this kind of work for estate tax planning purposes. Many believe that the current changes to the estate tax are not likely to last over the long run, meaning that people will eventually wind back up in their estate planning lawyer’s office.

What You Need to Know About Prioritizing a Dead Spouse’s Debts

When a spouse passes away, it can be an alarming discovery to realize that they have more liabilities than they did assets. Paying off these expenses can be extremely confusing for a spouse who was appointed as the personal representative of the estate. When an estate does not have appropriate assets to pay all of the debts in full, they must be prioritized. 

The first of these debts that should be paid are all funeral expenses and any of the expenses and costs associated with administration. If the funeral expenses were advanced by the surviving spouse, those can be paid back first.

Furthermore, someone who is serving in the process of probating the spouse’s estate will be able to get reimbursed for the cost of administration, like legal fees. Next in line for debts to be paid are taxes that are entitled to preference under state or federal law. Hospital expenses and reasonable medical expenses are the next in line to be paid, particularly to the point that they relate to the final illness. If there are medical bills for treatment that was not related to the final illness, that is included in the remaining category of unsecured loans and credit card bills.

Every legitimate claim in a category should be paid first, before moving on to the next category. This can be a difficult situation for a spouse to find themselves in after the loss of a loved one when the grief and other elements of moving through the claim can be especially difficult. To understand your rights and to move forward with powerful knowledge about the future, schedule a consultation with an estate planning attorney.

What You Need to Know About the Survival of Dynasty Trust

If you are using trusts as part of your estate planning strategy, you are engaging with one of the most powerful tools for enhancing your privacy and control now and well into the future. Dynasty trusts have become increasingly popular in recent years as a tool for people to incorporate into their overall process. A trust gives a client the flexibility to change the disposition after a transfer. 

Even for many different clients who may be in the process of considering a dynasty trust when there is no estate tax, trusts are very flexible estate planning tools that also provide privacy and peace of mind for the person creating it. Dynasty trusts should always be drafted directly for the purpose of flexibility. Merger, decanting, amendment and non-judicial settlements are all different possibilities to consider in a dynasty trust. A trust that allows a trustee to make distributions for beneficiaries with the absolute discretion assigned to that trustee may provide more flexibility than a trust that requires distributions made to beneficiaries with an ascertainable standard.

All of these terms can be explained to you when you schedule a consultation with a trust planning attorney. Trusts offer numerous different benefits for people creating the trust, as well as for your beneficiaries down the line. But because there have become so many options in the area of trust planning, a consultation with a lawyer is important to identify the tool that is most appropriate for your individual needs.