Tag Archives: estate tax

Tips For Making Your Estate Planning a Smooth Process

estate-planning-paperworkIf you feel that the time has come for you, or an elderly loved one, to truly finalize your estate planning, you should contact an elder law attorney or an estate planning lawyer. When you go for your consultation with a Massachusetts living trust attorney, it is important to have in mind an idea of how you would like your estate planning to go. Below are some useful tips and guidelines that will help you as you work with your Massachusetts elder lawyer.

1. Consider including a simultaneous death clause, which will pass your estate onto your children in the event that your spouse dies shortly after you do.

2. In order to disinherit a child, you must spell that out in your will.

3. Remember to keep beneficiaries on your pension, life insurance and 401(k) current.

4. Be sure to designate an executor as well as a back up executor.

5. Store your personal and private information in one designated location in the home, preferably a fire proof safety deposit box. This box should include important personal and financial records, as well as computer passwords and PIN numbers.

6. Understand the impact of estate taxes and discuss with your estate planning attorney some options for reducing or avoiding estate taxes.

Remember that upon your death, your family and loved ones will be going through an emotionally taxing as well as stressful time, and you will help them considerably by having your affairs in order. It is important to recognize that with age comes certain responsibilities, and that the sooner you have your estate and other affairs in order, the better off you and your loved ones will be. Contact us with any questions you might have regarding Massachusetts and even federal law, and set up an appointment to begin the process of finalizing your affairs. You will feel at ease, and your family will be glad to know that an already taxing time will be much less stressful because of your willingness to work ahead.

The Dangers of a Do-it-Yourself Last Will

do-it-yourself-last-willA do-it-yourself will sounds like a simple and inexpensive way to let your loved ones know your wishes in the event of your death. Doing your own will at home, however, may end up leading to avoidable problems such as taxation and court battles. Do-it-yourself wills may seem like a good deal, but the money put out later could cost a lot more than using an estate planning lawyer to draw up your documents.

Do-it-yourself wills may prove to be invalid if you do not follow all state and federal laws. For instance, if you used a witness with an invested interest in your estate, the will may not hold up in court. It must also be proven that the signatures found on the will were properly witnessed. Also, if the original will can’t be produced, your wishes may not be followed. An estate planning lawyer typically stores your will in a fireproof location to ensure the original can be produced in court. An estate planner could also be called into court and testify about the validity about the claims included in the will.

The language used in the will must be perfect for claims to be valid. As an example, a court could interpret the wording wrong and subject your assets to costly estate taxes. Estate taxes can deplete the funds you leave behind for your beneficiaries. Instead, meet with an estate planning attorney to go over the language and inclusions of your documents to prevent will contests. Otherwise, your family may then be forced into a legal battle and be forced to pay an exorbitant amount of court and probate lawyer fees.

The biggest downfall of a do-it-yourself-will package? You don’t receive personalized advice from an estate planning attorney. The will software packages can provide general advice, but won’t be helpful if you have a more unique situation. Will software packages are not likely to provide you with guidelines on how to handle domestic partnerships, children from other marriages, disinherited children or special needs children. As an example, a stepfather who claims in his do-it-yourself will to leave all his assets to his children may find his stepchildren cut out of any inheritance money he meant for them. Also, living trusts and power of attorney are not usually properly handled in online will programs. In these cases, set up a consultation with a living trust attorney.

Do-it-yourself will software packages may require you to fix errors later on. Get your will right the first time by meeting with a licensed and professional estate planning attorney. Reduce family conflict by clearly stating your wishes and keeping the proper documentation stored with a lawyer. The Law offices of Adam Tobin is waiting to hear from you to create your legal and valid last will and testament.

Why You Should Create an Estate Plan Today

Estate planning is not only for the elderly. Even if you don’t think you have any significant assets to protect, it could be beneficial to consult an estate planning attorney and discuss your options. If you know anyone who has had to deal with the loss of a loved one who didn’t have an estate plan they will probably tell you, in retrospect, that they wish they had made specific arrangements. There’s a reason why people say “Always be prepared!” Here are some major reasons why you should consider creating an estate plan today:

Avoid Probate

The main reason that many people create an estate plan is to avoid probate. Probate is the process of the administration and distribution of the estate of a deceased person. This legal process is typically carried out according to the person’s legal will. However, if the person does not draft a will the probate court will administer the person’s estate according to state statute. As a result of horror stories in the media of families dealing with probate, most people often want to avoid probate at all costs. Creating an estate plan is an effective solution.

Reduce EstateEstate Planning Taxes

Another good reason to consult an estate planning attorney about creating a plan is to reduce estate taxes and/or state inheritance taxes. Depending upon the individual’s situation, the payment of these taxes can account for a significant loss of an estate. Through simple planning you can make estate or inheritance tax much less burdensome or nonexistent.

Avoid Stress

Many times when people have personal experience, or witness someone, go through the process of dealing with the administration of a loved one’s estate they’re more likely to meet with an estate planning lawyer. Not having a plan in case you become mentally incapacitated or pass away can be overwhelmingly stressful for loved ones to deal with. Creating an estate plan is a proactive way to avoid family feuds and costly court proceedings.

Protect Beneficiaries

One of the main reasons for creating an estate plan is to protect beneficiaries. Beneficiaries could be either minors or adults. When creating an estate plan with minor beneficiaries in mind you should appoint a guardian and trustee to oversee the minor’s finances until they are of age (either 18 or 21 years old, depending on the state in which they live). If the beneficiary is already an adult but has trouble managing money you should create an estate plan which will protect the beneficiary from their own bad decisions.

It’s always good to plan ahead – contact elder law attorney Adam J. Tobin today to discuss the best steps toward creating your own estate plan.

Wealth Gifts to Children: How a “Crummey Trust” May be Right for You

Massachusetts Elder Law information on Crumney Trust.While still alive, many parents and grandparents wish to pass their wealth on to their children or grandchildren: these gifts are also a good way to decrease a taxable estate. In 2010, you can give a child or grandchild $13,000 a year without the subsequent incurring taxes, but you may not want the child directly receiving the gift just yet. (You can read the full law about giving to grandchildren here) Utilization of a “Crummey” trust (named for the court case that approved this type of trust) allows for you to take advantage of the gift tax exclusion while keeping the gift in a trust until the minor comes of age. However, similar “custodial accounts” for these minors entail parents or legal guardians retaining custody of this large account until the child turns 18, and you may not want an 18 year old receiving that large of a gift.

Instead, placing the money into a “Crummey” trust permits you to decide when the gift will be given to the minor and how much they will be given. Using a regular trust can cause one large complication: to avoid being taxed, the minor must have a “present interest” in the gift. An elder attorney will explain that due to the fact that promise of giving the child the gift later does not count as “present” interest, many gifts to regular trusts are not excluded from the tax. Click here for additional trust information.

A Crummey trust is structured to allow your gift to be placed into the trust while also getting the gift tax exclusion. One provision allows for the beneficiary to withdraw cash after approximately 30 days, where the money then becomes part of the trust. This is a critical aspect of the Crummey trust, as the beneficiary must be aware of this capability so that the IRS does not apply the gift tax exclusion. The risk with this is that the beneficiary will take out cash immediately, in which case you must make a verbal agreement that continued withdrawals will result in no more gifts. As the gift giver, you can control how much the beneficiary can receive and when they can receive it once the gift is in a Crummey trust.

(Source article here)

Do you need an estate planning attorney?

Do you need a Massachusetts Estate Planning Attorney?Estate plans are both relevant and necessary if any of the following apply to you:

  • If it matters to you who inherits your assets
  • The future of your health care should you fall ill or otherwise incapacitated
  • Desire to avoid the inconveniences and hassles of probate court

The use of an estate plan is no longer associated for the upper classes looking to pay less taxes. Should anything happen to you, a probate court judge can have control over the fates of your assets and any children you may have under the age of 18 – unless you have an estate plan. The systematic process involved with probate is both financially draining and lengthy: a situation that can be avoided for your loved ones if you have an estate plan.

For these reasons, an estate plan is very beneficial. However, yours must be constructed correctly. An estate plan that is old, filled with loopholes and other potential issues for compromising your assets can be easily avoided by hiring an estate planning attorney. With the increasing trend of “do-it-yourself” trust or will-template websites, this can be a risky alternative to a very  important document. You need an estate planning lawyer to provide individualized legal advice for not just your estate planning, but for trusts, applicable laws for estate taxes, and probate.

Make the investment in your loved ones future, and assure that your wishes are followed through. Contact a Massachusetts estate planning attorney like Adam Tobin today to get you started on an estate plan or will that is right for you!

Click here for source article.

Possible Social Security Benefit Changes

Social Security seems to be moving toward its day of reckoning. According to a recent article by Philip Moeller, efforts to put Social Security on a sound long-term footing included higher tax rates for payments into the system, raising retirement ages, and treating some Social Security payments as taxable income.

U.S. Senator Herb Kohl (D-WI), Chairman of the Senate Special Committee on Aging, asked the U.S. Government Accountability Office (GAO) to review benefit options affecting lower-income beneficiaries, who traditionally are the core focus of the program. This group, and particularly older widows, depends almost exclusively on Social Security. The GAO report reviewed eight areas where, it said, benefit changes were most commonly proposed. The report looked at how effectively each proposal would help lower-income beneficiaries, whether it would have much of a financial impact on Social Security, and on how difficult it would be to administer. Here are summary excerpts of some of their findings, which will be part of a larger Social Security report due soon from the Kohl committee.
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Guaranteeing a Minimum Benefit. Guaranteeing a minimum benefit by increasing Social Security retirement benefits for those who have worked in low-wage jobs throughout their careers addresses concerns about benefit adequacy. One option would provide a minimum benefit equal to 120 percent of the poverty line for a minimum wage earner who had worked for 30 years. Another option would provide a minimum benefit equal to 100 percent of the poverty line for a 30-year worker and 111 percent of the poverty line for a 40-year worker. Social Security Administration officials said that, depending on how this option is designed, it could work well, but it is difficult to target lifetime low earners effectively.

Reducing the Marriage Duration Required for Spousal Benefits. Reducing the marriage duration required for spousal benefits is an option that targets divorced spouses. However, experts also said they do not expect this option to effectively target economically vulnerable groups. This option would not benefit women who were never married but could benefit higher-income women who are not economically vulnerable.dependent children or elderly relatives. Time spent out of covered employment as a caregiver may reduce benefits for workers, and others may not work enough to earn the required 40 credits to be eligible for benefits. One caregiver credit option would allow a specified amount of care giving time, such as three or four years, to count as covered

Providing Caregiver Credits.
Providing caregiver credits increases benefits for those who spend time out of the workforce to care for employment, and assign a wage to that time. Another design excludes a limited number of care giving years from the benefit calculation so that instead of averaging earnings over 35 years, earnings are averaged over fewer years. A third design supplements caregivers’ retired worker benefits directly, regardless of whether they took time out of the workforce for care giving. For example, an income-tested supplement could be given to increase retired worker benefits by 75 percent for those who have one child and 80 percent for those with two or more children. Both parents of a child would be eligible for this supplement, as long as the total household income did not exceed 125 percent of the federal poverty line. Retirement security experts said this option recognizes the societal value of care giving, but experts also said that, for various reasons, it may not reach its target population. For example, low-income people are less likely to be able to take time off from work. Therefore, people who have relatively higher incomes may benefit more from the creation of caregiver credits. Retirement security experts and SSA officials told us that caregiver credits would be complex to administer. A key issue is how to verify that care was provided to a qualifying person.

Read the rest of the changes here.

Have a question about social security, taxes, or other information for you or a loved one? Make sure to contact Adam Tobin to get your questions answered!

Estate Planning: What You Can Do Now

estate-planningElder lawyers are a great resource for planning your estate. An increasing amount of people are seeking advice on estate planning, and there is currently an intense discussion in Congress about an estate tax law. In her latest book, “Estate Planning Smarts”, Deborah L. Jacobs outlines the essential pieces you need to know when planning your estate.
A good estate plan should accomplish these goals:

•    Caring for yourself by authorizing people to handle your affairs if you no longer can because of illness or disability
•    Specifying who gets what after you pass away
•    Providing for children who are minors or who have special needs.
Trusts play critical roles in estate planning, and can be used to hold money for minors, forestall spendthrift family members, protect assets from former spouses or creditors, or even make provisions to care for pets that survive you.
(Source: www.estateplanningsmarts.com)
See an elder lawyer like Adam J. Tobin, or one nearest you to get your estate plan in motion!

Paying your Estate Taxes

If you have done everything possible to minimize any estate tax liability and ultimately still owe estate tax, the question that often arises is “what is the best way to pay the estate tax?”

One of the most important goals of estate planning is to provide for sufficient liquidity in a decedent’s estate.  In addition to probate costs, funeral expenses, legal fees and debt that may come due at death, the federal estate tax is generally due nine months after the date of death.  Without liquidity in the estate, the executor and the heirs of the estate may need to sell illiquid assets such as real estate, or liquidate marketable securities in an unfavorable market, such as we are experiencing now, to raise cash within a short period of time.

I will explore some funding options for paying the federal estate tax:

  1. Borrow money to pay the estate tax liability: Most banks and financial institutions will provide an individual or an estate loan as long as there is sufficient collateral (estate assets) against the loan.  If the estate tax liability is $1,000,000, you may be able to get a loan for the $1,000,000 estate tax liability, but it comes at a price… large payments of interest.
  2. Selling estate assets to pay the estate tax liability: This is the often the most logical choice to fund the liability when no formal plans have been made to pay the tax.  It can, however, have drastic financial consequences.  On the same $1,000,000 estate tax liability, the executor or trustee would need to sell $1,000,000 of the estate assets to pay the tax.  The problem with this approach is that you may be forced to sell property and securities possibly at depressed values.  Housing values and investment portfolios have taken a severe beating over the last few years.
  3. Use discounted dollars: By setting up an Irrevocable Life Insurance Trust (ILIT) with crummy provisions, you could fund the potential $1,000,000 estate tax liability in a more cost efficient manner.  For most clients, it would work like this:  You and/or your spouse would set up the ILIT and fund it with annual gifts of $13,000 each totaling $26,000 per year.  These gifts are gift tax free.  The life insurance death benefit is income tax free.  The trust, because it is outside of your estate, is estate tax free.  The trustee would purchase an insurance policy on one or both spouses and use the annual gifts to fund the premiums.  For example, a couple, both age 70 and in average health, gifts $26,000 per year could allow the trustee of the ILIT to purchase a life insurance policy with a death benefit of $1,250,000.  This death benefit would be income and estate tax free as it would be owned by the trust and  outside of their estate.  So in this situation, if both spouses died at age 90, they would have paid $520,000 ($26,000 x 20) and the death benefit would be $1,250,000.  Thus they have funded their estate tax liability and saved $730,000.00.

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Common ways to reduce Estate Taxes

Question: My parents have considerable assets. What can they do now to reduce the potential estate taxes?

Investing towards the future. Elder Law Estate planning in Massachusetts.Many clients may be near or over the estate tax exemption and owe federal estate taxes upon their death (see my post on ways to avoid state taxes to see federal estate tax rates).  Furthermore, individuals must also face a much lower threshold and may also be subject to Massachusetts estate taxes (currently assets over $1,000,000 are subject to the MA estate tax).

Here are some common, somewhat complex examples on how to reduce your estate in order to minimize the ultimate tax owed:

  1. The Credit Shelter Trust (By-Pass Trust) – In 2009, a married couple will be able to transfer $7,000,000 without federal estate tax.  To do so, each spouse must make maximum use of their $3,500,000 applicable exclusion amount.  A credit shelter trust can allow us to take full advantage of the applicable exclusion amounts and still provides for the surviving spouse and children.  Both a credit shelter trust and a marital deduction trust can be included in a Will or a Living Trust.
  2. Family Limited Partnerships (FLP) – One can use a family limited partnership or an LLC to consolidate ownership and management of family assets and potentially shift income or appreciation to the children.  In essence, these entities allow parents to make discounted gifts of limited partnership interests to children and grandchildren without surrendering control of the business or property.  Such gifts make qualify for gift tax discounts on their valuation as they can be discounted as much as 35% due to lack of control and marketability.
  3. Benefits of Lifetime Gifting – If one still expects estate tax liability even after applying the above mentioned options, one may consider gifting strategies.  For example, in 2009 anyone can make a $13,000 gift, income tax free and gift tax free. Lifetime gifts can remove assets and their future appreciation from the estate.  When deciding what to gift, it is best to gift assets that are likely to appreciate after the gift.  Consider a husband and wife with two children, each spouse can give each child $13,000 annually.  This amounts to $52,000 of tax free gifts annually. Also, any medical or education related expenses you pay directly on behalf of a child or grandchild are immediately removed from your estate without any gift tax.

(photo credit: http://michiganelderlaw.info)

Are there ways to avoid estate taxes?

Co$ Enjoys Unfair Tax Exemptions
Image by LafayetteBeacon via Flickr

Yes. I frequently counsel clients to reduce and often eliminate estate taxes through various techniques, including but not limited to:

  • Drafting Credit Shelter Trust Provisions; whereby spouses leave some of their property in trust for their children, but give the surviving spouse the ability to access some or all of it for the remainder of their life. This keeps the second spouse’s taxable estate half the size it would be if the property were left entirely to the spouse.
  • Drafting “QTIP” Trust Provisions; whereby couples can postpone estate taxes until the second spouse dies.  This allows for additional gifts qualifying for the annual exclusion.
  • Drafting Charitable Remainder Annuity Trusts; whereby a tax free gift is made to a tax-exempt charity and the surviving spouse and/or children receive perpetual income from the transfer.
  • Drafting Irrevocable Life Insurance Trusts; whereby the value of life insurance proceeds is removed from the client’s estate.
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