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Estate Planning

Wednesday, October 17, 2012

Fall 2012 Estate Tax Law Update

The current estate tax law is scheduled to expire on December 31, 2012, together with other "Bush Tax Cuts" affecting overall tax rates, capital gains taxes and taxation of trusts.  If Congress does not act by December 31, 2012 or pass a retroactive tax law change, the current $5.12 million estate tax exemption will expire and the law will revert to the 2001 exemption, adjusted for inflation, of $1.3 million.  Because of the risk that the larger exemption might expire and not be renewed retroactively, some wealthier Americans are choosing to take advantage of the $5.12 million exemption by making larger gifts in 2012 to family members or to trusts for themselves or their family. 

Contact us if you want to discuss your situation and how you might take advantage of the current law before it expires.


Tuesday, October 2, 2012

Your Digital Assets

Where's the Combination to the Safe?  You may have imagined family members asking this question in the event of your death.  It's a simple matter to let them know where you keep that combination. 

One of the challenges of life in the “electronic age” is keeping track of login information and passwords.  As we all know, the more random, complex and short-lived we make passwords, the more secure our information is.  This information should be changing constantly.

Tracking your own passwords and login information is complicated.  Trying to puzzle through someone else's password and login information is at best, challenging and at worst, it's impossible.

A few months ago an Anchorage man passed away unexpectedly.  His sister, dealing with the shock of his death, traveled to Anchorage to settle his affairs.  In life, this family had been separated by many miles and in death, unknown passwords meant the man's most important information was inaccessible to his sister.  Tasked with settling the man's affairs, his sister had no idea what his passwords were – this man literally took secrets to the grave.  The result is that nothing has been easy; some information will never be uncovered. 

According to the Pew Internet & American Life Project, 36% of adults over age 45 now do their banking online.  Without access to your digital assets, even figuring out what automatic payments are made each month and cancelling your subscriptions can be a challenge.

Passwords and login information are assets to be protected during life and passed on at death.  So how to go about doing this?  Here are some ideas: 

1.  The Old Fashioned Way:  Write them down.  Keep a list of passwords and login information in a safe place.  Tell at least two other people where it is and update the list EVERY time something changes.  With help from some of our clients, we have developed a simple form that's a starting point for a list of password and login information.  Give our office a call and we'll email it to you.

2.  The "Simple" Technology Way: Put them into a document on your computer.  Make a list of passwords and login names; if you want, you can password protect the list.  Tell at least two other people the name of the document, its location and the password.  Update the document EVERY time something changes.  If you email a copy of the document to someone, password protecting it is a must; however, do not make the mistake of sending the document and the password in the same email.

3.  Use a Password Tracking Program.  There are dozens out there.  Lastpass and RoboForm are two our clients have mentioned.  Pick one that works on your computer and any portable devices you use.   Set it up and use it religiously.   Tell at least two other people what service you use and how to log into the service.  Again, do not give them all of that information by email at the same time. 

4.  Use a Service That Releases Information in the Event of Your Death.   These services require proof of your death.  An example is Legacy Locker (http://legacylocker.com/).  Another service, Deathswitch (http://www.deathswitch.com), will send an email to you at the frequency you have selected.  If you don't respond after repeated requests, the service will send information you prepared to loved ones or friends of your choice.  If you use a service like this, make sure your information will also be available to those chosen confidants in the event of your disability.

There are lots of other ways to keep this information safe for others.  What's important is that you leave a trail for your loved ones to follow. 

Let us know what works for you!  Drop us a line or send an email, and we'll publish some of your ideas in a future newsletter.

 


Tuesday, September 25, 2012

Keeping it Simple

"Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple.  But it's worth it in the end because once you get there, you can move mountains."  -Steve Jobs

            One of the most common comments we hear from clients is, "Why does it have to be so complicated?  My estate is simple."  The prevailing presumption is that it is the nature of lawyers to make things more complicated than necessary and in many instances, the clients are probably right.

            As the above quote from Steve Jobs indicates, it takes more work to keep things simple.  The easiest path is not usually the path of least resistance.  But Foley & Foley makes it a practice of making the extra effort to try and keep things simple for our clients.  Some of these extra efforts include:   

            Education.  We spend a great deal of time counseling and educating clients through our workshops and in our personal client conferences.  When clients have a basic understanding of the law and the issues that will be faced by heirs upon the death of a loved one, the estate planning process doesn't seem quite so complicated.

            A Step by Step Process.  Foley & Foley follows a simple process for assisting clients as they implement their estate plan.  The process is thorough, systematic and understandable, which means that details do not fall between the cracks.  Every client goes through the same five steps: 1) Intake appointment, 2) design appointment, 3) delivery appointment, 4) funding appointment, and 5) updating and maintenance.

            Internal Systems.  Foley & Foley has implemented internal systems and procedures that ensure that the plans and legal solutions are quickly and reasonably implemented.  These systems also ensure that every member of the estate planning team, from the receptionist to legal assistant, paralegal and lawyer, remains in the loop and understands the current status of each plan.

            Technology.  Foley & Foley keeps up to date of the latest hardware and software technology available to assure that we can:

  • Communicate efficiently and effectively with our clients as well as other lawyers and advisors.
  • Efficiently create and edit sophisticated legal documents.
  • Organize, archive and retrieve physical and electronic documents.
  • Research and educate ourselves and our clients about changes in the law.
  • Maintain, update and respond to changes in our clients' situations.

            Simple Legal Solutions.  The attorneys and staff are constantly looking for the simplest and most effective legal solutions to the particular problems faced by our clients.  Because we have worked with hundreds of estate planning clients, we have the experience necessary to suggest ways to keep things simple. 

            Fixed Fees.  We try to utilize fixed fees whenever possible to reduce the stress of not knowing what the plan is going to cost.  When fees are fixed and not hourly, everyone, including the lawyers, have incentive to keep it simple.

 


Thursday, August 16, 2012

Leaving Behind or Gifting Your Assets Does Not Mean Losing Control

A recent article in the Wall Street Journal by Laura Sanders (link below) explored the many ways in which you can provide for your loved ones and still ensure that the assets you have left are used in a productive manner after your gone.  In fact, there is a great deal of leeway for individuals who wish to provide conditions on the distribution and release of not only the inheritance that they leave behind, but also gifts they may wish to make now. 

As Ms. Sanders explains in her article, what you give away and how is especially relevant because of the unusual, and likely short-lived, current estate and gift tax exemptions which allow a taxpayer to transfer up to $5.12 million tax-free, either at death or through lifetime gifts. Because the current exemptions are set to expire in January 2013, you should consider making gifts before the end of the year. 

While making gifts now means giving up control of a portion of your assets, you can structure the terms of your estate plan to restrict distributions until the achievement of a certain goal or landmark event.  You can also use your assets as future incentives to encourage your children or grandchildren to complete higher education or become entrepreneurs.  When designing your estate plan, you may also want to include a popular provision provided in many states, including Alaska, prohibiting your beneficiaries from contesting the validity of your estate plan or else risk losing their inheritance. 

To read the article in its entirety, see Laura Sanders, How to Control Your Heirs From the Grave, Wall Street Journal, Aug. 10, 2012.


Thursday, July 12, 2012

Considering the Heirs

In his recent article in the New York Times, Paul Sullivan writes about the current tax break that allows individuals to give up to $5.12 million to their heirs tax-free.  The fate of this current break, set to expire in nearly five months at the end of 2012, may not be determined until after the November election.  In the meantime, individuals have a "once-in-a-lifetime opportunity" to transfer their assets in trust to their children and other loved ones without leaving them a hefty tax bill.  As Paul writes, the issue for some is giving up control and trusting they have enough liquid assets to live on should their financial circumstances change:

Now, some of the wealthy are faced with a choice that seems designed by a behavioral economist to test rational decision-making: Do they give their heirs the full amount of the exemption, happy that the money will help the heirs now and reduce their eventual estate tax bill? Or do they give less, or none at all, for fear that they could be left with not enough to live on?

One option for individuals worried about retaining their liquid assets is to put real estate or shares in a private business into a trust.  While no one can predict with certainty what the estate laws will look like in January, one thing is clear:  You should sit down with an estate planning attorney to assess your concerns and consider taking advantage of this opportunity soon, before the law expires.  

Check out Paul's entire article here.

 

 


Wednesday, June 13, 2012

Common Estate Planning Myths

Estate planning is a powerful tool that among other things, enables you to direct exactly how your assets will be handled upon your death or disability. A well-crafted estate plan will ensure you and your family avoid the hassles of guardianship, conservatorship, probate or unpleasant estate tax surprises. Unfortunately, many individuals have fallen victim to several persistent myths and misconceptions about estate planning and what happens if you die or become incapacitated.

Some of these misconceptions about living trusts and wills cause people to postpone their estate planning – often until it is too late.

Myth: I’m not rich so I don’t need estate planning.
Fact: Estate planning is not just for the wealthy, and provides many benefits regardless of your income or assets. For example, a good estate plan includes provisions for caring for a minor or disabled child, caring for a surviving spouse, caring for pets, transferring ownership of property or business interests according to your wishes, tax savings, and probate avoidance.

Myth: I’m too young to create an estate plan.
Fact: None of us know exactly what the future holds. Even if you have no assets and no family to support, you should have a power of attorney and health care directive in place, in case you ever become disabled or incapacitated.

Myth: Owning property in joint tenancy is an easier, more affordable way to avoid probate than placing it in a revocable living trust.
Fact: In Alaska, only a husband and wife can jointly own property with a right of survivorship.  Holding title to real property with someone other than your spouse results in a tenancy in common.  Tenants in common have no right of survivorship, meaning that if one tenant in common dies, that tenant's interest in the property will be part of his or her probate estate and pass to their heirs and devisees either by will or intestate succession. 

Myth: Keeping property out of probate saves money on federal estate taxes.
Fact: Probate, and probate avoidance, are governed by state law and address how property passes upon your death; they have nothing to do with federal estate taxes, which are set forth in the Internal Revenue Code. Estate planning can reduce estate taxes, but that has nothing to do with a discussion regarding probate avoidance.

Myth: With a living trust, a surviving spouse need not take any action after the other spouse’s death.
Fact: Failure to adhere to the proper legal formalities following a death could result in significant administrative and tax implications. While a properly drafted and funded living trust will avoid probate, there are still some tasks that have to be performed such as filing documents, sending notices and transferring assets.  

Which myths have you heard? Which ones have you believed? 

 

 


Monday, May 14, 2012

5 Events Which May Require a Change in Your Estate Plan

Creating an estate plan is not a one-time event. You should review your estate plan periodically, to ensure it is up to date, and make necessary changes if your personal situation, or that of the people you wish to receive and administer your estate, has changed. There are a number of life-changing events that require your estate plan to be revised, including:

1)  Change in Marital Status: If you have recently been married or divorced, it is imperative that you review and modify your estate plan. With a new marriage, you must determine which assets you want to pass to your new spouse or step-children, and how that may relate to the beneficiary interest of your own children. Following a divorce it is a good practice to revise your estate plan to formally remove the ex-spouse as an heir. While you’re at it, you should also review the beneficiaries listed on any life insurance policies, pensions, or retirement accounts to ensure they are consistent with your estate plan. Estate planning is complicated when there are children from multiple marriages.  If one of your beneficiaries experiences a change in marital status, that may also trigger a need to revise your estate plan. 

2)  Births: Upon the birth of a new child, parents should amend their estate plans immediately, to include in their wills the names of the guardians who will care for their child if both parents die.  In addition, parents and grandparents alike may wish to modify the distribution of assets provided in their estate plans, to include the new addition to the family.

3)  Deaths or Incapacitation:  If any of the named beneficiaries, personal representatives, trustees, or guardians for your children, pass away or become incapacitated, your estate plan should be revised accordingly.

4)  Change in Assets: Your estate plan may need to be changed if the value of your assets has significantly increased or decreased, or if you dispose of an asset.  You may want to modify the distribution of other assets in your estate to account for the changed value or disposition of the asset.  In addition, changes in the estate and gift tax laws can occur at any time.  The current estate tax exemption of $5.12 million is set to expire the end of 2012.  Changes in the size of your estate or in the estate and gift tax laws could make some tax planning strategies advantageous to you and your heirs and devisees.

5)  Change in Employment:  A change in the amount and/or source of income means your estate plan should be examined to see if any changes must be made.  Retirement or changing jobs could also entail moving to another state, and possibly subjecting your estate to the laws of that state when you die.  If the change in income modifies your investing, saving or spending habits, it may be time to review your estate plan to make sure the distribution to your heirs and devisees will be as you intended.

Changes can cause the best estate plans to become obsolete over time. At Foley & Foley, we are here to help ensure that your estate plan is always current and will work the way that you intend by offering regular updating and maintenance of your plan through our Generations Program.   

 

 


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