FROM THE DESK OF:

Attorney Jack Alpern

After practicing estate planning law for 40 years and having dealt with many families after loved ones have passed away, I continue to be stunned by the amount of family conflict which arises about “who gets what”
when it comes to household goods and personal belongings.  Many of us do not realize that the division of so-called little things – jewelry, collections, paintings, pictures, tools – can fracture families when parents pass away.  Arguments often erupt even before the departed loved one is buried. Many times, families never speak to each other
after the dust settles.  How sad!

All of this can be avoided by clearly spelling out in your estate planning documents – wills or trusts – how these specific things should be disposed of.  The expression “fair does not necessarily mean equal” often comes to mind for me in advising clients how these items should be divided.  Can’t decide who should get what?  Well, one solution is to let the children draw straws to see who gets to select an item first, followed by a selection of one item at a time by each person.  It is important to remember that you must define an “item”; that is, does an item mean just one piece or does it apply to a set of pieces (for example, a dining room table and chairs)?  Another way to handle the situation is to
hold an auction among family members, with each person bidding, and the highest bidder wins.

In any event, it is also important to spell out in your will or trust whether or not the value of the item selected by an heir gets subtracted from his or her share.

When it comes to disposing of personal possessions at death, the worst thing we can do…is nothing!

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

COMPLIMENTS OF THE ALPERN LAW FIRM

By The American Academy of Estate Planning Attorneys
www.aaepa.com • blog.aaepa.com

You and your spouse have worked hard to save for your golden years. But have you planned for a long, secure retirement if one of you outlives the other? Study after study shows that women tend to fall behind men when it comes to planning for retirement, and there are a great number of reasons for this situation.

During their pre-retirement years, women traditionally have not earned as much as men, and mothers have often curtailed their career plans in order to raise children. This translates into less opportunity to save for retirement needs. Just as significantly, women statistically live longer than men, meaning that retirement tends to last longer for women. Further, women are more likely to need long-term care and other services as they join the ranks of the more substantially elderly.

As a married couple, it’s essential to approach retirement planning with the goal of ensuring that the spouse with greater longevity, usually the wife, is set up to enjoy a secure, worry-free retirement. This goal can be accomplis hed by paying special attention to certain key financial areas.
     •    Social Security. Did you know that when you choose to start receiving Social Security benefits can make quite a difference in your retirement income? Delaying retirement can increase your Social Security benefit by as much as 8% per year. This is especially significant when one spouse was formerly the higher wage earner. If, for example, the husband earned more during his working years, his widow could claim his higher Social Security payment when he passes away instead of relying on her own lower monthly benefit. So, the longer the higher wage earner waits to retire (ideally until age 70), the more retirement income the surviving spouse will have ultimately.
     •      Life Insurance. Life insurance isn’t just for families with young children. If you qualify for a policy, the death benefit can be a lifesaver to your surviving spouse, who will be free to put the funds toward household expenses, medical costs, or reducing debt.

     •      Annuities. If you are considering purchasing an annuity to provide an additional income stream during retirement, you may want to look into one that carries a “joint life” benefit. Under this arrangement, annuity payouts continue as long as either one of you is living.

     •      Long-Term Care Coverage. Women not only tend to outlive their husbands, but their longevity means that they are also more likely to need long-term care at some point during their retirement years. Whether it’s a nursing home, an assisted living facility, or a home health care arrangement, long-term care is expensive. If you qualify, a well-chosen policy of long-term care insurance can help protect your family’s assets and pay for care.

Aside from seeking reliable advice from a qualified professional advisor, perhaps the most effective way to ensure that both you and your spouse have the best possible retirement plan in place is to make planning a joint effort. Both of you should have a good grasp of your family’s finances, and you should work together to make the major decisions that will affect both of your lives during retirement.

About Our Law Firm
The Alpern Law Firm is devoted exclusively to estate planning. We are members of the American Academy of Estate Planning Attorneys and offer guidance and advice to our clients in every area of estate planning. We offer comprehensive and personalized estate planning consultations. For more information, to attend an upcoming FREE seminar, schedule an appointment or obtain a FREE on-line report, please contact us at 1-(800) 307-5544, and ask for extension 115, or visit us online at www.alpernlaw.com.

About the American Academy of Estate Planning Attorneys
This article is taken from one written by the American Academy of Estate Planning Attorneys. The Academy regularly publishes articles on various estate planning topics as a free resource to consumers. These articles are intended as an overview of basic estate planning topics and issues, and not legal advice. We recommend that you consult with a qualified estate planning attorney to review your goals.

The Academy is a national organization dedicated to promoting excellence in estate planning by providing its exclusive membership of attorneys with up-to-date research on estate and tax planning, educational materials, and other important resources to empower them to provide superior estate planning services to families in their communities. The Academy expects members to have at least 36 hours of legal education each year, specifically in estate, tax, probate, and/or elder law subjects. Since 1993, the Academy has been a highly-regarded and sought-after resource for attorneys and consumers alike, and has been recognized by Consumer Reports, Suze Orman in her book, 9 Steps to Financial Freedom and numerous times by Money Magazine.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

Estate planning is an ongoing process – when life changes, so should your plan.  Many believe that once estate planning documents, such as a will, living trust or a durable power of attorney, are executed, their estate plan is complete.  This is not the case – in fact, there are several mistakes that people tend to make in estate planning:

1.         Failing to keep documents up to date.

Changes such as marriage, divorce or the death of a spouse, beneficiary or executor should trigger a review of your estate planning documents.  All too often, spouses name each other in their documents, and when a spouse is lost, during the survivor’s period of grief, the documents are not updated.

2.         Failing to properly use gifting strategies.

Making lifetime gifts can be a powerful estate planning tool – but it must be done properly and as part of a comprehensive estate plan.  In addition to the tax advantages of gifting, you must consider other related isslues, such as whether or not gifting will affect your ability to have the State of Ohio pay for your nursing home expenses after you make gifts.

3.         Failing to update beneficiary designations.

Your retirement plan, life insurance policy and more have beneficiary designation forms.  It is important to not only keep the primary beneficiaries updated, but you should have secondary or contingent beneficiaries named in the event that the primary beneficiary has died.  Since these forms were often completed years prior when an account opened or a policy purchased, it’s an easy task to overlook.

4.         Failing to plan for the expense of nursing homes or long term care.

With nursing home expenses in Ohio now topping $70,000 annually, it is essential to address these costs sooner rather than later.  Not only is there long-term care insurance to consider, but Medicaid planning can help preserve family assets while qualifying for this needs-based benefit.

5.         Not working with an expert.

All too often, people rely on second-hand advice to address their estate planning needs.  You should have expert advice based on your specific needs, and a meeting with an estate planning attorney can save you and your heirs time, money and heartache in the future.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

It seems to be practical – opening a bank account as “joint tenants with rights of survivorship” with a spouse – but did you know that holding a joint account impacts your family when you pass away?  The ‘ownership’ of the account determines what happens to the account upon the death of one owner.

For example:  If a husband has a credit card solely in his name and passes away, the account is settled during probate, which is the legal process that administers an estate.  The debt is either paid off, or in the case where an estate does not have enough money to pay all of the bills, is not paid in full, but normally the credit card company could not then go after family members for the debt.

On the other hand, if that credit card account was a joint account with both the husband and wife listed, the bills could then become the responsibility of the wife should the husband pass away.  This is not only the case for the ‘debt’ accounts, such as credit cards and loans, but the ‘asset’ accounts, such as stocks, savings accounts and more.  In that case, joint ownership can be a helpful estate planning tool to allow these accounts to avoid probate.

It’s important to realize that how your accounts are set up, even how your home is owned, impacts your future and your family’s future when you pass away.  Working with an estate attorney will give you and your family an overview of how well you’re prepared for the host of issues you will face if one of you dies suddenly. Debt is only one piece of that puzzle.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

If you have a cause or organization that is important to you, make sure you mention this to your estate planning lawyer during your first meeting.  It may be a win/win to leave  a charitable bequest in your will or trust to a non-profit. 

There are several estate planning tools that can be used, including:

1.         Will Bequests

Leaving an outright gift to a nonprofit or charitable organization as a bequest in a will is one of the simpler estate planning techniques, and may be appropriate for modest gifts. 

2.         Charitable Remainder Trusts

Normally a charitable remainder trust is used for highly appreciated assets, such as stocks, as it can eliminate immediate recognition of  capital gains on the sale of those assets.  The assets are placed in a trust to earn annual income for you during your lifetime, and you can access the income as needed. When you die,  the remaining funds are paid to the charity.  You also qualify for an income tax deduction when the trust is created. Finally, you will have removed the assets transferred into the charitable trust from your taxable estate at death.

3.         Charitable Gift Annuities

Gift annuities are typically backed by the charities themselves and they allow you to make a tax-deductible contribution.  In exchange, you receive regular payments for the rest of your life. Ideally, about half of the initial gift remains with the charity when you die. 

But the economic downturn could cause some charities to have trouble meeting their annuity obligations. Some have seen the reserve funds they use to ensure payouts shrink, prompting them to turn to insurance companies to back up their obligations.  In a worst case scenario, if a charity goes bankrupt, creditors ahead of you in line could have a claim on assets intended to fund your payments.  Since the gift is irrevocable, you cannot get your money back if the charity runs into trouble.

If leaving a legacy of giving is one of your estate planning goals, work with an estate planning attorney to make sure it is a truly a win/win situation.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

You don’t need to be wealthy to have an estate plan, but what you should have is fiscal fitness within an estate plan.  What do you need in a fiscally fit estate plan?

A Will

A will is necessary even if you are using a trust in an estate plan, since the will is used to name an executor for an estate as well as a guardian for minor children.  A pourover will is used together with a trust to transfer any property that may not be held within the trust after you pass away.  If the will is the primary estate planning document, it should also document how you would like your property distributed.

Life Insurance

Life insurance can play an important role in estate planning.  It can be used to not only leave money to the family to replace your income, but for other purposes, such as taking care of funeral expenses, estate probate expenses or estate taxes.

Retirement Account

A retirement account can not only help fund your retirement, but upon your passing the balance passes to a named beneficiary, such as a spouse, and can help take care of them later in life.

A Durable Power of Attorney

Incapacitation planning is an important aspect of estate planning.  Plans should be made to handle your personal and financial affairs in the event you are no longer able to do so on your own.  A durable power of attorney that names a proxy or attorney-in-fact can help avoid the intrusiveness and expense of guardianship proceedings.

Advance Medical Directives

Advance medical directives allow you to document your wishes concerning end-of-life treatments and the use of life sustaining measures.  Besides lightening the burden of these decisions on family, they help avoid the expense of litigation should there be a disagreement concerning your care while you are incapacitated.

The fiscal fitness of your estate plan depends on your personal and family situation.  An estate planning attorney can advise you on the tools that can meet your family’s estate planning needs and goals.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

An estate plan is what’s known as a living plan, meaning it can change with you as life changes occur.  Estate planning documents should be reviewed every few years, but there are also five life changes that should trigger a review or update to an estate plan.

1.         Marriage or divorce

Your spouse has rights to an estate under many state laws.  Obviously a change in marital status needs to be addressed in estate plan.

2.         Birth of a child

Even before a child is born, you need to begin considering who you would like to choose as a Guardian should the unthinkable occur.  This task can stop many parents in their tracks, but it would be even worse to have a court make that choice for you.

3.         Moving to a another state

The laws involving estates, wills and trusts are made at the state level.  Should you move to another state, your estate planning documents should be reviewed by a local estate planning attorney to ensure they are consistent with any differing state law.

4.         Death of an Executor or Beneficiary

While you should have a successor Executor named in a will, should any change occur with an Executor or Beneficiary, the will should be updated to reflect it.

5.         Buying or selling a significant asset

A large asset may need special handling within an estate plan, such as a primary residence, a business or a large stock portfolio.  For example: You may want to establish a Living Trust to handle a large portfolio of financial instruments where you may appoint a Trustee to manage the portfolio should you become incapacitated and to smooth the transfer of the assets while avoiding probate upon your passing.

Review of an estate plan may not be on the top of everyone’s ‘to do’ list, but it’s necessary to ensure that these documents stay current and meet your estate planning goals.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

There’s been much media attention on estate taxes in 2010 due to the lack of a federal estate tax during the year.  What happened to the estate tax?  In 2001, Congress voted to raise the estate tax exemption while cutting the actual rate of the tax. This act resulted in a repeal of the tax in 2010.

This was unexpected, as the law was intended to be only a temporary measure, and it was assumed that Congress would pass a new law to enact appropriate estate tax levels before the 2010 expiration, but it did not.  Instead, the estate tax was actually eliminated as of January 1, 2010.  But, unless Congress acts very quickly, the elimination of the estate tax is scheduled to expire at the end of 2010.

This means that the provisions of this 2001 Tax Act that reduced the tax and raised the exemption limit will no longer be effective on January 1, 2011, so the tax structure as of 2001 will take effect again.  In other words, the federal estate tax is scheduled to return with a vengeance on January 1, 2011, with a tax of up to 55% on estates valued at more than $1 million.

So what does the estate tax situation mean to estate planning?  While the future of estate taxes remains uncertain, there are still estate planning strategies available in the interim.   An estate planning attorney can help you review and update your estate plans to ensure they are viable under the current tax laws, as well advise you of future strategies for upcoming changes. 

With the federal estate tax exemption slated to be just $1 million in 2011, many families stand to benefit from estate planning, which can minimize or eliminate those taxes, now more than ever.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

Normally, a person receiving an inheritance, the beneficiary, does not have to pay federal estate tax on their bequest, although the estate itself may be subject to estate taxes.  But what happens if the beneficiary then chooses to sell the property?

 Determining the cost basis of the inheritance will determine if the sale of inherited property is taxable.  A basis is the term that tax law uses to refer to the amount of investment in property.  The basis of property you purchase is usually its cost or purchase price, along with certain other expenses allowable in acquiring the property.  For inherited property, the fair market value of the property at the date of the individual’s death is generally used as the basis (although for farms and businesses this may not be the case).

For 2011 and thereafter (unless Congress changes the law), the manner in which the cost basis of inherited assets is allocated among the inheritors is very different than in previous years.  Getting advice on this important issue is paramount.

When property is received as an inheritance, the beneficiary’s basis is often termed “stepped-up” or “stepped-down,” meaning the beneficiary’s basis of the inherited property is the value on the date of the donor’s death rather than the deceased’s original basis in the property.  This is important considering a deceased’s basis may be a purchase price from several decades before their passing. 

The calculation of a beneficiary’s cost basis is calculated on the property’s value at the time of the donor’s passing, and a beneficiary will pay capital gains taxes only on any gains or losses realized on the asset after the donor’s death.

Estate planning and inheritance planning take into account the IRS guidelines that govern both gifts and inheritances.  Working with an estate planning lawyer knowledgeable in estate and inheritance taxes can not only save your estate money, but reduce the financial impact on your beneficiaries, ensuring that your inheritance is a blessing, not a burden.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

A will is a must-have for any estate plan, but a will does not normally distribute each and every piece of personal and real property owned by an individual.  A Residuary Clause is a provision in a will that disposes of property not expressly disposed of by other provisions, and is often overlooked by those who choose to prepare a will on their own.

Residuary estate is a term used in probate law to identify the portion of an individual’s estate that remains after all specific gifts and bequests have been made and all claims of the estate are satisfied. A will often contains a residuary clause that gives the right to the residuary estate to a named beneficiary or several beneficiaries .   Not only does the Residuary Clause handle property that may have been overlooked or not otherwise disposed of;  it can handle bequests that are void due to the death of the beneficiary.

For instance, if a will bequeaths a diamond bracelet to your sister, but your sister has passed away, the bracelet becomes part of the residuary estate.  The clause will also cover property that is acquired after your will was written, and therefore not specifically mentioned within the will.

If a will omits a residuary clause, the assets not left specifically to anyone would pass to heirs through the intestate succession laws of your state, which apply to the distribution of property for those without a will.  However, this would occur only after delays and probate court involvement.

No matter how small your residuary estate may seem when you draft a will, a Residuary Clause needs to be included.  Working with an estate planning attorney ensures that wills are properly written and that they address all the necessary aspects of an estate.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.