Many people think that “estate planning” is only for extraordinarily wealthy families, celebrities and the like. Not so. Every family can benefit from having an estate plan of its own, one designed and implemented by an attorney who focuses on this highly specialized area of the law.
Without your own plan, the state of Arizona will control how your assets are distributed after you pass away. The state does not concern itself with making sure your wishes about “who gets what” are honored. It is not interested in minimizing costs or distributing assets in a timely manner. Instead, the state just follows established guidelines for asset distribution.
Another reason you need a plan of your own is to ensure people of your choosing will have the authority to make financial and medical decisions on your behalf in the event you become incapacitated. Without a customized plan, someone will likely need to petition the court to gain control over your medical care and hard-earned assets. This could very well be a person you would never have chosen to make important decisions for you. The court processes involved, known as conservatorship and guardianship, are expensive, time-consuming, and extremely stressful for your loved ones.
These are but a few examples of the benefits inherent in estate planning. We can design a plan capable of accomplishing a great deal more, depending on your particular needs and goals. For example, your plan could:
To accomplish goals like these, we’ll work closely with you and any of your existing advisors. Ultimately, we want you to enjoy the peace of mind that comes from having a well-designed plan in place for the future.
In 2012, you can leave gifts to other individuals upon your death worth up to $12.92 million free of any federal estate taxes.
This is the so-called estate-tax exemption. If married, both you and your spouse are entitled to separate $12.92 million exemptions. If one spouse dies and does not use up his or her full exemption, the leftover exemption amount can be left to the surviving spouse if a form 706 for portability election is filed.
A post in the Wall Street Journal notes that you can also give away a cumulative total of $12.92 million to relatives, friends, or whoever during your life without owing any federal gift tax.
Gifts made under the $17,000 annual gift-tax exclusion rule will not trigger any federal gift taxes nor will they reduce your federal gift-tax or estate tax exemptions, the post points out.
However, gifts in excess of the $17,000 “freebie” will reduce both exemptions dollar for dollar.
Most people will never reach the point of owing any federal estate taxes.
For those with very large estates, the $12.92 million exemption may not be enough. That’s where the $17,000 gifts can help. They reduce your taxable estate.
Planning for your care and estate when you are older is more complicated if you don’t have children, since children often fall into the role of caregivers.
Here are some tips to help ensure that you are well prepared if you do not have any children, according to an article in the Houston News.
As a recent article explains, “Traditional families are on the decline in America today, offset by an increase in non-traditional families.” Now more than ever, it is important for individuals to take the time to sit down and create an estate plan that fits his or her unique needs.
Blended families are families pasted together from broken families. Recent U.S. Census Bureau reports that 1,300 stepfamilies are created every day. Estate planning in blended families is particularly important because the rules of intestate succession – which apply if the person does not leave a will – do not provide for stepchildren.
For a woman who is not the primary breadwinner in a marriage, it is important that she understand her worth within the family and the home. Marriage is an economic partnership, and anything owned or acquired during the course of a marriage may be subject to equal or equitable division between the two spouses. Problems often arise when women allow their husbands to complete the financial planning, and are then economically paralyzed after a divorce. Women should not only take part in the financial planning, but also have their own estate plan in place.
Estate planning is vital for unmarried couples because the rules of intestate succession do not apply to them in most states. Therefore, it is important for unmarried couples to use estate-planning vehicles such as trusts and beneficiary forms to ensure that their partner is protected.
Parents with special needs children need to be careful when drafting their estate plans to ensure that the plan provides adequate support for their child without causing any negative consequences. As a recent article explains, the most common way to do this is through a Special Needs Trust (“SNT”).
Special needs beneficiaries often receive benefits such as Supplemental Security Income and Medicaid. These programs are need-based, so a large inheritance received outright may cause benefits to cease. The key aspect of a SNT is that it allows a person to transfer money to his or her special needs beneficiary without affecting the beneficiaries Supplemental Security Income and Medicaid benefits. This is because, legally, the trust owns the assets rather than the beneficiary.
Most commonly, parents set up testamentary special needs trusts. These trusts are drafted and put in place, but are not funded until the death of the trust creator. This means that the money remains yours until your death. A self-settled trust, on the other hand, requires funding immediately.
In order to set up a SNT, speak with an attorney who can tailor the trust to your individual circumstances. The best trust will address your needs but also remain flexible. Importantly, be sure to select a trustee that is willing and able to handle the responsibilities that come along with being a trustee. If you do not have a family member that would be appropriate, consider hiring a professional.
It is not at all uncommon for a parent to have an adult child live with him or her. This typically occurs for one of two reasons. Either the child is acting as a caregiver for the parent, or the child is unable (or unwilling!) to begin living on his own. No matter the reason that the adult child is living with the parent, this often causes problems with other children and beneficiaries when the parent passes away.
The first issue is, what happens when the parent dies? The other surviving children and grandchildren may want the individual to move out immediately so the property can be sold and the proceeds divided between the heirs. This can often cause tension between family members. If the family member living in the home wants to remain in the home, he or she will need to buy out the other siblings. If the child does not move out of the house immediately after the parent dies, the other heirs may require that child to pay rent.
If you have an adult child living in your residence, and you would like him or her to remain in your residence after your death, consider transferring the residence to him or her, then making comparable gifts or bequests for your other children. Be sure to make a clear plan for the disposition of your home and share this plan with your children.
Many people are now drafting special portions of their estate plans to incorporate their digital assets. Google, for example, has incorporated digital estate planning into its long list of offerings in order to make it easier for users to plan for their digital afterlife.
Google has recently announced its “Inactive Account Manager.” Using the manager, users can determine what will happen to their Google data – information stored on Gmail, Blogger, Google Drive, Google+, Picasa, Google Voice, and YouTube – after an account has been inactive for a specified period.
Rather than relying on a friend or family to inform Google of your death, the system allows you to set the length of inactivity after which it will spring into action. After this time has passed, Google will send you an email or text message warning that you have been inactive for your specified period. If you do not respond to the email, Google will either share your data with up to 10 trusted contacts that you previously indicated or delete all the data stored in your various Google applications.
Often, people fail to consider how to best handle their retirement accounts when crafting their estate plan. Retirement accounts, however, are typically one of the largest assets in a person’s estate. Therefore, this failure can often prove problematic for beneficiaries. A recent article encourages readers to properly plan for their retirement accounts.
Interestingly, many people forget to even name a beneficiary for their retirement, or update the beneficiary designation after experiencing a death or divorce. One wealth advisor Karen Altfest has noted, “We’re always asking clients about these accounts and they look like deer in the headlights.” Recently, Altfest assisted a client who did not realize that she did not name a beneficiary for her retirement account worth a whopping $500,000.
Although estate planners are constantly encouraging family members to discuss their estate plans with one another, some people simply refuse to do so. A recent article discusses what to do if your parents insist on staying mum about his or her estate plan.
It is first important to realize that, as an adult child of your parents, you have no right to access any of their estate planning or financial information. For example, you cannot call you parent’s insurance company to determine what type of insurance your parents have, or call the bank and determine how much your parents have in savings. To access any of this information, you must have authority
There are two ways to gain this authority. First, your parents can designate you as their power of attorney. Many powers of attorney documents have a springing provision so they do not take effect until your parent becomes incapacitated.
If a parent become incapacitated without first having executed a power of attorney document, you will have to ask a court to grant you a conservatorship to tend to his or her financial accounts. It is often difficult for conservators to pick up the pieces of a parent’s financial life, however, because the people who require conservatorships often did not organize information on their financial affairs for their conservator.
One important facet of estate planning is beneficiary designations. These designations are common on documents such as insurance policies and retirement plans. Although it may seem simple to put a name on a designation and forget about it, this can often lead to adverse consequences.
We all have mountains of paperwork we file away each month: bills, retirement account statements, investment statements, life insurance policy value updates. Some of us now also have many accounts online which require passwords and usernames for access instead of paper statements. When someone passes away, finding all the accounts, insurance policies, and necessary information to close an entire estate can be a monumental search for information.
Creating an inventory of assets not only helps the person who is responsible for closing your estate, but it can also be an invaluable learning experience for yourself. You may have more than you realize, and you can’t prepare a thorough estate plan unless you fully understand what you have to give away.
The best way to stay organized for yourself and your loved ones is to keep an updated list of assets with account numbers, named individuals on the accounts/titles/deeds, and account contact information. You should also have a list of every online account along with username and password information for your own access and that of your personal representative.
Many people create an inventory when they go through the process of initially planning their estate, but an inventory should be updated annually. One easy way to annually update your inventory is to collect the statements you get in the mail at the end of the year for tax purposes. Place them all in a folder as they come in the mail and use the contents of the folder to write or update your inventory.
An experienced estate planning attorney can help you create an inventory of your assets and plan for asset preservation and distribution.
With people increasingly living their lives online, digital assets are quickly becoming a substantial component of many people’s assets.
Most people assume that Internet users skew toward younger demographics. While this is true for platforms such as Instagram and Twitter, older Americans have quickly caught up with their younger counterparts on other social sites. For example, 69 percent of adults used Facebook in 2022. Breaking that number down even further, Pew Research Center discovered:
● 77 percent of adults aged 30 to 49 use Facebook
● 73 percent of adults aged 50 to 64 use Facebook
● 50 percent of adults aged 65 and up use Facebook
This demonstrates the growing comfort and reliance all Americans feel with social media.
Digital assets fall into a number of categories. Yes, it includes digital devices, such as smartphones and computers, but it also includes the files within those devices. These include books, documents, photos, videos, and, yes, your social media accounts.
Beyond this, digital assets encompass your entire online presence, such as:
Many of these virtual assets hold real-world value, whether monetary or sentimental. What’s more, if left unattended, they may become vulnerable to hackers and present a security risk. As such, they need to be included in your estate planning.
With so many digital assets out there, and so many of them holding actual monetary value, knowing what to do with them is vital. As of 2022, most states have statutes pertaining to an estate’s digital assets.
Of course, you can still include your digital assets in a will or trust, or can list them in your power of attorney.
Create a list of your online accounts, including usernames, passwords, and security questions. Guard this list carefully, as it contains highly sensitive information. It will probably take some time to come up with every online account you have, but start with:
Include instructions for your executor on how you want each account handled, such as whether to delete the account completely.
Your executor (also called personal representative) is the agent you nominate in your will for the court to appoint to distribute your assets after your passing. This must be a person whom you trust to honor your wishes. In addition, you may want a different executor for your digital assets, as he or she will have access to a lot of personal, sensitive information, as well as having the responsibility for handling it.
Common duties for a digital executor include:
Make sure you fully arm your executor to fulfill his or her role by providing all the information needed to do so. You can use a password management application. Then, include the password to this site with your estate plan. One warning: make sure this is one heck of a strong password.
On January 31st of 2014, the Chinese celebrated the Year of the Horse. Which got me thinking about famous horses: Black Beauty, Secretariat, Trigger, Sea Biscuit, Silver, the Budweiser Clydesdales, Man O’ War, Pokey, and even the Trojan Horse.
That famous tale, expertly depicted in the Brad Pitt film Troy, recounts how the Greeks hid warriors inside a huge wooden horse they had constructed, left it on the beach, and pretended to sail away. The Trojans unknowingly and arrogantly pulled the horse behind their city walls as a victory trophy. After the Trojans fell asleep, the Greeks climbed out of the horse and opened the city gates and destroyed Troy. Those Greeks were pretty crafty.
Today the term Trojan horse means a trick that induces someone into thinking an object is useful or harmless. There are many Trojan horses in estate planning. Here are three examples.
Ever heard the phrase “penny wise, pound foolish?” Or “you get what you pay for?” That is what I think of when I see these do-it-yourself documents that you can purchase at an office supply store or online. Although the majority of these claim they are created to conform to your specific state’s rules, most of the time they are completely deficient. They are the extremely basic in instruction and do not cover a variety of situations.
These documents are a Trojan horse because people believe that since they have created estate planning documents, they and their families are well protected. Nothing could be farther from the truth. In some cases, no planning at all would have better protected their family.
I often hear, “I have a trust so my assets are protected.” No they are not. A revocable living trust provides no asset protection to the Trustmaker. Or “I have a will so my family won’t have to go through probate.” Untrue. Whether or not your family goes through probate depends on what assets you have that are probate assets- regardless if you have a will.
Your family and life are not simple and basic. Your estate planning documents shouldn’t be either.
When I do public presentations, I tell the audience that other attorneys are not my competition. My competition is your neighbor, hairdresser, or those answering the Nextdoor question you posted. Why? Because people seem to readily believe any “legal” information they hear—regardless of the source. The problem is much of the advice is horrible, or because the facts or law would not apply in your particular circumstance.
I recently saw a post on Facebook that stated how she recently wrote a letter to her sister telling her she would like her sister to raise her children should something happen to her. Several people chimed in on how great an idea that was so that a judge wouldn’t decide. Not true, a judge will still decide who raises this woman’s child because in Arizona the only place to nominate a legal guardian for your child is in a properly executed will.
As an estate planning attorney, I am smart enough to know I shouldn’t review a real estate transaction contract. Or defend a medical malpractice lawsuit. Or prepare corporate merger documents. These are not my areas of specialty.
I once heard of a non-estate planning attorney who created a revocable living trust for a couple. The trust was fraught with errors that had major tax consequences as the successor trustee was not a US resident or citizen. The attorney likely did not know that was huge mistake. The client did not know they had a trojan horse.
When I had a partial retina tear and needed eye surgery, I didn’t go see my family nurse practitioner. I went to a surgeon who specialized in eye surgery.
Your estate planning documents should be created by an estate planning attorney. Period. Otherwise, what you have is likely a Trojan horse, inducing you to think that the documents are useful, when in reality they may open the gates to the court system.
Because of the high federal estate tax exemption, fewer people need to plan to avoid federal estate taxes. Estate-planning attorneys have shifted their attention to utilizing estate planning tools to reduce income taxes instead.
For those who are in the top tier tax brackets, this is a welcomed change. Unlike the federal estate tax that only affects .01% of individuals, income taxes affect the vast majority of citizens. Therefore, income tax planning is important in terms of helping Americans to retain more of their wealth.
One poplar income tax planning maneuver is planned loans to family members in low tax brackets. Any income from the loan is taxed in the lower tax bracket, and then the lender receives the full amount of the loan back following the life of the loan. Therefore, rather than paying nearly 50 percent in taxes on the income from invested money, the borrower would pay a mere 15 percent if he or she is in a low tax bracket.
The expense of dying as well as the time leading up to it can be very costly.
If you are thinking about drawing up an estate plan — and if you don’t already have one, you should be — there are several questions you will need to ask yourself. Some of them may make you uncomfortable.
First, you have to start thinking seriously about your own mortality. Or about the possibility of your developing Alzheimer’s. So you may want to think through some of these questions before you meet with your estate planning attorney, as he or she will likely be asking you most of them, says an article in Forbes Magazine.
These are just some of the issues you will have to begin thinking about when it comes to drawing up an estate plan. They aren’t easy, but they are necessary. Don’t wait until you are in the office of your estate planning attorney to start thinking about these issues.
There are several myths about estate planning that can cause confusion and, if you believe them, can end up causing problems for your family, says an article on Forbes.com. Among them:
While there is a $12.92 million exemption in 2023 on the estate tax, you don’t need a multi-million-dollar estate to be helped by an estate plan. Estate planning also deals with making sure that your finances are taken care of if you are incapacitated, that decisions about your health care are carried out according to your wishes, and that your heirs are taken care of when the time comes. Estate planning is for every adult.
Young people die, too.
Any gift that tops $17,000 (beginning in 2023) in a given year reduces the total lifetime gift and estate tax exemption by that amount. Only after you exhaust the total lifetime exemption (currently $12.92 million) will you have to start paying.
If you pass away without a will, the state will apply its laws of “intestacy” to determine who gets what. If you don’t like your state’s default laws, you will need to create a will.
Most trusts do not in and of themselves help you avoid estate taxes. However, certain trusts can be used as part of a strategy to reduce and even avoid tax liability. Check this out with a qualified estate planning attorney.
Estate planning is a very complicated area of the law. This is a rather unfortunate fact when considering that estate planning is an area of the law that applies to virtually everyone. Here are some frequently asked questions.
Estate planning is all about protecting yourself and your loved ones. Essential to estate planning is ensuring your goals are met, such as avoiding the probate court, transferring assets to chosen beneficiaries in the manner you want, and choosing trusted family or friends to make healthcare and financial decisions for you if you are incapacitated.
Cholewka Law has been providing thoughtful legal representation to families in Gilbert and surrounding communities since 2010, and has specialized in estate planning since 2013.
A will and estate planning are not the same things. While they generally go hand-and-hand, a will is just a small part of the estate planning process. For most people, a well-prepared estate plan involves much more than only a will.
Sibling disputes often erupt after a parent dies, and it is time to divide up the assets of an estate. Sibling disputes can result in lengthy and expensive legal actions. However, a little forethought from parents can avoid such disputes, or they can be addressed by siblings who employ savvy strategies after a parent dies.
Arizona law gives some protection to a surviving spouse and minor children against disinheritance. It may not be possible to entirely disinherit these people. If, however, you make a Will and leave all your estate to other people or organizations, your spouse and minor children may receive only the minimum amounts guaranteed by law.
Note: One-half (½) of your community property belongs to your spouse, and you cannot dispose of that portion by your Will. Additionally, joint tenancy with right of survivorship property automatically belongs to the surviving joint tenant or tenants upon the death of the first joint tenant. These matters are rather complicated, and if you have questions about them, you should see a lawyer. It is possible to completely disinherit an adult child (one who is age eighteen (18) or older).
Pets cannot own property, so you cannot leave property directly to your pet. However, you can create a trust for your pet’s benefit, which can ensure your pet has a good life after you die. Use your estate plan to make sure that your pet goes to a caring person or organization, and the new caretaker has the resources to take good care of him or her.
With people increasingly living their lives online, digital assets are quickly becoming a substantial component of many people’s assets. Adding your passwords and security details to your estate binder with directions for retrieval is a great way to protect your assets and ensure that your currency is not lost. You should give your Power of Attorney, Trustee, and/or Personal Representative of your will the legal right to handle and control your digital assets.
Careful estate planning can include a Personal Representative that you trust with all your online accounts and passwords. A thorough discussion with your Attorney and your Personal Representative can help you decide if you should keep these accounts after your death or have them deleted. Some platforms, like Facebook, allow you to make these decisions before you die by adjusting your account settings.
Not necessarily. A dementia diagnosis doesn’t necessarily mean you’re unable to make important decisions at a certain point in time. But as symptoms of dementia get worse over time, you may no longer be able to make decisions about things like your finances, health, or welfare. This is sometimes referred to as lacking mental capacity. If you are worried about this possibility or if you have been given the news that you have dementia, you should immediately call your Attorney and make arrangements to discuss your options.
Yes! Planning for your care and estate when you are older is more complicated if you don’t have children since children often fall into the role of backup agents and caregivers.
It is also important to consider the financial impact your death will have on your loved ones. Through discussing this with your estate planning attorney and financial planner, you can determine whether you have enough life insurance to care for your loved ones.
Death planning includes instructions for paying your debts and who will receive the balance of your assets. This is an important aspect of a solid estate plan and one in which our legal team will be more than happy to help you prepare.
Disclaimer: The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship. IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
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