Estate Tax Exclusion is $5 million per person

For 2011 and 2012, the estate tax exclusion will be $5 million per person and $10 million per couple. It appears that the new law also allows for the exemption to apply to anyone who died in 2010 if the estate wants to have the step up in basis. It appears also that one spouse can use another spouses exemption to some extent in a portability provision. More information to come.

New Tax Law Passed by the House and Senate

Well finally we have some new tax law -- if the President signs it. It appears that the estate tax exclusion will be $5 million for just two years -- but we need to wait to see what the law is when it is finally signed. The two year period may be good for income tax issues and the economy but for estate tax issues, the uncertainty continues.

Tis the Season To Remember Family

This is the season to visit family. This is also a good time to think about which family members would you rely on to take care of your finances if you became ill. Also consider which family members would be most helpful with your doctors and health care providers. Even if you are married, you need an alternate to your spouse-- in case you both are injured or ill at the same time. You also want to be sure that your spouse has full authority and will not have to be battling family members to help you. Powers of Attorney for finances and health care is the assurance that the right people will be your agents authorized to help you.

Small Funding Errors Frustrate Trusts

Once you have a trust, be sure all of your accounts are titled in your name as trustee of your trust. If you want to keep your name on the account for some reason, then at least fill out a "pay on death" or "transfer on death" form with your financial institution and list the trust. You do not want your loved ones to be short on cash or not have access to assets, because the accounts remained in your name and a probate is needed.

Have you provided for your loved ones?

Many of us with grown children, rely heavily on our friends and want to leave a legacy to our friends as much as our children and family. To do this, we can use a trust or even pay on death designations on accounts. "POD" accounts are useful but could create confusion if a friend is listed as a POD but our Wills leave everything to our family. Be sure that your Will references that any accounts listing a POD or designated beneficiary go to the named beneficiary, even though the Will directs other assets to go family.

Should my powers of attorney be immediately effective?

Yes, your financial powers of attorney should be effective upon signing and if you become incapacitated. You want to have your named financial agent to be able to help you without a doctor having to declare you incapacitated. Once someone is declared incapacitated they lose the legal right to change their documents or handle their affairs. It may be that you are only sick and do not have the energy to argue with creditors. Even the elderly who have an onset of dementia have lucid times as well as times of diminished capacity. Therefore, name a trusted person as your financial agent, and a trusted alternate, and have them be able to help you immediately.

Do you take care of the Grandchildren or Children?

Many of my clients wonder if their trust should provide for their grandchildren directly or just their children. If the children are responsible then it is a good idea to leave assets to the children and let them take care of their children (your grandchildren). If the grandchildren are very young, then money will have to be left in trust. This could restrict money their parents might need, for various reasons out of their control, such as a bad economy or medical emergency. Also, with minor children, it is not clear if they will grow up to be responsible or if having a trust will distract them from school or employment. However, if a child is not responsible and will not take care of his children, then a trust for the grandchildren, where an uncle or aunt can oversee the trust, can be a great idea. This also applies to whether to leave money to nieces and nephews or brothers and sisters.

Estate Planning and Step-Children

If you have step-children, then you most certainly want your spouse to have a Will. If your spouse dies without a will, then one-half of the community property will go to the step-children, not the surviving spouse. If the assets are held "with right of survivorship" or a death designation, then the surviving spouse can receive the assets. However, to be sure there are no surprises, a Will is a must any time there are step-children so everyone is clear what assets are to go to the surviving spouse and what assets are to go to the step-children.

Do you ever have problems communicating with your Doctor?

When we are sick and needing information from our health care provider, sometimes it can be a real challenge to get our call in and get a response back that is helpful. It is that much more difficult if you are SO sick that you can barely call on the phone. This is the reason that a Health Care Power of Attorney is vital. You can give the legal authority to the person you want to follow up with your doctors or coordinate care at the hospital. If you are married, your spouse does not have any extra authority to get information than that of other family members or friends. A Health Care Power of Attorney is still needed. Also, don't forget to list an alternate in case something happens to both you and your first agent listed.

Does your Deed Realy Avoid Probate?

I find that many couples who think their deed to their home will avoid probate, find out too late that it does not. Even if the other owner is your spouse, you still need the deed to say it is owned "with right of survivorship." Otherwise, if one of you dies, the other will have to go to court and have it probated. In addition, title companies requires that the owners each sign an "acceptance" saying that they agree to set aside their heirs' rights so the house can go to the other joint tenant or owner. Without the acceptance language on the deed, a title company will likely require probate before the house can be sold with title insurance. If your house is titled in the name of your trust, problems still can occur if the legal description was not complete or the names of the trustees and initial beneficiaries are not listed. When you seek an estate plan, you will also need your deeds checked to make sure probate is avoided, if that is your goal.

Same Sex Couples--Legal Solutions for Estate Planning Problems

Same sex couples truly can benefit from estate planning. A trust and powers of attorney can give legal authority to your loved one -- to help you if you are ill, incapacitated or even make sure the loved one receives your assets the way you want. For more information see the article on my website under About Living With People, Domestic Partners Should Not Be Legal Strangers.

Help Me Raise Money for MDA

I am helping raise money for MDA. I'm excited to tell you that I have chosen to serve as an MDA Jailbird and am being Locked-Up...that's right, I'm going behind bars to help Jerry's Kids©. In order to be released on good behavior, I need your help to raise my “bail.”

My bail has been set at $3,200.00 and if everyone I know makes a tax-deductible donation, I’ll reach my goal quickly!

To make a secure, online donation before 08/19/10, go to www.joinmda.org/telupw2010/sravenscroft/.
Thank you for your consideration.

10% Discount through August 31, for Estate Planning Fees

Mention this blog or my Facebook page and receive 10% discount on fees related to the preparation of estate planning documents. Good through August 31, 2010.

Its Hot but not Too Hot To Take Care of Your Family

Taking care of your family with the proper will and powers of attorney can give you peace of mind. Make sure the right persons take care of your assets and health care if you are sick, incapacitated or if you die. Now offering a 10% discount through August 31, 2010, on fees related to an estate plan by mentioning this blog, or my Facebook.

Three ways to avoid Probate for Real Estate

Would you like to avoid the probate court process, upon your death, with your home or other Arizona real estate? This can be done by (1) deeding the property to your revocable trust; (2)recording a beneficiary deed and listing your beneficiaries; or (3) titling the property as joint tenants with right of survivorship or community property with right of survivorship. With a trust, the trustee can execute a deed to your beneficiaries upon your death. With the beneficiary deed or "right of survivorship" deeds, the beneficiaries simply record your death certificate to vest title. Be careful though, with the "right of survivorship" deeds, the other tenant has immediate ownership interest and the tenant's creditors can reach the property. Thus, if you really do not own the property with someone else, use the trust or beneficiary deed.

Do You Trust Your LLC?

In these economic times, many people are forging into their own businesses and forming LLC's. However, many people are forgetting to integrate their estate planning, specifically their revocable living trust, into their LLC.

The Arizona Corporation Commission requires a minimum to create an LLC; submit the requisite Articles of Organization, pay the filing fee and publish the Articles after being approved. This minimum does not protect you from having to seek court intervention if a Member of the LLC becomes incapacitated and does not avoid the need for probate if a Member dies.

If you have gone to the effort to have an estate plan, then be sure that your Member's interest is titled in your trust. By having your Member's interest held in trust, if you become ill, incapacitated or die, your Successor Trustee can act on your behalf and you can avoid court involvement in such a situation.

Probate does not keep your privacy

When a probate is filed, all of your legal heirs must be notified. Legal heirs are those who would receive your assets if you did not have a Will. Thus, even if you want your assets to go to friend or certain relatives, if probate is necessary, all legal heirs will receive notice of it. To keep matters private, you can avoid probate several ways: pay on death designations, beneficiary designations or a revocable living trust. Even if you have a trust, to avoid probate, you need to be sure all of your assets are titled in your trust -- that is, the asset should be titled in your name as trustee of your trust.

Easing the Burden on Your Family

When we are ill, the last thing we need is for our family to be blocked from helping us -- with our medical care or with our financial needs. Powers of attorney are necessary so the RIGHT people can assist us when we are sick. Having a Trust makes sure that our families do not have to go through the court system just to get access to our assets. Trusts put your goals simply; include guidelines and motivation for going to college, buying a house or making sure investment are not risky. A trust can make sure that the right person is overseeing your money for your children and that the right people are the beneficiaries of your hard-earned assets.

Lion of the Year Award

Thank you Phoenix Biltmore Lions Club for your support and for the award of Lion of the Year 2009 and 2010. It has been exciting working with a Club that supports so many good causes-- glasses for children in need; Christmas gifts and scholarships for families of those serving abroad in the National Guard. It is an honor to be a part of the club.

Are your retirement account designated beneficiaries properly listed?

People with a revocable living trust often forget to use the trust when they fill out their designated beneficiary for their IRA or 401K or other qualified retirement account. The participant's spouse is normally the first beneficiary. The second beneficiary should be the Trustee of the participant's revocable living trust.

Even if the trust is intended to pay out to your children, listing the trust avoids having to have a conservatorship because a minor is a beneficiary. A minor in Arizona can only receive $10,000 in a year so if an IRA or 401K is going to pay out more than $10,000 to the minor, a conservatorship has to be set up with the court and last until the minor is 18.

If you list the trust, then the trustee can hold the retirement account benefits without court involvement. If you are leaving your retirement account to adult children, then list the adult children as the second beneficiary after the trust. Then, if an adult child predeceases you, his share can go to your minor grandchildren without the court being involved. If the adult children are all alive, the Trustee can disclaim or distribute the qualified retirement account to the adult children and it can even be stretched over their life time.

What is going on with the federal estate tax law?

I heard that someone kept their loved one alive through January 2 on machines just to take advantage that there is no estate tax law this year. Unfortunately, there also is no step-up in basis at death and so that family could be facing a very high capital gains tax. This was not a concern when there was an estate tax because there also was a step-up in basis at the time of death.

However, Congress is not done with confusing us all. Legislation is being contemplated that will reinstate the estate tax with a $3.5 million exclusion. It likely will be retroactive or at least an alternate option for those estates where someone died this year.

The reinstatement of the estate tax with the $3.5 million exclusion, as it was in 2009, could be good news because next year the estate tax comes back with an exclusion of only $1 million. The estate tax with the exclusion of at least $3.5 million has been one of the fairest "death taxes" that have been considered in the last decade. Until Congress finally sets a law in place, there are several planning options for those with an estate close to or over $1 million which need to be considered.

Powers of Attorney to Empower Health

If you are ill or in an accident, who is going to make sure the doctors give you the care you need? Even if you are awake and able, being confined to a hospital bed can make it very difficult to check up on when your doctor is going to examine you, when your tests are going to be run and if your medications are being given correctly.

You can give full legal authority to the person of YOUR CHOICE with a health care power of attorney. Estate planning is not just about what happens with you money when you die. Estate planning documents provide the legal framework for the persons of your choice can help you with your health care and finances when you are alive but need assistance.

Don't let your family and friends fight about what kind of medical care you should have. Make your choice through a health care power of attorney and make sure you have the care you need.

What is happening with the federal estate tax?

Currently, there is no federal estate tax, but that does not mean there is no taxation at death. Instead, right now there is a capital gains tax that can be levied on any assets over $1.3 million (or $3 million for a spouse). Congress has been struggling with trying to adopt a law which will put the $3.5 million estate tax exclusion back in place-- a much fairer tax in most situations. As it stands now, Congress may pass a law that allows estates of decedents who die this year to choose between the capital gains tax and the $1.3 million exclusion or the $3.5 million estate tax exclusion. So, right now, no one really knows whether the tax will remain as it is this year, or change or even what it will be for next year.
How does a married couple plan for that? There is a lot of flexibility in revocable living trusts which can allow for a QTIP or qualified terminable interest trust, or an A-B split or even keep the trust revocable when one of the spouses die. These are complex times but there are simple solutions available when using wills and trusts in your estate planning.

Protect access to your finances-now easier than ever

The Durable Power of Attorney protects your access to your finances. You can give legal authority to the person of your choice to handle your finances if you cannot.

Now, a financial power of attorney is simpler than ever. The Arizona legislature removed the requirement of initial each power to protect the agent from civil and criminal penalties if the agent received an incidental benefit when acting on your behalf. The agent must still work in your best interest, but there are less formalities.

A written financial power of attorney is still necessary and must have "durable" language so your selected agent can help you if you become incapacitated. For more information, see www.sharonravenscroft.com.