Estate Planning Blog

Serving Clients Throughout North Central Missouri

Elder Law, Medicaid and VA Benefits

How Much Money Can Be Gifted Tax-Free?

September 13, 2024

There are limits to the amount of assets a person can give to another person or entity without needing to pay a federal gift tax. Your generosity could come with a tax bill. However, there are ways to manage this. A recent article from Erie News Now, “What Is the Annual Exclusion for Gift Taxes?” digs into the details.

First, what is the gift tax? In formal terms, a gift is the transfer of property from one person to another when the donor receives nothing or less than full value in return. Disguising a sale as a gift gets into murky waters and is not recommended. In 2024, the annual exclusion for gift taxes is $18,000 per person, which means you can give $18,000 to as many people as you want without paying any gift taxes.

Gifting, when part of a well-thought-out estate plan, can effectively reduce tax liabilities by decreasing the estate’s value. However, it’s important to note that haphazard gifting can lead to unfavorable outcomes. This underscores the need for strategic planning and the guidance of an experienced estate planning attorney.

When you do need to pay a gift tax, it’s high—anywhere from 18% to 40%. It was designed to prevent people from using gifts to avoid estate taxes, which is why there is a lifetime gift limit.

The lifetime exemption is the total value you can give away during your lifetime before federal gift or estate taxes are required. In 2024, this limit is set at $13.61 million. Understanding this concept is key to managing your gifting strategy effectively.

Think of the gift and estate taxes as two parts of the same pie. The gift tax applies to gifts made while you are living, while the estate tax is when you have passed and is based on the total value of your estate.

Together, the lifetime and annual exclusions provide flexibility and opportunities for managing taxes in estate planning.

Consult with an estate planning attorney before making large gifts or a series of large gifts. Some tax pitfalls must be avoided, and penalties for gift tax missteps are costly.

Reference: Erie News Now (April 5, 2024) “What Is the Annual Exclusion for Gift Taxes?”

estate planning newsletter

Prepare Now for Coming Changes to Estate Taxes

September 11, 2024

Anyone who wants to leave their estate to heirs needs to plan now so their wishes will be followed and, equally importantly, to minimize their estate’s tax liability. A recent article from The San Diego Union-Tribune asks, “Are you prepared for changes to estate tax laws? Here’s what you need to know.”

Because of the Tax Cuts and Job Acts of 2017, taxpayers who die in 2024 can pass up to $13.61 million federal tax-free to their heirs. In 2025, this amount will be adjusted for inflation. On January 1, 2026, the federal basic exclusion amount reverts to $5 million indexed for inflation. Many experts expect this to adjust to $6.5 to $7 million.

When calculating the total value of one’s estate, the IRS looks at all taxable gifts made while you are living, and all assets transferred upon your death. This includes the value of your home and its contents, retirement and investment accounts, life insurance not owned by an irrevocable trust, cash, annuities, boats, vehicles and bank accounts.

Estate planning must include tax planning. With the right planning, preserving the 2024 and 2025 higher exclusions may be possible through a lifetime gifting program. Let’s say the exclusion amount in 2026 is $7 million. You’d have to gift more than $7 million before January 1, 2026, to preserve the current exclusion amount.

Two years ago, in April 2022, the Treasury and IRS published Proposed Regulation Section 20.2010-1(c)(3) to limit certain types of gifts from qualifying for the current exclusion and restrict benefits of certain types of gifts if they were made within 18 months of the date of death. This regulation is still proposed and not final. However, you and your estate planning attorney must remember it during the estate planning process.

If making large, multi-million-dollar gifts is not possible without constraining the taxpayer’s lifestyle, there are other gifting strategies to use to take appreciating assets out of the estate over time. One way to do this is to make annual exclusion gifts every year. These are gifts that pass entirely tax-free. In 2024, a taxpayer could gift up to $18,000 per person to an unlimited number of people without paying any gift taxes.

Gifts to 501(c)(3) charities of any amount can be made tax-free with no gift or estate tax. This includes gifts made while you are living or after you have passed.

It is also permissible to pay an unlimited amount for tuition for an unlimited number of people, if the payment is made directly to the educational institution. These gifts may not include room, board, or fees. Similarly, one person can pay for another person’s medical expenses if the payment is made directly to the healthcare provider.

There are many ways to prepare for the coming changes to tax laws. What is right for one person may not be right for another, as everyone’s circumstances are unique. Discussing how to prepare for these changes with your estate planning attorney should take place soon, as it takes time to work out the details of a new estate plan and you can be sure estate planning attorneys will be very busy in 2025.

Reference: The San Diego Union-Tribune (April 30, 2024) “Are you prepared for changes to estate tax laws? Here’s what you need to know”

Retirement Planning

Why Communities Want Small Businesses to Have a Succession Plan in 2024

September 9, 2024

Entrepreneurship inspires new business openings every day. Small business owners may not consider succession planning when starting their new business. However, it is an essential step in any venture. Small businesses become a part of the community and make an impact beyond the owner’s livelihood. They add jobs, contribute to the community’s economic health, and become local fixtures for residents.

Based on Teamshares’ article, “Succession planning statistics in 2024: preserving a legacy,” we’re discussing the looming succession plan dilemma, why it’s essential and what it means for your business. As many small business owners without a succession plan set their sights on retirement in the next two years, those employees and their communities may lose wages and a business they love.

What Is the Small Business Succession Plan Dilemma?

Succession planning is ideally on every small business owner’s checklist, leaving a legacy in a family member’s hands once the owner retires. Owners should have a plan ahead of retirement if they become incapacitated or pass away unexpectedly. Succession planning is elemental for small business owners, much like estate planning is for anyone with assets.

Teamshares’ statistics indicate that over 60% of small business owners will retire between 2024 and 2026. Without a plan for family or someone else to lead the company once they retire, the company will likely close. You might be asking, “Why is that important?”

Why Small Business Planning Is Important for Your Company and Community

Small businesses employ nearly half of America’s workforce and contribute to local economies. With most owners retiring without a succession plan, chances are many of those companies will close across the U.S. in the next two years. Not having a succession plan for retirement or, in case of incapacity, could unwittingly be the catalyst for closing your company.

What Succession Planning Today Means for Your Company

Your company is built on hard work, entrepreneurship, and a dream. Having a successor running your business, if you retire or are unable, passes a legacy to family or someone you trust.

Work with an estate or business planning attorney to create a plan that protects you, any employees, your family’s livelihood, and your community. Like an estate plan, legal documents, such as living trusts, can keep your company open and pass on your legacy.

Establish a living trust, appointing a trustee or co-trustees to handle company operations and run the business. Draft financial and medical powers of attorney, empowering trusted agents to manage bill and invoice payments and bank transactions, employee payroll and oversee your healthcare, if you are mentally or physically impaired.

Small Business Succession Planning Dilemma Key Takeaways:

  • The Dilemma: Many small business owners will retire through 2026 and don’t have a succession plan to keep the business running.
  • Why Succession Planning is Important: Small business owners must create a plan for family or another trusted person to lead the company and continue its legacy.
  • What it Means for Your Business: Succession planning protects your business and legacy by empowering a successor after you retire or if you become incapacitated.

Conclusion

Whether you’re creating an exit strategy, empowering family members to take over, or preserving the company’s livelihood in a crisis, a succession plan protects you, your family and community from your company closing. Losses include income, employee wages and resident patronage. Consider a succession plan to empower a successor who will keep your business running.

Reference: Teamshares (Dec 22, 2023) “Succession planning statistics in 2024: preserving a legacy”

mountains

Lessons from the Hilton Trust Contest: Navigating Estate Planning with Foresight

September 6, 2024

Even famous families like the Hiltons aren’t above estate planning problems. As Kiplinger reports, businessman and philanthropist Barron Hilton did many things right. Nevertheless, his family felt underserved by his will and challenged it, which shows the depth of preparation necessary to carry out your wishes.

What Happened with the Hilton Family Trust?

Barron Hilton made significant changes to his estate plan after his wife Marilyn died. He left 97% of his estate to charity, with only 3% to his children and family. Despite taking steps to avoid disputes, his family contested the trust. This delayed the IRS’ issuance of the charitable donation dedication for his estate and illustrates that even a well-planned estate can face challenges.

Lessons from the Hilton Trust Contest

Can You Prevent Family Disputes over Your Estate?

One key lesson from the Hilton case is the importance of clear communication. Open communication about your estate plan and discussing your wishes openly with your heirs can reduce misunderstandings and prevent future disputes. Not only did Barron Hilton inform his family of his intentions well in advance, but he also issued a public statement explaining his charitable intentions. Including a statement of purpose within your estate documents can further clarify your intentions and create a stronger case against estate challenges.

Should You Consider a Nonqualified Disclaimer?

Barron Hilton used a nonqualified disclaimer to provide for his children and his charitable goals during his lifetime. The California Probate Court approved this move, which allowed his children to receive assets earlier than the trust stipulated. This isn’t without tradeoffs; however, these withdrawals were open to gift tax liabilities.

Is a Post-Marital Agreement Necessary?

Barron and Marilyn Hilton had a post-marital agreement that clarified the division of their assets. This agreement ensured that certain assets remained Barron’s sole property, which he later directed towards charity. Such agreements can provide clarity and prevent disputes over asset ownership.

Why Obtain Written Consents from Heirs?

Barron Hilton obtained written waivers from his children, agreeing not to contest his disclaimer of the marital trust. Done correctly, such consents can prevent legal battles. But if you’re not careful, inheritors can contest them as being conditional or coerced agreements.

Should You Consider Your Heirs’ Attitudes and Relationships?

Understanding your heirs’ relationships and attitudes towards money is crucial. Not everyone is ready to receive a large inheritance all at once. Likewise, receiving a large sum might impact their relationships in a way you don’t intend. Trusts are valuable tools to exercise more control over how exactly you leave money to loved ones.

How to Choose Successor Trustees?

Choosing the right successor trustees is vital. Sometimes, appointing a family member can lead to conflicts, especially if there are restrictions on their share. An independent trustee or a co-trustee with a tiebreaker can help manage disputes.

Why Include Personal Property in Your Estate Plan?

Personal items can hold significant sentimental value and may become points of contention. Address the division of personal property clearly in your estate plan to avoid disputes over items with emotional significance.

Can Charitable Planning Benefit Your Estate?

Incorporating charitable giving into your estate plan can provide tax benefits, and support causes that are important to you. Barron Hilton’s significant charitable contribution reflects his desire to make a positive impact, a goal many people share.

The Hilton family trust contest underscores the importance of thorough and thoughtful estate planning. Clear communication, legal agreements, and consideration of family dynamics can help ensure your wishes are honored and prevent disputes.

Start Your Estate Planning Today

If you want to learn more about effectively planning your estate and creating a trust that reflects your wishes, contact us today. Schedule a consultation to secure your legacy and peace of mind.

Key Takeaways

  • Clear Communication: Ensure your wishes are clearly communicated to all involved parties to avoid misunderstandings.
  • Regular Updates: Regularly update your estate plan to reflect any changes in your life circumstances.
  • Professional Guidance: Seek advice from a knowledgeable estate planning attorney to ensure your plans are legally sound and comprehensive.
  • Consider Trusts: Trusts can help manage and protect your assets. However, setting them up properly is crucial to avoid disputes.

Reference: Kiplinger (April 2024) “Nine Lessons to Be Learned From the Hilton Family Trust Contest”

Is Estate Planning for Everyone?

Legal Planning can Help Prevent Elder Abuse

September 4, 2024

In a recent case reported by FOX43, an 86-year-old father fell victim to elder abuse at the hands of his own son. According to the report, the son stole $153,168 from his father. This story is a painful reminder of how even trusted individuals can exploit the vulnerability of our elderly loved ones. Likewise, it reminds us to be vigilant of elder abuse to prevent these heartbreaking situations.

What Is Elder Abuse, and Why Is It a Growing Concern?

Elder abuse is a serious issue that affects many older adults. It includes physical, emotional, and financial harm, and the perpetrators are often trusted individuals. Many elderly people rely on others for their daily needs, making them vulnerable to abuse.

To make matters worse, elder abuse is becoming more common as the elderly population grows. The National Council on Aging (NCOA) states that one in ten Americans aged 60 and older has experienced some form of elder abuse.

How can Legal Planning Protect Elders with POAS?

Legal planning can help protect an elderly person’s wishes and their assets. Elder law attorneys can assist in creating essential documents like wills, trusts, and powers of attorney. These documents guide the management of an elderly person’s assets and who will make decisions on their behalf.

A power of attorney (POA) is especially important. It’s a legal document that allows someone to make decisions for another person. If an elderly individual cannot make decisions for themselves, a POA is vital. A trustworthy person holding power of attorney can prevent financial abuse and protect the elderly person’s needs.

What are the Warning Signs of Elder Abuse?

Recognizing the signs of elder abuse is crucial for prevention. Some common warning signs include:

  • Unexplained injuries or bruises
  • Sudden changes in financial situation
  • Withdrawal from normal activities
  • Poor hygiene or living conditions
  • Fear or anxiety around certain individuals

What Steps can Be Taken to Prevent Elder Abuse?

  • Regular Check-Ins: Regularly check in on your elderly loved ones. Frequent visits or phone calls can help you notice any changes in their behavior or living conditions.
  • Educate Yourself: Learn about the signs of elder abuse and stay informed about how to protect your loved ones.
  • Legal Safeguards: Work with an elder law attorney to create legal documents that protect the elderly person’s assets and outline their care preferences.

How can Elder Law Help Protect Seniors?

Elder law encompasses various legal issues affecting older adults. These include estate planning, healthcare, and guardianship. An elder law attorney can help create a comprehensive plan to protect the elderly individual and their assets. Some strategies include setting up trusts to manage assets, appointing guardians or conservators, and drafting advance healthcare directives.

Take your first step toward securing a comprehensive estate plan; schedule a consultation today.

Key Takeaways

  • Elder Abuse Awareness: Stay alert to warning signs of elder abuse. Sudden financial changes, unexplained injuries, and strange behaviors are potential warning signs.
  • Importance of Legal Planning: Elder law can protect your loved ones. Leverage legal tools like powers of attorney and trusts.
  • Role of Estate Planning: Estate planning isn’t just for distributing assets after someone dies. Instead, it can protect them during their lifetime.
  • Consult an Elder Law Attorney: Aging well can be a challenge. Professional legal advice can make it safer and easier.

References:  FOX43 (Oct. 22, 2018) “Son charged for stealing $153,168 from 86-year-old father, officials talk elder abuse warning signs | fox43.com”

NCOA (National Council on Aging) (Feb. 23, 2021) “Get the Facts on Elder Abuse”

elder care

Planning Your Own Funeral Eases the Burden for Your Loved Ones

September 2, 2024

Planning your own funeral may seem like a morbid task. However, it can significantly reduce the stress and financial burden on your loved ones after you pass away. Choice Mutual’s recent article “How To Plan Your Own Funeral: 10-Step Guide + Checklist” explains that by making decisions about your funeral arrangements in advance, you can ensure that your final wishes are respected and that your family is spared from making difficult decisions during a time of grief.

Why Should You Consider Planning Your Funeral Early?

After a death, family and loved ones are responsible for managing your estate and organizing a funeral while grieving. Planning your funeral early while drafting or as part of your estate plan is a thoughtful and responsible step that alleviates the emotional and financial strain on your loved ones.  If you’ve already created your estate plan, an experienced estate planning attorney can help you detail your funeral planning in a “Last Wishes” document or addendum to your estate planning documents. These documents provide crucial guidance that reflects your personal preferences and eases the decision-making process for loved ones.

What are the First Steps in Pre-Planning Your Funeral?

Choosing a Funeral Home

One of the first decisions in pre-planning is selecting a funeral home. This choice is crucial as it can significantly affect the logistics and cost of your funeral services. Consider the reputation, services offered and pricing of different funeral homes. You can select a funeral home, create a plan and even prepay for it. Be sure to share existing funeral plans or prepayments with your estate lawyer.

Deciding Between Burial and Cremation

Do you prefer a burial or cremation? Each option comes with different considerations, such as the type of ceremony, the handling of remains and the associated costs. If choosing burial, consider the kind of burial—traditional, in a vault, or a natural burial. If cremation is your choice, decide whether you want it done before or after the funeral service and what should happen to your ashes.

How Do You Want to Be Remembered?

Selecting the Type of Funeral or Memorial Service

Your funeral or memorial service can reflect your personality and values. Decide whether you want a traditional funeral, a celebration of life, or a simple memorial service. Each type of service offers different atmospheres and can be tailored to how you wish to be remembered.

Planning the Ceremony Details

Think about the location, the attendees and the flow of the ceremony. Would you prefer a religious, secular, or culturally specific service? Details like flowers, music, and readings should also be considered, as these can make the service personal and meaningful.

How Can You Ease the Funeral Logistics for Your Family?

Creating a Last Wishes Document as Part of Your Estate Plan

Creating a Last Wishes document of your funeral plans and sharing it with your family is essential. This document should detail all your decisions—from the type of service to the specifics of your burial or cremation preferences. It is also wise to discuss these plans with your loved ones to ensure that they understand your wishes and the reasons behind them.

Financial Planning for Funeral Expenses

Consider how you will finance your funeral. Options include savings, life insurance, prepaid burial plans, or relying on your estate. Your estate planning attorney can guide you in choosing the right prepaid funeral plan based on your financial situation.

What are the Benefits of Planning Your Funeral in Advance?

Planning your funeral in advance can significantly ease the emotional and financial burden on your loved ones. By making critical decisions about your funeral arrangements, such as the type of service and financing options, you ensure that your wishes are honored and relieve your family of added stress. Consulting with a qualified estate planning attorney can provide clarity and direction, ensuring that you make informed decisions integrated with your estate plan.

Key Takeaways

  • Early Planning: Start funeral arrangements early when drafting your estate plan to reduce future stress for your loved ones.
  • Funeral Home Selection: Choose a funeral home carefully, considering services, reputation and pricing to avoid future complications.
  • Burial vs. Cremation: Decide whether you prefer burial or cremation, and detail your specific wishes for handling these.
  • Planning the Service: Tailor your funeral or memorial service to reflect your personality and values, making the event meaningful for attendees.
  • Documenting Last Wishes: Record all funeral plans, include them with your estate plan and share them with your family to ensure that your final wishes are honored.
  • Financial Planning: Explore financing options like insurance, savings, or prepaid plans to manage funeral costs effectively and prevent financial strain on your family.

Reference: Choice Mutual (April 2, 2024) “How To Plan Your Own Funeral: 10-Step Guide + Checklist”

OLoughlin Law Firm-LLC

Business Owners and Estate Planning: Special Concerns

August 30, 2024

Estate planning for business owners offers numerous opportunities for lifetime transfers to move value and future appreciation out of the taxable estate. An article from The National Law Review, “Estate Planning for the Business Owner, Part 1: The Business Owner as a New Client,” explains the information an estate planning attorney needs to know when helping a business owner create a plan addressing their business and personal assets.

First, how is the business structured? Is it a partnership or wholly owned by the founder? If it includes real estate, is the real property owned by the business or a separate entity? If more than one legal entity owns the business and its assets, all of those entities need to be considered when creating an estate plan. Some entities also have restrictions on their ownership, so this may need to be examined.

Are the proper business agreements in place already? This includes shareholder and operating agreements between equity owners. If the business is a corporation, are bylaws, limited liability companies, or partnerships in place? These may impact transfers of equity.

When was the last time a business valuation was performed? Income statements and balance sheets must be reviewed to create an estate plan. The estate planning attorney may benefit from meeting with the accountant.

Understanding the cash flow from the business is an integral part of building an estate plan. Does the business owner take a salary? Are net profits disbursed to equity holders at the end of the year, or are they plowed back into the business?

Is the business a new one, a family business passed down from many generations, or is it nearly time for the owner to retire? The stage of the business and projections for its future will have a major impact on the owner’s estate plan.

Finally, is there a succession plan? If there is one, the estate planning attorney will need to review it to ensure that the estate plan dovetails with the plan for the future. If there is no succession plan, this needs to be addressed.

Reference: The National Law Review (April 18, 2024) “Estate Planning for the Business Owner, Part 1: The Business Owner as a New Client”

elder care

Harnessing Technology in Aging Care: Long-Term Care Planning Strategies

August 28, 2024

Technological advancements increasingly influence the aging care field to enhance efficiency, improve quality of care and adopt value-based care models. This transition towards technology-driven solutions in aging services not only promises improved operational outcomes but also sets the stage for more personalized, efficient care strategies. Based on LeadingAge’s article, “Top 5 Tech Trends in Aging Services for 2024,” our article outlines significant trends in aging care technology for 2024 and how they impact elder law strategies.

What Significant Technology Is Trending in Aging Care?

Automation in Health Care Workforce Management

One of the forefront issues in aging services is workforce management. Integrating technologies such as robotic process automation (RPA) and generative AI (artificial intelligence) is revolutionizing this domain. By automating repetitive tasks, these technologies free up staff to engage in more meaningful work, thereby improving job satisfaction and overall care quality. For instance, initiatives like the digital transformation at United Methodist Communities (UMC) have significantly improved staff engagement and operational efficiency through adopting automation.

Understanding these technological advancements is crucial from an elder law perspective. Elder law attorneys can advise clients on how these technologies might affect seniors’ long-term care options, particularly regarding staffing and quality of care in various settings. As elder care professionals, our team also strives to stay informed about how such technological integrations affect compliance and privacy, protecting clients’ rights and preferences.

How Is Aging Care Technology having an Impact on Long-Term Care Planning?

An elder care lawyer strives to ensure that seniors’ long-term care plans are comprehensive and forward-looking, especially in terms of integrating technology. As care facilities increasingly adopt technological tools to support value-based care, it becomes essential to craft care plans that anticipate the use of these technologies and address the legal implications they may bring. For example, an elder law attorney can help seniors and their families understand how their personal data will be managed in technology-enhanced care settings and create safeguards to protect their personal information.

The Role of Generative AI in Personalizing Elder Care

The advent of generative AI in aging services is set to transform how personalized care is administered. Many care providers are now leveraging AI for tasks ranging from creating personalized patient care plans to automating routine administrative duties. This technological shift suggests a future where AI significantly supports decision-making and presents an opportunity for elder law attorneys to ensure that seniors’ long-term care plans are designed to help so seniors receive care that is not only personalized and efficient but also aligns with their values and legal rights. This includes advising on how technology can enhance the quality of care without compromising the dignity and autonomy of the elderly.

As an elder law office, our team can help clients consider the impact of these technologies in their healthcare directives and long-term care planning. We aim to help clients create long-term care plans that remain relevant and adaptive to technological advancements. As you consider your long-term care plan and how healthcare technological advances might impact your goals, schedule a consultation with our team.

Key Takeaways:

  • Consider How to Integrate Technology into Long-Term Care Planning: Clients should be informed about how automation and AI can influence care settings, potentially improving the quality and efficiency of the care they might receive.
  • Prepare for AI-Enhanced Care: Understanding and planning for AI-driven care can help clients take full advantage of emerging technologies, ensuring that their care remains top-notch as technology evolves.
  • Legal Guidance on Data Protection: Elder law attorneys are crucial in ensuring that seniors’ long-term care plans address the management and security of personal data as care facilities increasingly utilize technology.

Reference: LeadingAge (Jan. 5, 2024) “Top 5 Tech Trends in Aging Services for 2024”

Elder Law, Medicaid and VA Benefits

How to Plan for Beneficiaries with Disabilities

August 26, 2024

When creating an estate plan, it’s important to consider all of the possibilities—including disability, says a recent article, “Beneficiaries with disabilities will impact plans,” from The News-Enterprise. A well-prepared estate plan can protect all heirs.

Disability planning typically includes two types of protections: first, to protect the disabled individual’s inheritance from the loss of government benefits. This includes Medicaid, SSI, food stamps, Section 8 housing and other means-tested assistance programs.

Good planning protects continuity of care. Most disabled individuals who qualify for government benefits live in supportive housing communities and/or are helped by caregivers. Losing access to these support systems could become overwhelming to a disabled person.

If the inherited assets are used in place of these programs because of poor planning, upon their depletion, the disabled individual would have to start the process of applying for government assistance all over again. The possibility of being assigned to the same programs and receiving the exact same support is unlikely. A long wait time for services could also become problematic.

Second, an estate plan that considers a disabled individual must protect them from vulnerabilities and exploitation. Financial scams and outright thefts are not limited to the able-bodied. A disabled person known to have access to an inheritance becomes a target for scammers. The estate plan needs to ensure a responsible and savvy individual serving as the trustee is looking out for their best interests.

Testamentary documents are most helpful in estate planning for people with disabilities. The most common mistakes made are completely disinheriting the beneficiary or putting funds under the control of a caregiver. Disinheritance is common, as most people don’t understand there are ways to prevent the loss of services while keeping inherited assets available for the individual.

Giving funds to a caregiver is almost always a recipe for disaster. The caregiver may not follow the directions or become a victim of scammers, leaving the disabled heir without the benefit of their inheritance.

One answer is a third-party trust. This is created by one person—the grantor—for the benefit of another person—the beneficiary. It is funded with assets that never belonged to the beneficiary, so any funds in the trust aren’t subject to a payback provision to the state when the beneficiary dies. Third-party trusts are an excellent tool for estate planning and can also pass funds along to contingent beneficiaries when the original beneficiary passes.

An experienced estate planning attorney will know the nuances of planning for disabled individuals. Your estate plan deserves to be created by a professional to protect those you love.

Reference: The News-Enterprise (April 27, 2024) “Beneficiaries with disabilities will impact plans”

estate planning

What Is IRS Rule 706 and Why Should Someone to File It?

August 23, 2024

IRS Form 706 Estate and Generation-Skipping Transfer Tax Return has become a hot-button issue in the estate planning and tax worlds. A recent article appearing in Forbes addressing this issue, “How To Avoid Faulty Advice On IRS Form 706 And The Portability Election,” makes it very clear this is one to get right from the start.

The IRS was so overwhelmed by the number of private letter ruling requests it issued a rule of its own to extend the ability to make the portability election to on or before the fifth anniversary of the decedent’s date of death.

What’s the issue? Portability allows a surviving spouse to claim their late spouse’s unused tax exclusion amount. It’s known as the Deceased Spouse Unused Exclusion Amount or DSUEA. The important thing to know is the DSUEA isn’t an automatic process. The spouse must complete Part 6 of IRS Form 706, and the portability election becomes effective as of the DOD of the deceased spouse.

This allows the surviving spouse to shelter more assets upon the other spouse’s death. It effectively locks in the deceased spouse’s exemption amount and gives the surviving spouse a greater chance of not needing to pay estate taxes upon the second spouse’s death.

This option will become even more critical in 2026 if the Tax Cuts and Jobs Act expires and the federal gift and estate tax exemption amounts will return to 2018 levels. With inflation, estate planning attorneys expect the revised exemption amount to be roughly $6 million.

Determining the form is unnecessary because the estate is not large enough to reach the exemption level, or it’s a waste of time to prepare the form, which could be an expensive mistake. The number of requests for private letter rulings clearly proves the value of ensuring this form is completed when administering an estate for a deceased spouse.

Speak with your estate planning attorney to learn if your estate will be impacted if the federal estate tax exemption returns to prior values. Planning ahead for the loss of a spouse and potential changes in estate tax liabilities will require time and resources to be well spent. The cost of a private letter ruling or paying federal estate taxes is far more costly.

Reference: Forbes (May 21, 2024) “How To Avoid Faulty Advice On IRS Form 706 And The Portability Election”

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