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Estate Planning Blog

Serving Clients Throughout North Central Missouri

estate planning

What to Do Upon Death of a Spouse

Forbes’ recent article, “What To Do After The Death Of A Spouse,” provides a thorough list of topics to address when a spouse dies.

Paying Bills. See how the bills are being paid from joint bank accounts, your spouse’s, or your own account. The funeral home will usually inform the Social Security Administration. It is also important to notify current/former employers, since it is common to have employer-provided life insurance, stock options and other benefits that may require your attention.

Asset Titling, Beneficiary Elections, and Probate. Your spouse hopefully had a will. Assets owned by your spouse individually that don’t pass through a beneficiary designation, like on a retirement account or life insurance policy or through a transfer-on-death or payable-on-death arrangement, will likely go through probate. Get help from an experienced elder law attorney.

Retirement Accounts. If you’re the primary beneficiary of an IRA, 401(k), or other type of retirement account, work with your attorney to discuss your options. Surviving spouses have many choices after inheriting a retirement account.

Social Security. A surviving widow(er) who is at least full retirement age will typically receive 100% of the highest benefit you or your spouse was receiving. If you were both receiving Social Security, you’ll only get one check going forward (the highest one). You should also remove your spouse’s social security number from joint accounts and close any of their spouse’s individual accounts to avoid income tax complications in the future.

Consider Your Housing Options. Look at housing options, like whether to sell or keep the home, or downsize. Mortgages aren’t transferable, even if both your names are on the loan, so you’ll need to pay the mortgage off or refinance into a new loan supported by your assets and income as a widow(er). If you decide to sell your marital home, you’ll have two years from the date of death to sell and keep the full $500,000 federal gain exclusion for married couples.

Filing Taxes For The Year of Death. When a spouse dies, the surviving spouse may need to file taxes for both them and their deceased spouse for that tax year (by April 15th of the following year). Ask your attorney if you need to file a federal or state estate tax return (due nine months after death). Note that some non-retirement assets owned by your spouse will also be eligible for a step-up in basis to the fair market value at the date of death.

Reference: Forbes (April 20, 2023) “What To Do After The Death Of A Spouse”

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Start Planning Now for Coming Changes in Estate Tax Exemption Levels

The historically high federal estate tax exemption will sunset on December 31, 2025. It may sound like there’s plenty of time to change your estate plan, but according to an article from Think Advisor, “Act Now to Avoid Estate Planning Logjam in 2025,” the time to start planning is now.

Your estate planning attorney will be in high demand over the next two years as more and more people realize their estate may be subject to the new lowered levels of the federal estate tax. Estate planning is a complex process; any strategy may take years to implement fully.

The 2017 Tax Cuts and Jobs Act delivered some of the most sweeping changes in federal tax law in nearly three decades. At the time, the exclusion amount for estate, gift and generation-skipping transfer tax purposes increased from $5 million to $10 million and was indexed for cost-of-life adjustments starting in 2010.

For anyone who dies in 2023, the exemption amount is nearly $13 million, or a combined exemption of a little less than $26 million for married couples.

The increase in the exclusion only applies to estates of decedents dying after December 31, 2017, before January 1, 2026, and to gifts made during that period. On January 1, 2026, the exemption returns to $5 million per person, indexed for cost of living.

You don’t have to die to take advantage of these generous exemptions.  However, you still need to enact some of the various strategies to move wealth out of your estate and be sure that such strategies are appropriately supported legally.

Start by realistically assessing your entire net worth, looking beyond your investment portfolio. Include the value of any assets included in your taxable estate. You’ll also need to know how much exemption remains if you’ve already engaged in some legacy planning.

Consider gifting assets to a qualified charity as one of the most effective ways to reduce the size of your estate.

If your focus is keeping wealth in the family, there are several strategies to pass wealth to the next generation while living and after you have died. Some are relatively straightforward, such as making annual gifts, while others are complex, including transferring assets to trusts or creating generation-skipping trusts.

Now is the time to meet with your estate planning attorney to determine which strategies could be used to reduce your taxable estate in light of the lowered exemptions.

Reference: Think Advisor (May 22, 2023) “Act Now to Avoid Estate Planning Logjam in 2025”

estate planning for singles

Did Jerry Springer Really Leave His Fortune to Two Teens?

Twitter was buzzing recently as a clip made the rounds showing the late television personality – buried in a ‘small’ private ceremony – reading a last will.

However, it was quickly discovered that it was actually from a 2020 virtual play called Blood Money, where the talk show host had a cameo role.

The Daily Mail’s recent article, “Jerry Springer viral for will giving large portion to two Black kids,” reports that in the clip, Jerry could be seen addressing five people, including two who happened to be Black.

Springer looks at a document and says: “Joan kept me away from you with the threat of exposure. She did not keep me from providing for you. You see I told her that if I had to accept the life without you she would not get a red cent of my fortune and that you would be named equally on my will in the event of my passing.”

“But with everything going on in the world right now, I realize that I have to go a step further. Jordan, Megan, I leave our home here in New Orleans to you to do whatever you want. The rest of the estate, my properties in Mississippi, Georgia, South Carolina, my bank accounts, investment portfolios, all liquid and intangible assets everything all of it will go to my children John and Misha.”

Springer goes on to say, “Girls all of your life I’ve been telling you to make your millions and I hope you have. If not, you could always sell the house and split the profit but my entire estate.”

Many who believed the clip was legit took to Twitter to react.

One person wrote, “The best Jerry Springer episode ever is Jerry reading his own will [two red exclamation point emojis] He had two black children out of wedlock, wife threatens to expose, so he keeps it under wraps until he dies, then leaves all his money to the children he never met. What a legend [two red exclamation point and mind blown emojis]”

Another posted, “Wow, Jerry Springer really went out with a bang. This is his will and final testament on this earth.”

Meanwhile, weeks ago, Springer got emotional as he talked about his family perishing in the Holocaust. He also revealed that his daughter seeing him perform The Waltz on Dancing with The Stars was his ‘single happiest moment in television’ in a wide-ranging final interview before dying at 79.

Reference: Daily Mail (May 16, 2023) “Jerry Springer viral for will giving large portion to two Black kids”

Retirement Planning

What Should I Do Now for a Successful Business Succession?

According to the Conway Center for Family Business, family businesses account for 64% of the U.S. Gross Domestic Product (GDP), yet 57% of those businesses have no formal succession plan.

Twin Cities Business’s recent article, “Don’t Wait for the Future,” notes that many businesses are founded on a high degree of personal trust and loyalty, often a simple handshake agreement. However, these informal agreements aren’t enough to protect you against disagreements and damaged relationships, which can be costly. A lack of business succession planning can negatively impact business owners, as well as their heirs and employees.

There are two key reasons business owners should think about a business succession structure sooner rather than later. One is taxes. Under the current laws, the estate tax exemption is scheduled to sunset in 2025. This leaves business owners with a small window to take advantage of the planning opportunities around this exemption. Second, the absence of a succession structure may result in business disruption at a very emotional time for owners and employees.

The reason why so many business owners are unprepared is that many of them find it uncomfortable or daunting to discuss succession planning or enacting formal agreements. Others don’t truly see the importance of such discussions. And, in other cases, it can be seen as a sign of disloyalty.

The good news is that partnerships can be strengthened if you address this process the right way, with respect for everyone’s point of view and a willingness to listen. The result will be that you’re totally confident that everyone’s interests are secured. This lets you focus on your business, instead of being distracted by unspoken concerns.

Formal contingency plans help business partners clarify their vision for the future. Many are so busy with personal lives, families, and work that they frequently fail to consider the impact of events outside their control. However, these conversations help us think clearly about what we want in the future and what it will take to get there.

If the process is handled correctly, guided by an experienced attorney, the result should be peace of mind and a higher degree of protection for partners and their families.

Reference:  Twin Cities Business (April 10, 2023) “Don’t Wait for the Future”

estate planning newsletter

Prepare Now for Coming Estate Tax Changes

The TCJA nearly doubled the lifetime estate and gift tax exemption from $5.6 million for individuals (and $11.18 million for married couples) to $11.18 million and $22.36 million for married couples), indexed for inflation after 2018. Right now, the exemption stands at $12.92 million per person and $22.84 million for couples, as reported in a recent article, “How To Prepare Clients Now For Looming Estate Tax Changes” from Financial Advisor.

All this changes on January 1, 2026, resulting in a roughly 50% reduction over the next few years. Individuals could see their federal estate tax exemption dipping to approximately $7 million, while couples could see a decrease to $14 million.

In anticipation of this drastic change, estate planning attorneys are reviewing plans now with clients to implement an appropriate course of action in less than three years. This is especially important for clients who might not have been impacted by estate tax laws in the past but who will be in 2026 because of a combination of the lowered amount and any growth in their assets.

Here are some strategies for preparing for the new lowered levels:

Review the complete estate plan with an estate planning attorney. Without a proper estate plan, it’s easy to lose sight of the value of all assets and may be entirely in the dark concerning estate tax liabilities. For instance, a boomer who hasn’t reviewed their estate plan in twenty years could see an enormous change in the size of their assets, possibly bringing them across the $7 million estate tax exemption threshold. Failing to address this could risk financial security in retirement and significantly impact their heirs.

Create a strategy with the information you have now. First, review your estate plan with an eye to moving assets out of the estate. You should then consider the overall goals and time horizons to determine the best way forward. There are several optimal strategies, including using annual gift tax exclusion, which as of 2023, is up to $17,000 per person.

The use of trusts is a well-known facet of estate planning. Which type of trust is used depends upon your specific situation. Trusts generate income and protect access to assets used for living expenses, reduce taxation on the estate, protect assets from creditors and keep a family’s financial assets and affairs private upon death.

Other strategies to consider:

Allocating assets to a 529 education plan, allows you to put money aside for the education of loved ones. It can be used for education from kindergarten to college, graduate coursework and more. There is also an option of accelerating gifting by giving up to five years of contributions in one year per individual.

Suppose you wish to pass assets to grandchildren, instead of gifting them during their lifetimes. Consider generation-skipping trusts, which allow you to create a separate fund for grandchildren under age 37.

There is no one-size-fits-all approach to estate planning. However, a discussion with your estate planning attorney will clarify your wishes and allow you to plan for the future.

Reference: Financial Advisor (May 8, 2023) “How To Prepare Clients Now For Looming Estate Tax Changes”

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Do We Know What Was in Jerry Springer’s Will?

Legendary talk show host Jerry Springer died at age 79 last month. According to a statement from his family, he died peacefully in his home in suburban Chicago.

Talk show host Jerry Springer had been diagnosed with cancer several months ago and lost his battle. He’s survived by his daughter, Katie Springer, 47, whom he had with his ex-wife Micki Velton. Springer was married to Velton between 1973 and 1994.

The New York Post’s recent article, “Jerry Springer’s net worth: The fortune the legendary host left behind,” says that he leaves behind a fortune –estimated to be from $60 million to $75 million.

His fortune was amassed over a long and storied career. Before becoming a colorful and controversial talk show host, Springer was a politician who served on Cincinnati’s City Council in 1971. He was elected as the city’s mayor in 1977, serving just one term.

After politics, he went into television and became a news anchor and commentator at WLWT in Ohio City before taking on his most iconic role as a TV host when he launched his famous “Jerry Springer” show, which ran from 1991 to 2018.

He was also known for the “Judge Jerry” show, which aired three seasons, the Springer on the Radio Show, Baggage, and the Jerry Springer Podcast, and he even had a ‘60s folk music radio show in Cincinnati.

During a podcast interview in November of 2022, Springer said, “I’m just a schlub who got lucky.”

“Jerry’s ability to connect with people was at the heart of his success in everything he tried whether that was politics, broadcasting, or just joking with people on the street who wanted a photo or a word,” family spokesperson Jene Galvin said in a statement.

“He’s irreplaceable, and his loss hurts immensely, but memories of his intellect, heart and humor will live on.”

Reference: New York Post (April 27, 2023) “Jerry Springer’s net worth: The fortune the legendary host left behind”

Retirement Planning

How is Congress Trying to Protect Seniors from AI Scams?

Senator Mike Braun, R-Ind., the ranking Republican on the Senate Special Committee on Aging, led a bipartisan effort to draft a letter to the Federal Trade Commission (FTC) that asks for an update on what the agency knows about AI-driven scams against the elderly and what it is doing to protect people. The letter, signed by every member of the Senate committee from both parties, asks about AI-powered technology that can be used to replicate people’s voices.

Fox News’ recent article entitled, “AI ‘voice clone’ scams increasingly hitting elderly Americans, senators warn,” reports that the letter to FTC Chairwoman Lina Khan cautioned that voice clones and chatbots are allowing scammers to trick the elderly into making them believe they are talking to a relative or close friend, which leaves them vulnerable to theft.

“In one case, a scammer used this approach to convince an older couple that the scammer was their grandson in desperate need of money to make bail, and the couple almost lost $9,400 before a bank official alerted them to the potential fraud,” the Senate letter said. “Similarly, in Arizona, a scammer posing as a kidnapper used voice-cloning technology to duplicate the sounds of a mother’s crying daughter and demand ransom.”

Senator Braun said “imposter” scams lead to about $2.6 billion in losses every year and that the elderly are especially at risk now that scammers have access to voice-clone technology.

“We’re getting calls into our constituent services line back in Indiana already where this is coming in and happening to some extent,” Braun said. He added that imposter scams can be done without using an artificial voice but warned that “AI makes it even easier because it’s like talking to your grandkid.”

Braun recalled a Senate hearing this week in which Senator Richard Blumenthal, D-Conn., opened the hearing on AI with an AI-generated voice that sounded like him, reading off an AI-generated script and said scammers have access to these same tools.

“When you can replicate a voice to the extent I couldn’t tell if that was Sen. Blumenthal or a replication – it sounded exactly like him – just imagine,” Braun said. “That is a tool that the scammers never had.”

The FTC has said it will use its authority to protect consumers from AI to the extent it can, as Washington policymakers look to expand their regulatory oversight of this new technology. The Senate letter to the agency suggested that the FTC update its “educational and awareness” materials to help seniors understand that scammers may be looking to fleece them out of their money using AI-generated voices.

“I’ve never seen any new technology, new business, where the people that created it have been more worried about how you use it,” he said. “They’re worried that if they’re going to get any monetary value out of it, they are going to have to make sure it’s well-regulated.”

“I just think there’s no way that AI can go unchecked, and I’m glad to see the people … on the forefront are thinking the same way,” he said.

Reference: Fox News (May 18, 2023) “AI ‘voice clone’ scams increasingly hitting elderly Americans, senators warn”

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How Gifting and Joint Ownership Can Go Wrong

As with many things related to estate planning, do-it-yourself solutions appearing to be fast and easy fixes often become problems for parents and their children. Trying to simplify asset protection by gifting is loaded with risks, says a recent article, “SENIOR SCENE | Pitfalls of gifting and joint ownership of assets” from The Sentinel-Record.

Most notably, the laws governing eligibility for Medicaid used for nursing home care require a 60-month “look-back” period, where any transfer of assets for any reason makes the person ineligible for Medicaid benefits up to 60 months or even longer from the date the gift was made.

Secondly, creditors of the person making a gift could claim any transfer was a fraudulent transfer made in an attempt to defeat the rights of creditors to make a claim. Both parent and child could end up in costly, time-consuming litigation over creditor claims.

Third, and perhaps most problematic, is the chance for the child’s creditors to attach the assets in order to satisfy a claim against the child. This could also occur if the child is embroiled in a divorce—the assets could be considered a marital asset by the court.

Gifting assets was a popular estate planning strategy to reduce or eliminate estate taxes in the past. Nevertheless, in light of the very high current federal estate tax exemptions, this is only used for some families.

Another disadvantage of gifting is the transfer of tax cost basis from the parent to the child for capital gains tax purposes. As a result, the child would be forced to pay capital gains taxes on the increase in value from the parent’s tax cost—typically the original purchase price—versus the ultimate sales price.

Contrast this with a child who inherits an asset at death from a parent. When the child inherits the asset at death, the asset receives a step-up in tax basis to its date-of-death value. This is one of the most favorable tax rules remaining, which is lost when gifting during life is used.

Another problem occurs when seniors make assets jointly owned, especially bank accounts. The bank often encourages this, trying to be helpful so the child may pay the parents’ bills. However, by placing the child’s name on the account, the parent may be subjecting their account to potential creditor claims of their children.

In addition, the jointly owned account passes only to the surviving owner, so the estate plan may be circumvented by having the assets in the account pass to the one child rather than passing to all the remaining trust under a will or trust.

An estate plan created by an experienced estate planning attorney can eliminate many pitfalls of gifting and joint ownership. Before making gifts or establishing joint accounts, meet with an estate planning attorney to learn how to achieve your goals, including planning for Medicaid, without putting your assets at risk.

Reference: The Sentinel-Record (May 28, 2023) “SENIOR SCENE | Pitfalls of gifting and joint ownership of assets”

estate planning

Estate Planning Lessons from Elvis’ Mistakes

So far, part of the Presley legacy appears to be the failure to create effective estate plans, says a recent article from Kiplinger, “Five Estate Planning Lessons We Can Learn From Elvis’ Mistakes.” An effective estate plan transfers assets and legacy to the right people at the right time, while keeping the wrong people out.

In this case, the right people would be the people whom Elvis and Lisa Marie wanted to benefit, and a good estate plan would have ensured that their desired beneficiaries or heirs received their inheritance. The right time would be to give control of assets to loved ones when they are mature enough to benefit for a lifetime. Keeping the wrong people out would mean minimizing tax and administrative costs and protecting heirs from lawsuits, divorce, creditors and a second level of estate taxes upon their own death.

Most recently, Priscilla Presley challenged a 2016 amendment to Lisa Marie’s trust which would have removed Pricilla as co-trustee from serving alongside Lisa Marie’s former business manager, Barry Siegel. This may have been her intent. However, the amendment didn’t include basic legal formalities. A confidential settlement was recently reached on this issue.

Priscilla had grown Elvis’ estate after his death. Despite his fame, he left an illiquid estate worth $5 million in 1977—adjusted for inflation, roughly $20 million in today’s dollars. The IRS successfully asserted that the estate was worth far more and asserted $10 million in estate taxes.

The estate didn’t include as much royalty income as expected because Elvis’ business manager, Colonel Tom Parker, sold the music catalog to RCA for $5.4 million, of which only $1.35 million went to the estate. Priscilla then assumed control of the estate. From her wise use of Graceland profits, merchandising and royalties for music recorded after the RCA deal, Priscilla grew the estate to $100 million.

In 1993, Lisa Marie turned 25 and was eligible to receive and control her inheritance. She established a revocable trust to hold her inheritance, then appointed a businessman as her co-trustee with primary control over her assets. In two years, he sold 85% of her interests in Elvis Presley Enterprises, an entity The Elvis Presley Trust created to conduct business, including Graceland and worldwide licensing of Elvis Presley Products.

The deal was worth $100 million but brought the estate only $40 million after taxes, plus $25 million in stock in a future holding company of American Idol, later made worthless due to bankruptcy by its parent company.

Careful planning could have avoided substantial income tax on the sale and provided the family a much better financial return. Siegal was removed as trustee in 2015 when lawsuits between Siegel and Lisa Marie began, which were pending when she died unexpectedly in 2023.

The lessons from the Elvis estate:

Use a trust, not a will. The trust removes delays, and higher costs and keeps private details private.

Make sure that your estate plan addresses estate tax issues. The goal is to reduce the value of the taxable estate and increase the value of your legacy to family and loved ones. The estate tax must be paid in cash within nine months from the date of death. This often requires a sale of estate or trust assets to pay the tax and can lead to heirs getting less than the full value of assets because of the need to come up with the cash. A simple testamentary charitable lead annuity trust (TCLAT) could have prevented the estate tax assessed after Elvis’ death and provided substantial benefits to Lisa Marie.

Plan for a lifetime legacy. Lisa Marie gained complete control over her inheritance at age 25. First, however, she needed to prepare for the complexity of the business and other assets she inherited and learn how to maintain a lifetime of living within her means.

Plan for estate taxes on the sale of the family business. Careful planning can almost always reduce the tax triggered by the sale of appreciated property. Unfortunately, no tax mitigation planning was taken before the $100 million sale of Elvis Presley Enterprises. As a result, the maximum capital gains tax, federal and estate combined, can be more than 40%.

Carefully choose the successor trustee or executor and provide at least two alternatives. Elvis appointed his father Vernon as the executor. Elvis died tragically in 1977 when Vernon was elderly and not well. Appointing a business manager as a trustee creates an inherent conflict of interest due to the business manager’s ability to profit from decisions made. A professional trustee would have been a better choice due to the complexity of the estate and Lisa Marie’s age.

Reference: Kiplinger (May 18, 2023) “Five Estate Planning Lessons We Can Learn From Elvis’ Mistakes”

Is Estate Planning for Everyone?

What Legal Documents Does Every Senior Need?

Legal documents pertaining to health care, end-of-life treatments and allowing others to access medical records are vital to protecting adults at any age. However, they are especially important for seniors, says a recent article from The News-Enterprise, “All seniors need legal documents for medical issues.”

These documents include a living will, health care power of attorney and HIPAA authorization. In addition, they give you the ability to name the individuals you want access to secure medical information and who will be able to make decisions about your health care during incapacity.

The health care power of attorney is the broadest and most important medical estate planning document. Depending upon where you live, it may be known as medical power of attorney, healthcare proxy, or healthcare surrogate.

Here’s where an estate planning attorney is needed: like many estate planning documents, the health care power of attorney can be broad, encompassing both a living will, and a HIPAA authorization within one single document, or it can be extremely limited. By having a document created for you, rather than using a boilerplate form, you can ensure your exact wishes are followed.

The health care power of attorney generally makes specific determinations. The document needs to name one person or agent and a backup agent to act on your behalf. Many people think they can change their agent if the agent becomes incapacitated or unavailable. Still, all too often, they need to remember to have their document updated, and then, when they need to have an agent act on their behalf, no one can do so.

Without an appointed agent, court intervention becomes necessary, which is time-consuming and costly.

The health care power of attorney should specify when the agent may act on behalf of the person and address both access to information and decision-making. The ability to immediately make decisions is critical when the individual is at an advanced age or has urgent medical needs. In addition, other provisions are included to ensure the agent has the full ability to act.

A living will, sometimes called an advance medical directive, may be a separate document or contained within the health care power of attorney. It includes instructions for end-of-life decisions. These may be as detailed as outlining when artificial nutrition and hydration may be used or as simple as naming an agent with the right to remove the person from life support. If you have strong feelings about using life-prolonging devices, your wishes can be legally enforceable through a living will.

Lastly, a HIPAA authorization permits another person to have access to review medical records.

These health care documents should be created with the help of an experienced estate planning attorney to ensure the person carrying out your wishes is the person whose judgment you trust and to clarify your wishes. Preparing for these tough decisions in advance is hard. However, this is a gift to those you love, who will otherwise be left hoping they did what you would have wanted.

Reference: The News-Enterprise (May 27, 2023) “All seniors need legal documents for medical issues”