Sunday, November 08, 2015
Common Question: Do I Transfer My House to My Child?
Minneapolis Estate Planning and Probate Lawyer Cautions Against Transferring Your Home to Kids
Most people are aware that probate should be avoided if at all possible. It is an expensive, time-consuming process that exposes your family’s private matters to the public and allows for easy challenges by others. It sounds simple enough to just give your property to your children while you are still alive. Then it's not subject to probate upon your death.
This strategy may offer some potential benefits, but those benefits are far outweighed by the risks. And with other probate-avoidance tools available, such as living trusts, it makes sense to review the risks and benefits of transferring title to your property with a qualified estate planning attorney.
- Property titled in the names of your heirs, or with your heirs as joint tenants, is not subject to probate upon your death.
- If you do not need nursing home care for the first 60 months after the transfer, but later do need such care, the property in question will not be considered for Medicaid (Medical Assistance in Minnesota) eligibility purposes.
- If you are named on the property’s title at the time of your death, creditors cannot make a claim against the property to satisfy the debt.
- Your heirs may agree to pay a portion, or all, of the property’s expenses, including taxes, insurance and maintenance.
- It may jeopardize your ability to obtain nursing home care. If you need such care within 60 months of transferring the property, you can be penalized for the gift and may not be eligible for Medical Assistance for a period of months or years, or will have to find another source to cover the expenses.
- You lose sole control over your property. Once you are no longer the legal owner, you must get approval from your children in order to sell or refinance the property.
- If your child files for bankruptcy, or gets divorced, your child’s creditors or former spouse can obtain a legal ownership interest in the property.
- If you outlive your child, the property may be transferred to your child’s heirs.
- Potential negative tax consequences: If property is transferred to your child and is later sold, capital gains tax may be due, as your child will not be able to take advantage of the IRS’s primary residence exclusion. You may also lose property tax exemptions. Finally, when the child ultimately sells the property, he or she may pay a higher capital gains tax than if the property was inherited, since inherited property enjoys a stepped-up tax basis as of the date of death.
Transferring ownership of your property to your children while you are still alive may be appropriate for your situation. However, it comes with significant risks. I generally don't recommend this strategy. If your goal is to avoid probate, maximize tax benefits and provide for the seamless transfer of your property upon your death, a living trust is likely a far better option.
Contact the firm now so we can discuss your options
Sunday, November 01, 2015
Help Your Parents Plan Now
Minnesota Estate Planning Attorney Urges You to Help Your Parents Put a Plan in Place
I live the practice of estate planning because I enjoy helping people. All people. I specialize in the “overlooked” because, well, these individuals and families are overlooked by society and need a fierce advocate on their side. Another specialty area that I have incorporated into my practice is that of elderly care and protection. All too often in America the elderly are left to their own devices as they battle illness and/or dementia. In Minnesota, the majority of seniors who need care receive it from a family member. The family needs help knowing what to do for their loved one. This is where I come in…
Currently, close to 5.3 million Americans suffer from Alzheimer’s. In the earliest stages of this illness it is difficult to impose upon your parent(s) the type of measures that will protect them wholly from financial scams or to remove their financial decision-making privileges. The desire to preserve your parent’s dignity and self-respect may make you decide to “stand down” in the beginning. They are your parents, after all. You don't want to take their cards or checkbooks away as though they were children. This desire to be kind and respectful can unfortunately have serious repercussions to their finances. In these earliest of stages there is a middle-ground, legally-speaking, that you can work with so that your parents still have autonomy but you can rest easy knowing that should something happen you will be informed in time to mitigate the damage.
My firm can work with you to provide your family with financial safeguards. Elderly care, especially when it comes to financial management, is a very important part of my practice area. I routinely work with families to create a Power of Attorney so that children can assume care of their elderly parent, or even to provide this decision making tool to a spouse, sibling or adult child who is better able to handle the financial obligations.
Call me today if you are at that point where you need to begin to help make decisions for a parent, or if you are beginning to see a need to plan ahead for your own financial future. I can walk you through all of the options available to you to protect you or your loved one’s finances in the days ahead.
Tuesday, October 06, 2015
6 Events Which May Require You to Revise Your Estate Plan
Creating an Estate Plan is not a one-time event. You should review your will periodically, to ensure it is up to date, and make necessary changes if your personal situation, or that of your executor or beneficiaries, changed. As the weather cools and we head toward the end of 2015, it's a great time to reflect back on the changes in your life. Keep in mind that there are a number of life-changing events that require your Will, and other estate planning documents, to be revised.
Read more . . .
Monday, August 24, 2015
13 Costly Misconceptions About Planning for Your Senior Years
A Minneapolis Estate Planning Lawyer Dispels 13 Myths About Planning for Your Twilight Years
Misconception #1: Most seniors move into nursing homes as a result of minor physical ailments that make it hard for them to get around. Wrong! A large number of admissions to nursing homes are actually due to serious health, behavior, and safety issues caused by Alzheimer’s disease and dementia.
Read more . . .
Monday, August 10, 2015
My Business is Small. Do I Need a Succession Plan?
A Minneapolis Estate Planning Attorney Explains the Value of Drafting a Business Succession Plan for Small Business Owners
Business succession planning is a practice or set of estate planning practices used by business owners to ensure that a small business can run successfully in the event of their death or in the unfortunate circumstance where they are unable to manage or operate the business. I receive a lot of inquiries on this topic. People want to know if they need a business succession plan or if they are somehow covered by wills and living trusts. I usually walk people through a basic set of questions such as:Read more . . .
Sunday, July 26, 2015
I Just Moved to Minnesota. Do I Need a New Will?
A Minneapolis Estate Planning Attorney Discusses How Moving to Minnesota Affects Your Estate Plan
Minnesota’s economy is booming with one of the lowest unemployment rates in the country and this means that people are moving here to take advantage of our great standard of living. As a result, I often receive calls from people asking if they need to update their estate plans due to the move.
In general, wills or living trusts that are valid in one state should be valid in all states. However, if you’ve recently moved to Minnesota, it’s highly recommended that you consult a Minnesota estate planning attorney. This is because states can have very different laws regarding all aspects of estate planning. For example, some allow you to use a handwritten will, but Minnesota does not.
And, as a practical matter, you want to ensure that the proper people are able to get their hands on your legal documents. This may prove difficult if they are all still located in another state.
Another event that can cause problems with moving and estate planning is moving from a community property state to a common law state, such as Minnesota. In community property states, all property earned or acquired during marriage is generally owned in equal halves by each spouse, with some exceptions, such as any property received by only one of them through gift or inheritance. The property that is considered community property includes income, anything acquired with income during the marriage, and any separate property that is transformed into community property. Separate property includes anything owned by either spouse before marriage, property received by only one spouse by gift or inheritance, and any property earned by one spouse after permanent separation. One spouse is not required in community property states to leave his or her half of the community property to another spouse, although many do.
In common law states, property acquired during a marriage is not automatically owned by both spouses. In common law states, the spouse who earns money and acquires property owns it by himself or herself, unless he or she chooses to share it with his or her spouse. Common law states usually have rules to protect a surviving spouse from being disinherited.
You will also want to make sure that your Health Care Directive and Power of Attorney are valid in Minnesota. Minnesota law is very specific about the form of your Power of Attorney so you should have this redone to match. Otherwise, you risk having a bank, or other institution, reject it.
As you can see, the laws of different states vary significantly with respect to incapacity planning, estate planning and inheritance rights. Therefore, it’s important to contact an estate planning attorney in your new area, especially if you are moving from a community property state to a common law state.
New to Minnesota? Contact an experienced estate planning attorney now!
Monday, June 22, 2015
Is There a Way to Disinherit a Child?
A Minnesota Estate Planning Attorney Explains Possible Ways to Disinherit a Child From Your Estate
I have had numerous clients ask about disinheriting a child from their estate. There are many reasons why you may want to disinherit a child, but you need to take careful steps to ensure your wishes are honored.
If your estate plan and related documents are properly and carefully drafted, it is highly unlikely that the court will disregard your wishes and award the excluded child an inheritance. As unlikely as it may be, there are certain situations where this child could end up receiving an inheritance depending upon a variety of factors.
To understand how a disinherited child could benefit, you must understand how assets pass after death. How a particular asset passes at death depends upon the type of asset and how it is titled. For example, a jointly titled asset will pass to the surviving joint owner regardless of what a will or a trust says. So, in the unlikely event that the disinherited child is a joint owner, that child will still inherit the asset because of how it's titled.
Similarly, if the child you want to disinherit is listed as a named beneficiary on a life insurance policy or retirement plan asset, such as an IRA or 401k, that child will still receive those benefits as the named beneficiary even if your will specifically left that child out. Another way such a "disinherited" child might receive a benefit is if all other named beneficiaries died before you.
So, assume you have three children and you wish to disinherit one of them. You draft the will to state that all of your assets should go to the other two, and if they are not alive, then to their descendants. If those other two children die before you and do not have any descendants, there may be a provision that in such a case your "heirs at law" are to take your entire estate and that would include the child you intended to disinherit. In order to disinherit a child, your estate plan must be carefully drafted to ensure he/she is left out of each part of the plan.
If you wish to disinherit a child, or anyone else, all of these issues can be addressed with proper and careful drafting by a qualified estate planning lawyer. You have the right to determine who is entitled to your assets after your death.
Contact an experienced and knowledgeable Minnesota estate planning attorney now to act on your wishes.
Tuesday, April 21, 2015
Choosing a Guardian for Minor Children
A Minneapolis Estate Planning Lawyer Offers Tips on Choosing a Guardian
If you are a parent and you are considering estate planning, one of the most difficult decisions you will have to make is choosing a guardian for your minor children. It is not easy to think of anyone else, no matter how loving, raising your child. Yet, you can make a tremendous difference in your child’s life by planning ahead.
The younger your child, the more crucial this choice is, because very young children cannot form or express their own preferences about caregivers. Yet young children are not the only ones who benefit from careful parental attention to guardianship. Children close to 18 years old will be legal adults soon, but, as you well know, may still need assistance of a parental figure after the fact.
By naming and talking about your choice of guardian, you can encourage a lifelong bond with a caring family. The nomination of guardians is a straightforward aspect of any family’s estate plan. It can be as basic or detailed as you want. You can simply name the guardian who would act if both you and your spouse were unable to or you can provide detailed guidance about your children and the sort of experiences and family environment you would like for them. Your state court, then, can give strong weight to your expressed wishes.
There are essentially four steps to this process. First, make a list of anyone you know that might be a candidate for guardian of your children. It is important to think beyond your sisters and brothers and consider cousins, aunts and uncles, grandparents, child-care providers and business partners. You might also want to consider long-time friends and those you’ve gotten to know at parenting groups as they may share similar philosophies about child-rearing. Second, make a list of factors that are most important to you. Here are some to consider:
- Child-rearing philosophy
- Presence of children in the home already
- Interest in and relationship with your children
- Ability to meet the physical demands of child care
- Presence of enough “free” time to raise children
- Religion or spirituality
- Marital or family status
- Potential conflicts of interest with your children
- Willingness to serve
- Social and moral habits and values
- Willingness to adopt your children
You might find that all or none of these factors are important to you or that there are others that make more sense in your particular situation. The third step is to, match people with priorities. Use the factors you chose in step two to narrow your list of candidates to a handful.
For many families, it is as easy as it looks. For others, however, these three steps are fraught with conflict. One common source of difficulty is disagreement between spouses. But, consensus is important. Explore the disagreements to see what information about values and people is important to one another and use all of your strongest communications skills to understand each other’s position before you try to find a solution that you can both feel good about. Step four is to make it positive. For some parents, getting past this decision quickly is the best way to achieve peace of mind and happiness. For others, choosing a guardian can be the start of an intensive relationship-building process. An attorney who understands where you and your spouse fall on that spectrum can counsel you appropriately.
Wednesday, April 15, 2015
An executor's fee is the amount charged by the person who has been appointed as the executor of the probate estate for handling all of the necessary steps in the probate administration. Therefore, if you have been appointed an executor of someone’s estate, you might be entitled to a fee for your services. This fee could be based upon a variety of factors and some of those factors may be dependent upon state, or even local, law.
General Duties of an Executor
- Securing the decedent's home (changing locks, etc.)
- Identifying and collecting all bank accounts, investment accounts, stocks, bonds and mutual funds
- Having all real estate appraised; having all tangible personal property appraised
- Paying all of the decedent’s debts and final expenses
- Making sure all income and estate tax returns are prepared, filed and any taxes paid
- Collecting all life insurance proceeds and retirement account assets
- Accounting for all actions; and making distributions of the estate to the beneficiaries or heirs.
This list is not all-inclusive and depending upon the particular estate more, or less, steps may be needed.
As you can see, there is a lot of work (and legal liability) involved in being the executor of an estate. Typically the executor would keep track of his or her time and a reasonable hourly rate would be used. Other times, an executor could charge based upon some percent of the value of the estate assets. What an executor may charge, and how an executor can charge, may be governed by state law or even a local court's rules. You also asked whether the deceased can make you agree not to take a fee. The decedent can put in his or her will that the executor should serve without compensation but the named executor is not obligated to take the job. He or she could simply decline to serve. If no one will serve without taking a fee, and if the decedents will states the executor must serve without a fee, a petition could be filed with the court asking them to approve a fee even if the will says otherwise. Notice should be given to all interested parties such as all beneficiaries.
If you have been appointed an executor or have any other probate or estate planning issues, contact us for a consultation today.
Monday, April 06, 2015
Should You Just Add Your Kid to Your Bank Account?
Minnesota Probate Lawyer Discusses the Issues with Simply Adding A Child to Your Bank Account
If I had a dime...
Why don't I just add my adult child to my bank account? She helps me with all my bills anyway? This questions has the honor of being the one I am asked the most. This post will discuss some of the concerns raised by handling your estate this way.
When deciding who will inherit your assets after you die, it is important to consider that you might outlive the beneficiary you choose. If you have added someone to your financial accounts to ensure that he or she receives this asset after you die, you might be concerned about what will happen should you outlive this person.
What happens to a joint asset in this situation depends upon the specific circumstances. For example, if a co-owner that was meant to inherit dies first, the account will automatically become the property of the other co-owners and will not be included in the decedent’s estate. However, whether it is somehow included in this person’s taxable estate, and is therefore subject to state death tax, also depends on state law. Assuming the other co-owners were the only ones to contribute to this account, and that the decedent did not put any of his or her money into the account, there may be state laws that provide that these funds are not taxed. The other co-owners might have to sign an affidavit to that effect and submit it to the state department of revenue with the tax return.
And if the adult child encounters money problems, a creditor could attach a lien to the bank account and reduce the amount you have saved for your peace of mind.
Also, if the decedent’s estate was large enough to require the filing of a federal estate tax return the same thing may be needed in order to exclude this money from his or her taxable estate. You would generally state that this person’s name was placed on the account for convenience, and that the money was contributed by the other co-owners.
If you are considering adding someone to your financial accounts so that they inherit it when you die, you should contact an experienced estate planning attorney to discuss your options.
Monday, March 30, 2015
For How Long Should a Business Keep Tax Records?
Minnesota Estate Planning Lawyer Talks About the Issues Related to Keeping Tax Records
There are many reasons for retaining tax records. They can be a useful guide for business planning, for tracking receipts and expenses, and in cases where the company or shares are being sold to outside parties.
The IRS expects taxpayers to keep records for as long as they are needed to administer any part of the Internal Revenue Code. In other words, if you fail to keep records, and an item in a past return is questioned, you may not have the documentation you need to defend yourself and avoid taxes and penalties. In addition, insurance companies and creditors may wish to see tax returns even after the IRS no longer does.
What is the "Period of Limitations" for a Tax Return?
Generally, you must keep records that support income and deductions for a tax return until the "period of limitations" for that return elapses. This is the period during which you can still amend your return to get a refund or credit and during which the IRS can still assess more tax. It varies depending on the circumstances surrounding each return.
- If you owe additional tax, but you haven't seriously underpaid, committed fraud, or failed to file a return, the period is 3 years from the date taxes were filed.
- If you failed to report income that you should have reported, in excess of 25% of the gross income that you did report, the period is 6 years.
- If you filed a claim for credit or refund after you filed your return, the period is the later of 3 years after the return was filed or 2 years after tax was paid.
- If you filed a claim for a loss from worthless securities or a bad debt deduction, the period is 7 years.
- If you filed a fraudulent return or failed to file a return, the period is unlimited.
Note: Returns filed before taxes are due are treated as though they were filed on the due date.
Other Periods of Limitations
Additionally, if you are an employer, you must keep employee tax records for at least 4 years after the later of the date the tax becomes due or the date it is paid.
For assets, you should keep records until the period of limitations elapses for the year in which you sell the property in a taxable transaction. You will need records to compute depreciation, amortization, or depletion deductions and to add up your basis in the property for purposes of calculating gain or loss. A business law attorney experienced in tax matters can further guide you in relation to your specific situation
From within Hennepin County Unique Estate Law represents clients throughout Minnesota, including Minneapolis, Edina, Bloomington, St. Louis Park, Minnetonka, Plymouth, Wayzata, Maple Grove, St. Paul, and Brooklyn Park.