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Estate Planning

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.

Misconception #2: Nursing home costs in Minnesota average $1,500 to $2,500 per month per person.  Hardly.  Current nursing home charges for one resident typically run $6,000+ per month, or $72,000 per year, which does not include prescription drugs -- and those costs continue to rise.

Misconception #3: Children can care for a parent with Alzheimer’s disease at home, without the need for nursing home care.  Not true!  Many patients with Alzheimer’s disease end up in nursing homes because children are simply unable to provide the level of care their parent needs.  In most cases, the children want to care for their parents.  But, as a practical matter, they simply can’t.  Moving a parent into a nursing home is an intensely personal issue and should not be labeled as a right or wrong decision. In many cases, it’s the only realistic option.  The rare exception is when the family has enough money to pay for skilled nursing care at home.

Misconception #4: Standard legal forms are all you need for a good estate plan.  False.  A competent estate plan begins with clearly defined goals, supported by well-drafted legal documents, and the repositioning of assets, as needed, to protect your estate from taxes, probate costs, and catastrophic nursing home costs. Further, an estate plan is much more than a set of documents. It’s also the valuable advice from a qualified Minnesota Estate Planning Attorney.

Misconception #5: Your child will never move you into a nursing home.  Wrong.  Most children consider all options before moving a parent into a nursing home.  But, sadly, children may find they have no other alternative.  As a result, parents who never expected to live in a nursing home soon discover that a nursing home is the only place with the staff and equipment to provide the care they need.

Misconception #6: As payment for nursing home care, the government will take your family home.  Not necessarily.  With proper planning, you may be able to save the home.  Many people fear that the government will take their home in exchange for nursing home care, but you can avoid this with proper planning.  You’ll be glad to know there are some ways you can protect your home so it won’t be taken.

Misconception #7: If your spouse enters a nursing home, all of your joint savings will have to be spent on his or her care.  No.  With proper planning you can keep half of your combined “countable” assets up to approximately $120,000. “Countable” assets are those assets such as cash, checking accounts, savings, CDs, stocks, and bonds that the government considers available to be spent on the cost of nursing home care.

Misconception #8: Legally, you can give away only $14,000 to each of your children each year.  Not true.  You can give away any amount, but you have to report to the IRS gifts in excess of $14,000 per recipient per year ($28,000 if both husband and wife make a gift).  However, there is no requirement that you pay any gift tax unless you have exhausted your lifetime exclusion amount, which is currently set at $5,000,000 for an individual.

Misconception #9: You can wait to do long-term planning until your spouse or you get sick.  Not advisable. You and your spouse will be much better off if you have taken important planning steps in advance, before a crisis occurs.  What stops most people from being able to effectively plan when they are in the middle of a crisis is that the ill person is unable to make decisions and sign the necessary legal documents. Further, the government will “look back” five years to see if you’ve given away any assets and will charge those against your care. Early planning may allow you to gift assets (e.g. Family Cabin) to beneficiaries prior to the 5 year mark.

Misconception #10: Since you are married, your spouse will be able to manage your property and make financial decisions without a general durable power of attorney.  Not true.  If you become incapacitated and your spouse needs to sell or mortgage the family home -- or gain access to financial accounts that are in your name only -- your spouse will need a general durable power of attorney.  Without one, your spouse will have to go to Court and get the judge’s permission to act on your behalf by way of a conservatorship proceeding. This is a common issue where a well spouse may attempt to obtain funds (hardship withdrawal) from an ill spouses retirement account. You may believe that all of your assets are jointly titled, but a retirement account is always held in only the employee’s name.

Misconception #11: You can hide your assets while you become eligible for Medicaid.  False!  Intentional misrepresentation in a Medicaid application is a crime and can be costly.  The IRS shares any information concerning your income or assets with the local Medicaid eligibility office.  You -- or who-ever applied for Medicaid -- may have to repay Medicaid to avoid prosecution.

Misconception #12: Medicaid rules that applied to your neighbor when he went into a nursing home will also apply to you.  Maybe not.  Medicaid rules change.  Don’t assume the law that applied to your neighbor will also apply to you.  In addition, there may have been facts about your neighbor’s situation that you just don’t know.

Misconception #13: You should just transfer your home to your kid.  Danger Will Rogers! There are many factors that go into making such a decision. Just a few of the questions that will need to be answered are: Does the child have debt? Do you plan to still live there? Will you need Medical Assistance within the next 5 years? 

As you can see, planning for your senior years can be quite complex. But, an experienced lawyer can guide your through it. Contact a qualified Minnesota estate planning lawyer today.

 

 


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:

  1. If you die or become incapacitated, can a trusted person run your business successfully without your guidance and support?
  2. Would your family be able to hire an appropriate person to run the business without your assistance?
  3. Are there partners involved in this business?
  4. Do you want this business to “stay in the family” or do you want it to be sold to support your family? More importantly, does your family want the business?

While I ask these questions and more, I have to be honest and say that I already know what the answer should be.  Yes, you need a Business Succession Plan because as “they” say: an ounce of prevention is worth a pound of cure.  Even if you believe your family is well-equipped to handle things if/when you are gone, you really don’t (and won’t) know until that time comes.  Having a well-thought out Business Succession Plan at least eliminates a great many of the questions that your family would have to ask someone (at a high hourly rate) should something happen to you.

There is also often a miscommunication between generations on whether the named successors even want the business. Perhaps your son or daughter does want it. But, maybe not! Please discuss this with them to be sure you are leaving it to someone who will care and nurture it as you have.

Just recently one of my clients became incapacitated and the Business Succession Plan he and I created “kicked in”.  His partner is now able to operate the business and keep it running until he is back on his feet again because we successfully planned for it.  Had we not prepared so thoroughly it is possible that the salon would have closed within a month.  Think about it, who would pay the utilities?  The rent?  Salaries?

Protect that which you worked so hard to build. Call a qualified estate planning attorney today.

 

 


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:

  • Maturity
  • Patience
  • Stamina
  • Age
  • Child-rearing philosophy
  • Presence of children in the home already
  • Interest in and relationship with your children
  • Integrity
  • Stability
  • 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

Executors Fees

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

  1. Securing the decedent's home (changing locks, etc.)
  2. Identifying and collecting all bank accounts, investment accounts, stocks, bonds and mutual funds
  3. Having all real estate appraised; having all tangible personal property appraised
  4. Paying all of the decedent’s debts and final expenses
  5. Making sure all income and estate tax returns are prepared, filed and any taxes paid
  6. Collecting all life insurance proceeds and retirement account assets
  7. 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


Monday, March 02, 2015

Changing Uses for Bypass Trusts

Minneapolis Estate Planning Lawyer Explains the Reasons Why You May Want a Bypass Trust

Every year, each individual who dies in the U.S. can leave a certain amount of money to his or her heirs before facing any federal estate taxes. For example, in 2013, a person who died could leave $5.25 million to his or her heirs (or a charity) estate tax free, and everything over that amount would be taxable by the federal government. Transfers at death to a spouse are not taxable.

Therefore, if a husband died owning $8 million in assets in 2013 and passed everything to his wife, that transfer was not taxable because transfers to spouses at death are not taxable. However, if the wife died later that year owning that $8 million in assets, everything over $5.25 million (her exemption amount) would be taxable by the federal government. Couples would effectively have the use of only one exemption amount unless they did some special planning, or left a chunk of their property to someone other than their spouse.

Estate tax law provided a tool called “bypass trusts” that would allow a spouse to leave an inheritance to the surviving spouse in a special trust. That trust would be taxable and would use up the exemption amount of the first spouse to die. However, the remaining spouse would be able to use the property in that bypass trust to live on, and would also have the use of his or her exemption amount when he or she passed. This planning technique effectively allowed couples to combine their exemption amounts.

For the year 2013, each person who dies can pass $5.25 million free from federal estate taxes.  This exemption amount is adjusted for inflation every year.  In addition, spouses can combine their exemption amounts without requiring a bypass trust (making the exemptions “portable” between spouses). This change in the law appears to make bypass trusts useless, at least until Congress decides to remove the portability provision from the estate tax law.

However, bypass trusts can still be valuable in many situations, such as:

(1)  Remarriage or blended families. You may be concerned that your spouse will remarry and cut the children out of the will after you are gone. Or, you may have a blended family and you may fear that your spouse will disinherit your children in favor of his or her children after you pass. A bypass trust would allow the surviving spouse to have access to the money to live on during life, while providing that everything goes to the children at the surviving spouse’s death.

(2)  State estate taxes. Currently, Minnesota has an estate tax exemption of 1.2 million per person (to increase to 2 million by 2018), so a bypass trust may be helpful to allow you and your spouse to combine your assets that can be exempt from state estate tax.

(3)  Changes in the estate tax law. Estate tax laws have been in flux over the past several years. What if you did an estate plan assuming that bypass trusts were unnecessary, Congress removed the portability provision, and you neglected to update your estate plan? You could be paying thousands or even millions of dollars in taxes that you could have saved by using a bypass trust.

(4)  Protecting assets from creditors. If you leave a large inheritance outright to your spouse and children, and a creditor appears on the scene, the creditor may be able to seize all the money. Although many people think that will not happen to their family, divorces, bankruptcies, personal injury lawsuits, and hard economic times can unexpectedly result in a large monetary judgment against a family member.

Although it may appear that bypass trusts have lost their usefulness, there are still many situations in which they can be invaluable tools to help families avoid estate taxes.

 Don't pay unnecessary taxes, call a Minneapolis estate planning attorney now to discuss your options with an attorney.


Monday, February 23, 2015

A Discussion of Wills, Part 3: Beware of “Simple” Estate Plans

“I just need a simple will.”  It’s a phrase I hear at least once a week.   What could be wrong with that?  This post explains the many common situations in which a "simple will" may not be a good fit for your family tells the cautionary tale of one family who relied on a will purchased at a stationary store.


Read more . . .


Monday, February 16, 2015

What Happens If Your Heir Doesn't Want What You Are Giving?

Beneficiaries may not want the asset left to them?  Why? And what happens if they reject it? I explain the reasons why someone may reject an inheritance and what happens to it if they do.


Read more . . .


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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.



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