Category: Heirs

Consider a family meeting about estate planning

Consider a Family Meeting about Estate Planning

Kiplinger’s recent article entitled “It’s Never Too Late for a Family Meeting – Here’s How to Do Them Well” emphasizes that no matter the amount of wealth that a family has, wealth education is crucial to overall financial education, preparing for the future and to becoming a good steward of an inheritance. Consider a family meeting about estate planning.

Family meetings are a great way of bringing members of a family together with a goal of facilitating communication and education. This allows for sharing family stories, communicating values, setting goals to help ensure transparency and helping members across generations understand their roles around stewardship and wealth.

Here are some ideas on how to have an effective family meeting about estate planning:

Prepare. The host of the meeting should spend time with each participating family member to help them understand the reason for the meeting and learn more about their expectations. There should be a desire and commitment from the participants to invest time and effort to make family meetings about estate planning a success.

Plan. Create a clear agenda that defines the purpose and goals of each family meeting about estate planning. Share this agenda with participants before the meeting. Select a neutral location that makes everyone comfortable and encourages participation.

Have time for learning. Include an educational component in the agenda, such as an introduction to investing, estate planning, budgeting and saving, or philanthropy.

Have a “parking lot.” Note any topics raised that might need to be addressed in a future estate planning meeting.

Use a facilitator. Perhaps have a trusted adviser facilitate the meeting. This can help with managing the agenda, offering a different perspective, calming emotions and making certain that everyone is heard and understood.

Follow up. Include some to-do’s and schedule the next meeting to set expectations about continuing to bring the family together.

Consider a family meeting about estate planning that will allow all family members to feel they are included in decisions, and foster a better understanding of what their inheritance will look like.

If you would like to learn more about difficult family conversations, please visit our previous posts. 

Reference: Kiplinger (Sep. 1, 2021) “It’s Never Too Late for a Family Meeting – Here’s How to Do Them Well”

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The Estate of The Union Episode 10 out now

 

www.texastrustlaw.com/read-our-books

Prevent Asset problems with thoughtful Planning

Prevent Asset problems with thoughtful Planning

Kiplinger’s recent article entitled “5 of the Worst Assets to Inherit” says that if you’re planning to leave an inheritance to others, you should take care in what you leave them. Some assets can cause problems. However, you can prevent asset problems with thoughtful estate planning and the help of an experienced estate planning attorney.

Let’s look at five of the worst assets to inherit and what you can do to help manage them before you pass away:

Timeshares. A timeshare is a long-term agreement where you get to use a vacation property. These contracts are notorious asset problems in estate planning and are difficult to end. If you pass away, and include the timeshare, your children may be responsible for the ongoing contract costs. Allow your children to decide at your death whether they want to take over the contract. They can refuse to accept it then—even if your will left them the timeshare—by making a formal disclaimer of the asset.

Potentially Valuable Collectibles. This may be a coin collection, rare stamps, or a piece of artwork. Note that the capital gains tax rate on collectibles goes up to 28%, much higher than the maximum 20% long-term gains rate on other investments. When you die, your heirs receive a step-up-in-basis, meaning when they sell they receive tax-free what the collectible was worth on the day you die. Even so, there are some substantial risks to leaving valuable collectibles as an inheritance. One problem with collectibles is that thy may be difficult to value. If you have any valuable collectibles, tell your heirs where they’re located, their estimated value and the dealers they should work with after you’re gone, so they don’t run into trouble.

Guns. Firearms can also get complicated as an inheritance because of the amount of regulation. They aren’t the type of asset that you can simply hand over to a person without the proper registration or permit. There are a number of state and federal rules, depending on your state of residence and the type of gun.

Vacation Properties. Inherited vacation properties can be a potential financial and emotional asset problem, especially if you’re planning to leave one to multiple family members. Disagreements can arise over how often each can use the property, who owes what for the repairs, whether they should sell and whether they should buy one of them out and at what value, especially if one heirs is living far away and doesn’t want their share. Even if the siblings are on good terms, a vacation property has expenses, like maintenance, property taxes, insurance and any remaining mortgage. These costs could outweigh the value of the vacation property to your heirs. If you have a vacation home, begin these discussions early with your heirs and determine if they even want the property and, if so, can you get them to agree on the terms.

Any Physical Property (Especially with Sentimental Value). Disagreements among heirs can happen over any type of physical property, like a favorite chair or Mom’s silverware. These sentimental items are a common asset problem and can be tough to divide in your estate planning. Moreover, it’s harder to tell what some of these items are worth. Avoid these issues and start planning the distribution of your physical property ahead of time. It is important to be clear on who will receive what to prevent arguments.

You can prevent asset problems with thoughtful estate planning. Sit down with your family and have a frank and honest discussion about what assets should – and should not – be included in your estate plan. If you would like to read more about what to include in your estate planning, please visit our previous posts. 

Reference: Kiplinger (Sep. 14, 2021) “5 of the Worst Assets to Inherit”

The Estate of The Union Episode 9 out now

 

www.texastrustlaw.com/read-our-books

gift-tax is treated differently by IRS and Medicaid

Gift-Tax treated differently by IRS and Medicaid

Different government agencies have different rules for the same things. It’s a hard lesson, especially for those who try to use their $15,000 annual gift tax exclusion for asset protection for long term care. The results are not good. The gift-tax is treated differently by IRS and Medicaid.

A recent article from The News Enterprise makes it clear: “Medicaid and IRS don’t view gift-tax-exemption in same way.”

To understand the exclusion better, let’s start by looking at what the amount is being excluded from. The IRS generally allows each person to gift a total of $11.7 million in gifts during their lifetime and after death without incurring a gift tax. There are exceptions, but this is true in most cases. However, that first $15,000 given to each person within each calendar year is excluded from the total amount.

If a woman gives her three children $15,000 each per year for five years, she has given away a total of $225,000. However, this amount is not deducted from the $11.7 million that she is allowed within her lifetime non-taxable gift amount.

However, if the same woman gave her children $16,000 each for five years, the extra $3,000 per year must be deducted from her lifetime non-taxable gift limit. Unless she reaches the $11.7 million after her death, her estate will still not pay taxes on the gifts. She will be required to file a form every year letting the IRS know that she is reducing her limit.

The $15,000 gift tax exclusion each year simplifies the ability to give gifts without cumbersome reporting requirements. However, it creates huge—and costly—problems when used in an attempt to become eligible for Medicaid. This federally funded program was created to help low-income people pay for medical and nursing home care. A person’s assets and any financial transactions made within a five-year lookback period are considered when determining eligibility.

What most people don’t know is that Medicaid does not allow the gift tax exclusion to be used for the lookback period.

Remember the woman who gave her three children $15,000 each year for five years? If she goes into a nursing facility in the fifth year, after giving her final set of gifts, the IRS won’t count any of those gifts made against her lifetime gift tax exemption. However, Medicaid will count the full amount—$225,000—as if those assets were available to pay for her care. The penalty period will make it necessary for her or her family to pay for care, possibly for five years.

To take advantage of the annual gift tax exclusion safely when Medicaid may be in the future, an estate planning attorney can create an Intentionally Defective Grantor Trust to hold assets. This is a hybrid trust used to separate assets from the grantor just enough to begin the five-year lookback period while holding property within the grantor’s taxable estate, allowing for a continuing opportunity to take advantage of the annual gift tax exclusion without triggering a new five-year look back at each gift.

The gift-tax exemption is treated differently by IRS and Medicaid because they work under different rules. Understanding what each agency requires can protect the family and those needing nursing home care without creating expensive and stressful results. In addition, some Medicaid planning techniques may work in some states but not in others.

If you would like to learn more about the gift tax, and other estate taxes, please visit our previous posts. 

Reference: The News Enterprise (Sep. 14, 2021) “Medicaid and IRS don’t view gift-tax-exemption in same way”

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The Estate of The Union Episode 9 out now

 

www.texastrustlaw.com/read-our-books

Businesses should have a buy-sell agreement

Businesses should have a Buy-Sell Agreement

Businesses should have a buy-sell agreement to protect the owners, their families, employees and the company. Without a buy-sell agreement or succession plan, any company is at risk, notes a recent article titled “Why does your business need a buy-sell agreement?” from the Philadelphia Business Journal.

Many business owners are reluctant to recognize the possibility of their becoming disabled or dying, so they put off creating a buy sell agreement. However, as we all know, unexpected events happen and it’s always better to be prepared.

A buy-sell agreement offers protection first by establishing what type of triggering events could happen and defining the terms and conditions for how shareholders will enter and exit their ownership of the business.

Companies often have a buy-sell agreement stuck in a file drawer from ten or twenty years ago. Chances are that big changes have taken place in the business and the old agreement is no longer relevant. The day-to-day operations of a business are pressing, and there’s never enough time to get around to it. However, when the unexpected occurs, shareholders are left to negotiate among themselves during the worst possible time.

A well-drafted buy-sell agreement for a business should address the most common events: death, disability, divorce, personal bankruptcy, voluntary termination, retirement and involuntary separation. The agreement should clearly state the percentage and type of ownership, how shares are valued and how any insurance proceeds are to be handled. Without knowledge of the value and terms of payment, there’s no way to provide protection for a triggering event.

Once the value of the company and its shareholders is defined, it may become clear that a business needs to close a valuation gap.

The intentions for the future of the business can also be clarified through this process. Some provisions to consider are:

  • How to notify other shareholders, in the event of a voluntary termination.
  • Trailer provisions to protect exiting shareholders, in the event of a subsequent liquidity event.
  • Discounts on value or extended payment terms for non-compliance of notification provisions.
  • Insurance portability provisions to allow existing shareholders to reassign beneficiary designations (once payments owed to the exiting shareholder have been made).

Businesses should have a buy-sell agreement. They are dynamic entities with frequent changes, so buy-sell agreements should be reviewed and updated in the same way that an estate plan needs to be updated—every three or four years. If you would like to read more about buy-sell agreements, and other succession planning topics, please visit our previous posts. 

Reference: Philadelphia Business Journal (Sep. 1, 2021) “Why does your business need a buy-sell agreement?”

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The Estate of The Union Episode 9 out now

 

www.texastrustlaw.com/read-our-books

keep the vacation home in the family

Keep the Vacation Home in the Family

There are several ways to keep the vacation home in the family and is not overly burdensome to any one member or couple in the family, according to the article “Estate planning for vacation property” from Pauls Valley Daily Democrat.

To begin, families have the option of creating a legal entity to own the asset. This can be a Family LLC, a partnership or a trust. The best choice depends upon each family’s unique situation. For an LLC, there needs to be an operating agreement, which details management and administration, conflict resolution, property maintenance and financial matters. The agreement needs to include:

Named management—ideally, two or three people who are directly responsible for managing the LLC. This typically includes the parents or grandparents who set up the LLC or Trust. However, it should also include representatives from different branches in the family.

Property and ownership rules must be clarified and documented. The property’s use and rules for transferring property are a key part of the agreement. Does a buy-sell agreement work to give owners the right to opt out of owning the property? What would that look like: how can the family member sell, who can she sell to and how is the value established? Should there be a first-right-of refusal put into place? In these situations, a transfer to anyone who is not a blood descendent may require a vote with a unanimous tally.

There are families where transferring ownership is only permitted to lineal descendants and not to the families of spouses who marry into the family.

Finances need to be spelled out as well. A special endowment can be included as part of the LLC or as a separate trust, so that money or investments are set aside to pay taxes, upkeep, insurance and future capital requirements. Anyone who has ever owned a house knows there are always capital requirements, from replacing an ancient heating system to fixing a roof after decades of a heavy snow load.

If the endowment is not enough to cover costs, create an agreement for annual contribut6ions by family members. Each family will need to determine who should contribute what. Some set this by earnings, others by how much the property is used. What happens if someone fails to pay their share?

Managing use of the property when there is a legal entity in place is more than a casual “Who calls Mom and Dad first.” The parents who establish the LLC or Trust may reserve lifetime use for themselves. The managers should establish rules for scheduling.

For parents or grandparents who create an LLC or Trust, be sure it works with your estate plan. If they intend to keep the vacation home in the family and wish to leave a bequest for its maintenance, for instance, the estate planning attorney will be able to incorporate that into the LLC or Trust.

If you would like to learn more about protecting property in estate planning, please visit our previous posts. 

Reference: Pauls Valley Democrat (July 29, 2021) “Estate planning for vacation property”

New Installment of The Estate of The Union Podcast

 

www.texastrustlaw.com/read-our-books

The Estate of The Union Episode 10 out now

New Installment of The Estate of The Union Podcast

In this new installment of The Estate of The Union Podcast, Brad Wiewel is joined by Ann Lumley, JD, the Director of After Life Services and Trust Administration for Texas Trust Law to discuss celebrity estate planning screw ups.

The size and scope of the mistakes made by celebrities may be enormous, but many of the mistakes are common for, well, us common people. Ann and Brad discuss the havoc created by celebrities when they died with no planning or inadequate planning. It’s a fun, fast moving discussion on What-Not-To-Do. Learning lessons from celebrity estate planning mistakes is a good way to prevent yourself from making those same errors. If you don’t have an estate plan, get it started. If you haven’t looked at your estate plan in a while, have it reviewed.

In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insight into estate planning, making an often daunting subject easier to understand.

It is Estate Planning Made Simple!

The Estate of The Union can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. Please click on the link below to listen to the new installment of The Estate of The Union podcast. We hope you enjoy it.

Episode 8 of The Estate of The Union podcast is out now

The Wiewel Law Firm focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization. 

Understanding the responsibilities of the trustee

Understanding the Responsibilities of the Trustee

Being a fiduciary requires putting the interest of the beneficiary over your own interests, no matter what. The person in charge of managing a trust, the trustee, has a fiduciary duty to the beneficiary, which is described by the terms of the trust. Understanding the responsibilities of the trustee requires a review of the trust documents, which can be long and complicated. This is explained in a recent article titled “Estate Planning: Executors, executrix and personal representatives” from nwitimes.com.

An estate planning attorney will be able to review documents and explain the directions if the trust is a particularly complex one.

If the trust is a basic revocable living trust used to avoid having assets in the estate go through probate, duties are likely to be similar to those of a personal representative, also known as the executor. This is the person in charge of carrying out the directions in a last will.

A simple explanation of executor responsibilities is gathering the assets, filing tax returns, and paying creditors. The executor files for an EIN number, which functions like a Social Security number for the estate. The executor opens an estate bank account to hold assets that are not transferred directly to named beneficiaries. And the executor files the last tax returns for the decedent for the last year in which he or she was living, and an estate tax return. There’s more to it, but those are the basic tasks.

A person tasked with administering a trust for the benefit of another person must give great attention to detail. The instructions and terms of the trust must be followed to the letter, with no room for interpretation. Thinking you know what someone else wanted, despite what was written in the trust, is asking for trouble.

If there are investment duties involved, which is common when a trust contains significant assets managed in an investment portfolio, it will be best to work with a professional advisor. Investment duties may be subject to the Prudent Investor Act, or they may include the name of a specific advisor who was managing the accounts before the person died.

If there is room for any discretion whatsoever in the trust, be careful to document every decision. If the trust says you can distribute principal based on the needs of the beneficiary, document why you did or did not make the distribution. Don’t just hand over funds because the beneficiary asked for them. Make decisions based on sound reasoning and document your reasons.

Being asked to serve as a trustee reflects trust. Understanding the responsibilities of the trustee is a serious responsibility, and one to be performed with great care.

If you would like to learn more about the role of trustee, please visit our previous posts. 

Reference: nwitimes.com (July 18, 2021) “Estate Planning: Executors, executrix and personal representatives”

 

The Estate of The Union Episode 10 out now

Episode 7 of The Estate of The Union Podcast

We are estate planning and probate attorneys and we experience death weekly. The saddest aspect of our work is knowing that most, if not all, of the great stories of our clients’ lives have died with them. This can be heartbreaking for future generations. The solution to this dilemma is to capture those memories NOW. In episode 7 of The Estate of the Union podcast, Brad interviews Michael O’Krent with Life Stories Alive.

Mike’s company videotapes life stories so that generations of family members can grasp the essence of the individual loved one, not just the inheritance. Brad and Mike discuss what to expect when recording your life story and how the process works with Life Stories Alive. Brad talks about his personal experience recording his story for his loved ones, and Mike shares some touching stories of how impactful these video presentations can be for both the storyteller and the viewer.

Take the time to record these special stories while you can. The Money will be spent, but the memories can endure forever.

In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insight into estate planning, making an often daunting subject easier to understand.

It is Estate Planning Made Simple!

The Estate of The Union can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. Please click on the link below to listen. We hope you enjoy it.

If you would like to learn more about Michael O’Krent and Life Stories Alive, please visit their website www.lifestoriesalive.com

Episode 7 of The Estate of The Union podcast is out now

www.LifeStoriesAlive.com

The Wiewel Law Firm focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization. 

things that do not belong in a will

Things that do not belong in a Will

A last will and testament is the basic document of an estate plan, which is how you direct assets according to your wishes after you have died. However, there are certain things that do not belong in a will, and it’s important to know what they are. Mistakes can lead to expensive and worrisome complications, says the article “Things you should never put in your will” from msn.com.

Your will can get very specific about who receives what in the way of your personal possessions. For example, you can give your car to a family member of your choice. What you can’t do is tell the family member how they can use the car, or if she should never sell the car. Enforcing conditional wishes through a will isn’t legal, nor is it practical.

If you want to control aspects of an inheritance, the best way to this is through a trust, which allows you to set terms that are enforceable, even after you have died. A trust is a legal entity with a trustee and the law to enforce its terms. You can set goals or milestones for heirs best with a trust.

Leaving assets out of your will actually benefits family members in many regards. First, they’ll receive their inheritance faster. Upon death, your will must be reviewed and validated in a court of law in a process known as probate. Depending on your jurisdiction and the complexity of your estate, this can take months and, in some cases, years. Papers have to be filed, judges have to review your will and determinations must be made. Wills can also be contested in court, further tying up assets and slowing the process of distribution.

Putting property in a trust or having accounts that are Payable On Death (POD) will speed up the process for heirs.

Don’t put anything in a will that you don’t own outright. If you are a co-owner with someone, upon your death, the other owner will become the owner, with no need for court involvement.

Trusts are a key tool in estate planning, used to avoid probate and increase control of assets. Once property is titled into the trust, it becomes subject to the rules and directions of the trust, which are explained in detail in the trust documents. Nothing placed in a trust should be included in a will to avoid any confusion and delays.

Certain accounts and assets are payable or transferable on death. They are distributed directly to heirs, so putting them in a will is not necessary. These are accounts with beneficiary designations, typically brokerage or investment accounts, retirement accounts, pension plans and life insurance policies.

Business interests can be given through a will, but you don’t want to do this. Succession could be contested, and your business partners may be left with a big headache, instead of focusing on transitioning the business to the next generation of owners. Your estate planning attorney will be able to help create a succession plan that will align with your estate plan. The two need to work together.

Once deemed valid by the probate court, your last will and testament becomes a public document.  Anyone who wants to read it, can do so. Things that do not belong in a will include any account numbers, account values, login information, passwords, or any information you would not want to be shared in public.

If you would like to learn more about Wills and Trusts, please visit our previous posts. 

Reference: msn.com (July 11, 2021) “Things you should never put in your will”

Episode 6 of The Estate of The Union podcast is out now

 

www.texastrustlaw.com/read-ou-books

Information in our blogs is very general in nature and should not be acted upon without first consulting with an attorney. Please feel free to contact The Wiewel Law Firm to schedule a complimentary consultation.
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