Choosing an Executor can be a Difficult Decision

September 13, 2023

Choosing an executor can be a difficult decision. Planning for death-related events isn’t as much fun as planning a weekend getaway. Therefore, you’d be forgiven for procrastinating. However, that doesn’t mean you can put off naming an executor forever, says a recent article from AARP, “7 Things to Know About Appointing an Executor.”

Your executor needs to possess the stamina, patience, and persistence to complete the tasks of this role. If they don’t, having your estate administered may become difficult or impossible. Serving as an executor can be harder than people think. Problems begin when someone names a family member just because they are family—which is not the best reason.

It’s best to name someone rather than no one, advises the article. You can always change the executor if they decide they don’t want the responsibility or die before you. If you don’t name anyone, the court will decide for you, It may not be someone you know or the last person you want to handle your estate.

Things can get even more complicated if you don’t leave clear instructions, including where to find your important documents, the keys to your home and car and usernames and passwords to various digital assets. Instead of making everything harder for the ones you love, it’s best to make it easier.

There are seven main tasks for the executor to complete. The first is planning the funeral. You can make that easier by expressing your wishes to your executor and leaving the information in documents. Don’t add it to your will—the executor may not see the will until long after you’ve been buried or cremated.

The executor must obtain a death certificate, find the will and retain an estate planning attorney. The death certificate is issued by your county of residence and is signed by the physician who verified your death. If you’ve had a valid will prepared, your property will be distributed according to the terms of the will. Assets in trusts or accounts with beneficiary designations will go directly to your heirs. Everyone should review their beneficiary designations regularly and update as needed. The beneficiary designations surpass any wishes in the will.

Notify the probate court. Your executor or attorney will need to petition the probate court in the area where you live. They’ll complete a form to obtain a Letter of Administration or Letters Testamentary. These are used to prove that they are the court-approved executor.

Inform all interested parties. Deaths must be reported to employers, Social Security, friends, and family members. Anyone who might have an “interest” in the estate needs to be notified. In some jurisdictions, this requires publishing a death notice in the local paper several times shortly after the person has passed. Banks and other financial institutions also need to be notified.

Pay all debts and file taxes. If applicable, the executor must settle all obligations with creditors and file income, inheritance, or estate taxes.

Create an inventory of assets and plan for distribution. This includes probate and non-probate assets. This includes assets that are jointly owned or held in trust. Next, the executor determines what is sold, kept, donated, or discarded.

Distribute assets among beneficiaries. This occurs only after any estate liabilities, including taxes and paying creditors, are settled.

Complete the final accounting and all required forms. Your executor must dissolve existing accounts and ensure that the court has everything needed to settle your estate.

Your will helps your loved ones navigate the process of settling your estate. Include clear instructions in a letter of intent, so they know what accounts they must deal with. Above all, make sure that the person you name to serve as executor can handle the tasks and the family dynamics accompanying grief.

Choosing an executor can be a difficult decision to make. Consult with your estate planning attorney. He or she will have the experience and expertise to help you make an important decision. If you would like to learn more about the role of the executor, please visit our previous posts.

Reference: AARP (Aug. 8, 2023) “7 Things to Know About Appointing an Executor”

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Benefits and Drawbacks to a Funeral Trust

September 7, 2023

An irrevocable funeral trust allows you to save for your end-of-life costs. It can be an excellent way to make arrangements for your burial. However, there are benefits and drawbacks to a irrevocable funeral trust. Be sure you have the flexibility you need since irrevocable trusts can’t be modified after they go into effect.

The main point is that you cover the costs yourself. Remember that even if your will leaves behind money to pay for your funeral, it must go through the probate process. Your heirs may still be required to pay for your funeral upfront and hope to collect reimbursement from your will. But with a funeral trust, these payments are handled automatically.

The next point is that you (or your heirs) can pay less. The funeral trust pays for your funeral with the proceeds of its life insurance policy or other investments. This means that you may pay less upfront than you would otherwise, explains Yahoo Finance’s recent article, “Pros and Cons of an Irrevocable Funeral Trust.”

The details of those costs are varied based on the individual trust fund. Some funeral trusts only cover basic services, like a casket, burial, or cremation. But others will pay for a full funeral ceremony, with any associated officiants, transportation, and other costs. This can make the planning process easier for your family because if you set up a funeral trust that comes with specific, pre-arranged costs and services, all of those details will already be arranged when you pass away. Your family won’t have to go through finding a funeral home and making arrangements.

Another benefit to an irrevocable funeral trust is Medicaid eligibility. Because you no longer own these assets, they won’t count against your net worth when determining Medicaid coverage and any other government benefits. But that’s true only for irrevocable trusts. The money in a revocable trust is still legally yours. As a result, it counts against eligibility determinations.

As with all irrevocable trusts, you should know that once this money is in the trust, it’s no longer under your control. So be sure this is money with which you can comfortably part. Also, confirm these plans with your family if you set up a funeral trust with pre-arranged services. Be sure they’ll want what you’ve planned because this will be for their comfort.

Finally, you can lose all the money if you set up this trust with a funeral home that goes out of business or has financial issues. And these trusts aren’t always portable, which can also be a problem. Remember, there are both benefits and drawbacks to a funeral trust. Discuss these potential outcomes with your estate planning attorney to decide if a funeral trust is a good option for you. If you would like to learn more about irrevocable trusts, please visit our previous posts.

Reference: Yahoo Finance (April 29, 2023) “Pros and Cons of an Irrevocable Funeral Trust”

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The Safe way to Pass on Family Heirlooms

August 30, 2023

Family feuds are more likely over Aunt Josephine’s jewelry than the family home. Putting sticky notes on personal items before you die or expecting heirs to figure things out after you’ve passed often leads to ugly and expensive disputes, says a recent article from The Wall Street Journal, “Pass On Your Heirlooms, Not Family Drama. The safe way to pass on family heirlooms is via a trust of will.

Boomers handling parents’ estates and assessing their personal property are having more conversations around inheritance and heirlooms. However, there are better ways to plan and distribute property to avoid family fights over cars, jewelry, furniture and household items.

The person you name to handle your estate, the executor, typically distributes personal property. Therefore, pick that person with care and clarify how much power they will have. An example of this comes from a police officer in Illinois who has been settling his father’s estate for nearly two years. His father owned more than twelve vehicles, a water-well drill rig and two semitrailers of car parts and guns dating back to the Civil War. He also listed 19 heirs, including stepchildren and friends. He told his son he knew he could handle everyone and the stress of people who “aren’t going to be happy.”

If you want a particular item to go to a specific person, make it clear in your will or trust. Describe the item in great detail and include the name of the person who should get it. A sticky note is easily removed, and just telling someone verbally that you want them to have something isn’t legally binding.

Without clear directions, one family with five siblings used a deck of cards and played high card wins for items more than one sibling wanted. Only some families have the temperament for this method.

In one estate, two sisters wanted the same ring. However, there were no directions from their late parents. An estate settlement officer at their bank had a creative solution: a duplicate ring was made, mixed up with materials from the original ring, and each daughter got one ring.

The safe way to pass on family heirlooms is via a trust of will. Ask your estate planning attorney how to address personal heirlooms best. In some states, you can draft a memo listing what you want to give and to whom. It is legally binding, if the memo is incorporated into a will or trust. If not, the personal representative can consider your wishes. Make sure to sign and date any documents you create.

Get heirlooms appraised to decide how to divide items equitably, which to sell and what to donate. If heirs don’t want personal property, they can donate it and use the appraisal to substantiate a tax deduction. Appraisals will also be needed for estate tax and capital gains tax purposes. If you would like to learn more about personal property, please visit our previous posts.

Reference: The Wall Street Journal (July 30, 2023) “Pass On Your Heirlooms, Not Family Drama”

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Complexities of Determining Who is a Descendant

August 28, 2023

Not using specific names and terms open to definition could significantly impact who might inherit from your estate or trust. The complexities of determining who is a descendant can make beneficiary distribution more difficult. There are situations where some people may choose to deliberately restrict or expand the definition of the group, which might be included in these definitions, explains the article “Who Is Your Descendant: Intentional Limitations Or Broadening Of Definitions In Your Will Or Trust” from Forbes. For some people, creating a new role of a special trust protector who holds a limited or special power of appointment to determine who should be included or removed from the definition of “issue” or descendant is worth considering.

What might arise if the wish only considers children descendants if they belong to a particular faith? Is this type of legal restriction permitted? Clauses limiting heirs to members of a particular faith or a sect within the faith may raise questions about the constitutionality of the clause. Potential heirs excluded under such provisions have argued that a religious restriction on marriage violates constitutional safeguards under the Fourteenth Amendment protecting the right to marry.

Courts have held clauses determining if potential beneficiaries qualify for distributions based on religious criteria enforceable, if the potential beneficiaries have no vested interest in the assets. Another court upheld the provisions of a will conditioning bequests to their sons as long as they married women of a particular faith.

These decisions are narrowly tailored to the specific fact patterns of the cases, since individuals are generally allowed to disinherit an heir with the exception of a spousal elective share or a community property interest. The courts have reasoned that the restriction is not on the heir to marry but on the right of the testator to bequeath property as they wish.

An alternative approach to addressing the complexities of determining who is a descendant is to create a single trust for all heirs, mandating the funds in the trust be used for the cost of religious education, attending religious summer camps, taking relevant religious studies, religious institutional membership, etc. The trust could use the assets to encourage religious observance. However, it may only partially address the question. What about the remainder of the assets—should it be used for all heirs regardless of religious affiliations?

An estate plan compliant with Islamic law may involve a different determination of who is a descendant. The Sharia laws of inheritance are similar to the intestacy statute. One-third of the estate may be distributed as the decedent wishes. However, the remainder must be distributed as mandated under Islamic law. The residuary inheritance shares after the first third are restricted to Muslim heirs. Additional laws prescribe specified shares of the estate to be distributed to certain heirs, depending upon which heirs are living at the moment of the decedent’s death.

Suppose you or a family member is lesbian, gay, bisexual, transgender, or queer (LGBTQ). The law may not address the unique considerations regarding who may be considered a descendent. Special steps may be needed to carry out your wishes as to who your descendants are. What if you view a particular child as your own, but share no genetic material with a child? Children may be adopted or born through surrogacy, so neither parent nor only one parent is biologically related to the child. While some states may recognize an equitable parent doctrine, this may be limited and not suffice to protect the testator.

The many new complexities of determining who is a descendant are complicated and evolving. Changing family structures and religious beliefs based on different values all impact estate planning. A special trust protector may make decisions when uncertainty arises from provisions in a will designed to carry out the wishes. This is a relatively new role and not permitted in some states, so speak with your estate planning attorney to protect your wishes and heirs. If you would like to learn more about beneficiary designations, please visit our previous posts.

Reference: Forbes (Aug. 4, 2023) “Who Is Your Descendant: Intentional Limitations Or Broadening Of Definitions In Your Will Or Trust”

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Finding a Missing Heir can be Challenging

August 17, 2023

If someone dies without leaving a will or naming beneficiaries, a probate judge will likely consider the next of kin the heir. Known as intestate succession, this doesn’t prevent family members who aren’t blood relatives from receiving much of the estate. Finding a missing heir can be challenging. That’s why it’s important to locate family members easily after death.

Next Avenue’s recent article, “Where’s Your Heir?” says that in some states, such as Florida, companies can help with an “heir search.” Using the information available to identify the heir, these companies do the due diligence on behalf of the executor or personal representative to locate the heirs and distribute the property or inheritance according to the (deceased benefactor’s) wishes.

Finding someone can require searching a proprietary database or looking at genealogy websites. One company helped find a missing sibling who was homeless and hadn’t been in contact with his family for more than ten years.

In another case, a mother of four children was discovered to be an adoptee only after her death. Further research found that the adoptee’s birth mother had purchased Certificates of Deposit in their names as an inheritance.

To support its networks of genealogical researchers, private investigators, and other agents across the country, these companies charge to find missing heirs.

The heir often pays the fee, ranging from 20% to 30% of the full inheritance amount.

Note that legitimate heir hunters will provide their licenses and other credentials when they first make contact. They won’t ask potential heirs to pay money before they have their inheritance. The arrangement should be a contingency where they get paid once the heir has received their inheritance.

Finding a missing heir can be challenging for an executor. With this in mind, when creating a will, an experienced estate planning attorney will have the creator of the will be as specific as possible in naming heirs or recipients of the estate.

It’s crucial to use the full legal name of each heir. Another best practice is to include the heirs’ dates of birth on documents, especially when heirs have a common name. If you would like to learn more about probate, please visit our previous posts.

Reference: Next Avenue (July 3, 2023) “Where’s Your Heir?”

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Be cautious using Portability in a Second Marriage Estate Plan

July 19, 2023

Be cautious using portability in a second marriage estate plan. Despite its advantages, portability isn’t always the solution, even as it’s been used to take the pressure off couples to focus on using as much estate and gift tax exclusion as possible after the first spouse’s death. According to a recent article from Wealth Management, “Portability and Second Marriages,” portability might be a mistake.

The couple and their estate planning attorney need to consider whether leaving the executor with the discretion to use portability is appropriate, and if it is, who the executor should be and how the estate tax burden should be allocated.

The problem with portability in nonstandard families is this: it allows the surviving spouse to use the DSUE (Deceased Spouse’s Unused Exemption) amount personally, instead of requiring it be used for the beneficiaries of the first spouse to die. It’s almost like leaving assets outright to the surviving spouse. In the case of a testate decedent, Treasury regulations provide that only the executor may make the portability elections. The executor should probably not be also a beneficiary and should not be responsible for making the portability election.

Let’s say the estate isn’t large enough to require an estate tax return filing. If the executor is a child from a prior marriage, they may not choose to incur the expense of filing an estate tax return solely to make the portability election for the second spouse. Instead of having the family involved in a disagreement over the need for a return or determining who will pay for its preparation, a better option is to have the estate plan direct whether an estate tax return should be filed to elect portability and if this is done, establish who is responsible for the cost of the preparation and filing.

In complex families with children from a prior marriage, a Qualified Terminable Interest Property (QTIP) trust is used for the surviving spouse, with the trust assets eventually passing to the client’s descendants. However, if the QTIP trust is combined with portability, the estate plan may not operate as intended.

Here’s an example. Ted marries Alba several years after his first wife, Janine dies. Ted has three children from his marriage to Janine. He bequeaths most of his estate to a QTIP trust for Alba and the remainder to his children, naming Alba his executor. At Ted’s death, Alba elects QTIP treatment for the trust and portability. She then makes gifts of her assets to her family using Ted’s DSUE amount. Alba dies with an estate equal to her basic exclusion amount, which she also leaves to her family. The QTIP trust pays estate tax, and Ted’s children receive no benefit from Ted’s exclusion amount.

Even if Alba didn’t make gifts to her family, assuming her estate was large enough to absorb most of her applicable exclusion amount (including the DSUE), the QTIP trust would have to contribute to pay the estate taxes attributed to it unless the estate plan waives reimbursement. Thus, the QTIP trust could bear most or all of the estate tax at the death of the second spouse, while the second spouse’s personal assets are sheltered in part by the deceased spouse’s DSUE amount.

In cases like this, the prudent course of action may be to use traditional credit shelter/marital deduction planning. If there’s a DSUE amount available, the estate plan could direct whether it will be used and how the tax burden on the QTIP trust is handled.

Be cautious using portability in a second marriage estate plan. An experienced estate planning attorney will look at the family’s situation holistically and evaluate which strategies are most appropriate to distribute the property per the parent’s wishes to minimize taxes and ensure that the estate plan achieves its goals. If you would like to read more about estate planning for second marriages, please visit our previous posts.

Reference: Wealth Management (June 21, 2023) “Portability and Second Marriages”

Pour-Over Will can be Extremely Valuable in your Estate Plan

July 13, 2023

The pour-over will can be extremely valuable in completing your estate plan. You may have come across the term “pour-over” will in a conversation with an estate planning attorney, especially as it relates to revocable living trusts. When written alongside a revocable living trust, a pour-over will ensures that certain unallocated assets will be, in the end, accounted for, according to a recent article, “4 Concepts You May Be Getting Wrong About Pour-Over Wills” from The Street.

Assets not already transferred to a trust during your life will be transferred or “poured over” into the trust after going through probate after your death.

Probate is the court-supervised legal process used to verify your will and appoint an executor to handle estate affairs.

The goal of the pour-over will is to provide a safety net for any imperfections or oversights during the estate planning process. They are popular for this reason. However, they are also poorly understood and often incorrectly used. Here are four key misconceptions and mistakes to be aware of.

Pour-over wills are unnecessary if you have a revocable living trust. Not true. Many people make the mistake of thinking they don’t need a pour-over will because of their revocable living trust. However, this is wrong. Very few people are as diligent about updating their trusts as they need to be and often die without finalizing the transfer of all assets into their trust. People also simply forget to make transfers. The pour-over will solves this problem.

The executor doesn’t matter because I’m going to fully fund my revocable living trust. Wrong again! Life often gets in the way of the best of intentions. For example, if you have a large digital asset, like crypto, and completely forget to transfer it into your trust, your executor will be in charge of it. As an aside, you’ll want your executor to be someone knowledgeable about crypto and finances.

I have a living trust and pour-over will. I’m done with estate planning. This would be like saying you had your car washed and won’t ever have to wash it again. The pour-over will takes assets left in your name and moves them into your trust after your passing. The pour-over is a safety net. However, it’s still got to be kept current. Estate planning attorneys recommend a review of your plan every three to five years or whenever there’s a trigger event, like death, divorce, or remarriage. A trust-based estate plan needs to be reviewed every time a new asset is acquired.

There’s no need to do anything in the event the living trust hasn’t been set up when I pass because of the pour-over will. Wait, what? Not true. It’s always possible the disposition of assets into the trust could be invalid or inoperative. To be sure, name the same beneficiaries as presently provided in the trust agreement as contingent beneficiaries in your pour-over will. This will ensure that your objectives are realized, even if somehow a defect in the trust instrument invalidates the intended transfer.

The pour-over will can be extremely valuable in completing your estate plan. However, it still requires reviewing every three to five years to avoid any problems. Talk with your estate planning attorney to see how this can work to strengthen the rest of your estate plan. If you would like to read more about trusts, please visit our previous posts.

Reference: The Street (June 14, 2023) “4 Concepts You May Be Getting Wrong About Pour-Over Wills”

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You need to make a Plan for Digital Assets

June 14, 2023

What happens to digital assets when you die? There are state laws offering the executor of an estate or an estate planning attorney to obtain access to a person’s online accounts after incapacitation or death. These laws—including RUFADAA (Revised Uniform Fiduciary Access to Digital Assets Act)—will help to protect digital assets, but only if you have a digital estate plan, reports the article “How to Tackle Digital Estate Planning in Four Easy Steps” from Kiplinger. Whether or not your state has created these laws, you need to make a plan for your digital assets.

RUFADAA has a three-tier process for accessing digital assets:

Tier One: Some digital service platforms offer a way to designate what happens to digital assets after death. Yahoo has an inactive account manager to designate a friend, which guides what happens to digital assets.

Tier Two: If there is no such tool, the owner’s estate planning documents must dictate what should happen with the asset.

Tier Three: If neither of these tiers is in place, refer to the platform’s Terms of Service Agreement (TOSA) to see how the executor may access these accounts.

What makes up your digital estate? It includes all electronic and virtual accounts, passwords and assets, including:

Social media
Email
E-Commerce accounts
Photos saved in cloud-based storage
Cryptocurrency keys, wallet, and any related accounts
Cellphone and cellphone apps
Domain accounts
Text, graphic and audio files and any other intellectual property
Blogs and domains
Loyalty benefit programs, like credit card perks and frequent flier rewards programs
Utility accounts, including electricity and cable tv
Online banking
Gaming
Online shopping accounts

Electronic bank accounts are considered digital assets. However, the money in the bank account is not a digital asset. Likewise, cryptocurrency account access platforms, such as Coinbase, are digital assets, but the actual cryptocurrency, such as Ethereum or Bitcoin, is not a digital asset.

Here are the four steps to creating a digital estate plan:

Create a complete digital asset inventory. This should include all account names, usernames, passwords and the URL or address of the digital asset.

Decide how you want digital assets handled. List intentions for every account, so your executor knows what you want to happen. This is known as a “directive” and will likely be required by the platform to indicate your wishes. Some companies have conditions in the TOSA, so make sure your wishes can be followed. For example, Twitter and Google have “legacy” policies. Facebook lets family members memorialize your account.

Name a digital executor. This person doesn’t need to be the same as your executor. You’ll want to select someone familiar with the online world.

Store your digital estate plan in a secure place. Make sure that your digital executor knows where the information can be accessed. There are online platforms to help organize digital estate plans in the event of an emergency. Note that they are not the same as password managers, which store passwords. These platforms should include directives indicating what you want to happen with your digital assets.

The bottom line is this: you need to plan for your digital assets or your family may loose access to them. The digital estate plan is considered informal, if your state has not passed RUFADAA. Ask your estate planning attorney if you can formalize it by making it a codicil to your will. If you would like to learn more about digital assets, please visit our previous posts.

Reference: Kiplinger (May 16, 2023) “How to Tackle Digital Estate Planning in Four Easy Steps”

Name a Successor Executor to avoid Problems

June 12, 2023

If the executor dies while the estate is being administered, it can create many complications, says a recent article, “What Happens If the Executor of My Will Dies?” from yahoo! finance. One solution is to name a successor executor to avoid some of the problems. Many people fail to do this. It’s a big mistake.

In estate planning, an executor is charged with settling the estate of a deceased person. The executor is named when your will is created. That is when you have the opportunity to name the person you trust to act as an executor. If you die without a will in place or your will fails to name an executor, any interested party can petition the probate court to become the executor.

You probably prefer to select the person to be your executor, rather than hoping the court names someone you trust to follow your wishes.

The executor has a number of tasks to complete, including but not limited to:

Creating an inventory of the decedent’s estate
Notifying creditors of the decedent’s passing
Liquidating estate assets to pay creditors
Distributing remaining assets among heirs according to the terms of the will

Executors have a fiduciary duty when settling estates, meaning they must always act in the best interest of the decedent’s heirs. If they fail to do this, they can be removed.

If the executor dies before the person who makes the will, a new one needs to be named. This is yet another reason why last wills need to be updated on a regular basis, especially if the executor is close in age to the testator, the person who created the will.

The court will name an executor if the testator fails to update their will or write a new one. Any interested person can petition the court, which may not be what you had in mind. Someone who is not qualified or doesn’t have the best interest of heirs could be appointed.

What if the executor dies during the probate process? If a successor executor is named in the will, they can step up to finish the estate settlement. However, this only happens if the testator names one or more successor executors. When there is no successor executor named, the court will name one.

The easiest way to avoid problems arising from the death of the executor is to name a successor executor. Another is to place most or all of your assets in a trust, which would allow them to bypass probate. For a trust, you’ll need to name a trustee who will manage assets on behalf of beneficiaries.

Placing assets in a trust avoids complications following the death of an executor as the trustee would be responsible for distributing the assets. Instead of waiting for probate to be included, the trust beneficiaries could receive their assets according to the terms of the trust. If you would like to learn more about the role of the executor, please visit our previous posts.

Reference: yahoo! finance (May 15, 2023) “What Happens If the Executor of My Will Dies?”

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You Need to File an Estate Tax Return

June 5, 2023

Even if your spouse has died and left all their assets to you and no estate tax is due, you still need to file an estate tax return. Doing so may save your family significant sums in estate taxes after your death, according to a recent article from Forbes, “5 Reasons You Must File An Estate Tax Return (Even When No Tax Is Due).”

The estate tax is a one-time tax due nine months after the date of death. The federal threshold in 2023 is $12,920,000 for an individual. Many states have their own estate taxes, with thresholds ranging from $1 million in Oregon and Massachusetts to $12,920,000 in Connecticut. Your estate planning attorney can advise which assets are included in calculating this amount. For example, many people are surprised to learn that proceeds from their life insurance policies are taxable on their death, unless the policy is owned in an irrevocable trust.

No estate tax is due if your assets are left to your surviving spouse because of the unlimited marital deduction. You get an unlimited deduction for the assets left to your spouse. Spouses can leave any amount to their surviving spouse tax-free, whether $2 or $2 million. However, there are reasons to file an estate tax return. The law requires it, even if the value of your estate assets is below the filing threshold.

If you’ve done estate planning, your spouse most likely has a trust that will break into various sub-trusts upon her death. As the surviving spouse, you’ll need to fund those trusts and apportion assets to them, which is done through the estate tax return. The estate tax return establishes the value of what those trusts are funded with.

Critical tax elections. When you file an estate tax return for your spouse, you’ll make certain elections to determine what assets are included in your estate when you die.

Tax savings for heirs. If your spouse has not used up all their $12,920,000 exemption, you can lock in their unused portion and port it to your estate tax return when you die. The portability of the deceased spouse’s unused exemption could potentially save your children millions of dollars in estate taxes in the future.

The combined exemption for two spouses is currently $25,840,000. The federal estate tax rate can be as high as 40%. By locking in the unused exemption, you could save more than $5 million in estate taxes that would otherwise be due on your death. Even if your assets are not in the $12 million to $25 million range, this is still smart because your assets could increase in value, and the estate tax thresholds are scheduled to drop to $5 million in 2026 (adjusted for inflation).

More tax savings for grandchildren. If your spouse has yet to use all of their general-skipping transfer tax (GST Tax) exemption, you can lock in their remaining GST Tax exemption. The GST Tax is a 40% tax on assets, if you “skip” your children and leave them directly to your grandchildren or in a trust that will eventually be distributed to them. The amount of GST Tax exemption is the same as the estate tax exemption, $12,920,000 per person in 2023. Therefore, the amount is the same, but they are different taxes.

You need to file an estate tax return to ensure that you have complied with tax law. Work with an estate planning attorney who has experience handling probate and trust administration. If you would like to learn more about the estate tax, please visit our previous posts.

Reference: Forbes (May 10, 2023) “5 Reasons You Must File An Estate Tax Return (Even When No Tax Is Due)”

Category: Executor

Choosing an Executor can be a Difficult Decision

Benefits and Drawbacks to a Funeral Trust

The Safe way to Pass on Family Heirlooms

Complexities of Determining Who is a Descendant

Finding a Missing Heir can be Challenging

Be cautious using Portability in a Second Marriage Estate Plan

Pour-Over Will can be Extremely Valuable in your Estate Plan

You need to make a Plan for Digital Assets

Name a Successor Executor to avoid Problems

You Need to File an Estate Tax Return

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