There are a number of very important documents in your estate plan which come into play after your death, but as this article in Forbes reminds us, there are two or three estate planning documents that are of the utmost importance while you are still alive: your Healthcare Proxy, your Advance Directive (also called a Living Will), and your Power of Attorney. Together, these three documents ensure that your medical and financial affairs will be taken care of and that your wishes will be followed should you somehow become incapacitated.

Healthcare Proxy: This document nominates the person (or people) who will interact with medical staff, have access to your medical records, and make healthcare decisions for you if you are ever unable to do so yourself. This can be a standalone document, but it can also be wrapped up as part of the next document;

Advance Healthcare Directive (or Living Will): This is the document that describes in as great or as little detail as you wish your preferences for medical treatment, your wishes for resuscitation (or lack thereof) and even your wishes for the disposition of your remains. An Advance Healthcare Directive also often includes a section nominating a healthcare agent (or healthcare proxy) to make decisions for you if you cannot.

Financial Power of Attorney: If you ever become incapacitated you will still have bills to be paid, investments to be monitored, and financial decisions to be made; the Financial Power of Attorney gives the person you nominate the power to keep all those various financial balls up in the air. The person named as your power of attorney will have the power to access your bank (and other financial) accounts, so be sure the person you choose is someone you trust.

The Forbes article mentions that “One in eight baby boomers will get Alzheimer’s after they turn 65. Sure, you hope you won’t be one of them. But the risk of a slow decline and incapacity, meaning that you don’t know what assets you have, what you want to do with them and who your family members are, lurks for us all.” Having the three above-mentioned documents ensures that you—and your family—will be ready for whatever the future may hold.

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When most people think about estate planning they think about how to leave financial assets—savings, retirement accounts, investment assets, or large assets such as a home—to their children, grandchildren or other loved ones. But our firm knows that estate planning is about much more than just money. In fact, once clients get beyond the big-ticket financial items and start considering the other assets or items they’d like to leave to their loved ones they often find that these “smaller items” involve far more concern and consideration than the finances.

Consider for a moment which items have meaning for you. What will happen to these items when you’re gone? The first things that come to mind are often family heirlooms: Your grandmother’s china, the engagement ring your father gave your mother; but what about items of significance to you in particular—a home library with antique books, a classical guitar collection, your personal inventory of artwork, or perhaps a valuable coin or stamp collection.

All too often these items of personal value are given only a vague mention as part of “the estate.” These personal items can end up either given away for a pittance at a yard sale, or they may cost hundreds of dollars in legal fees when siblings fight over them. Siblings often end up fighting and disowning each other over a disagreement about small items of personal value from mom or dad.

Luckily, you don’t have to leave the distribution of these items to chance. Our firm will work with you to create an estate plan that will not only pass your financial assets to your heirs, but also your beloved personal items as well. Perhaps you’d like to leave that home library to your literary niece along with a modest sum to help her buy bookshelves. Your classical guitar collection might be most appreciated by your local music center, along with a financial donation to put toward a musical scholarship program.

Artwork, coin collections, stamp collections—these “small” items can be the Achilles’ heel of an estate plan if not given the consideration they deserve; but it doesn’t have to be that way. With the right planning you can leave your cherished personal items in the hands of appreciative people who will care for them. Contact our office today and let us help you provide for the people—and things—you love most.

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Do you know the best way to pass your IRA savings on to your loved ones when you die? It sounds like a simple question, but naming beneficiaries for your IRA is not always as straightforward as it sounds. This article in CBS MoneyWatch explains: “Without proper estate planning, you may be reducing your family’s future wealth potential. That’s because improper planning can mean not only a premature end to your IRA at your death, but also assets being inherited by the wrong individuals or entities.”

Deciding who should inherit your retirement savings is fairly simple (although it is not uncommon for an ex-spouse to receive IRA benefits because beneficiary designation forms are not updated after significant life events such as a divorce,) it’s figuring out how the assets should be distributed that poses the problem. If done correctly, inherited IRA assets can be rolled over and stretched out by beneficiaries for years. But without the correct planning your heirs may find themselves paying significant taxes on their inheritance or worse yet, unable to access the funds at all.

The article explains that each of the many options for IRA beneficiaries requires a different kind of planning. Naming a spouse as a beneficiary is fairly straightforward, your spouse can either “Roll the funds into his or her own IRA” or “Open an inherited IRA and take distributions based upon his or her remaining life expectancy.” Planning to leave your IRA to a single child is somewhat similar to planning to leave it to a spouse.

But if you would like to leave your IRA to more than one child, or to a trust for the benefit of multiple individuals or charities, you’ll likely want to contact an attorney or accountant for more significant planning. As beneficial as these options can be, there are regulations and requirements involved with multiple beneficiaries, and “there are a lot of complexities with naming trusts as beneficiaries, so seek a competent estate planner for assistance.”

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In a multi-cultural, multi-religious country such as ours the subject of personal faith or religious beliefs is one that many advisors are reluctant to bring up. Some advisors are afraid of offending their clients, other advisors may simply feel that religion has no bearing on the financial service they provide; but a recent article in the Wall Street Journal questions this assumption and asks is there a circumstance under which business and religion should mix?

The WSJ article takes the view that yes, there are circumstances when religious beliefs do have a bearing on financial matters. For example, “Making sure a client’s living will and health-care proxy are in line with his or her religious beliefs—or lack of belief—should be a priority for advisers.” Additionally, creating a “‘family values and mission statement,’ which typically includes a section about the family’s ‘spiritual values’… [can help a client] gain clarity about their family’s priorities.”

When it comes to estate planning, religious beliefs and values are often a very large part of the planning process. Parents and grandparents hope that they can leave a moral and financial legacy, and how you choose to do this will have a significant effect on your estate plan. In order to serve their client to the fullest an estate planning attorney has to know which questions to ask and how to listen with an open mind in order to ascertain the complete scope of a client’s goals and help our client achieve those goals.

Including religious beliefs in an estate plan won’t be a priority for everyone. But for those who do wish to address the subject, they may find it’s not so easy to jump right into the topic with a relative stranger. The most natural place to start is often with a healthcare directive or living will, where you will want to include your end-of-life wishes and memorial instructions. Discussing values in this context can often lead to a greater discussion of how to pass your values on to your heirs through your will or trust as well.

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Just a few weeks ago the IRS announced the November 15, 2011 estate tax filing deadline for large estates of decedents who passed away in 2010; but some executors might be relieved to know that the IRS recently extended the deadline to January 17, 2012.

This extension gives executors of large estates more time to determine whether or not its in the best interests of the heirs to take advantage of the 2010 estate tax repeal. The decision facing executors of the 2010 estates is this:

* Choose not to pay estate taxes, but subject the assets of the estate to carryover basis rules (meaning heirs will pay capital gains taxes based on the price of an asset when it was initially acquired by the decedent); or

* Pay estate taxes under the 2011 rules, with a $5 million per-person exemption and a 35 percent top rate, but with a stepped-up income tax basis (meaning heirs will pay capital gains taxes on the price of an asset when it was inherited.)

For any executors who haven’t already made the decision, they can now take more time to weigh the pros and cons, and maybe even enlist the advice of an estate planner, tax planner, or probate attorney to help walk them through any possible unexpected consequences. If you are an executor or an heir faced with this particular and time-sensetive issue, please don’t hesitate to contact our office for assistance.

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If you have a child with special needs, planning your estate takes on a whole new dimension; especially, as this article in Forbes points out, now that “state and local governments are tightening income restrictions for medical benefits and supportive services, which are typically paid for by Social Security and Medicaid. Those services are tough to find—or afford—in the private sector for many adults with disabilities so severe that they can’t live alone… As a result, it’s increasingly important to structure an inheritance in a way that won’t disqualify a child for such benefits down the road.”

Structuring an estate plan with a special needs child as a beneficiary takes special consideration. Because a direct inheritance could disrupt that child’s public benefits, “some parents simply leave another child all their assets in their will. If there are three children, they might leave two-thirds to the child who lives closest to the one with special needs.”

Unfortunately this particular strategy is rife with possible dangers. The heir may be tempted to use his special needs sibling’s money for his own purposes, or could decide he’s simply tired of being a caretaker. Even worse, the heir could pass away unexpectedly, in which case the entire inheritance would go to the heir’s spouse or children, with nothing left for the special needs child.

The article gives a number of suggestions for safe and reliable ways to leave your special needs child an inheritance, including leaving property to your child in a Qualified Personal Residence Trust, setting up a housing collective, and the tried-and-true option of a Special Needs Trust. But we know that each family is going to have different needs and goals, and there isn’t one solution that will work across the board.

If you have a special needs child your very best course of action is to contact a knowledgeable and experienced attorney to help you understand your options and choose the one that will best protect your child.

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A recent article in Forbes has shed light on a fact that estate planners have always known: There is far more to creating a good estate plan than just drafting the documents. In fact, according to the article, there is a fine art to putting together a good estate plan. “Estates are often shrouded in some mystery even for the people who plan and manage them. It is logical that an estate plan should offer a clear map of what a person owns, but this isn’t always the case.”

The point is made in the article that very few estate plans contain an accurate accounting of what the estate entails. There may be any number of reasons for this; in some cases a person “doesn’t have an accurate balance sheet to start with, and chooses not to update it or to share every detail.” In other cases “people may withhold information because they do not entirely trust an adviser, or because they are embarrassed to talk about money.”

The job of an estate planner is to draft a plan solid enough to offer security, but flexible enough to hold up to unexpected surprises—and how to achieve this will be different for every client. “A big part of the job is to value assets properly, and that task is an art, not a science.”

Of course, the clients who come back every few years for an update and review have a much better chance of their estate plan remaining accurate and secure, but not every client will be willing or able to do this, and estate planners do take this into account. However, “even a plan that starts out based on a complete accounting will be thrown out of whack if the estate owner doesn’t come in to update it after a big life event like marriage or the sale of a business.”

Whether you are considering creating a new estate plan, or looking for someone to help you update an existing one, contact our office for help. We can help you make sure your plan is a masterpiece.

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When someone creates a will or a trust of course they want to choose a dependable and trustworthy person as executor or trustee. For most people this means someone close to them—a family member or friend, or often the most responsible of their adult children. However, this often means that the person they’ve chosen as executor or trustee is also a beneficiary. The question that occurs is this: Is it a conflict of interest to be both executor/trustee and beneficiary?

As executor or trustee a person has a legal duty to manage the property in the decedent’s estate for the benefit of the trust or estate beneficiaries. This means that while the executor/trustee should be compassionate, he or she must act in an equal and unemotional manner toward ALL the beneficiaries.

A beneficiary, on the other hand, is often by definition emotional. Even those beneficiaries who are not concerned with the monetary aspect of their inheritance (and let’s be honest, many heirs are more concerned with the dollar amount than they might let on) will likely be emotionally invested in the heirlooms of the estate. Many family feuds are sparked when siblings can’t agree on who gets the family silver or great grandma’s engagement ring. And the potential for conflict only increases when real estate is involved.

If you are creating your will or trust, the best way to avoid this conflict is to be as specific as possible in your instructions to your executor and beneficiaries. Spelling out in no uncertain terms who gets the family silver will decrease the chances that the executor will be tempted to take advantage of his or her position. You may also want to consider naming a disinterested party as a trust advisor or co-executor to provide checks and balances throughout the administration process.

If you are a beneficiary who is also serving as executor/trustee there are a few things you can do to ensure you keep your executor and beneficiary roles separate:

* You may want to consider contacting a probate or estate planning attorney to mediate or oversee the process.

* Rely on random but fair methods (such as flipping a coin, drawing straws, or organizing a round robin) to distribute unassigned personal property with emotional value.

* Be sure to involve an impartial appraiser if real property is involved.

* If all else fails, an executor or trustee is always permitted to step down and hand the role over to a qualified and disinterested party.

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Income, estate, and other federal tax levies have commonly been a bone of contention between those with different political ideologies; but the current conflict has reached unusual heights, with various million- and billionaires publicly expressing their views (pro or against) about current tax laws. Of course, million- or billionaires aren’t the only ones with strong opinions about taxes.

If you feel that you pay too much in taxes, Brett Arends of the Wall Street Journal has some tips to help you save on taxes in the future. Much of his article is tongue-in-cheek, but the suggestions are valuable ones. Of special interest to our firm and our clients are four of the tips nestled in the middle of the article:

Give to your family. “Until the end of 2012 you can give $5 million, tax-free… In addition you can give $13,000 a year to each recipient — each child or grandchild — and a spouse can do the same. So a married couple with, say, three children and eight grandchildren can give another $286,000 a year, on top of that one-off $10 million. Over ten or twenty years that really adds up.”

Put your grandkids—and great grandkids—through college. “Money paid directly to schools or colleges escapes estate taxes.” Furthermore, if you contribute to a 529 educational savings account that money can be tucked away—and eventually used by the student for whom it is intended—tax free (so long as it is used for educational purposes.)

Buy life insurance. Proceeds from a life insurance policy can go to your beneficiaries tax-free upon your death, although you may have to make some arrangements ahead of time. The article states that “Typically you put the policy in an Irrevocable Life Insurance Trust… The premiums that you pay annually are gifts to the beneficiaries… And when you die, the proceeds of the policy go to the trust, for the beneficiaries, free of estate tax.”

Talk to an estate planner. “There are other moves that can cut your estate tax, too. A Qualified Personal Residence Trust can slash the estate taxes on a residence. A Grantor Retained Annuity Trust, or GRAT, can slash them on an investment portfolio. So, too, can setting up a Family Limited Partnership. Financial planners say this is a great time to put investments — like stock — into a GRAT.”

If you have questions about these tax-saving strategies, or other strategies that can help you preserve your estate for your heirs, please contact our office. We can help you determine what your best options are to help protect your assets—and your family—in the years to come.

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The past two years have been tough on the average American family. The economy has been floundering and the unemployment rate has been hovering around 9-10% since 2009, not to mention the roller coaster ride we’ve all been through with the stock market. But through it all some families and individuals have fared better than others—and many of these lucky ones are eager to extend a helping hand to their family and friends… if only the tax laws would let them.

A recent article in Forbes, entitled 6 Ways to Give Family and Friends Financial Aid, explains that “the tax law regulates your [financial] generosity… This kind of assistance is considered a lifetime gift unless it’s for someone whom you are legally obligated to support, such as a child.” This is important because “lifetime gifts” over a specific amount (currently $5 million per person) are subject to taxation.

“Gifts of cash or other assets can count against your $5 million exclusion from gift or estate tax. If you exceed that limit, you could wind up owing gift tax of up to 35%. Even if you don’t, your lifetime gifts would reduce how much you can pass tax-free through your estate plan.”

But if you are willing to work within the system there are ways to give financial assistance to friends and family without having to pay gift tax. Here are a few strategies suggested in the Forbes article:

1. Don’t give more than $13,000 (or $26,000 if you are giving as a married couple) per person per year. $13,000 is the current annual gift exclusion amount, and giving more than this can count against the $5 million lifetime exclusion.

2. Pay medical, dental, or tuition expenses directly to the provider. “Without using your annual exclusion or dipping into the lifetime limit, you can pay for tuition, dental and medical expenses of anyone you want. Note that you must make the payments directly to the providers of those services.”

3. Contribute to 529 educational savings plans. While contributing to a 529 savings plan does still count as a financial gift, once in the account the money can grow and be withdrawn tax-free, “provided it is used to pay for college, a graduate, vocational or another accredited school, or for related expenses.”

These are only a few of the suggestions offered in the article, and a consultation with your attorney or financial planner could reveal even more options available to you should you wish to offer aid to friends or family without coming up against the lifetime gift or estate tax. Please contact our office for more information.

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