A recent article in Forbes listed one author’s opinion of the 7 Major Errors in Estate Planning.
The 7 Major Errors were listed as:
My colleagues Jason Walker and Collins Hunsaker have discussed the first two errors and how to remedy those problems. I will discuss the third major error.
Failure to Review Beneficiary Designations or Titling of Assets
I spend a significant amount of time in probate and guardianship court. Unfortunately, I see first-hand the problems that can be created by failing to review the titling of assets or beneficiary designations. Generally, when a person creates an estate plan involving a trust, title on the assets must be changed and beneficiary designations should be modified or removed. Oftentimes, deeds are required for real property and assignments are necessary to transfer interests in corporations, LLCs, and partnerships. As a general statement, all assets with the exception of qualified retirement plans (such as an IRA or 401K) can and should be owned by a trust. Sadly, in some cases, these changes are never made. In other cases, new assets are purchased and not titled properly in the trust. These oversights can be very costly as correcting the error may require an expensive probate or guardianship proceeding.
This costly error is a simple fix. Each year, you should review all your assets to make sure each asset is titled correctly and has the correct beneficiary named. Statements from your financial institution will usually indicate how title is held. Real property can be checked online through the county assessor’s webpage. If you are unsure how an asset should be titled in your estate plan, contact your attorney for help. A good attorney will be able to help make sure that your estate planning goals are not frustrated because of an error in the titling of assets or beneficiary designations.
A recent article in Forbes listed one author’s opinion of the 7 Major Errors in Estate Planning.
The 7 Major Errors were listed as:
I have the opportunity to discuss Major Error Number Two.
ONLINE OR DIY RATHER THAN PROFESSIONALS
There is an abundance of advertisements which purport that a person can create their own will or trust through the use of a certain company’s website. These advertisements have led to the often-repeated question I hear during an initial consultation – why should I use your services over an online company? I have reviewed many of these internet wills and trusts, and many of these internet documents are laughable leading me to believe that an attorney had no hand in the creation of the documents. While I would readily admit that the other documents I have seen seem to be fine, legally speaking, they often demonstrate a lack of personalization in meeting the client’s goals and objectives. Recently, I decided to go through a more widely recognized do-it-yourself internet site that allows a person to create his or her own legal documents. Although my experience was better than I had expected, I was left wanting the site to do things that it did not offer. This may be why the site uses the disclaimer that “LegalZoom is not a law firm and is not a substitute for an attorney or law firm.” These internet sites are not meant as attorney substitutes, and I would add that not all attorneys can properly prepare estate planning documents. While such sites are slightly less expensive than an actual attorney, there is much more to a properly prepared estate plan than the legal document itself. As Mr. Clarfeld states in his Forbes article, “estate planning documents should represent the culmination of a well thought out financial and estate plan. Fill-in-the-blanks documents are not a plan and one size definitely does not fit all.”
- Attorney A. Collins Hunsaker
A recent article in Forbes listed one author’s opinion of the 7 Major Errors in Estate Planning.
The 7 Major Errors were listed as:
I have proposed to my colleagues that we take turns discussing these 7 errors and how to remedy these problems for our clients. Naturally, I’m taking the first error, since it is the easiest, but you’ll hear from me again before we have completed all seven.
NOT HAVING A PLAN
This one is easy to fix. Get a plan. It’s probably an over-generalization, but most estate planning firms offer free consultations. See an attorney and learn what is involved and how much effort and cost is required to get a plan in place. This error universally applies to all individuals, whether old, young, married, single, wealthy, with children, without children, etc. In Nevada, we usually recommend revocable/living trusts for property owners in order to avoid the probate process in Nevada courts. Other important elements to an estate plan in Nevada include a pour-over-will, a healthcare power of attorney, a directive to physicians (or living will), and a financial power of attorney. A good attorney will also provide assistance and advice on how to “fund” your trust with the proper assets in order to accomplish your goals.
An estate-tax planning technique often contained in many Trust agreements for married individuals is to require the establishment of two or more sub-trusts when the first spouse dies, in particular the establishment of an Exemption Sub-Trust. If the Trust agreement is properly drawn and the Exemption Sub-Trust correctly administered during the life of the surviving spouse, at the time of the death of the surviving spouse all of the assets of the Exemption Sub-Trust pass to the beneficiaries federal estate-tax free. This is true even though all of the income (and principal if need be pursuant to an ascertainable standard such as for health, education, maintenance and support) from the Exemption Sub-Trust is used for the benefit of the surviving spouse during his or her lifetime. The equivalent exemption amount for federal estate tax purposes for deaths occurring in 2012 is $5,120,000.00 and the tax rate is 35%, but as of January 1, 2013 the equivalent exemption for federal estate tax purposes for deaths occurring in 2013 and thereafter is reduced to $1,000,000.00 and the tax rate is increased to 55%. Accordingly, this estate-tax planning technique is of great importance.
When the first spouse dies, the Successor Trustees must determine what Trust assets should be used to fund the Exemption Sub-Trust. This is a very important determination in light of the fact that the Exemption Sub-Trust assets remaining at the time of the death of surviving spouse will not be subject to federal estate tax regardless of value. In other words, the Exemption Sub-Trust assets could be worth $20,000,000.00 at the time of the death of the surviving spouse and the equivalent exemption under law could be only $1,000,000.00, but nevertheless the assets of the Exemption Sub-Trust will not be subject to potential federal estate tax. Therefore, assets with high appreciation potential (i.e. Apple stock, real estate on the Las Vegas Strip, et cetera) generally speaking should be used to fund the Exemption Sub-Trust. But as is always the case, there is an exception to every rule. The exception is where the beneficiaries of the Exemption Sub-Trust and the beneficiaries of any other sub-trust are not one and the same individuals. In most situations, the beneficiaries will be the same. However, where the beneficiaries will not be the same, the Trustee has to consider this when funding the sub-trusts in that the Trustee has a fiduciary duty to treat all of the beneficiaries fairly and impartially in carrying out the terms of the Trust agreement. A corporate or individual Trustee could subject themselves to claims by non-beneficiaries of the Exemption Sub-Trust if in fact all of the assets with high appreciation potential are used to fund the Exemption Sub-Trust.
At the Jeffrey Burr law office, we have many years of experience assisting and advising corporate and individual Successor Trustees in the administration of a Trust after the death of a Trustor, including the funding of Exemption and other sub-trusts.
Many of our clients who are married have joint revocable trusts that include instructions for the possible division of the trust upon the first spouse’s death. The purpose of the division of the trust into two separate trusts upon the first spouse’s death is primarily estate tax reduction. Sometimes these types of trusts are called “A-B trusts,” “2 trusts,” “credit shelter trusts,” and “exemption trusts.” More recent clients may have trusts known as “disclaimer A-B” or “disclaimer 2 trust” and these trusts would also fit within the topic of this article.
Most planners feel that we currently have a disappearing opportunity to engage in lifetime gifting in excess of $1 Million. In 2011, the lifetime Gift Tax exclusion amount for each person was increased to $5 Million. For 2012, this amount was adjusted for inflation and is now $5,120,000. This amount will change back to $1 Million in 2013 unless Congress enacts a change prior to December 31 of this year.
One strategy for utilizing this higher gift tax exemption that people have been receptive to is to utilize the “exemption” or “credit shelter” that already exists in one of the trust types described in the first paragraph, and to make a completed gift into this type of trust for the benefit of a spouse. Both spouses can accomplish this, but careful attention will be required to be sure that these credit shelter trusts funded with gifts are not treated as reciprocal trusts by the IRS.
Some clients find the idea of making large gifts difficult since they are usually gifting these funds to children or grandchildren and the client essentially loses the ability to control or enjoy the property that has been gifted. Gifting to a spouse, however, might be more easily tolerated than a substantial gift to children or grandchildren. Aside from the dynamics of whether it is easier to gift to a spouse or successive generations, gifting is a powerful estate tax reduction technique. The funding of a credit shelter trust is just one of many ideas that our firm can assist you with. Please call your attorney to discuss gifting techniques or for more information on funding a credit shelter trust for your spouse.
The US Census Report has confirmed what we have all suspected; more and more seniors are living together without first getting married. In fact the number of seniors age 65 and above living together has more than tripled in just the last decade. Actual numbers may be even larger, considering the social taboos within the senior community against cohabiting couples.
While a majority of seniors still regard marriage as important, the increasing trend in cohabiting reflects a more relaxed attitude towards marriage. Only half of all adults reported being married during the 2010 Census, but nearly sixty percent of adults stated they lived with a partner.
For seniors, it’s not just changing social mores. Money concerns often overshadow marriage considerations. Many widows and widowers would forfeit retirement survivor’s benefits or Social Security benefits if they were to remarry. Additionally, children by prior marriages often complicate estate planning.
Significantly, with remarriage come legal obligations for support and care. If a spouse becomes ill and requires long-term care, the cost of nursing care, now more than $70,000 per year, falls upon the combined finances of the family, potentially impoverishing the family.
Sometimes our clients suggest they have a “common law” marriage. Nevada, however, has not recognized common law relationships for nearly 90 years and our statutes expressly reject common law marriages. What Nevada does have are excellent prenuptial laws. Seniors considering remarriage should always have a prenuptial agreement.
Yes, there is an unromantic element to a prenuptial agreement, but for most seniors cohabiting or married; their relationship is based upon companionship and sharing experiences with a sense of belonging and connection with another person.
If you are a senior and are considering remarriage, you should consult with your partner the wisdom of a prenuptial agreement. Here at Jeffrey Burr, we have helped hundreds of senior couples plan for the legal complexities of either cohabitating or remarriage.
We all have heard the overused phrase that “we live in a litigious society.” For many of us, being a named defendant in a lawsuit is often an uneasy proposition. Even if a person believes that he or she is not at fault for another’s injuries, that person is relying on what many believe is an imperfect justice system to find the truth. In recent times, the area of law known as asset protection has become increasingly popular both as a practice for attorneys and as a solution for their clients. However, what many people do not fully understand is that they may own protected assets which did not require the assistance of an attorney in obtaining protection.
Many of these protected assets are contained within the Nevada Revised Statute (NRS) at Section 21. The following is just a partial list of such assets:
This list does not include cash accounts, business interests and assets, or investment property. In order to protect those assets, a person will need to seek the advice of an attorney to properly establish what we at JEFFREY BURR, LTD. call an “Integrated Estate Plan.” An Integrated Estate Plan not only provides asset protection for unprotected assets, but it will also provide solutions for avoiding probate and guardianship.
At JEFFREY BURR, LTD., we have the knowledge and experience necessary to assist our clients in creating an Integrated Estate Plan.
- Attorney A. Collins Hunsaker
Every once in a while we hear rumors that lawmakers might make changes to our tax laws that would affect planning involving Legacy Trusts. We heard this about a year ago, and new rumors have been heard on the same subject very recently.
A Legacy Trust (also known as a Dynasty Trust or Generation Skipping Trust or GST Trust) is a trust set up in a state that has repealed the “rule against perpetuities” so that the trust can remain in place for multiple generations. In Nevada, a Legacy Trust can exist for up to 365 years. These trusts are typically designed so that the assets held by the trust are not included in the estate of any beneficiary of the trust and therefore the trust is not subject to the federal estate tax during the duration of the trust. For example, if $5 Million were funded into a Legacy Trust today and if those funds could appreciate consistently at 6% and not be subject to multigenerational transfer taxes (estate tax), then the trust would be worth $92 Million in 50 years.
Now for the scare tactics: We strongly suspect that we have a limited opportunity to take advantage of the $5 Million gift tax exclusion that is set to expire at the end of 2012. If lawmakers also somehow remove the advantages of a Legacy Trust in the coming years, then today is the perfect opportunity to engage in some estate planning that will utilize a Legacy Trust for your children and grandchildren. A trust that is established and that is funded with assets would be almost certainly “grandfathered” in the event of a change in the laws. We feel that now is the best possible time to engage in this type of planning.
No contest clauses in a Trust and Will have been discussed previously in this blog. A no contest clause is a provision in a Trust or Will that provides that any beneficiary challenging the validity of the terms of the Trust or Will shall have his or her share reduced or eliminated. Nevada law has recognized the validity of no contest clauses with certain exceptions.
Along with these legal exceptions, many courts in the past have held that the actions of the beneficiary must directly relate to the Trust or Estate itself and/or an actual lawsuit must be filed in court in order for a no contest clause to be enforceable. The last session of the Nevada Legislature has expanded the existing law to make it clear that, with certain important exceptions, a beneficiary’s share may be reduced or eliminated under a no contest clause by conduct contrary to the express wishes of the Decedent as set forth in the Decedent’s Trust or Will. Under the new law, which is effective October 1, 2011, conduct by a beneficiary that could trigger a no contest clause may include, without limitation:
However, the new law specifically states that a no contest clause will not be enforced if the beneficiary seeks only to:
Also a no contest clause is unenforceable, notwithstanding its terms, if the court finds that the challenge to the Trust or Will, any document referenced in or affected by the Trust or Will, or any other Trust or Will related document was made in good faith based on probable cause.
Except for these four exceptions, it is now clear under Nevada law that a beneficiary could see his or her share of the Trust or Estate reduced or eliminated via a no contest clause even though the actions of the beneficiary do not directly relate to the Trust or Estate itself and/or the beneficiary does not bring a formal action in court challenging the validity of the terms of the Trust or Will.
- Attorney John Mugan
If you had a car accident or a medical emergency and were unable to talk, who would make medical decisions for you? Does this person know what types of life support or end-of-life care you want? Have you memorialized your decisions in writing? Does your family know where to find these documents? And does your physician know of your wishes?
Most families will at some time need to make medical decisions concerning the continuing care of an incapacitated family member. Documenting your medical, legal and spiritual decisions is an essential part of your estate planning. Your family should have powers of attorney for health care, living wills, wallet cards, and your medical documents should be on file with your physician and registered with the Nevada Secretary of State.
At Jeffrey Burr, our experienced attorneys can assisted you and your family through all aspects of medical decisions and will memorialize your family’s care plans with the most current and up to date governmental documents. With proper planning, you can be assured that your end of life wishes will be honored.
Call us, we are here to help.
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