Tax Saving, Trust, Asset Protection, Will, executor help

12 Common Misconceptions About Estate Planning

True_False_Buttons1. Wills avoid Probate.

FALSE: Wills don’t avoid probate; in fact, they all but guarantee it. Probate can be a long and expensive process, in which a court decides whether to admit a will to allow administration of an estate. Even the simplest probate process typically can last a year or more and involve significant expense. If you have real estate in more than one state, each property may have to go through probate in its respective state. Additionally, all heirs – those who would take if the will is found invalid – must be notified of the probate even if they are excluded from the will. This can result in painfully detailed genelogical research at times. Therefore, while a will provides the court with guidance on your wishes, it doesn’t avoid the probate process – only a trust can do that. For more information on avoiding probate potholes, read our recent blogpost, www.docrlaw.com/articles/probatepotholes

2. There will be a reading of the will.

FALSE: A reading of the will is one of those classic movie moments but, while dramatic and compelling, this never happens today. Wills were read before photocopies were invented, in times when many people were illiterate. Normally, people will have told their executors or family members that they have drafted a will, and where it is stored. Your family will be able to read your will after you die, usually in the form of photocopies, but they will not gather in a room and have your lawyer read the document out loud.

3. My will controls all my assets.

FALSE: A will normally controls the assets in your name upon your death, but there are certain assets that you own which are not subject to probate. In other words, these assets are not subject to the terms of your will. The first and most common type is jointly owned property, which frequently passes automatically by right of survivorship. If a jointly owned property has the right of survivorship – a common arrangement between spouses – your portion transfers into the hands of the surviving owner at death. Additionally, certain assets (life insurance policies and retirement accounts) usually pass by a beneficiary designation, and will pass directly to the named beneficiary (whether an individual or a trust) instead of having to be subject to review by the court. Similarly, some clients have bank or investment accounts that pass via a POD ("Payable On Death") or a TOD ("Transfer On Death") arrangement. These are likewise not controlled by a will.

4. If I die without a will, everything goes to the state.

FALSE: If you pass without a will, each state applies what are known as “laws of intestacy” to determine who will inherit what and how your property will pass upon your death. In most states if you are married with children, the estate is given half to your spouse, with the remaining half being divided among your children. If someone is single everything will generally pass to their children, if they have any. However, minor children cannot inherit assets, so the court will appoint someone to take care of those assets until the children reach the age of majority, usually 18 or 21. The only way a government will inherit your estate is if you die intestate (without a will) and have no identifiable surviving heirs or creditors. In this case the state where you reside would inherit your property, which is a very rare occurrence.

5. I don’t need a will – my spouse has Power of Attorney over all of my accounts.

FALSE: A power of attorney is a legal document that lets someone you trust stand in for you when it comes to certain legal, financial, or medical matters. Depending on what type of power of attorney you create, your agent then can make decisions about property or money (a financial power of attorney) or over healthcare decisions (healthcare power of attorney or healthcare proxy). When creating this document, you decide when it goes into effect, and what powers your agent may exercise. Unfortunately, though, a power of attorney ceases to be effective on death. That is where a will or trust takes over.

6. I downloaded a will -  that's good enough.

FALSE: Some people may be attracted to going online and inputting their information into a will-creating software, but as fascinating as this technology may seem, these online wills may not be the best fit for you and your family. Online wills don’t involve the advice and expertise of an attorney during drafting, and most times these online services use vague language or general terms that may not apply to your situation. Additionally, wills created online almost never take into account tax and long-term care planning. Lastly, for a will to be recognized as a legal document it must be witnessed by two or three people – depending on the state laws. Improper execution – a common mistake we see in DIY wills – gives an opportunity for the will to be contested in the future, which can be costly and time-consuming, and lead to the imposition of unexpected taxes.

7. I will never go into a nursing home.

FALSE: Although many of us don’t like to consider the possibility of living at a nursing home or a long term care facility when the time comes, the reality is some people may need to move into these facilities so they can receive the care they need. Studies show that 69% of adults age 65+ will likely need in-home, assisted living or nursing home care. An aging spouse and family members can only do so much. While it is not a pleasant consideration, early planning is critical based on the stringent 5-year look back rules imposed by Medicaid, and the need to get long term care insurance before you receive a critical diagnosis. Failure to plan for this type of care can destroy even the best laid retirement plans, and rob you and those you love of your life savings.

8. I can do a DocuSign, right?

FALSE: As technology has slowly taken over our daily lives with our smartphones, smart TVs, smart thermostats, and even smart cars, there is still one field where old-fashioned pen and paper is still required: Trust and Estates.  Most jurisdictions will not accept electronic signatures on customary estate planning documents like trusts, wills, and codicils. The Federal E-Sign Act and the Uniform Electronic Transactions Act (‘UETA’) also prohibits using electronic signatures to sign wills or testamentary trusts.

9. It’s good to name your Estate as an IRA beneficiary.

FALSE: You are allowed to name anyone, including non-persons, as the beneficiary of your IRA. Examples of non-persons include charities, a trust, or your estate. Although possible, it is not recommended to name your estate as the beneficiary of your IRA because this may create a greater tax liability upon your passing. Another downside to naming your estate as the beneficiary is that, under the IRS rules, your estate is not a “designated beneficiary” which means it has no life expectancy and can’t take advantage of the “stretch IRA” concept. It is best to name your spouse as the beneficiary as he/she will be able to rollover the IRA to his/her own name. You may also want to name your children as contingent beneficiaries, so long as your children are competent adults. On the other hand, naming a trust as the beneficiary of an IRA may be a better fit if you are looking to protect the assets, and ensure they are used appropriately and not squandered. If the trust is not drafted properly and carefully, the IRA might be paid out on an accelerated schedule rather than letting each heir have the option to draw it out over a period of years.

10. Grandma's word is her bond.

FALSE: When it comes to inheritance, only written bequests carry weight. While Grandma may have had the best of intentions, she may have promised the same real or personal property to multiple people in an effort to make everyone happy. Moreover, Grandma’s actions during her lifetime supersede her promises. If Grandma gave away her property during her lifetime, there may be nothing left for her to give upon her passing, despite her “promises”. In addition to having an appropriately executed will or trust, we regularly advise clients to leave written instructions for the executor or trustee regarding how tangible personal property (that is furniture, cars, and jewelry) should be distributed. Without instructions, the executor alone can decide how to distribute furniture, jewelry and other family heirlooms.

11. Marriages are for life.

FALSE: Failure to consider the effects of divorce in estate planning can result in a former spouse being the beneficiary of certain assets upon your death, if not updated after the divorce is final. Although in most states an ex-spouse will be automatically disinherited, not updating your documents may result in them managing your grandchild’s inheritance or owning a property jointly with your family members. An example of this situation happening can occur if you die intestate while your son/daughter is going through a divorce, if before the divorce has been finalized, he/she dies intestate. This would likely result in their former spouse now being both a part owner of your summer vacation home and trustee of your grandchild’s inheritance.

12. Trusts are only for rich people.

FALSE: There are numerous benefits for choosing a trust (revocable or irrevocable) over a will. Trusts are much easier and faster to administer than wills, given that trusts avoid probate altogether, and they may even provide you with tax savings and other advantages in the long run. Additionally, a trust may be more cost-effective depending on your family situation, and may help you protect assets from long term care expenses and other creditors. Lastly, trusts allow for nearly seamless transfers of power over assets between the grantor, the trust, and the beneficiaries. Though they initially cost more to draft, they can save significant time, taxes and money in the long run.

 

January 7, 2022

Tax Saving, Trust, Tax Savings, Asset Protection, Will, Revocable Trust, Irrevocable Trust

The Advantages and disadvantages of a Will, a Revocable Trust, and an Irrevocable Trust

Wills_Estate-Planning

 

There are a host of complicated terms associated with the legal practice of estate planning, but the Donohue, O’Connell & Riley team prides itself on making the process as simple for our clients as we can. Download our free comparison chart to learn if a Will, Revocable Trust or an Irrevocable Trust is best for you here.

 

DOWNLOAD OUR WILLS VS TRUSTS COMPARISON SHEET

 

 

 

February 26, 2019

NH Fiduciary Trust, Tax Saving

Realize the Benefits of a New Hampshire Trust

No matter where you live, you can take advantage of NH’s favorable trust laws through our Firm's NH offices.

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New Hampshire is arguably the best jurisdiction in the country to establish a trust relationship, and based on our firm’s NH offices, ANY of our clients can benefit from a NH Trust.

• NH Trusts pay no State income, estate or sales taxes

• Investment growth escapes State & Federal estate taxes

• Flexible distributions to you & your family

• Enhanced asset protection from creditors

• Transparent, real-time online access to accounts

• Use your current investment advisor or self-manage your portfolio

• Low fiduciary fees of 0.1% - 0.3% per year

LEARN MORE

 

July 26, 2018

Tax Saving

There’s something for everyone in the new tax legislation

The Tax Cuts and Jobs Act (TCJA) impacts virtually all taxpayers – individuals, corporations, partnerships and other “pass-through” business entities, estates, and even tax-exempt organizations. Our goal is to cut through the hype and explain how our clients can benefit from these changes.

Business owners will benefit from a permanent 14% reduction in the corporate tax rate, from 35% down to 21%.

Self-employed taxpayers will benefit from the new 20% pass-through deduction for qualified business income from a partnership, S corporation or sole proprietorship.

The gift/estate/generation-skipping transfer (GST) tax exemptions have been doubled to $11.2 million per individual. Now, a married couple will not pay any federal estate tax unless their estate exceeds $22.4M. An individual can transfer up to $11.2 million before paying the 40% GST tax and a pair of grandparents can gift over $22.4 million to their grandchildren tax-free.

Individual tax brackets and tax rates will change for most taxpayers. In comparison to previous tax brackets and tax rates, the new rates are slightly lower and the brackets are slightly broader.

Our firm takes pride in our personalized approach to client service. Please contact us so we can understand your unique circumstances & family dynamics to tailor our advice to best meet your current and long-term needs.

Pre-TCJA rates

10%, 15%, 25%, 28%, 33%, 35%, 39.6%

New rates under the TCJA

10%, 12%, 22%, 24%, 32%, 35%, 37%

The standard personal deductions have nearly doubled:

  • $12,000 (single)
  • $18,000 (head of household)
  • $24,000 (married filing jointly)

Prior to this reform, about 30% of taxpayers itemized deductions on Schedule A, instead of taking the standard deduction associated with their filing status. Many of these taxpayers will now claim the higher standard deduction and therefore will not need to file Schedule A.

As always, gifting to charitable organizations can be a great way to lower one’s taxable estate, with the added benefit helping the community and preserving your legacy. The deduction for charitable contributions has been expanded so that taxpayers may contribute up to 60% of their Adjusted Gross Income.

April 19, 2018