Hooper Law Office,LLC Estate Planning Blog

Monday, April 21, 2014

My brother died and his Will divides his estate between my sister and me. I really don't need the money and would rather have it go to my children. How can I do this?

In this age of increased life expectancy it is not uncommon for someone to inherit at an age where they no longer can receive any significant benefit from an inheritance.  You have two options if you want your children to receive the inheritance.

Your first option is to accept the inheritance and then give it to your children.  Be aware that any gift of more than $13,000 to an individual in a single year requires filing a gift tax return.

The second option is a legal "no thank you" which is called a qualified disclaimer.  The effect of the disclaimer is that you are treated as predeceasing your brother.  Therefore, prior to disclaiming, you need to check with an experienced estate planning attorney to make sure the disclaimer has desired results.

With a gift you can have precise control over the amount and manner by which your children will receive the money.  With a disclaimer you have no such control and the inheritance will go to your children equally.  It is also worth noting that a disclaimer is not an all or nothing technique.  You can disclaim everything, a fraction of the inheritance, or specific assets.

Monday, April 14, 2014

My mom and I are on an account as joint owners. What happens after she dies?

Check the last account statement.  If you are listed as power of attorney (POA) then the entire account is part of your mother's estate and should pass according to the controlling documents or a payable on death designation written on the account.  However, if you are the true joint owners then the account may pass directly to you without probate unless the joint ownership was established entirely for convenience purposes.

Monday, April 7, 2014

How Do My Siblings and I Divide Personal Property?

Personal property is a person's "stuff" - the couch, rings, tools, etc... It does not include cash accounts, cars, or land.  You must first read the will or trust to see if your parents left any instructions regarding how their personal property should be divided.  Often a personal property memo is authorized by the estate plan, which provides that specific items be given to certain people.  These are called "specific distributions."  Any items that are not specifically distributed will pass to the beneficiaries of the estate in shares determined by the estate plan.  If there is no plan, distribution pattern will be determined by state law.  Dividing the personal property does not mean you have to cut the couch in three pieces and give one to each heir.  Rather, it requires the trustee or personal representative make sure the personal property is divided so that each person receives an amount of property in proportion to their share.  The children will often decide among themselves what is fair and the trustee or personal representative has the authority to settle disputes.  If certain property is unwanted it is often sold and the proceeds are divided between the beneficiaries.

Thursday, March 20, 2014

How Does Charitable Planning Provide Tax Benefits

Any donation that you  make to nonprofit charities is not subject to capital gain, income, or estate taxes.  The amount of tax savings you receive depends on the following:

  • the type of asset being donated;
  • the charitable planning technique used;
  • the amount of your annual income; and
  • the size of your taxable estate.


Thursday, February 27, 2014

Should I Name My Living Trust as the Owner of My IRA?

No!  Unlike most of your other assets, the ownership (title) of your IRA should never be transferred to your revocable living trust during your lifetime.  The IRS treats the transfer of ownership of your IRA in any manner, including to a living trust, as a withdrawal.  This means income taxes are immediately due on the entire IRA!  While a trust can be named as a beneficiary of your IRA, it should never be named as its owner.  A trust should not even be named as a beneficiary unless the trust is drafted to comply with the IRS's designated beneficiary rules.

Tuesday, February 4, 2014

How can I encourage my parents to plan?

If you have brought up the topic of estate planning with your parents only to be cut off with the response that "it's done" or "it's taken care of," do not let the discussion end there.  Too much is at risk.  You need to make sure they have a sound plan in place that is compatible with current laws.

Even if they have a plan, you need to make sure it is up-to-date with the constantly changing circumstances of your family, as well as the law.  Trusts, wills, and other legal documents should be reviewed and updated at least every two to three years to keep them current.  You are doing your parents a favor by encouraging them to have their estate planning documents regularly reviewed. 

By taking the following steps, you can promote a successful estate planning conversation with your parents:

  • Pick a time and place that will be free of interruptions;
  • Provide your parents with copies of this book and its companion publication, Your Life, Your Legacy:  The Fundamentals of Effective Estate Planning, with the relevant sections highlighted, before you meet; and
  • Prepare an agenda of discussion topics.

Consider the following events good opportunities to start the discussion:

  • Your parents have just attended a funeral or visited a cemetery.  You can say, "I really need to talk to you about what happens if you are not here anymore."
  • When the issue of tax reform is seen in a newspaper or on the television, you may state, "I see there have been a lot of changes in the estate tax laws.  Have you thought about how they affect your estate plan?"
  • When you plan your own estate, tell your parents about it!  Inform them about your plan and then inquire about theirs.  Ask them if they are willing to discuss their plan with your attorney so your plan and theirs will work in tandem to best protect you and your children (their grandchildren).

Parents often say that everything is taken care of to avoid discussing this difficult topic, but if you wait for a crisis to occur before you insist on talking about it, it is usually too late.  Planning done in a crisis is stressful, costs more, and limits your options for decision-making.  Help your parents plan ahead to avoid this situation.

Even if your parents clearly have a plan in place, ask them whether an attorney who does only estate planning prepared it.  The days are long past when the many complex issues invoiced with planning an estate could be entrusted to general practitioners who try to "do it all."  This is not an area of the law in which an attorney should dibble.  Many of the estate plans we review miss important planning opportunities or are just plain wrong.  Let your parents know that it makes a lot of sense to get a second opinion of their documents from an attorney whose legal practice is dedicated to helping their clients plan their estates.  Doing so will also help your parents overcome their resistance to planning their estate.



Wednesday, October 2, 2013

What are the options for distributing an IRA?

IRAs are the most difficult asset type when it comes to probate and trust settlement.  Therefore, if you don't hire an experienced estate planning attorney to help with the other aspects of the settlement, please get help with the IRA.  The rules are complex and the mistakes tend to have huge consequences.

Basically, upon the death of the IRA owner it goes to the individuals and entities specified in the beneficiary designation.  If a trust is named there are additional complications.  Trusts are frequently used as beneficiaries as IRAs to provide asset protection.  Trust rules are complicated and there is a wide misunderstanding of rules in the financial industry.

During a probate or trust settlement, if the decedent was older than 70 1/2, it must be determined if he or she took out their required minimum distribution for the year of death.  If they didn't, then the required minimum distribution must be taken out in the name of the estate prior to distributing the IRA to beneficiaries.

When a beneficiary inherits an IRA they cannot combine it with their own IRAs and special distribution rules apply.  When Bill Sample dies and his IRA is inherited by his son, Junior, the IRA remains in Bill's name with Junior indicated as the beneficiary.  This is called a "beneficiary IRA" and Junior must start taking out a required minimum distribution that is based upon his age at the time the beneficiary IRA was created.  Unlike a regular IRA there is no early withdrawal penalty if the beneficiary is under the age of 59 1/2.  If Junior does not start taking out the minimum distributions beginning with the year following the year of Bill Sample's death, then he must take out the entire IRA within 5 years.

Sunday, August 4, 2013

Did the Veteran need to serve in combat to qualify?

No, the only requirement is that the veteran served at least one day during time of war, as part of a minimum 90 day deployment that was for other than training purposes. The critical dates are:

World War II- 12/7/1941 to 12/31/1946

Korean conflict- 6/27/1950 to 12/31/1955

Vietnam War- 8/5/1964 to 5/7/1975

Saturday, August 3, 2013

What are the types of VA pension benefits?

If the veteran, or the surviving spouse of a veteran, qualifies they can receive either a basic pension, a higher pension for being homebound, or a pension called Aid and Attendance if they are in need of medical assistance. The Aid and Attendance benefit is especially helpful because, unlike Medicaid, it will help defray long term care costs if the recipient is either receiving care at home or is in assisted living.

Friday, August 2, 2013

My child lives with me, what happens if I go to a nursing home?

It is a fairly common situation for a child to live in your house and provide assistance that allows you to remain at home. It would be sad indeed if after this sacrifice your child was thrown out of the house after you went into the nursing home.  Fortunately, this is unlikely to happen. As long as a child lives in your house for at least two years prior to your admission to a nursing home, and they helped you stay in your home, then they will be able to remain in the house. Under these circumstances, the home can be transferred to the child without incurring a divestment penalty.

Thursday, August 1, 2013

I have Medicare; should I worry about nursing home costs?

Yes; Medicare is a health insurance program for those people over the age 65. Medicare will not pay for custodial care in the nursing home, but it will pay rehabilitative care in a nursing home setting. To qualify for Medicare coverage, a patient's nursing home stay must have been preceded by a three night, or longer, hospital stay. Typically, Medicare will pay for the first 20 days in the nursing home for those patients receiving physical therapy or other rehabilitative treatment. Medicare will then pay a portion of the next 80 days in a nursing home. After 100 days, Medicare will, in virtually all cases, cease payment. Medicare also have the ability to terminate coverage before the end of the 100-day period if the patient is not making progress towards rehabilitation and recovery.

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