There’s No Estate Tax in 2010 – Shouldn’t I Wait to Do My Estate Planning?

There is no federal estate tax this year. Most of us who even know about estate taxes didn’t think we’d see this day. We all figured that Congress would pass a new law that would change the tax scheme that removed all federal estate taxes in 2010. But Congress did not act and here we are.

In New Jersey, we still have a state estate tax that your estate must pay when your estate (assets less liabilities) total more than $675,000. Should you wait to see what law Congress passes when it deals with the estate tax issue or should you make an appointment with your estate planning lawyer now?

Most of us think of only a will as our estate plan. When you meet with an estate planning lawyer, he/she will ask you about more than what assets you want to give to whom. Your lawyer will ask whether you have a durable power of attorney and whether you have a health care proxy and a living will. She will also ask about whether you have long-term care insurance or another means of funding your care when you become too frail to take care of yourself or if you get Alzheimer’s disease. All of these issues are part of estate planning and there’s more. Is your financial life online? Can your family or loved ones access your online accounts? Do you have a family history that you want to leave to your children and grandchildren? Have you taken any steps to videotape your stories or create a scrapbook of family photos? This is also part of estate planning.

So, even if you do not think you need estate planning because you will not owe federal or New Jersey estate taxes, there are many other aspects to estate planning that are important to you and your family. Go call an estate planning lawyer and create the plan that will make you and your family happy.

Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.GronskyLaw.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at RGronsky@Gronskylaw.com. Thank you!

Having the “Talk” With Your Parents

Christmas is a time when many families get together. This can be a good time to talk to talk to your parents about their plans for if they become disabled.

Yes, we all know it’s a difficult subject but it doesn’t get any easier the longer you wait. It is stressful for everyone if you have that talk when you or your parents need help immediately, especially if the family is scattered around the country the rest of the year.

Talk about what medical steps they would want taken or not taken if they can’t talk for themselves. Go through different scenarios and find out whether they want treatment, relief from pain only, food and water, or ventilators. If possible, have them put their wishes in writing. It may or may not be up to the standards of a living will but it will be better than nothing.

You should also ask your parents where they keep their will, life insurance and long-term care insurance policies and who their lawyer, accountant, financial advisor and doctors are. This will alleviate the need to go through all of their papers and phone books if you need to call someone or to deal with legal papers.

Planning when you are not in crisis mode is worth every bit of discomfort, every hour it takes to get the information, and every dime it costs to implement your parents’ wishes. It is cheaper to do it now rather than later and the peace of mind that you will get from knowing that your parents have a plan in place for when they can’t take care of themselves is priceless.

Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.GronskyLaw.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at RGronsky@Gronskylaw.com. Thank you!

If You Die Without a Will – Part I

More than half of all Americans die without a will. For most people, getting their will done seems like a waste of money (I’m not rich enough to need a will) or they keep procrastinating because death is such an unpleasant subject.

Some possible endings in life may never happen – for example, you may not die young or you may never have a long, drawn-out illness. But death is inevitable for all of us. And many of the fights that families have don’t happen because of the inheritance of large amounts of money. The fights occur because your family has no idea of what your final wishes are and they disagree about how to guess what you would want.

If you don’t have a will when you die, New Jersey has an intestacy statute (that’s a law that governs when you don’t have a will) that makes the decisions of how to divide your assets for you. It doesn’t leave any discretion to your family. The only possible discretion is left to a judge that you don’t know. If you die without a will, your assets are divided in a certain manner. If you have a spouse, and all of your children are the children of that spouse, your spouse gets it all. It doesn’t matter that you haven’t lived with that spouse for 10 years (for your own reasons), that’s the law and a judge can’t change it. If you die with a spouse and you have children from your current marriage and a previous marriage, your spouse gets the first 25% of your estate (which cannot be less than $50,000 or more than $200,000) plus ½ of the balance. All of your children get the rest.

If you die with a spouse but no children and your parents are still alive, your estate would be divided between your spouse and your parents. Most people would want their spouse to get everything.

If you have been living with someone but have not married that person (or created a civil union), nothing will be inherited by him or her. It doesn’t matter how long that relationship has lasted.

If you want to disinherit a family member, then you need a will to specifically state that wish. The intestacy laws do not have any provision for disinheriting someone who is legally entitled to inherit.

Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.GronskyLaw.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at RGronsky@Gronskylaw.com. Thank you!

 

 

Giving Away Your Stuff

It is obvious to most people that if you have a big estate and you divide it unequally, that your heirs (usually that’s your family) will be mad at you and each other because they were not treated the same. But, even if you don’t have a large estate and the main thing that you have to give to your family is your “stuff,” leaving unequal shares or not giving instructions on how it should be divided, can also cause hard feelings.

What do I mean by “stuff?” Think of your furniture, your jewelry, your Beanie Baby collection, your golf clubs, or your Christmas ornaments. The monetary value of some of the things you own can be minor but who gets them can cause a big fight among the people you love.

I do not advise my clients to make lists of their possessions and include the distribution of these items in their wills. If you originally give your diamond earrings to one daughter but later change your mind and wish to give it to your other daughter or a granddaughter, then you don’t want to have to change your will. Standard wills have a paragraph that gives the personal property to a spouse or to the children in equal shares, with the executor of the will deciding who will get what. If there is a spouse in the picture, there are usually no arguments. But, when it’s the executor who must decide who gets what, and especially when the executor is one of the children, then I see lots of bad feelings among family members that take years to overcome.

If you have definite feelings that one child should have a particular possession, then create a separate letter to be attached to the will, that lists the possession and who should get it. Add to that list all of your other possessions that you have specific people in mind who should inherit them. If you run out of ideas as to who should inherit what, have a family meeting and ask your family if any one is interested in inheriting a specific item. There may be more than one person interested in a particular item, so you may need to do some trading around until there is family harmony. If you don’t feel that you can face a family discussion about this topic, talk to each family member one-on-one. If you explain in your letter, why you are giving certain things to certain people, it usually dispels some of the bad feelings.

You can also give your stuff away while you are alive so that you can see your family enjoying these items while you are alive. Most of us have more than enough stuff that giving away one item to each family member will not leave you with an empty jewelry box or an empty house.

The most important consideration is giving some guidance to your executor on how to divide your stuff and why you are giving these particular things to particular family members. People want to think they are being treated fairly, so if you are not giving in equal shares, make sure everyone knows why.

Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.GronskyLaw.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at RGronsky@Gronskylaw.com. Thank you!

Update Your Estate Plan

I recommend to my clients that they come in for an estate plan check-up every two years. An estate plan check-up is a time when I meet with my client, ask about what has changed in her life in the past two years, and describe what changes have taken place in the law that might affect her estate plan. After we have our conversation, I ask whether, in light of what we just spoke about, would my client want to change anything in her estate plan.

Usually, the answer is “yes.” Why? Because the laws affecting estate tax is changing fairly often these days and that impacts how your estate plan is structured. Frequently, in order to avoid paying estate tax to the state or the federal government, I will create one or more trusts in your will. A trust is a great device to get money out of your estate, and therefore not have to pay estate tax on it, but it can be a burden in terms of living with it. You have to file tax returns for the trust every year and sometimes prepare an accounting to the beneficiaries of the trust so they know how much was earned, through which investments, and how the income from the trust was distributed. A lot of extra work that you may not want to go through if you don’t need to.

On the other hand, maybe you never needed to think about estate taxes, but your mother died and left you a significant inheritance. Now you have some real money to think about. That can change your estate plan.

Your estate plan may change because you have had a big fight with your executor (or divorced him if it was your husband) and now you don’t want that person to act as your executor. Or perhaps the couple that you chose to be your children’s guardian have moved away from your neighborhood and your kids haven’t seen them in a few years. So you want to name a different guardian.

Your estate plan is never set in stone. It’s not a one-shot deal that you never have to re-think until someone dies. If it has been more than two years since you last talked to your estate lawyer, make an appointment now. You might find that you need to change more than you thought.

Estate Planning If You Are Not Wealthy

You may not think you need to have a will. After all, you don’t think of yourself as wealthy. And you think you won’t need to pay any estate taxes (those are only for the rich, right?). And you’re fairly young and in good health, so you aren’t dying anytime soon. But you could be wrong – about all of your assumptions.

There are many reasons that people own their property in joint ownership. One of those reasons is so that the other owner automatically inherits upon your death. But, there are also reasons why that could be a bad idea. You may have accounts that can be “payable on death.” And for those accounts, you would not need a will. But, it is unlikely that everything you own is in joint ownership or a “payable on death” account. So, you need a will.

You probably have heard that you don’t pay “death taxes” unless you have an estate of more than $3.5 million. That $3.5 million is the federal estate tax exemption. So if, you die and your estate is less than $3.5 million, then your family does not pay federal death tax. But if your estate is more than $675,000, you will pay estate tax to New Jersey. And if you start counting the equity in your house, the balance in your retirement account, a life insurance policy that is not in a life insurance trust, and your stocks (even with the hit it took in the stock market these past few months), you might easily be past the $675,000 number. Do you want to pay estate (death) taxes to New Jersey? So, you need a will.

Do you have minor-aged children? Do you want your relatives arguing over who should be the guardians of your children? Do you think that one of your relatives shouldn’t even be the guardian of your pets, much less your children? Are you certain that you will not die until the youngest child is over 18? So, you need a will.

Do you want your family wealth to be destroyed by your creditors, by an ex-spouse, by the stupid decisions of your college-aged kids, by your spouse re-marrying and giving your money and things to the new spouse? So, you need a will.

Of course the wealthy know that they need estate planning. And the majority of them spend the time and money to come up with a plan that leaves them with the peace of mind that comes from being in control as much as possible. They don’t leave things to chance. You may think you don’t need to act like them because you don’t have the same amount of money. But don’t you like the idea that you can leave things the way you want them, not to chance? Don’t you like the idea that your loved ones will be protected from bad luck and bad decisions? So, you need a will. Go call an estate lawyer. You’ll be glad you got a will.

 

Powers of Attorney

A Power of Attorney is a legal instrument that gives certain legal powers from you to another person that you designate. Why does everyone need one? People who are in an accident or who are no longer competent to make their own decisions, need to continue to make financial transactions as long as they are alive. Who will pay the bills, make bank deposits and withdrawals, prepare your tax return, or manage your investments? Who will sign legal documents for you if you cannot, for one reason or another? A durable power of attorney will make life easier for you and your family if times get tough.

The person who signs a Power of Attorney is called the Principal. The Power of Attorney gives legal authority for another person (called an Attorney-in-Fact) to make property, financial and other legal decisions for you. You can give an Attorney-in-Fact broad legal authority, or very limited authority.

Your Power of Attorney can be “immediate” or “springing.” An immediate Power of Attorney is in effect as soon as the Principal signs the Power. The Attorney-in-Fact can go out and act as the agent of the Principal even if the Principal did not intend the Attorney-in-Fact to take immediate action. A springing Power of Attorney does not take effect until you become disabled. The springing Power of Attorney is sometimes used when you do not intend for the Attorney-in-Fact to be able to act as your agent until you are not competent to act for yourself.

The issue with a springing Power of Attorney is that your agent may have to jump through some hoops before he can use the Power of Attorney. Since it cannot be used before you are disabled, you need a doctor (or perhaps two doctors) that will certify that you are not competent. Your agent may not be able to find doctors who are willing to sign a legal document that does certify that you are not competent. Or the institution that your Attorney-in-Fact presents your Power of Attorney to does not accept your document and wants your agent to use their form (very common with banks). If you are not competent, you cannot sign another Power of Attorney.

Obviously, you want your Attorney-in-Fact to be someone you totally trust. You can name your spouse or a relative or even a close friend, so long as that person is at least 18 years of age. Most married persons choose their spouse as their Attorney-in-Fact. You may also wish to name one of your children to act as your Attorney-in-Fact, if your spouse cannot act as your agent. It is not recommended that you name two (2) persons to act jointly as your Attorney-in-Fact. If they cannot agree on an action to take, you have gridlock and no action will take place.

You should ask that person if he wants to act as your Attorney-in-Fact. The person who agrees to act as your Attorney-in-Fact will owe you a fiduciary duty, which means that your best interests must always be placed first while acting as your agent. The Attorney-in-Fact does not have to be compensated, but, especially if the duties are complicated or time-consuming, you may wish to consider compensation.

Decide on who you will designate as your Attorney-in-Fact and call your lawyer to get a durable Power of Attorney signed. If you have already signed one, review it with your lawyer to make sure that the document you signed years ago still meets your needs.

What to Ask Your Estate Planning Attorney

You’ve made your appointment to get your estate planning done and you want to make sure that you cover all the bases with your lawyer. What should you ask her?

Your conversation should include a discussion about wills, trusts (although they are not needed in most cases, you might be one of the persons who should have one), health care directives that appoint someone to act as your health care representative and gives your doctors some guidance on what procedures you do and don’t want done, and a durable power of attorney which allows your agent to manage your personal affairs (such as taking care of your banking, signing any legal documents, paying your bills).

You would also want to talk about estate taxes, both federal and state. The federal limits went up in 2009 to $3.5 million that you can leave to your heirs without paying estate tax. However, the state estate tax is still $675,000. If you have some equity in your house, a retirement plan and some mutual funds, you could be over the state limit and might need some tax planning.

You should be prepared to talk to your lawyer about all of your assets and how they are titled. Is your house in joint tenancy or a tenancy by the entireties? Do you have separate or joint bank accounts? Do you have Payable on Death designations on some of your accounts? Your attorney will want to know these things.

Do you have minor-aged children? Your attorney will discuss guardians with you. You hopefully know whom you want to name as guardian, but your lawyer may have some thoughts on whether to name a couple or just part of the couple, how many back-up guardians you should name, etc.

Do you have pets that you want to provide for? Ask your lawyer about how to accomplish your wishes. She should have some suggestions for you.

You should have a good idea of how you want your estate distributed. Your attorney can give you some strategies if you can’t think of how you want to accomplish a specific goal.

Finally, ask about the fees involved with the drafting of your documents. You should not pick a lawyer based on who is the cheapest or most expensive, but the lawyer should explain whether she charges a flat fee (and how much that fee will be) or whether she charges by the hour (maybe you have a lot of existing wills, trust documents, divorce agreements and other legal documents to review before the lawyer can start creating the best estate plan).

Other questions may come up during your meeting with your attorney. It might be a good idea to bring a pad and pen with you to jot down your questions and to write down the issues that you need to follow up with that arise during the meeting. If you aren’t comfortable with the lawyer you are meeting with, ask around for the name of another lawyer. Your estate planning lawyer should be your lawyer for a long while and you want to feel that you can discuss anything with her.

 

Using Wills from the Internet or a Book

Have you ever heard the commercials on radio and television for companies that do a will for you for a very small fee, much smaller than a lawyer’s fee? Is it worth it to use a will form from a company that is on the internet or that is printed in a book?

How do you know if the will you get from a book or from an internet company will do the job until it’s too late? You don’t. You could have a will from an internet company that does distribute your assets to the people you want in the way you want but it might cost you thousands of dollars in state estate tax. Or, the internet form will not tell you that you should put all of the money that your young children will inherit in a trust. Or the trust may end when your child turns 18. Do you want your 18 year old to inherit thousands of dollars all at once? Will they use your money wisely?

Does the form from the internet tell you exactly how to have the will signed (you need witnesses who are not beneficiaries under the will and who can be found by the court when you die? Your instructions may not be that thorough or they may not give you certain tips that a lawyer would give.

If you want an estate plan that does not fit with the form’s fill-in-the blanks, what do you do then? You may not have any options to change the form. Or by changing the form, you may create unintended consequences.

If you have any legal questions about your estate plan, you cannot ask the internet company for legal advice – they will refer you to an attorney.

People hate spending money for experts. They will try to do their own plumbing, self-diagnose their illnesses, and create their own legal documents. You think you are saving money by doing it yourself and occasionally you are. But there are many more times that by doing it yourself, you make things worse. And when you call in the experts, it costs more to fix the problems that you created than it would have if you had gone to the expert first. Don’t do surgery on yourself and don’t write your own will. Call an estate planning lawyer, someone who knows the right questions to ask you. That way, you will have the will that works the way you intended. You can pay me now (to write your will) or pay me later (to fix your probate problems), but paying me later is always more expensive.

 

New Year’s Resolutions

Many people create their personal list of New Year’s resolutions and then abandon them by February or March. This year, be different, create a roadmap of how you will achieve your goals.

For example, if one of your resolutions is to organize your financial records (and that’s a great goal in these uncertain times as well as every year at tax time), your road map should start with buying certain supplies – perhaps an accordion file, certainly a fireproof box, file folders. Then, start organizing your papers by different categories. Your road map should state when you are going to take each step, maybe week by week or month by month.

If your goal is to lose weight, then write down very specific ways in which you will make changes – choosing different foods to lower your calorie count, exercising a certain number of days per week. Write down your exercise goals in your calendar so that you will actually do them. Find an activity that gets you off the couch that burns calories, dancing, gardening, tennis with your friends – they all will help.

Maybe you need an outsider to keep you motivated. If you are strapped for cash, enlist the help of friends. Everyone is great at keeping someone else’s New Year’s resolutions. They will offer good suggestions and provide accountability. If you want to keep your friends out of the picture, hire a professional. There are life coaches, personal trainers, nutritionists, financial planners, and lawyers. They will all help you achieve different goals.

Add estate planning to your New Year’s resolutions. Everyone who is over the age of 18 needs certain basic documents and those documents need to be updated periodically. If you have never had an estate plan done, call a lawyer who specializes in estate planning now. Every one of us has a story of someone who died unexpectedly. And when they die without an estate plan, it makes it so much harder for the family left behind.

Get a fresh start now and get your life moving in the direction that makes you happy . Then add in those items that you know that you should do but always put off. Once you do those things, you will feel so relieved. And accomplishing these goals is a wonderful gift to your family.