What If My Spouse Is Not a U.S. Citizen?

There is a great deal of speculation about estate taxes but given the current state of the economy, most people believe that Congress will not repeal estate taxes. The government needs the income from estate taxes. Therefore, you need to know certain rules that may pertain to you if your spouse is not a U.S. citizen.

First, if you or your spouse owns property (real estate or stocks or bonds) outside the United States, all of this property is included in your estate for tax purposes.

When you die, the amount you own in excess of the state estate tax limit ($675,000 in New Jersey) or the federal estate tax limit ($2,000,000 in 2008, going up to $3,500,000 in 2009) is subject to estate taxes. If your spouse is a U.S. citizen, you can give her/him everything you own, no matter how much that is, and you do not owe any estate tax. However, when your spouse then dies, everything he/she owned before plus what he/she inherited from you, is now subject to estate tax. It is different if one of you is not a U.S. citizen. Under those circumstances, any amount over $2,000,000 in 2008, or $3,500,000 in 2009, that is given to your non-citizen spouse is taxed at a tax rate of 45%. Why are foreign spouses treated differently? Because the government is concerned that your foreign spouse will take the money that is inherited from you and go back to her/his native land. And then you will never have paid taxes on your estate.

One way to solve the estate tax problem is for the non-citizen spouse to become a citizen. This can be done while you are both alive or even when you have already passed on.

If your spouse does not wish to become a U.S. citizen, then you can have a “Qualified Domestic Trust” (usually called a “QDOT”) created in your will. The money your spouse inherits from you is placed in a QDOT and estate taxes on your estate can be postponed. The QDOT must have a U.S. citizen trustee, the surviving spouse must be entitled to receive all of the income that the trust assets generate, and the QDOT must be established within 9 months of your death and must be elected on your estate tax return.

The QDOT assets are taxed when QDOT principal is withdrawn from the trust, when the trust does not conform to QDOT requirements, and when your spouse dies.

If you or your spouse are not U.S. citizens, it is important that you consult an estate planning lawyer right away. That is, unless you like giving your money to the government.

 

 

 

 

What Does Estate Planning Cost?

People who do not have an estate planning documents signed are hesitant about going through the process for many reasons. One of the ones I hear very frequently is that it costs too much.

I am asked about the cost of doing a will before I set up an appointment with a potential client. I wish I had a quick answer. For many clients, after I speak with them and get answers to questions about amount of assets, whether a will has been previously signed, whether there is a divorce decree in the picture, I can get a better handle on whether the client has a fairly simple estate plan to write or a time consuming one, where I will have to read other wills, trusts, or divorce agreements. I will be able to see whether estate taxes are part of the picture and ask whether the client wishes to spend an extra $2,000-$3000 to save $99,000.

It is always the client’s choice as to whether they want the basic documents - a will, durable power of attorney and living will – without any tax planning desired because it’s too complicated or too expensive. Or, they may decide that it’s worth it to spend extra money now to save money later. So, I apologize for not being able to immediately answer that question of how much it costs. Sometimes, it takes a couple of hours of talking to each other to find out what the clients want and how I can help my clients achieve their goals. If there are no estate taxes involved, I can probably quote you a flat fee. If I am doing tax planning and reading lots of documents that you already have signed 10 years ago, I may charge on an hourly basis. I urge you not to be penny-wise but pound-foolish about your estate planning. It will be worth it.

Estate taxes

Do you know whether you would owe the government any estate taxes when you die? Did you immediately think “no – my estate is too small.”

There are two kinds of estate taxes that may be due when you die – federal estate tax and New Jersey estate tax (you never hear about our state estate tax). Most of the discussion is about the federal estate tax. It can be quite likely that you do not owe federal estate tax. In 2008, the tax code allows you to pass up to $2 million to anyone and an unlimited amount to your spouse. In 2009, that amount goes up to $3.5 million and in 2010 there is no estate tax at all. However, in 2011, the amount you can give without paying estate tax is $1 million. The most common scenario is that the husband dies first and everything has owns goes to his wife. That means his estate (all assets that he owned) pays no federal estate tax. Unfortunately, it is all too common that the widow does not re-write her will (assuming she has one in the first place) after her husband dies. And depending on how much money she now has, she may have an estate large enough to pay estate taxes.

What most residents of New Jersey do not know is that our state estate tax starts at an estate of $675,000. If you live in a fairly modest house with some equity built into it from the increase in house values in the past few years, and have some savings and a retirement account, you may have an estate large enough to pay New Jersey estate tax. If you have a will that was written before the law changed in 2002, or your estate has increased so that you might have to pay New Jersey estate tax, you should talk to a lawyer. You may wind up paying tens of thousands of dollars in New Jersey estate tax, when a little estate planning would change that outcome.

What You Need to Do After You Sign Your Estate Planning Documents

Congratulations! You did the best thing for your family and signed a will, advance health care directive and durable power of attorney. Your lawyer gave you a fat stack of documents. What do you do now?

Your original will should be safeguarded in a fireproof lockbox in your house. Even if you have a safe deposit box at a bank, your family may have problems accessing that box in the first weeks after you die.

If you have signed a durable power of attorney, the agent that you have appointed should have an original of the power. A power of attorney lets another person that you have designated handle your financial matters for you if you cannot. Banks and brokerage companies will not accept a copy of the power of attorney and may insist on their own form (you should find this out now, before you need to use the power of attorney). If you were smart enough to choose a back-up agent-in-fact, in the event your first choice agent-in-fact cannot or will not serve, the back-up person should also have an original power of attorney. You should have signed a few originals. If you do not wish to distribute the original to your agent-in-fact, you should keep the originals in the same fireproof lockbox that you have stored your will in and make sure that your agent knows where the original is located.

The third document that you should have signed is an advanced health care directive that appoints a health care proxy to make medical decisions on your behalf if your are unable to do so. The advance health care directive may also state your wishes as to what kind of medical treatment you would want, whether you would want nutrition if you are in a persistent vegetative state and whether you would want to donate your organs. Copies of this document should be given to your primary care doctor, the person you have chosen as your health care proxy, and your back-up health care proxy. It is important to discuss with your health care proxy and your family members what your wishes are in the event that you cannot speak for yourself. By going through various scenarios with them and talking about what medical care you would want or that you want no medical care in certain circumstances, the chances are much higher that your family will understand what you want and don’t want and will carry out your wishes. As unpleasant as it may be to have this talk, if you don’t say anything, they will be guessing what you would have wanted and those guesses might be the opposite of what you would have wanted.

Finally, if your estate is more complicated, do you understand what the estate plan that your lawyer has created and how it accomplishes your goals? Does it require your to set up one or more trusts while you are alive and to transfer assets into that trust? Do you need to have certain assets re-titled, perhaps so that it is not in a joint tenancy with your spouse? Do you know how to set up the trust or re-title your assets? If the answer to any of these questions is “no,” then you must go back to your lawyer, have him explain everything to you in simple language and have him take care of setting up the trusts and re-titling the assets. Yes, he will charge you for it and it will cost more money, but would you rather spend some extra money now and get it done right or hope that you did it right and find out that you owe thousands of dollars in estate tax because you did it wrong? It’s always cheaper to spend the money now to get it done right.

HIPAA – What’s That?

HIPAA stands for the Health Insurance Portability and Accountability Act.  It created privacy rights about your medical records. You will encounter its effects if you are in a serious accident and can’t consent to access to your medical records so that your family and your doctors can decide on the best treatment. By virtue of the HIPAA law, hospitals, doctors, nurses, and health insurers cannot release your medical records to other hospitals, doctors, nurses or your family without your authorization. Or if your parent has a heart attack or a stroke that is unexpected, if you do not have the proper documents, the doctors and nurses are not permitted by HIPAA to discuss your parent’s medical situation with anyone else, even you or your siblings.

You will even need a HIPAA Release Form in non-emergency situations. My aunt was recently hospitalized with a heart problem. She wanted her hospital records sent to her family doctor so the doctor could evaluate what the hospital had done. The hospital was taking forever to send the records so she asked me if I could call the hospital and get them to forward her medical records. Of course, they would not speak to me until they had a written authorization from my aunt in their hands.

Many health care proxies and advance care directives that were signed awhile ago will not be helpful if the health care provider insists on maintaining your medical privacy. You need to have specific language in the health care proxy allowing your agent to see your medical records.

Make sure to contact an attorney who specializes in estate planning for exact details on your specific situation. I can’t imagine what it would be like for you, if your loved one was seriously injured or dying, to be denied information about her condition.

 

What Happens to Your Children if Both of You Are Severely Injured

You go out to dinner in town. On the way home, your car is hit by another car. Both of you are unconscious and taken to the hospital. Do you have a plan for your children?

If you are one of the smart ones, you have wills that are actually signed (not just the drafts that you were supposed to review). Your wills name a guardian that you spent much time and agony deciding on. But that guardian may live in another state and is not legally the guardian because you are not yet dead. What have you planned if something goes wrong before you get back from dinner?

If your children are small and there is a babysitter, you must leave telephone numbers of relatives, friends, or neighbors that a babysitter can call if she can’t reach you and it is much later than you said you would be returning. You should have a signed document in your house authorizing that relative, friend or neighbor to have temporary custody of your children in the event of emergency. You should be carrying something in your wallets that emergency personnel can act on, a card with the name and telephone number of someone to call if you are unconscious. Emergency personnel are trained now to check cell phones for the ICE number on your contact list. ICE stands for In Case of Emergency and you should have the phone number of the person who will have temporary custody of your children listed as your ICE contact. Finally, the person who you have designated as the temporary guardian should be aware that he/she may get that phone call and have some idea of what you would want him/her to do until you can talk to him/her.

If your children are old enough to be left on their own without a babysitter, then they must be left with names, telephone numbers and instructions of who to call and how to proceed if you do not come home that night.

It’s a horrible thought that this scenario (and others like it) may happen to you. But just read the newspaper or listen to the news and you will hear of car accidents, plane crashes, and other bad things happening to other people. What would happen if bad things happened to your family? Do your planning now.

Estate planning for your child who just turned 18

Your child has just turned 18. He/she has just graduated high school and is probably off to college in the fall. Your child will always be your baby but in the eyes of the law, your child is now an adult.

This means that your child needs all of the estate planning documents that you do. Although you had the automatic right to make health care decisions for your son/daughter, you do not have that right now. Now your child needs his/her own health care proxy and living will. You do not have the right to see his/her medical records either. Before your daughter goes off to college, make sure that you have him/her sign a document called a “HIPAA Release” (named after the law that created a right to privacy about your medical records) that gives you the right to view her medical records.

Your son will also need a durable power of attorney that names you as his agent to act in connection with his financial affairs in the event he can’t. If he is in an accident and cannot speak or sign his name, the durable power of attorney will allow you to do his banking for him and make decisions for him until he can do so for himself.

Although it may seem strange to have a child make a Will, it may be necessary if that child has significant assets (maybe an inheritance from Grandma) and there are family issues. Without a will, unless your child is married, both parents inherit from their children.

Finally, since your child has reached the age of majority, he/she can act as a guardian to your younger children, if necessary. I’m not sure you want to give that kind of responsibility to a person who you barely wanted to give the car keys to just a year ago, but it can be a temporary solution to the guardian issue if you do not have another adult to whom you want to act in that capacity for your other children.

California Gay Marriage – Does It Affect Us Here?

Does the decision in California to permit the marriage of gay couples affect us in New Jersey? Not yet. Even if a gay couple travels to California and gets married there, when they return to New Jersey, the marriage will not be recognized as a “marriage”.

This means that gay couples must file for a civil union in order to get certain New Jersey state benefits that married people have – such as adoption, inheritance, hospital visitation and medical decision-making rights and the right not to testify against a partner in state court. They do not get any federal benefits, such as social security benefits from a deceased partner or the unlimited gift and estate tax breaks that married couples enjoy.If you are a gay couple in New Jersey, you must still get all of the estate planning documents in place – a will, durable power of attorney, health care proxy and living will (with your wishes about how much or little treatment you want if you cannot speak for yourself in writing), and a release for your partner to gain access to your medical records, called a HIPAA Release. The laws are always changing so contact your estate planning attorney at least once a year to make sure that your partner gets the property that you intend to give to him/her.

 

 

 

Health Care Proxies

A health care proxy is a form of power of attorney concerning your health care decisions in the event that you can’t speak for yourself. It will be used infrequently but it is a necessary tool that you must have in order to protect yourself and your family.

If you become unconscious or cannot speak for yourself, a health care proxy gives someone that you trust the legal right to make medical decisions for you. It saves your family a lot of time and grief to have a person already named in a legal document able to makes medical decisions for you if tragedy strikes.

A health care proxy runs hand-in-hand with an advanced care directive (or living will) but may also be combined into one document. The health care proxy names a person to make your medical decisions if you can’t and the advanced care directive (or living will) gives that person some guidance as to what you would want done for you in terms of food and nutrition, heroic lifesaving measures, and other medical determinations on your behalf.

Medical personnel who are given a health care proxy that is drawn up in accordance with legal requirements must honor the decisions made by the agent (the person that you choose). And if you have discussed your preferences with your agent, they will carry out your wishes. You could also have a living will that will spell out your wishes. It takes the burden off your family of guessing who you would want to make those decisions and what those decisions should be.

In order for your health care proxy and living will to be useful, you need to give your agent a copy of the health care proxy to be available in case you can’t talk for yourself. You don’t do yourself any good if no one knows you have drawn up this document or can’t find it when you least expect to need it.

Estate Planning isn’t Just For Old Rich People

I’m a lawyer and a mom to 2 boys.  My family means everything to me and I try to protect my sons while teaching them how the skills to survive in the grown-up world.

One way you can protect your children is by preparing and executing a plan to pick a guardian for your children, for ensuring that the money you are saving and the life insurance you have bought is used for their upbringing, and planning for most contingencies.

I help families with that planning and getting the necessary documents signed so that you have a plan that the courts will followand let you have the peace of mind that comes with knowing you have done something positive to protect your family.

Most people think you need to be rich to have have a will.  That’s not true.  Everyone who has children should have a will.  You want to have a system in place of your own choosing for how your kids will be protected if something happens to you.

This blog will give you information about how to go about the planning of your children’s protection with the use of idfferent strategies and legal documents.

If there is anything you need more information about, please feel free to email me at RGronsky@Gronskylaw.com.