Category Archives: MyStarterWill

The “New Normal” of Estate Planning

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What has changed? Surprisingly little. And that has changed everything.

Now that Congress has made permanent the $5 million federal individual exemption (adjusted for inflation) for estate taxes and other provisions that take estate tax planning out of the picture for the vast majority of Americans, estate planning will look very different. Very. In fact, most of the esoteric planning that engineered tax breaks for the wealthy will still be employed, but the bar for who is “wealthy enough” to need estate tax planning has just been raised significantly.

At the end of December 2012, it was widely assumed that the $5 million individual exemption could drop to $1 million, or at least $3.5 million. Alternatively, there could be another “stop gap” extension and a need to vote again, leaving us with continued uncertainty in the estate tax arena. Yet instead, Congress surprised everyone and enacted permanent provisions that are more generous than anyone anticipated.

As a brief summary, here’s where we are on the federal estate tax front:

1) The $5 million per person exemption was extended, which will continue to be indexed for inflation.

2) The top rate increased to 40%, effective 1/1/13.

3) Portability remains in place (a post-mortem election you can take to preserve the first spouse’s exemption).

4) The $5 million gift tax exemption remains in place.

You can also check out my YouTube video from January 2 for the same summary:

Now that you know this, for the foreseeable future, many of you can simply tune out federal estate tax planning altogether. Wow. How often do lawyers say that? Tune it out? Almost never, I can assure you. But in this case, you probably can do just that. Big caveat: If you do have an estate approaching the thresholds or expect an inheritance or other infusion of cash that may put you there – lucky you! – of course, perk your ears back up and take notice.

If you would like further commentary about the new estate tax laws and their effect, take a look at luminary estate planner Martin Shenkman’s article from Financial Planning entitled: Tax Deal a Game Changer for Estate Planning.

Anne Marie Segal is admitted to practice law in Connecticut and New York and provides estate planning and other legal counsel to businesses and individuals. This information is provided for your convenience and does not give legal advice for your situation. You should consult an attorney for advice if you have questions about what type of estate plan is right for you. State estate taxes, divorce/remarriage concerns (present or future) and other factors may also affect your decisions about estate planning.

 None of the interactions on this site form an attorney-client relationship. This is a public forum. Please do not post confidential or fact-specific information regarding your legal questions on this site.

I Know I Should Have an Estate Plan, But How Much Planning is Enough?

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Just about everyone knows he or she should have an estate plan, but how much planning is enough? When is a basic estate plan sufficient, and when should a more complex plan be put into place?

Is a basic estate plan right for me?

Generally speaking, a basic estate plan may be the right choice for you if:

1) You are relatively young and in good health. If you are creating a will for the statistically unlikely event that you don’t beat the odds, you may not require a complicated estate plan if you meet the other criteria below.

2) Your current and expected estate (including life insurance) does not approach $1 million. While the current federal estate tax exemption is higher than that in 2012 (approximately $5 million), it may drop to $1 million in 2013 if Congress does not act. In addition, the state estate tax in Connecticut is $2 million and in New York is $1 million.

3) You do not require any specialized planning. If you wish to engage in complex planning or have a particular situation that needs greater care (such as a special needs child who may benefit from a special needs trust), you may want to consider additional steps beyond a basic estate plan.

4) You do not own a business or family entity.  Family-owned businesses and entities can pose special succession issues, including valuations, liquidity and control, that require more advanced estate planning.

5) You and your spouse or partner (if any) do not have children from another marriage/parent. If there are sufficient assets involved, families with children from previous marriages or conceived prior to marriage often benefit from special arrangements to direct that their children, and not a current spouse’s family (upon his or her death), ultimately receive the inheritance a parent intended when drafting the will.

6) You do not intend to create a complicated list of specific bequests. If you intend to make specific bequests of certain assets, such as a car or a treasured painting, these can be done with a basic will. By contrast, if you have twenty cousins who should each receive one piece of jewelry, one artwork, 1/20th of your book collection and so on, you may want to bolster the language of your will to maximize harmony among your heirs and assure that your wishes are respected. Specific bequests can get complicated, need to be specifically documented and can cause will contests, disagreements or simple family bitterness if heirs are unclear about what they should have received or feel cheated by the “process”.

7) You have no reason to expect a will contest. If you intend to leave your estate in a manner that will anger or incite certain would-be heirs or have other “surprises” in your will, you will want to draft the will provisions extremely carefully to mitigate risks of litigation over your estate. For example, you may leave your estate to a non-marital partner rather than family members, which could generate friction after your death.

8) You are not concerned about generating immediate liquidity for your family. If cash could be tight in the event of your death, and you want to quicken the probate process, you may consider putting a revocable living trust into place in addition to a will. Any decision to create a revocable living trust or other trust should be based on a holistic approach to your estate plan.

9) You are not concerned about the public nature of the probate process. Trusts generally preserve your privacy, with some exceptions. Wills do not.

10) You do not expect any of the above factors to be relevant in the near future. Unless you plan to review your estate plan on an annual basis (and actually do it), you should create a plan that will not need to be revised based on facts that may come into being in the next three to five years. For example, you may be expecting an inheritance that would put your own estate closer to $1 million or be considering a remarriage with children involved. While it is always a good idea to keep in mind your situation and potential changes in law that might affect your estate plan, if you know that one of the above factors is likely to occur soon, you should plan ahead so that the time, emotional investment and money that you put into creating the plan pays off as you expect.

The information above is general in nature and may not be optimum for your individual situation. Please contact me or another qualified estate planning attorney to determine the best estate plan to fit your needs. The enclosed also appears on my website at www.MyStarterWill.com. MyStarterWill is a trademark of Anne Marie Segal.

Law Office of Anne Marie Segal provides estate planning advice and other legal counsel to businesses and individuals. None of the information posted on this site constitutes legal advice or forms an attorney-client relationship. This is a public forum. Please do not post confidential or fact-specific information regarding your legal questions on this site.

Seven Top Reasons All Single Parents Need Estate Plans

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With every time crunch and other obstacle a single parent must face, estate planning may seem like a far-flung concern or something only needed by the wealthiest of parents. Nothing could be further from the truth. As a single parent with moderate income and assets, your child(ren) need to keep every penny possible that you worked so hard to earn! Here are seven top reasons – aside from taxes and special needs – that even a basic estate plan will save your family headache and heartache down the road.

1) You can name a physical guardian. In your will, you can designate who your minor child’s guardian will be in the event there is no longer a living, available and appropriate parent. If your former spouse passed away, your child’s other parent is no longer involved with the child or there is a history of abuse or other reason to designate a non-parent guardian, this is especially important. (And in cases of abandonment or abuse, you should leave additional information and evidence separate from your will, if possible, to support your election of a non-parent guardian over the living parent.) Without your designation of a guardian, a probate judge will make his or her best guess on who is the best person for the job, which may or may not accord with your wishes or the actual best interests of your child.

In the case where your former spouse would ordinarily be guardian of your child in the case of your death, it is still advantageous to appoint a guardian. For example, there could be situations where he or she is unwilling or unable to serve as a guardian (including if he/she predeceases you).

2) You can name a property guardian.  In addition to naming someone as a physical guardian to care for minor children, you can also designate who will take care of your child’s financial affairs. This person may or may not be the same individual who serves as the physical guardian. For example, your son or daughter’s other parent may be his or her physical guardian after you pass away, but you may designate your sister or brother to be a property guardian for the assets you have left behind. Without designation of a property guardian, the child’s custodial parent would have control of your estate assets.

3) You can set up a trust or custodial account. You may choose, after considering the options, to set up a trust or custodial account to manage the assets on behalf of your child and designate ages and conditions for which your child will receive the principal in the trust or account. A typical age is 25, for example. You may also wish for the child to receive equal shares at different ages so that if he or she does not properly manage the first influx of cash, there is another opportunity. Without a trust or account, your child will have unfettered access to any estate assets at age 18, which is probably not the most opportune time to make the wisest financial decisions.

4) Your estate will not need to pay to bond the administrator. If you die without a will (or if you do not waive the requirement in your will), your estate’s administrator (or executor) will need to be bonded for each year that your estate is in probate. This surety bond could drain hundreds of dollars in probate costs from your estate.

5) You can plan for incapacity or other health emergencies. None of us likes to imagine that we won’t be available for our children whenever they need us, but every day things do happen. As part of your estate plan, you can determine who will take care of your medical and financial decisions if you cannot do so yourself due to incapacity or another disability. Significant funds can be depleted on delay and wasted efforts if you do not plan ahead for this possibility, however remote.

6) You or your attorney will review your beneficiary designations. Have you checked that your former spouse, for example, is no longer listed as the beneficiary of your 401(k)? If you have more than one child, are they listed as co-beneficiaries (assuming this is your intent)? Are you sure? In the course of reviewing your documentation, you may be surprised what you find (and want to change).

7) The very act of estate planning will get your financial paperwork in order. As a single parent, you (usually) do not have another partner who knows the financial details of your life. Where is the information to claim life insurance? Where are the stock certificates and 401(k) account statements? Where is the safety deposit box key? As you work through the questions posed by your estate planner, you will have an opportunity to consider what information you need to document and where to best keep it available yet confidential in case your estate executor needs to find it.

Single parents, if you have read this post to the end, pat yourself on the back! You probably already know that life can throw a few curve balls your way. By educating yourself about estate planning, you have taken an important step to assure your children’s future. I wish you all the best.

Law Office of Anne Marie Segal provides estate planning advice and other legal counsel to businesses and individuals. Please visit www.amscounsel.com or MyStarterWill.com for more information. None of the information posted on this site constitutes legal advice or forms an attorney-client relationship. This is a public forum. Please do not post confidential or fact-specific information regarding your legal questions on this site.