Latest News

Estate planning is challenging in many ways, but it is also a very nice feeling to be able to make a difference in the lives of your loved ones and perhaps even your favorite charities and/or non-profit organizations. You may be sitting in your favorite chair watching a Syracuse basketball game thinking back on all of the great times you had there as an undergraduate at the Carrier Dome and decide to include a nice behest to the athletic department in your estate plan. You may also think that you would love to give your vacation cabin to the Boy Scouts, and make sure that your cousin’s daughter can afford that beauty shop she talked about last time you saw her.

These may be great ideas, but how will your wife feel about them? Does she have a right to weigh in on decisions such as these? When you think about married couples who have never been divorced engaging in estate planning it’s easy to envision a single entity that agrees on everything, but most real living, breathing human beings don’t melt into one being. It may be relatively easy to agree on some things, like taking care of the children and grandchildren, but when it gets down to some of the optional discretionary decisions there can be profound divergences of perspective.

There is nothing at all wrong with this and it need not present a problem. In fact, being able to make your own personal decisions when you are married and planning your estate may be something that most people want but never get due to a reluctance to defy convention. If you simply execute a post-marital agreement that spells out the personal property of each person, that freedom to give what is yours in the manner of your choosing is there for you.

When you evaluate your estate and recognize the fact that you are in a position to provide inheritances for your loved ones that will have life changing impact, you invariably feel a sense of profound responsibility. It is not as easy as simply handing over a large sum of money and letting the rest take care of itself. Having no financial motivations in life can prevent people from reaching their true potential at best and pave the way toward a self destructive or purposeless existence at worst.

There are no easy answers and nobody can make all of their loved ones’ decisions for them, but there is an estate planning tool that can provide at least a partial solution. Incentive trusts have been used successfully for generations as a way to guide people toward fruitful actions and away from damaging behavior.

The way that they work is that you fund the trust, appoint a trustee, and name your beneficiary, but you also include stipulations that you build into the trust agreement. So for example, you can make distributions available to your heir after every college semester that has been successfully completed with a lump sum reward upon graduation. If you wanted to foster a work ethic after college, you could further stipulate that the trust will pay out a dollar to your heir for every dollar he or she earns on her own.

One can also use a trust to discourage self-destructive behavior. Let’s say you have an heir who has a history of substance abuse. You could stipulate that this person must complete a rehabilitation program and undergo ongoing testing as a condition for receiving distributions from the trust.

The benefits of incentive trusts are self evident, but there are pitfalls as well. This hypothetical family member who is required to go to treatment and submit to testing may resent this, rebel, and fall deeper into addiction. On the other hand, the incentive trust may save his or her life. There is a delicate balance there, and it is advisable to proceed with caution and with the knowledge that the incentive trust is indeed a tool that is available to you.

In 2011 the estate tax is back after a one year temporary repeal, and the thing about it that can take a lot of people by surprise is the new exclusion amount. In 2009 the exclusion was $3.5 million, so if the total overall value of your estate did not exceed this number it was not subject to the estate tax. However, in 2011 this figure has been shrunk down to just $1 million, and the maximum rate of taxation is 55%. So if your next door neighbor died in 2009 with an estate worth exactly $3.5 million her heirs paid no estate tax at all. But if the neighbor across the street dies in 2011 with an estate worth the exact same $3.5 million, his heirs will get a bill from the IRS for $1.375 million.

The logic behind this is anybody’s guess, but the way that it impacts you and me is this: if your estate is worth more than a million dollars you would be well advised to re-situate your assets to avoid the estate tax. One way to do this is through the creation of a qualified personal residence trust. With these instruments you place your house in the trust and name your heirs as the beneficiaries. You can live in the home for a period of time that you prescribe when you draw up the trust agreement free of rent, but of course you do have to take care of maintenance costs and property taxes.

The value of the home has now been removed from the estate, but as a gift to the trust it is subject to the gift tax. However, the taxable value is reduced by your retained interest in the house so the true market value is not used by the IRS. If this amount turns out to be less that the $1 million lifetime gift tax exemption, no gift tax will be due on the transaction, and if your remaining assets aside from the home are valued at less than the $1 million estate tax exclusion, your heirs will escape estate tax liability as well.

Most people are aware of the fact that those who serve in the armed forces for at least twenty years are eligible to receive a retirement pension. This reward has always been a good recruiting tool because an individual could choose to join the military right out of high school, gain an education and job experience while serving, and then retire before the age of forty earning a pension while pursuing a civilian career. However, this is not the only pension benefit that the military provides for qualified veterans.

There is an often overlooked benefit called the Veterans Aid and Attendance Pension, and it is available to qualified veterans who need the assistance of another individual to take care of their daily personal needs. One of the reasons why many veterans who are eligible to receive this pension wouldn’t think to check is because the length of service requirement is so minimal. To qualify one must have served at least one day in the military during a time of war, and the total length of time spent on active duty must be at least 90 days.

Aside from the length of service requirement you have to prove that you need the assistance via medical documentation, and there are also financial eligibility criteria to meet. To qualify for the Veterans Aid and Attendance Pension your total assets cannot exceed $80,000; however, the value of your home and your motor vehicles does not count toward this $80,000.

An eligible veteran who is single can receive up to $1,632 per month, and a couple who qualify can get a monthly check for as much as $1,949 . Even surviving spouses can take advantage of the Veterans A & A benefit and receive up to $1,055 each month. It should be noted that these figures are subject to revision by the Veterans Administration at any time.

There are those who are under the impression that the only thing that they need to plan when they are considering their estate is the eventual distribution of their assets after they pass away. This is really not the case, because it is also important to address matters that can crop up when you are still alive but unable to make decisions for yourself.

As we all know people who are reaching their twilight years sometimes encounter medical problems that lead to physical incapacity. There are others who reach the point where they are unable to make sound decisions due to a decline in their mental capacity. If any interested party feels as though an individual is no longer capable of handling his or her own affairs, they can petition the court to appoint a guardian to act on behalf of the incapacitated person. The guardian makes personal decisions, such as health care decisions as well as where the protected person will reside and how they will spend their time, as well as financial decisions in behalf of the estate of the protected party.

A lot of people don’t feel comfortable with the idea that someone may ask a court to decide who should make decisions in their behalf in the event of their incapacitation.

The way to avoid this is to make those decisions yourself in advance through the execution of legal documents known as health care proxy and durable financial power of attorney. With these two documents you name the person who you empower to make medical decisions on your behalf, and you also name a financial decision maker. In so doing you take personal control of the matter and keep it out of the hands of the court.

Incapacity planning is indeed an essential estate planning component that can save you and your family a great deal of stress should you be unable to make your own decisions at some point in the future.

When you are planning your estate during the earlier stages of adulthood you are going to have a very different focus that you will have later on. If you have dependent children still in the home, making sure that they are provided for come what may will be your primary concern.

Financially you can protect them by purchasing adequate life insurance coverage, and this is something that estate planners will always emphasize. In addition, you will also need to make sure that you name a guardian in your will so your wishes are known should you and your spouse pass away suddenly in an accident. And if you are a single parent, choosing a guardian is even more important.

When your children reach the age of adulthood your estate planning focus will shift, and you might think that the need to concern yourself with potential guardians no longer exists. This is true, unless…you have pets. If you do, one of the things that you will have to consider when you are planning your estate is how they will be cared for in the event of your death or incapacitation.

The way that many people address the matter is to select someone that they know and name this person in their will as the caregiver for the pet, bequeathing a sum of money as well to provide for the care of the animal. It is advisable to name an alternate caregiver as well to cover your bases should something happen to the primary choice.

Another way to go about it is to create a pet trust to provide for the pet in the event of your passing or incapacitation. You simply fund the trust and name the caregiver while also selecting a trustee to distribute funds from the trust for the animal’s ongoing care and provide oversight to make sure that the pet is being looked after properly.

In addition to the financial matters that you must attend to when planning your estate it is also important to address the realities of aging as they apply to health care. People in the United States are enjoying ever-increasing life spans and medical science can do amazing things, so Americans are routinely living into their late eighties and beyond.

When you reach such an advanced age it is not uncommon to go through a period of time when you are incapacitated and unable to make medical decisions for yourself. The way that this possibility can be planned for is through the execution of an advance health care directive known as a health care proxy. You simply appoint an agent to act for you in the event of your incapacitation and this person will be legally empowered to make health care decisions for you. Presumably you will have some discussions with your agent so that he or she understands your perspective as it applies to possible medical scenarios.

The wild card that exists when you are making these plans is presented by the Health Insurance Portability and Accountability Act of 1996. This law prevents medical insurance companies, pharmacies, and health care providers from divulging your person medical records to any individual or entity without your express written permission. Some hospitals and medical centers do not allow their health care providers to share information with the appointed agents of patients who have executed health care proxies for fear of violating provisions contained within the HIPAA.

The way that you can be sure that your designated proxy can interact with your doctors and make decisions in your behalf is by including a HIPAA release in or with your health care proxy. When this document has been signed the hospital’s HIPAA concerns are assuaged and your agent can then communicate freely with the health care providers and make decisions in your behalf.

Many people have a tendency toward procrastination, and when you do put things off they are usually going to be things that you would prefer not to do. There is no denying the fact that considering the end of your life and possible disability or incapacitation leading up to your death is not the most pleasant way to spend an afternoon. Some people don’t want to “go there” until they absolutely have to, and they may put off creating an estate plan for just that reason.

The financial ramifications of this procrastination/denial syndrome can be profound. For example, the estate tax exemption amount is going down to just $1 million in 2011 unless there is some last minute change to the law. You may have been told years ago that your total assets will fall within the exclusion amount when it stood at $2 million, but that may not be the case now. If you keep your head in the sand, you may never become aware of changes such as these, and it can cost your heirs hundreds of thousands of dollars.

Estate Planning Procrastination

The comprehensive modern estate plan also includes a health care component. It is important to let your wishes be known in terms of which medical procedures you would approve of and deny in the event of your incapacitation via the execution of a living will. It is also advisable to name someone who you would like to empower to make medical decisions for you if you were ever in a position where you were unable to make them for yourself via a health care proxy.

These are just a couple of things to consider, but the best way to meet the propensity toward procrastination head on is to think about your loved ones. After all, planning your estate has everything to do with your family, and if you don’t have a plan in place it will be up to them to sort things out, making a very difficult time in their lives that much harder to handle.