Probate & Estate Administration

When To Contact a Trust and Estates Lawyer In Provo, UT

There are times in life when it is obvious that people in the Provo, UT area should start meeting with a trust and estates attorney. For example, it’s more obvious that seniors need to get their estates in order than younger people do. While some situations are more urgent than others, there are actually quite a few indicators that you’re ready to start estate planning with an attorney.

2013 Estate Tax Law Updates

The New Year has arrived with all of its attendant changes.  Although Congress couldn’t seem to get its act together until after the deadline passed, they have ultimately settled on a few things, which is very good news for those of us who are trying to understand what our options are.  Here is a quick summary of some of the highlights of the 2013 American Taxpayer Relief Act that are particularly relevant to our clients:

 

     The gift and estate tax exemption amounts will be at least $5.12 million per person.  This amount will likely go up this year to $5.25 million due to inflation adjustments.  Thus, an individual may still gift or devise as much as $5.25 million  without incurring any transfer tax liability.

     The estate tax rate changed from 35% in 2012 to 40% in 2013 for those who die having more than the $5.25 million in their estates.  This means that if your estate is larger than this, additional planning strategies will need to be implemented to avoid paying the IRS $0.40 on the dollar for every dollar over this amount when you die.

     “Portability” will remain between spouses on the use of their estate tax exemption.  This means that a surviving spouse can use the other spouse’s unused estate tax exemption if the $5.25 million is not sufficient at the second spouse’s death.  However, portability is not automatic as the surviving spouse must make this election on a Form 706 after the first spouse’s death.  Such a filing must be made shortly after the first death or this benefit may be lost.  Although this benefit is certainly a good thing, it can lull people into a false sense of security regarding their estate tax liability and prevent them from doing the kind of planning that is much more certain to ensure that estate taxes are not a problem.

     The GST Tax (Generation Skipping Transfer Tax) stays at the same rates as the estate and gift tax.  This tax is imposed upon transfers of wealth over $5.25 million to individuals 37.5 years younger than the individual making the transfers, either through testamentary transfers or lifetime transfers.

     The annual Gift Tax exemption amount increased from $13,000 per person to $14,000.

 

Most of these changes to the estate, gift, and GST tax laws have been passed as “permanent” changes rather than under the “sunset” provision conditions that we’ve been dealing with for the last 10 or so years.  Thus, there is some measure of certainty going forward that this is going to be the law for some time.  I hope that is the case.  Nevertheless, Congress can change any of the laws just as soon as they decide it is prudent to do so.  So, any real permanence in these laws may in fact be illusory.  For the moment, however, I will operate under the assumption that these laws will remain permanent.

Don't Like Paying Taxes? Geithner Says Too Bad.

It has been a busy year for us here at Platt Law, and we haven't been as regular with our e-newsletter as we have in the past. For that, I apologize.

There has been a great deal of uncertainty and debate in the wealth management and planning world regarding the future of the tax laws and how they will affect the average American as we try to build wealth for our families and provide for them in the future.

A question I get almost daily from my clients centers on the future of the wealth transfer taxes in this country. If you recall, the current tax laws will lower the estate and gift tax exemption to $1 million per person on January 1, 2013 (less than six months from today). What this means to you is that if your estate (which includes the death benefit value of any life insurance policies you own) is over $1 million, your family could pay up to 55% of each dollar over that amount to the IRS.

Amy Winehouse's House: Not So Orderly After All?

A few months back, I shared a report by Forbes magazine indicating that the late singer, Amy Winehouse, had done a good job of estate planning. It was reported that she had updated her estate planning documents shortly after her divorce to reflect her wishes that he not inherit her wealth were anything to happen to her.

However, Forbes is now reporting that an intestacy proceeding has been filed in court with a majority of her estate being listed as the assets that must pass through probate. What does this mean? It could mean a number of things:

A Mother’s Love

If a theme is to be found from my many interviews with clients over the years, it’s that parents love their children and will do anything for them.  Over and over, when I work through the estate planning process with my clients, I find that the guiding principle motivating parents in their planning is the happiness and well being of their children.  Parents will frequently state to me that they are willing to do anything for the success and happiness of their children. 

 

This sentiment was proven again in a dramatic fashion recently.  You’ve likely heard by now about the amazing story of the mother in Louisville, KY who protected her children from almost certain death when a tornado with 175 mph winds ripped their brand new brick home to shreds.  If you’ve not seen the inspiring newsreport yet, it’s well worth watching.

Guitar Shopping Anyone?

Merry Christmas! December and all of the holiday celebrations that this month brings has finally arrived. My kids are bouncing off the walls already. Last night, I took each of them to the store to help them pick out presents for their siblings and mother. After we got them all wrapped back at home, our little girl asked if she was going to get to open them tomorrow. I told her, “No. We still have about 20 days before you can open them.” I couldn’t help but feel her pain as a drawn-out whimper of despair escaped her lips while she tried to comprehend the eternity of the next 20 days. Ahhh, waiting for Christmas morning. What torture!

December is also a big birthday month in my family. Last Saturday I had the chance to go with my nephew Talmage to Guitar Center to help him look for a new electric guitar that his parents wanted to get him for his birthday. Of course, my doing so wasn’t entirely selfless as I will jump at any opportunity to go to Guitar Center and play with the big boy toys that fill my dreams on these long winter nights.

There Is No Good Reason to Make These Mistakes

Today I read an excellent article warning CPAs (Certified Public Accountants) of the risks that many of their clients face with regard to estate planning. Even when some form of estate planning has been done, the following mistakes show up repeatedly in clients' estate plans:

(1) "Outdated or Unsigned Estate Planning Documents" (i.e., if they have a plan at all, most clients' plans are either outdated or inadequate, and worse yet, unexecuted)

(2) "Lack of Coordination between the Estate Planning Documents, Titling of Assets and Apportionment of Estate Taxes" (i.e. the house is still in dad's name rather than in the name of the trust resulting in an unnecessary probate proceeding)

(3) "Lack of Understanding That a Transfer of $1 Is a Gift" (i.e., that transfers (typically of real property) for less than the fair market value of the property constitute a gift)

(4) "Life Is a Movie, Not a Snapshot" (i.e., that estate planning should be viewed as a process rather than a one-time transaction)

Sorry Folks, That Ship Has Sailed

It is not uncommon for my office to receive a call from a panicked family member of an elderly individual. The call may go something like this:

Caller: Hi, I'm calling to see how much it costs to get some estate planning done for my mom.

Paralegal: We'd be happy to help you if we can. Why don't you first tell me a little bit about your mom.

Caller: Okay. Well, mom's not doing too well these days. She's in an assisted living facility and mostly doesn't recognize us anymore. Although she sometimes has good days, most of the time she's confused and is asking for her husband who died three years ago.

Paralegal: Okay. What kind of property does your mom have?

Caller: Well, she has a home that's paid for. She has a brokerage account, a checking and savings account, some farm land in Tooele and I think she has some municipal bonds that she invested in once. But I'm not really sure.

Paralegal: Does your mom know what property she owns and does she understand its value?

Caller: Oh heavens no! She put me on her checking account years ago because she was so overwhelmed with trying to manage her finances. I don't think she has a clue how much she owns, nor could she keep it straight even if we told her.

Paralegal: I think we can help you, but you'll need to meet with an attorney to discuss some of the legal implications of your mother's situation.

Although this above excerpted conversation is a fictitious example, and a very abbreviated one at that, it illustrates a trap that many people fall into with regard to estate planning.

Winehouse Had Her Legal House In Order

I’ve briefly discussed the case of the late Amy Winehouse before. She was young, very talented, and had found financial success and notoriety as an R&B singer. Here’s a great video of one of her performances in case you’re not familiar with her.

In the past, I’ve pointed out times when celebrities have really dropped the ball when it came to estate planning. And more often than not, when an estate plan fails big, it’s not that an estate plan was never done, it’s that an estate plan WAS done, but it was out of date or did not reflect the current wishes of the deceased individual.

The Future of Medicaid and Medicare

In May, we reported about the federal government’s efforts to decrease spending in 2011 by making sweeping cuts to numerous federally funded programs to avoid a government shutdown. Four months later, the focus on cutting Medicaid and Medicare benefits has gained momentum, despite documented evidence of the many benefits of Medicaid, as well as the huge detrimental impact cutting either program can have on individual states.

Proposed Cuts

As has been widely reported, the Obama Administration is offering to cut tens of billions of dollars from Medicare and Medicaid as part of the negotiations to reduce the federal budget deficit. The depth of the cuts depends on whether Republicans will accept any increases in tax revenues.

It appears that hospitals and nursing homes will be the unwilling recipients of some of the cuts, as Administration officials and those involved in the negotiations say that the cuts can come from health care providers like hospitals and nursing homes without directly imposing new costs on needy beneficiaries or overhauling either program. Some of the proposals being considered are:

• Gradually eliminating Medicare payments to hospitals for uncollectible patient debt. Medicare currently reimburses hospitals for 70% of debt resulting in patients failing to pay deductibles and co-payments and the hospitals have made reasonable efforts to collect.

• Reducing Medicare payments to teaching hospitals for the cost of training doctors, caring for sicker patients and providing specialized services such as trauma care and organ transplants.

• Reducing the federal share of payments to health care providers treating low-income people under Medicaid and the Children's Health Insurance Program.

Lawmakers opposed to the cuts say it would impair access to care for the poor and shift costs to the states that are already facing a huge expansion in Medicaid eligibility and enrollment beginning in 2014 under the terms of the health care reform legislation passed last year. Hospital executives say that additional cuts (besides the reduction in Medicare payments already part of the health care reform legislation) will result in hospitals discontinuing services and increasing charges to patients with private insurance.

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