Closeup of man hand holding cardboard at new home. Young man unpacking boxes in new apartment. Man hand carrying carton box while relocating with his girlfriend.

Moving Out of State? You May Need to Revise Your Estate Plan.

Closeup of man hand holding cardboard at new home. Young man unpacking boxes in new apartment. Man hand carrying carton box while relocating with his girlfriend.Approximately 3 million Americans move to another state each year, while last year alone the number was 4.7 million. Given the stress and myriad changes that come with such a move, it’s not surprising that many people forget to review their estate plans. However, differences between states regarding taxes, ownership of property, inheritance, and more make it extremely important to review, and if necessary, update your planning documents with an attorney who focuses on estate planning.

Let’s look at some of the legal issues involved when moving to a new state and the changes that may have to made to your plan.

Estate Taxes

With the current exemption on federal estate taxes set at $11.7 million for individual filers and $23.4 million for married couples filing jointly, most of us don’t have to worry about federal estate taxes (at least this year). Unfortunately, as of 2021, 11 states levy their own estate taxes, and exemption amounts are considerably less than the federal level. In addition, six states levy an inheritance tax and Maryland imposes both. The good news is that with proper planning, you may be able to minimize or even eliminate your estate’s vulnerability to state “death” taxes. You can find a complete list of states with estate and/or inheritance taxes here: https://www.aarp.org/money/taxes/info-2020/states-with-estate-inheritance-taxes.html.

Key Planning Documents

Contrary to what many people believe, a will that is valid in one state may not be valid in another state. The same is true of other important legal documents, including living wills or advance directives, health care proxies, powers of attorney, and more. (It is worth noting that the Uniform Power of Attorney Act, which was designed to help eliminate conflicting laws between states regarding powers of attorney, has not been enacted in all 50 states.)

Consider, for example, what might happen if health care providers in your new state won’t recognize and accept the medical power of attorney or health care proxy you made in another state? Your agent or attorney-in-fact might not be able to make the decisions you empowered him or her to make on your behalf in a medical emergency. Your loved ones might even need to take the matter to court to enforce a document’s validity so that your wishes will be carried out. A medical emergency is not the time to be worried about, or trying to enforce, the validity of key legal documents.

Your “Helpers”

When moving to a new state, it is not realistic to expect your helpers, such as your agent, attorney-in fact, or executor, to continue to serve in this capacity. We’ve mentioned the issues surrounding powers of attorney. In addition, the vast majority of states do not allow a non-resident to serve as an executor, and of those that do, the executor must be related to you directly. Other states have additional restrictions as well.

Finally, states differ with regard to the laws governing community property, titling (which could impact your trusts), tenants by the entirety, and joint tenancy with or without right of survivorship.

Contact an Experienced New York Estate Planning Attorney

The bottom line is this: If you are planning to move to another state, or you’ve already done so, be sure to speak with a qualified estate planning attorney to review and update your plan.

Mature Couple Reviewing And Signing Domestic Finances And Investment downsizing home In Kitchen At Home

If You’re Thinking About Downsizing Your Home in Retirement, Avoid These Common Mistakes

Mature Couple Reviewing And Signing Domestic Finances And Investment downsizing home In Kitchen At HomePerhaps you have considered selling your current home, buying a smaller one, and using the difference to help fund your retirement. A recent article on Investopedia.com explores this approach and details the mistakes you must avoid when downsizing home. Here are some of the highlights.

Overestimating Your Current Home’s Value

Many people overestimate how much their current home is actually worth because of what friends and neighbors say they received for the sale their homes. To get a realistic sense of your home’s value, visit websites liken Zillow.com and Realtor.com to learn the prices of recently sold properties in your area. Online “estimators” from banks like JP Morgan Chase and Bank of America will also provide useful information. Bear in mind that prices and estimates shown on these and other sites may not take into account the specific features sought by prospective buyers. Consulting local real estate agents or independent appraisers can address this problem. You should also ask these real estate professionals about inexpensive spruce-ups that will increase your home’s curb appeal and value. Most experts agree that the cost of major renovations will not be recouped unless your home is in extremely poor condition.

Underestimating the Cost of Your New Home

You can use the online tools and real estate professionals mentioned above to get a sense of what you’ll have to pay for the type of home you want to buy. If you plan to move to a new area, such as a place you’ve always enjoyed visiting, it’s important to spend a significant amount of time there. This will give you a feel for what it’s like to actually live in the area. Renting a property for a year or so before buying may be the wisest approach.

Ignoring the Tax Implications of Downsizing Home

Most couples are currently able to exclude up to $500,000 in gains from the sale of their home, while singles can typically exclude up to $250,000. Your tax bracket and the length of time you’ve lived in your current home could impact whether taxes will be due upon its sale. You can find detailed information about this issue in IRS Publication 523.

You should also consider factors beyond income taxes on your home’s sale, particularly if you are moving to a different state. Lower property taxes in your desired destination could be offset by higher sales and income taxes. Similarly, pensions and withdrawals from retirement accounts could be taxed at a higher rate than where you live now. A particular state’s revenue or tax department website is a good source for this important information.

Ignoring Closing Costs

If you haven’t bought or sold a home in quite a while, you may have forgotten about all of the closing costs involved. Title insurance, recording fees, legal fees… the list of miscellaneous charges can seem endless. In addition, if you use a real estate agent, commissions can be as high as 6% according to Realtor.com. In addition, don’t forget about the cost of moving your belongings to your new home.

The bottom line is this: Do your research and run the numbers carefully before downsizing. You may find ways to save a significant amount of money on your move, or perhaps you’ll realize that you should stay where you are for now.

To learn more about downsizing your home in retirement, contact us for a personal meeting to discuss your particular needs and goals.

Middle-aged man working on his digital estate while sitting at table

What Will Happen to Your Digital Estate When You Pass Away?

Middle-aged man working on his digital estate while sitting at tableEven if you are not tech savvy, you likely have a digital estate comprised of assets with financial and sentimental value. You probably also have plenty of personal information floating around out there in the digital universe. To protect these assets, and to ensure you don’t leave behind a massive digital mess for your loved ones to clean up, you should organize your online accounts and make sure they can be accessed by your loved ones if you become incapacitated and after you pass away.

Most states now have laws granting a decedent’s executor or family members the right to access and manage some of his or her digital assets. However, certain digital platforms do not allow such access, and others have extremely tight security, with two-factor password authentication, confirmation codes, and more. This makes organizing your digital accounts and keeping a record of how they can be accessed extremely important.

Here are some examples of the assets you might have in your digital estate:

  • Email accounts, which may contain “conversation threads” revealing other digital accounts and assets
  • E-Commerce accounts and Apps like Amazon, PayPal, Etsy, and Venmo
  • Financial accounts and Apps like Scottrade, E*Trade, and Banks
  • Retail accounts with usernames and passwords
  • Social media accounts and Apps like Facebook, Pinterest, Twitter, YouTube, and TikTok
  • Photo sharing accounts such as Instagram, Flickr, Shutterfly, and Snapfish

While some of your digital accounts might have been inactive for years, others probably play an important role in your current personal and financial affairs. To begin the organization process, ask yourself this: what would happen if you deleted each of your accounts right now? If the answer is “nothing much,” you probably don’t have to make that particular account part of your digital estate plan. For the others, you’ll want to make sure your executor or loved ones can access and manage the accounts if you become incapacitated and after you pass away. To accomplish that, you need to compile a list of the passwords, authentication codes, and other information necessary to access important accounts… and make sure your executor and family know where to find them. The one place you don’t want to provide this information is your last will and testament. Remember, a will is a public document, and anyone can see it if your estate is probated.

To learn more about protecting your digital estate, contact us for a personal meeting to discuss your particular needs and goals. 

Happy mother and son outdoors. Nature background.

If Your Children Have Turned 18, They Need Their Own Legal Documents

Happy mother and son outdoors. Nature background.When your children turn 18 they are legal adults. They might not act like adults all of the time, and you may still be supporting them financially, but in the eyes of the law they are indeed adults. This means that you can no longer make certain decisions for them, including health care decisions. Furthermore, you can no longer obtain medical information about your adult children without their authorization—even in an emergency.

Consider the following scenario. Your son is away at college and gets severely injured in a car accident. When you become aware of what has happened you immediately call the hospital for information about his condition, but nobody will tell you anything. This is because the law—specifically, a statute enacted in 1996 called the Health Insurance Portability and Accountability Act (HIPAA)—prevents the disclosure of a patient’s health information without the patient’s consent. The hospital in question could be prosecuted for violating HIPAA guidelines.

This is why your adult children need a legal document called a HIPAA Release. It allows your adult children to list the people who are permitted to receive medical information about them.

Another crucial legal document your adult children need is a Power of Attorney for Health Care, which is also called a Health Care Proxy. It allows them to name a person they trust to make health care decisions on their behalf if they cannot do so themselves. Medical decisions covered by a Power of Attorney for Health Care can include the types of treatments allowed in an end-of-life situation, such as the use of a feeding tube, as well as do not resuscitate orders.

Similarly, a Power of Attorney for Finances allows your adult children to designate a trusted individual to make financial decisions if they cannot make them on their own.

If your adult children have their own Powers of Attorney for Health Care and Finances, and they name you as their agent in the documents, you will be able to make medical and financial decisions on their behalf if they become incapacitated. If you are named in your adult children’s HIPAA release, you can get medical information about their condition in an emergency.

To learn more about obtaining legal documents for your adult children, contact us for a personal meeting to discuss your particular needs and goals. 

three generation asian family taking selfie outdoors

What’s Not to Like About an I Love You Will? Plenty.

three generation asian family taking selfie outdoorsAn “I Love You Will” is a last will and testament in which the testator—the person who makes the will—leaves everything to his or her spouse. If you have thought about making a will in the past, you likely considered this approach. Perhaps you have already created such a will.

While an I Love You Will may be appropriate for certain situations, there are several potential problems you should take into account. First, it could unintentionally disinherit your children. How? Think about what would happen if you passed away and your spouse, who has inherited your assets through the I Love You Will, remarries and creates the same type of will. If your spouse passes away before his or her new spouse, the new spouse would inherit these assets. That is, your children might receive nothing.

Of course, an I Love You Will shares the limitations of basic wills in general. For example, if the surviving spouse develops Alzheimer’s disease or another form of dementia, and no advance directives were created, estate assets may fall under the jurisdiction of a guardianship or conservatorship court. In that case, your wishes and those of your surviving spouse may be thwarted.

An I Love You Will also ensures your estate will have to go through probate. The probate process can take several months (or considerably longer) to complete. During the probate process, your spouse may be unable to access estate assets, which could make it difficult to pay expenses such as a mortgage, homeowner’s insurance, property taxes, automobile loans, credit card bills, and more. In addition, probate is a public process, meaning anyone can discover information about your assets and debts that you would have wanted to remain private. Finally, the costs associated with probating an estate can be significant.

An I Love You Will may sound like a good idea, but to ensure your wishes are carried out and your assets are distributed efficiently to your loved ones, you may want to consider a trust-based estate plan. We invite you to contact us at your earliest convenience to discuss your options.

Family portrait of small business owners

Tips for a Successful Family Business Succession

Family portrait of small business ownersFewer than one-third of family businesses survive into the second generation, while only 13 percent make it to the third generation. Here are some tips to beat the odds and help your business live on for generations to come.

The sooner you start the planning process the better

The sooner you start planning for succession, the smoother the transition is likely to be. Beginning the process five years in advance is good and 10 years is even better. In fact, many experts recommend having a succession plan built into the original business plan.

Try to include family members in all discussions about succession

Creating your succession plan on your own and then simply announcing it to the rest of the family is a recipe for disaster. By discussing your thoughts with other members of the family, you’ll get an idea of who wants to be part of future operations and who might be interested in pursuing other options.

Don’t let your feelings or preconceived expectations cloud your judgement

Many business owners consider their first-born child to be the natural choice for successor. However, you have to ask yourself if this is honestly the wisest option. Maybe your oldest son or daughter isn’t committed to the business. Maybe one of your other children is not only extremely interested in running the business but also has the right skill set. Or maybe none of your children possess the drive or the necessary skills, in which case it may be best to sell the business to existing employees or an outside party.

Similarly, you can’t lose sight of what is best for the business itself. While giving everyone in the family an equal share of the business might seem like the simplest and fairest approach, it could lead to a host of problems down the road. It may actually be fairer, and smarter, to give the largest share of the business to your successor and find other ways to compensate family members who are not involved in running the business.

Train your successor well

No matter how extensively you plan, you can’t expect your successor—or your business—to flourish without adequate training. You should involve your successor in decision-making and share your knowledge of what it takes to run the business effectively at least two years before stepping aside.

To learn more about family business succession, contact us for a personal meeting to discuss your particular needs and goals. 

Portrait Of Loving Senior Couple Relaxing On Sofa At Home

Estate Planning for Second Marriages

Portrait Of Loving Senior Couple Relaxing On Sofa At HomeSecond marriages can present unique challenges when it comes to estate planning, particularly if you or your new spouse have children from previous marriages. Let’s take a look at some of the factors, tools, and strategies to consider when planning for a second marriage.

Prenuptial Agreements

You’ve been married before, so you’re a little bit older and a whole lot wiser the second (or third) time around. However, this doesn’t mean you should throw caution to the wind. While it is hardly the most romantic aspect of planning a life together, many couples should at least discuss a prenuptial agreement. This is especially true if any of the following scenarios apply:

  • One of you is giving up a lucrative career to get married
  • You or your future spouse owns a business
  • Either of you has significant assets and wants to keep them separate from marital assets
  • One of you carries significant debt
  • There are children from a previous marriage

If you think a prenuptial agreement makes sense in your situation, the next question is when the documents should be prepared. The sooner the better is a good rule of thumb. This will avoid the appearance of coercion, which can render some prenuptial agreements null and void. Your documents should be signed at least one month before the wedding, preferably before the invitations are sent out. In addition, you and your future spouse should each have an attorney involved in the design and review of the prenuptial agreement.

Review and Update Beneficiary Designations

Did you know that the people you have named as beneficiaries in various retirement and other accounts will generally inherit account assets even if other beneficiaries were named in your will? Consider the following situation. You got divorced, remarried, and changed your will to make your new wife your primary beneficiary.

However, if your ex-wife is still named as beneficiary in your retirement and investment accounts, she will inherit the funds, not your new wife. Beneficiary designations typically trump wills.

Fortunately, it is relatively easy to make and update beneficiary designations. When you open a retirement account, such as an IRA, the provider generally offers a beneficiary designation form within the account itself. You can name your beneficiaries when you create the account and change your beneficiaries whenever you wish (with one possible exception). As for investment and bank accounts, making beneficiary designations will likely require you to request a transfer on death form. This, too, is easily accomplished.

The exception noted above refers to certain laws governing the passing of retirement accounts to spouses. Your spouse will typically inherit your 401(k), for example, unless he or she signs a consent form waiving his or her right to it. If your ultimate goal is to leave your 401(k) to your children, your spouse will have to agree to this in writing. Designating your children as beneficiaries of your 401(k) will generally not be enough.

Protecting Children from a Previous Marriage

If all of your estate’s assets are left to your new spouse, your children from a previous marriage may not be provided for in the manner you would have wanted after you pass away. Your new spouse could, upon his or her death, leave all of the assets to his or her children from a previous marriage, thereby excluding your children. Conversely, if the majority of your estate is left to your children from an earlier marriage, there may not be enough assets remaining to provide for your new spouse or any children you have together. It can be a balancing act, one that requires proper planning to ensure your wishes, and those of your new spouse, are carried out. At the very least, each spouse should have a will. Without one, intestacy laws will likely result in assets being distributed in a manner neither of you would have wanted.

A trust, or combination of trusts, is generally a better approach than a will for second marriages and blended families. One such trust, which provides an excellent form of asset protection, is called a Qualified Terminable Interest Property Trust (QTIP). A QTIP Trust can generate income for the benefit of the surviving spouse during his or her lifetime. When the surviving spouse passes away, the QTIP’s assets can be distributed between mutual and prior children according to the wishes of the previously deceased spouse. In addition, if the children are young, assets from the QTIP Trust can be held in another trust, under the control of an independent trustee. This approach can prevent estate assets from falling under an ex-spouse’s control. It can also protect your children’s inheritances from threats like creditors, lawsuits, and even your heirs’ poor decisions if they are not yet ready to manage an inheritance on their own.

To learn more about planning for second marriages and blended families, contact us for a personal meeting to discuss your particular needs and goals. 

Office accessories in a cardboard box at office.

If You’re Thinking About Downsizing Your Home in Retirement, Avoid These Common Mistakes

Office accessories in a cardboard box at office.Perhaps you have considered selling your current home, buying a smaller one, and using the difference to help fund your retirement. A recent article on Investopedia.com explores this approach and details the mistakes you must avoid. Here are some of the highlights.

Overestimating Your Current Home’s Value

Many people overestimate how much their current home is actually worth because of what friends and neighbors say they received for the sale their homes. To get a realistic sense of your home’s value, visit websites like Zillow.com and Realtor.com to learn the prices of recently sold properties in your area. Online “estimators” from banks like JP Morgan Chase and Bank of America will also provide useful information. Bear in mind that prices and estimates shown on these and other sites may not take into account the specific features sought by prospective buyers. Consulting local real estate agents or independent appraisers can address this problem. You should also ask these real estate professionals about inexpensive spruce-ups that will increase your home’s curb appeal and value. Most experts agree that the cost of major renovations will not be recouped unless your home is in extremely poor condition.

Underestimating the Cost of Your New Home

You can use the online tools and real estate professionals mentioned above to get a sense of what you’ll have to pay for the type of home you want to buy. If you plan to move to a new area, such as a place you’ve always enjoyed visiting, it’s important to spend a significant amount of time there. This will give you a feel for what it’s like to actually live in the area. Renting a property for a year or so before buying may be the wisest approach.

Ignoring the Tax Implications of Your Move

Most couples are currently able to exclude up to $500,000 in gains from the sale of their home, while singles can typically exclude up to $250,000. Your tax bracket and the length of time you’ve lived in your current home could impact whether taxes will be due upon its sale. You can find detailed information about this issue in IRS Publication 523.

You should also consider factors beyond income taxes on your home’s sale, particularly if you are moving to a different state. Lower property taxes in your desired destination could be offset by higher sales and income taxes. Similarly, pensions and withdrawals from retirement accounts could be taxed at a higher rate than where you live now. A particular state’s revenue or tax department website is a good source for this important information.

Ignoring Closing Costs

If you haven’t bought or sold a home in quite a while, you may have forgotten about all of the closing costs involved. Title insurance, recording fees, legal fees… the list of miscellaneous charges can seem endless. In addition, if you use a real estate agent, commissions can be as high as 6% according to Realtor.com. In addition, don’t forget about the cost of moving your belongings to your new home.

The bottom line is this: Do your research and run the numbers carefully before downsizing. You may find ways to save a significant amount of money on your move, or perhaps you’ll realize that you should stay where you are for now.

To learn more, contact us for a personal meeting to discuss your particular needs and goals.

Three generation Hispanic family standing in the park, smiling to camera

Do You Need a Trust?

Three generation Hispanic family standing in the park, smiling to cameraOne of the first questions many clients ask is whether they need a trust. It’s a great question, but it leads to another: What do you want your plan to accomplish? Let’s begin with a brief discussion of what trusts are and how they work. Then we’ll explore their benefits, which should give you a better idea of whether a trust is right for you and your family.

What is a Revocable Living Trust?

There are many different types of trusts and they can accomplish a wide range of goals. However, when most people think about trusts, the one they have in mind is a Revocable Living Trust.

A Revocable Living Trust is a legal document that allows the grantor (the person who creates the trust) to take personal assets and transfer them to the ownership of the trust. While the trust technically owns the assets, the grantor can continue to use them as he or she normally would.

When a Revocable Living Trust is established, the grantor names a trustee to manage the assets in the trust during the grantor’s lifetime. Most grantors name themselves as trustee, giving them complete control over the trust’s assets. Typically, a successor trustee is also named to take over management of the trust and distribute trust assets after the grantor passes away.

What Are the Benefits of a Revocable Living Trust?

One of the primary benefits of a Revocable Living Trust is that it enables assets held in the trust to avoid probate after the grantor’s death. This allows trust assets to be distributed to heirs quickly. The costs associated with probating the estate are also avoided. In addition, a Revocable Living Trust protects the privacy of the grantor (and beneficiaries) because the trust’s provisions are confidential. A Last Will and Testament, on the other hand, is a matter of public record. Anyone can access information about the decedent’s assets, creditors, debts, and more.

Another benefit of Revocable Living Trusts is they not only allow the grantor to control trust assets during life but also after he or she passes away. The grantor can stipulate when, how, and under what circumstances the successor trustee is authorized to distribute trust assets to beneficiaries. This is particularly important if the beneficiaries are not yet mature enough to manage an inheritance on their own, or in situations involving blended families. For example, the grantor could stipulate that children from a first marriage receive assets from the trust, not just the children from a more recent marriage.

Revocable Living Trusts can also be used to protect the grantor and the grantor’s family from a stressful and expensive guardianship proceeding if the grantor becomes incapacitated.

As we mentioned earlier, there are many different types of trusts. If one of your primary goals is to protect assets from long-term care costs, creditors, lawsuits, and other threats, an Irrevocable Trust or an Asset Protection Trust may be a much better option then a Revocable Living Trust. If you have a loved one with special needs, a Special Needs Trust can allow you to create a fund for goods and services not provided by Medicaid or Supplemental Security Income while protecting eligibility for these vital programs. A Charitable Trust allows the grantor to set aside money for both a charity and beneficiaries, realize certain tax advantages, and generate an income stream.

These are but a few examples of various trusts and what they can accomplish. If you’re still not sure whether you need a trust, we welcome the opportunity to explain your options in detail and, if appropriate in your particular circumstances, design and implement the trust that’s right for you and your family.

To learn more about whether a trust is right for you and your family, contact us for a personal meeting to discuss your particular needs and goals.