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Estate Planning Considerations for Mothers

How should a mother provide for her children in her will?  A recent article asks this question, pointing out that many women live alone and need to make decisions on their own, and not with a spouse or partner, regarding their estate planning, finances, and inheritance for their children.

“There are 26.7 million women who are aged 65 or older, according to the 2016 profile of older Americans by the U.S. Department of Health and Human Services. Nearly half (46%) of women who are aged 75 or older live alone. These women have homes, financial resources and children, requiring them to make these decisions on their own.”

The author points out that a mother’s desire to treat her children “equally” in her estate planning, may not match the realities faced by her children.  “For many, dividing the inheritance equally among their offspring is a deeply held value. But it isn’t always easy: What if one child is a successful professional with a good pension plan, and the other is a struggling artist who may never have adequate health coverage? Or perhaps one daughter has a special-needs child, and the other has chosen not to have children? What then is the process of balancing their value of equal distribution and the contradictory need to make financially realistically decisions?”

 

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Estate Planning Under New Tax Law

With the new tax law, and the Federal Estate Tax exemption at more than $11 Million per person, the question arises: Is Estate Planning Now Dead?

The answer is without question: No, estate planning is certainly not dead!  Planning is as important as ever.  The change in tax law merely provides an opportunity to focus on other priorities, including providing for care and protection of minor children, determining the right decision makers, and achieving charitable and family goals.  The list of planning considerations is as diverse and as unique as each individual, and the for those who no longer planning around the Federal Estate Tax, this is a great opportunity to make sure other planning objectives are achieved.

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Inheritance Tax in Indiana

Good news for Hoosiers doing their estate tax planning: Indiana does not have an inheritance tax.  Indiana previously had an inheritance tax, but it was repealed in 2013.  Thus, there is no Indiana Inheritance tax for those who die after December 31, 2012.

Indiana is in good company.  The majority of U.S. states do not have Inheritance Tax.  However, Federal Estate Tax and other taxes remain and are important considerations in planning your Indiana estate.

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Finally Writing a Will

Here’s a journalist’s take on getting (his long put off) estate planning documents in place:

What it was Like to Finally Write My Will, by John Schwartz.

And here’s Mr. Schwartz’s “To Do” list from this piece.  Of course, I recommend always having a lawyer prepare your documents!

“Get a will. Really. Dying without one — “intestate” — is a drag for everyone.

Get a lawyer. Unless your life is wonderfully uncomplicated, you’ll want the help of an adviser. Even if you do it yourself, have an attorney look over your work.

Decide on your beneficiaries, and make sure your insurance policies and other investments are in agreement with what your will says.

Name an executor. It’s a tough and thankless job, so get someone with good judgment; this person can be paid out of your estate.

Got young kids? Name a guardian. If not, the courts will appoint one; why not take care of this essential matter ahead of time?

Secure your paperwork. Once the documents are done, put them in a safe place and make sure your relatives know how to find it.

Revisit it every five years. The world changes; your will should, too.”

This is a great starting list, but I also add:

Get Advanced Directives.  Have decision makers in place in the event of incapacity.

Put a Trust in Place for Minors.  Make sure you protect your children’s inheritance until they are at mature ages.

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New Tax Law

Happy New Year!

We have some big tax changes. Highlights of the new tax law’s impact on your estate planning:

  • Federal Estate Tax:
    o The federal estate tax exemption amount has doubled. In 2018, each individual has a $11.2 Million exemption amount. This is double the 2017 exemption of $5.49 million per person.
    o As with recent years, the federal estate exemption amount will continue to be adjusted annually for inflation.
    o Portability remains. This means in 2018 a married couple can collectively pass $22.4 Million without Federal Estate Tax.
    o The stepped-up basis remains.
    o The top federal estate tax rate, on transfers more than the exemption amount, remains 40%.

 

  • Gift Tax:
    o The gift tax lifetime exemption amount has similarly doubled, now at $11.2 Million per person as well.
    o In 2018, the annual gift tax exclusion is $15,000 per person, an increase of $1,000 from 2017. The annual exclusion will continue to be annually adjusted for inflation.

 

  •  Generation Skipping Tax (“GST”)
    o The GST has also doubled in 2018, to $11.2 Million per person.

But note that under the new law, on January 1, 2026, these increases will all revert back to 2017 amounts.

With these significant changes in tax exemptions, it’s a good time to pull out your estate planning documents and review your plan. If your estate benefits from these exemption increases, you will want to evaluate whether to make gifts prior to the 2026 return to 2017 amounts.

It is also a good time to make sure your documents reflect your current intentions. In additional to reviewing who are the beneficiaries of your estate, review all of your decision makers. Include your incapacity documents in this review (Power of Attorney and Health Care Representative) and make sure you still have the correct persons named.

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Do You Have A Will?

If the answer is “no,” a recent survey shows that you are not alone.  Only 4 in 10 American adults have a will or trust in place.  While older Americans are more likely to have a plan in place (81 percent of those age 72 or older and 58 percent of boomers), younger Americans, including those at ages of having minor children, are much less likely to have a plan.  A “a whopping 78 percent of millennials (ages 18-36) and 64 percent of Generation Xers (ages 37-52) do not have a will.”  See this AARP article for more information about the survey results.

 

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Tax Updates for 2017

Happy New Year!  Tax updates for the new year:

  • The Federal Estate Tax exemption amount has increased to $5.49 million per person.  With portability, this means a married couple can collectively transfer just less than $11 Million ($10.98 Mill to be precise).
  • The annual gift tax exclusion amount remains at $14,000 per person.  For a married couple, they can each make a gift of $14,000 to the same individual, providing for a total gift of $28,000 to that person.
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Prince – Dying Without A Will?

The recent passing of music legend Prince serves as yet another reminder to get your estate plan in place.  As reported in the press, Prince’s sister has filed papers with the Court alleging that her brother died without a will.  Dying without a will in place is called “intestate.”  You can find my summary of Indiana’s intestate laws, here and here.  The intestate laws act as a default estate plan, and very likely may not include all of your intentions.

In Prince’s case, it has been widely reported about his great business abilities and his strong desire to be in control of his music and his public image.  It also appears Prince was generous and was a benefactor to many charitable organizations. If Prince truly did not have a Last Will & Testament (and this remains to be seen), then his great desire for control over his art and his charitable intent will not be realized now that he has passed.  A true loss of opportunity for his great legacy.

For the rest of us, this is a reminder that it is never too early to plan and make sure our intentions will be followed.

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Happy New Year!

With 2016 only a few hours away, here’s a look at changes to the Federal estate and gift tax exemptions for 2016.

  • The Federal Estate Tax Exemption amount will be $5.45 million per individual, an inflation-adjusted increase from $5.43 million in 2015.
  • The annual gift tax exclusion amount remains at $14,000, the same as in 2015.

The increase in the Federal Estate Tax Exemption means an individual can leave $5.45 million to her beneficiaries without Federal Estate Tax, or gift tax during her lifetime. In 2016, a married couple will be able to collectively transfer $10.9 million without Federal Estate Tax, or gift taxes during their lifetimes.

Happy New Year!

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Working with Fantastic People

I work with great people!  Harrison & Moberly is comprised of a team of talented, smart, and caring individuals.  Most of our staff have been with us for decades.  It’s an incredible place to work.

I was reminded of this fact this morning, when I found a pile of thick, extra-long scarfs knitted by our long-time legal assistant, Janice Collins.  Janice – a knock out litigation assistant — told me she just has to keep busy in the evenings, and so knits away.  She recruited H&M tax and estates lawyer, Fred Scott, to pass out these scarfs to homeless people on his daily walks to Court.

They did not want me to write about this.  Their motivation to help others, in some small way, stay warmer in the cold weather months, was certainly not motivated by a desire for attention or recognition.  But I couldn’t help but share this story.  It’s another reminder that people are what make a work place and a law firm great.  I am thankful to call Harrison & Moberly and its people my law firm family.