Category: Estate Planning/Wills and Trusts

2018 Tax Reform for Meals and Entertainment

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The 2018 Tax Reform made a lot of changes to the meals and entertainment deductions. Here’s a short list of what died on January 1, 2018, so you can get a good handle on what’s no longer deductible:

  • Entertainment and meals while entertaining included in the cost of the event are not deductible
  • Golf
  • Skiing
  • Tickets to football, baseball, basketball, soccer, etc. games
  • Disneyland

Meals during the course of entertainment will be deductible if purchased separately from the entertainment event.

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Estate Planning Lessons to Be Learned From the Passing of Aretha Franklin

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Aretha Franklin, a.k.a. the Queen of Soul, died August 16, 2018. She influenced millions through her music and civic actions. She was a longtime resident of Michigan, where she lived until her death. Aretha Franklin left behind four adult sons, and unfortunately for them, she did not have a will or trust. Her estate has been widely estimated to be worth currently about $80 million, and under Michigan law, her four sons will divide the estate equally among themselves.

One of the biggest reasons a person, especially someone in a financial position like
Aretha, should have a trust is for the added privacy it provides. If a person has only a will or nothing at all in place, the estate would go through probate. One of the worst things about the probate process is that it is all public record, and available to anyone’s eyes. A trust would have ensured that the nature of her assets be kept private because it avoids probate, and not put on public display.
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ABLE Accounts

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Last month we told you about Special Needs Trusts, which are an important tool in planning for the support and care of a disabled person. Today, we will continue that conversation and tell you a little about how you can use both a Special Needs Trust and an ABLE Account to plan for the support and care of a disabled person.

ABLE Accounts have been talked about on our blog in the past, but here is a little refresher. ABLE Accounts are available in both Kentucky and Ohio, through the National Achieving a Better Life Experience (“ABLE’) Act. ABLE Accounts allow for a disabled person to save and invest money without losing eligibility for certain public benefits programs, like Medicaid, SSI, or SSDI. Additionally, earnings in your ABLE Account are not subject to federal income tax, so long as you spend them on “Qualified Disability Expenses.” Some examples of “Qualified Expenses” include education, housing, transportation, employment support, health prevention and wellness, assistive technology and personal support. However, ABLE Accounts have limited deposits of $15,000 a year, lifetime funding limits, and a medicaid payback provision. Additionally, the onset of the disability must have occurred prior to age 26. These restrictions on ABLE Accounts make planning all the more important.

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Two Common Pitfalls for Traditional IRA Beneficiary Designations in Blended Familis

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Baby Boomers Beware!

I have found over the years that many of my baby boomer estate planning clients share the same common facts: (1) their IRAs, 401(k)s, or other qualified retirement accounts are typically their largest asset; and (2) they increasingly have blended families – meaning, they are in their second or third marriage and have children from prior relationships.  Since most baby boomers’ largest assets are their IRAs, they need to be careful when designating their beneficiaries for these accounts.  This becomes especially important when the account owner has a blended family.  Failing to properly plan their IRA beneficiary designations can result in the accidental disinheritance of a child, create unnecessary legal fees, and trigger significant income tax consequences for their family. Unfortunately, most IRA account owners are unaware of the complicated rules surrounding beneficiary designations and so the estate plan they thought was in place does not become a reality.  This article will address common pitfalls for IRA beneficiary designations for blended families.

Pitfall 1: The Account Owner Names His or Her Spouse as Beneficiary

Most commonly, an IRA account owner will designate his or her spouse as beneficiary.  In some situations, this designation works just fine, but other times, and especially for those in blended families, naming the spouse as beneficiary will make their estate plan inconsistent with their overall estate planning goals.

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Don’t Shoot Yourself in the Foot: Protect Your Firearms in Your Estate Plan

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Kentuckians love their guns. According to CBS News, Kentucky ranks number 16 in the number of registered firearms among all 50 states with almost 60,000 federally registered firearms. Ohio, although much more populated than Kentucky, ranks in at number 23. Much like items of personal property like jewelry and antiques, firearms aren’t cheap and can also hold sentimental value among family members and friends. As such, firearms need to be accounted for in an estate plan. Failure to properly account for firearms in an estate plan could result in excessive fines or even jail time for the recipient.

Laws Relating to Transfers of Firearms

Federal law addresses the issue relating to receipt of firearms, stating that “it shall be unlawful for any person to receive or possess a firearm which is not registered to him in the National Firearms Registration and Transfer Record; or to transport, deliver, or receive any firearm in interstate commerce which has not been registered as required by this chapter.” These laws are regulated strictly and are enforced with a zero tolerance policy. Violations can create potential criminal liability of up to ten years in prison and a $250,000 fine.

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Is Your Old A-B Trust a Tax Burden for your Family?

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Save Taxes by Updating your Estate Plan

If you have an old A-B Trust in place, you may be unaware that recent tax law changes have transformed your A-B Trust from an estate tax shelter into an income tax burden for your loved ones.  An A-B Trust, also known as a Credit Shelter Trust or Bypass Trust, typically provides that on the death of the first spouse, a particular share of the married couple’s assets are transferred into an irrevocable sub-trust (the “B” trust), rather than to the surviving spouse directly.  Traditionally, using an A-B Trust was an estate planning strategy to preserve the deceased spouse’s estate tax exemption to be used upon the death of the surviving spouse.  Without sheltering the first spouse’s unused exemption in the “B” trust, any assets in excess of the survivor’s exemption amount would be exposed to very high federal estate taxes.

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New POA Law Highlights the Need for Estate Planning Review

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Financial elder abuse, although often overlooked, is a serious problem in our world today.  As baby boomers age and the average life expectancy rises, the number of elder abuse cases will continue to increase.  More often than not, the abuser in these types of cases is someone in a trusted role – a caretaker, a child, or even an agent appointed in a financial Power of Attorney.  While most agents acting under a Power of Attorney are honest, some have abused their power.  To prevent and punish this kind of misconduct, the Ohio legislature passed the Uniform Power of Attorney Act (UPOAA) in 2012.

The UPOAA says that unless certain “hot powers” are specifically granted in a Power of Attorney document, an agent cannot do the following: (1) create a trust or make changes to an existing trust; (2) make gifts; (3) create or change rights of survivorship for certain assets; (4) change beneficiary designations; (5) allow others to serve as the agent; or (6) waive rights to be a beneficiary under certain annuities and retirement plans.

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Online Estate Planning Docs. Can Devastate-Money Can Be A Curse

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Reason 2: Ignorance Is Bliss! Don’t be a fool and do your own Generic Online Estate Planning Documents

The second reason in our series on how online estate planning documents can devastate your family and leave them in financial ruin is because online documents are generic and will oftentimes make your plan more complicated and confusing for your family.  If you have ever been in a position where a family member was sick or passed away, you know how much stress the situation can cause your family.  Unfortunately, some people have good intentions of making things easier for their family by using online estate planning documents, but oftentimes that decision just makes matters worse for everyone.  Online document users find it unnecessary to meet with a lawyer because they think that their situation isn’t complicated and that their online Will, Power of Attorney, and health care documents will suffice.  However, online documents are overly generic and usually do not serve the needs of even the most basic family situations.  In Reason 2 of this blog series, I will analyze how generic online documents can make matters worse for your family. More specifically, Part I of Reason 2 will address how customization issues can cause confusion and chaos for your loved ones.

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10 Reasons to Use a Trust in Your Estate Plan

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While trusts may seem necessary only for the wealthy, there are actually many benefits for creating them, even if you’re a member of the middle class.  Here are the top 10 reasons why you might consider using a trust in your estate plan:

  1. Wasteful spending. Some experts estimate that heirs spend 80% of their inherited money in the first 18 months of receiving their inheritance.  Without a trust in place, your heirs will receive their inheritance outright.  A trust can protect your heirs from quickly depleting their inheritance by spacing out distributions over a certain number of years or for their lifetimes.
  2. Wrong heirs. A trust can keep your estate assets in your blood line and not to your heir’s in-laws or your surviving spouse’s new partner. A trust can delay distributions so that your grandchildren inherit your estate after the death of your children instead of your children’s spouses.
  3. Worthless investments. A trust can protect your loved ones from investing their inheritance in worthless investments that will quickly deplete their inheritance or provide little to no return.
  4. A trust can ensure that assets and IRA/pension plans are used to provide for the surviving spouse for life, rather than being liquidated and spent on a new partner.
  5. A trust can control how assets are allocated among children and step-children upon the death of the surviving spouse. If you have a blended family and have children from a prior marriage, a trust can ensure that all of your children will be taken care of after your surviving spouse passes away.
  6. A trust can maximize federal estate tax savings, if necessary.
  7. A trust can control/hold assets in trust and limit distributions if heirs have alcohol/drug issues. Failure to leave your estate in trust to these individuals means they might stop working or going to school and use their inheritance to fund their lifestyle of drugs and alcohol.
  8. A trust can create asset protection for heirs from their creditors. Failure to leave your estate to your heirs in a trust means that family members own the assets outright and if they are subject to a lawsuit or the claims of their creditors, their inheritance may be lost to their creditors. Inherited IRAs also can get asset protection with a trust.
  9. A trust can avoid probate delays, costs, and burdens for your loved ones. Probate is costly, stressful, and time-consuming.  The only people who benefit from probate are the attorneys.
  10. Lastly, a trust can keep your estate private from the public. Simply implementing a Last Will and Testament will not keep your estate private.

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Top 3. Estate Planning Docs. Can Devastate-Pt. 4

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The Top 3 Reasons How Online Estate Planning Documents Can Devastate Your Family and Leave Them In Financial Ruin – Money Can Be A Curse!!

Reason 1: The Pitfalls of Not Getting Legal Advice from an Attorney Can Cause Your Estate Plan to be Defective Because of Wrong Heirs, Wasteful Spending, and Worthless Investments

Arguably one of the biggest reasons why online estate planning documents can devastate your family’s estate plan and leave them in financial ruin is because you don’t get legal advice with do-it-yourself documents.  What most people don’t realize is that the value of an estate plan isn’t just in the documents – it’s in the advice and counsel you get from your estate planning lawyer.  An estate planning lawyer can identify issues that are unique to your financial and personal life that will affect your estate plan.  Some of those issues might include: blended families, predeceased beneficiaries, family drug/alcohol problems, problems with the in-laws, careless spending, worthless investments, and Medicaid planning opportunities. Part I, Part II, and Part III of this series addressed the concerns you might have if the wrong heirs inherited your estate, concerns you might have with wasteful spending and worthless investments, and concerns with outliving your money.  This blog, which addresses the last part of Reason 1, will present an unfortunate, but all too common case study on how do-it-yourself documents can ruin your estate plan.

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