Attorney & Mediator
Attorney & Mediator

Linda Wasielewski

The kids are home for the holidays!

 

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I know that we all want to keep the holidays fun filled and upbeat.  If your adult children are coming home for the holidays, this might be a good chance to take some time to talk about estate planning issues.

It doesn’t have to be a morbid conversation – it can be upbeat and done over a holiday beverage.  It is important that your children know your wishes.  It is also important that your children attend to this business as well.

If your adult children have kids – do they have Wills?  Have they named a Guardian and Conservator for your beloved grandchildren?  This is the most important decision that they will have to make.

Do your children have Patient Directives?  If they are married, they can speak for one another; however, if they are single, there is no one who can legally step in to assist them if they are ill or injured.  They may think that you can, but you can’t.

These all are “family business” issues and a family gathering is the time to discuss these matters – maybe not on Christmas Eve – but while the troops are assembled.

Snowbirds, are you getting ready to leave for the South?

 

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The holidays are upon us.  Most people are planning for the Christmas holidays and nothing could be further from their mind than estate planning and legal affairs.

Many of our snowbirds have already flown south for the winter; however, there are a number that stay here until the holidays are over.   If so, don’t wait until the Monday before you are ready to leave to address those estate planning issues that were on your mind last month.

If you are taking copies of your documents with you, do you know where they are?  Now is the time to look.

When you find them, take a quick look at them to see if they are accurate.  If changes need to be made, now is the time to call your attorney for an appointment.  There is still plenty of time to make amendments to your documents.

Scrambling at the last minute is not pleasant for anyone.   A little planning now will assure that you are all ready to fly south after the holidays.

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Taxes

I am often asked by clients about taxes when it comes to inheritances and gifts.  There seems to be confusion about what gets taxed, when and why.

Income taxes are imposed on the money that you earn, either through wages, or through income from your investments

Inheritance taxes or estate taxes are upon what you own and give away during your lifetime or at your death.

First, there is no income tax to the recipient of gifts or inheritances.  Just as with life insurance, the money passes to the recipient or beneficiary income tax free.

There is one exception to this rule.  When a beneficiary receives all or part of an IRA or 401K, there is income tax as the money is withdrawn.  This is not because it is an inheritance but rather because the money was never taxed in the first place.  For IRAs and 401K’s, whoever withdraws the money pays the tax.

Inheritance and gift tax is levied against the estate or the individual who makes the gift.  We are each allowed an exclusion amount of $5 Million.  Therefore, no tax will be paid on the first $5 Million that each of us gives away during lifetime or at death.

So why do we worry about the $14,000 per year limit of gifts?  In order to keep track of what we give away during our lifetimes, we must file a Gift Tax Return with the IRS.  Therefore, if you gave away $100,000 per year for 20 years, you would have gifted away $2 Million.  Thus at death, you could only give away an additional $3 Million before taxes would be imposed.

The exception to this rule is that we can gift $14,000 to each person that we chose to in any given year without filing a gift tax return.  If you made 10 gifts of $14,000 each, you would gift away $140,000 without filing a gift tax return.  If you need to give more money to an individual in a calendar year, you won’t have to pay tax on the money; however, you will have to file a Gift Tax Return.

For most of us, we don’t have to worry about exceeding the limit of taxable gifts.  It is just a matter of knowing the rules and keeping track.

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Charitable Gifts

The primary focus of estate planning is to direct where our wealth goes when we are no longer here.  Whether we use Wills, Trusts or Beneficiary Designations – the goal is to assure that the assets go to the correct individuals or entities in the proper amounts.

As we approach the holidays, we will all be contacted by many charitable organizations requesting a gift for this year.  Without those gifts, charities would be unable to operate and achieve their goals.   Many of us regularly give to the same charities annually – some small gifts, some large gifts. It is estimated that 85% – 95% of adults make at least one charitable gift each year.

How does that fit in with our estate planning goals?  Apparently, not as well as you would expect.  Only 5% of estate plans make provisions for charitable gifts.  Why the disparity?

While some may be accounted for by tax benefits – end of year contributions to charities are tax wise for many individuals – or at least they see it as the government assisting in their gift.  Yet, many would give even if the tax benefits were not available.

Most individuals who engage in estate planning are older – their children are often grown and out of the home.  There is no need to worry about giving money to the children so older adults feel comfortable in giving extra funds to charitable causes that they believe in.  Somehow, when they get ready to do estate planning, there is a disconnect.  They once again return to the idea that all of their wealth should be passed on to their children.

This is an area where family discussion could lead to a different outcome.  Family discussions of charitable ideas – the family vision and values – would promote a greater understanding by the next generation.  They would understand that they would not be the recipients of all of their parents’ wealth  The children would recognize their parents’ passions and values; they would appreciate those institutions that were important to their family and honor the gift.

For parents who are interested in instilling charitable values in their children, it could become a family tradition to discuss giving and jointly select those institutions and causes that would receive an annual contribution.  When charitable giving becomes a part of a family tradition, it gets passed down with the other family values.  It would also promote an understanding by the children and an admiration by them when a portion of their parents’ estate is gifted to causes important to the family.

A discussion of charitable giving should be a part of all estate planning discussions. It should also be a part of family discussions as well.  Impart your values to your family by demonstrating how much you care for the charities that are close to your heart.

Her Majesty, Queen Elizabeth II

Queen at Buckingham Palace

Yesterday, Her Majesty, Queen Elizabeth II, became the longest reigning sovereign in England’s history.  She is 89 years old and she still works – she reviews correspondence daily, she meets with the Prime Minister weekly, she makes public appearances, she continues to carry out her duties (“Duty first, self second”).  She may not be close to being done – her mother, the Queen Mother, lived to be 101.

While the Queen has less concern with estate planning – it all gets handed down the line – I doubt that she ever contemplated being on the throne this long.   This is an excellent example of how life may not play out as we imagine or contemplate.

When an individual with children makes an estate plan at the age of 40 or 45, she is contemplating the next twenty years – planning for a spouse and young adult children.  As grandchildren come along, they may be added to the estate plan – their education being a high priority.

This same plan is no longer relevant when she is 85 or 90.  By now, her children are senior citizens and her grandchildren are grown.  There are great-grandchildren, perhaps great, great-grandchildren.  The planning focus must change – the children are retirees – they have already provided for their own retirement income.  The grandchildren have completed their educations and have married.

Estate planning must be seen as an ongoing process over our lifetime.  Unless we meet an unfortunately premature demise, the documents that we first draft cannot be locked up in a safety deposit box and never revisited.  Life changes. We change.  Things do not go as planned or anticipated.  It is vitally important to revisit our plans over our lifetimes, changing and tweaking as we go.

Americans admire the Queen – her grace and dignity, her work ethic.  She is an example of life today and in the future – living and working longer, confronting futures different than anticipated, having horrible years and great years.  When we reach the age of 89, we may find ourselves not at the end, but looking forward to more, healthy, productive years.  We will be obliged to plan for the future – even then.

 

 

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Back to School – for Adults Too

School Bell

The end of summer is capped by the beginning of

school house

the school year.  If you have ever had kids, you know that this is really the beginning of the “new” year.

Summer fun is over for the most part, we are getting ready for autumn – closing up the garden, putting things away.  The holiday season is still a distance off.

This is the time to pull out the “to do” list.  What did you mean to get done during summer – but the summer fun got in the way?  What is still sitting there – nagging at you.  Things that you know you should get to – but they never seem like front burner issues.  It is time to get down to business before you are once again too busy and too full of excuses to tackle these nagging, yet important issues.

One of these is estate planning and financial planning.  It is time to make an appointment with your financial planner if you have one – and if you don’t you need to find one.  It is also time to make an appointment with an estate planning attorney.

If you don’t have an estate plan – it’s time to get one done – young or old, rich or poor, healthy or sick.  You need a plan!  It might be a very simple plan – or it may be quite complex involving trusts.  In either case, this is the time to get down to business and get started.  In this way, you will have it completed in plenty of time to get ready for the holidays.  If you don’t, it will continue to nag at you as an undone to do.

What do you need to know to get started?  The hardest part is deciding who.  Who will be your Personal Representative or Trustee?  Who will be your Agent under your Durable Power of Attorney?  Who will be your Patient Advocate under your Durable Power for Health Care?

Once that is decided, the rest will fall into place.  Your estate planning attorney will give you options and various tools to accomplish your goals and purposes.

If you don’t get started – you will never be done.  No more excuses!  Make an appointment to get started today.

A Catastrophe Highlights the Need for Being Prepared

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For those of us in northern Michigan, it has now been two weeks since the devastating storm of August 2nd.  There was overwhelming property damage for some of us and we are not yet through digging out.  It is amazing that there were not deaths and injuries.  This is probably due to the fact that the storm hit in the afternoon when we could all see it coming and take cover.  Would the result have been different if the storm had struck 12 hours later?

This highlights the need for estate planning – for all of us – young and old.  A storm at 4:00 a.m. could have resulted in the loss of life and severe physical injuries.  It would not have only fallen upon the older generation, but would have struck randomly to the young, the old, those who are married, those who are single.

Would you be prepared?  You have property insurance and medical insurance – but do you have your affairs in order?

If you were severely injured, would your family or friends have the ability to assist in your medical decisions?  They would if you have a Medical Power of Attorney or Patient Advocate Designation in place.  Otherwise, they could not step in to assist when you need it most.  It takes time, even in an emergency, to go to Probate Court to obtain a Guardianship.

Could they assist in handling your legal and financial affairs while you were hospitalized?  Only if you have a Durable Power of Attorney in place.  Otherwise, they would have to apply to the Probate Court for a Conservatorship.  This is time consuming and expensive.

If you did not survive, is your estate in order?  Have you made provisions for your minor children?  Have you nominated a Guardian to care for them?  A Conservator to handle the finances to raise them?  For those without minor children, have you gotten all of your beneficiary designations in order?  Do you have a Will or a Trust to direct the distribution of your estate?

Life can change in only an instant and without warning.  It is important to be prepared for whatever comes.  The storm of August 2015 should serve as a wake-up call for those who haven’t taken the time to address their estate planning needs and for those who thought they really didn’t need to.

Children in England have much greater rights than in the U.S.

 

Children in England have much greater rights than in the U.S.

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While our laws in the U.S. are derived from the English Common Law system, changes over time have put the inheritance laws on divergent paths.

In Michigan, it is possible to disinherit a child from taking from your estate.  Apparently, this is not the case in England any longer.

 

Disinherited children are suing and winning when they are left out – even when the child is estranged from the parent.

See this interesting article that shows one of the “winners”:  http://www.bbc.com/news/uk-england-beds-bucks-herts-33684937

It’s good to be American if you are the parents.  It’s good to be British if you are the kids.

Estate Planner’s Perspective – Gifting today or bequests later?

 

Family

Many clients plan for their passing by leaving their assets to their children at their death.  They do not leave assets to grandchildren or great-grandchildren.  Now that the exempt amount for estate taxation is $5Million per person, many have forgotten about gifting programs to diminish the size of their estates.

 

From a tax perspective, all of this makes sense; however, it may be worth another look since we have had big shifts in our economic reality.

 

For those with modest estates, staying the course as above is probably wisest.  It is crucial to maintain adequate assets to last for your lifetime, including a period of disability.

 

For those with large estates, it may be time to look at the economic reality that is confronting your children and grandchildren.   This generation of adults is confronted with paying for student loan debt, mortgage debt, funding their own retirements, and saving for their children to go to college all at the same time.  Even with good jobs, they can be struggling economically.  While they will certainly appreciate any bequest they may receive when you pass away, it may be a little late for it to make a meaningful change in their lives.

 

For your grandchildren, they will need education in this coming age.  Yet, the increasing mountain of student debt is staggering.  Higher education is now reaching the point where it is virtually unaffordable.

 

How can you alter your planning to assist with this changed reality?

 

First, you may consider gifting during your lifetime on an annual basis to your children or your grandchildren.  Giving additional funds today may ease the financial burden they are laboring under.   For grandchildren, you should strongly consider establishing and funding 529 Plans for college education.  This money will grow as they do and may provide the ability for them to go to the college or university of their choice when they are ready, without being buried under a mountain of student loan debt.

 

Next, you may consider leaving bequests to your grandchildren directly in your trust or will.  It will undoubtedly come at a time when they can truly benefit from the money.  It can make a real change in their lives.  Additionally, it will also touch their hearts to know that you remembered them.

 

New times may mean new plans.

Same-sex Marriage in Michigan

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Same-sex Marriage in Michigan.  The celebration from the Supreme Court decision has diminished.  But is it really all over?

 

There is still significant work to do.  Laws in Michigan need to be changed to conform to the mandates of the Supreme Court ruling.  And – there will be challenges and end-runs by the religious freedom activists on the right.

 

The Supreme Court decision may really be a beginning instead of an end.

 

See: Same Sex Marriage Michigan Law Supreme Court Ruling

 

© Copyright 2015
Linda E Wasielewski, P.L.C. by awasielewski