Estate Planning for Family Members with Disabilities

Over the next few days, I will discuss the issues pertaining to estate planning for families with disabled family members. Generally, family members desire to leave money to a disabled loved one in order to maintain or improve the quality of life. However, if this is done with a bequeath in a Will or an outright gift, more harm than good could result.

Medicaid and SSI both have very stringent resource (and income) thresholds that could be implicated by any significant bequest or gift. The result is that the disabled individual could loose their SSI and Medicaid benefits. Therefore, they could be forced to pay for or even forego nursing care or other healthcare benefits.

Let's discuss what can be done over the next few days. Feel free to contact us at http://www.ythlaw.com/ to discuss all your estate planning needs.

A Final Gift

A friend's mother passed and I attended the memorial service in celebration of her mother's life. It was very intriguing for me. Her mother donated her body to science. Though I have noted that request in documents for many individuals, this was the first time that I attended a service where one had donated their body to science. My friend's mother had follow in the footsteps of her own mother who gave her body to science at a time when very few people considered that option.

As I have said in several blogs that our assets include everything, even our bodies. We can recall the controversy surrounding Michael Jackson's body and burial. What about Anna Nicole Smith? There was major controversy over the location of the burial of her body.

So, think about ALL your assets and make those needed decisions so things can go as smoothly (at least as regards the body) for your family when you die as it did for my friend's family. Leave your comment here or contact us at www.ythlaw.com

2. Saves Money - final comment

A final comment regarding Max and Margaret. Not only can they save on Federal Estate Tax but they can save on the state inheritance tax in states with an inheritance tax like Pennsylvania.

Who will get Margaret’s extensive art collection? If she leaves it to a charitable organization or qualified non-profit, there would be no inheritance taxes. However, her sons may also have an interest in art. In order to avoid the taxes on personal property, Margaret could begin gifting during her lifetime some of her art collection to her sons. There would be no taxes if she is under her one million dollar lifetime exclusion amount for gifting.

All of this requires planning on the part of Max and Margaret. In the long term as well as the short term, the value of a little planning today goes a long way to your family's future savings and security.

Contact us at www.ythlaw.com or leave your comments here.

Ways to Make Charitable Gifts

Many people during their lifetime engage in charitable giving activities. They make gifts to cancer research, heart associations, educational institutions, or well water projects. Many give to hospitals, churches, or other religious and cultural institutions. Others have long term relationships with charities and want to continue charitable giving upon their death but they just do not know how. That is where estate planning comes into play.

There are many ways to engage in charitable estate planning. Today, I will address one of the most basic ways to make a charitable gift. That is through a bequest made in your will or trust. A bequest is appealing to many people because they can maintain control of their assets until they die, it is the easiest way to give, and it can also be changed at any time. The bequest is a statement in the will or trust identifying assets you want to leave and to which charitable institution you want to leave the assets.

Tomorrow, we will address other charitable estate planning methods. Stay tuned.

Leave your comments here or contact us at www.ythlaw.com

Gift Tax Law

It is unusal but it does happen. I had a client who was the sole beneficiary under his aunt's will. His aunt did not have any children or a surviving spouse. However, there were other relatives but the aunt only saw fit to leave her estate to this particular nephew. No one disputed the will. The client came to me because he wanted to share the wealth with others.

Bottom line; the inheritance is his and he has to pay all of the inheritance taxes. If he chooses to share any of his inheritance, it would be a gift to the other relatives. Whenever assets are given to another for less than its full value, the amount by which the asset’s value exceeds the money paid for them is a gift. In this case, the $95,000 for each of 5 relatives would be a gift of $475,000. Everyone has a lifetime gift exclusion amount of $1,000,000. As long as he does not gift over $1,000,000 during his lifetime, there will be no gift tax due. However, there is a gift tax filing required if his gift over a certain amount annually. This annual exclusion amount for 2009 is $13,000. Therefore, in his case, the gift tax filing will be required.

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How can I avoid Federal Estate Tax?

Question:
My husband died unexpectantly and without a will. The estate is worth in excess of 3.5 million dollars. My husband had children from a prior marriage and we had children together. Can I avoid Federal Estate taxes? How can I best provide for all of his children?

Answer:
Yes, you can avoid federal inheritance tax because of the unlimited marital deduction applied to estate assets that pass from your deceased husband to you. However, since your husband died without a will, there was no planning in place to take advantage of his lifetime exclusion amount or his credit against potential future taxes. Further, there will be taxes on the monies which go directly to the children.

WHY, you might ask? When someone dies without a will, the state determines who inherits what assets. In your case, Pennsylvania provides that ½ of the estate would pass to you and the other ½ would pass equally to all of his children. However, this only applies to probate assets – assets that were titled in your husband’s name only. The intestate (to die without a will) laws do not apply to jointly held property and assets providing for designated beneficiaries.
Assuming that most of the estate was held jointly or provided you as the designated beneficiary, the following estate planning strategies are available to provide for the children while minimizing the Federal estate tax:
Gifting: $13000 can be given annually to each child tax free. Such funds could be placed in a trust for the benefit of the children.
529 College Saving Plans: $6,000 (representing 5 years of annual gifts of $13000) is permitted for each child.
Family Limited Partnership: is another gifting vehicle.
Irrevocable Life Insurance Trust: takes life insurance proceeds out of your estate.

Have your questions answered by entering a comment or submitting an inquiry through http://www.ythlaw.com/.

How can I provide for my grandchildren?

Here is another question raised by a reader.

"How can I best provide for my grandchildren? My son has been divorced twice. His 2 children (5 and 9) do not have the same mother. I have a wonderful relationship with my grandchildren but not with their mothers. My son has full custody of his 9 year old son and joint custody of his 5 year old daughter. However, he is not financially responsible. What is the best way for me to provide for my grandchildren during my lifetime as well as when I die? Giving or leaving money to either parent for the care of the children is not an option."

In Response to your question:
During your lifetime, you may want to consider a gifting program. This would allow you to annually gift up to $13,000 (as of 2009, amount changes periodically) in a separate trust for each child. The terms of the trust will dictate how the money will be spent. You should not serve as the trustee but designate a person or institution that you trust. Other options for gifting would include custodian accounts (distribution required at 18 or 21) and 529 Plans (limited to college education expense). You should also be aware of any tax implications. Prior to any final decision, consult with your tax advisor.

If you set up an irrevocable trust during your lifetime, it could continue under the same terms and conditions when you die. If you did not set up anything during your lifetime, you could establish a testamentary trust with terms and conditions that you desire for the care of your grandchildren. However, whenever assets skip a generation (ie. to grandchildren instead of children), a generation-skipping transfer has occurred and a tax is imposed unless the amount is within the exemption. There is no tax if you do not exceed your 1.5 million dollar lifetime exemption.

Made your comments here or email a question via my website http://www.ythlaw.com/ .

Generational Wealth

I was listening to an entertainer recently commenting about his neighborhood. He said there are a few other wealthy entertainers living in his area. However, this neighborhood of multi-million dollar homes included many people who do not have multi-million dollar salaries.

This is where generational wealth is an advantage. It is not about what the individual makes. It is about access to wealth and to other sources of assets. Generational wealth is about trust funds, inheritance, gifting and other estate planning techniques. In order for one generation to help another generation, there has to be planning done. It can not be done in a choatic way or at the last minute if your intent is to make a positive financial difference for the next generation.

Whether expensive homes, exotic travels, charitable endeavors or other opportunities are of interest to your heirs, you can make it all possible in a way that is most productive and beneficial to those you love. Let's talk about what your plans might be soon. Call for a free consultation.