The Importance of Estate Planning in Your Child’s Life

You love your child dearly and sacrifice so much for him or her. Maybe you’re working an extra shift or putting in hours on the weekend to afford (or pay off) summer camp. Or perhaps parenting means you’ve abandoned an easy evening routine for one involving cooking barely-touched meals, picking food off the floor and cajoling your little one to stay in bed—and not make yet another trip to the bathroom.

For all the sacrifices parents make, however, they often only concentrate on the here and now. It’s hard to plan ahead, let alone several decades ahead, when you’re in the thick of paying bills, driving to soccer practice and fighting through your own cold while nursing a smaller version of yourself with the same cold. But you owe it to yourself—and, of course, to your child—to see the big picture.

Fortunately, if you’re (relatively) young and healthy, your odds of surviving to see your child’s graduation, wedding and beyond are high. But they’re not perfect. And if something were to happen to you—and/or to your co-parent, if you have one—the consequences of your failure to plan could be devastating.

The challenge isn’t necessarily about what would happen to your child immediately after you die. You probably have relatives and friends who would swoop in to do triage. But what happens weeks, months, years later? What if you didn’t set aside money for your child through a trust or annuity? What if you didn’t have life insurance, a written statement of values, or any way to convey your moral guidance? What if you didn’t appoint a guardian, and no one in your family steps up to help out—or the wrong person does?

Obviously, these thoughts are uncomfortable. And it’s easy to shrug them off, given the hopefully low odds that such contingency plans ever need to be considered. But statistics can be deceiving.

Imagine if you commute home every day across a bridge high over a river. On one random day of every year—which you could never predict in advance—the bridge’s middle section magically disappears for an hour. Anyone who drives over it at that unlucky moment would plunge into the river. You’d probably be scared to cross the bridge at first, but eventually that conscious fear would go away, and it would be replaced with a vague, gnawing sense of unease whenever you got in the car to go to work.

Rather than live with that threat and the psychological burden it carries, it rationally makes much more sense to take a different route to work—one that doesn’t involve crossing that bridge every day! That’s in essence what estate planning does. It takes a bit of effort and forethought to find a new route, just as it takes a bit of effort and forethought to plan for your child’s future. But the long-term payoff is definitely worth it. You get peace of mind. You remove a nagging source of uncertainty, and that makes you feel freer.

The process of planning for your kids does not need to take a long time or force you to have lots of uncomfortable thoughts or conversations. It actually canbe quite fun and heartwarming. We invite you to call our offices now to discuss your options. We can help! Contact one of our seasoned attorneys to discuss planning for your kid’s future.


Valuation discounts for transfers in family businesses in jeopardy   

The ability to take valuation discounts on the transfer of an interest in a family business for estate, gift and generation-skipping transfer tax purposes would be drastically limited under long-awaited proposed regulations from the Treasury Department.

The most impactful element of the proposal bars any significant discount for lack of control or lack of marketability associated with the transfer of an interest in a family-controlled entity.Valuation-discounts-for-transfers-in-family-businesses-in-jeopardy   

If the regulations are finalized as written, the tax cost for transferring interests in such businesses will be substantially higher.

The rules would apply to family-controlled corporations, partnerships, limited liability companies (LLCs) and other similar entities.

Under current rules, transfers of interests in family businesses may be discounted due to lack of marketability and lack of control. The idea is that if you give a percentage of interest in your business to your child, it should be discounted because your child wouldn’t be able to immediately sell his or her interest to someone else for the same amount. Discounts of this nature can yield significant tax savings.

For example, assume three siblings inherited an equal third of their parents’ business and now one of them wishes to transfer her third to her children. Assume if the business was liquidated or sold, the value of her one-third interest would be worth $5 million.

If a combined 30 percent discount for lack of control and lack of marketability were applied to the business interest, then the value of the gift would be $3.5 million. If the regulations become final and eliminate discounts, then the value of the same gift would be $5 million. At a 40 percent gift and estate tax rate, the impact of the elimination of discounting on this family would be $600,000 in additional tax.

As a result of the proposed changes, if you’ve been thinking of doing such a transfer involving a family business for estate planning purposes, it’s critical to consider doing it now, before the regulations become final.


What’s the timing?

The proposed regulations were issued in early August and a public hearing about them was scheduled for December 1st. Generally, the rules go into effect on the day they are published in final form, although certain portions will be effective for transfers occurring 30 or more days after the date of publication.

While it’s unclear exactly when that will be, the rules aren’t expected to be finalized until sometime in 2017. Still, you should act soon and contact an estate planning lawyer if you want to take advantage of the discounts under current law before then.


Could the rules be retroactive?

Even if you make transfers now, though, there is one new rule in the proposal that might have a retroactive effect. The so-called “three-year rule” in the proposed regulations may prohibit certain discounts taken for transfers made within the three years before the transferor’s date of death.

That rule would apply to transfers that result in the transferor losing a liquidation right. That means that if a transfer is made soon to take advantage of the current rules on discounts — or if the transfer has already been made — the discount might be lost if the final rules go into effect and the person who transfers the interest dies within three years.

The same rule would also apply to measure any gift component of a transfer that has been structured as a sale. Therefore, discounts on gift tax elements of such transfers could also be caught by the three-year rule.


Are there other significantValuation-discounts-for-transfers-in-family-businesses-in    changes?

The proposed regulations are lengthy and some of the applications are still unclear.

But it’s important to be aware of one new section of the rules that could have a big impact. That is the creation of a new set of “disregarded restrictions.”

These restrictions would be “disregarded” when valuing the transferred interest for estate or gift tax purposes in any family-controlled entity.

They include any provision that limits the ability of a holder of an interest in a family-controlled entity to compel liquidation or redemption.

For valuation purposes, that means the new rule would assume that someone who holds an interest in a family-controlled entity has the right to liquidate or redeem the interest for its pro rata share of the net asset value in cash or other property payable within six months of exercise.

Under the rules, “disregarded restrictions” will be disregarded if they lapse after the transfer, or if the transferor or the transferor’s family may remove or override them.

With respect to restrictions that will be ignored for valuation purposes, the new rules no longer focus on those that are more restrictive than the relevant state law rules, but instead will affect virtually any restriction that limits the ability to liquidate.

Through public comments and a hearing, the rules will continue to be debated and discussed before they become final. To understand the possible application to your family business,  Contact one of our seasoned attorneys to discuss your estate planning needs.

Honor those who fight and have fought for our freedom!

Remarriage is a reminder to revisit your estate plan

Approximately 40 perceRemarriage-is-a-reminder-to-revisit-your-estatent of marriages these days are remarriages for at least one partner. When you remarry, there are all sorts of issues to consider related to your estate plan.

For older people, the main focus may be ensuring that their adult children or grandchildren have an inheritance. Without proper planning, a new spouse could receive assets that were originally intended for children and grandchildren.

Here are some important elements to review in order to protect everyone’s interests when you remarry:

  • Consider drafting a pre-nuptial or post-nuptial agreement.

In most states, a spouse is entitled to a certain percentage (typically approximately a third) of the other spouse’s assets at death even if the other spouse has provided differently in a will. If you don’t want this to happen, the best way around it is for your spouse to waive this right in a pre-nuptial or post-nuptial agreement.

You can also use the agreement to specify how your assets will be divided when one of you dies.

Before you sign a pre-nuptial or post-nuptial agreement, have it reviewed by your own attorney to ensure it is legally valid and doesn’t accidentally give up any important rights.

  • Check titling of your assets.

Who gets your assets when you die depends on how they are titled, not on what you say in your will. If an asset is titled as a joint tenancy with rights of survivorship, tenancy by the entirety or community property with rights of survivorship, it will go automatically to the surviving owner. That means you have to retitle the assets if you don’t want them to pass to the joint owner on the account.

  • Revise your beneficiary designations. 

When a person dies, many retirement accounts automatically pass to the person’s spouse, unless the spouse has signed a waiver or disclaimer. This is true even if the person’s will and pre-nuptial agreement state otherwise. Be sure you know where your retirement accounts will go if something happens to you. You should also review the beneficiary designations on life insurance policies, annuity contracts, and bank or brokerage accounts.

  • Update your power of attorney and health care directives.

Make sure you update your power of attorney and other health care directives if you want to change who you list as your agent. Also, make clear who you want as your guardian to make it easier for your new spouse or another relative to care for you if you become ill.

  • Put certain assets into a trust.Remarriage-is-a-reminder-to-revisit-your-estate-plan

Many people who remarry provide in their will that certain of their assets will pass into a trust for the surviving spouse after they die. The trust will commonly pay income to the second spouse for the rest of his or her life, and when that spouse dies, the assets will go to the first spouse’s children.

Oftentimes, such a trust is called a “Qualified Terminable Interest Property” trust, or QTIP. One advantage of a QTIP is that all the property in the trust is treated as having gone to your spouse for estate tax purposes, so there is no estate tax on the assets at the time of your death.

In the trust, your spouse will likely want investments that generate income, while your children will favor growing the principal. It’s important to specify how the assets are to be invested. Otherwise, you risk having your spouse and your children arguing about it. A possible solution is to create a “unitrust” that will pay the spouse a percentage of the total assets each year — that way everyone benefits if the assets are appreciating.

One caveat to creating a QTIP trust is if your new spouse is significantly younger than you are and could possibly outlive your children. In that case, it might be better to protect your children’s interest by buying a life insurance policy with your children (or a trust for them) as the beneficiary.

  • Consider buying long-term care insurance.

If one spouse requires expensive nursing home care, the other spouse may be legally required to pay for it. And few things can drain a child’s potential inheritance faster than paying for a step-parent’s expensive medical care. Long-term care insurance is a great way to solve this problem before it happens.

Contact one of our seasoned attorneys to discuss your insurance or estate planning needs.

Should you amend or rewrite your revocable trust?

It’s important to review a revocable trust regularly to see if any amendments are needed, such as when something changes in your life or if the law changes. There are two ways to go about it. You can either amend the existing trust to change a certain part of it or rewrite the whole trust, which is known as a restatement. While you might expect that an amendment is easier and more cost-effective, that’s not always the case.Should-you-amend-or-rewrite-your-revocable-trust

Remember that your trust should provide instructions to your heirs about your wishes, so it has to be clear and comprehensive. If you’re making one or two simple changes, then amending is often sufficient. That’s especially true if the changes don’t interrelate.However, if you’ve made a lot of changes over time, it might be time for a restatement to ensure that the trust clearly states your wishes and is set up to be administered properly.

In addition, a restatement can also reduce how much paperwork you need to give to third parties like banks and avoid beneficiaries learning about prior terms of the trust. Click here to let us know how we can help you!

Learn from celebrities’ estate planning blunders

There are many lessons to be learned about estate planning from the bad experiences of some of the world’s most famous people. The AARP recently gathered their stories, and here are the highlights:

Florence Griffith Joyner: Before her death in 1998, Olympic gold medalist Florence Griffith Learn-from-celebrities’-estate-planning-blunders -Florence-Griffith-JoynerJoyner never told anyone the location of her will. Without the original document, it took four years to close her probate estate due to a long battle among her relatives.

Lesson learned: Don’t keep the location of your will a secret.



Prince: When Prince died in 2016 he left no will. Now a Minnesota judge will oversee the Learn-from-celebrities’-estate-planning-blunders-Princedistribution of the singer’s estimated $300 million estate among six siblings. However, other potential heirs have surfaced, including a federal inmate claiming to be Prince’s son. If there is proof he is in fact Prince’s son, then he may inherit the estate under the intestacy statute.

Lesson learned: Have a will.


Learn-from-celebrities’-estate-planning-blunders-HoustonWhitney Houston: Songstress Whitney Houston had a will when she drowned in 2012, but it was drawn up a month before the 1993 birth of her only child and never revised. Per the terms of the outdated will, Houston’s daughter Bobbi Kristina (who was 18 when her mother died) was to receive 10 percent of the estate — $2 million — when she turned 21 and the rest later. But Houston failed to consider whether her daughter was mature enough to handle millions of dollars. Ultimately Bobbi Kristina got the $2 million but not the rest of her inheritance. She died in 2015, also as a result of drowning and drug intoxication.

Lesson learned: Review and update your will regularly.


James Gandolfini: ‘Sopranos’ actor James Gandolfini was reportedly worth $70 million when heLearn-from-celebrities’-estate-planning-blunders-James-Gandolfini died in 2013 of a heart attack in Rome. His will provided for his widow, daughter and two sisters, but did not factor in proper tax planning as it was drawn up hastily before a vacation. As a result, the estate ended up paying federal and state estate taxes at a hefty rate of 40 percent.

Lesson learned: Be sure to consider the impact of estate taxes on your plans.

Learn-from-celebrities-estate-planning-blundersMarlon Brando: Actor Marlon Brando had a written estate plan for his $100 million fortune when he died in 2004, but it did not include promises he allegedly made orally to his long-term housekeeper, Angela Borlaza. She claimed Brando gave her his house as a gift, but the actor never completed the paperwork to transfer the deed to give her legal ownership. In court, she sought $627,000 — the market value of the house — plus $2 million in punitive damages. The case settled for $125,000.

Lesson learned: Avoid oral promises.

Don’t learn these lessons the hard way, contact one of our seasoned attorneys to discuss your estate planning needs.

Happy Halloween!

Happy Halloween!

Protect Your Power of Attorney from Legislative Changes

Medical and financial powers of attorney are a critical aspect of effective estate planning, but did you know they must be kept up to date? It is recommended to have them reviewed every 2-3 years.

Several legislative changes over the years have given financial institutions and healthcare providers reasons to reject powers of attorney. As new laws are enacted, necessary provisions must be incorporated into your power of attorney, as failing to including certain language could mean your documents will not be accepted.

Notable issues include:

  • Your medical power of attorney was executed prior to your state adopting the Uniform Health Care Decisions Act. In 1993, this federal law was approved to expand and solidify the authority of a medical power of attorney. It has since been enacted state by state. Key changes include decision-making power surrounding life-prolonging procedures, authorization for organ donation and approval for admission to health care facilities for treatment.
  • Protect-your-power-of-attorney-from-legislative-changesYour medical power of attorney does not include Health Insurance Portability and Accountability Act (HIPAA) language. If your power of attorney was drafted prior to adoption of HIPAA laws, it will not include the necessary language authorizing access to your personal medical information.
  • Your financial power of attorney does not include certain provisions adopted by the Uniform Power of Attorney Act. Financial institutions, particularly banks, often reject powers of attorney if they believe, in good faith, that the document may no longer be valid. Certain types of authority (including the ability for the holder of your power of attorney to amend trust documents, make gifts on your behalf, and designate or change beneficiaries) will only be accepted if they are clearly written into your document.

Major life events or changes in your situation are good trigger points for reviewing your documents. It is important that the people you designate to act on your behalf continue to be in line with your wishes over the years. Reasons to make a change could include separation or divorce from your spouse, or death, distance or incapacity of the person you have named.

In addition, be sure to consider naming a backup person who can take over if the currently named agent in your power of attorney is unable or unwilling to serve.

As your tastes, desires and wishes change with time, it is important to make sure your power of attorney reflects that and remains consistent with your goals and wishes. An estate planning lawyer can help ensure your documents are up to date and reflect your concerns.

An estate planning lawyer can help ensure your documents are up to date and reflect your concerns. If you desire assistance with documents or any other matter, contact one of our seasoned attorneys.

What millennials need to know about estate planning

What-millennials-need-to-know-about-estate-planningA recent survey by senior-living focused website, quoted in USA Today, revealed that 78 percent of Americans under the age of 36 don’t have a will or trust in place. But even with youth on their side, the millennial generation needs to be planning for the unforeseen. If most would consider the following three issues, they’d be off to a good start:

  1. Incapacitation provisions: No one expects to be incapacitated, but there are at least two documents needed in the event that occurs. The first is a durable power of attorney that identifies who will make financial decisions on your behalf if you are unable to do so. The second is a health care advance directive (including a living will) that outlines preferences for medical care if you are unable to state these for yourself.
  2. Death documents: These include a last will and testament and possibly the establishment of a trust, either revocable or testamentary.
  3. Beneficiary designations: Keep these up to date for things including life insurance and 401(k) programs.

Many millennials assume they don’t have assets worth protecting yet, but are actually unaware of the range of assets that need to be addressed for a proper estate plan. These include:

  • Retirement accounts
  • Life insurance policies (personally owned policies as well as policies purchased by or through an employer)
  • Real estate, vehicles, boats, jewelry, electronics and home furnishings
  • Family memorabilia. These are often quite important items, although they may not have a high degree of monetary value
  • Pets
  • Digital assets, including a complete list of accounts and passwords

What if you don’t have the proper estate-planning documents in place? What are the risks? Typically, default rules may apply.

For issues that are covered by durable powers of attorney and health care advance directives, the default for a minor is that a parent (or parents) makes decisions on their behalf. But past the age of 18, it will be necessary for parents to get a court order appointing them as guardians if such documents aren’t in place prior to the onset of incapacitation.

In many states, if unmarried individuals with no children die without a will, regardless of their age, the estate reverts to parents. If you are an unmarried individual without a spouse or children and want to select siblings or a significant other rather than your parents, you should specify that choice in the appropriate documents

Contact one of our seasoned attorneys to discuss your estate planning needs.

Are LLCs your best option for asset protection? Know the risks

Limited liability companies can offer better asset protection than ordinary stock corporations, but there are potential adverse economic and tax results if investors are not alert.Are-LLCs-your-best-option-for-asset-protection? Know the risks

Investors increasingly use LLCs to operate a trade or business, to hold real estate or to hold other investment assets, as opposed to state law corporations. But when investors transfer LLC interests to a spouse, children, trust or others, as opposed to ordinary corporate stock, they can risk losing control of the business or decreasing the basis for heirs — with a corresponding increase in the beneficiary’s income tax.

An LLC owner or “member” has two types of rights: economic and management. Economic rights allow them to receive property from the LLC both during existence and upon liquidation, along with tax attributes and profits/losses. Management rights allow them the right to vote, participate in management or the conduct of company affairs and have access to company reports, records and accountings.

It is the latter category that can cause problems when transferring LLC interests by gift or at death, and the division of these two bundles of rights are important in distinguishing LLCs from ordinary stock (although S corporations may have voting/non-voting shares and C corporations may have preferred stock).

Problems occur when an LLC member transfers a portion of his or her ownership interest in the LLC to another person, either during his or her lifetime or at death. Unlike when you transfer corporation stock and get the same rights as the previous owner, if an LLC member transfers the transferee may become a mere assignee of the LLC interest, and not a full substitute member. Under the laws of most states, unless the operating agreement provides or parties otherwise agree, an assignee only receives the transferor’s economic rights in the LLC, not the management rights.

Laws governing this were enacted to protect business owners from unwillingly becoming partners with someone they never intended to be partners with. But they can wreak havoc on your business and tax planning if you are not careful.

To protect yourself against these hazards, contact one of our seasoned attorneys to arrange for certain transferees or assignees — such as a guardian/conservator, spouse, children or trust — to be full substitute members while keeping other transferees — such as creditors or ex-spouses — as mere assignees with no management rights. This can be set forth in the LLC’s written operating agreement.