Thursday, May 31, 2012

No Contest Clauses

A quick primer on "no contest" clauses which are permitted in Ohio.  They work best when the beneficiary has something to lose by challenging the will.  Leaving someone the proverbial $1 is ineffective.  It is best to leave $50,000 or so which is the amount that could be spent in defending a lawsuit from a disgruntled heir.

Tuesday, May 29, 2012

Social Security and Posthumous In Vitro Babies

The Supreme Court unanimously ruled that in vitro babies conceived after the death of the father are not automatically entitled to Social Security Benefits. State law has to permit them to qualify as heirs at law for intestacy purposes. I can only hope that the forthcoming decision on Obamacare will also be unanimous.

Friday, May 25, 2012

Planning for Second Marriages

Couples in a second marriage face issues different than couples in their first marriage.

1.  How to balance the  financial needs of the new spouse with the expectations of children from the first marriage.
2.  When the second spouse is close in age to the children, how to provide for the spouse without making the children wait their entire lives for an inheritance.
3.  Who/what to designate as the beneficiary of retirement assets and insurance policies.

Of course, like many topics on this blog, these issues can be addressed through the use of a trust in an estate plan. A prenuptial agreement is also important when there are children from a prior marriage.        

Thursday, May 24, 2012

Expecting Couples

Advice for new parents:

1.  Increase life insurance to at least 10x salary, or 15x if affordable.  
2.  Prepare a will which designates a guardian for your child.
3.  Consider a trust to avoid child receiving inheritance at 18..
4.  Jay is a good name for boys.

Tuesday, May 22, 2012

Minimizing Estate Taxes

Simple strategies to minimize estate taxes:

1. Do not procrastinate. It is tough to plan to avoid taxes when you never get to it before death.

2. Transfer large insurance policies to an irrevocable trust so they pass estate tax free to spouse and children.

3. Give assets away during life rather than waiting until death. Due to the difference in the calculation of gift tax and estate tax, paying gift tax is better than the estate tax.

The article mentions 2 more strategies of limited applicability to most people so I will not summarize them in the interest of brevity.

Friday, May 18, 2012

Facebook IPO Gift and Estate Tax

Everyone else seems to be writing about the Facebook IPO so I will reluctantly follow the herd, but from an estate tax perspective.

Zuckerberg and other FB founders have the ability to avoid future gift and estate taxes on their FB stock by creating a GRAT.  That trust allows them to annually receive income generated by the stock, but ultimately transfer it to their heirs at the current  value discounted for the time value of money.  This strategy also works for people who are not only founders of social media behemoths.

Wednesday, May 16, 2012

Long Term Care Insurance?

A professor of health and economics debates a nursing home reform advocate about the pros and cons of buying long term care insurance.  My conclusion is that the people with minimal savings do not need it nor do those without children.  If people can afford it, they should buy it.  Annual premiums cost $3,500 which is less than a month in a nursing home.  I am inclined to spend $3,500 to save $80,000 - $100,00 per year.  However, I do understand the hesitation to write a $3,500 check.      

Tuesday, May 15, 2012

Pet Planning

Once again, with federal estate taxes not being much of a concern to most people, the smaller estate planning issues have become more prominent.  Planning for pets has taken on greater importance in recent years with the advent of pet trusts and other arrangements after the death of the owner.

My favorite anecdote in the article is the couple who has designated a guardian for their children, but would not trust them with their pet.  I think that they might wish to revisit the guardian selection.

Thursday, May 10, 2012

Controversial Wills

Many people have criticized the wills of Chief Justice Burger and Howard Hughes as being poor examples of estate planning.  A recent article defends the Burger will as being adequate and raises the point that Hughes' hand written "Mormon  will" might have been legitimate after all and actually accomplished his estate planning goals.  Of course, if Hughes had hired an attorney to prepare the will, the questions about its authenticity would have dissipated.

Tuesday, May 8, 2012

Aging Parent(s)?

When and how do children offer to assist their parents with the management of  their financial affairs?  A few signs that assistance is needed are:

1.  a large volume of phone and mail solicitations for money,
2.  checkbook errors,
3.  unpaid bills, and
4.  disorder where there used to be order.

Children should offer to assist with bill paying and financial management.  Additionally, the parent should make sure that he has a will, financial power of attorney, health care power of attorney and perhaps a trust in place to enable the child to assist the parent.    

Monday, May 7, 2012

Unified Credit Per Obama Proposed Budget

For those looking for some clarity on the future of estate taxes, the Obama Administration has proposed a unified credit of $3.5 million and an estate tax rate of 45%.  Though this has the same likelihood of passing as the Paycheck Fairness Act and the Buffett Rule (re: nil) and would require the Senate to pass a budget for the first time in 1,000 days, it is illuminating for two reasons.

First, it indicates that unified credit will not revert to $1 million as currently slated.

Second, it amplifies the exigency of making a large gift this year for those who can afford to give away $5 million.  

Thursday, May 3, 2012

Digital Data (Again)

When estate taxes do not apply to most people, the hot topic in estate planning apparently becomes accessing post-mortem digital data. I have revised my wills to authorize executors to access on-line accounts.  A corollary is to have a note with the will which lists the passwords and desired disposition of the account and data.    

nb.  The recommended language in the article is the type of drafting that people pejoratively refer to as "legalese."

Wednesday, May 2, 2012

Facebook Organ Donation Campaign

As if getting members to share the details or their lives and otherwise sell their souls is not enough, Facebook now wants members' body parts.  Actually, Facebook is encouraging its members to sign up to become organ donors.  However, in keeping with its minimal belief in personal privacy, the status would be shown on the member's page.      

Tuesday, May 1, 2012

Divorce and Insurance

People getting divorced need to change the beneficiary of their insurance policies.  Most states provide that a former spouse will be considered deceased for beneficiary purposes, but bad results can still happen especially if the former spouses own insurance on each other.

Also, for new marriages a trust could serve as a vehicle for receiving insurance proceeds to benefit a new spouse, but have the proceeds pass to the children from a prior marriage.