Writing Your Tulsa Estate Planning Blog

Many people who think that there is no reason that they need to plan for the estate tax, will have estates that face large estate tax bills because they have not thought about state estate taxes.

When most people think about estate taxes, if they think about them at all, they think about the federal estate tax. That is the estate tax that receives most of the attention in the national media.

For most people that is the only estate tax they do need to worry about. It is the only one that could apply to their estate.

Most people do not need to worry too much about it, since their estates will be below the historically high estate tax exemption at the federal level.

Nevertheless, there are other forgotten estate taxes that can create problems as the Wills, Trusts & Estates Prof Blog points out in “Don’t Underestimate State Estate Taxes.”

Eighteen states and the District of Columbia have their own estate taxes.

These state taxes often have much lower exemptions than the federal government.

The estate of someone who has planned only for the federal estate tax, might have to pay a large and unexpected bill to these states to cover the state taxes.

As is the case when the federal estate tax has not been adequately planned for, not planning for state estate taxes can create problems for estates that have few liquid assets and thus no simple way to pay the bill.

Fortunately, planning around state estate taxes can be done with the help of an experienced estate planning attorney.

Reference: Wills, Trusts & Estates Prof Blog (June 8, 2017) “Don’t Underestimate State Estate Taxes.”

The state of New Jersey is currently considering proposals to offer tax credits for blood and organ donations. They might be in violation of federal law, if passed.

All over the U.S. many people die unnecessarily. This includes many elderly.

Why?

It is because of a lack of organ donations.

Getting people and their families to agree to donate organs has proven to be exceptionally difficult. In some cases, it is even difficult to find enough blood donors.

There have been many awareness campaigns, but they normally only have a short-term effect, if they have any at all.

The New Jersey assembly is considering another idea to increase donations, according to the Tax Foundation in “Organ Donation Tax Credits: A Life or Death Proposal?.”

The state is considering offering donors small tax credits for donating blood or organs. In the case of a deceased donor, the tax credit could be used on their final tax return filed by the estate.

Whether these credits would do very much to increase donations is uncertain.

These proposals could also be in violation of federal law, which makes it illegal to profit from organ donations. Other states have gotten around that problem, by offering tax exemptions for any expense incurred while donating.

It is important to find more blood and organ donors. However, it appears that these New Jersey proposals are likely not going to be solutions, unless federal laws are changed.

Reference: Tax Foundation (June 7, 2017) “Organ Donation Tax Credits: A Life or Death Proposal?.”

The tax court has ruled against the state of Minnesota and declared its income tax statute unconstitutional, as it applies to some trusts created in that state.

Minnesota has an unusual way of taxing trusts. The state’s income tax statute makes 100% of a trust’s assets taxable in that state, if the trust became irrevocable when the settlor was a resident of Minnesota.

This rule applies regardless where the trust beneficiaries reside or where any trustees reside.

Fortunately, the tax court has decided this method of trust taxation is unconstitutional, according to the Wills, Trusts & Estates Prof Blog in “Tax Refunds for Trusts With Minnesota Grantors? Minnesota Income Tax Statute Ruled Unconstitutional.”

The court looked at trusts that had an out-of-state trustee, beneficiaries who lived in Minnesota and beneficiaries who lived in other states.

It determined that these trusts could not be considered resident trusts of Minnesota and, therefore, the state could not tax intangible assets. Presumably, the same logic could be applied to some other trust situations.

This ruling could lead to refunds for some trusts.

However, those refunds may not come in the near future, since it is expected that the state will appeal this ruling to the Supreme Court, which could render a different decision.

Reference: Wills, Trusts & Estates Prof Blog (June 7, 2017) “Tax Refunds for Trusts With Minnesota Grantors? Minnesota Income Tax Statute Ruled Unconstitutional.”

Early signs indicate that Social Security benefits could see a dramatic increase next year. That will be welcome news for seniors whose benefits have lagged far behind their buying power.

Every year the Social Security benefits that millions of senior citizens receive on a monthly basis are supposed to increase with the cost of living. However, it has long been pointed out that it does not really happen.

The methods used by the federal government to determine cost of living adjustments are not an accurate reflection of the purchasing power of recipients. For example, since 2000 benefits have risen 43%, but senior buying power has risen 86% according to advocates.

The average increase in benefits in the last few years has only been 1%, since overall official inflation rates have been low.

That could change next year, according to Barron’s in “Big Social Security Bump Could Be Coming.”
Early signs indicate that a benefit increase of 2.1% is coming next year.

That is good news for seniors who have seen their benefit dollars pay for fewer and fewer of their expenses.

The bad news is what that might mean for the health of the Social Security system itself. It needs to be adjusted to make sure the Social Security Trust Fund does not run out of money in the next couple of decades, which would result in automatic steep benefit cuts.

Benefit increases are only expected for now.

No official announcement will be made until October. Therefore, seniors should not plan for raises yet.

Reference: Barron’s (June 6, 2017) “Big Social Security Bump Could Be Coming.”

People who are eligible for Medicare and who do not sign up on time can face stiff penalties. Some of them have been granted a small window to have those penalties waived.

The federal government has always been particular about Medicare. Eligible people either sign up at the right time or they face stiff penalties, if they attempt to sign up later.

Elder law advocates have always thought that this was a harsh way to penalize many people who simply made honest mistakes and were not aware of those penalties.

Advocates’ complaints have typically fallen on deaf ears, since the government was more concerned about cost controls. However, an important victory has been won for some who would otherwise face penalties for not signing up for Medicare on time.

NPR reports on this latest development in “Feds to Waive Penalties for Some Who Signed up Late for Medicare.”

People who purchased their health insurance through the Affordable Care Act’s marketplaces were not made aware that they needed to sign up for Medicare, when they became eligible.

When looking at the marketplace website, it appeared they were doing everything properly as long as they continued to purchase insurance on the marketplace. They have been granted a waiver of the penalties.

People affected will need to apply for the waiver. They only have until Sept. 30, 2017 to do so.

This waiver is only being granted to those who continued to purchase insurance through the Affordable Care Act, but it is an important step for many elderly people.

Reference: NPR (June 6, 2017) “Feds to Waive Penalties for Some Who Signed up Late for Medicare.”

There is possibly no greater blow to a person, than losing all of their assets to creditors. It can happen to anyone, but you can protect against it by utilizing estate planning tools.

You have probably noticed at some point or another, that the U.S. is a very lawsuit happy country, much more so than most European countries.

The reasons for this have a lot to do with the way that our court system is set up. Anyone can file a lawsuit for almost anything. There is very little to deter someone from doing so, in most cases.

Even if the plaintiff loses, he does not have to pay the defendant’s legal bills, which can be quite high. Consequently, no matter how wealthy a person is, they can be sued and potentially lose everything if the court system rules against them, rightly or wrongly.

Therefore, it is extremely important for the wealthy to protect their assets from potential creditors, as the Wills, Trusts & Estates Prof Blog discussed in “Asset Protection Measures.”

The good news is that protecting assets from potential creditors is not an inherently difficult task.

Estate planning attorneys have many ways to assist clients in doing that.

A trust is typically the best option for doing this. However, there are other ways to protect assets, including utilizing retirement accounts and college savings plans.

As a last resort, insurance can be purchased to protect against creditors.

You should protect your assets, and you should visit with an estate planning attorney to determine the best way to do so.

Reference: Wills, Trusts & Estates Prof Blog (May 31, 2017) “Asset Protection Measures.”

It is often noted that great family wealth has a tendency to disappear after a generation or two. That is because the same mistakes in handling that wealth are made over and over again.

There is little doubt that an ever increasing amount of America’s total wealth is being concentrated in fewer and fewer hands. Many wealthy people are amassing large fortunes that could potentially pass down through their families for generations.

This “generational wealth” has the potential to make some families wealthy for hundreds of years.

However, we know from history that rarely actually happens, when great wealth is passed down by families.

Most of the time, the wealth dissipates after a generation or two, even if we do remember the exceptions where that did not happen.

If you are someone who is going to receive an inheritance of generational wealth, then you need to know how to make sure that you are one of the exceptions that preserves the wealth.

Financial Advisor recently discussed in this challenge “These 5 Mistakes Destroy Generational Wealth.”
Things to avoid doing include:

•Do not spend recklessly as soon as you get an inheritance. Buying all of your dream items, is not a good idea immediately after receiving an inheritance.

•Do not think you can handle the assets without receiving proper financial advice.

•Take your time to make a plan about what to do with the money. There is no need to act right away.

•Make sure that you are not paralyzed by all of your investment options. You should not act right away in a rush, but you do need to act eventually.

•Avoid giving to every friend or family member with a hand out at your expense.

On the other hand, contact an experienced estate planning attorney who can help you form a team of advisors to help guide you to prudent decision-making.

Reference: Financial Advisor (May 23, 2017) “These 5 Mistakes Destroy Generational Wealth.”

“Forget finances, you’ll never be ready to retire, unless you’ve thought through exactly what you want your next chapter to be like.”

In the past, people usually retired when they reached 65. They stayed near their family homes and died after just a couple of years. We now see retirement very differently.

Some folks are now working well into their 70s or even 80s at their current job or at a new position. Some seniors continue to work full time, and others work part-time, with time for vacation trips and leisure activities in their routine. Some people remark that they’re busier now, than when they worked full time.

Kiplinger’s recent article, entitled “The Emotional Side of Retirement Planning,” explains that the majority of people who are happily retired, spent a lot of time thinking and planning for it.

People in their 60s should be thinking about retirement. While most have started to make plans, others have trouble formulating a strategy. Nevertheless, everyone wants to know whether they can afford to retire. The answer is usually “that depends.” It depends on the answers to some questions like the following:

•What do you see yourself doing your first week of retirement and how does that feel?

•If you’re married, how does your spouse feel about retiring?

•Do you think you’ll stay in your home or downsize?

•Do you want to live in warm weather or a cooler climate?

•How’s your health?

•Do you want to leave a legacy for your family or spend your money now?

Figure out what your retirement looks like. Before you consider whether you can afford to retire, check where you are both psychologically and emotionally. If you’re not ready mentally, then boatloads of money won’t make you 100% happy in retirement. It’s not unusual for people these days to spend 15-20 years in retirement.

The Stages of Retirement:

Many people first think of retirement like it’s a long vacation. Some return to school and take fun courses, change professions or find new hobbies and interests. Many new retirees do more traveling or get involved with church or charities. But after the novelty of retirement declines, many people gravitate to a slower and more settled lifestyle.
Physical health may start to decline, and at some point, many aren’t able to live on their own and require assistance. Some try to stay in their homes with help, some go to assisted-living facilities and others enter nursing homes. Everyone has a distinct set of circumstances, and decisions must be made on an individual basis. Available finances impact how, when and where someone retires. With more resources, there will be more options. However, every potential retiree needs to have a well-thought-out plan in place that makes sense for them financially and emotionally. Speak with an elder law attorney about creating your game plan.

Reference: Kiplinger (May 2017) “The Emotional Side of Retirement Planning”

Most people would prefer to stay where they currently live when they retire. That means that they need to do some planning.

Generally speaking, the longer elderly people can remain in their homes, the better off they will be. It is good for the elderly to stay where they are comfortable and where they have built up support networks of friends and family.

It is certainly what most people would prefer to a nursing home. It is also normally better than moving to a new home that a person is not used to. Nevertheless, if aging in place is what you would prefer when you retire, then it is important that you take stock of your home to see if that will be possible.

The New York Times reported on this in “Planning to Age in Place? Find a Contractor Now.”

Most homes are not designed and built with the elderly in mind. If nothing else, most homes have far too many stairs that are frequently difficult for elderly people to navigate.

Older homes can be even worse.

For example, many older homes have smaller doorways. Consequently, someone in a wheelchair cannot comfortably get through such doorways, if they can at all.

There are all sorts of things you might not even think about, that can make a home a bad place for an elderly person to live.

Therefore, if you would like to stay in your home in your later years, you need to plan for that now.

Your home most likely needs to be remodeled in some ways to make it safer and more livable. That should be done before the changes are absolutely necessary.

Reference: New York Times (May 19, 2017) “Planning to Age in Place? Find a Contractor Now.”

Most Americans pass away owing debt. What happens to that debt after they pass away?

It is not a secret that most Americans owe money to someone. The people of the U.S. are used to buying things on credit and, as a consequence, they have debts.

Most people would like to be rid of all that debt by the time they pass away. Unfortunately, the reality is that most of them will not.

Approximately 73% of people in the U.S. pass away while still in debt. The average amount of debt is $61,554, but that average goes down to $12,875, if mortgage debt is not included.

Market Watch discussed this in “What happens to your debt when you die?”

Because you are likely to pass away while still in debt, it is important to understand what will happen to that debt, to make sure it is not a burden on your family.

If it is debt that you alone are responsible for, then your estate will pay the debt out of any available funds before any assets are distributed to your heirs. If you estate does not have enough assets to cover your entire debt, then most types of debt die with you.

However, there are exceptions.

For example, any family member who still lives in a house with a mortgage would be responsible for the mortgage payments, if he or she wishes to stay in the home.

What this means is this: you should not worry about most debt being a burden to your family. However, if you wish to ensure that your debt does not eat up the inheritances of your heirs, then you should do some estate planning to avoid that.

Reference: Market Watch (May 29, 2017) “What happens to your debt when you die?”