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Life, Death and Estate Planning

October 27, 2016 by mary.r

“Dying is a very dull, dreary affair. And my advice to you is to have nothing whatever to do with it.”
-Somerset Maughan. While we much prefer to focus on living and not what happens when life comes to end; it is imperative to plan for after death. There are some basic reasons estate planning is a necessity but an experienced estate planning attorney can offer you and your loved ones many other benefits. Get help and make the logistics of your passing as painless as possible for those left behind.

The basic reasons for estate planning are to legally make your wishes for your estate and assets after your death known, as well as establish healthcare and financial powers of attorney in the event of your incapacity. Estate planning allows you to manage the division of your estate no matter how large or small. The sad statistic is that only around 50% of people have a living will or trust. While it may be unpleasant to think about, a lack of planning can leave your estate and loved ones in the lurch. Without a will or trust, state laws will dictate how your estate will be divided. Similarly, if you are ever in the position of needing someone to make medical decisions on your behalf, the person to do this is determined by the courts and not by your choice. If left up to the state, you could have a relative that doesn’t understand or care about your situation making important medical decisions on your behalf. Estates without wills or trust can also create conflicts and rifts between family members that can never be repaired. Lawsuits can be brought and by the time the dust settles (and taxes have been collected), there may be very little left. Love the people around you enough to plan for the inevitable and put your wishes in a binding legal document.

Besides the primary benefits of estate planning there is much more that a good estate plan can do. Creating a plan is especially important if you have children. If you have minor children you need to establish funds for their care and education as well as designate the person responsible for raising them in your absence. An estate planning attorney can also help you structure provisions for your children, whether they are minors or adults. If you have a child that you worry is not able to independently manage his/her inheritance you can establish a trust with conditions that can protect your child. This can be accomplished any number of ways depending on your concerns. If you have a child that has difficulty managing money, you can set up a distribution schedule. If your child has a previous history of drug abuse his or her inheritance can be contingent on passing regularly scheduled drug tests or tests can be requested at the discretion of an appointed trustee. In addition if you have a child with special needs you can establish a trust to help him/her without losing benefits under government programs. A special needs trust can provide for a child’s living expenses and care; however the trust can also impact government funds received such as social security benefits. It is important in any of these scenarios that you work with one of the many qualified Arizona estate planning attorneys to properly setup the appropriate trust.

Blended families in particular need to consult with a qualified estate planning attorney. Prior planning can protect your children’s inheritance. If you have children from a previous marriage and you remarry and don’t have a trust, in the event of your death, your assets may pass to your new spouse to the exclusion of your children and vice versa. An advanced, legally implemented plan can prevent this from happening by ensuring your children and/or spouse inherit as you designate.

Planning can extend even further. If your adult child receives his or her share of your estate outright it is subject to community property considerations. This means in the event of divorce it could be considered community property and split with your child’s soon to be ex-spouse. If the inheritance is put into a trust, the trust owns the assets not your child. When setup correctly, the trust can be effective at preserving the assets for your child’s benefit only. In this day and age when about 50% of all marriages end in divorce, estate planning is a wise strategy to protect your beneficiaries.

Estate planning, done correctly, can also maximize your tax efficiency and increase what you have left to leave to your beneficiaries. Life insurance policies can be placed in trust to avoid probate and minimize taxes. You have many options when it comes to vehicles to maximize your tax savings. Charitable remainder trusts, qualified personal residence trusts, and irrevocable trusts all have tax savings potential. A charitable remainder trust can benefit the charity of your choice while also generating tax savings for yourself. Each of these approaches has requirements that must be met in order to receive the tax benefits. You need an estate planning attorney to match the correct planning tools to your goals in the most efficient way possible.

Whether your concerns are family or financial, consulting with an estate planning attorney is not just recommended, it is essential. Let an expert review your situation and work with you to create a comprehensive and effective estate plan. Call our office today at 480-998-0999.

Are Living Trusts Effective at Avoiding Probate?

October 13, 2016 by mary.r

“The longest Will ever admitted to probate was 1,066 pages, and 95,940 words long! It was bound in 4 volumes. (Frederica Evelyn Stilwell Cook). It went to probate in 1925.” Even if your estate does not warrant a 1,066 page will you should provide for your heirs and estate with proper planning. The administration of your estate after your death does not have to be a cumbersome, painful process. Avoiding probate can save time, money and unnecessary headaches. There are some distinct advantages to creating a living trust instead of a will. One of those advantages is avoiding probate.

Why would you want to avoid probate? The probate process is a court procedure that involves establishing the validity of the will and administering the will as requested by the deceased. The validity of the will and the nominated administrator of the will have to be affirmed by the court. Creditors of the deceased have to be notified and paid. Assets may need to be appraised and sold prior to being distributed to heirs. Every individual state has its own laws regarding probate. If an estate goes to probate it will incur court costs as well as lawyer fees. Some people choose to try and administer estates through probate without legal assistance although this is not advisable. While hiring a probate attorney will cost money, there are many legal filings and deadlines that need to be met and the assistance of an attorney can be extremely helpful. If you are able to avoid probate altogether you can also avoid probate fees and legal costs associated with probate leaving your heirs with more to inherit. Probate also takes time. Going through probate and all the required legal steps can be a lengthy process. When going through probate, beneficiaries of the estate may wait a year or more depending on the complexity of the estate to collect their inheritance. In addition, probate is processed in open court. It is a public process so the details of the estate, debts and distribution become public knowledge. The details of your will become part of the public record and available to anyone that cares to review it. Probate is a slow, public and potentially expensive process.

How does a living trust avoid probate? If probate does not sound like the best option for you, you can create a living trust and transfer assets to it. A living trust is similar to a will in that it is a legal way to document your wishes for your estate after your death. A living trust is a basically a holding vehicle for your assets. Some assets such as pensions and annuities should be put into the trust for tax reasons; rather than pass them by beneficiary designation. The trust holds your assets during your lifetime and then transfers them to your beneficiaries after your death. You will appoint a successor trustee to handle the distribution of your assets as dictated in the trust. Your living trust bypasses the probate process altogether, “Property you transfer into a living trust before your death doesn’t go through probate. The successor trustee… simply transfers ownership to the beneficiaries you named in the trust. In many cases, the whole process takes only a few weeks, and there are no lawyer or court fees to pay. When all of the property has been transferred to the beneficiaries, the living trust ceases to exist.” A living trust is an excellent way to avoid the expense and time that probate incurs. Because your trust never goes to court, it is never made part of the public record. In this way, the terms of your living trust are able to remain private.

Living trusts are very effective at avoiding probate and beyond those already listed have some additional advantages. If you create a revocable living trust you can move assets in and out of the trust as you wish throughout your lifetime. A living trust also allows your chosen representative to act on behalf of your estate in the event of your becoming incapacitated.

There are a few instances when a living trust will not help you avoid probate. For instance, if you create a living trust but do not put your assets in the trust, then those assets will go to probate at the time of your death. That is why Living Trusts are usually created in conjunction with a special type of will known as a “pour-over will.” A pour-over will is a last will and testament that serves as a safety device to capture any assets that are not transferred to or included in a living trust and that do not pass by beneficiary designation or survivorship. An important part of creating a living trust is that it needs to be “funded,” meaning that your personal assets must be transferred into the trust document via the trust document and/or re-titling the assets in to the trust’s name. While “funding” a living trust can be an easy process, sometimes assets don’t always make it to the trust for a variety of reasons.”

Work with your estate planning professional to determine if a living trust is right for you. Not all assets automatically go through the probate process and depending on the size and items within your estate this may or may not be the proper estate planning vehicle for you.

What are Some Questions that I Should Ask a Lawyer Who Does Estate Planning for People Over 50?

October 10, 2016 by mary.r

“Death, like taxes, is certain. And like taxes, it’s one of the least pleasant topics to contemplate, let alone discuss with others. Even so, a recent Gallup Poll* indicates half of American adults have faced up to the inevitable and written a last will and testament, directing where or to whom their worldly assets should be distributed when they leave this one.” If you are one of the 50% who have already created a legal document as part of your estate plan there is still some work to be done to ensure your document continues to meet your goals. If you are one of the 50% who has not created a will or trust, you need to start working on expressing your wishes in a legal document and then some. For people over 50, working with an estate planning attorney is wise, and here are some important questions you need to ask.

Do I have adequate life insurance and long term care in place? If you have minor children you should have a life insurance policy in place for the unexpected to make sure that your family and loved ones are taken care of financially. You should also have something in place in the event you need long term care down the road. There are many policies and options available to cover these possibilities. “Long-term care insurance policies reimburse policyholders a daily amount (up to a pre-selected limit) for services to assist them with activities of daily living such as bathing, dressing, or eating. You can select a range of care options and benefits that allow you to get the services you need, where you need them.” If you do not have a life or long term care policy and are unable to get one it would be prudent to put money aside for these expenses. Have your estate planning attorney review what you have in place now and make sure that you have adequate coverage or assets in place.
Is my will or trust up-to-date? This is an important item to review with your estate planning attorney. Whenever a life or financial event occurs you should have your will or trust reviewed for any needed updates. If you have additional children you will want to make sure they are included in the inheritance of your estate, and make sure that your estate plan makes provisions for their care. If you create a trust you should review it regularly to make sure your beneficiaries on all accounts and life insurance policies are listed correctly. Your estate planning attorney will guide you in determining when to name your trust as the primary beneficiary and when it is prudent to name an individual such as your spouse. You should also review your documents to ensure that your financial and medical powers of attorney are accurate. Sometimes relationships between loved ones can change and you will want to be sure that the people listed are still the individuals best suited for their respective positions.
Is my estate plan tax efficient? You want to plan ahead for retirement and possible tax consequences. Review your entire estate with an experienced estate planning attorney and explore possible tax savings vehicles such as a charitable remainder trust. There are avenues to achieve tax savings depending on your specific situation so work with a trusted expert to find those that best fit your estate plan. When looking at your long term financial plan keep in mind that once you reach 70 1/2 years of age you will be have to take Required Minimum Distributions from some of your retirement accounts.
Does my current estate plan match my goals? Do you want to save your existing accounts and assets to leave as an inheritance or are you hoping to retire early or with a higher standard of living? Consult with your estate planning attorney to make sure your accounts, assets and existing plan match your short and long term goals.
What should I do with my business? If you are 50 or older and a business owner you may be wondering what to do with your business when you are ready to retire. It’s good to start putting that plan together now; whether you want to retire tomorrow or in 30 years. There are many options for business owners; you can sell your business, leave it to your heirs, or establish a succession plan that is a melding of the two. Your financial circumstances and personal preferences will dictate how to move forward. Regardless of which choice is best for you, you will need properly drafted legal documents to successfully transfer or leave your business to others. Proper estate planning and business succession planning can make all the difference to your finances now and your heirs after your death.

Estate planning is so important to your present, future and legacy. Regardless of your age, if you do not have a will or trust in place; please start putting one together now. We often take tomorrow for granted even though it’s never guaranteed. If you are 50 or older and working with an estate planning attorney, ask the questions above to assist you in establishing your estate plan.

Tax Planning Guide: Scottsdale Lawyer’s Tax Planning Guide

October 3, 2016 by mary.r

Have you heard the saying the early bird gets the worm? When it comes to your tax filing, failing to plan can be expensive. The early bird doesn’t just file tax returns on time; he or she plans for tax time well in advance. Tax preparation is what sets you up for optimum success. The more you work with your tax planning professional the more you are able to take advantage of all available deductions and incentives. The first step in efficient tax planning is to regularly communicate with your tax planning professional and get started early. Every person’s situation is unique and your tax professional will know exactly what information is needed to get your tax strategy implemented prior to the actual filing. Here is a Scottsdale lawyer’s tax planning guide of things you can do and items you can gather to get you started:

Get organized (if you aren’t already). You will want all your paperwork and statements accessible in one safe place. Try to put all pertinent documents together, such as your W2’s, 1099’s, interest statements, and the items listed below, preferably in a fire proof safe. This will make it much easier to find everything when it is time to visit your tax professional.
Your mortgage statement. According to the IRS “You can deduct home mortgage interest if all the following conditions are met.

You file Form 1040 and itemize deductions on Schedule A (Form 1040).
The mortgage is a secured debt on a qualified home in which you have an ownership interest.”

Second homes and home equity loans may also qualify for the mortgage interest deduction. Second homes are eligible provided they are not classified as rental homes and home equity debt may qualify for the mortgage interest deduction with limitations.

Charitable donation receipts. Charitable donations are only deductible if you itemize on the 1040. Charitable donations must be made to qualifying organizations to qualify for the deduction and you must retain a record of the donation such as a receipt or acknowledgment letter. There are various IRS forms that will need to be filled out depending on the type and amount of your donation. Keep meticulous records and receipts of all charitable giving.
Healthcare: proof of coverage and expenses. For 2015, the IRS has created three different information forms relating to your healthcare coverage. You will determine which form to use based on how you obtained healthcare coverage for the year. If you obtained healthcare through the Marketplace you may be eligible for a premium tax credit and should receive a form 1095-A. While the IRS does not require you to send proof of your healthcare coverage with your return, you should keep these records on file and provide them to your tax planning professional in case of an audit down the road.

You may also want to calculate your medical expenses for the year. Your medical and dental expenses may be tax deductible. The IRS stipulates that you must itemize in order to take the deduction and you can only deduct expenses over 10% of your adjusted gross income, (7.5% for certain tax payers). Work with your tax planning professional to determine if your medical expenditures meet the minimum IRS requirements.

Mileage documentation: Mileage deductions can be taken but you must have carefully documented records. Miles for business, charity or medical purposes may be deductible. The news is even better if you are self-employed. According to usnews.com “For 2016 tax filings, the self-employed can claim a 54 cent deduction per business mile. Those miles could be racked up from meetings with clients, travel to secondary work sites or errands to pick up supplies. “You may be going to Office Max to buy paper for your printer,” Dietrich says, “or scouting out locations for a photography shoot.” Unlike some of the other mileage deductions available, mileage for self-employed workers isn’t subject to any threshold requirements. In other words, all miles are deductible regardless of how much a person drives for work.”
Business reports and deductions. The list of possible business deductions is extensive. In a perfect world you have already consulted with your tax planning professional in order to establish your business entity and strategize for your taxes. It is helpful to submit your profit and loss statement and balance sheet to your tax planning professional so that he or she can confirm you have allocated and categorized your books correctly.

According to the IRS business expenses may be deductible if they are ordinary and necessary. “It is important to separate business expenses from the following expenses:

The expenses used to figure the cost of goods sold,
Capital Expenses, and
Personal Expenses.”

Other possible business deductions include automobile expenses, employee gifts, startup costs, legal and professional fees, home office expenses and furniture and equipment costs and depreciation. Each of these deductions has specific criteria, established by the IRS, which must be met. For your protection, you should always keep receipts and records in the event of an audit.

Most recent account statements. Your most current account statements will give your tax professional valuable information. These statements will help determine if you have maxed out your 401k contributions. The statements will also reflect any required minimum distributions (RMD’s) if you are 70 1/2 or older.

Every person’s finances are unique and need specific and detailed planning. This Scottsdale lawyer’s tax planning guide should give you a good starting place. The best strategy you can have when tax planning is to partner with a tax planning professional. Together you can map out your tax savings strategy and put as much of your hard earned money as possible where it belongs; back in your pocket.

When Should You Go Visit A Tax Planning Attorney?

September 26, 2016 by mary.r

Would you rather leave your hard earned money to your loved ones or to the tax man? Tax laws can be complicated and convoluted and estate planning is just one of many reasons you need to visit a tax planning attorney. If you find yourself in any of the situations below, be sure to consult with an experienced attorney and save yourself as many tax dollars as possible. Put your hard earned dollars where you want them to go, and not into Uncle Sam’s pocket.

You are leaving money or assets to loved ones. Whenever you are considering estate planning you should also take into consideration tax implications and visit a tax planning attorney. Tax planning and estate planning go hand in hand and work in tandem to plan for your wealth long-term. By consulting with a tax attorney you can often save yourself taxes on your estate now as well as your beneficiaries when it comes time for them to inherit. In some situations, it is better to gift your estate to your heirs a little at a time while you are still alive. You should also consider your state’s tax laws and how they will impact your estate. If you are creating a will or trust to distribute your assets, consult with a tax planning attorney to maximize the amount your heirs will inherit and minimize estate taxes.
You want to build a legacy. Leaving part of your wealth behind as a legacy might include creating a scholarship fund or gifting your estate to an educational institution. However you decide to leave your legacy, you need to plan and strategize. You should articulate what your financial goals are and make sure you are using tax laws to maximize benefits and available deductions while achieving those goals. Visit a tax planning attorney and ask for a sound advice.
You need specialized trusts. If you are considering a charitable trust or want to utilize a specialized trust to improve your estate tax, work with a tax planning attorney. For instance, a charitable remainder trust can be established and your estate and the charity of your choice can both enjoy tax benefits.

A specialized trust could also be used to address the disbursement of your estate for a child that has special needs or has excessive spending habits. Any of these scenarios greatly benefit from a knowledgeable tax attorney.

You are moving out of state. While it sounds so simple, an out of state move should warrant a visit to a tax attorney. Tax laws vary drastically from state to state and you will want to consult with an expert in your new location to make sure your current plan still makes sense. For instance, according to retirementliving.com, “Many people planning to retire use the presence or absence of a state income tax as a litmus test for a retirement destination. This is a serious miscalculation since higher sales and property taxes can more than offset the lack of a state income tax. The lack of a state income tax doesn’t necessarily ensure a low total tax burden.” A skilled tax attorney can looks at the state’s tax laws and help make sure you are taking advantage of all available deductions and not getting penalized with state tax unnecessarily.
Life changes happen, whether by choice or unexpectedly. Hopefully, you already have a tax strategy in place. Many factors go into this strategy such as your gross income, number of deductions, when you’d like to retire, etc. If you suffer a job loss, death of a close relative, birth of a child or any other life altering event; you should consult with your tax planning attorney. Any one of these items could impact your overall tax strategy which may need to be adjusted. Your tax planning should be an ongoing conversation that has room to be maneuvered and changed if needed.
You are starting a business. Congratulations! Starting a business is a huge step. Before you file any entity paperwork, consult a tax planning attorney. The specifics of your business setup can cost or save you a bundle in taxes. Your situation and financial projections will help determine if you need to set up an S-corp, C-corp, or LLC. The structure of your business and your long term plans need to be assessed to make sure your money is going back into your business and not to taxes.
You currently own a business. If you already have an established business you may still benefit from meeting with a tax attorney. There are many strategies and deductions available and you should be taking advantage of as many as possible. Entrepreneur.com gives a small sampling of tax tips for businesses. They list items such as putting your children on the payroll, implementing a 401k and purchasing a vehicle and taking advantage of the depreciation deduction. Not every available deduction will fit your situation and this list given by Entreprenuer.com is far from comprehensive. Existing business owners also need to consider their exit strategy. What does your business succession plan look like? Are you planning on selling your business or passing it down to your children? These are all questions that have potentially expensive tax implications. Work with your tax planning attorney to see which tax saving solutions fit your business.
You are considering paying medical or educational expenses for a loved one. If you would like to financially assist a loved one, work with a tax planning expert to see if paying for educational or medical expenses is the best financial route. While there is a gift exclusion of $14,000 for 2016, per the IRS, you may be able to give more money tax free by paying directly for medical or educational expenses. In each instance, the money has to go to the institution directly; but there is no dollar amount cap to how much you can pay for your loved ones medical care or education tax free. There are other limitations and caveats for each, so work with your tax attorney to make sure you are correctly using this strategy.

Your hard earned money is your own. Work with a tax planning attorney to keep it that way. If you find yourself in any of the scenarios above, it is particularly important to make the most of every tax advantage possible.