Estate Planning: Helping Protect Your Interests

Death to Death Taxes: The Future of the Estate Tax Under the Proposed Tax Plan

Brian C. Zaldivar

Brian C. Zaldivar




Authored by Brian C. Zaldivar with contribution from Misty A. Watson

“Death will no longer be a taxable event in America,” said U.S. Vice President Mike Pence during a speech to a Michigan crowd in late September 2017.  Among the many proposed tax revisions, the House (“Tax Cuts and Jobs Act” or “H.R.1”) and the Senate’s proposed bills have increased the credit against the estate, gift, and generation-skipping transfer tax. The House eventually repeals the estate and generation-skipping transfer tax; however, the Senate allows the estate tax and gift tax to remain intact.

Under current law,

  • Property in an estate is generally subject to a top tax rate of 40% before it passes to the estate’s beneficiaries.
  • Additionally, property that is transferred beyond one generation, whether by bequest or by gift, is subject to an additional generation-skipping transfer tax, also with a top tax rate of 40 percent.
  • The first $5 million worth of transferred property is exempt from the estate, gift, and generation-skipping taxes, in any combination thereof. This amount is known as the basic exclusion amount and is indexed for inflation ($5.49 million for 2017).
  • Transfers between spouses are excluded from these taxes, and when an individual dies without his or her assets exhausting the basic exclusion amount, any unused basic exclusion amount passes to his or her surviving spouse, with a top basic exclusion amount of $10.98 million for 2017.
  • When a beneficiary receives property from an estate, the beneficiary generally takes a basis in that property equal to its fair-market value at the time the decedent dies, which is known as taking a step-up in basis. However, when a donee receives a gift from a living donor, that donee generally takes the donor’s basis in that property, which is known as taking a carryover basis.

As proposed in H.R.1 and the Senate Bill, Continue reading »

It’s Official: ABLE Accounts Now Available in Missouri & Illinois

Misty A. Watson

Misty A. Watson




After much anticipation, Achieving a Better Life Experience (ABLE) accounts may now be opened in both Missouri  (where they are called STABLE accounts) and Illinois.

These new accounts are designed for individuals with disabilities who developed their disability before age 26. Individuals who meet the age criteria and are currently receiving Supplemental Security Income (SSI) or Social Security Disability Income (SSDI) benefits are automatically eligible for an ABLE account. Individuals not currently receiving benefits but who meet the age requirement can open an ABLE account if they satisfy SSI criteria for “functionality limitations.”

The ABLE Act allows an individual with a disability – and his or her family – to put funds into a tax-advantaged account. ABLE account funds may be used for qualified expenses of living with a disability. In addition to medical expenses, funds may be used for basic living expenses, education, housing, transportation, employment, assistive and personal support services, health care, legal fees, health and wellness, financial management, and administrative services. Continue reading »

Understanding the Special Needs Trust Fairness (SNTF) Act

Misty A. Watson

Misty A. Watson




With the passing of the Special Needs Trust Fairness (SNTF) Act, individuals with a disability under the age of 65 may establish a first party special needs trust on their own behalf. Prior to the SNTF Act, special needs trusts could only be established by a parent, grandparent, legal guardian, or court.

Special Needs Trusts

Special needs trusts are established for the benefit of individuals with a disability to supplement the financial assistance they receive from government programs, namely Medicaid. Special needs trusts are valuable tools for maintaining Medicaid and Supplemental Security Income (SSI) eligibility, as funds held in a special needs trust are not considered when determining an individual’s eligibility for financial assistance under such programs.

Eligibility

To establish a SNT on their own behalf, the individual must be capable of making financial decisions and be under the age of 65. If eligible, individuals with disabilities enjoy increased autonomy and self-direction under the SNTF Act, especially in cases where living relatives or guardians are unable or unwilling to establish a trust on the individual’s behalf. Continue reading »

Rights of Will and Trust Beneficiaries

Jeffrey R. Schmitt

Jeffrey R. Schmitt




After the death of a family member, people are often left wondering what interest they have in the deceased’s assets. At a time of grieving, it can be difficult to know where to begin. Lack of information or misinformation can leave potential beneficiaries in the dark as to the manner in which the deceased’s assets will be transferred.

Obtaining Wills, Trusts, and Other Documents

Fortunately in Missouri, and many other states, potential beneficiaries have rights allowing them access to information regarding the estate. In Missouri, if a will exists for a decedent, the original will must be filed with the probate court upon the death of the creator of the will. The will becomes public record at that point. If a family member believes that a will exists but has not been filed, that family member can open a probate estate with the court in order to try and require production of a will or other estate plan documents.

Similarly, trust beneficiaries often have rights to obtain copies of trust documents. Trusts do not have to be filed with the court but instead may be maintained privately by the named trustee. However, in most circumstances, trust beneficiaries are entitled to a copy of the relevant trust documents and can require production of them through a lawsuit, if necessary.

Accounting of Assets

Trustees, executors, administrators, and agents under a power of attorney all have some duty to account as to the assets and liabilities of the probate estate or trust.  After being appointed by the probate court, executors and administrators of wills have an obligation to file an inventory of assets and a corresponding obligation to advise the court concerning the liquidation or disposition of those assets.

Trustees of trusts have similar accounting requirements and are required by law to provide periodic accountings to the beneficiaries showing the assets, liabilities and expenses of a trust. If any of these fiduciaries fail in their accounting obligations, certain categories of heirs and beneficiaries have rights to compel the executor, personal representative, or trustee to prepare accountings and either file them with the court or provide the accounting to beneficiaries.

Discovery of Assets

A common concern for beneficiaries in estate matters is that a personal representative is hiding assets, has dissipated assets, or has incurred unnecessary or extraordinary expenses (which could be for the personal representative’s own benefit). However, the law provides certain rights for beneficiaries  to make inquiries and investigate possible improper dissipation of assets by filing a lawsuit to conduct an investigation.

Discovery of asset proceedings are not only limited to decedent’s estates but also can be used to investigate conservatorships or situations where a power of attorney is misused.

Will and Trust Contests and Construction Actions

A more extreme remedy that goes beyond investigation is asserting wrongdoing with respect to the creation or amendment of estate plan documents and filing a lawsuit to contest the estate plan documents. People who believe they are aggrieved by an estate plan (including a will or a trust that was either created or amended improperly) have the right to file a lawsuit to try to set aside those estate plan documents.

Reasons for contest actions include concerns that the estate planning documents were improperly executed, that the decedent lacked requisite mental capacity at the time the documents were signed, or that other family members or friends unduly influenced the decedent to make or change their estate plan.

Additionally, some estate planning documents may be drafted in a way that leaves questions as to who the correct beneficiaries are or what interests they might have, and a will or trust construction lawsuit provides the ability to have a court review the estate planning documents in question and make orders clarifying the terms or concluding the identities of the proper beneficiaries.

As is the case with many lawsuits and requirements of the probate and trust codes, many of the above procedures and remedies have strict time requirements or statutes of limitation. While these can be difficult situations after dealing with the loss of a family member or loved one, it is vital that someone who has questions or is concerned about possible wrongdoing take action as soon as possible so that their rights do not expire.

Posted by Attorney Jeffrey R. Schmitt. Schmitt represents businesses and individuals in civil and commercial litigation matters including banking and finance, real estate, condo and homeowners associations, probate, professional liability defense, title disputes, transportation, and pension and retirement plans. 

 

Special Needs Trusts Can Now Be Created by Individuals

Misty A. Watson

Misty A. Watson




On December 13, 2016, the long awaited amendment to the Special Needs Trust Fairness Act was signed into law by President Obama.

For more than 20 years, individuals who had a disability were unable to create a self-settled special needs trust without a parent, grandparent, or legal guardian participating in the process. The only other option for an individual with a disability was to have the court create the trust on his or her behalf. This was often an incredibly costly process. Continue reading »

Understanding the ABLE Act

Misty A. Watson

Misty A. Watson




Co-authored by Misty Watson and Samantha Maerz

“A major victory for the disability community, ABLE, for the first time in our country’s policy on disability, recognizes that there are added costs to living with a disability….For far too long, federally imposed asset limits to remain eligible for critical public benefits have served as a roadblock toward greater financial independence for the millions of individuals living with a disability.” – Michael Morris, Executive Director of the National Disability Institute

Savings accounts for individuals with disabilities will soon be possible without risking their access to federal benefits. On December 19, 2014, the Achieving a Better Life Experience (ABLE) Act was signed into law by President Barack Obama after receiving huge bipartisan support in both the U.S. Senate and House of Representatives. The ABLE Act is an amendment to the federal tax code that eliminates the $2,000 cap on conventional savings accounts for individuals with disabilities to qualify for Supplemental Security Income (SSI) and Medicaid.

Eligibility for many federal benefits, such as SSI, SNAP and Medicaid, requires that individuals meet a means test. Part of that test includes that an individual can report no more than $2,000 in savings. However, such a uniform test failed to recognize the additional costs of living with a disability. The ABLE Act seeks to remedy this unfairness by allowing a tax-advantaged savings account to supplement federal benefits, rather than supplanting them. Continue reading »

Estate Planning for Second Marriages

Misty A. Watson

Misty A. Watson




Prior to saying “I do,” those getting married for a second time have many more estate plan considerations to take into account than a first-time marriage.

Children from the previous marriage and spouses often have different interests and expectations about inheritance. If a large difference in age or health status exists between the new spouses, further complications can arise.

Without some type of waiver of spousal rights, a surviving spouse may have a right to elect against the estate plan that is put in place. In Missouri, this means the surviving spouse may receive one-third (1/3) of the estate, even if the will only provides for the children. Continue reading »

Estate Planning – Why It’s Important for You

Misty A. Watson

Misty A. Watson




Recently we’ve heard a number of stories about estate planning blunders that have resulted in huge tax costs and undesired distribution of assets. While a $50 million mistake certainly makes for good headlines, the fact is that quality estate planning is not just for the rich and famous.

It is common for people of all kinds to find themselves in similar situations when loved ones die, albeit with less fortunes involved – all because the deceased did not plan appropriately for death or disability.

Estate planning is all about your control over what happens to the assets you have accumulated during your life (including planning to minimize estate tax) and your control over your health care decisions.

Benefits of Estate Planning

1.    Avoiding probate of your assets. Probate is a court process by which the heirs of an estate are determined and the deceased person’s assets are distributed to those heirs. The benefits of avoiding probate include:

  • Your assets can be distributed to or held for your beneficiaries in a timelier manner.
  • Your estate avoids costly statutory attorneys’ fees.
  • Assets can be held for minor children without court involvement.
  • Your estate is distributed to your intended beneficiaries versus under Missouri law. Continue reading »

Costs of Raising a Child with Special Needs: The Story of Finn

Misty A. Watson

Misty A. Watson




Meet Finn and his family. Finn is a real boy with autism.

Finn’s father, Jeff Howe, shared his family’s story in “Paying for Finn: A special-needs child” for CNN’s Money Magazine. According to Howe, Finn is representative of 8% of all U.S. children because he is a child with special needs: he is autistic. His household is one of 25% of all U.S. households with a family member with special needs.

As the Howe family has learned, raising a child with special needs comes at great cost, both financial and emotional. Howe goes into great detail explaining his family’s journey with Finn. He does not hold back from sharing the specifics of his family’s finances and the costs associated with Finn’s care.

The financial burden for raising a child with special needs is staggering, to say the least, even for a family with considerable means. For families with less financial resources available to them, the financial burden is even more overwhelming. Continue reading »