IRS Announcement: Estate Tax Closing Letters Will Now Only Be Issued Upon Request

Due to the increased volume of federal estate tax return filings in order to make the “portability election,” the IRS has announced that estate tax closing letters will only be issued upon request by the taxpayer. This change in IRS policy started on June 1, 2015.

What is the “Portability Election” and How is the Election Made?

The “portability election” refers to the right of a surviving spouse to claim the unused portion of the federal estate tax exemption of their deceased spouse and add it to the balance of their own exemption. The portability election went into effect for deaths occurring on or after January 1, 2011. 

To properly make the election, a surviving spouse must file a federal estate tax return within nine months of the date of a spouse’s death, although a six-month extension of time to file the return can be requested. Filing an estate tax return is required to make the election even if the value of the deceased spouse’s estate does not exceed the federal estate tax exemption.

A Portability Example:

The easiest way to understand how portability works is through an example.  Let’s say Carol and Bob are married, all of their assets are jointly titled with rights of survivorship, their total estate is valued at $4 million, and neither spouse made any taxable gifts during their lifetimes.  If Bob dies in 2015, none of his $5.43 million federal estate tax exemption will be needed since Carol will automatically inherit the entire estate through rights of survivorship.  In addition, a federal estate tax return will not otherwise be required for Bob’s estate since it is valued under $5.43 million.

Nonetheless, if Carol wants to pick up Bob’s unused $5.43 million exemption and add it to her own exemption so that she can pass on up to $10.86 million when she dies, she can timely file an estate tax return for Bob’s estate and make the portability election with regard to Bob’s unused exemption.

What is an Estate Tax Closing Letter?

An estate tax closing letter is a document drafted by the IRS after it determines that an estate tax return has been accepted as filed—or that all required adjustments have been completed.  In other words, the closing letter provides written proof from the IRS that all federal estate tax liabilities have been satisfied. An estate tax closing letter is often necessary to sell or distribute property.

New Rules for Issuance of Estate Tax Closing Letters:

Prior to June 1, 2015, the IRS automatically issued estate tax closing letters.  However, the IRS recently announced the following on its website in response to the increased number of federal estate tax return filings for the sole purpose of making the portability election: 

“For all estate tax returns filed on or after June 1, 2015, estate tax closing letters will be issued only upon request by the taxpayer.  Please wait at least four months after filing the return to make the closing letter request to allow time for processing.  For questions about estate tax closing letter requests, call (866) 699-4083.”

The portability election provides another strategy that estate planning attorneys can use to lessen the burden of death taxes on your family. Like any other tax or legal strategy, you should seek legal advice from an estate planning attorney to select the strategies that will work in your situation. If you have any questions about federal estate tax returns, the portability elections, or the new rules regarding the issuance of estate tax closing letters, please feel free to contact us.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

How Will the 2015 Supreme Court Decisions Affect You and Your Family?

While approximately 10,000 cases are appealed to the U.S. Supreme Court each year, only 75 to 80 make it to oral argument.  Of those cases, only a minuscule few grab the media’s attention.  Below is a summary of three landmark decisions handed down in 2015 that could affect how you are taxed, pay for healthcare, and plan your estate.

Comptroller v. Wynne – A State Can’t Double Tax Income Earned Outside of the State:

Legal Issue:  Does Maryland’s state income tax scheme violate the U.S. Constitution by “double taxing” a resident’s income earned from economic activity in another state that also taxes the same income?

Decision, 5 – 4:  In a taxpayer-friendly ruling, the Supreme Court ruled that, yes, Maryland’s “double taxation” scheme violates the dormant Commerce Clause.

The Wynne case involved a Maryland couple who owned stock in a Maryland S corporation that did business in 39 states.  Since income generated by an S corporation is passed through to its shareholders, the Wynnes paid income taxes in Maryland as well as their pro-rata share of taxes on the income the corporation earned in the other states. 

In Maryland, residents are subject to a state income tax as well as a “local tax” based on the city or county in which they live.  Prior to the Wynne case, the state allowed residents to take a credit against the Maryland state tax to offset a similar tax paid to another state, but it did not allow a credit to be taken against the local tax.  Thus, income of a Maryland resident earned outside of the state was “double-taxed” by being subject to: (1) out-of-state taxes, and (2) the local city or county tax.  The Court struck down this “double taxation” scheme, holding that because the dormant Commerce Clause gives Congress power over interstate commerce, Maryland could not hinder interstate commerce by offering a credit against state income taxes but not against local income taxes.

Planning Tip:  The Wynne decision will potentially affect hundreds of cities, counties and states other than Maryland, including Indiana, New York, and Pennsylvania.  If you pay income taxes in your home state and other states, you should seek qualified tax advice regarding filing protective claims (such as amended returns or requests for refunds) for tax years in which the statute of limitations has not run.

King v. Burrell – Obamacare Subsidies Are Available to All:

Legal Issue:  Can the IRS provide tax-credit subsidies to healthcare coverage purchased through the federal healthcare exchange under the Patient Protection and Affordable Care Act (the “ACA,” commonly referred to as “Obamacare”)?

Decision, 6 – 3:  Yes, Obamacare subsidies are available to individuals who obtain their healthcare coverage through a federal exchange.

Buried in the 2,700-page ACA is a provision which states that tax-credit subsidies are available to individuals who sign up for healthcare coverage “through an exchange established by the state.”  After the ACA was passed, 34 states did not establish exchanges, leaving their residents to use the federal exchange to obtain their coverage.  The King case challenged the validity of federal subsidies given to these residents since the ACA appeared to limit subsidies only to individuals who relied on a state-established exchange.  Writing for the majority, Chief Justice John Roberts stated, “We doubt that is what Congress meant to do.”  Thus, the validity of subsidies claimed by residents of the 34 states that use the federal healthcare exchange was upheld.

Planning Tip:  Despite the King decision, the Obamacare debate will continue to be hashed out in the political arena as the 2016 presidential election fast approaches.

Obergefell v. Hodges – Same Sex Marriage is Legal Everywhere in the United States:

Legal Issue:  Does the Fourteenth Amendment of the U.S. Constitution require a state to license same sex marriages and recognize same sex marriages that are legally licensed and performed in another state?

Decision, 5 – 4:  Yes, same sex marriages are legal and must be recognized everywhere in the United States.

The Obergefell case consolidated four cases that challenged state-banned same sex marriages in Kentucky, Michigan, Ohio and Tennessee.  Relying on the Due Process and Equal Protection Clauses of the Fourteenth Amendment, the Court held that marriage is a fundamental liberty and denying the right of same sex couples to wed would deny them equal protection under the law.

Planning Tip:  Same sex couples who are considering marriage need to decide if commitments regarding how to handle money, debt, and related matters should be formalized in a prenuptial agreement.  Same sex couples who are already married need to determine if their prenuptial agreement should be fine-tuned and if their estate planning documents need to be amended in view of the King decision.

The Bottom Line on the Wynne, King and Obergefell Decisions:

There are constant changes in the law from judicial, legislative, or regulatory action. These selections from the recent Supreme Court session are just a small example of the numerous changes that occur every year. How the Wynne, King and Obergefell decisions will affect your planning options has yet to be fully determined. Our firm is available to answer your questions about these landmark cases and how they may affect you and your family.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

5 Most Expensive States for Retirees in 2015

While there are many factors to consider when choosing the place where you will retire, the ones that will impact your wallet may be the most important.  Why?  Because having a low crime rate and beautiful weather will be irrelevant if high costs deplete your retirement nest egg faster than anticipated. 

Recently Investopedia.com compared cost-of-living and tax-rate data from Bankrate.com’s list of “Best and Worst States to Retire” and Kiplinger’s list of “10 Worst States for Retirement” to come up with their list of “The Most Expensive States to Retire In.”  We’ve added Genworth’s “2015 Cost of Care Survey” to the mix to come up with our five most expensive states for retirees when comparing cost of living, tax rate, and long-term care expenses (as listed in alphabetical order):

• Connecticut ranks #3 in tax rate and cost of living and #2 in long-term care expenses.  Along with a state estate tax, Connecticut is also one of only two states that collect a state gift tax (New York is the other).

• New Jersey ranks #2 in tax rate, #6 in cost of living, and #4 in long-term care expenses.  Along with a state estate tax, New Jersey is also one of six states that collect a state inheritance tax.

• New York ranks #1 in tax rate, #4 in cost of living, and #5 in long-term care expenses.  Along with a state estate tax, New York is also one of two states that collect a state gift tax (Connecticut is the other).

• Rhode Island ranks #8 in tax rate, #9 in cost of living, and #10 in long-term care expenses.  Rhode Island also collects a state estate tax.

• Vermont ranks #9 in tax rate, #10 in cost of living, and barely fell out of the top 10 by coming in at #11 in long-term care expenses.  Vermont also collects a state estate tax.

Final Thoughts on Where to Retire:

Each year the statistics on tax rates, cost of living, crime rates, health care expenses, and weather are sliced and diced to come up with various lists for those approaching retirement to consider.  But in the end the choice of where to retire is personal.  While the financial data may point you away from or to a particular location, staying close to your support system of kids, grandkids, other family members, and friends may be priceless.

No matter where you end up deciding to retire, you should obtain qualified estate planning counsel to make sure your plan will work when it’s needed. If you plan on relocating upon retirement, living part-time in another state, or traveling extensively, we encourage you to contact us, so that we can assist you with your estate planning needs.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Additional Resources:

15 Most Expensive States for Long-Term Care in 2015

15 Most Expensive States to Retire

Dispelling the Top 3 Estate Planning Myths

Like any other complex subject, estate planning has its share of myths and misconceptions.  Understanding the top three estate planning myths will help you to create and maintain a plan that will work the way you expect it to work when it’s needed.

Estate Planning Myth #1 – You Don’t Need an Estate Plan Because Your Spouse Will Inherit Everything:

A common belief is that if you’re married and you don’t have a will or a trust, your spouse will still inherit everything.  Unfortunately this is not always the case.  Who will inherit your estate even if you’re married depends on many different factors, including how your property is titled, who you have named on your beneficiary designations, and the laws of the state where you live and any other state where you own property.  The only way to insure that your spouse will inherit everything is to sit down with an experienced estate planning attorney who will help you create an estate plan that will meet all of your goals.

Estate Planning Myth #2 – You Don’t Need an Estate Plan Because Your Family Knows Your Final Wishes:

You’ve shared your final wishes with your family and you’re confident that they’ll “do the right thing” after you die.  Unfortunately, without having these wishes written down in a valid will or a valid trust, your family may not be able to fulfill your intentions for several reasons.  First, how your property is titled will determine who inherits it, not who you’ve told your family you want to inherit it.  In addition, if you fail to complete or update the beneficiary designations for assets such as bank accounts and life insurance policies, your family won’t have any authority to tell the bank or insurance company who should inherit the proceeds.  Finally, without an estate plan, the laws of the state where you live and any other state where you own property will dictate who inherits your probate estate, not your family.  The only way to insure that your property will go to your intended heirs is to sit down with an experienced estate planning attorney who will help you create an estate plan that will meet all of your goals.

Estate Planning Myth #3 – Once You Have Created Your Estate Plan—It’s Done:

Suppose that you’ve taken the time to sit down with an experienced estate planning attorney and create an estate plan that meets all of your goals.  You may think that now you can sit back and relax because your estate plan is done.  While this attitude may seem reasonable, unfortunately as the years go by your life and the laws governing wills, estates, probate, trusts, and death taxes will continue to change, which means that eventually your estate plan will become out of date.  The only way to insure that your plan will work the way you intend it to work is to pull it out of the drawer every few years and have it looked over by your estate planning attorney.

Final Thoughts About Estate Planning Myths:

These are only three of the top estate planning myths.  Unfortunately there are many more.  The only way to separate the myths from the reality and get a plan that will work for you and for your family is to retain the services of an experienced estate planning attorney.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

What You Need To Know About The Latest Updates To Federal and State Estate Taxes

Death taxes are back in the news at both the federal and state level. Specifically, decoupled estate taxes effecting both Delaware and Minnesota.

What Happened to the Death Tax Repeal Act of 2015?

Back in February and March of 2015, identical bills calling for repeal of the federal estate tax and generation-skipping transfer tax were introduced in the U.S. House and Senate.  In April 2015 the U.S. House passed the “Death Tax Repeal Act of 2015” by a margin of 240 to 179.  While the votes were largely along party lines (233 Republicans voted for the bill, while 176 Democrats voted against it), seven Democrats ended up supporting the bill.

In spite of the Republicans’ majority in the U.S. Senate – there are currently 54 Republicans, 44 Democrats, and two Independents – the bill has stalled there.  Why?  Because Democrats have signaled that they will filibuster the bill, which means that at least 60 senators need to be in favor of repeal in order to overcome the filibuster.  Since the two independents – Sen. Angus King (ME) and Sen. Bernie Sanders (VT), who is actually running for U.S. President as a Democrat – caucus with the Democrats, Republicans will need six Democrats to change their minds and vote for repeal.  That’s a lot.  And even on the slim chance that this would happen, President Obama has repeatedly expressed his support of the estate tax and would undoubtedly veto the repeal bill if it ever came across his desk.

What’s Going On With Death Taxes in Delaware and Minnesota?

Delaware enacted an estate tax in 2009 with a $3,500,000 exemption.  Since then Delaware’s estate tax exemption has been indexed for inflation so that each year it matches the federal exemption.  Thus, in 2014 Delaware’s exemption was $5,340,000, and with a small population and such a high exemption, the state only brought in an insignificant $1,300,000 in estate tax revenues.  This has prompted the introduction of legislation to eliminate Delaware’s estate tax effective July 1.

Meanwhile, just last year Minnesota legislators tweaked their state’s estate tax laws by increasing the exemption from $1,000,000 to $1,200,000 and then increasing it in $200,000 increments on an annual basis so that it reaches $2,000,000 by 2018.  But apparently this was not enough because in May 2015 a bill was introduced that will increase Minnesota’s exemption to $5,000,000 by 2018, after which it will be indexed for inflation so that it matches the federal exemption.

Where Do We Go From Here?

Will any of these estate tax bills become law?  Only time will tell.  One thing is certain though - legislative changes can affect your estate plan and your estate tax bill. Please stay tuned as our firm continues to monitor both federal and state legislation that may affect your estate plan and your estate tax bill.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Caution: Your Traditional Asset Protection Plan is Set Up to Fail

You may be surprised to learn that not only has asset protection planning been around for a long time, but you have already engaged in it at some point during your life.  In fact, you probably have one or more types of traditional asset protection planning in place at this very moment.  The problem is in many cases the type of planning you have right now won’t be enough to protect you and your family.

What is Asset Protection Planning?

Asset protection planning is done to preserve and protect your property in advance of a claim, or the threat of a claim.  In other words, this type of planning will not be effective to shield your property from an existing claim.  Instead, it must be done long before there is even the hint of a claim.

The goals of asset protection planning are to provide an incentive for settling a claim, improve your bargaining position, offer options when a claim is asserted, and, ultimately, deter litigation.

What Is Traditional Asset Protection Planning, and Why Does It Often Fail?

There are several types of traditional asset protection planning that have been around for years.  The most common is liability insurance – automobile, homeowners, umbrella, officers and directors, malpractice, and the like.  You probably have at least one liability policy in place right now.  Unfortunately, liability insurance may actually encourage a lawsuit since it is perceived as “easy money.”  Aside from this, liability insurance often fails because the coverage is inadequate, the policies have extensive exclusions, or the carrier becomes insolvent.

Another common type of traditional asset protection planning is the use of a business entity, such as a corporation, to segregate business assets and liabilities from personal assets and liabilities.  But while a corporation may shelter your personal assets from a lawsuit filed against the corporation, the opposite is not true – if you, as the shareholder of a corporation, are personally sued, your shares of stock in the corporation are not protected from a judgment entered against you.  Of course, it is possible that if your corporation fails to observe certain formalities, then the “corporate veil” may be pierced and your personal assets will become vulnerable to a judgment entered against the corporation.

The final common type of traditional asset protection planning is established under state law and allows residents to exempt specific assets from the claims of creditors.  This may include protection for property owned jointly by spouses (“tenancy by the entirety” ownership), a primary residence (“protected homestead”), the cash value of life insurance, investments held in a retirement account, and annuities.  Nonetheless, these state exemptions are often subject to limitations, such as placing a cap on the value or land area of the protected homestead.

What Should You Do?

You may think that only wealthy people need to do advanced estate planning.  The truth is anyone who has accumulated any amount of wealth can be sued for just about any reason.  The only way to protect you and your family is to engage in more advanced forms of asset protection planning such as irrevocable trusts and sophisticated business structures.

This office can help you go beyond traditional asset protection planning by creating a comprehensive plan that will be custom-tailored to your family situation and financial status.  Please call today to arrange for your asset protection consultation.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

The Shocking Truth About Asset Protection Planning

Some view asset protection planning with a skeptical eye.  They believe there is a moral obligation to pay one’s debts.  They think that asset protection planning is immoral because it prevents a creditor from collecting on a judgment entered by a court.
 
The truth is the U.S. justice system is unpredictable.  Defendants are faced with ever-expanding theories of liability, being sued just because they appear to have “deep pockets,” and judgments entered against them based on desired outcomes instead of the law.

What, then, can you do that will ethically and legally protect your hard-earned assets from creditors, predators, and lawsuits?

What Asset Protection Planning Is, and What it Is Not:
The first step in protecting your assets is to understand that planning to preserve and secure your property in advance of a claim, or the threat of a claim, is a legitimate form of wealth planning. A few of the goals of asset protection planning are to:

1. Provide your creditor with an incentive for settling a claim;

2. Improve your bargaining position;

3. Offer you options when a claim is asserted; and

4. Ultimately, deter your creditor from filing that lawsuit.

On the other hand, asset protection planning is not about avoiding taxes, keeping secrets, hiding assets, or defrauding creditors.  In addition, it will not be effective to shield your property from an existing claim, and it must be done long before there is even the hint of a claim. 

When Done Right, Asset Protection Planning is Completely Legal and Ethical:
Using all legal tools available to help clients protect their hard-earned assets from future claims is consistent with the rules of professional conduct that govern the actions of attorneys.  In fact, these rules require attorneys to pursue representation of their clients with diligence and advocacy.  What these rules do not allow, however, is assisting or counseling a client in fraudulent or criminal conduct.  Therefore, you must be wary of an attorney who offers to assist you in protecting your property after a lawsuit has already been threatened or filed.  This type of conduct is not ethical or legal.
  
The Final Truth About Asset Protection Planning:

While you may drive carefully and steer clear of barroom brawls, unfortunately you cannot avoid all activities that create liability.  Putting together a plan to preserve and protect your assets in advance of a claim is a completely acceptable and, more importantly, legal form of wealth planning.

We are experienced at helping clients design and implement asset protection plans that are custom-tailored to each client’s family situation and financial status.  Please call us if you have any questions about this type of planning and to get started on protecting your assets from future creditors, predators, and lawsuits.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

A Member Of My Family Just Died—What Do I Do Now?

After a loved one or family member passes away, it is not only difficult from an emotional standpoint, but can become an administrative nightmare. You need to gather many important documents, which are necessary to settle his or her estate.  While the documents required will vary depending on what your loved one owned and owed, below is a list of common documents you will need to find:

1. Account statements – These may include bank statements and investment account statements (including brokerage accounts, IRAs, 401(k)s, 403(b)s, annuities, pensions, and health savings accounts).  The closer to the date of death that the statement is dated, the better.

2. Life insurance policies – If you are not sure if your loved one owned any life insurance, check their bank account ledger for checks written to a life insurance company.  Because some people choose to pay life insurance premiums on an annual basis, rather than a monthly basis, you might need to look back some time in the check register. If your loved one was employed at the time of death or worked for a large corporation, a local or state government, or the federal government prior to retiring, check with their employer or former employer to determine if your loved one had any employer-provided or government-provided life insurance benefits.  If your loved one served in the U.S. military, check with the U.S. Department of Veterans Affairs to find out if your loved one had any military-based life insurance benefits.

3. Beneficiary designations – These may include beneficiary designations for life insurance, retirement accounts (IRAs, 401(k)s, 403(b)s, annuities), payable on death accounts, transfer on death accounts, and health savings accounts.

4. Deeds for real estate – If you are unable to locate the original deed, many states now allow you to view and print deeds online.  Note that you will not need the original deed to sell the property. 

5. Automobile and boat titles – If you are unable to locate the original title, a duplicate original can be ordered from the department of motor vehicles.  Alternatively, some states will allow the transfer of a vehicle title without the original for an additional fee.

6. Stock and bond certificates – This may include corporate certificates, local and state bonds, and U.S. savings bonds.  If you are unable to locate an original certificate, a lost certificate affidavit can be filed by the deceased person’s legal representative.

7. Business documents – If your loved one owned a small business, then you will need to locate all of their business-related documents, including bank and investment statements, corporate records, income tax returns, business licenses, deeds for real estate, loan documents, contracts, utility bills, and employee records.

8. Bills – This will include utilities (electric, gas, water, sewer, garbage), cell phones, credit cards, personal loans, property taxes, insurance (real estate, automobile, boat), storage units, medical bills, and the funeral bill.  Check their checkbook for bills that were paid during the past year.

9. Estate planning documents – This may include a Last Will and Testament, any Codicil(s) to the will, a Revocable Living Trust, and any Amendment(s) to the trust.

10. Other legal documents – This may include a Prenuptial Agreement and any Amendment(s), a Postnuptial Agreement and any Amendment(s), leases (real estate, automobile), and loan documents (personal loans, mortgages, lines of credit).

11. Tax returns – This should include gift tax returns and the past three years of state and federal income tax returns.

12. Death certificates – It is a good idea to order at least ten (10) original death certificates so that you do not have to keep ordering more.

As you can see, a significant amount of paperwork is involved. For even a small estate, you should set up a filing system for the deceased loved one’s affairs. This can help ensure that nothing gets missed and that administration costs can be minimized.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Where is the Best Place to Store Your Original Family Legacy Protect Planning Documents?

Estate planning attorneys are often asked where original estate planning documents – wills, trusts, powers of attorney, and healthcare directives – should be stored for safekeeping.  While there is no right or wrong answer to this question, consider the following:

1. Should you store your original estate planning documents in your safe deposit box?  Many people may believe that the best place to store their original estate planning documents is in their safe deposit box at the local bank.  This may make sense if you have given your spouse or a trusted child, other family member, or friend access to your box.  However, since a safe deposit box is a rental arrangement (you are leasing the box from the bank), if you are the only one who signed the lease and you become incapacitated or die, no one else will be able to open your box.  Usually the only way for someone else to gain access to your box if you become incapacitated or die is to obtain a court order, which wastes time and money.  If you are not comfortable giving someone else immediate access to your box, many banks will allow you to add your revocable living trust as an additional lessee, which will give your successor trustee access to your box if for any reason you can no longer serve as trustee of your trust. 

2. Should you store your original estate planning documents in your home safe?  Home safes are popular these days, but in order for yours to be a good place to store your original estate planning documents, it should be difficult to move (bolted to the floor!), fire-proof, and water-proof.  In addition, make sure someone you trust has the combination to your safe or will easily gain access to the combination if you become incapacitated or die.

3. Should you ask your estate planning attorney to store your original estate planning documents?  Traditionally, many estate planning attorneys offered to hold their clients’ original estate planning documents for safekeeping (usually without charging a fee). Today most don’t want to take on the liability.  In addition, as the years go by, it may become difficult for family members to track down your attorney, who could change firms, become incapacitated, or die. 

4. Should you ask your corporate trustee to store your original estate planning documents?  If you have named a bank or trust company as your executor or successor trustee, this may be the best place to store your original estate planning documents.  This is because banks and trust companies have specific procedures in place to insure that your original estate planning documents are stored in a safe and secure area.  If you choose this option, make sure one or more of your family members know where your original documents are located.

Regardless of where you decide to store your original estate planning documents, make sure your family members, a trusted friend or advisor, or your estate planning attorney know where to find them.  Otherwise, if your original documents can’t be easily located, then it may be legally presumed that you no longer liked what they said and purposefully destroyed them.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

WILL YOUR FAMILY BE ABLE TO FIND YOUR ORIGINAL WILL WHEN IT IS NEEDED?

While it’s not unusual for an original last will and testament to be misplaced, it is when your daughter happens to be the Register of Wills for Baltimore City.

What is a Register of Wills?

In Maryland, the Register of Wills is an elected official in each county and the City of Baltimore who is responsible for overseeing the administration of the estates of deceased persons during the probate process.  As an added benefit, each Maryland Register of Wills provides safekeeping for the last will and testaments of living persons.

Why is it Important to Locate an Original Last Will? 

Belinda Conaway became the Register of Wills for Baltimore City in December 2014 after her stepmother, Mary W. Conaway, held the office from 1982 through 2012.  After Belinda’s father, Frank M. Conaway, Sr., died in February 2015, court records indicate that the family was unable to locate his original last will and testament but did find a copy of a will he signed in 1999.  The 1999 will left Mr. Conaway’s estate equally to his children, Belinda and Frank M. Conaway, Jr.  In March 2015, Belinda filed a petition requesting that the copy of the will be admitted to probate.  She stated in her petition, "This copy was found among the personal papers and I have not been able to locate the original."

Ironic, isn’t it?  Fortunately in this case, Mr. Conaway’s children agreed that the 1999 will was in fact their father’s last will and the probate judge admitted the copy to probate.  But this may not be the case in your situation.  Sometimes after an original will goes missing and a copy is found, family members will disagree about whether it is in fact the deceased person’s last will.  If this is the case, then the copy may be overlooked in favor of an older original will that has been located or state laws that dictate who inherits when there is no will (known as “intestacy laws”).

This is why it is so important for your loved ones to be able to find your most-recent original last will – because without it, the laws of your state may presume that you intended to destroy your will and a copy of it will be viewed as worthless.

Who Knows Where to Find Your Original Will?

Do you know where your original will is located?  Do your loved ones know where your original will is located?  While your family members certainly don’t need to know what your will says, they do need to know where your original will is being stored.

On the other hand, if you’re uncomfortable letting family members know where to find your original will, then let someone you trust – such as your attorney, accountant, or financial advisor – know where to find your original will.  Otherwise, your family may end up in front of a probate judge and your true final wishes may be overlooked.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Four Steps to Stop Mail Addressed to a Deceased Person

One of the first things you should do as a newly appointed executor of a deceased person’s probate estate or successor trustee of a deceased trustmaker’s trust is ask the post office to forward the deceased person’s mail to your address.  Unfortunately, along with important pieces of mail – statements, bills, and refunds – many not-so-important pieces – catalogs, solicitations, and plain old junk mail – will end up in your mailbox. 

On the other hand, you may have purchased a home from a deceased person’s estate or trust and have received some of their mail at your new address.  

What can you do to stop the post office from delivering mail addressed to a deceased person?  Follow these four steps:

1. If you are the executor of an estate that has been through probate court and the estate is officially closed, hand-deliver or send a copy of the probate order closing the estate and dismissing you as the executor to the deceased person's local post office, and request that all mail service is stopped immediately.  If you don’t take this step and find that some mail continues to trickle through two or more years after the death, this is because the U.S. post office only honors forwarding orders for one year.  The only way to completely stop delivery is to request that all mail service be discontinued.

2. To stop mail received as the result of commercial marketing lists (in other words, junk mail), log on to the Deceased Do Not Contact Registration page (https://www.ims-dm.com/cgi/ddnc.php) of the DMAchoice.org website and enter the deceased person’s information.  According to the website, “DMAchoice™ is an online tool developed by the Direct Marketing Association to help you manage your mail. This site is part of a larger program designed to respond to consumers' concerns over the amount of mail they receive, and it is the evolution of the DMA's Mail Preference Service created in 1971.”  After registering the deceased person on the website, the organization claims that the amount of mail received as the result of commercial marketing lists should decrease within three months.

3. For magazines and other subscriptions and mail that are technically not "junk" mail (for example, solicitations from charities to which the deceased person made donations while they were living), contact the organization directly to inform them of the death.  Note that most publishers will issue a refund for any unused subscription.

4. If you shared the mailing address with the deceased person or if you are the new owner of the deceased person’s home, write “Deceased, Return to Sender” on any mail addressed to the deceased person and leave it in your mailbox for pick up.

Remember it is a federal offense to open and read someone else’s mail; so if you’re not a legal representative of the deceased person, don’t open their mail!

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Caution: Writing Your Own Deed to Avoid Probate Can Lead to Unintended Consequences

One common way to avoid probate of real estate after the owner dies is to hold the title to the property in joint names with rights of survivorship with children or other beneficiaries.  This is accomplished by adding the names of the children and certain legal terms to a new deed for the property and then recording it in the applicable public land records. 

Many people believe that they do not need to pay an attorney to help them prepare and record the new deed.  Instead, they think that a deed form can simply be downloaded from the internet or obtained from a book that can then be easily filled out and recorded.  But deeds are in fact legal documents that must comply with state law in order to be valid.  In addition, in most states, property will not pass to the other owners listed in a deed without probate unless certain specific legal terms are used in the deed.

How is a Defective Deed or an Invalid Deed Corrected? 

If the problems with a defective deed or an invalid deed are discovered before the owner dies, then the problems can be addressed by preparing and recording a “corrective deed” in the applicable public land records.  This should only be done with the assistance of an attorney.

Unfortunately, many times the problems with a defective deed or an invalid deed are not discovered until after the owner dies.  If this is the case, then the problems cannot be fixed with a corrective deed since the deceased owner is unable to sign the corrective deed.  Instead, the property will most likely need to be probated in order to fix the problems with the title.  Aside from probate taking time and costing money for legal fees and court expenses, until the problems with the title are sorted out in probate court, heirs will not be able to sell the property.  Or, worse yet, the property may be inherited by someone the owner had intended to disinherit when they prepared and recorded their own deed.

What Should You Do?

If you want to add your children or other beneficiaries to your deed in order to avoid probate, and you think you can save a few bucks by using a form you find on the internet or in a book, think again.  Deeds are legal documents that have very specific requirements and are governed by different laws in each state (in other words, a deed that is valid in New York may not necessarily be valid in Florida). 

If you want your home or other real estate to pass to your children or other beneficiaries without probate, then seek the advice of an attorney who is familiar with the probate and real estate laws of the state where your property is located. This will insure that the deed will be valid and your property will in fact avoid probate and pass to your intended heirs.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Death Tax Repeal Act Introduced in House and Senate

Identical bills have been introduced in the U.S. House and Senate that would permanently repeal the federal estate tax and generation-skipping transfer (“GST”) tax.

Overview of Current Federal Estate, Gift, and GST Tax Laws

Under current law, the exemptions from federal estate taxes, lifetime gift taxes, and GST taxes are indexed for inflation on annual basis.  In 2015, the exemption from each tax is $5,430,000.  In addition, the top tax rate for each type of tax has been holding steady at 40 percent since 2013 and will remain at this rate in future years (barring any legislative changes).

Summary of Death Tax Repeal Act of 2015

On February 26, 2015, Rep. Kevin Brady (R – TX) introduced a bill “To amend the Internal Revenue Code of 1986 to repeal the estate and generation-skipping transfer taxes, and for other purposes,” to be known as the “Death Tax Repeal Act of 2015” (H.R. 1105). 

This bill currently has 135 Co-Sponsors (134 Republicans and one Democrat – Rep. Sanford D. Bishop, Jr. (GA)) and provides for the following:

1. Repeals the federal estate tax and the GST tax for estates of decedents dying, and generation-skipping transfers made, after the date of enactment;

2. Includes special rules for assets held in a qualified domestic trust before the date of enactment;

3. Retains the federal gift tax with a top rate of 35 percent;

4. Retains the current law regarding the lifetime gift tax exemption;

5. Retains the gift tax annual exclusion ($10,000 as adjusted for inflation at a minimum of $1,000 increments; the exclusion is $14,000 for 2015);

6. Provides that transfers in trust will be treated as taxable gifts, unless the trust is treated as a grantor trust; and

7. Retains the carryover basis rules for lifetime gifts and stepped-up basis for property transferred after death.

On March 25, 2015, Sen. John Thune (R – SD) introduced an identical bill in the Senate (S.860) (the Senate bill was introduced with 26 Co-Sponsors, all Republicans).  On that same date, the House Ways and Means Committee (the chief tax-writing committee of the House) voted to favorably report the bill (as amended) by a roll call vote along party lines of 22 yeas to 10 nays.

What is the Future of the Death Tax Repeal Act of 2015?

Is it possible that with a Republican-controlled House and a Republican-controlled Senate, the Death Tax Repeal Act will become law in 2015?  Not likely.  President Obama has already expressed his disapproval of the proposal and would most assuredly veto the bill if it ever came across his desk for signature.  Nonetheless, our firm will continue to monitor both state and federal bills that will affect your estate plan and your estate tax bill. You should be aware of these proposed changes because legislative changes can have a significant impact on your estate plan.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Three Liability Planning Tips for Physicians Anyone Can Use

Whether you are a physician or not, you probably know that the practice of medicine is a profession fraught with liability.  It’s not just medical malpractice claims either – employment related issues, careless business partners and employees, contractual obligations, and personal liabilities add to the risk assumed by a physician in private practice.  Unfortunately, in our litigious society, these liability risks are not unique to physicians.  Business owners, board members, real estate investors, and retirees need to protect themselves from a variety of liabilities too.

Below are three liability planning tips anyone – physicians and non-physicians alike – can use to protect their hard earned money.

Tip #1 – Insurance is the First Line of Defense Against Liability:

Liability insurance is the first line of defense against a claim.  Liability insurance provides a source of funds to pay legal fees as well as settlements or judgments. Types of insurance you should have in place include (as applicable):

1. Homeowner’s insurance

2. Property and casualty insurance

3. Excess liability insurance (also known as “umbrella” insurance)

4. Automobile and other vehicle (motorcycle, boat, airplane) insurance

5. General business insurance

6. Professional liability insurance

7. Directors and officers insurance

Tip #2 – State Exemptions Protect a Variety of Personal Assets From Lawsuits:

Each state has a set of laws and/or constitutional provisions that partially or completely exempt certain types of assets owned by residents from the claims of creditors.  While these laws vary widely from state to state, in general you may be able to protect the following types of assets from a judgment entered against you under applicable state law: 

1. Primary residence (referred to as “homestead” protection in some states)

2. Qualified retirement plans (401Ks, profit sharing plans, money purchase plans, IRAs)

3. Life insurance (cash value)

4. Annuities

5. Property co-owned with a spouse as “tenants by the entirety” (only available to married couples; and may only apply to real estate, not personal property, in some states)

6. Wages

7. Prepaid college plans

8. Section 529 plans

9. Disability insurance payments

10. Social Security benefits

Tip #3 – Business Entities Protect Business and Personal Assets From Lawsuits:

Business entities include partnerships, limited liability companies, and corporations.  Business owners need to mitigate the risks and liabilities associated with owning a business, and real estate investors need to mitigate the risks and liabilities associated with owning real estate, through the use of one or more entities.  The right structure for your enterprise should take into consideration asset protection, income taxes, estate planning, retirement funding, and business succession goals.

Business entities can also be an effective tool for protecting your personal assets from lawsuits.  In many states, assets held within a limited partnership or a limited liability company are protected from the personal creditors of an owner.  In many cases, the personal creditors of an owner cannot step into the owner’s shoes and take over the business.  Instead, the creditor is limited to a “charging order” which only gives the creditor the rights of an assignee.  In general this limits the creditor to receiving distributions from the entity if and when they are made.

Final Advice for Protecting Your Assets:

Liability insurance, exemption planning, and business entities should be used together to create a multi-layered liability protection plan.  Our firm is experienced with helping physicians, business owners, board members, real estate investors, and retirees create and—just as important—maintain a comprehensive liability protection plan. If you have a Revocable Living Trust and it has been a few years since it has been reviewed, then we can help you determine if a Revocable Living Trust is still the right choice for your estate plan. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Is a Revocable Living Trust Right for You?

Revocable Living Trusts have become the basic building block of estate plans for people of all ages, personal backgrounds, and financial situations. But for some, a Revocable Living Trust may not be necessary to achieve their estate planning goals or may even be detrimental to achieving those goals.

What Are the Advantages of a Revocable Living Trust Over a Will?

Revocable Living Trusts have become popular because when compared with a Last Will and Testament, a Revocable Living Trust offers the following advantages:

1. A Revocable Living Trust protects your privacy by keeping your final wishes a private family matter, since only your beneficiaries and Trustees are entitled to read the trust agreement after your death.  On the other hand, a Last Will and Testament that is filed with the probate court becomes a public court record which is available for the whole world to read.

2. A Revocable Living Trust provides instructions for your care and the management of your property if you become mentally incapacitated.  Since a Last Will and Testament only goes into effect after you die, it cannot be used for incapacity planning.

3. If you fund all of your assets into a Revocable Living Trust prior to your death, then those assets will avoid probate.  On the other hand, property that passes under the terms of a Last Will and Testament usually has to be probated. A probate could add thousands of dollars of costs at your death.

Why Shouldn’t You Use a Revocable Living Trust?

Although Revocable Living Trusts offer privacy protection, incapacity planning, and probate avoidance, they are not for everyone. 

For example, if your main concern is avoiding probate of your assets after you die, then you may be able to accomplish this goal without the use a Revocable Living Trust by using joint ownership, life estates, and payable on death or transfer on death accounts and deeds.  However, those strategies aren’t a perfect fit for everyone.

In addition, if you are concerned about protecting your assets in case you need nursing home care, then an Irrevocable Living Trust, instead of a Revocable Living Trust, may be the best option for preserving your estate for the benefit of your family. The rules governing Irrevocable Living Trusts can be very complex, and you should only create an Irrevocable Living Trust after a thorough discussion with a qualified trust attorney.

Do You Still Need a Revocable Living Trust?

While some estate planning attorneys advise their clients against using a Revocable Living Trust under any circumstance, others advise their clients to use one under every circumstance.  Either approach fails to take into consideration the fact that Revocable Living Trusts are definitely not “one size fits all.”  Instead, your family and financial situations must be carefully evaluated on an individual basis and the advantages and disadvantages of using a Revocable Living Trust must be weighed against your personal concerns and estate planning goals.  In addition, these factors must be re-evaluated every few years since your family and financial situations, concerns, and goals will change over time. 

If you have a Revocable Living Trust and it has been a few years since it has been reviewed, then we can help you determine if a Revocable Living Trust is still the right choice for your estate plan. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.