Articles Posted in Estate Planning

Part of proper estate planning means safeguarding not only your physical, tangible assets but your digital assets, as well. Many people do not protect these assets for a variety of reasons: a few do not think that it is important, some do not know how, and others simply do not want to think of the prospect of estate planning. However, protecting your digital assets can be easy and doing so will not only give you some peace of mind but will do so for your loved ones, too.

Why You Should Protect Digital Assets

You can do and buy just about anything online nowadays, and most of it you can accomplish with the phone in your pocket. Digital assets are more plentiful than ever, and you might not be aware of how much you have actually amassed in this form. One study by McAfee, a computer protection company, found that the average person has over $35,000 worth of digital assets on various devices that they own.

The ethical will, a document with no legal significance but can be supplemented to a regular will as part of the estate planning package, is meant to share personal lessons and advice with loved ones in addition to passing along physical parts of the estate. While the concept of an ethical will has dwindled in recent decades, the concept has seen resurgence in the technological age.

What is an Ethical Will?

Originally an oral tradition, ethical wills date back as far as 3,500 years. These wills have been used for millennia to pass on life lessons and ethics to the younger generation. Beginning around 1000 A.D., ethical wills began being written down and some still exist to this day.

With the end of the year approaching, it is good time to review your estate plan and take care of any last minute financial chores before any new tax and estate planning laws take effect for the following year. Here are eight basic items to check off of your to-do list as the end of the year approaches:

Review your Current Retirement Accounts

With the stock market rebounding this year and other market indexes at all-time highs, it is important to revisit your current retirement accounts and consider reallocating your asset distribution within your retirement accounts. It is also a good chance to see if you are on track with your contributions for the year, especially if your employer matches your contribution to the account. Even if you can’t make the maximum this year, consider bumping up your contributions until the end of the year.

Millions of elderly and disabled Americans receiving Social Security benefits will see a small increase in their government payments next year. The Social Security Administration announced earlier this month that it will be adding a 1.7% cost of living increase for the nearly 58 million Americans receiving federal retirement or disability benefits.

2015 Increased Social Security Benefits

On average, this increase would add $22 per month for retirees, and this makes for the third straight annual increase in Social Security benefits in as many years. The cost of living increases have all been between 1.5% and 1.7%, and this year’s increase matches the 1.7% rise in consumer prices in September. This is according to the data released by the U.S. Labor Department last week. According to the American Federation of Government Employees, more than 2.5 million federal government retirees will also receive a 1.7% cost of living increase.

The federal estate tax is no longer the biggest concern for many people going through the estate planning process. However, this was not always the case. In 2004, any estate worth more than $1.5 million, or whose estate owner made gifts above that limit while alive, were subject to federal tax at top rates of almost 50%. There was extreme uncertainty as the federal tax levels bounced around from year to year and even disappeared entirely in 2010, which made effective planning exceedingly difficult.

Finally, last year Congress set up a new estate and gift tax rate, topped at 40%, and raised the exemption level to $5.34 million per person. Each year that number is adjusted for inflation and the level is expected to be set at $5.43 million per person next year.

New Tax Saving Opportunities

Despite the strong standards that are set by the state and federal governments that are supposed to ensure that our elderly nursing home residents receive good care, a recent federal study found that over one third of all short term patients who enter a nursing home for rehabilitation are harmed. Moreover, the study found that almost sixty percent of the harm caused to these residents could have been preventable.

Federal Nursing Home Study

The report, published by the Office of the Inspector General of the U.S. Department of Health and Human Services, studied the number of adverse events occurring in skilled nursing facilities across the United States. The experts discovered that an estimated 22% of Medicare beneficiaries suffered an “adverse event” during their stay at a nursing home facility, and an additional eleven percent suffered a temporary harm during their time at a facility.

Not only is it important to create an estate plan that documents your final wishes for your estate and medical choices, but it is equally important to remember where those documents are when they are needed. Family members or close friends need to know where they can locate your estate planning documents in the time just before or after your passing. If someone does not know where these documents are kept, it could mean that your final wishes are not fulfilled.

Problems with Lost Documents

Being unable to find estate planning documents can have a drastic effect on your final wishes. One man wished to be buried at Arlington Cemetery after he had died, but his son could not find the paperwork after his passing. The cemetery offered to place his father in cold storage for six months while the son tracked down the proper forms documenting his military discharge. He eventually found it being used as a bookmark in his father’s home.

More and more grandparents are now using some of the money that they have tucked away using retirement and estate planning to help their grandchildren pay for college. According to a study done by Sallie Mae, 17% of families in the United States relied on relatives to help pay for college. This percentage is expected to increase as more grandparents use their estate plans to help benefit their families.

However, it is important that grandparents should be smart about how they help their grandchildren pay for school because it can have major tax consequences for them and their loved ones if the correct steps are not taken.

Understanding Estate Planning Gift Taxes

Battles over estates can intensify underlying issues between siblings and ultimately tear families apart. However, there are ways to lessen the chances of infighting among your heirs before you pass on. Advance planning can drastically help minimize conflicts among your children, spouse, and other heirs.

Not Just About the Money

According to a prominent wealth management group, around $30 trillion of wealth will be passed to the younger generations over the next thirty to forty years. Roughly 70% of those families will lose a chunk of their inheritance, mostly due to estate battles.

Far too many entrepreneurs, despite their successes in business, have put far too little time into planning for the eventual sale of their business for retirement. In fact, more often than not business owners do not start planning the sale of the business until the day that they sit down with a potential buyer. Starting this late almost always means that money is left on the table, and it is far too late to make a meaningful difference in the money that you will be able to keep when you sell your business.

Talk to Estate Planning Attorneys

One of the most important people to speak with when planning the sale of your business is an estate planning attorney. After explaining the financials and structure of your business as well as a timeline for when you wish to sell, your estate planning attorney can review your tax situation and explain what your options are to save the most money in an estate plan.