If you have questions about your Georgia estate planning or the benefits to your family from this gift tax exclusion increase, contact us today for a consultation.  Available to meet in person, via Zoom, or over the phone.  We are conveniently located not far from Perimeter Mall in Dunwoody, Georgia.   Happy New Year to all!  It’s a great time of year to re-look your estate planning documents to make certain they are current, properly reflect your wishes, and address your concerns.  We are getting lots of questions about trusts due to increased time to probate during COVID.

©Karen S. Hindson, Hindson & Melton LLC

If you regularly make annual gift tax exclusion gifts to family members, or think you may want to start, consider leveraging your gifting with an irrevocable trust.  Call the Atlanta law firm of Hindson & Melton LLC for more information about annual gifting, irrevocable trusts, and other estate planning ideas to benefit your family.  And have a great 2018!

© Karen S. Hindson, Hindson & Melton LLC

In 2017, the basic exclusion amount was $5.49 million, but the Tax Cuts and Jobs Act of 2017  doubled the exclusion amount for years 2018 through 2025.  As of now, the 2017 provisions end in 2025 and the exclusion amount will go back to the old amount.  The 2017 tax law made portability permanent,  meaning a spouse can make use of the unused portion of the deceased spouse’s estate tax exclusion.  The 2017 tax law also made the basic exclusion amount permanent.

Keeping track of estate tax law changes can be important to your family’s financial future.  Atlanta law firm Hindson & Melton LLC can assist you with estate planning tailored for your family’s needs and goals.  Call us to discuss your family’s situation.

© Karen S. Hindson, Hindson & Melton LLC

Personal estate planning notebook for key information

Start a notebook for your family with information that would be important if you die or are suddenly incapacitated. Brainstorm and jot down initial thoughts and begin to collect information in your personal estate planning notebook. There is no better way to demonstrate your love than planning for your family’s future.

Key people and recent account statements

You will have important names and contact information, such as financial and legal advisors and insurance agents. Include a recent statement for every investment account, retirement account, bank account, and dividend reinvestment account you own. Replacing the statements in your notebook quarterly is ideal, but update them at least annually.

What about online accounts?

People conduct personal business online these days. Periodically print a statement for each online account if you do not receive hard copies by mail. For accounts that you have closed or transferred, either remove the statement from your notebook or make an annotation about the disposition of the account.

Stock certificates

Photocopies of any stock certificates or bonds for which you have the actual certificates or bonds, including all stock split certificates.  For stocks held in “dividend reinvestment plans” (DRIPs), a copy of the most recent account statement from the transfer agent for each account.

Safety deposit box

If you have a safety deposit box, include the location of the box, who has access, and consider a current list of contents or box inventory.

Where are the originals of your Will and any Trusts?

Include the identity and location of your original estate planning documents such as your last will and testament and any codicils, and trusts for which you are the grantor, trustee, or beneficiary.

Living will and powers of attorney

A copy of your living will and health care power of attorney (or Georgia advance directive for health care) should be included in your notebook along with the location of the originals.  In South Carolina, the living will is called a declaration of desire for natural death.   Also include the location of your durable power of attorney or financial power of attorney, and any designation or nomination of guardian.

Insurance – life and disability

For life or disability insurance, record the name of the issuing company, the policy number, and include a copy of the policy “declaration page” or summary sheet in your notebook. Note the location of the original documents and any helpful points of contact.

Family information

If you have family members living overseas or geographically dispersed, it might be helpful to list their addresses and contact information.  If you have a deceased  spouse or child, include a death certificate.

Other responsibilities

Are there are others who should be notified if you die? Do you have responsibilities to third parties or charitable organizations?  Are you a guardian or trustee or attorney-in-fact for someone else?

What if I own a business and I die or am incapacitated?

If you own a business or are self employed you will need to include information in your notebook such as how to access your accounts payable and receivable, information about work in progress and customer or client information. What would need to happen if you died suddenly or were disabled?

Business succession and estate planning information

Your personal estate planning documents are probably insufficient to deal with a business, especially if you operate as a corporation, LLC, or partnership. Your executor or heirs need to have proof of your ownership and rights to the business. They also need copies of any shareholder agreements or buy-sell agreements.

Anyone acting on behalf of your business after you die, or once you become incapacitated, must have proper legal authority in order to access business bank accounts or take other action on behalf of the business. Proper planning for business succession or disability is critically important if your family depends on income from your business. An estate planning and business attorney can help identify and address your specific business needs.  Business owners frequently are “too busy” to plan for such contingencies.   Take the time necessary to plan for your possible death or disability.

Copies of Last Will and Testament and any Trusts?

You may want to include an information copy of some, or all, planning documents in your estate planning notebook. This will depend in part on whether you have transparency with the individuals who might see your notebook from time to time. Remember that your heirs would need the original documents to act, so don’t lose track of the location of your originals, and be certain to record this information. If you have concerns that a document might “disappear” or be destroyed by someone displeased with the content, speak with your attorney about ways to safeguard your document.  Good planning makes for good results.

Real property whether owned individually, jointly, or in trust

List any real properties in which you own an interest, including address, county, state, country. List the names of any co-owners. If property is owned by a trust, list the name of the trust and the location of the trust document. A photocopy of the actual warranty deed to each property is ideal; it will help your advisors confirm whether the property is titled individually, joint with rights of survivorship, in joint tenancy, or owned by an entity such as a business or limited partnership.

Tax basis

If you have information about the tax basis for any specific property or investment, include that information or documentation or its location.

Loans and promissory note documents and payment info

If you have loaned money to family members or others, include copies of loan documents such as signed promissory notes, and a record of any payments received. Also, make sure your last will and testament or trust is clear if you consider certain transfers or gifts to your children as advances against their inheritance. Your estate planning attorney can help you accomplish your goals with appropriate documents.

Password and login for email and social media

For email accounts, online “cloud” repositories, bank or investment accounts, and all social media accounts, your estate planning notebook should probably include your login information including current passwords. This information must be preserved somewhere.  Your executor, trustee, or heirs will need access to this information if you die. Your loved ones might need this information if you are incapacitated. Be sure to keep this list current, since we all change passwords frequently.

Protect the security of your information — weigh the risks

How do you keep information in your estate planning notebook safe? As you have undoubtedly recognized, a person with the information in your notebook could potentially wreak havoc with your estate — or loot your accounts using your passwords. As a result, you must consider this security risk when creating and managing your estate planning notebook — and weigh the benefits of collecting and storing this information against the risks inherent in having the information assembled in one place. You can brainstorm with your lawyer and loved ones about security measures appropriate for your family’s information.

Family considerations in sharing estate planning information

While it would be most excellent if all families had only mature, responsible, reliable, and trustworthy members, that is not always the case. Most families have a strained or broken relationship, sibling rivalries, an immature or irresponsible member, or other family dynamic that should be taken into account in estate planning.   Your estate plan is YOURS, so don’t let your kids or other family members pressure you into planning decisions you don’t like.  The contents of your estate planning documents (if not the location) may need to remain totally private until after your death, depending on your individual circumstances.   Family issues are important when deciding where to safeguard your original documents and with whom to share the information described in this article.  Sometimes a trusted friend or advisor plays a role in safeguarding your information.

Second marriages – blended families – special needs information

Second marriages and blended families will have additional issues to consider, not only in the estate planning process but also in information collection, storage, and sharing. Families with a special needs member may want to add a narrative to their notebook with helpful information about the special needs individual and his or her likes, dislikes, challenges, strengths, and sources of joy. This could be enormously important under the right circumstances.

Frequent updates

Once you create your estate planning notebook, please keep it up to date. If you don’t, unnecessary confusion or suspicion amongst family members might be the result. I recommend updating your estate planning notebook quarterly; put it on your calendar “to do” list. You will be surprised how often things change and how easy updates are, once you have the notebook in place. You may even find yourself addressing issues you have avoided once you begin this process!

Copyright Karen S. Hindson, Hindson & Melton LLC – February 2, 2014, updated February 3, 2017

ALSO SEE:

• ESTATE TAXES AND IRAs
• USING A TRUST TO PLAN FOR YOUR INCAPACITY
• IRREVOCABLE LIFE INSURANCE TRUSTS

A QTIP trust – or qualified terminal interest property trust – can be helpful in the right situation.  Two common scenarios where a QTIP trust might be useful are:

• for a married individual with children from a prior marriage (who wants his or her children to ultimately receive anything left at the spouse’s death), or
• for a married individual who is concerned about leaving their assets to a spouse and the ramifications of the surviving spouse remarrying.

The trust needs to work in concert with investment account titling and beneficiary designations.  If you would like to discuss whether a QTIP trust is a good solution for you, and how it might fit into your overall estate plan, contact me at 770-939-3936.

Happy New Year!

Karen S. Hindson, Hindson & Melton LLC

Additionally, you can make unlimited payments directly to some educational and medical providers on behalf of someone else.  Of course there are regulations – for example, qualified education expenses are limited to tuition and you cannot pay for books or room and board as a qualified education expense.

The 2016 total exemption applying to estate tax and lifetime gifting is $5,450,000; for 2017 it will increase to $5,490,000.  If you make a gift to any individual that exceeds the annual gifting exclusion amount ($14,000), that will reduce your lifetime (including estate tax) gift amount.  At death, any unused exemption can be transferred to a surviving spouse but this requires a timely filing with the IRS.

If you have an estate that is potentially subject to estate tax, we can assist you with strategies designed to minimize your taxable estate and transfer wealth to the next generation.  This includes holding life insurance outside of your estate using an irrevocable life insurance trust, or using tax savvy trusts such as grantor retained annuity trusts (GRAT) to help keep the taxable value of your lifetime gifting low.  Contact us for more information about estate tax savings or gifting strategies that are right for you.

Karen Hindson, Hindson & Melton LLC

ALSO SEE

• Estate Planning Tips
• Estate Tax Portability
• Estate Tax and IRAs

Case study #1: “Jane”, a surviving spouse over the age of 70 ½, receives annual Required Minimum Distributions (RMDs) from the IRAs her husband left naming her as beneficiary.  While the RMDs are about the same amount as when “Dick” was alive, Jane suddenly finds herself with an unexpectedly large income tax liability because she now files Single rather than Married Filing Jointly.  Using Qualified Charitable Distributions (QCD) to fund her gifts to charity could save her money on her taxes.

Case study #2: Dick and Jane are a married couple over 70 ½ receiving annual Required Minimum Distributions from their IRAs.  They think they are paying too much in taxes.  If Dick and Jane give typically money to their church, or give to other charities, they can save money on taxes by utilizing Qualified Charitable Distributions – QCD – to make their gifts.  Senior couples with IRAs should know about QCDs for tax  savings.

What is a Qualified Charitable Distribution and how can it help a senior couple or a surviving spouse over 70 1/2? Instead of receiving the IRA required distributions from the IRA custodian, and then making gifts to church/charity, the taxpayer requests that the IRA custodian make all or part of the distribution DIRECTLY PAYABLE from the IRA custodian to the charity.  The effect is that the amount paid directly to the charity is not income to Dick or Jane, reducing the amount of IRA distributions that would otherwise be taxed as income.  The tax savings can be significant, especially for taxpayers in a higher tax bracket or for a surviving spouse.

While it is true that Dick and Jane will not receive a charitable deduction for the gift, it is more advantageous for the amount of the gift to be excluded from their income than it would be to receive the distribution and take a charitable deduction.

To find out more about Qualified Charitable Distributions or other tax saving or estate planning tips, consult with your financial advisor and estate planning attorney.

© Karen S. Hindson, Hindson & Melton LLC   March 25, 2016

Retirement plan benefits are frequently divided between husband and wife as part of divorce. The court order dividing a retirement plan is called a Qualified Domestic Relations Order or QDRO for short (QDRO is pronounced “quad-row”).

There are two basic types of QDROs – a separate interest QDRO and a stream of payment QDRO. The most common type is a separate interest QDRO.

A Separate Interest QDRO actually divides the employee’s (plan participant’s) interest in the retirement plan. A portion, or separate interest, is awarded to the spouse (called the alternate payee) and transferred into the spouse’s name. The separate interest QDRO results in a portion of the plan participant’s benefit being removed from the employee and assigned to the spouse. The advantage of a separate interest QDRO is that the alternate payee spouse can choose when to start receiving plan benefits and how they will be paid.

By way of contrast, a Stream of Payment QDRO is much less flexible for the non-employee spouse. This form of QDRO says that “when or if” the employee starts receiving pension payments, a portion of each payment will be paid to the former spouse by the plan instead of 100% being paid to the plan participant.

Either type of QDRO must be signed by the judge as a court order. The QDRO will be reviewed by the retirement plan administrator to make certain that the QDRO meets the requirements of the law. The plan administrator’s review also confirms that the language of the QDRO is consistent with the options available under the specific retirement plan. Most large employers have sample QDROs available from the plan administrator.

An IRA can be divided as part of the divorce without a QDRO. The receiving spouse’s portion can be rolled over into a pre-existing IRA or into a newly established IRA account. This rollover of all (or part) of an IRA requires less attorney work than a QDRO, but there are some advantages to dividing a qualified retirement plan instead of an IRA when you have a choice.

Distributions from both IRAs and Qualified Plans before age 59½ are called early withdrawals. Such early withdrawals are usually subject to a 10 percent income tax penalty. However, such a distribution under the terms of a QDRO to an alternate payee can be made without being subject to the penalty tax on early distributions. Consult with your tax advisor if you need to take a retirement plan distribution to make certain that you meet all of the requirements of I.R.C. § 72(t)(2)(C). If the QDRO distribution is rolled directly into an IRA, and the alternate payee then withdraws funds from that IRA before age 59½, the IRA distributions would be subject to the penalty tax.

Most often, if permitted by the retirement plan, keeping a separate account within the plan would be preferable for the payee spouse to rolling the spousal share over into an IRA. Certainly this is the case where the receiving spouse anticipates an early withdrawal. Many divorcing parties have both retirement accounts and IRAs. In dividing marital assets, such considerations can help determine whether the receiving spouse would rather receive a portion of a retirement plan under a QDRO or an award of IRA assets as part of the equitable division.

© Karen S. Hindson, Hindson & Melton LLC  February 19, 2014

ALSO SEE:

• PROPERTY DIVISION GEORGIA DIVORCE
• ATTORNEYS FEES FOR GEORGIA DIVORCE
• PARENTING PLAN REQUIRED FOR ALL GEORGIA CUSTODY CASES

The IRS has opened a temporary window to apply for retroactive estate tax portability of the unused exemption amount for decedents who died in 2011, 2012, or 2013.  IRS Revenue Procedure 2014-18 issued in late January provides a window for the remainder of 2014 during which a surviving spouse can file an estate tax return for a decedent who died in those years and retroactively qualify for portability. 

The advantage of estate tax portability is that the surviving spouse can claim the deceased spouse’s unused exemption amount (DSUEA).  This greatly reduces the likelihood of future estate tax liability for most couples and provides a financial and tax planning opportunity.  The Form 706 estate tax return must be filed in 2014 to qualify for the retroactive portability window.

For 2011, estates exceeding $5 million were taxed at 35 percent.  In 2012 the estate tax exemption was inflation-adjusted to $5.12 million.  For 2013 and 2014, the exemption amounts are $5.25 million and $5.34 million, respectively.  The tax rate has now increased from 35 percent to 40 percent. 

When unused exemption amount (DSUEA) portability was first enacted in 2010 as part of the first fiscal cliff legislation, it was temporary.   Many missed the deadline for filing for portability, or decided that the expense of filing an estate tax return wasn’t worth it for a temporary law.  The American Taxpayer Relief Act of 2012 made portability permanent, however, and portability is now an important estate planning tool for many families.  Rev Proc 2014-18 allows surviving spouses a second chance to file the Form 706 and claim DSUEA.

Estate tax returns normally must be filed within 9 months of death, with a possibility of a 6-month extension.  A Form 706 must be filed to elect portability, even if there is not an estate tax liability or other reason to file the return.  During the 2014 window, estates can claim an extension for filing an estate tax return beyond the normal filing period for decedents who died in 2011, 2012, or 2013.

The Revenue Procedure allowing a late extension to file only applies to those estates where there was not otherwise a requirement to file an estate tax return (in other words, estates under the estate tax exemption amount).   The decedent must have been married and a U.S. citizen or resident at the time of death.

Who should take advantage of this 2014 window of opportunity?  Any widow or widower whose spouse passed away during 2011, 2012, or 2013, should at least consider filing an estate tax return and claiming DSUEA.  The only reason not to file is if the net worth is so low that the surviving spouse is unconcerned about potential future federal estate tax liability, or believes that the risk of estate tax liability is so low that portability is not worth the expense of filing the estate tax return.

Surviving spouses with assets currently under the estate tax threshold should consider their life expectancy and the possibility of future growth of their assets.

If you, or someone you know, can benefit from the significant planning opportunity presented by Rev Proc 2014-18, do not delay.  Contact your estate planning attorney or CPA now to discuss or take advantage of the 2014 window.

© Karen S. Hindson, Hindson & Melton LLC  February 13, 2014

ALSO SEE:

• ANNUAL EXCLUSION GIFTS TO MINORS
• ESTATE TAXES AND IRAS
• LIFE INSURANCE TRUSTS