Estate Planning With Life Insurance

Posted on May 23, 2013 by Victor Medina

As this recent article explains, one of the most critical parts of any estate plan is a life insurance policy. Having a life insurance policy increases the size of the estate that a person is able to leave to his or her heirs. The cash from a life insurance policy can also aid your heirs in fulfilling unexpected post-death financial obligations.

If you name an individual as the beneficiary of your life insurance policy, the proceeds will be paid out directly to that individual. This provides quick cash to your beneficiaries to pay the expenses associated with settling your estate. If you name your estate as the beneficiary of your policy, the proceeds will go through the process of probate. In this case, your heirs may have to wait an entire year before they receive the proceeds.

Life insurance policies can be used to balance estates that include a business. Often, business owners choose to leave their business solely to one of their children. This presents the problem of providing the rest of the children with an equally valuable portion of the estate. In this instance, many people take out a sizable life insurance policy and name their other child(ren) as the beneficiary.

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Medina Law Group – A Resource to the BizBrain

Posted on May 21, 2013 by Victor Medina

Recently I’ve begun to serve as a resource to Karin Price Mueller, who writes the New Jersey state-wide column, Ask the Biz Brain. When appropriate, Karin reaches out to me to help answer estate planning, gift tax, elder law, and estate administration questions. These are fun to answer and recently two were published in the paper and online. 

The first one discussed how to update your Will without an attorney. (I know, I nearly spit out my coffee…who would want to do that?)

Medina said one of the most important parts of creating a codicil is the way it is signed, or executed.

“A well-drafted will or codicil contains ‘self-proving’ language that makes it so your executor can present the will and have it accepted without having to find and get statements from the witnesses back when you signed it,” he said. “A self-proving will — or codicil — includes language stating that the testator, who is the person making the will, has signed the document willingly, and it is also properly witnessed and notarized.”

Medina said you have “an absolute right” to the original will being kept with the lawyer who drafted it, and he suggested you ask for the original will back because whoever is dealing with your estate will need to present originals of both the will and the codicil for the will to be effective. So, he said, you’ll need to keep both documents together in a safe place.

The second one asked how to make proper gifts to minor children if you wanted to help them save for retirement. 

In 2013, the IRS allows you to give up to $14,000 per person without having to report that gift at all, and married couples can combine their gifts, which allows you to give up to $28,000 per recipient, said Victor Medina, an estate planning attorney with Medina Law Group in Pennington.

“If you gift more than the annual exclusion amount, you’ll have to file a gift tax return — which isn’t the same thing as owing gift tax,” he said. “You don’t start to owe gift tax until you give more than your lifetime exemption, currently $5.25 million — which would be quite a trust fund.”

Enjoy – I hope to stay on the roster and help out by sharing what I know. 

 Posted by Victor J. Medina, Medina Law Group, LLC

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The Limited Power of Attorney

Posted on May 16, 2013 by Victor Medina

One of the documents that helps to make up a proper estate plan is the power of attorney (“POA”). A POA is a document that authorizes a representative of your choosing to act on your behalf in private and business affairs. Although most people select one person to serve as their POA, this recent article discusses how a person can split the powers typically given to one person between several people.

The best way to split up POA powers is to have your attorney draft several limited POAs. Consider that you have a daughter that you would like to make decisions on behalf of the family business, and a son that you would like to control your personal accounts. In order to achieve this division of power, you could execute two limited POAs. The first would authorize your daughter to act on your behalf in situations concerning the family business. The second would authorize your son to manage your personal financial accounts.

If you have limited POAs drafted by an estate-planning attorney, they can be as flexible as you would like. To ensure that all decisions made will be solely in your best interests, be confident that the parties splitting authority to act on your behalf are able to work together and get along.

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Estate Tax Exemption Revisited

Posted on May 9, 2013 by Victor Medina

When President Barack Obama recently released his 2014 budget proposal, it was revealed that the estate tax exemption may not last as long as many had previously anticipated. According to a recent article, the proposed budget would not only increase estate taxes, but it would also drop the per-person exemption from federal estate taxes.

Currently, the per-person exemption from federal estate taxes is at $5.25 million. Under the proposed budget, this number would drop to $3.5 million. The $3.5 million cap would not be indexed for inflation. The proposed budget would also increase the top tier estate tax rate to 45 percent, rather than 40 percent.

If passed, the new levels would take effect in 2018, and effectively reverse the fiscal cliff budget deal signed into law by President Obama last January. According to acting director of the Office of management and Budget, “We believe that in these fiscal times, that it’s responsible policy in 2018 for the estate tax to return to the 2009 parameters.”

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Painless Estate Planning

Posted on May 2, 2013 by Victor Medina

Despite the grave importance of having an estate plan, a large amount of Americans still have not undertaken any steps towards drafting their estate plan. Often, people put the task aside because it is unpleasant to consider the reality of our deaths.

A recent article suggests that, by simply preparing for a meeting with an estate planning attorney, people can make estate planning as quick and painless as possible. Several things a person should do before meeting with their estate planning attorney include:

  1. Creating an inventory of your assets. Assets include all financial accounts such as investment and retirement accounts, insurance policies, real property, and valuable personal property.
  2. Consider who you would like the beneficiaries of your estate to be. The beneficiaries of your estate are the people who will receive the assets in your estate after your death. Also consider who you would like “back-up” beneficiaries to be. Consider that your spouse or children may predecease you.
  3. Consider who you would like to manage your financial affairs should you become unable to do so based on incapacity.
  4. Consider who you trust to manage and distribute your estate honestly and according to your wishes after your death.
  5. If you have children who have not yet reached majority, consider who you would trust to care for them should they be left without a parent. Be sure to discuss your election with your selected guardian before writing their name into your will. Moreover, select an alternate guardian should your first choice be unable or predecease you.
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How to Select a Personal Representative Outside of Your Family

Posted on April 25, 2013 by Victor Medina

Whether for work, school, or simply finding a warmer climate, a recent article discusses how many individuals find themselves living away from the rest of their family. Although it is perfectly acceptable to name personal representative who lives in another state, some may feel more comfortable naming a personal representative who is closer.

If you would like to name a person or entity closer to you to be your personal representative, consider speaking with a representative of your local bank. Many banks have divisions that deal exclusively with trusts. These divisions often offer estate settlement services. One benefit of naming a bank as the executor of a will is that such divisions have a wealth of experience and knowledge in administering estates.

Unfortunately, the experience and knowledge of a bank’s trust division comes with a price. However, if the staff at a knowledgeable bank — rather than a friend or family member — settles your estate, you may save considerable money in attorney fees.

You can also name an attorney as the executor of your estate. If you are interested in this option, speak with your estate planning attorney. Their firm may be able to handle this for you, or they may be able to recommend someone who can.

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The Pros and Cons of a Revocable Trust

Posted on April 18, 2013 by Victor Medina

Like most estate planning devices, a revocable living trust is not right for every estate. A recent article discusses several of the pros and cons of creating a revocable living trust.

A revocable living trust is a trust that a person establishes during their life with their own assets. The terms of the trust can be modified, and the trust may be terminated before the creator’s death.

It is important to note that a revocable living trust provides no tax benefit to the creator or the creator’s heirs. Any assets in a revocable living trust are included in the creator’s estate for the purposes of calculating estate tax. The creator’s creditors can also reach assets in revocable trusts.

The major reason why many people choose to set up revocable trusts is that they wish to avoid probate. By setting up a revocable living trust, people can pass their assets to their heirs outside of probate. While wills become public record once they are probated, assets that pass through trusts remain private.

While probate in New Jersey doesn’t tend to be a big deal, estates can have their assets frozen if they are bigger than $675,000 until the state issues waivers, which can take up until 18 months after the date of death. A revocable living trust avoids the wait, and makes it far easier for beneficiaries to receive distributions after you die.

Revocable trusts are also beneficial to those who have significant assets and need assistance managing them during your lifetime. By placing such assets into a revocable trust and naming yourself co-trustee along with a financial professional, you can stay in control of your assets while also utilizing the assistance of a professional.

Related Blog Post: Why A Living Trust is Better Than a Simple Will

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Compensating Your Trustee

Posted on April 11, 2013 by Victor Medina

If you include any kind of trust in your estate plan, one important consideration is whether you would like to compensate the person you name as trustee. A recent article discusses the “when and how” of trustee compensation.

Not all trustees need or expect to be compensated for their services. Trusts that do provide trustee compensation may provide for reasonable compensation, a fixed amount of compensation, or may dictate a formula through which compensation may be determined. Generally, in situations where the trust is silent as to compensation, the trustee may request and receive reasonable compensation.

Reasonable compensation is determined based on a variety of factors including the trustee’s experience and qualifications, the hours he or she spent administering the trust, and the value and complexity of the trust. Typically, a trustee will not be paid until he or she has completed distributing the trust assets.

If you would like to be sure that your trustee is compensated for his or her services, it is important to include how you would like him or her to be compensated in your trust documents. Specify your wishes as to how and when he or she will be compensated. Finally, speak with your trustee upfront about whether and how they will be compensated for their services.

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The Living Will: Your Right To Die With Dignity

Posted on April 4, 2013 by Victor Medina

Due to advances in medical technology, there is a growing possibility that people’s lives will be prolonged against their wishes. For those who would not like their lives to be prolonged indefinitely with various medical instruments, it is vital to provide detailed instructions as to your medical wishes and elect a health care representative. A recent article discusses some basics of a living will, or in New Jersey, the Instruction Directive.

As the United States Supreme Court has held, every American has a constitutional right to be able to decide what medical treatment he or she will receive. If a person has valid legal documents in place detailing their wishes for medical care should they become unable to dictate those wishes themselves, medical professionals must follow those wishes, despite what the patient’s family may want.

When drafting your living will, consider what types of medical treatment you would and would not like to receive in the event that you could not dictate this yourself. Some treatment options include undergoing surgery, blood transfusions, testing, dialysis, taking medications, and being put on a respirator. Consider to what extent you would want treatment should you become seriously ill with no chance of recovery.

Each state has adopted laws setting forth what form of living will is acceptable and conforms to the requirements. Be sure to check with your state to make sure that your form, if you don’t use the one that that the state endorses, complies with the rules.

Because there is always room for uncertainty with written documents, consider appointing a health care representative to speak for you should your written wishes be unclear. Choose someone you trust, and be sure you discuss your wishes with them in advance, and make sure to get them a copy of the document appointing them to their role before you need it.

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The Four P’s of Estate Planning

Posted on March 28, 2013 by Victor Medina

Many people understand the importance of creating an estate plan, however it is often difficult to determine where to begin. A recent article simplifies the estate planning process into four steps: people, property, plans, and planners. Below is a brief overview of this process.

    1. People:  The first and foremost thing to consider when creating your estate plan is people. Make a list of all the people you would like to receive assets from your estate. If you have children who are under the age of eighteen, carefully consider who you would trust to care for them and manage finances on their behalf. Finally, consider whether you would like to leave a gift to any charitable organizations.

    2. Property: The second P of estate planning is property. Make a list of all your significant assets, such as real estate, bank accounts, and investments. You don’t need to detail every item of personal property, however if there is a specific item you’d like to leave to somebody, be sure to list it

    3. Plans: After you have listed your property and those you would like to benefit upon your death, it is time to link the two. You may wish to divide your property evenly by the number of heirs you have, or you may wish to leave specific assets to specific heirs.

    4. Planners: The final P of estate planning is planners. Planners are the experts who finalize your estate plans with the appropriate legal documents. These documents may include a will, trust, advance directive, or power of attorney.

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