Thursday, October 20, 2016

Why Avoid Probate?

Typically, estate planning attorneys use trusts and other instruments to help their clients avoid probate court.  Clients often ask, why it is important to avoid probate court?  The two best reasons for avoiding probate court are (1) time and (2) cost. 

Probating a deceased person’s estate is a long process.  For a normal probate estate beneficiaries can expect to wait six months to a year before the process is completed and the assets are distributed.  The reason the process is sluggish is because probate requires several steps and a large amount of court involvement.  Several of the steps require mandatory time-waiting periods giving creditors and other parties time to become involved in the proceedings.  For example, before assets can be distributed to beneficiaries, a notice to creditors must be filed.  All creditors are given a 90-day time period in which they can file creditor claims against the estate.  Extra steps are also required if real property must be sold or interested parties object at any time during the probate proceedings.  The end result is that from start to finish probate takes a significant amount of time.

The second reason to avoid probate is its cost.  Because probate requires court involvement, attorneys, executors and other parties are almost always involved.  The usual attorney fees are set out in the Nevada Revised Statutes Chapter 150.  Generally, attorney fees are calculated based on the size of the estate.  Executors and administrators are also entitled to a similar, but slightly smaller fee.  Beneficiaries will also be required to pay court filing and other fees.  Overall probate ends up being an expensive process.
As probate is both time-consuming and expensive, many people successfully avoid probate all together.  This can be done by setting up a proper estate plan.  If you have any questions about avoiding probate and setting up your estate plan, feel free to contact one of our attorneys.

Friday, October 14, 2016

Nevada Remains a Top-Ranked Dynasty Trust State

A local law firm recently published a chart which named Nevada as one of the top two jurisdictions that are best for establishing Dynasty Trusts.

A Dynasty Trust is a special trust created to last for multiple generations.  They use what is called the generation-skipping transfer tax exemption under the Internal Revenue Code (currently $5.45 million per person) to pass family wealth to multiple generations without being eroded by estate taxes at each generation, which is what happens without a Dynasty Trust.  In Nevada, a dynasty trust can last for one day less than 365 years.

Other advantages of a Dynasty Trust include:

  • ·         Protecting trust assets from potential creditor claims against beneficiaries;
  • ·         Reducing a grantor’s estate by the amount of the gift transferred to the trust, plus the appreciation from those assets; and
  • ·         Removing the value of the trust assets from a number of succeeding generations’ estates for estate tax purposes.
To discuss whether a Dynasty Trust is right for you, please contact the attorneys at Jeffrey Burr, LTD. today.

-Rebecca J. Haines, Esq. 

Tuesday, October 11, 2016

Proposed §2704 Regulations to Take Away Discounting

In an effort to keep you informed of developments in federal gift and estate tax laws, we are writing to tell you of a potential change in the law.  By way of background, when Congress passes provisions of the Internal Revenue Code, they authorize the United States Treasury to issue regulations as further interpretation and enforcement of the Code.   The regulations that are the subject of this post are of particular interest for single clients with an estate greater than or approaching $5.5 million or married clients with combined estates greater than or approaching $11 million.

Proposed Regulations Issued: The Treasury (IRS) has recently issued Proposed Regulations that could have a dramatic impact on your estate planning by eliminating valuation discounts. For wealthy people looking to minimize their future certain estate tax, this is critical.  If you are concerned about protecting a family business, family investment assets, or real estate from having to be sold in order to pay the federal estate tax at your death, then it is worth investigating this. 

Act Now: Time is of the essence. Once the Proposed Regulations are effective, which could be as early as year-end, the ability to purposely structure discounts on assets of your estate might be substantially reduced or eliminated, thus curtailing your tax and asset protection planning flexibility.  Properly planning with these types of techniques takes some time to structure the various steps of the plan.  It is important to start right away.

What are Discounts Anyway? Here’s a simple illustration of discounts and what the proposed regulations are attempting to take away: Andrew has a $20 million estate which includes a $10 million family business. He gifts 40% of the business to a special irrevocable trust to grow the asset out of his estate. The gross value of the 40% business interest is $4 million.  Since an owner of the business with a minority position cannot force a sale or redemption of its interest, the non-controlling interest in the business transferred to the trust is worth less than the pro-rata value of the underlying business. Thus, the value should be reduced to reflect the difficulty of marketing the non-controlling interest.  As a result, the value of the 40% business interest transferred to the trust might be appraised, net of discounts, at $2.4 million. The discount has reduced the estate by $1.6 million from this one simple transaction.  The proposed regulations will eliminate the ability to take the discounts for lack of control and lack of marketability, meaning that the IRS would require that the sale of 40% of Andrew’s business to a trust or family member must have a price tag of $4 million and no less.

Election Impact: If the Democrats win the White House and the Democratic estate tax proposals are enacted, the results will be devastating to wealth transfer planning.  Pundits have predicted that a Democratic White House could affect down-ballot races and flip the Senate to the Democrats. The current administration’s estate tax “wish list” includes the reduction of the estate tax exemption to $3.5 million, elimination of inflation adjustments to the exemption, a $1 million gift exemption and a 45% rate.  However, the current Democratic presidential candidate’s plan would impose a 50% tax rate on estates above $10 million, a 55% tax rate above $50 million, and a 65% tax rate on estates over $500 million.  The Democratic plan will most likely include the array of proposals included in the current administration’s Greenbook which seek to restrict or eliminate GRATs, note sale transactions to grantor trusts, and more.  Wealthy taxpayers who don’t seize what might be the last opportunity to capture discount planning, might lose much more than just the discounts. They might lose many of the most valuable estate tax planning options. 

What You Should Do: Contact your planning team. A collaborative effort is essential to effective planning at this level. Your estate planning attorney can review strategic wealth transfer options that will maximize your benefit from discounts while still meeting other planning objectives. Projections completed by your wealth manager could be essential to confirming how much planning should be done and how. Your CPA will have vital input on wealth transfer options, federal and state income tax implications, and more. Your insurance consultant can show you how to use life insurance to backstop some of the planning strategies, in coordination with the financial forecasting done by your wealth manager, to maximize both the tax benefits and your financial security. 

We are including a link to a recent New York Times® article which discusses the proposed regulations and the affected planning in more detail.

If you are interested in learning more about the planning that could be terminated by these proposed regulations, we invite you to contact our office to set up a consultation to discuss an example of this type of discounting planning and whether this type of planning fits your individual situation.  More information will be posted to the blog about that date when it has been determined.

Attorney Jason C. Walker

Monday, September 26, 2016

Planning for the Unexpected ... Divorce

The recent news of the “Brangelina” (Brad Pitt and Angelina Jolie) split has me thinking...even the perceived “match made in Heaven” can end in divorce. The unexpected can become reality. So no matter how improbable divorce may be for you, plan for the unexpected.

Nevada is a community property state, and there is a presumption in Nevada that property acquired during marriage is community property and, therefore, subject to an equal division upon divorce. Some property, however, is not considered community property, unless commingled with community property. For instance, property brought into the marriage is generally the separate property of the spouse who owned the property prior to marriage. Also, inheritance is generally separate property.

How do we make sure, then, that commingling doesn’t happen? How do we deal with appreciation? How are mortgage payments treated? How are premium payments on life insurance, or 401(k)/IRA contributions treated? What do we do with family owned businesses?
Sometimes these questions are left unconsidered, whether because of premarital bliss, naivety, or some other reason. But as the news of Brad Pitt and Angelina Jolie’s divorce shows, the outcomes of human relationships are unpredictable. Sometimes (or many times) unexpected things happen, and we should be ready when they do.

Contact an attorney at JEFFREY BURR, LTD. to make sure you have the right plan and discuss with us your options for a separate property trust, a domestic asset protection trust, or other community property and separate property issues.

Wednesday, September 21, 2016

Join us for NBI Seminar on 10/6/16

Please join Jason Walker, Esq. and Collins Hunsaker, Esq. at their upcoming NBI seminar on October 6th.  Jason and Collins are scheduled to speak to attorneys, certified public accounts, and financial planners regarding:

·         Estate and Gift Tax Laws
·         Taxation of Trusts
·         Revocable Living Trust based plans versus Will based plans
·         Structuring Separate and Joint Revocable Living Trusts

Here is a link to the seminar webpage so you can read more and register: Revocable Living Trusts from Start to Finish

We hope to see you there!

Tuesday, August 30, 2016

If I’m Not Leaving Millions, Do I Need an Estate Plan?

Even if you are not a celebrity or self-made millionaire, failing to plan properly will leave a huge mess for your family.

Some ways to make sure that your family is not scrambling to find assets upon your passing or spending thousands of dollars in court and attorney fees to transfer those assets to your beneficiaries are:

1.  Make sure you at least have a simple Will.

The Will tells a court who you would like your Executor to be, or person that you would like to manage and oversee the probate process.  If you fail to nominate someone, the court will nominate someone for you.  A Will also directs the court to distribute assets to your named beneficiaries in accordance with the terms you lay out.  If you do not have a Will, the state substitutes its own estate plan for yours by distributing your assets according to the state’s intestacy statutes – which may inadvertently disinherit those who you actually wanted to leave your assets to. 

2.  Determine if a Living Trust is good for you.

Living Trusts enable you to bypass the court probate process entirely.  They enable for a smooth transition of assets from you to your beneficiaries after you are gone.  Another benefit of the Living Trust is that it can provide for means to take care of you if you are ever incapacitated. 

3.  Title your Assets Properly.

If you have a Living Trust, it is important to “fund” the Trust with your assets. This means that you must transfer title of bank accounts, investment accounts, real property and vehicles into the name of the Trust. Otherwise, your family will have to probate the assets left in your individual name.  Life Insurance and Retirement Plans should have updated beneficiary designations, which can include your Trust.

4.  Keep an Updated Asset Inventory.

One of the most difficult parts of distributing a person’s assets after they are gone is figuring out exactly what that person owned before they passed away.  Keeping an updated asset inventory will enable your family to effectively take over without having to scramble to figure out if or where you held investment accounts, stock, real property, etc.

While it may seem counter-intuitive, investing in setting up an estate plan now with an experienced estate planning attorney will save your estate (and your family) money in the long run.  So to prevent a mess for your family, even if you are not a celebrity or self-made millionaire, take the time now to meet with an estate planning attorney and determine the best estate plan for you.  

Monday, August 22, 2016

AFR's for September

The AFRs Annual Semi-annual Quarterly Monthly
are as follows
Short-term 0.79% 0.79% 0.79% 0.79%
Mid-term 1.22% 1.22% 1.22% 1.22%
Long-term 1.90% 1.89% 1.89% 1.88%