Wednesday, March 25, 2015

JURISDICTION OF THE NEVADA PROBATE COURT

Jurisdiction is the power of a legal body (a court) to hear and make a judgment or ruling on a case.   The Nevada Probate Courts are only able to hear and adjudicate probate cases that come within its jurisdiction.  The Nevada Probate Court’s jurisdiction is set forth in NRS 136.010:

  1. Wills may be proved and letters granted in the county where the decedent was a resident at the time of death, whether death occurred in that county or elsewhere, and the district court of that county has exclusive jurisdiction of the settlement of such estates, whether the estate is in one or more counties.
  2. The estate of a nonresident decedent may be settled by the district court of any county in which any part of the estate is located. The district court to which application is first made has exclusive jurisdiction of the settlement of estates of nonresidents.

In other words, the Nevada Probate Court may hear and make rulings on cases where (1) the Decedent was a resident of Nevada at the date of death or (2) the Decedent was a non-resident but owns property located within the State of Nevada.
Three simple examples illustrate the Nevada Probate Court’s jurisdiction: 

  1. Decedent A was a resident of Colorado and owned a vacation home in Las Vegas, Nevada.  The Nevada Probate Court has jurisdiction over Decedent A’s probate because the Decedent owned real property in Nevada.
  2. Decedent B is a resident of Nevada at the date of Death.  The Nevada Probate Court has jurisdiction over Decedent B’s probate because Decedent B was a Nevada resident.
  3. Decedent C is a resident of Texas and has no assets in the state of Nevada.  However, Decedent C’s children are Nevada residents.  The Nevada Probate Court does not have jurisdiction over Decedent C’s probate because Decedent C was not a Nevada resident and did not own and property in the state of Nevada.

Should you have any questions regarding the Nevada Probate Court’s jurisdiction, feel free to contact our office.

Wednesday, March 18, 2015

AFR's for April

The Section 7520 rate is 2.0%
The AFRs Annual Semi-annual Quarterly Monthly
are as follows
Short-term 0.48% 0.48% 0.48% 0.48%
Mid-term 1.70% 1.69% 1.69% 1.68%
Long-term 2.47% 2.45% 2.44% 2.44%

Wednesday, March 11, 2015

Review and Update of Estate Plan by Surviving Spouse

When a spouse dies, it is important that the surviving spouse review his or her own estate plan and estate planning documents.  In most situations, a married couple nominates his or her spouse to serve as their attorney-in-fact (agent) under their power of attorney for health care decisions and as their attorney-in-fact (agent) under their power of attorney for financial matters.  Under these documents, the person nominated to make health care decisions and to handle the financial affairs for the surviving spouse is now deceased.  Accordingly, it is essential that the surviving spouse review the powers of attorney to insure that there are alternate agents nominated to so serve. 
 
Oftentimes the surviving spouse will desire to update the powers of attorney by making the alternate nominated party or parties under the existing powers of attorney now the primary nominated party or parties and adding new alternate nominated parties. This is also true for nominated successor trustees under the Trust agreement and for the nominated personal representatives under the Last Will and Testament of the surviving spouse. Again, the nominated successor trustee and the nominated personal representative is often the now deceased spouse. 

Such a review is not limited to these estate planning documents.  The surviving spouse should also review any insurance policies insuring the life of the surviving spouse as to designated beneficiaries.  Again, the spouse, who is now deceased, is usually the designated beneficiary of the policy.  The surviving spouse needs to be sure that there are alternate designated beneficiaries under the terms of the policy (a revocable trust is a good beneficiary for insurance policies).  Unfortunately, if there is no living designated beneficiary at the time of the death of the surviving spouse, some policies provide that the proceeds are paid to the estate of the insured.  This would in all likelihood result in the necessity of a probate of the estate of the surviving spouse, something we always try to help our clients avoid due to the costs and fees involved with a probate proceeding. 

Additionally, if the surviving spouse has a retirement plan, the designated beneficiary provisions of the plan should be reviewed to make sure that there are alternate designated beneficiaries other than the deceased spouse.

-Attorney John R. Mugan

 

Thursday, February 26, 2015

Estate Planning Essentials

You have likely spent many years accumulating wealth, establishing relationships and caring for your family.  Don’t let that all go to waste by neglecting to plan ahead. By carefully designing and establishing an integrated estate plan, your wealth, relationships and family will be protected.
 
Approximately 55% of American adults do not have a Will or other estate plan in place according to a 2013 survey conducted by LEXISNEXIS, a legal research provider.  Although thinking about and planning for potential incapacity and inevitable death may be uncomfortable, it is essential to assure that your wishes are carried out, your hard-earned money goes where you want it to, and your loved ones have direction and guidance as to your wishes.  These important documents warrant careful thought and planning as they will speak for you when you can no longer speak for yourself. 

If a person passes away without an estate plan, their loved ones and family are left in what could be a sticky situation.  They may not know where to find bank account information to pay that last phone bill, where the keys to a safety deposit box are located, or who was supposed to get the family silver.  While these questions are seemingly insignificant, they have the potential to develop into large family disputes when the person who has the answers to these questions is no longer there.  While under emotional stress of losing a loved one, a family is forced to guess the deceased person’s intent.  The situation is further complicated when the family has to go to court for probate of the estate where Nevada (or the state of the decedent’s death) may have a say in guessing the intent of the decedent.  This process of attempting to discern a deceased person’s intent may last for months and cause unnecessary disputes and tension between loved ones and family members.
 
If you are part of the 55% of American adults who have a Will or other documents in place to speak for you when you pass away, you are already way ahead of the curve.  However, oftentimes when people have executed solely a Will, they neglect to plan for what may happen in the event of incapacity.  Without a document like a living Will which states who you would like to act for you when you can no longer make decisions for yourself, family members may fight over who will take care of you and Nevada (or the state of your residence) may step in and choose someone who you would never want to be in that position of trust.  If you have a living Will, you can name a person (or persons) who will step into your shoes and assure that you are taken care of.  This person will enable you to maintain your standard of living, help provide for any dependents you have, and prevent your family from having to guess at what you would have wanted while under emotional stress and time constraints. 
 
These potential messes can generally be avoided with a comprehensive estate plan, wherein your wishes and intent are explicit.  Please contact our office for a FREE 30 minute Trust or Will consultation so you can plan and be prepared.
 
-Attorney Rebecca J. Haines

Wednesday, February 18, 2015

Planning for Aging Parents and Family Pets

When putting together our estate planning, it is natural for us to plan for our descendants and other persons whom we wish to be benefitted by our legacy.  We may also want to include provisions for certain charitable organizations that are meaningful to us.  Our population is changing such that estate planning considerations are also expanding to less traditional classes of beneficiaries, such as aging parents and family pets.  The older generations are living longer, and people are finding themselves caring for an aging parent, relative or friend.  Persons in care-giving roles may want to think about including their aging parents in their estate plans to ensure there is no disruption in their parents' ongoing care and/or diminution in their parents’ quality of life.  In addition, some pet owners go to great lengths to provide a high level of care for their pets.  To them, it is important to make arrangements for the continued care of their pets should their pets outlive them.  For the owner’s peace of mind and the security of the pet, an estate plan may include a reasonable monetary bequest to a caregiver who could in turn use the funds to care for the pet.
 

Tuesday, February 10, 2015

LLCs v. Corporations

Both LLCs and Corporations can be utilized as part of an integrated estate plan to provide additional protection, flexibility and perpetuity.  It is important to know the primary differences between an LLC and Corporation so that you can choose which type of entity will best help you achieve your business and estate planning goals.  Three of the primary differences between LLCs and Corporations are the following: differences in flexibility, differences in management structure, and different treatment for tax purposes.

1.      Flexibility.  Corporations are defined by statute, LLCs are defined by contract.  Corporations are rigidly defined and must meet numerous formalities to satisfy statutory requirements to protect assets, while LLCs are more flexible in nature as the members of the LLC write the contract by which the LLC is governed.

2.      Management Structure.  Corporation management is vested in its Board of Directors.  Each Director has one vote and the Board sets policies to be executed by the Officers on day to day basis and have the responsibility to govern the company.  An LLC’s governing structure is based upon its Operating Agreement.  The default organizational structure of an LLC is that all members of the LLC have an equal right to participate in management, but the members can agree to have a member-managed or manager-managed LLC.  In a member-managed LLC all the members of the LLC share responsibility for the day-to-day running of the business.  This structure usually works best for small businesses.  In a manager-managed LLC, a manager is chosen by the members to oversee the running of the business and the members almost act as a corporate Board of Directors in that the members delegate management responsibilities to a manager.  A manager-managed structure typically works best in a larger business where a separate management level is desirable or some members of the LLC want to be passive investors.

3.      Tax Treatment.  Corporations are subject to ‘double taxation.’  When a person sets up a corporation, he or she is taxed on both the corporate and the individual level.  However, a corporation can avoid double taxation of corporate profits and dividends by electing Subchapter S status.  An LLC typically allows for ‘pass-through’ taxation, wherein profits and losses typically pass through the LLC and get reported on the personal income tax returns of the owners.  Additionally, an LLC can elect to be taxed as a C or S corporation depending on the tax objectives of its owners. 

There are various reasons to choose forming a corporation versus an LLC and vise versa, not the least of which are flexibility, management and tax treatment.  To determine whether a corporation or LLC should be a part of your integrated estate plan and which type of entity will best help you achieve your business and estate planning goals, come in and speak with one of the knowledgeable attorneys at JEFFREY BURR.

-Attorney Rebecca J. Haines

Thursday, January 29, 2015

Inherent Unfairness In The Proposed Closing Of The “Trust Fund Loophole”

In November of 2014, I wrote a blog entitled Income Tax Basis Adjustment of Trust Assets at Death of Trustor.  The blog discussed how under long-standing tax law, an asset of a decedent or of the decedent’s revocable trust or estate receives a new basis for income tax gain and loss purposes equal to the value of asset as of the date of death of the decedent.  For example, if the decedent or the decedent’s revocable trust died owning Apple stock with a value of $115.00 per share on the date of death, if and when the stock was sold by the trust or its beneficiaries any taxable gain is equal to the excess of the sale price over $115.00 per share.  This is true even though the decedent may have purchased the stock at $90.00 per share during his or her lifetime, and $90.00 per share was the decedent’s basis in the asset.  As noted by Attorney Collins Hunsaker in his recent blog entitled President Obama’s Tax Plan and the “Trust Fund Loophole, President Obama wants to eliminate this income tax basis adjustment of an asset to the value on the date of death, and instead require that the income tax basis remain the decedent’s basis even after death.  Mr. Obama touted this in his most recent State of the Union Speech, and labeled it the closing of the “trust fund loophole”.  If such a proposal was enacted into law, if and when the stock was sold by the trust or its beneficiaries in the above example, any taxable gain would be equal to the excess of the sale price over $90.00 per share, the decedent’s basis, and not the $115.00 per share, the value as of the date of death. 

So what is unfair about that? After all, that is what the decedent’s income tax basis was when he or she was alive.  Why should the beneficiaries obtain an increase in the income tax basis to the value on the date of death just because a death occurred?  The answer is federal estate tax.  When one dies, the decedent’s estate and trust is potentially subject to federal estate tax depending on the value of the estate and trust assets.  If federal estate tax is due as a result of the death of the decedent, the tax rate is 40% and generally the tax must be paid within 9 months of the date of death.  Federal estate tax is based on the value of the assets as of the date of death, not the decedent’s basis in the assets.  Accordingly, to subject the decedent’s estate, trust and beneficiaries to federal estate tax based on the value of the assets as of the date of death, it is only consistent from a tax point of view to adjust the asset basis to the same value for income tax purposes if and when the asset is sold, namely the value of the asset on the date of death.  To do otherwise has traditionally been viewed as unfair and inconsistent. As opposed to closing the “trust fund loophole”, arguably the adoption of such a proposal would allow the government “to have its cake and eat it too” tax-wise.   

-Attorney John R. Mugan