Wednesday, December 31, 2014

What are the Differences Between a Last Will, a Living Trust and a Living Will?

People are often confused about the differences between a Last Will, a Living Trust and a Living Will.  Although these things may sound alike, they all serve different purposes. 

A Last Will lets you dictate who receives your property, provides instruction for the handling of your remains upon death, and if you are a parent of a minor child allows you to nominate a guardian.

A Living Trust, like a Last Will, allows you to dictate who receives your property.  The major difference between a Living Trust and a Last Will is that a Living Trust typically avoids Probate upon the death of the Settlor – the creator of the Living Trust.  Thus, the property you place in a Living Trust passes free of court involvement to your beneficiaries.  A Living Trust is also known as Revocable Trust or a Family Trust.

A Living Will has nothing to do with the distribution of your property.  Rather a Living Will indicates your wishes as it relates to artificial life support.  During times of incapacity, the Living Will may provide peace of mind to your loved ones as they will know your wishes relating to end of life treatments.  A Living Will is also known as an Advanced Directive or Directive to Physicians.

The attorneys at JEFFREY BURR have extensive experience implementing these documents into a person’s estate plan.  Please feel free to contact our offices for a free 30 minute consultation.

-A. Collins Hunsaker

Wednesday, December 3, 2014

December AFR's announced

The Section 7520 rate is 2.0%
December AFRs Annual Semi-annual Quarterly Monthly
Short-term 0.34% 0.34% 0.34% 0.34%
Mid-term 1.72% 1.71% 1.71% 1.70%
Long-term 2.74% 2.72% 2.71% 2.70%

Wednesday, November 26, 2014

Income Tax Basis Adjustment of Trust Assets at Death of Trustor

When a person (“Trustor”) establishes a revocable living trust during his or her lifetime for the Trustor’s benefit and transfers assets of the Trustor into the Trust, the income tax basis of the Trust asset remains the same as when the assets were owned by the Trustor individually.  For example, if the Trustor transfers real estate with an income tax basis of $350,000.00 and Apple stock with an income tax basis of $100.00 per share into the Trust, the income tax basis of these Trust assets remains the same during the Trustor’s lifetime.  In the event the Trust sells the real estate for $375,000.00 and the Apple stock at $115.00 per share during the Trustor’s lifetime, there would be capital gain of approximately $25,000.00 on the real estate sale ($375,000.00 sale price minus $350,000.00 income tax basis and sale expenses) and $15.00 per share capital gain on the Apple stock sale ($115.00 sale price minus $100.00 income tax basis and sale expenses). 
 
However, what if the Trust sold the assets after the Trustor’s death?  Upon the death of the Trustor, these Trust assets acquire a new income tax basis equal to the fair market value of the asset on the date of Trustor’s death.  This is commonly referred to as the “stepped up basis”.  The reason for the adjustment is that federal estate tax is based on the value of the assets as of the date of death.   If we take the above example and assume the value of the real estate was $375,000.00 and the value of the Apple stock was $115.00 per share on the date of Trustor’s death and the Trust sold the assets after the Trustor’s death for $375,000.00 and $115.00 per share, there would be no capital gain.  Accordingly, it is very important that the fair market value of the Trust assets are determined as of the date of death, particularly when Trust assets are not sold for a number of years after the date of death of the Trustor.
 
So how does one establish the date of death values?  The best proof of the value of the Trust assets as of the date of death is a federal estate tax return (Form 706) filed with the IRS.  If the return is accepted by the IRS, the income tax basis is the value of the asset as reported on the return.  However, many trusts and estates are not required to file federal estate tax returns.  In that case, written real estate appraisals as of the date of death should be obtained, a written record of the average of the high and low bid price for the stock on the date of death obtained, et cetera.  The Jeffrey Burr law office has over thirty (30) years of experience in administering trusts when a Trustor dies, and the attorneys and support staff of the Trust Administration Department can assist in establishing and documenting the stepped up basis of the Trust assets for future use. 
 
 

Monday, November 17, 2014

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, November 5, 2014

IRS Announces 2015 Estate and Gift Tax Figures


Political junkies probably had a late night last night watching election results.  I’m actually tired from the night before; waiting for the IRS to announce updates to important 2015 tax numbers!   
The IRS recently issued Rev. Proc 2014-61 which reveals many important tax figures, such as the standard deduction figure for income taxes, the child tax credit, the earned income credit, along with a few important estate and gift tax figures.  The number I was interested in is the lifetime exclusion amount, also known as the “exemption” amount which is set by statute at $5 million, but is indexed for inflation.  The IRS determines the inflation rate for this important figure.  This figure for 2015 will be $5,430,000.  That’s an increase of $90,000 over 2014’s figure of $5,340,000.  2013’s amount was $5,250,000, if you’re keeping score.  The estate and gift tax rate of 40% remains unchanged.

Sometimes we also get a change in what is known as the “annual exclusion.”  The annual exclusion is the amount that a person can gift outright to another person during one calendar year without having to file a gift tax return.    This annual exclusion amount remains unchanged at $14,000 per person.

Attorney Jason C. Walker

Monday, November 3, 2014

Asset Protection Update: The Trustee in a Chapter 7 Bankruptcy Can Control and Sell Assets of a Nevada Single Member LLC

In a recent decision by the United States District Court, District of Nevada, in the case of In re Cleveland, that Court affirmed its position that a trustee in a Chapter 7 bankruptcy succeeds to all of a debtor’s rights in such debtor’s single-member LLC.  2014 WL 4809924 (D. Nev. Sept. 29, 2014).  These rights include the power to control the LLC and to sell the assets of the LLC. 
 
Under Nevada state law, a judgment creditor of an LLC member is entitled only to a charging order to enforce its judgment.  NRS § 86.401.  The charging order is the exclusive remedy, and this is the case no matter if the LLC has only a single-member or not.  With a charging order, the judgment creditor can only claim distributions that would have been made to the member.  In other words, each time the LLC is to make a distribution to a member subject to a charging order, the creditor that obtained the charging order can direct the LLC to make the distribution to it instead of to the member.  The judgment creditor cannot, however, reach the LLC’s assets with a charging order.
 
The In re Cleveland decision, although decided by the United States District Court for the District of Nevada, does not limit the trustee in a Chapter 7 bankruptcy to only a charging order when it comes to single-member LLCs.  Instead, in a bankruptcy situation, which is governed by federal law and which preempts state law, the trustee is permitted to control and otherwise sell the assets of a single-member LLC – something that cannot be done with a charging order.  This distinction between state and federal law is important and should be considered when forming an LLC and certainly when a member of a single-member LLC is contemplating bankruptcy.
 
-Attorney Michael D. Lum    

Wednesday, October 8, 2014

The Real Property Probate Trap

In previous blog posts I have discussed the benefits of avoiding probate in the State of Nevada.  One of the most common assets to land you in probate is real property.  Real property is generally a probate trap because unlike financial assets, beneficiaries are not commonly named on real property assets.  There are several ways to keep your real property out of probate:

  • Creating a properly funded revocable trust;
  • Recording a beneficiary deed naming beneficiaries to the property; or
  • Holding title to the property in joint-tenancy.
Determining the best option depends on several factors such as the size of the estate, the age and relationship of the beneficiaries and your overall estate planning goals.  It is important to note that there are risks involved with some of the options listed above, such as being subject to liability as a result of owning property in joint-tenancy with someone other than a spouse.

Avoiding probate with real property assets can be easy.  However, avoiding probate generally requires filing the correct documentation with the Recorder’s office in the county in which the property is located.  I often times meet with clients who do not realize that the current titling of their real property could be causing undesired probate consequences for their spouse or beneficiaries.  If you have any questions regarding whether your real property assets may be subject to probate, contact your estate planning attorney to find out more.

Tuesday, September 30, 2014

The Impact of a Nevada Court of Appeals on Probate and Trust Cases

It is not hard to tell when it is election time in Clark County.  Everywhere you look there signs asking for your vote.  While the candidates are highly publicized in advance of the election, the ballot measures often do not get as much attention.  One of the ballot measures this fall asks voters to approve the addition of a Court of Appeals in the State of Nevada.  Nevada is one of only a handful of States that do not have a Court of Appeals.  Among the States without a Court of Appeals, Nevada has the largest population and highest caseload per justice.
 
As it stands right now, all appeals from the District Court go directly to the Supreme Court of the State of Nevada.  Given the high rate of population growth and the increased caseloads, the limited resources of the Supreme Court are being taxed in order to sustain a timely resolution of all of the cases in the pipeline.  An overburdened appellate court creates a backlog of cases on appeal waiting to be heard.  In turn, individual litigant’s access to justice can be delayed for several months or even more than a year.
 
Under Nevada’s model, the addition of an appellate court would enable the Supreme Court to refer cases to the Court of Appeals in appropriate cases.  These would typically be housekeeping cases or those that do not concern an important policy of the State of Nevada.  More cases could be processed and justice will be served in a more timely manner.

Like any other civil case, a will contest, a trust contest or other litigation involving trusts and estates can be appealed from the District Court.  The addition of a Court of Appeals would allow these types of cases to be more swiftly determined on appeal.  This is especially important in the context of wills and trusts, since the overall objective of the probate code and trust code is to resolve such matters on a more expedited basis than an average civil case.  That objective is thwarted when these cases get tied up in the appeal process since it prevents the estate and/or trust from being finally settled and distributed to the rightful parties.  Having a Court of Appeals would further the overall goal of allowing the trust or estate to be ultimately administered and distributed without unnecessary delay.

Wednesday, September 24, 2014

Please join Attorney Collins Hunsaker 
at the Annual ASDO Caregiver Conference

Wednesday October 22, 2014
8:30 am - 4:30 pm

UNITED HEALTHCARE
2716 N Tenaya
Las Vegas, NV 89128

5 CEU's approved for nurses, social workers
and long term care administrators.

Call (702) 363-7566 to Register.

Thursday, September 18, 2014

Thursday, September 11, 2014

Come Bearing Annual Exclusion Gifts


As we near the end of the third quarter of 2014 I ask myself, where has the year gone?  It seems it was just yesterday that I was indolently celebrating the New Year.  Now, I have come to realize that we are coming into the last few months of 2014, and with that, the holiday season is impending. Fearing that I may be perceived as one of those people who begins their Christmas countdown months too early, I am reluctant to say that Christmas is in fact around the corner, and the time to begin shopping for gifts is uncomfortably near.  In the spirit of this gift-giving discussion, I wish to remind those of you who are benevolently inclined or who are looking to transfer assets free of gift tax that in addition to budgeting for the latest and greatest toys and gadgets for your young children and grandchildren (toys and gadgets that we only dreamed of as kids), you must also budget for your annual exclusion gifts.  
 
Internal Revenue Code section 2503(b) provides in relevant part:
(1) In general.-- In the case of gifts (other than gifts of future interests in property) made to any person by the donor during the calendar year, the first $10,000 of such gifts to such person shall not, for purposes of subsection (a) [defining the term “taxable gifts”], be included in the total amount of gifts made during such year. (Emphasis in original.)
 
In 2014, the $10,000 figure above, which is indexed for inflation, increased to $14,000.  Thus, in 2014 taxpayers can gift up to $14,000 per donee, and married couples can gift twice this amount, or $28,000.  This can be a useful tool to transfer value out of ones estate free of gift taxes.  And, if a taxpayer has many donees to which he or she is prone to make gifts, the annual exclusion can be especially effective.  So again, for those of you who are altruistically disposed, before you get caught up in the holiday cheer and before the year-end comes and goes, be sure to budget you annual exclusion gifts.    
 

Wednesday, September 3, 2014

AFR's for September announced

September Annual Semi-annual Quarterly Monthly
AFR's
Short-term 0.36% 0.36% 0.36% 0.36%
Mid-term 1.86% 1.85% 1.85% 1.84%
Long-term 2.97% 2.95% 2.94% 2.93%

Thursday, August 21, 2014

Trust Beneficiary Receipts and Releases

When a Trustee is ready to terminate a Trust and make distributions to the Trust beneficiaries, it is important that a written Receipt And Release signed by the beneficiary is obtained.  Oftentimes a Trustee will ask why is this necessary as there will be a cancelled check that is evidence of the distribution to the Trust beneficiary and the amount thereof.  There are a number of good reasons for the Receipt And Release. 

First, a written Receipt And Release signed by the beneficiary will avoid any future dispute as to whether the beneficiary received all that he or she is entitled to under the terms of the Trust agreement.  For example, a beneficiary may die shortly after the distribution and the deceased beneficiary’s surviving spouse and/or children may dispute that the decedent received his or her full share.  The Trustee will be required to prove that the decedent received all he or she was entitled to, possibly in a court of law.  This situation can be avoided with a signed Receipt And Release that states that the beneficiary acknowledges that the beneficiary has received any and all Trust property and assets that he or she is entitled to under the terms of the Trust agreement.

Second, a Trustee does not want a beneficiary to use the distribution to hire an attorney to sue the Trustee for alleged wrongdoing in the administration to the Trust.  The Receipt And Release will state that the beneficiary releases the Trustee from any and all claims, damages, legal causes of action, et cetera, known or unknown, regarding the administration of the Trust.    

Third, there may be unknown liabilities at the time of the distribution, most commonly income tax.  The Receipt And Release should provide that the beneficiary agrees to immediately refund to the Trustee part or all of the distributed Trust property and assets (or the cash proceeds resulting from the sale thereof) that may be requested in writing by the Trustee if it is subsequently determined that: (1) part or all of the distribution should have been paid to someone other than the recipient, or (2) funds are needed for the payment of claims or other obligations entitled to be paid from the recipient’s share of the Trust.  Item No. 2 is important in the event the decedent’s final income tax report has not been filed, plus the IRS can audit the decedent’s income tax returns previously filed.  Generally speaking, the IRS has three (3) years after a return is filed in which to audit the return.  However, there is no time limit if the IRS is claiming fraud.
For these and other reasons, it is always best practice that a Trustee obtain a signed, written Receipt And Release from a beneficiary at the time of distribution.  
 
-Attorney John R. Mugan

Friday, August 15, 2014

My Trusted Trustee Has Gone Bad!

In some unfortunate cases, a trustee of a trust may fail to follow the terms of the trust or may take actions inconsistent with their fiduciary duty as a trustee.  Fortunately, Nevada law provides several remedies when a trustee beaches his or her fiduciary duty to the beneficiaries:
 
NRS 163.115 allows a beneficiary or co-trustee to maintain a court proceeding if a trustee (1) commits or (2) threatens to commit a breach of trust.   The beneficiary or co-trustee can ask the court to apply the following remedies to correct or rectify any breach of trust:
·         To compel the trustee to perform his or her duties.

·         To enjoin the trustee from committing the breach of trust.

·         To compel the trustee to redress the breach of trust by payment of money or otherwise.

·         To appoint a receiver or temporary trustee to take possession of the trust property and administer the trust.

·         To remove the trustee.

·         To set aside acts of the trustee.

·         To reduce or deny compensation of the trustee.

·         To impose an equitable lien or a constructive trust on trust property.

·         To trace trust property that has been wrongfully disposed of and recover the property or its proceeds.
 
These tools allow beneficiaries and co-trustee to request the court’s help to remedy any bad actions taken by existing trustees.  The tools also provide peace-of-mind to clients who are creating new trusts or have existing trusts as the courts can take action against any future trustee who does not follow the terms of their trust.  These laws and many other laws in the state of Nevada help protect you if your trusted trustee has gone bad.

Wednesday, August 6, 2014

Trustee Incapacity and the Los Angeles Clippers

Donald Sterling and the Los Angeles Clippers have been in and out of the news for several months now.  There was some conclusion last week when Mrs. Shelly Sterling was successful in her attempt to take control of the Sterling Family Trust as sole Trustee.  This opens the door to Mrs. Sterling being able complete the sale of the Los Angeles Clippers basketball franchise to Steve Ballmer.  As an estate planning attorney it is a little bit exciting to have news relevant to our practice.

I obviously haven’t read the Sterling trust, but most trusts allow for a Trustee to be removed upon evidence of incapacity.  Our trust’s standard incapacity language requires one doctor’s note regarding a Trustee’s physical or mental incapacity.   In the case of the Sterling Family Trust, both Shelly and Donald must have both been Co-Trustees despite their separation.  According to news stories that I’ve read, Mrs. Shelly Sterling obtained notes from Donald Sterling’s physician(s) that he was incapacitated and demonstrating symptoms of Alzheimer’s disease.  After obtaining these doctors’ notes, Shelly took the position that she could serve as sole Trustee of the Family Trust and was therefore able to control the sale of the Clippers.
The question before the court was apparently whether Shelly Sterling was properly in place as the sole Trustee after obtaining the doctors’ notes.  The judge found the doctors’ notes credible and the judge also found that Shelly Sterling was acting in good faith and that she was not secretly trying to take over control of the team and the family trust.

So what are we to learn from the Sterling situation?  Well, in the context of estate planning, it may be worth reviewing your own trust and what the incapacity section requires for another person to take over as Trustee.  There’s a delicate balance required.  You want to allow a Successor or Co-Trustee to take control without too much effort and without great delay, but you also don’t want to make it so easy that someone can take control without determining that there is true incapacity.  We usually discuss this incapacity clause with our clients and let them decide whether one doctor’s note is sufficient or if they want to require two doctors’ notes.  An interesting alternative is to require a majority or unanimous decision of an “incapacity panel” made up of family members and perhaps a primary physician.  This allows some discretion by the panel (usually made up of family members) to remove a Trustee without the formality of a doctor’s note and this could also allow for easy reinstatement of a Trustee if there was only temporary incapacity.


 


 

Wednesday, July 23, 2014

Are Inherited IRAs Protected From Creditors?

The United States Supreme Court addressed this question in the context of bankruptcy laws on June 12, 2014 in its decision in Clark v. Rameker.  In that case, the question presented was whether funds contained in an inherited IRA qualify as “retirement funds” within the meaning of the federal bankruptcy exemption.

In short, the United States Supreme Court held that inherited IRAs do not constitute “retirement funds.”  In other words, unlike traditional or Roth IRAs that are exempt from a person’s bankruptcy estate and thereby not subject to creditor attack, inherited IRAs are not so protected.  Thus, creditors can claim funds held in an inherited IRA in bankruptcy situations.

In finding that inherited IRAs are not “retirement funds,” the United States Supreme Court based its conclusion on three legal characteristics of inherited IRAs not indicative of traditional or Roth IRAs.  First, the Court reasoned that “the holder of an inherited IRA can never invest additional money in the account.”  According to the Court, this runs contradictory to the purpose of retirement funds in that they are intended to provide tax incentives for regular contributions.

Second, the Court reasoned that inherited IRAs are not funds set aside for retirement given the fact that inherited IRA account holders are required to withdraw money from the inherited IRA account regardless of the account holder’s proximity to retirement.  This feature results in a diminution of the inherited IRA account’s value, which according to the Court is contrary to the purpose of retirement funds.

Third, the Court reasoned that inherited IRAs are different than traditional and Roth IRAs in the sense that holders of an inherited IRA can withdraw the account balance, up to the whole thereof, at any time.  To the contrary, traditional and Roth IRA account holders are subject to penalties for most withdrawals made prior to attaining the age of 59 ½.  Thus, traditional and Roth IRA account holders are encouraged to leave such account funds untouched prior to retirement age.  Such is not the case with inherited IRAs.  For the reasons above, the United States Supreme Court held that inherited IRAs are not “retirement funds” and therefore are subject to creditor claims in bankruptcy. 

Nevada, like many other states, has opted out of the federal bankruptcy exemptions and instead adopted its own exemptions, save for a couple of exceptions.  In Nevada, up to $500,000 in certain retirement accounts is exempt from execution.  However, Nevada law does not specifically exempt inherited IRAs.  Even if a particular state does protect inherited IRAs, there is no guarantee that each IRA beneficiary will never move from that state to a state that does not protect inherited IRAs.  Accordingly, it is now important to consider whether to designate a trust as the beneficiary of IRAs and qualified accounts for asset protection purposes.  If you have questions in this regard, please contact our offices.
 

Friday, July 18, 2014

Nevada Transplants-The Need For An Estate Plan Check-up

According to a recent news article, the vast majority of the recent population growth in Clark County, Nevada, is from an influx of baby boomers relocating from different states. This trend is expected to continue as baby boomers reach retirement.  A baby boomer is commonly defined as a person born during the post World War Two baby boom period of 1946 to 1964.  Most baby boomers have established estate plans consisting of revocable trusts, last wills and testaments, powers of attorney and living wills.  The potential problem is that these documents were prepared pursuant to the state law where they were residing at the time. State law governing these type of documents can vary substantially. For example, Nevada is a community property state, one of only nine (9) community states in the nation.  A person can also incorporate certain Nevada trustee powers in his or her revocable trust by reference. However, almost all revocable trust agreements provide that the law of the state in which the person establishing the trust is residing at the time of the establishment of the trust controls the administration of the trust. 
 
Another potential problem is powers of attorneys and living wills that have been prepared to conform to non-Nevada law.  A health care power of attorney in which you appoint someone to make health care decisions for you and set forth a statement of desires regarding your health care, is particularly sensitive to state law. The same is true for a living will that states your intentions regarding life-sustaining treatment such as hydration and nutrition when you have an incurable or terminal condition.  (In fact, a living will is called a “Directive To Physicians” in Nevada.)  Some states are very liberal regarding your health care options and some states are very conservative.  If you have a health care power of attorney and a living will that was prepared in conformity with say, Michigan law or some other non-Nevada state law, a Nevada health care provider may not accept them.  Needless to say, this can have very serious ramifications for you and your family. 
The answer is a simple estate plan check-up.  The Jeffrey Burr Law office provides a free one-half hour consultation during which an estate planning attorney can review your current estate plan documents.  All estate planning attorneys at the Jeffrey Burr Law office are certified public accountants or hold advanced degrees in taxation.  Although a periodic estate plan check-up is always a good idea because of changes in circumstances or changes in Nevada or federal law, an estate plan check-up is especially important to someone moving to Nevada.
-Attorney John R. Mugan



         

Wednesday, July 16, 2014

Save the Date!!

Save the Date!!

ASDO Caregiver Conference
 
Wednesday, October 22nd 2014
8:30 AM — 4:00 PM
 
UNITED HEALTHCARE
2716 N. Tenaya
Las Vegas, NV 89128
 
5 CEU's available
 
Call (702) 363-7566 to register!
 

orkers & Long Term Care Administrators





 
Call (702) 363-7566 for Registration and Sponsorship Information

Wednesday, July 9, 2014

Holographic Wills in Nevada

A holographic will is a handwritten last will and testament written and signed by the Testator.  Nevada law provides:
 
NRS 133.090  Holographic will.
1.  A holographic will is a will in which the signature, date and material provisions are written by the hand of the testator, whether or not it is witnessed or notarized. It is subject to no other form, and may be made in or out of this State.
As such, holographic wills are valid if the will is (1) signed, (2) dated and (3) the material provisions are written by the person creating the holographic will.
Even though holographic wills are valid in the state of Nevada, they are often not recommended for several reasons:
  • Probate Avoidance.  Although holographic wills may be valid as to the disposition of the testator’s assets, the creation of a holographic will does not help a person avoid probate.  Probate is the court supervised process to pay creditors and distribute a person’s assets to beneficiaries.  Most attorneys advise their clients to avoid probate if possible because it is a long and expensive process.
  • Admitting the holographic will to court.  NRS 136.190 provides that “a holographic will may be proved by authentication satisfactory to the court.”  Even though a holographic will may be valid under the holographic will statute, the court will not accept the will until it is “proved by authentication satisfactory to the court.”  This means that the court must have evidence sufficient to prove that the will was actually written by the testator.  This generally requires affidavits from parties familiar with the testator or an analysis from a handwriting expert.  This process can be time consuming and expense. 
  • Legal advice.  Generally when a person creates their own will, they do so without legal advice.  Many of the holographic wills that we see in our office are either done incorrectly or lack important provisions that are usually found in a will.  A will is an important document that speaks for a person when they are no longer able to speak for themselves.  As such, proper legal advice is key to creating a functional will.
Holographic wills are valid in Nevada and can serv an important purpose if used properly.  Should you have any questions regarding holographic wills in Nevada, feel free to contact our office.
 

Tuesday, July 1, 2014

JEFFREY BURR named 2014 Mountain States Super Lawyer

Congratulations to Jeffrey Burr for being named as Moutain States top 100 lawyers for 2014 by Super Lawyers Magazine.

Monday, June 30, 2014

CAN MY ESTATE PLAN PROVIDE FOR MY PET?

The other day I was meeting with a client who stated – “I have a silly question, but I need to ask it.  Can I provide for my dog in my estate plan?”  I explained to this client that this question is one that is often asked by many clients with pets.  And why shouldn’t it be asked when most pet owners view their pets as members of their family and as such want to ensure that their faithful companions’ needs are met if the owner does in fact pass away before the pet.
 
The answer to my client’s question is that she can provide for her dog through her estate plan.  Nevada law provides that a person can create what is more commonly known as a “pet trust” (see NRS 163.0075).  In order for a person to create a pet trust, the pet owner will need to decide how the trust will be funded, who will be the trustee, and who will be the caretaker of the pet.  In addition, the pet owner will need to provide direction as to how the trustee or caretaker will manage the pet and the funds for the benefit of the pet.  It may be helpful to provide specific instructions in the trust agreement as to the pet’s specific needs such as a certain brand of food to be fed to the pet or a particular veterinarian to be consulted for the pet’s care.

The benefit of creating a pet trust is that the trust is enforceable by law thereby providing pet owners with peace of mind knowing their pets will be cared for according to their instructions.  If you should have any further questions regarding pet trusts, please feel free to contact the law office of JEFFREY BURR at (702) 433-4455 for a free half-hour consultation.
 

 

Thursday, June 26, 2014

AFR's for July

The section 7520 rate is 2.2%
July AFRs Annual Semi-annual Quarterly Monthly
are as follows
Short-term 0.31% 0.31% 0.31% 0.31%
Mid-term 1.82% 1.81% 1.81% 1.80%
Long-term 3.06% 3.04% 3.03% 3.02%

Monday, June 9, 2014

Funding The Exemption Sub-Trust Revisited

Some Trust agreements require the establishment of an Exemption Sub-Trust.  This was very common in Trust agreements prior to the dramatic increase in the equivalent exemption for federal estate tax purposes.  The principal advantage of an Exemption Sub-Trust that if it is correctly administered during the life of the surviving spouse, at the time of the death of the surviving spouse all of the assets of the Exemption Sub-Trust pass to the beneficiaries federal estate-tax free. This is true even though all of the income (and principal if need be pursuant to an ascertainable standard such as for health, education, maintenance and support) from the Exemption Sub-Trust is used for the benefit of the surviving spouse during his or her lifetime. 
 
When the first spouse dies, the Successor Trustees must determine what Trust assets should be used to fund the Exemption Sub-Trust.  This is a very important determination.  In light of the fact that the Exemption Sub-Trust assets remaining at the time of the death of surviving spouse will not be subject to federal estate tax regardless of value, in the past the general rule was that assets with high appreciation potential should be used to fund the Exemption Sub-Trust.  In other words, the appreciation potential of an asset was the primary factor.  This was to avoid federal estate tax when the surviving spouse die, which federal estate tax is due 9 months after the date of death calculated at a 40% tax rate.
However, the equivalent exemption for federal estate tax purposes for deaths occurring in 2014 is $5,340,000.00.  The equivalent exemption is indexed for inflation, so it will continue to increase each year in the future. With the large equivalent exemption now in effect and to continue to increase in the future, another primary consideration in funding an Exemption Sub-Trust is the income tax basis of an asset.  Assets in the Exemption Sub-Trust have an income tax basis equal to the fair market value on the date of death of the first spouse to die, and there is no “step up in basis” to the value of the asset on the date of death of the surviving spouse. Accordingly, an asset in the Exemption Sub-Trust that has significantly increased in value since the death of the first spouse will, upon sale, have significant taxable gain for income tax purposes. Therefore, when funding the Exemption Sub-Trust, if it appears that there is very little likelihood of any federal estate tax upon the death of the surviving spouse because the surviving spouse’s taxable estate will be less than the projected equivalent exemption, it is prudent not to fund the Exemption Sub-Trust with assets with high appreciation potential assets but leave them in the taxable estate of the surviving spouse.  That way when the surviving spouse dies, those assets will receive a step up in basis equal to the fair market value as of the date of death of the surviving spouse. A sale of such asset shortly after the death of the surviving spouse in all likelihood will trigger very little, if any, taxable gain for income tax purposes plus there is no federal estate tax. Accordingly, the beneficiaries have the best of tax worlds, no federal estate tax and a step up in basis for income tax purposes.
At the law office of JEFFREY BURR, we have many years of experience assisting and advising corporate and individual Successor Trustees in the administration of a Trust after the death of a Trustor, including the funding of Exemption and other sub-trusts.         


Friday, May 30, 2014

Is My Estate Big Enough to Need Estate Planning?

I often get asked if there is a minimum estate value before estate planning is required.  The term estate planning is often associated with planning to minimize estate taxes and to plan to pass large amounts of wealth to future generations.  Although sometimes this is the case, with the recent changes in estate tax laws most clients do not require estate tax planning and most clients are not passing large amounts to future generations.  The typical family has a house, a modest savings and maybe some life insurance.  Estate planning is not just for the wealthy, everyone should have some type of estate plan regardless of the size of the estate.
 
For the majority of our clients, estate planning focuses on two goals:  The first goal is protect the client and their family in the case of incapacity.  When someone in the family becomes incapacitated, whether through an accident or through a disease such as dementia, it is essential to have legal documents in place that provide a mechanism for another person to be able to step into the shoes of the incapacitated person and have the legal authority to make both health care and financial decisions for that person (someone to pay the bills and make medical decisions).  In the absence of these legal documents, the family may be required to spend thousands of dollars to obtain a court-appointed guardian over the incapacitated person to accomplish these same tasks.  Guardianship proceedings are not only expensive but are supervised by the court and require constant court supervision and annual accountings.  Guardianship can usually be avoided by preparing simple power of attorney documents prior to incapacity.
The second goal of estate planning is to provide for a distribution of the clients assets to their desired beneficiaries in the event of their passing.  Often times this entails a plan to delay a full distribution to children until they reach a mature age or to protect the children from creditors or divorce.  Another major part of an estate distribution is to avoid having to go to probate court.  Like a guardianship proceeding, a probate proceeding is very costly and time consuming because every step of the process is supervised by the court.  With careful planning by an estate planning attorney, assets can be distributed to beneficiaries in a manner that will both protect the beneficiaries (sometimes from themselves) and avoid the high costs of probate.
Returning to the original questions of how big an estate must be before estate planning is required?  Estate planning is not just for the wealthy; every person should have some estate planning documents.  Each client has a unique estate and a diverse family makeup.  Should you have any questions as to whether you or your family are in need of estate planning, feel free to call our office for a free half-hour consultation.

Attorney – Corey J. Schmutz

Tuesday, May 27, 2014

AFR's for June

June AFRs Annual Semi-annual Quarterly Monthly
are as follows
Short-term 0.32% 0.32% 0.32% 0.32%
Mid-term 1.91% 1.90% 1.90% 1.89%
Long-term 3.14% 3.12% 3.11% 3.10%