With baby boomers aging, a massive transfer of wealth will occur over the next 25 years. It is estimated that over 60 trillion dollars will transfer to future heirs of this generation. If you become one of the lucky ones and receive an inheritance or some other type of windfall, look at these 5 tips for making sure that your windfall provides financial security for many years to come.
1. Seek Good Advice. Legal requirements and tax implications go hand-in-hand with any major windfall. You need to build a wealth team with the following 3 advisors: CPA, financial planner and estate planning attorney. Each advisor has a different, yet vital role in ensuring your money is protected and continues to grow.
2. Set Boundaries with Friends and Family. Long-lost friends and family members will approach in droves wanting handouts. Some ask simply for cash, while others ask for loans or offer you opportunities to invest in them or their businesses. While it may seem like you are being generous or helpful, any gifts, loans or investments should be carefully considered and vetted by your neutral financial advisor. Adding the advisor to the conversation adds another layer of security and may help you set boundaries to protect your relationships and your wealth.
3. Reduce Your Debt First. Have your team work with you to chart out a course to pay down (or off) your debts. This may be done all at once or via an installment plan. This should be done before any additional spending takes place.
4. Keep Working.In most cases, if you are young and able-bodied you should continue to earn an income regardless of your windfall amount. You may want to change careers and find a more satisfying income stream, but having that purpose often prevents you from overspending and provides a more overall satisfying lifestyle.
5. Consistent Review Sessions. Have a plan in place to meet with your team of advisors on a regular basis to review your goals, get updates on changes in the law and go through your financial statements. At these meetings, discuss topics such as insurance needs, retirement planning and charitable donation goals.
If you recently received a windfall, our knowledgeable and experienced estate planning attorneys at Stouffer Legal in the Greater Baltimore area would love to be a part of your team of advisors. Contact us to learn more about how we can help you manage your windfall.
Getting remarried late in life can create inheritance problems without a careful look at your estate plan.
Remarriage late in life without proper estate planning can quickly cause problems with families and estates, according to New Hampshire Magazine in "Navigating Late-Life Remarriage."
Elder advocates generally consider it a positive event when people find love and comfort late in their lives but it can create problems, the biggest being when people do not take the time to consider what a second marriage might mean for their children's ability to receive an inheritance. Children from an earlier marriage can be left out of an estate entirely without planning.
By default, a person's entire estate goes to a living spouse. It cannot be assumed that the spouse will make plans to leave anything inherited for stepchildren in his or her estate. There is no legal obligation for the spouse to do so and the law will not give the money to those children if the spouse passes away without an estate plan.
This, of course, does not mean that someone should not get remarried late in life. It just means that some planning needs to take place before doing so.
An estate planning attorney can guide you in creating an estate plan that reduces the chances that remarriage will create problems for your family and estate. Call (443) 470-3599 today and schedule a consultation with Maryland Attorney Britt L. Stouffer to learn more about Estate or Elder Law and how she can help you.
With the rise in popularity for investing in and holding on to various forms of cryptocurrency, it is important to understand how to incorporate these types of assets into your estate plan. Over 1000 different versions exist, the most popular of which being Bitcoin. Cryptocurrencies are a type of digital or virtual currency that uses cryptography for security. The enhanced security makes it difficult to counterfeit and the currencies are not issued by any central authority which provides immunity from government interference or outside manipulation.
Estate Plans with Cryptocurrencies
These cryptocurrencies are considered assets and should be included in your estate plan; however, cryptocurrencies are not treated the same as funds you hold in a traditional bank. Virtual currency according to the IRS will be treated as personal property for federal tax purposes. There is still relatively little authority on tax treatment of these assets, but the IRS is beginning to monitor these assets more closely.
When creating an estate plan or administering an estate, cryptocurrency is treated as property rather than currency and this means that the transfer of cryptocurrency into another type of currency can result in losses or gains. Cryptocurrency increases or decreases in value like real estate but it does not accrue interest or pay dividends. The exchange or sell of cryptocurrency can lead to capital gains or losses. These capital gains or losses must be reported to the IRS on timely filed income tax returns. In addition to the IRS, the SEC is also starting to regulate some types of cryptocurrency (currently not Bitcoin) as securities.
Gifting Cryptocurrencies
Understanding how these cryptocurrencies are treated impacts how they are included in estate planning, administered during probate and consequences of gifting them. Like other assets, cryptocurrency may be gifted in order to reduce estate taxes or they may be donated to qualified charities in order to receive a charitable deduction on income taxes. When gifting cryptocurrency, it is important to properly track the basis of the gift. Best practice would be to include an appraisal of the fair market value of the cryptocurrency being gifted along with the date of the transfer and the donor’s basis in the gift.
During estate administration, the executor will need to have the decedent's passcode to access and transfer the account. There will be fewer checks on a fiduciary handling a cryptocurrency account than traditional bank accounts so it is advisable to name a very trustworthy executor or trustee to handle cryptocurrency passwords and accounts. The executor will need to get an appraisal of the value as of the date of death and be able to ascertain the decedent’s basis in the asset.
To properly incorporate cryptocurrency into an estate plan, all cryptocurrency should be listed and information regarding access to passcodes provided. Passcodes cannot be recovered so they should be stored securely, possibly in multiple locations with directions to access provided to the executor upon death or an agent under a power of attorney upon incapacity.
Funding Trusts with Cryptocurrencies
Currently there is no authority that would prevent any trust from being funded by cryptocurrency or directing how those transfers should be treated for tax purposes. In theory, to fund a trust with cryptocurrency directly the grantor would simply provide the trustee with the passcode or a cold storage device for the cryptocurrency account to access and manage the account on behalf of the beneficiaries. It is probably wise to diversify a trust portfolio to include assets other than cryptocurrencies. If a trust holds only cryptocurrency, the trust language should release a trustee from the duty to diversify and provide the trustee with any necessary indemnification.
As you can see, this new area of cryptocurrencies and its impact on trusts and estates is rapidly evolving. At Stouffer Legal, we strive to stay abreast of new laws concerning cryptocurrencies and how these can impact our clients. If you own cryptocurrencies, schedule a consultation with our experienced attorneys to review and update your estate plan with these assets in mind.
LIVE Webinar – Click Here to Register for January 19th at 10am
How to Protect your "Stuff" in 3 Easy Steps (Estate Planning Workshop)
This webinar covers frequently asked questions and common misconceptions regarding: Wills & Trust, Asset Protection, Nursing Home Issues, Medicaid Qualification, and Estate Taxes.
Please click to register for our webinar:
LIVE Webinar – Click Here to Register for January 19th at 10am
Our webinars are designed to be educational, interactive, informative and generate relevant discussion for attendees. Modern Estate Planning is more than just preparing a will and putting it in a safe. Find out how a comprehensive Estate Plan will protect your assets and your family. Our experienced attorney, Wilson McManus, will be sharing stories on how Estate Planning is beneficial and sometimes crucial. In an Estate Plan, you need to know the Rules: Who's "Rule-book" controls your Estate Plan? Yours? The Governments? Someone else? You need to know your Predators: Who's a Threat to Your Stuff? The Government? Long-term Care Costs? Your Family? You need to know your Options: What Plans are out there? Does a Will work? What about a Trust? Which kind of Trust?
Please click to register for our webinar:
LIVE Webinar – Click Here to Register for January 19th at 10am
Our workshops fill up fast, so please call (443) 470-3599 today to RSVP.
We can't wait to see you!
Today is the right day to take your first step. Click below to register for our next free workshop and learn what everyone is talking about.
Attending our next free Workshops is the best way to
Get Started on your New Estate Plan!
In a digital world of quick and easy templates, it may be tempting to cut corners and execute a do-it-yourself estate plan. Or it may seem like a good idea to use a friend of a friend who practices law or the law firm down the street to draft up your will and a power of attorney. Unfortunately, these decisions can lead to some dire consequences down the road.
Estate planning is a highly complex area of law overlapping tax laws, real estate laws and probate. Regardless of your level of wealth, hiring an estate planning attorney with the right expertise for your needs will be crucial in actualizing your overall financial and planning goals. When considering who to hire, ask the following 7 questions:
1. How much of your time is dedicated to estate planning and administration? The best answer here is 100%. You do not want a jack of all trades, master of none drafting your estate planning documents.
2. Are each of your estate plans unique?You do not want boilerplate documents. You want an attorney who will carefully interview you, learn about your situation and develop a plan that works for you.
3. Can you assist me with other family members? While your conversations with your attorney are confidential, you may authorize your attorney to include your spouse, adult children or other loved ones in the process. An experienced attorney knows how to handle these communications carefully and ethically.
4. Will you work with my other advisors? In order for a comprehensive estate plan to work properly, the estate planning attorney will work closely with your financial advisors and CPAs to make sure everyone is on the same page.
5. How do estate plans stay up-to-date?You want an attorney with a system in place for reminding you to review and revise. You also want an attorney who stays up-to-date on everchanging laws and policies that may impact your plan.
6. How do you incorporate technology in your practice? Attorneys with cutting-edge client management software stay more organized, communicate better and run their offices more efficiently. This is an important question and you want to hear that using proper technology is a priority for the firm you choose.
7. How experienced is your staff?Along those same lines, you want to know that the staff if knowledgeable and able to provide information when the attorneys are unavailable.
We welcome the opportunity for you to interview us at Stouffer Legal for your estate planning, incapacity planning, elder law or probate needs. You will find that we will answer all of these questions and more to ensure that you receive the services that best fit your needs.
Living trusts serve many functions such as providing greater control over asset distribution, privacy, probate avoidance and tax benefits. All assets used to fund the trust are managed by the trustee for the benefit of the beneficiaries. A trust is designed to survive the incapacity and death of the grantor and trustee. When a trustee can no longer carry out his or her duties, a successor trustee must step in.
The trust document will typically designate a successor trustee at the time of its creation. All control over the trust assets immediately moves to the successor trustee, who must also abide by the terms and conditions of the trust, just as the original trustee did. Often there are additional alternative trustees named in case the first named successor is now unable or unwilling to serve.
Deciding on who to name as trustee or successor trustees requires careful consideration of the type of property managed by the trust. Certain skillsets may be required depending on the complexity of the assets. It is not uncommon for a successor trustee to be a professional fiduciary which requires a fee. The benefit of these professional trustees is that they are accustomed to taking over at a moment’s notice and understand trust language. They can get up to speed quickly and make a seamless transition in most cases.
For those who find themselves in new territory by taking over as a successor trustee, the first step will be to review the trust document with an experienced estate planning attorney. The attorney will help the successor in some of the following manners:
- Review all terms and explain legalese and procedures;
- Inventory the assets and check for current financial balances, appraisals or fair market value depending on the type of asset;
- Develop a calendar for on-going distributions and other deadlines per the terms;
- and make sure all beneficiaries are properly identified with updated addresses and contact information.
Taking the time to get organized on the front-end of the transition goes a long way to making sure the trust is properly administered going forward. If you are taking over as a successor trustee and need assistance in making a smooth transition, contact the experienced estate planning attorneys at Stouffer Legal in the Greater Baltimore area.
With a new administration moving into the White House, many high net worth married couples are reaching out to seasoned advisors about the impact of potential tax changes. At Stouffer Legal, we discuss the creation of a spousal lifetime access trust commonly referred to as a SLAT with many of these couples.
The Basics – What is a SLAT?
A SLAT is a gift from one spouse to an irrevocable trust for the benefit of the other spouse. The SLAT is funded while both spouses are still alive which is different than many other types of credit shelter trusts. The beneficiary spouse can receive distributions from this trust even though it is designed to be excluded from the beneficiary spouse’s gross estate and not subject to estate tax when the beneficiary spouse dies. The amount transferred into the SLAT uses the federal lifetime gift exemption (currently $11.58 million in 2020) and shields the gift from gift tax.
The grantor gives up any rights and control over the assets transferred; however, the spouse, as beneficiary, still maintains access. The spouse can receive trust distributions as the beneficiary, but use them for joint support and maintenance.
We work with couples to draft language in the SLAT appropriate for each particular situation and take precautions against future divorce or premature death. Often a SLAT will be worded to only benefit a current spouse so that it ends with divorce. It can also be worded to allow funds to be returned upon the spouse’s death or even allow the beneficiary spouse to make loans back to the grantor spouse as needed. There are many creative ways to word SLATs to protect spouses in a variety of unforeseen circumstances.
While a couple may set up SLATs for each other, they are not permitted to mirror one another. The IRS will not recognize mirrored SLATs which then defeats the purpose of creating them in the first place. To remedy this, the SLATs need to be funded with different types of assets and set out different distribution schedules.
Generally, the SLAT and the grantor are treated as the same taxpayer for income tax purposes even though the SLAT is a separate legal entity. You report the income and deductions on your tax return and pay ordinary income tax on the income generated from the assets in the SLAT.
Set up a consultation with the knowledgeable attorneys at Stouffer Legal to learn more about SLATs. Exemption. Do not procrastinate because it may be wise to set up and fund these prior to any tax law changes that decrease the federal gift and estate tax. With the urgent need to fund COVID-19 related stimulus spending, the federal government may need to raise revenue rather quickly. It is even possible that legislation passed later in 2021 will be retroactive to January 1, 2021. That is worse case scenario, but if you are a high net worth married couple, schedule an appointment right away to discuss the option of using a SLAT to protect your assets.
Do you worry what will happen to a child or loved one suffering from addiction after you pass away? Will they blow their inheritance?
Research indicates that addiction is a chronic disease. Recovery is a lifelong healing process peppered with relapses. Because of this, when developing an estate plan, some clients make the mistake of giving outright gifts on one extreme or completely disinheriting the addict on the other extreme. Some attempt to use other family members as a buffer by leaving one child’s inheritance to another with provisions to dole it out gradually to the addict. This is a huge mistake. It places an unfair burden on the beneficiary left responsible for dealing with an addict family member. That is a recipe for strife and discord. There is a better way to provide for an addict through proper estate planning.
Including an Addict’s Trust into your overall estate plan can help you accomplish the goals of providing for your loved one suffering from addiction while still setting up certain parameters that prevent enabling the addict. These incentive-based trusts are worded so that they motivate the addict to stay clean and sober and reap more rewards.
The following provisions are often included in the trust:
-Requirements that the beneficiary submit to random testing;
-A tiered payout with a minimal amount that will sustain the individual and higher payouts for certain time periods of sobriety;
-Depending on the severity of the situation, the trust may pay for provisions directly and never allow cash access to the individual beneficiary;
-Provides for payment of rehabilitative or treatment programs;
-Typically includes a harassment provision designed to penalize the addict from harassing the trustee or any third party service provider.
The trustee is typically a professional trustee rather than a family member. This provides a layer of protection so that the trustee does not submit to emotional or unreasonable demands.
Creating these types of incentive-based trusts require the knowledge and expertise of experienced estate planning attorneys. These are not boiler-plate documents. Estate planning attorneys drafting these trusts must be creative and use very specific language. The goal is to ensure that the beneficiary receives the care needed while also aiding them through recovery. A carefully tailored trust provides for the addict without enabling the individual to continue bad habits.
If you have a family member suffering from addiction and want to incorporate an Addict’s Trust into your estate plan, contact Stouffer Legal in the Greater Baltimore area today for a consultation.
LIVE Webinar – Click Here to Register for January 13th at 10am
How to Protect your "Stuff" in 3 Easy Steps (Estate Planning Workshop)
This webinar covers frequently asked questions and common misconceptions regarding: Wills & Trust, Asset Protection, Nursing Home Issues, Medicaid Qualification, and Estate Taxes.
Please click to register for our webinar:
LIVE Webinar – Click Here to Register for January 13th at 10am
Our webinars are designed to be educational, interactive, informative and generate relevant discussion for attendees. Modern Estate Planning is more than just preparing a will and putting it in a safe. Find out how a comprehensive Estate Plan will protect your assets and your family. Our experienced attorney, Wilson McManus, will be sharing stories on how Estate Planning is beneficial and sometimes crucial. In an Estate Plan, you need to know the Rules: Who's "Rule-book" controls your Estate Plan? Yours? The Governments? Someone else? You need to know your Predators: Who's a Threat to Your Stuff? The Government? Long-term Care Costs? Your Family? You need to know your Options: What Plans are out there? Does a Will work? What about a Trust? Which kind of Trust?
Please click to register for our webinar:
LIVE Webinar – Click Here to Register for January 13th at 10am
Our workshops fill up fast, so please call (443) 470-3599 today to RSVP.
We can't wait to see you!
Today is the right day to take your first step. Click below to register for our next free workshop and learn what everyone is talking about. Attending our next free Workshops is the best way to Get Started on your New Estate Plan!
A will isn’t just about avoiding the federal estate tax.
Even if the Republican-controlled Presidency and Congress eliminate the federal tax, the need for an estate plan is not eliminated, according to Forbes in "Five Reasons You Need a Will (Even If the Estate Tax Is Repealed)!"
The reasons include:
· In a will you appoint an executor who is in charge of administering your affairs. The executor can make sure that all of your debts are paid and that your assets are handled appropriately.
· If you have minor children, a will is used to designate who you want to have guardianship of those children in case something happens to you.
· In a will, you can give specific bequests to people. That means if you want one of your children to have a specific piece of personal property for sentimental reasons, a will is the place that you do that.
· While getting a will you can also get advanced medical directives that will determine how you should be cared for, if you are incapacitated and not able to communicate with doctors at the time.
A will is more efficient than allowing the courts to handle your affairs without directions from you. It also protects your estate by making sure that your property does not go to people you do not want to have it. Call (443) 470-3599 today and schedule a consultation with Maryland Attorney Britt L. Stouffer to learn more about Estate or Elder Law and how she can help you.
