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Monday, May 16, 2016

Executor Duties

What’s Involved in Serving as an Executor?

An executor is the person designated in a Will as the individual who is responsible for performing a number of tasks necessary to wind down the decedent’s affairs. Generally, the executor’s responsibilities involve taking charge of the deceased person’s assets, notifying beneficiaries and creditors, paying the estate’s debts and distributing the property to the beneficiaries. The executor may also be a beneficiary of the Will, though he or she must treat all beneficiaries fairly and in accordance with the provisions of the Will.

First and foremost, an executor must obtain the original, signed Will as well as other important documents such as certified copies of the Death Certificate.  The executor must notify all persons who have an interest in the estate or who are named as beneficiaries in the Will. A list of all assets must be compiled, including value at the date of death. The executor must take steps to secure all assets, whether by taking possession of them, or by obtaining adequate insurance. Assets of the estate include all real and personal property owned by the decedent; overlooked assets sometimes include stocks, bonds, pension funds, bank accounts, safety deposit boxes, annuity payments, holiday pay, and work-related life insurance or survivor benefits.

The executor is responsible for compiling a list of the decedent’s debts, as well. Debts can include credit card accounts, loan payments, mortgages, home utilities, tax arrears, alimony and outstanding leases. All of the decedent’s creditors must also be notified and given an opportunity to make a claim against the estate.

Whether the Will must be probated depends on a variety of factors, including size of the estate and how the decedent’s assets were titled. An experienced probate or estate planning attorney can help determine whether probate is required, and assist with carrying out the executor’s duties. If the estate must go through probate, the executor must file with the court to probate the Will and be appointed as the estate’s legal representative.  Once the executor has this legal authority, he or she must pay all of the decedent’s outstanding debts, provided there are sufficient assets in the estate. After debts have been paid, the executor must distribute the remaining real and personal property to the beneficiaries, in accordance with the wishes set forth in the Will. Because the executor is accountable to the beneficiaries of the estate, it is extremely important to keep complete, accurate records of all expenditures, correspondence, asset distribution, and filings with the court and government agencies.

The executor is also responsible for filing all tax returns for the deceased person including federal and state income tax returns and estate tax filings, if applicable. Additional tasks may include notifying carriers for homeowner’s and auto insurance policies and initiating claims on life insurance policies.

The executor is entitled to compensation for his or her services.  This fee varies according to the estate’s size and may be subject to review depending on the complexity as well as the time and effort expended by the executor.

   


Monday, May 9, 2016

The Need for Advanced Medical Directives

Do I Really Need Advance Directives for Health Care?

Many people are confused by advance directives for health care. They are unsure what type of directives are available. and whether or not they need need directives at all, especially if they are young. There are several types of advance directives. One is a living will, which communicates what type of life support and medical treatments, such as ventilators or a feeding tube, you wish to receive. Another type is called a health care power of attorney or health care proxy. In a health care power of attorney, you name another person to make health care decisions for you in the event are unable to do so for yourself. A third type of advance directive for health care is a do not resuscitate order or a DNR. A DNR is a request that you not receive CPR if your heart stops beating or you stop breathing. Depending on the laws in your state, the health care form you execute could include all three types of health care directives, or you may do each individually.

If you are 18 or over, it’s time to establish your health care directives. Although no one thinks they will be in a medical situation requiring a directive at such a young age, it happens every day in the United States. People of all ages are involved in tragic accidents that could not be foreseen which result in life support being used. If you plan in advance, you can make sure you receive the type of medical care you wish, and you can avoid a lot of heartache for your family, who may be forced to guess what you would want done.

Many people do not want to execute health care directives because of some common misperceptions about them. People are often frightened to name someone to make health care decisions for them, because they fear they will give up the right to make decisions for themselves. However, an individual always has the right, if he or she is competent, to revoke the directive or make his or her own decisions.  Some also fear they will not be treated if they have a health care directive. This is also a common myth – the directive simply informs caregivers of the person you designate to make health care decisions and the type of treatment you’d like to receive in various situations.  Planning ahead can ensure that your treatment preferences are carried out while providing some peace of mind to your loved ones who are in a position to direct them.


Sunday, May 8, 2016

Learning from Prince's Mistakes


Why should we all have estate plans, no matter what our ages?

When Prince died prematurely last week, the world was in shock. How did an apparently healthy and wildly talented 57-year-old man leave us so suddenly? Not long afterwards, the second shock wave hit when people realized that Prince, who was currently unmarried and had no children, had not left a will.

The question echoed around the world: Who will inherit his estate?

His sister has filed documents to open probate and begin the lengthy process of distributing his assets, estimated at more than $300 million. It seems that someone as wealthy and renowned as Prince would have been advised to consult with an estate planning attorney. The error of omission, however, is not at all uncommon.


Read more . . .


Wednesday, May 4, 2016

A Primer on Spendthrift Trusts


How can I provide for a troubled heir in my estate plan?

When it comes to estate planning, some individuals are faced with the prospect of leaving property to a beneficiary who is not financially responsible or has other issues that may cause him or her to spend through the inheritance. One way to avoid leaving property to an heir who may squander it is to establish a spendthrift trust.

What is a Spendthrift Trust?

In short, a spendthrift trust is designed to limit access to principal in order to protect it from the beneficiary or his or her creditors. Rather than providing trust property directly to the beneficiary, the grantor names a trustee who is tasked with providing a regular payment to, or buying goods and services for, the beneficiary.

Spendthrift trusts are particularly effective when the beneficiary does not know how to handle money, has an addiction to drugs or alcohol, is susceptible to being taken advantage, or has a history of falling behind on debt.


Read more . . .


Monday, May 2, 2016

Incorporating a Business

Should I Incorporate My Business?

The primary advantages of operating as a corporation are liability protection and potential tax savings. Like any important decision, choosing whether to incorporate involves weighing the pros and cons of the various business structures and should only be done after careful research.

Once incorporated, the business becomes a separate legal entity, and assets of the corporation are separated from the owner’s personal finances. As a result, the owner’s personal assets generally can be shielded from creditors of the business.

To maintain this legal separation and avoid “piercing the corporate veil,” the corporation must observe certain formalities, including:

  • Keeping corporate assets and personal assets separate (no commingling of funds)
  • Holding shareholder and director meetings at least annually
  • Maintaining a corporate record book including bylaws, minutes of shareholder and director meetings, and shareholder records
  • Filing annual information statements with the Secretary of State
  • Filing a separate tax return for the corporation

Many business owners are concerned about “double taxation” of income that affects certain types of corporations known as “C-Corporations”.   Double taxation results when the C-corporation has profit at the end of the year that is distributed to the shareholders. That profit is taxed to the corporation, at the corporate tax rate, and then the dividends are taxable income to the shareholders on their personal tax returns. However, the corporate tax and dividend rates can be lower than the individual tax rate that a sole-proprietor would pay on a 1040 Schedule C, and a knowledgeable accountant or tax attorney may be able to advise on how to minimize the burden of double-taxation and indeed pay an effective tax rate which is lower than what a sole proprietor would pay.

For example, a small C-Corporation will likely have a shareholder who is also an employee. Paychecks to the shareholder/employee are, of course, tax deductible to the business. To the shareholder/employee, they are taxable income (as would be the case with a paycheck from any employer). A bonus could be paid to the shareholder/employee in order to lower the corporation’s taxable profit, eliminating the double-taxation. These calculations should be performed by a tax advisor, but shifting income from the corporation to the shareholder/employee (or not, depending on which has the lower tax rate) can be an effective way to lower your overall tax liability. In addition, there are certain advantages that are only available with a C-Corporation, such as full tax-deductibility of medical benefits for a shareholder/employee.

The S-Corporation avoids the double-taxation by offering a tax structure similar to the Limited Liability Company. A corporation with 100 or fewer shareholders can elect to be treated as an S-Corporation. If the corporation is profitable, the shareholder/employee must draw a reasonable salary (and pay employment tax on it), but then all remaining corporate profits flow through to the shareholder’s personal tax return (thereby avoiding the FICA tax on the portion of profits that is taken as a dividend).

An experienced attorney can help you decide which form of ownership is best for your business, help you establish the entity, and ensure the required formalities are observed.


Monday, April 25, 2016

Avoiding Bankruptcy as a Senior Citizen

Senior Citizens Comprise Growing Demographic of Bankruptcy Filers

It’s called your “golden years” but for many seniors and baby boomers, there is no gold and retirement savings are too often insufficient to maintain even basic living standards of retirees. However, baby boomers are the fastest growing age group filing for bankruptcy. And even for those who have not yet filed for bankruptcy, a lack of retirement savings greatly troubles many who face their final years with fear and uncertainty.

Another study, conducted by Financial Engines revealed that nearly half of all baby boomers fear they will be in the poor house after retirement. Adding insult to injury, this anxiety also discourages many from taking the necessary steps to establish and implement a clear, workable financial plan. So instead, they find themselves with mounting credit card debt, and a shortfall when it comes time to pay the bills.

In fact, one in every four baby boomers have depleted their savings during the recession and nearly half face the prospect of running out of money after they retire. With the depletion of their savings, many seniors are resorting to the use of credit cards to maintain their standard of living.  This is further exacerbated by skyrocketing medical costs, and the desire to lend a helping hand to adult children, many of whom are also under financial distress.  These circumstances have led to a dramatic increase in the number of senior citizens finding themselves in financial trouble and turning to the bankruptcy courts for relief.

Whether filing for bankruptcy relief under a Chapter 7 liquidation, or a Chapter 13 reorganization, senior citizens face their own hurdles. Unlike many younger filers, senior citizens tend to have more equity in their homes, and less opportunity to increase their incomes. The lack of well-paying job prospects severely limits older Americans’ ability to re-establish themselves financially following a bankruptcy, especially since their income sources are typically fixed while their expenses continue to increase.

 


Wednesday, April 20, 2016

The Effect on Taxes of a Lifetime of Giving


What are the tax implications of giving gifts to family members during your lifetime?

If you have substantial assets, it is natural to want to gift your family members from time to time, on special occasions, or to subsidize a particular purchase, trip, start-up business or educational venture. Nonetheless, it is important to be savvy about the tax implications of giving such gifts.

How do lifetime gifts affect your taxes?

Gifts given during your lifetime can affect your taxes on three levels:

  • Your individual income taxes
  • Your individual estate and gift taxes
  • Capital gains taxes potentially paid by the recipient

Current federal law considers estate and gift taxes in combination. You are allowed a cumulative $5.45 million exemption ($10.
Read more . . .


Monday, April 18, 2016

Fired for Having Bad Credit???

Can You Be Fired for Having Bad Credit?

If you are feeling the pinch, you are not alone. Many Americans have experienced a decline in income, while expenses have continued to increase. Many have taken a significant hit to their credit scores and are considering bankruptcy. Others who are on the eve of foreclosure may be considering a bankruptcy filing to stop an imminent foreclosure sale.

Whatever the reasons, a common concern of many consumers who face mounting debt, or are considering filing bankruptcy, is whether such credit issues can affect their ability to obtain or keep a job or get a promotion. In short, no. Bankruptcy is a protected, fundamental right granted by the U.S. Congress to all Americans. Under federal law, employers are prohibited from discriminating against a worker because of a bankruptcy filing. Bankruptcy courts across the country have weighed in on this issue and have consistently upheld the anti-discrimination protections contained in the U.S. Bankruptcy Code.

Employees who have filed bankruptcy and are subsequently fired must prove that bankruptcy was the primary factor in the termination. If the employer can prove there were other reasons for the termination, the employee’s wrongful termination claim will fail. Similarly, it is a violation of the law to refuse to hire or fail to promote an employee solely on the basis of a bankruptcy filing.
 


Monday, April 11, 2016

Gifting to Grandchildren? Issues to Consider...

Issues to Consider When Gifting to Grandchildren

Many grandparents who are financially stable love the idea of making gifts to their grandchildren. However, they are usually not aware of the many issues related to what many consider to be a simple gift. If you are considering making a significant gift to a grandchild, you should consult with a qualified attorney to guide you through the legal and tax issues that are involved.

Making a Lifetime Gift or a Bequest:  Before making a gift, you should consider whether you want to make the gift during your lifetime or leave the gift in your will. If you make the gift as a bequest in your will, you will not experience the joy of seeing your grandchild’s appreciation and use of the gift. However, there’s always the possibility that you will need the money to live on during your lifetime, and in reality, once a gift is made it cannot be taken back. Also, if you anticipate needing Medicaid or other government programs to pay for a nursing home or other benefits at some point in your life, any gifts you make in the prior five years can be considered as part of your assets when determining your eligibility.

What Form Gift Should Take:  You may consider making a gift outright to a grandchild. However, once such a gift is made, you give up control over how the funds can be used. If your grandchild decides to purchase a brand-new sports car or take an extravagant vacation, you will have no legal right to stop the grandchild. The grandchild’s parents could also in some cases access the money without your approval.

You could consider making a gift under the Uniform Gift to Minors Act (UGMA) or the Uniform Transfer to Minors Act (UTMA), depending on which state you live in. The accounts are easy to open, but once the grandchild reaches the age of majority, he or she will have unfettered access to the funds. You could also consider depositing money into a 529 plan, which is specifically designed for education purposes. Finally, you could consider establishing a trust with an estate planning attorney, which can be more expensive to set up, but can be customized to fit your needs. Such a trust can provide for spendthrift, divorce and creditor protection while allowing for more flexibility for expenditures such as education or purchase of a first home.

Tax Consequences: If you have a large estate, giving gifts to grandchildren may be a great way to get money out of your estate in order to reduce your future estate tax liability. In 2016, a single person can pass $5.45 million at death free of estate tax, and a couple can pass a combined $10 million without paying estate taxes. In addition, a person can give $14,000 in 2016 to any number of individuals without incurring any gift taxes. A grandparent with 10 grandchildren could give $140,000 per year to all grandchildren (and a married couple could give $280,000), thereby removing that property from his or her estate.


Monday, April 4, 2016

Making COLA Increase Permanent for Veterans


How are cost-of-living increases determined for veterans who receive VA benefits?

Veterans who receive benefits such as disability compensation, payouts for dependants and other Veterans Affairs living allowances typically receive Cost-of-Living Adjustments (COLA) annually, much as the recipients of Social Security benefits do. While COLA benefits for the latter group are automatic, recipients of veterans' benefits depend on intervention by Congress each year to approve cost-of-living increases.

What is a Cost-of-Living Adjustment (COLA)?

A Cost-of-Living Adjustment is an annual increase to Social Security, Supplemental Security Income, and VA Benefits to offset the effects of inflation. These increases are pegged to the percentage increases in the Read more . . .


Friday, March 18, 2016

Don't Be Conned into Buying an Unnecessary Living Trust

How are con artists selling seniors unnecessary living trusts?

While a living trust can be an important tool in estate planning, it is not useful in all cases. A living trust serves as a substitute for a will, but, unlike a will, is not subject to probate. The advantages of this are that it is a more private document than a will and is less prone to being contested.

For whom are living trusts inappropriate?

As mentioned, living trusts are not always helpful. They are particularly inappropriate for senior citizens living on fixed incomes with limited assets. Nonetheless, there has been a recent increase in scam artists preying on the elderly by selling Living Trust Kits as if they were essential. These frauds are rounding up seniors by the boatload -- through public seminars and by phone, mail, and door-to-door solicitation -- in order to exploit their trust and naiveté.  In this way, too many unsuspecting seniors have been sold estate planning tools that they do not require and can ill afford.

Beware of High-Pressure Tactics

Scammers of all kinds use similar tactics. In this case, where seniors are the targets, the con artists typically approach their victims with teasers they believe will focus on the latter's vulnerabilities, such as:

  • Gifts
  • Companionship and friendship
  • Scare tactics exaggerating death taxes and legal fees

By convincing the seniors they victimize that they (the scam artists) are their friends and will protect them from passing financial hardship onto their inheritors, the unscrupulous sellers rob vulnerable seniors of what few assets they have.

According to the 2015 True Link Report on Elder Financial Abuse, this kind of exploitation is costing U.S. seniors $17 billion annually, since every $20 loss adds to an approximate annual loss of at least $2,000. This is because once scammers gain a senior's trust, they most often manipulate the victim into further financial missteps, such as purchasing additional annuities or unnecessary insurance policies.

How To Protect Yourself from Financial Scammers

In addition to being generally alert and wary of anyone who seems very friendly but is trying to sell you something, you can protect yourself from scam artists by:

  • Never signing any document that you don't fully understand
  • Not yielding to overly "friendly" gestures, such as gifts or repeated phone calls
  • Not giving in to the pressure of time-limited offers
  • Checking out any supposed affiliations to familiar organizations or government agencies (AARP for example, does not endorse any company that sells living trusts)
  • Be aware of your right under the Federal Trade Commission's "Cooling Off Rule" to cancel any purchase within 3 days if it was made anywhere but in the seller's permanent place of business

It is always wise to do your estate planning with an experienced, reputable estate planning attorney. Resisting the temptation of solicitations of fly-by-night unknown salespeople will keep you safe and protect your assets.


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575 Lynnhaven Parkway, Suite 301 , Virginia Beach, VA 23452 | Phone: 757-215-4051
5425 Discovery Park Blvd., Suite 101, Williamsburg, VA 23188 | Phone: 757-215-4051