Episode 13: The SECURE Act and Your Client’s Estate Plan

The SECURE Act of 2020 (Setting Every Community Up for Retirement):

  • is changing retirement, and it may change how your wealth is distributed;
  • it may require a check-in with your estate planner to adjust your estate plan’s language and/or structure to do what you originally intended;
  • or if you’re an advisor, it may require a check-in with the estate planner and other financial professionals in your client’s sphere

Timestamps

:30 Krystal and Merrell introduce the impacts to qualified retirement plans and what changes after the planholder passes away. What should advisors expect from other advisors in response to the SECURE Act?

1:30 The rules before 2020…inherited IRAs, rollover IRAs, and ability of a beneficiary to stretch distributions over their life expectancy

2:33 As estate planning attorneys we considered passing wealth to another generation in IRA trusts. (A two-year old grandchild as example)

3:38 Krystal outlines the rules now, as of January 2020. If you inherit an IRA and are not a spouse, the entirety of the retirement plan must be paid out within ten years (and associated income tax)

5:00 Merrell discusses the SECURE Act in context of leaving wealth to grandchildren…

5:52 Exceptions to the ten year rule include: a surviving spouse; and person that fits the SECURE Act’s definition of  disabled and chronically ill persons; a beneficiary that is fewer than ten years younger than the planholder; and a minor child – not grandchild – until the age of majority

7:30 Krystal talks about revisiting client goals and trust provisions with CPAs and financial advisors

8:30 Merrell compares beneficiary possibilities – either as a trust or as a human, and the respective tax rates for each; she explains how the trust may need to have accumulation language so as not to force distributions and give the trustee some discretion

10:52 Common trusts (aka pot trusts, multiple beneficiary trusts) vs. Separate trusts; spreading the IRA tax hit

14:43 Explaining to the client how the 2020 SECURE Act laws are different than when we did their initial planning, and opening up the possibility of letting other assets appreciate

16:00 Merrell compares the relative risk of setting up a structure that requires the trustee to distribute wealth that will harm the beneficiary vs. taking the tax hit under the new law

17:28 Takeaways for estate planning clients as well as their advisors; revisiting your plan with your estate planning attorney to make sure it still makes sense and if an advisor, reaching out to make sure the client has the option to make changes

Resources

Other provisions of the SECURE Act 

If you like charts, National Association of Planners’ summary points of SECURE Act

 

Episode 12: Estate Planning through Beneficiary Designations

When is estate planning through beneficiary designations and/or payable on death designations a good idea? Merrell and Krystal discuss the very particular situations and criteria that makes this a safe estate planning tool.

Timestamps

:30 Merrell discusses her perfect client for this kind of estate plan – life insurance, homestead, checking account, and a retirement account, a modest estate and two adult children that are in good places in their life.

1:47 Krystal elaborates on additional things she looks for in trying to plan outside of a will, recommending estate planning through beneficiary designations: children that get along and have a good relationship if they will inherit assets together; no special needs issues, and more

3:08 The estate planning quadrant (take a trip inside Merrell’s head). “The Asset Action Plan” is divided into 1) own it with someone else, joint tenants, rights of survivorship, 2) assets that have beneficiary designations, 3) in their own name, not owned with anyone else and without a beneficiary designation (this kind of asset would go through probate), and 4) if a revocable living trust, the things that are titled in there.

4:08 How the Asset Action Plan works to avoid probate – moving all assets into box 1 or 2. Caution – this does not provide asset protection to the next generation.

4:36 What about business ownership transfers upon death?

5:30 If you’re going to do estate planning like this, you MUST have a good Durable Power of Attorney. A good one!

6:14 When other advisors tell you to use beneficiary designations and screw up a carefully crafted trust-based estate plan. (Advisors and estate planners, this is why we need to work together.)

7:22 For example, financial advisors, our mutual client may not be comfortable discussing her daughter’s bad marriage and why I have things set up so that she won’t inherit everything outright.

Resources

When is not making a last will and testament a bad idea? See Your Caring Law Firm’s article about jointly owned accounts and Quit Claim deeds.

 

 

Episode 11: Planned Giving, Gift Tax, and Other Options

Everything you need to know about a planned giving plan and the IRS:

Timestamps

1:00 Merrell explains why she generally advises against her clients gifting large amounts

1:25 Krystal discusses a client who wants to gift the proceeds from a house sale to her children, and whether or not she’d be better off paying off their mortgages or making smaller gifts over the years to fall under the reporting requirements

2:06 Tax reporting, and IRS form 709

3:05 Gift tax rules, what has to be reported and what doesn’t

4:25 Gifts that don’t count toward the gift tax limit (tuition, medical expenses directly to the provider, charitable giving, etc.)

5:50 Splitting gifts with a spouse

6:45 What about gifting portions of a Family Limited Partnership?

10:00 Gifting a house – now or after you get on the bus?

12:00 Summarizing – conversations that need to be had about reporting, basis, and getting a professional to help fill out a 709

 

 

 

Episode 10: Gifting DNA Testing

Thinking about gifting DNA testing for fun this holiday season? What if you find new relatives – or if they find you?
How does that impact your estate plan?
How can you take ownership of, and control, your test results?

Timestamps

:30 A story about an entire family doing 23andMe DNA testing

1:35 How does it affect your estate plan if you have a relative out there you were unaware of? How can you take control of your DNA test results?

2:15 Would you want to include new relatives in your estate plan? Is it on your radar if you’re planning on taking one of these tests?

3:00 Legally, are unknown, biological children heirs under state law? Generally, heirs at law are your biological child, not adopted out. Or, someone you have adopted, who isn’t your biological child.

3:45 What if your client doesn’t know they have a child – how can they be legally adopted out? Family attorneys, private investigators are helpful for that question. A good estate plan is more helpful.

4:40 State intestacy laws and other children popping out of the woodwork

5:25 Law enforcement using DNA test results to find criminals through relatives

6:00 What do you do if you find out your dad is not your dad? (Michael Jackson as an example) A child born of a marriage is considered to be a child of both parents, and an heir at law, even if not biological.

7:10 DNA testing and multi-generational asset protection trusts – “I’m an heir at law!”

8:08 Who get the information about your DNA when you die? DNA tests as a digital asset

9:55 Concluding thoughts – if you’re planning on gifting DNA testing for the holidays, you may want to revise your estate plan…just in case.

 

 

 

Episode 9: When Your Client Doesn’t Want What’s in Their Best Interests

What can you do when your client already knows what they want, and it’s not a good fit?

Timestamps

:37 Case example – clients wanted a charitable remainder trust set up using retirement assets.

2:50 Counseling the client, thinking about the next generation that is living through decisions

3:45 Case example #2 – Mom set up a special needs trust. Dad set up a trust that split assets three ways, including to the special needs sibling. Trust administration issues abound.

6:13 Case example #3 – three siblings, five years, and one of them wants to make a deal. Merrell counsels holding sibling #1 to the fiduciary standard rather than accepting the deal.

8:28 Clients ultimately need to make the decision. We provide the best advice we can.

Episode 8: Death & Dignity

Merrell and Krystal discuss Death with Dignity Statutes, and their concerns as estate planners. What about pressures on the elderly? How young is too young for a young adult trying to arrive at such a decision?

Resources

States with Death with Dignity Statutes

Colorado Medical Aid in Dying Statistics

Me Before You, a book by Jojo Moyes

Timestamps

:40 Introduction, Death with Dignity Statutes

1:21 A 17 year old girl in Belgium who used legal assisted suicide to end her life after rape

1:43  Elderly clients under pressure from children to use aid in dying laws?

2:28  States that have these laws and their various names (Medical Aid and Dying, End of Life Options Act, Death with Dignity Act, Patient Choice and Control at the End of Life Act, :  Colorado; California; Hawaii; New Jersey effective August 2019; Oregon; Vermont; Washington; and Washington, D.C.; and Montana rules that nothing prevents a doctor from prescribing meds that would end a patient’s life.

3:28 Colorado’s laws and hurdles

4:55 Vulnerability with elderly clients feeling pressured to die sooner than would be natural, and undue influence

6:21 What if you don’t have a diagnosis?

6:52 If the aid and dying statute is used, the death certificate shows that they died of their condition, or inanation

7:30 Merrell discusses her mother’s own decision to stop eating (where death with dignity was not an option)

9:06 As practioners, Krystal and Merrell discuss the difference that knowing of a terminal diagnosis makes in the counsel they feel comfortable offering.

12:03 Outlook for other states, being a resident of a state in order to take advantage of these kinds of statutes

13:00 Me Before You, the book about the Englishman who went to Sweden to take advantage of their laws

14:03 Discussing this option with clients

 

 

Episode 7: Gift Tax

In this episode of Tax Boss, we discuss gift tax and how to help your clients make friends by giving their wealth away.

Resources

Marilyn Monroe estate plan

IRS Gift Tax FAQs

Timestamps

1:17 Gift reporting and gift tax rules; when drafting a will to leave everything to one person with instructions to divide it further

2:30 The burden of gift reporting requirements

3:10 Gifts in excess of $15,000 in any calendar year need to reported to the IRS (married couples may gift up to $30,000 in a calendar year between the two of them)

3:30 Exceptions

4:20 Gifts and lifetime exclusion

4:39 Back to burdening one individual with reporting, and why her ‘actual’ gift would be less than what counts toward her lifetime exemption amount

6:10 Explaining why a Personal Representative solution is much better

6:42 What if your friend doesn’t gift out your estate the way you plan? What if she is in the middle of a divorce? Or is being sued?

7:17 Marilyn Monroe’s estate planning fail – why a woman she never met inherited everything

8:17 Leaving assets to one person in the hope they’ll gift to another person is a very, very bad idea

 

 

 

Episode 6: Solvency Certificates

In this episode of Tax Boss, we discuss solvency certificates and why attorneys request them.

Resources

Solvency explained

Timestamps

1:17 What is a Solvency Certificate? Why is a solvency certificate used?

3:04 Evidence of use of asset protection structures as estate planning measures and not measures against avoiding creditors

3:40 Risks of co-signing on student loans

 

Episode 5: Homestead

In this episode of Tax Boss, we discuss titling and homestead, tenancy in common, and how state law can change the outcome of your estate plan if you’re not paying attention!

Resources

Florida Statute 732.7025 to waive spousal homestead rights

Timestamps

1:17 What happens when you have jointly owned property, and you don’t want the co-owner to inherit it? Florida’s homestead laws

2:36 Colorado homestead laws and value of total estate (Family Allowance and Exempt Property Allowance)

4:00 Options in handling a jointly held homestead

6:30 Differences between tenancy in common, tenancy by the entirety (TBE), and joint tenancy with rights of survivorship (JTROS)

9:15 In JROTS properties, either party can sever the JROTS and bring it to Tenants in Common; both members in Tenants by the Entirety would have to agree

10:30 Approaching personal estate planning assets in four quadrants: 1. Joint tenancy by entirety or rights of survivorship; 2. Anything that has a beneficiary designation form; 3. Anything owned by them individually that would be a probate asset; and 4. Trust asset (if they have a trust.)

13:15 Does your attorney understand Florida Statute 732.7025 or will they create an invalid deed?

Episode 4: Portability in Estate Planning

In this episode of Tax Boss we discuss portability and estate planning, transfer taxes between married couples, prenups and generation-skipping transfer tax.

Resources

IRS form 706 (Revised November 2018)

Timestamps

1:43 Portability and transfer taxes between married couples (11.2 million dollars exemption currently, 22.4 together)

2:43 “I love you” Wills

3:50 how portability works and filing an estate tax return form 706

5:12 capturing the portable amount before Congress changes their mind

6:20 what about getting re-married? How would the IRS handle the prenup?

8:07 the generation skipping transfer tax is not portable

 

 

 

Episode 3: Do Not Resucitate (DNR)

If you feel a little overwhelmed by the number of advance directives to consider and how they’re similar and dissimilar, this episode of Tax Boss will help! We discuss DNR orders, physicians orders for life-saving treatment, healthcare surrogates, living wills, and the difference between all of them. We also discuss why you may want to consider naming different people in each case.

Resources

Advance Care Directives

Timestamps

1:48 DNR – what it is and what it isn’t

4:36 What is included in a Healthcare Surrogate document?

7:09 Having conversations with the people you’ve named – what you’d like them to know that they may not know

8:00 The Living Will document and choosing who you’d want to have your back

10:30 The Terry Schiavo case and definition of artificial life support

12:14 Three different paths of the Living Will in Florida

12:53 The P.O.L.S.T or Physicians Orders for Life Sustaining Treatment

18:25 Medicare and skilled nursing facilities

19:40 Dealing with statements like, “You must not love your father if you won’t let me treat him.”

 

Episode 2: Death

Weddings and funerals are two of the most stressful occasions we may encounter and they both require that you throw a party, too. Krystal and Merrell discuss information necessary to complete funeral home paperwork and why decisions made ahead of time really pay off, in many ways.

Resources

Estate Planning and Funeral Arrangement Resources from Your Caring Law Firm

Timestamps

2:10 Three questions asked by a mortuary for a death certificate

3:10 Naming an independent fiduciary to handle the passing of a loved one

5:30 Disposition of Human Remains document

8:00 Consider pre-paying if you think there will be a disagreement

9:45 Pre-planning pays off in a time of shock and sorry

 

Episode 1: Who is my client?

In this episode of Tax Boss, we discuss the age-old question, “Who Is My Client,” and when a bunch of people show up, how do you know who to throw out of the room?

Merrell and Krystal discuss different ethical standards between attorneys and CPAS, red flags, and why family members – and even financial advisors and CPAs – are asked to leave the room during estate planning with clients. You’ll also find tips for attorneys and advisors dealing with well-meaning but difficult family members.

Resources

Why am I left in the waiting room?

Lawyers and CPAs: How the Landscape is Changing

Timestamps

1:30 When a non-client makes the appointment

2:54 Asking “Who is my Client” when kids think they all are the client

10:16 Death and a little bit of money can bring out the worst in people

11:09 Ethics, why we can’t reach out to your clients, and different ethical standards between CPAs and attorneys

12:33 When your client wants certain family members included…their decision or undue influence?

15:51 Why we request that the advisor leave the room, or how to give yours a heads up