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Recent Blog Posts
Potential Tax Hit of Philip Seymour Hoffman's Estate
The recent death of 46 year-old Philip Seymour Hoffman was a loss felt by the entertainment industry and the talented actor's large fan base. What might make Hoffman's death even more tragic is the family he leaves behind, including his three young children and their mother, Mimi O'Donnell.
It's important to update your estate plan whenever a major life event occurs, such as a birth of a child, a wedding, divorce or a death. Otherwise the legal battles that can ensue between heirs can be very costly, both financially and emotionally.
Avoiding Estate Planning Mistakes: Preventing Improper Use of Joint Property
Jointly owned property can present many challenges to individuals, especially those couples who are not married and couples where one person is not a U.S. citizen. Without proper consideration, and individual may find himself or herself facing sudden tax-related issues and other concerns that all could have been prevented with proper estate planning.
To start with, joint property opens the door to possible federal and state gift taxes, especially for those non-citizens and non-spouses mentioned above. There's even the potential for double federal estate taxes if the ownership involves two individuals who are not spouses. In this scenario, the whole property is taxed inside the estate of the first to die, excluding where the survivor is able to show their contribution towards that property. Whatever the survivor gets and doesn't use or give away will be included in the survivor's estate, which is also subject to taxation.
Challenges Facing Baby Boomers Illustrate Importance of Planning
Millions of baby boomers today are helping to care for aging parents. Whether it's handling healthcare needs or helping with the day-to-day aspects of life, baby boomers are serving as the stopgap for older parents who might not have anticipated their needs in advance. The pressure put on baby boomers in this situation highlights the importance of proper estate planning.
Many people caring for an older parent are doing so while juggling responsibilities of their own, like working full time and taking care of immediate family members. Some have even put their own health care on hold in order to care for a parent in the short term.
While people often underestimate the cost of retirement and the assistance they might need during this period, some proper planning in advance could help to relieve the amount of responsibility falling on adult children.
Having the "Talk" with Your Kids
A recent article in Daily Finance highlighted just how important it is for adults to discuss with their aging parents what plans are in place should the day come with one or both of the parents become incapacitated. Failure to plan for that future can have devastating consequences for both the parents and their families. It's critical for parents to formulate a plan for the future and share it with their adult children.
It's not always comfortable for parents to discuss finances with their offspring. According to Tim Prosch, author of the book The Other Talk: A Guide to Talking With Your Adult Children About the Rest of Your Life, there are three reasons that cause the difficulty many parent have when it comes to discussing these matter with their children.
Estate Planning Guidelines When you Have a Non-Citizen Spouse
Standard estate planning tax advice might not work for situations in which one or both spouses are resident aliens. The term resident alien is used by the U.S. government to describe non-citizens who are permanent U.S. residents, and it could be beneficial for those in this circumstance to get some guidance from an estate planning attorney.
Under federal tax law, resident aliens and American citizens are governed by the same estate tax rules. In cases where the taxable estate assets are above $5.34 million, the IRS will want 40% of those excess funds. With careful planning, the implications of the federal estate tax can be avoided or minimized.
U.S. citizens are eligible to take advantage of the unlimited marital deduction, which allows for as many tax-free transfers to your spouse during your lifetime as you would like. Unfortunately, non-citizen spouses can't take advantage of this program. This can be a big hit when it comes to the estate tax, since the IRS will always want to go after 40% of the excess.
Tips on Leaving Inheritances to Your Children
According to an article from AARP, baby-boomer parents will be leaving $30 trillion to their children over the next four decades, keeping in mind factors such as longevity, the economy and the stock market. There are steps you can take to ensure that the estate plans you make are carried out in the easiest and less painful way possible.
One of the most important factors to keep in mind is communication with your children about where you stand financially. Fidelity Investments conducted a survey that revealed that most people underestimate their parents' financial worth by approximately $100,000.
It's also important to let your children know who to contact in the event of your death, as well as where important documents are kept for safe-keeping.
The Importance of Estate Planning when Diagnosed with Alzheimer's Disease
According to the Alzheimer's Association, Alzheimer's disease is the sixth leading cause of death in the United States.
Currently, there are 5 million people who are 65 years or older suffering from the disease, and another 200,000 younger than 65 who are struggling with early-onset Alzheimer's. Those numbers will continue to rise as Americans continue to grow older. By 2025, the number of Americans who will be diagnosed with Alzheimer's is predicted to reach over 7 million, and by 2050, that number will reach almost 14 million if no medical cures are found.
The National Institute on Aging, (NIA), recommends a series of steps that a person who has recently been diagnosed with Alzheimer's, or any other serious illness, should take in order to make sure that their wishes are carried out. The organization has broken down the estate planning one should do into two groups - documents outlining the health care wishes of the person and documents outlining the financial wishes.
What Happens to Your Digital Assets when You Die?
When most people think of estate planning, they think of items such as bank accounts, stocks, bonds, real estate, furniture, jewelry, etc. But what happens to a person's virtual property - or digital assets - when they die? An article in the Huffington Post discusses digital assets and what people should consider when planning their estate.
There are many items that fall under a person's digital assets, including:
- Emails;
- Social network accounts like Facebook, Twitter and LinkedIn, as well as all the content posted on these sites;
- Digital photos and videos;
- Songs;
- Ebooks;
- PayPal account.
According to a survey conducted by McAfee, the average internet user has about $37,000 in digital assets. Most of those assets are contained in unprotected digital devices.
Lessons Learned From Farrah Fawcett's Estate
The deaths of celebrities often have important lessons for estate planning. Failing to consider your estate in full can have ramifications for the beneficiaries and it can also mean that your intentions might not be carried out the way you thought after you have passed away. If you would like a review of your existing estate planning documents or if you would like to have a comprehensive evaluation of your needs, contact an Illinois estate planning attorney today.
When Farrah Fawcett passed away, her partner, Ryan O'Neal, took an Andy Warhol painting from her home, alleging that it was his. The University of Texas sued O'Neal because Fawcett's revocable living trust outlined that all her artwork was to be given to the school. There were two copies of the painting in question, and the University of Texas had already received one of them, but this didn't stop them from pursuing O'Neal for the other copy. Ultimately, O'Neal won the rights to keep the painting, and he stated that he plans to leave the painting for the child he had with Fawcett.
Estate Tax Changes for 2014
Typically, new amendments or laws regarding estate planning will start at the beginning of the year, and 2014 will be no different with regard to some changes in estate planning. One of the biggest changes hitting the landscape is that as of January 1st, individuals are able to pass on an additional $90,000 free of the federal estate tax to others during their life and at death. Since this is such a dramatic change, it's worth a call to your estate planning attorney to talk about how this might alter your existing plans for the upcoming year.
What's behind the change? It's a lot more practical to give individuals the opportunity to give gifts during their life or at death at this new higher limit without having to worry about the estate tax. Previously, the exclusion amount was capped at $5,250,000, but now each personal obtains a "Credit" to offset estate taxes on amounts up to $5.34 million.
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