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Estate Planning

Planning for Taxes Involved with Family Wealth

SchulzeLawGroup

In order to maximize wealth preservation and minimize tax liabilities, high-net-worth families implement a number of legal strategies. However, tax laws continually change and can impact new and existing estate plans.

For example, the SECURE and SECURE 2.0 Act presents some challenges and opportunities in high-net-worth estate planning and the ability to transfer wealth from one generation to the next. Other changes include portability election, changes to lifetime gift tax, generation-skipping transfer (GST) tax, and more.

Many of these changes increase the tax-free transferable amounts for three more years, which, without further legislation, will decrease dramatically on January 1, 2026. Now is the moment to take advantage of and plan for what lies ahead to protect your family’s wealth for generations.

Federal Estate Tax Exemption

The federal estate and gift tax exemption is currently $12.92 million per individual ($25,84 per couple), up from $12.06 million in 2022. Unless Congress changes the law, these estate tax limits will sunset on December 31, 2025, when the exemption amount will revert to the prior law’s $5 million cap. The $5 million cap will be adjusted for inflation, and the exemption projection is about $6.2 million, or almost half of the current exemption amount.

Gift Tax Exclusion

The gift tax exclusion is currently $17,000 per individual or $34,000 per couple, and these gifts won’t count against your lifetime exemption. If you have a high-net-worth estate, aggressively gifting cash to family members can reduce your overall estate value when the federal estate tax exemption is reduced to pre-2018 levels in 2026.

Generation-Skipping Transfer (GST) Tax

This tax is imposed on wealth transfers when it exceeds the exemption limit for grandchildren (or more remote descendants) over 37.5 years younger than the donor. The GST prevents non-taxable transfers of wealth that skip a generation and are over the exemption limit to a flat rate of 40 percent.

IRAs

The SECURE Act 2.0 makes substantial changes to inheritable IRA rules. These changes include:

  • Qualified Charitable Distributions
  • Delayed RMDs
  • Repealed ROTH Account Pre-Death RMDs
  • Conversions from 529 Plan to Roth IRAs
  • Changes to the 10-year withdrawal rule for IRAs

Corporate Transparency Regulations

Effective January 1, 2024, the Corporate Transparency Act requires business entities to disclose beneficial owners to FinCEN – the Financial Crimes Enforcement Network by January 1, 2025. These entities include LLCs, Corporations, and Limited Partnerships, which many high-net-worth families use to reduce taxes. Beneficial owners are those individuals who directly or indirectly:

  • Owns or controls a minimum of 25 percent of the company
  • Exercises substantial control over the company
  • Trustees of a trust or trust beneficiaries as the sole recipient of principal and income, or a trust settlor with the power to withdraw or revoke all assets

How Trusts Help

Legislation is always evolving and requires attention to identify opportunities and challenges, particularly regarding tax planning. Using different trust types is one of the most effective ways to protect your family’s high net-worth estate. These legal entities can hold assets for the benefit of designated beneficiaries while providing tax advantages and other protections.

Trusts are either revocable or irrevocable. Revocable trusts are typically used to avoid the probate process and allow the grantor to make changes to the trust during their lifetime. An irrevocable trust can’t be changed without special decanting rules or court permission. They are often used for asset protection and tax planning.

Intentionally Defective Grantor Trust (IDGT)

This trust allows a person to isolate certain assets for favorable income tax or estate tax treatment. It ensures the individual continues paying income taxes, shifting the future value of that asset from your gross estate to avoid death taxes on the appreciation.

Charitable Lead Trust

This trust provides income to a qualified charity for a certain time, after which the remaining assets go to beneficiaries. It provides dual benefits for a person who wants the legacy of a charitable donation while still providing for their loved ones.

Charitable Remainder Trust

The reverse of a charitable lead trust, this trust first provides income to beneficiaries for a certain time, after which the remaining assets pass to a qualified designated charity. This trust is useful for younger beneficiaries needing a head start in wealth accumulation without overlooking the grantor’s desire to benefit charity.

Crummey Trust

This trust allows the grantor to qualify for the annual gift tax exemption while transferring assets to beneficiaries in the future. It has a thirty-day limited period for beneficiaries to withdraw the gift, after which it becomes part of the trust.

Typically, this trust type is used to purchase a life insurance policy where the insured wants to remove the proceeds at death from their gross estate. The death benefits are managed to protect the insured from creditors of the beneficiaries.

Generation-Skipping Trust

This trust allows the grantor to transfer assets to two or more generations-younger beneficiaries. This skip benefits those who want to provide for grand and great-grandchildren while deferring the tax obligations of the estate tax for multiple generations.

Grantor Retained Annuity Trust (GRAT)

A GRAT allows the grantor to transfer assets to beneficiaries while retaining the right to receive trust income for a certain time. It provides some level of control over the assets while still transferring assets to heirs.

If the grantor dies while receiving the trust’s income, the full value of the assets will be part of their estate. If the grantor lives beyond the time they receive trust income, the full value of the trust property is not part of the estate and avoids estate tax.

Asset Protection Trust (APT)

High-net-worth families use an APT trust to protect assets from future unknown or unforeseeable creditors, predators, or lawsuits. It’s created by the grantor who benefits from the trust during their lifetime.

Is Your Estate Plan Safe?

An estate planning attorney specializing in high-net-worth estates can best assess how your plan will fare under current and future legislative changes to estate tax laws and regulations. They can review your family’s financial situation, assets, and potential tax implications to make changes to accommodate your needs.

An estate planning attorney can collaborate with other professionals like tax advisors, financial planners, and accountants to craft an estate plan that ensures all aspects of your family’s financial situation are considered to preserve your family’s wealth.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Elder Law

Technology in Senior Care

SchulzeLawGroup

As technology advances, aging Americans can remain in their homes longer and more safely due to self-monitoring medical devices, telemedicine, and smart homes. Elder law and at-home medical technology uses can intersect in several ways. Whether you are a senior looking to stay in your current home or have an aging parent and want to implement systems that create better safety and communication, an elder law attorney can help you craft a plan.

Strategies

Legal Documents

Elder law attorneys can assist older adults when creating legal documents, such as durable powers of attorney and health care proxies, in an online environment. These and other legal documents are crucial to have in place as they authorize someone to make decisions about the older adult’s medical treatment and the use of at-home medical technology.

Meetings with your estate planning or elder law lawyer and family members can happen virtually, and some states now legally recognize e-signatures. Creating these documents without leaving your home benefits seniors with mobility and transportation issues and protects against exposure to infectious diseases.

Privacy and Security

Elder law attorneys can advise older adults on the privacy and security of their personal information and medical data when using at-home medical technology. Secure network communication protocols will keep hackers from stealing your information and ensure the data integrity of communications with medical professionals and entities.

Medicaid Eligibility

Medicaid, the government health insurance program for low-income individuals, may pay for certain at-home medical technology if it’s deemed medically necessary. An elder law attorney can help older adults navigate the Medicaid eligibility process to ensure they receive all the benefits to which they are entitled.

Telehealth services allow Medicaid to reach more seniors at a lower cost than ever. Whether you’re having issues with eligibility, understanding home health services, or selecting home health providers, an elder law attorney can help you understand your Medicaid options.

Long-term care planning

Elder law attorneys can help older adults plan for future needs of long-term care, including using at-home medical technology to help them age in place and maintain their independence for as long as possible. Incorporating at-home medical technology into long-term care planning may include the following:

  • Monitoring Health – Technology such as wearable devices, remote monitoring systems, and telehealth services can track vital signs and send alerts to caregivers if there are any concerns.
  • Medication Management – Personal emergency response systems (PERS) and smart home devices can ensure that older adults are safe and can call for help if needed.
  • Mobility Aids – Robotic exoskeletons, stairlifts, and smart home devices can help older adults with mobility issues move around their homes and control the environment (locks, lighting, temperature) more easily.
  • Social Engagement – Virtual reality, video conferencing, and social networks can connect older adults with loved ones and socialize with others combating isolation and feelings of loneliness.
  • Care Coordination – Medical technology can connect older adults with care providers and healthcare professionals, such as doctors, nurses, and social workers, to monitor the care and support they receive at home.

At-home medical technology is a more affordable option than expensive institutional care. When planning for long-term care, it’s important to consider how technology can help older adults maintain their independence and quality of life.

Guardianship and Conservatorship

In some cases, older adults may be unable to make decisions about their medical treatment or use of at-home medical technology due to cognitive decline or other health issues. Elder law attorneys can assist in appointing a guardian or conservator to make these decisions on behalf of their loved one.

Getting Started

An elder law attorney can help an aging adult, and their family understand what at-home medical technology is available and if government programs will pay for it. Getting seniors to use at-home medical technology can be challenging and generally falls under the direction of the family. There are several strategies to implement to make the process easier:

  1. Keep it simple by starting with the basics. Then gradually introduce more advanced features as your loved one becomes more comfortable with the technology.
  2. Make sure the senior understands the benefits of the technology. Explain how it will help them stay healthy and independent and make their life easier.
  3. Demonstrate how to use the technology. Walk your loved one through the setup and use of each device, making sure they know how to operate it.
  4. Provide your loved one with a user manual or guide for reference.
  5. Schedule regular check-ins with your loved one to see how they’re doing with the technology, answer any questions, and ensure their communications with medical professionals are timely and accurate.
  6. Provide your loved one with technical assistance while visiting, and have them contact you if they experience technical issues. Everyone needs reliable IT support.
  7. Look for local support groups and online communities so your loved one can connect with others using similar technology.
  8. If your loved one is having difficulty understanding or not using the technology, consider hiring a professional to help with device setup, training, and guidance.
  9. Encourage your loved one to engage in a trial period with each new technology and see how they feel about it. If they don’t use or are uncomfortable with that particular technology, there might be better solutions.

Many providers make smart home technology for aging adults. The best options depend on the specific needs and preferences of the older adult and compatibility with existing technology and devices. Technology needs will also change with additional health challenges that invariably occur when aging.

Summary

Elder law attorneys can recommend at-home technology so that an aging adult can safely live at home. Family members must participate in the installation of the technologies to ensure their loved one’s security and privacy. Technology alone is not a solution. A support system, including family, friends, lawyers, and healthcare providers, must coordinate efforts in the senior’s best interest.

Whether you need to plan for future at-home health care or already require care management via remote health monitoring, consumer health technology can make senior care more patient-centric, personal, and accessible. Talk with an elder law attorney and see what senior technology strategies can benefit you or your loved one.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Elder Law

An Elder Law Attorney’s Guide to Medicaid Planning

SchulzeLawGroup

Even though Medicaid provides health insurance to low-income families and individuals, Medicaid planning is becoming increasingly popular as an alternative to spending assets to qualify for benefits due to the steep costs associated with long-term care. Individuals can plan to meet eligibility requirements by legally restructuring their financial resources and maximizing their likelihood of being accepted into the Medicaid program.

Common Reasons to Engage in Medicaid Planning

There are many reasons to participate in Medicaid planning, including:

·       Long-term Care Costs

Medicaid can help cover expensive long-term care costs. Medicaid planning can help prepare for the possibility that you or a loved one will need to qualify for benefits to offset costs for long-term care.

·       Protecting Assets

Medicaid has strict eligibility requirements, including limits on the number of assets you possess. Medicaid planning helps restructure these assets to ensure you qualify for health benefits when needed.

·       Estate Planning

Medicaid planning is often a key component of estate planning. By arranging your finances in a way that allows you to qualify for Medicaid, you ensure you have the resources you need to cover long-term health care costs while protecting assets for your heirs.

How Prevalent is the Need for Long-term Care?

According to the National Center for Health Statistics, approximately 65,600 regulated long-term care facilities in the US serve more than 8.3 million residents in various long-term care facilities, assisted living facilities, and nursing homes.

The percentage of individuals who will need long-term care is growing rapidly. According to the Administration on Aging (AoA), a division of the US Department of Health and Human Services (HHS), at least 70 percent of people aged 65 today will require some long-term care. This percentage continues to increase with age.

With an average stay of 3.2 years, Americans spend $475.1 billion annually to cover long-term care costs, and projections continue to climb. Medicaid benefits will cover approximately 42 percent of these costs making Medicaid planning crucial for financial solvency in retirement and legacy planning.

A Place for Mom

How to Begin Medicaid Planning

Taking the appropriate steps to legally and ethically protect assets while qualifying for Medicaid benefits is best handled by an elder law attorney in your state. Medicaid is a federal and state partnership program, and following your state’s rules and regulations is crucial to success. However, before engaging with an elder law attorney, you can gather some information to help them with your Medicaid planning strategy:

  1. Becoming familiar with your state laws and eligibility requirements regarding income and assets can streamline your consultation. Your attorney will answer all of your questions.
  2. Compiling a list of all assets, including savings, investments, property, insurance policies, and retirement accounts, can help your attorney determine which assets are exempt from Medicaid’s asset limits.
  3. Gathering information regarding all income sources will help your attorney figure out how much you can earn while still qualifying for benefits.
  4. Researching long-term care insurance policies helps decide whether you can afford to add it to your Medicaid strategy.

How an Elder Law Attorney can Help

After gathering the necessary financial information and any existing estate planning documents, it’s time to meet with your Medicaid planning or elder law attorney.

They will review your financial situation to determine what income and assets count toward Medicaid eligibility and identify any potential issues or challenges. Knowing your unique situation, your attorney can begin developing a custom strategy to comply with Medicaid rules and regulations.

Your Medicaid strategy must complement your estate planning documents and goals. An elder law attorney may amend existing will or trust documents to maximize Medicaid benefits and ensure a healthy spouse living at home has the financial resources they need.

An elder law attorney may recommend transferring assets into a Medicaid asset protection trust. The Medicaid lookback rules make it necessary to start this process at least five years before the need for care. When it’s time to apply for benefits, your elder law attorney helps prepare and submit your Medicaid application.

You or a Loved One are Likely to Need Long-Term Care

Medicaid planning ensures you can afford the care you need. Because Medicaid eligibility is as important as it is complicated, an elder law attorney can ensure you qualify and avoid simple mistakes that result in a denial or delay of benefits. When planning for potential long-term care, the sooner you begin, the more options you have.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Elder Law

Senior Living Trends in 2023

SchulzeLawGroup

The trend of senior consumerism is increasingly focused on wellness and solutions at affordable prices. Prevention and proactive measures are becoming increasingly important for maintaining physical and mental well-being. For seniors to thrive and flourish in retirement, technology and reliance on community and home-centered care is a game changer for wellness, financial viability, and happiness.

Increase of Rentals in Active Adult Communities

As adults flock to active adult communities, they create the need for more consumer services and support that allow them to live as long as possible. These are not retirement communities with expensive buy-ins. Senior health and wellness services are brought into existing communities at a lower cost.

As baby boomers age, provider models prioritize these consumers, following their retirement dollars. Boomer-centered wellness models bring fresh perspectives to a provider system stuck in traditional offerings that are no longer economically viable or desirable.

Aware of the growing need for more senior retirement choices, private-sector initiatives and government funding attempt to offset costs and make newer senior living solutions more affordable. The investment made upfront for active and integrated community living creates mentally and physically healthier seniors, keeping them out of the overcrowded and expensive assisted living and nursing home cycle.

Intergenerational Living

Many seniors prefer staying home for as long as possible rather than adapting to a new environment. While technology is making this a viable strategy, current economic conditions are prompting multigenerational living. An increasing number of adult children are moving back to their parent’s homes and bringing their children with them, providing financial protection.

An extended family means more adults to manage a home environment, greater safety, in-home companionship, IT help for seniors, and reduced living expenses for multiple generations.

The US government is a proponent of home-based care as an alternative to traditional senior facilities. The senior caregiver market is under increasing pressure to provide adequate, affordable care as retaining a sustainable labor force and enough residency options for the increasing senior population becomes untenable.

Targeting Medical Technology and Services for Seniors

Unsurprisingly, big tech business follows medical market share dollars, such as Amazon’s acquisition of a tech-enabled primary care platform. The purchase of One Medical is a shakeup to stale medical provider offerings.

The e-commerce giant gained about 767,000 members and a presence in 188 medical offices in a single purchase. This new platform will disrupt existing health care delivery for Americans by circumventing the traditional medical referral system and providing cost transparency.

Telehealth continues to grow, particularly for senior groups who may find transportation to medical office buildings impossible. Virtual medical diagnosis uses wearable medical technology that monitors and communicates health parameters via the internet. Telehealth also reduces a senior’s exposure to germs in a collective medical setting in a post-pandemic world.

Still, putting the pieces together to expand viable senior health care in these newer living models presents significant challenges. However, Amazon’s balance sheet can absorb projected losses until the formulary becomes profitable. Big tech is officially in the medical market.

Wellness and Solutions Focus

The new era of consumerism in the senior living market is hyper-focused on wellness and how to provide it. Preventative health care is less expensive than reactive health care, and the solutions and mechanisms that foster preventative health care tend to bring positive living experiences to seniors.

These solutions bring socialization to the forefront, which is excellent for senior mental well-being. Fresh approaches to senior living also reduce fiscal pressure that has long kept many seniors isolated in single-living environments without technology, community, and family outreach.

Elder Law Attorneys can Assist in Retirement Planning Goals

Americans often think of retirement and financial planners as synonymous. However, financial assessment and goal implementation are part of a larger plan relating to your retirement. Elder law attorneys have a breadth of knowledge regarding retirement, financial planning, and the legal documents and contract reviews needed to meet your goals.

Senior living trends will change over time. Technology, government senior support laws, and ever-changing economic conditions mean that extended lifespans in retirement need flexibility and regular strategy review for the best outcomes of a healthy, sustainable, satisfying senior living experience. Elder law attorneys stay current with retirement planning laws and strategies to implement documents that support and adapt to changing times.

Retirement Planning and Elder Law

An elder law attorney can be invaluable for retirement planning as they specialize in legal issues affecting older adults. They have extensive knowledge and experience in estate planning, long-term care planning, and other legal issues relevant to retirees.

Estate Planning

An estate plan must be comprehensive to protect assets and fulfill your wishes after your death. A robust, complementary, and legally enforceable series of documents, such as a will or trust, durable powers of attorney, and advance health care directives are all components of a full estate plan.

Long-term Care Planning

As you age, the likelihood of needing long-term care increases. In fact, at age 65, there is a 70 percent chance you will require some long-term care. An elder law attorney can help plan for this possibility by helping you with Medicaid planning, nursing home planning, and other long-term care needs.

Financial Planning

Retirement planning also involves financial planning, which should complement your estate planning goals. An elder law attorney can help you develop a plan for managing your finances in retirement, including investments, retirement accounts, and other assets.

Social Security and Medicare

An elder law attorney can help you navigate the complex rules and regulations surrounding Social Security and Medicare benefits. They explain your options and maximize your benefits.

Overall, an elder law attorney provides valuable guidance and assistance in navigating the legal and financial complexities of retirement planning. Contact our office for help with a comprehensive plan to build a retirement lifestyle while protecting your assets, ensuring your wishes are carried out, providing for long-term care, and gaining peace of mind about the future.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Estate Planning

Preparing for the Unexpected: The Importance of Planning

SchulzeLawGroup

You should plan for the unexpected by making sure your affairs are in order in the event of an accident, incapacitation, or death. If the COVID-19 pandemic taught us anything, it’s that life is uncertain and that caring for you and those you love is imperative, including legal preparedness. An elder law attorney and estate planning attorney can address your concerns and help plan for the unexpected.

Elder and Estate Law

Elder law focuses on legal issues affecting elderly individuals, including health care planning, long-term care planning, Medicaid planning, and guardianship/conservatorship. They help clients plan for their future needs and ensure protection in cases of incapacity or disability.

Estate law focuses on legal issues relating to the transfer of assets after an individual’s death. They help clients plan for the distribution of their assets, minimize taxes, and meet goals by creating wills, trusts, and other legal documents.

Both elder and estate law overlap significantly, particularly in end-of-life planning and long-term care. For example, an elder law attorney or an estate planning attorney can assist clients in creating a living will or power of attorney for health care decisions. A significant difference between the two legal practices is one focuses primarily on the needs of individuals while living, and the other plans the distribution of assets after an individual’s death.

Why Planning is Important

Many things can happen over your lifetime, and much of it is unexpected. But we can be aware of potential problems and prepare for uncertainty.

·       Healthcare Planning

Put a health care plan in place in the form of advance directives, such as a living will or durable health care power of attorney, ensuring your wishes are followed if you become incapacitated and unable to make decisions. Your loved ones won’t have to struggle with decisions during a difficult time.

·       Financial Planning

Financial hardships happen due to emergencies, requiring additional financial resources, insurance, and more to successfully manage unexpected events.

·       Digital Planning

Ensure your legal documents have digital copies on secure networks, making important documents and information accessible online to those who have your login credentials. Keep a list of credentials in a safe place and let a person you trust know the location.

·       Estate Planning

Many individuals not only create an estate plan, but regularly update their wills, trusts, and other legal documents to ensure their wishes are carried out, and their assets receive protection in case of illness or death. Your estate planning also protects the future of your loved ones.

Legal Planning for the Unexpected

Legal planning means having your affairs in order in case of unforeseen circumstances. These are six steps to increase preparedness:

1.     Create a Will

Not enough people in America have a will. This legal document outlines your asset distribution after your death. If you already have a will, review and revise its contents to address changes.

2.     Designate Beneficiaries

You can designate beneficiaries on your bank accounts, retirement accounts, life insurance policies, and other assets. Revise your beneficiary status in the event of a death, divorce, marriage, or other major life changes so you’re your asset distribution will reflect your intended beneficiaries.

3.     Create a Power of Attorney

A power of attorney allows someone you trust to make legal, financial, and medical decisions on your behalf if you become incapacitated.

4.     Create a Living Will

A living will outlines your end-of-life wishes. It includes whether you want to be kept alive through artificial means.

5.     Consider Setting up a Trust

A trust can manage and distribute your assets during your lifetime and after your death.

6.     Review and Update Your Plan Regularly

It’s important to review and update your plan regularly to ensure it reflects your current wishes and circumstances.

Consulting with an elder law attorney or estate planning attorney can help create and ensure your legal documents are thorough and complete. Preparing for an unexpected crisis will reduce the stress on yourself and your family members. A comprehensive legal plan that can address your desires during times of uncertainty can bring you and your loved ones peace of mind.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Estate Planning

Accumulation and Transfer of Wealth

SchulzeLawGroup

The process of building lasting generational wealth requires time and careful planning. Without specific plans to create and transfer your legacy, statistically, 70 percent of wealthy families will lose that wealth in the subsequent generation, and 90 percent will lose it in the following generation. The sooner you begin implementing the principles to build generational wealth and transfer it effectively, the greater the likelihood of success.

Money, investments, life insurance, real estate, business, valuable collections, or anything else with monetary value represents generational wealth. Subsequent generations receiving your legacy will experience financial advantages to create a better life sooner and with less stress. Strategically saving money and preserving assets in a tax-advantaged way allows more wealth to accumulate in each generation.

Financial Literacy

Building and maintaining wealth requires understanding financial principles that not everyone chooses to learn. The correct mix of assets in an investment portfolio is crucial to creating wealth. It requires modifications in changing economic times. Your income level matters too. Developing multiple income streams can offset lower dollar valuation in high inflationary times. Earning smarter and finding passive income streams can build your wealth.

Creating a Legacy Strategy

An estate planning attorney can help you plan and accomplish your long-term objectives innovatively and pragmatically. Creating a financial vision for generational wealth early in life provides the most valuable component in the wealth-building equation: time. Oversight and timely investment changes can significantly affect how fast wealth grows.

Families who want to pass assets to the next generation should reduce their exposure to capital gains, gift, and estate taxes. Executing an efficient wealth transfer strategy requires understanding the rules that govern taxation and asset transfer, which an estate planning attorney provides.

Wealth Transfer

In the US, two primary methods to transfer wealth are lifetime gifting and inheritance at death. Current law states individuals may transfer up to $12.92 million during their lifetime or at death without triggering estate or federal gift taxes, known as your lifetime exemption. This dollar amount is set to reduce significantly at the end of 2025 unless Congress changes the existing law.

Additionally, an individual may gift up to $17,000 annually to any person without incurring any estate or federal gift taxes. Known as the annual gift exclusion, it does not carry over, meaning it won’t accumulate year to year. For example, if you gift your child $25,000 in one year, the first $17,000 can apply to your annual exclusion amount, and the remaining $8,000 would use up a portion of your lifetime exemption amount.

Gifts over the annual exclusion made during your lifetime will reduce the amount you can exclude from the value of your estate at death. If you were to gift $2 million during your life, then at your death, the lifetime exemption amount decreases to $10.92 million for estate asset distribution. Any amount over this dollar figure is subject to a 40 percent federal estate tax unless it transfers to a spouse or charity. Transfers to spouses during life or at death receive an unlimited marital deduction. Assets that transfer to a qualified charity reduce the estate’s value in the estate tax liability calculation.

Generation-Skipping Transfer Tax

The generation-skipping transfer tax (GST) applies to gifts or bequests to grandchildren or great-grandchildren. Exemption amounts are the same for lifetime and estate tax ($12.92 million). However, there is a required 37 ½ year age gap between the gift giver (excluding spouses). These gifts also reduce your lifetime estate tax exemption.

Structuring GST in your estate can be very beneficial. However, it requires a thorough understanding of the tax laws, such as direct or indirect skips, and carefully crafted estate planning documents. Most people won’t encounter the need for the GST because of the current lifetime exemption high threshold, but post-2025, GST may become a more meaningful strategy for an increasing number of families.

Cost Basis Updates at Death

This very important update to stock asset valuation reflects the asset cost at the date of death. The original value of an asset may revise up or down. Inheritors can benefit when there is a stepped-up basis (increase in value), as capital gains tax won’t apply to any growth before the original owner’s death. In theory, the inheritor could immediately sell the asset, reaping the increase in value with little or no capital gains tax assessment.

Upstream Gifting

This approach involves making a gift to an older family member. It allows a parent to take advantage of the current lifetime exemption and gift to older generations, avoiding the estate tax while still taking advantage of a step-up in cost basis. This strategy assumes the grandparent has not, or likely will not, use up their estate tax or GST exemption.

Once the gifting of assets is complete, there is no longer any control of the asset by the gifter. A grandparent might leave the asset to someone else, or the asset may become subject to a creditor of the grandparent. Upstream gifting may also affect a grandparent’s income taxes, Medicare premiums, or benefits eligibility, so careful planning is required for success.

Planning for Generational Wealth Transfer

Contemplate creating a family legacy plan outlining your family’s values, goals, and future vision. A multi-generation legacy plan can help ensure your wealth transfer strategy aligns with your family’s long-term objectives.

With clear objectives, you can begin developing a comprehensive strategy with your estate planning attorney. A strategy includes a will, trusts, and other necessary legal documents tailored to your needs.

Trusts can effectively transfer wealth to future generations while minimizing taxes and protecting your assets. A revocable living trust provides more flexibility, and an irrevocable trust helps manage, preserve, and distribute your assets more efficiently.

Plan for taxes as estate taxes can significantly burden generational wealth transfer. Some estate planning attorneys may be well-versed in tax law, or you may hire a tax advisor to consult with your attorney to develop a tax-efficient strategy according to federal and state tax laws.

Use gifting strategies to reduce your taxable estate by making annual gifts to your children and grandchildren.

Review and update your estate plans regularly to ensure your plan continues to meet your needs and reflects any changes in your circumstances or the law.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Elder Law

Guardianship of Elderly Parents

SchulzeLawGroup

It is often the case that an aging parent can no longer think clearly enough to make informed and meaningful decisions about their life. This growing inability may occur due to Alzheimer’s disease, other forms of dementia, mental illness, stroke, brain injury, or other severe health or disability conditions. In the absence of your parent preparing for their elder years via a durable financial and medical power of attorney, guardianship may be needed to protect their best interests.

When There is No Durable Power of Attorney

If your parent did not prepare for this eventuality of requiring legally recognized help, you would not be allowed to create these documents once they are already mentally impaired. With that moment lost, claiming the guardianship of an elderly parent is a process that requires court approval to ensure the protections moving forward represent the best interest of the aging adult.

Medical Requirements for Guardianship

When a parent does not have an estate plan with the power of attorneys, they may bristle at the mere mention of requiring guardianship. Your first step is to obtain a doctor’s letter or physician’s certificate attesting to the patient’s physical abilities and mental acuities. Suppose you meet with resistance to having your parent willingly submit to an evaluation. In that case, you may still apply for guardianship with the court, which can compel your parent to submit to a court-ordered independent medical examination.

When is it Time to Step In and File for Legal Guardianship?

There are signs to recognize, such as lapses in bill payments, lack of healthy foods in the home, or your parent’s insistence they can drive. Driving is imperative to monitor because your parent endangers not just themselves but others. Additional signs it may be time for guardianship include self-isolation, hearing or sight loss, and general forgetfulness, which can lead to injury around stoves, stairs, and other risks.

Application for guardianship is filed with the clerk of superior court and is a fairly standard procedure; however, by state, there are nuances and differences in law and process. If possible, have a medical examination before applying. If not, the court can order one later. The court will begin legal guardianship proceedings to determine if you are fit to be the guardian. This process generally involves assessing any existing conflict of interests, financial responsibility, and even a criminal background check.

Notifying Your Parent and Family of the Proceedings

With the application on file and awaiting court approval, you must notify your parent, the proposed ward, of the application. This notification is a legal requirement and can sometimes create family conflict. A parent’s frantic contact with other family members upon receiving the guardianship documentation is not uncommon. Notifying these family members or others with a right to know is not only a legal requirement but also best discussed before filing. Having family on board to protect your parent with guardianship is best when you mutually agree.

Your Parent’s Right to Representation

The court will appoint an Attorney Ad Litem to represent your parent. This person will legally advocate on your parent’s behalf, representing their needs. The court may also appoint a Guardian Ad Litem, who may not necessarily be a lawyer, to represent the interests of a parent who may be incapacitated. Typically, court hearings occur between 15 and 30 days from the respondent (your parent) being provided the filing for guardianship. It may take longer if the court requests a multidisciplinary evaluation. In this instance, the clerk of the court may appoint an interim guardian whose powers include addressing the respondent’s immediate needs.

A Multidisciplinary Evaluation (MDE)

A thorough evaluation may include medical, psychological, daily life skills, education, social work, vocational rehabilitation, and occupational therapy needs of your parent, the respondent. In the case of an aging parent, the focus tends to remain on medical, psychological, and daily life skill assessments.

After a full assessment of your parent’s unique situation and your application for guardianship, the court will decide based on the best interests of your parent, the ward/respondent. There is a process to appeal the decision, generally filed in writing within ten days of the court’s decision. The appeal will prompt a new hearing before a superior court judge.

Guardianship Laws Vary By State

When applying for guardianship, it is crucial to understand the state laws where you live. Differences in terminology exist between states; some require a guardian to control your parent’s home environment, health care, and day-to-day needs, and a conservatorship which appoints someone to make financial decisions such as paying bills, investment management, and budgeting. Some states will use the terms interchangeably.

The process can take substantial time and money, particularly if family members disagree. Many states give preference to the ward’s spouse, adult children, and other family members as they know the family member and their needs the best. The court may also appoint a professional or public guardian. All court-appointed guardians are entitled to reasonable compensation, although family members or friends typically will not charge for the service. Compensation for guardians must have court approval.

If appointed your parent’s legal guardian, it will be stated in a written court order. You will remain their guardian until your parent dies, the court finds your parent is no longer incapacitated, you die, or the court finds it is in the ward’s best interest to remove you as the guardian or conservator.

Guardianship is the best option if your parent has no appointed durable power of attorney for health care and finances and they need your help due to advancing age, disability or illness. You should consult an estate planning or elder law attorney if you want to establish guardianship for your aging parent. They can guide you through applying for guardianship or conservatorship and help manage your expectations regarding the best care for your parent.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Estate Planning

Strategies for Transferring Wealth

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Transferring wealth or assets between individuals or entities is called wealth transfer. The transfer can happen either during your lifetime or after your death. Wealth transfer strategies use various methods to create the most tax-efficient and effective reorganization of assets. Below are some popular wealth transfer strategies.

Gifts

Gift giving involves giving a gift of cash, securities, real estate, or personal property to specific people. The annual gift tax exclusion allows an individual to give up to a certain amount, tax-free, to any number of recipients. In 2023, the annual exclusion is $17,000. This means you can give up to $17,000 per person per year to as many different people as you wish without incurring any gift tax liability. The annual exclusion amount is subject to change, so check with the IRS before making gifts.

Trusts

Trusts are legal entities that can hold and manage assets for the benefit of designated beneficiaries. There are many different types of trusts, including revocable and irrevocable trusts. Revocable trusts allow the creator to retain control of the assets during their lifetime and can be changed or canceled at any time.

Irrevocable trusts, on the other hand, can’t be changed or revoked once established. They can protect assets from creditors, reduce estate taxes, and provide for beneficiaries. Irrevocable trusts are a good option for people who want to qualify for Medicaid benefits and preserve assets from being spent on long-term care. They may also be used for people who have family members with disabilities to offer additional financial support without jeopardizing their government benefits eligibility.

Family Limited Partnerships

A Family Limited Partnership (FLP) is a type of partnership often used to transfer assets within a family while retaining control over them. An FLP is created by transferring assets, such as real estate, stocks, or businesses, into the partnership. The partnership then issues shares to family members, who become limited partners. The general partner, typically the person who created the partnership, retains control over the assets and manages the partnership.

Charitable Giving

Charitable giving is a popular way to transfer wealth and reduce tax liability. By donating assets to a qualified charitable organization, an individual can receive a tax deduction for the value of the donation. Charitable giving can also be structured through a charitable remainder trust (CRT), which allows an individual to donate assets to a trust and receive an income stream for a specified period. After the trust term ends, the remaining assets transfer to the designated charitable organization.

Life Insurance

Life insurance can be a useful tool for transferring wealth to future generations. They can provide tax-free benefits to beneficiaries and pay estate taxes or other expenses. Additionally, life insurance policies can be set up to allow the policy owner to transfer ownership to a trust or another individual.

Finding the Right Strategy

Many different wealth transfer strategies are available, each with advantages and disadvantages. These strategies can have complex tax implications and legal requirements, so working with a professional is important to ensure the transfer is efficient and effective for your unique situation. Consult with a financial advisor, elder law attorney, or estate planning attorney before using any wealth transfer strategy.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Elder Law

Changing Tax Laws and Retirement Planning

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SECURE 2.0 Act and the Inflation Reduction Act (IRA) enacted in August and December of 2022, respectively, contain new tax provisions. Lower-income household tax code changes will automatically take effect.

Households of higher income and net worth may want to review their retirement and estate plans to see if changes are necessary. Beyond these two new initiatives, some existing tax laws will expire by December 31, 2025. All new and due-to-expire tax laws affect your current bottom line, retirement, and legacy planning.

Inflation Reduction Act (IRA)

The IRA addresses many issues, including:

·        Climate Change

Incentivizing homeowners to add wind or solar power extend to 2032, with eligible homeowners qualifying for a 30% tax credit. Rebates for existing tax credits for purchasing new electric or other hydrogen fuel cell cars also extend to 2032. Qualifying car buyers receive a $7,500 tax credit at the point of sale. Qualifying sales of used electric vehicles for $4,000 have also been added.

·        Healthcare

Subsidy expansion for health insurance under the Affordable Care Act receives an extension through 2025. Another provision opens the possibility for Medicare drug price negotiations.

·        Corporate Taxation

Corporations earning more than one billion dollars in profits now have a minimum 15% tax based on the annual income of the corporation’s financial statement, not the taxable income. The IRA also adds a one percent tax on corporate stock buybacks based on the value of the shares.

·        Expanded IRS Enforcement

The IRS will receive an additional $80 billion over ten years to boost tax collections by increasing audits and other tax enforcement actions.

SECURE 2.0 Act

The SECURE 2.0 Act is part of the Consolidated Appropriations Act (CAA) of 2023. It changes how you save for retirement by altering rules from the original Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. These changes seek to improve retirement savings options regarding accrual and withdrawing money from retirement accounts. The Act includes 92 new provisions that promote savings, incentivize businesses, and increase flexibility for retirement savings strategies. Effective dates for some of the provisions vary as some are effective immediately while others phase in over the next few years.

The SECURE 2.0 Act has Three Overarching Goals:

  1. Empower people to save more for their retirement
  2. Improve existing retirement rules
  3. Lower the cost of setting up a retirement plan for employers

These goals address the need for retirement preparedness. Empowering individuals to close the retirement gap between what they have saved and should have saved will provide more flexibility upon retirement. If current projections don’t change, US retirees will outlive their savings by an average of eight to twenty years, putting undo pressure on already strained federal assistance programs.

Raising the Starting Age for Required Minimum Distributions (RMDs)

The threshold age has increased from 72 to 73 for taking required minimum distributions from traditional IRAs and workplace retirement plans. In January of 2033, the RMD threshold will rise to 75. Additionally, the penalty for failure to take RMDs on time is halved from 50% to 25% of the undistributed amount.

Taking advantage of delaying RMDs will provide a larger withdrawal and potentially result in a higher tax liability in later years. An estate planning attorney or elder law attorney working with your financial advisor can help tailor distribution strategies before age 73 to mitigate tax consequences. Pursuing a more tax-diversified investment portfolio, including Roth IRAs and non-qualified holdings with unrealized capital gains that receive more favorable tax treatment, can preserve assets, generate later-life income, and help manage future tax liability.

Increase in Catch-up Contributions

You can set aside additional dollars over the standard maximum contribution to retirement plans like a 401(k) and IRA with a new proposal for catch-up contributions for age groups 62 to 64 and ages 60 to 63.

Yet another provision requires all catch-up contributions to be on an after-tax basis, except for those earning $145,000 or less. Other catch-up contributions will enable you to set aside more income in tax-advantaged retirement savings options while reducing current taxable income.

401(k) Auto-Enrollment

Auto-enrollment allows employers to enroll employees into a workplace retirement plan automatically. By 2025, an employee has to opt out of the program their employer provides rather than opting in. Participants can automatically defer 3% to 10% of their annual income into the retirement plan.

The Remaining 89 Provisions

An estate planning attorney or elder law attorney can help coordinate your strategies for the best possible retirement and legacy outcomes by interpreting many other provisions not mentioned in this article. Some of the more notable provisions include:

  • Retirement plan contributions if you have student loan debt
  • Rollover of a 529 Plan to balance a Roth IRA
  • Roth’s employer plan changes
  • Saver’s credit match
  • Penalty-free early withdrawals
  • New qualified charitable distribution rules (QCDs)
  • New limits on qualified longevity annuity contracts (QLACs)

How these new provisions affect your retirement and estate planning is unique and will require some broad understanding of the laws and how they apply to your situation.

Tax Laws That Will Expire

Many tax laws will be sunsetting. They relate to the Tax Cut and Jobs Act (TCJA) provisions of 2017. As these sunset dates draw nearer, it’s crucial to leverage current tax laws and mitigate the impact of the changes on your retirement and estate planning.

2023 Tax Bracket Adjustments

After 2025, tax brackets will move higher.

  • The current top tax bracket for individuals taxpayers, trust income, and estates of 37% will increase to 39.6%
  • The current 24% rate will increase to 28%
  • The current 22% rate will increase to 25%
  • The current 12% rate will increase to 15%

Determine the potential benefits of maximizing pre-tax contributions to retirement plans and capitalize on the current lower tax brackets.

Dramatic Cuts in Unified Gift and Estate Tax Deductions

In 2026, tax deductions will reduce with a projected inflation-adjusted exemption of $6.8 million. Lifetime gifting strategies will become limited and impact certain estate planning and wealth transfer strategies at death.

Tax-efficient Planning in an Uncertain Economic Landscape

The economic environment continues to change considerably. Persistent higher inflation and interest rates play a part in the calculation when establishing Charitable Remainder Trusts (CRTs). Establishing this trust type at higher interest rates creates a potential tax advantage.

Summary

There is a narrow window of opportunity for higher-value individuals and estates to preserve and protect significant wealth. The IRA, SECURE 2.0 Act, sunsetting laws, and the limitless possibilities of more tax legislation passing Congress means taking strategic planning seriously. An estate planning attorney or elder law attorney can provide a comprehensive understanding of how current laws can be leveraged to protect your financial future and legacy.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Estate Planning

The Major Components of an Estate Plan

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Assuring your loved ones are taken care of after you pass away is one of the purposes of an estate plan. It requires organization and strategy and begins with five key legal documents that can address many areas of estate planning concerns.

Proper estate planning can provide tax savings and asset protection so that the bulk of your estate remains intact as it transfers to heirs. These major components of estate planning can be tailored to your individual needs and goals, regardless of the size of your estate. All estate documents must be part of a legally valid and enforceable plan to fulfill your wishes.

Major Components

A robust estate plan involves much more than simply creating a will. An estate planning attorney can help you craft a custom plan using these major components to meet your goals and needs while complying with state and federal laws.

Wills

A will is a legal document outlining how a person’s asset distributions will occur after death. An executor or personal representative named in the will oversees the asset distribution, proper court filings, and final tax returns for the decedent’s estate. When applicable, your will can appoint a guardian for minor children.

Without a will, known as dying intestate, the court implements asset distribution according to your state law which may not align with your intentions. It’s important to note a will only applies to assets owned solely in the name of the person who made the will. Jointly owned assets or those held in a trust pass directly to a designated beneficiary.

Trusts

A trust is a legal arrangement in which a trustee holds and manages assets to benefit one or more beneficiaries. Trusts can help avoid probate, minimize estate taxes, and care for minors or those with special needs. A trust is not subject to public probate proceedings as in the case of a will and provides greater privacy as assets don’t become part of public records.

There are many types of trusts, but the most common is a revocable living trust. It allows the person creating the trust, known as the grantor, to retain control of the assets during their lifetime. Upon the grantor’s death, the assets then transfer to the beneficiaries.

Powers of Attorney

A power of attorney is a legal document appointing someone to act on your behalf if you become incapacitated. This individual can manage your finances, make healthcare decisions, and handle other important matters when you can’t.

There are four types of powers of attorney:

  • A general power of attorney is used when you are healthy and mentally capable.
  • A durable power of attorney is effective upon signature and continues if you become incapacitated.
  • A springing power of attorney only becomes effective if you become incapacitated.
  • A health care power of attorney, surrogate, or proxy allows a person you trust to make health care decisions when you can’t communicate them.

Selecting someone you implicitly trust and know will represent your interests is crucial. They will have significant control over your affairs.

Healthcare Directives

Also known as living wills, advance directives, and other names depending on the state where you live, this combination of legal documents allows you to specify your wishes for medical treatment if you can’t communicate them yourself. The documents enable you to name an individual to follow your instructions and relay medical decisions to family and professionals.

A healthcare directive can include whether you wish to receive life-sustaining treatment, pain management, and other end-of-life care. They provide clarity and peace of mind for you and your loved ones during difficult times.

Beneficiary Designations

Beneficiary designations specify who will receive assets such as life insurance policies, retirement accounts, and other financial accounts after your death. Maintaining updated beneficiary designations is important when life circumstances change, such as divorce, marriage, or the birth of children. These accounts will pass directly to the listed beneficiary.

What if You Don’t Have a lot of Money or Assets?

Even if you don’t think you have enough money or assets, having an estate plan is still important for the following reasons:

·        Guardianship of Minor Children

If you have minor children, it’s critical to designate a guardian if something happens to you, your spouse, or other parent. Without naming a guardian, the court will appoint someone to care for your children; this guardian may not be someone you would select.

·        Healthcare Decision-Making

Even absent significant assets, you may still want to specify your healthcare wishes in the event of incapacity. An advance healthcare directive can help fulfill your wishes and provide clarity for your loved ones during a difficult time.

·        Avoiding Probate

Going through probate can be time-consuming and expensive for those you leave behind. A well-crafted estate plan avoids probate and ensures your accounts and belongings are distributed according to your wishes and outside the public record.

·        Protecting Your Digital Assets

Consider your online presence, including email accounts, social media profiles, digital photos, music, income-producing online storefronts, influencer ad revenue, and cryptocurrencies. More than ever, people have a tremendous presence or income in the digital world. An estate plan can address what will happen to your digital assets after your death.

Do I Need an Estate Planning Attorney?

Given the complexity of estate planning, working with an estate planning attorney is beneficial. An attorney can help you navigate the various components of estate planning and ensure your plan is tailored to your individual needs and goals in compliance with state and federal laws.

Each component of estate planning can affect another. For example, a trust can work with a will to provide for the distribution of assets not covered by the trust. A power of attorney can manage assets, not in a trust, and an advanced healthcare directive can work with a power of attorney to fulfill your healthcare wishes. Creating an estate plan where all facets complement each offers a smooth transition of your estate to loved ones.

An estate planning attorney can also review an existing estate plan routinely or when significant life changes occur. Regular estate planning reviews keep beneficiary designations current. Contact one of our attorneys to gain peace of mind for you and your loved ones.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.