A Gift to Your Children

Decatur and surrounding areas are bursting with new and growing families. Parents of young children have many new responsibilities, not the least of which is setting a long-term plan to guide them into adulthood. An essential part of this plan is establishing a will to ensure that your children’s personal and financial needs will be met no matter what challenges lie ahead.

Choosing a Guardian

A will is the only place where parents can make a legally binding choice of guardians for their children in the event of the parents’ deaths. It is especially important to designate guardians if you think there may be disagreements about choice of caretakers among family members, or if you want to make sure your children have the continuity of remaining in their current school and community.

The One-Third/Two-Thirds Law

If you do not have a will, Georgia law states that almost all of the property passing through your estate will be split between your spouse and your children. If there are two or more children, the surviving spouse’s share of this inheritance would be only one-third, whereas the children would share the other two-thirds. This is contrary to the intentions of most people, who would want their husband or wife to receive and control the full inheritance themselves.

Managed Responsibility

Any assets left directly to your child will fall under the child’s complete control when he or she reaches age 18—not the best timing for a financial windfall. While a parent or guardian may manage a child’s assets while he or she is a minor, the child gains full control and can spend as he or she wishes upon reaching age 18. A better alternative is to provide instructions in a will that the assets will be held in trust for the benefit of a child (for health, education, and living expenses) until they reach an age when they can responsibly make decisions for themselves.

The clear provisions you set forth in a will are an enduring gift to your children while they are young, upon reaching 18, and into adulthood.

 

Brooks Mackintosh, Certified Estate PlannerTM, is an attorney at Mackintosh Law, LLC, in Decatur. For more information, contact him at Brooks@Mackintosh.law or 404-793-2510.

End of Year Planning for Young Families

As the holidays roll by, the end of the year is a good time to take stock of the changes that have occurred in your family and the plans you should make for your children’s future. Here are a few items to consider from a legal perspective.

Superfund College Savings

A 529 college savings plan provides the great benefit of tax-free investment gains on account balances. Normally, contributions are limited to $14,000 per year before triggering the federal gift tax. However, if you are receiving a year-end bonus, or if grandparents or other relatives would like to contribute a large amount to your kids’ accounts, federal law allows making up to five years’ worth of contributions in advance without incurring any gift tax liability.

With strategic timing of contributions in December and January, this allows up to $84,000, per donor, per child, to be added to college savings accounts and to start accruing those tax-free gains. That’s quite a head start!

New Additions to Your Family

If you’ve had a child in the last year – or the last few years – and you do not have a will, putting one in place should be a top priority. A will is the only place to designate a choice of guardians for your children, and to ensure that a surviving spouse will be financially protected.

Under Georgia law, when there is no will, a surviving parent of two or more children receives only about one-third of the assets that pass through the estate. The other two-thirds is inherited by the children, and they would have complete control of the assets upon reaching age 18.

Having a will enables you to exercise your choice of guardian and ensures that the surviving spouse would have control of the family assets – as most people intend.

If Georgia Is Your New Home

If you moved to Georgia in 2016, you should prepare to file two state income tax returns – one for your previous state of residence and one for Georgia. It is also a good idea to review your choice of health care agent, financial power of attorney, and guardian for children. You may want to name local family members or trusted friends in these roles to ensure that they would be able to step into an emergency situation without delay.

If your estate planning documents were prepared in another state, you should have them reviewed to ensure that they comply with Georgia law.

By addressing these potential action items, you will be able to begin 2017 with the peace of mind that your family has a solid plan for the future.

Are You Getting the Most from Your Retirement Accounts?

Grow Your Retirement Accounts as Traditional Pensions Decline In the last 20 years, the number of people with traditional pensions from employers has been cut in half, and the assets held in 401(k), IRA, and other personal retirement accounts have more than quadrupled.  As a result, the current generation of workers preparing for and entering […]

Many Lawyers Can Write a Will, but for Estate Planning, It’s Best to See a Specialist

You wouldn’t expect your family practice physician to perform major surgery, nor would you attempt it yourself. The same is true when it comes to your estate. While the consequences are not as life-threatening, an inadequate estate plan can cause problems you won’t be able to fix.

Mistakes or omissions in your will can cause your heirs to end up contesting its provisions in prolonged, expensive, and public probate court—what you tried to avoid by making a will in the first place. Even if your will is not contested, the court is bound to follow the letter of the law in executing your wishes. If your stated wishes are vague, do not make sense, or the will has not been properly executed, your estate can remain in extended probate, using up your assets in legal fees.

As each person’s situation is unique and laws differ among states, an estate planning attorney guides you through these essential decisions to get your will right the first time.

  • Choose the appropriate Executor—Select the person who is the most capable of navigating the financial and legal requirements of probating an estate and who is willing to do it, not necessarily the person you are closest to.

 

  • Coordinate beneficiary designations—A well-crafted will specifies clearly who inherits your assets. It also works as a complement to the beneficiary designations on your insurance policies, retirement plans, and investment accounts, which supersede what’s in your will. If you neglect to name beneficiaries or you forget to update these when your circumstances change, an unintended person can end up with your assets.

 

  • Designate guardians for your minor children—Be sure the named guardians (and backups) are willing to take responsibility and are compatible with your children. It is important to avoid ambiguity and conflict among disagreeing relatives.

 

  • Determine whether you should set up a living trust—If you own real estate in multiple states or own your own business, it may be essential to avoid the additional costs and delays of formal probate proceedings.

 

  • Specify conditions for how your assets may be used—For example, you may require that your children reach a certain age or complete their education before they inherit their share of your assets. Your will or trust should contain specific instructions for making distributions on your children’s behalf.

 

  • Name a person to have financial power of attorney—The person that you name can make financial decisions for you during a period of incapacity. Without this power of attorney, your family may need to petition the court for a conservatorship—a much more expensive and time consuming process.

 

  • Put end-of-life and funeral decisions in the proper context— An estate planning attorney can prepare a separate advance directive for health care and funeral instructions to be given at the appropriate time to the agents you name to act on your behalf. Avoid putting these instructions only in your will. By the time your will is located and reviewed, it is often too late.

 

  • Don’t forget your pets—Provide for your pets through a trusted caretaker. Don’t leave money directly to pets. Your will or a pet trust ensures that a caretaker is named and sufficient funds are provided for your current and future pets’ care.

 

Brooks Mackintosh, Certified Estate Planner™, is an attorney at Mackintosh Law, LLC, in Decatur, Georgia.

 

New Baby on the Way? It’s Probably Time to Update Your Will

Parents with a new baby have lots of new responsibilities.  Your most important role as a parent is to provide a home for your children and to make sure their needs are met.  This includes a plan for their care and well-being if something were to happen to you, and a current will is an essential part of that plan.

Here are three things that new parents need to know if they have an outdated will or no will at all:

1)  A will is the only place where parents can make a legally binding choice of guardians for their children in the event of the parents’ deaths.  It is especially important to designate guardians if you think there may be disagreements about choice of caretakers among family members, or you want to make sure your children have the continuity of remaining in their current community.

2)  If you do not have a will, Georgia law states that almost all of the property passing through your estate will be split between your spouse and your children.  If you have two or more children, the surviving spouse’s share of this inheritance would be only one-third, whereas the children would share the other two-thirds.  This is contrary to the intentions of most people, who would want their husband or wife to receive and control the full inheritance themselves.

3)  Any assets left directly to a child will fall under the child’s complete control when he or she reaches age 18.  While a parent or guardian may manage a child’s assets when he or she is a minor, the child can spend as he or she wishes upon reaching age 18.  When a parent wants to provide for a child, the better alternative is to provide instructions in a will that the assets will be held in trust for the benefit of a child (health, education, living expenses) until they reach an age when they can responsibly make decisions for themselves.

Before your baby is born, or after the frenzied newborn period has passed, take the time to put a will in place that contains the thoughtful choices that your child deserves.

Recipe for the Sandwich Generation: Power of Attorney, Living Trust, and Advance Directive for Health Care

You’ve heard the terms, but what exactly do they do?

In the entertaining and poignant illustrated memoir “Can’t We Talk About Something More PLEASANT?,” author Roz Chast recounts her story of an only child dealing with the aging of her parents.

Her father was obsessed with finding the “bankbooks,” sure that bandits were poised to drain the couple’s bank accounts. Her mother said she didn’t want to become “a pulsating piece of protoplasm.”

To be generous, their ideas about health care and the state of their assets were in disarray. The parents knew what they wanted and didn’t want, but they were 93 before they put an estate plan in place to formalize their medical care instructions and protect their financial assets.

Whether you are 18, 93, or sandwiched between generations of your children and your parents, through essential legal documents you can appoint an agent to handle your financial affairs when you are not able to do so, and you can put in place a plan to provide for the needs of yourself and your dependents during a period of incapacity.

With a Power of Attorney, you name an agent who will make your business and financial decisions when you are unable to.

Along with this, you can set up a Living Trust that gives instructions on how you want your agent to handle your assets. You are the Trustee unless you become incapacitated, and then your alternate Trustee takes over and is bound by law to follow your instructions. Without this, the court may appoint a Conservator over your financial interests. More about court appointments below.

Through a Georgia Advance Directive for Health Care (formerly referred to as a Living Will) you can appoint an agent to make your health care decisions and state your wishes about end-of-life procedures should you become incapacitated. Without this directive in place, the people in your life could be required to petition the court to be appointed your Guardian.

A court hearing can be time-consuming, expensive, and is always public. Your appointed Conservator or Guardian may not have any idea about your choices and may be confronted by disagreeing family members, leading to additional court hearings. Meanwhile, your interests have been put on hold.

Roz Chast says she told her story to help others. If you have delayed making a plan, know that you are not alone and there is help readily available to get you through it. Then you can have peace of mind and talk about something more pleasant.

What You Need to Know About the Estate Tax and the Gift Tax

No one wants to be subject to the “death tax,” but the good news is that less than one percent of estates will have federal estate tax liability. For 2016, the federal estate and gift tax exemption is $5.45 million per individual, up from $5.43 million in 2015. Also, Georgia has abolished the state-level estate tax.

Federal Estate Tax Basics

Current federal law establishes a “unified credit” that allows an individual to make lifetime gifts and estate bequests in amounts up to $5.45 million without being taxed. This credit is applied against the net estate value, which consists of all assets, including life insurance benefits, less any debts.

Even better, there is an unlimited marital exemption for bequests made between spouses. This means that, with the proper estate planning and tax return filings upon the death of the first spouse, a married couple can leave up to $10.9 million in assets to their beneficiaries without incurring any estate taxes.

The unified credit is scheduled to increase in future years with inflation, but the credit is historically high now, and a change in the law by Congress could lower the tax-exempt threshold with little notice. If you and your spouse’s combined assets, including life insurance benefits, are at or near the $5 million level, this is an area worth watching.

Strategic Gift-Giving

As mentioned above, the unified credit applies to both lifetime gift-giving and bequests through one’s estate. If a person gives large gifts during their lifetime, the amounts must be reported in a gift tax return, and they can chip away at the unified credit over time. Such reportable “gifts” can include adding a son or daughter’s name to a bank or investment account if they did not contribute to the account.

There is more good news when it comes to gifts, however. In 2015 and 2016, every individual can give any other individual up to $14,000 that is excluded from the gift tax calculation entirely. This means that a couple can give up to $28,000 to each of their children (or to anyone else) each year without having to file a gift tax return and without chipping away at their lifetime unified credit.  (All gifts between spouses are exempt from the gift tax.)

The end of the year provides an opportunity for some strategic gift-giving that can make use of the annual gift exclusion to large effect. For example, a married couple may establish a bank or investment account for a son or daughter and transfer up to $28,000 to it by the end of 2015. In January 2016, the couple can transfer an additional $28,000 into the account and still remain below the reporting threshold for annual gift-giving.

If you have any questions about estate tax or gift tax planning, feel free to contact our office at (404) 793-2510.

When It Comes to Estate Planning, Indecision IS a Decision (One You May Not Like)

You’ve heard it a hundred times: If you have children, own a home, or have other significant assets, it’s important to have a will, a power of attorney, and other estate planning documents. Why is this? It is to ensure the protection of you and your loved ones and the preservation of your hard-earned money.

A basic estate plan includes a will, in which you make choices about how your assets will be distributed after you are gone. In the absence of a will, the state makes these decisions for you through the law of intestate inheritance, and, as described below, the results likely are not what you would choose for your family.

For a married couple without a will, for example, Georgia law states that a surviving spouse is entitled to a “year’s support” from the estate. This is an amount that is sufficient to meet the needs of the surviving spouse and any minor children for one year. Apart from the year’s support, the law of intestate inheritance divides the estate between the surviving spouse and the children of the deceased spouse. For a married couple with one child, if one spouse dies, all of the assets that pass through the estate apart from the year’s support are split evenly between the surviving spouse and the child.

If the couple has two or more children, the surviving spouse receives the year’s support and only one-third of the assets, with the other two-thirds split evenly among all the children of the deceased spouse. This can leave a surviving spouse with much less than expected or intended.

When the children inheriting these assets are minors, the court generally will appoint the surviving parent as guardian for the children. That parent will then be required to make annual reports to the court about how the children’s money is being managed.

At the age of 18, any assets inherited by a child are placed under the child’s exclusive control. There is no limitation that these funds be used toward education, nor that they be spent over a number of years. Those types of limitations can be enforced if assets are left by will to the surviving spouse or in trust to the children, but without any estate planning, the inheriting teenagers are free to spend as they wish.

While some assets can be removed from the control of the intestate inheritance laws through joint ownership and the designation of beneficiaries on accounts, it is essential to have an overall estate plan to make sure that your assets will be distributed to whom you want, the way you want, and when you want.

Apart from the distribution of assets, there are other important directions that can be accomplished only through a will. For example, a will is the only way for parents to name a guardian for their minor children after they are gone. By appointing a guardian, parents ensure that their children will live with the caregiver they choose, and they eliminate potential disagreements among surviving family members.

A will is also the only means to appoint a trusted person to serve as the executor of one’s estate. Appointing an executor can prevent squabbling among family members or the need to compensate an administrator that is appointed by the court.

If you made a will years ago, it is important to review your estate plan with an attorney to make sure it addresses your needs and intentions as of today. This is especially true if you have since married, had children, divorced, moved to a different state, or accumulated significant assets. You should also make sure that your will and other planning documents comply with current law.

Through a power of attorney, you are able to designate a trusted person to handle your business affairs and/or medical decisions when you are incapacitated and unable to do so yourself. Whether the disability is temporary or permanent, it is important to have a power of attorney in place so that these decisions can be made in a timely way.

In the absence of a power of attorney, a formal court hearing and appointment of a guardian and conservator is required. This is a public process that is both expensive and time-consuming.

By taking control of the estate planning process with the right choices for you and your family, you prevent the state’s default settings from leading to unintended and unnecessarily costly results.