With each year —and each new administration—come new tax plans and new proposals. However, this year, President Biden is proposing a major tax change in terms of a “death tax,” that could greatly affect your estate plan.
Proposed Changes
President Biden’s proposed tax plan could eliminate the loophole that currently allows Americans to escape taxation on their wealth by setting it up as an inheritance for their heirs. The proposed tax plan would also increase capital gains from 23.8%—at least for most estates—to 40.8%, which is higher than the current maximum estate tax of 40%.
In addition to these inheritance tax increases, Biden’s tax plan aims to eliminate the carry-over-basis. Currently, heirs do not have to pay capital gains if they sell inherited property (for example, a house, a stock portfolio, etc.) for its appraised value. If they sell it for more than the appraised value—for example, they sell a home for $300,000 when its appraised value is $250,000—there would be long-term capital gains tax on the $50,000 overage. However, with Biden’s proposed changes, the heirs would be taxed on all capital gains since the original time of purchase. So if the inherited house was originally purchased for $50,000, the heirs would be taxed capital gains on the $200,000 at 40.8%, thus making death a taxable event.
The Takeaway
While Biden’s proposed “death tax” could be costly to your estate plan, it has not been passed yet by Congress, and only remains a proposal. If this new tax plan is passed, we would recommend speaking with your financial advisor and your estate planning attorney sooner rather than later. Speaking with your estate planning attorney as soon as possible can help your estate planning team implement strategies to save your beneficiaries money in the long run.
If you have questions about the proposed “death tax” and what this could mean for your estate plan, then contact Miller Estate & Elder Law at (256) 472-1900 or register for one of our free estate planning workshops.
If you were to pass away without an estate plan, your assets would go through probate court. Probate is required when someone passes away with assets in their name; it is the process of getting those assets transferred to the deceased’s heirs or beneficiaries. Probate can be expensive, time-consuming, and emotional. If you have a will, the probate process is a lot easier, but there are still court costs and hearings involved. So, how can you avoid probate in Alabama?
Own Assets Jointly with Someone Else
Many house deeds and joint bank accounts have a right of survivorship. The right of survivorship basically says that when one owner passes away, the remaining assets are transferred to the surviving owner. This right of survivorship is not automatic. The co-owners would need to request that it be put in place.
Beneficiary Designation
Beneficiary designations are typically used in life insurance, IRAs, and 401Ks. You would name a person as the beneficiary on the account. When you pass away, the beneficiary would just need to send in a death certificate to the company, and the proceeds would be paid directly to the beneficiary, thus avoiding the probate process.
However, it is important to remember that assets with beneficiary designations are not governed by the will. So, for example, if you want all of your assets (including those with beneficiary designations) split between numerous people, then you would need to name numerous beneficiaries on those assets and not rely on the will.
Create a Trust
If assets are owned by a trust, and the trust says which beneficiary will receive which of the trust’s assets upon your death, then these assets will not pass through probate. There are many options when it comes to setting up trusts. It is recommended that you speak with an experienced estate attorney about your needs and goals to learn more about the options that are available to you.
If you are interested in learning more about how you can protect your estate and assets, please join Miller Law for a FREE Estate Planning & Asset Protection Workshop on August 12, 2021 at 10am at the Oxford Civic Center. Space is limited, so please register now!
Life is extremely unpredictable, so it’s vital that everyone has three specific estate planning documents set up before tragedy unexpectedly strikes. These documents ensure that, if we become incapacitated or worse, someone in your life will have the authority to make medical and financial decisions on your behalf—and that they know how you would like them to make those decisions. By having just three estate planning documents in place, you can save your family time, money, stress and heartache by having these important decisions made ahead of time. Not only will you be able to rest assured that you will receive medical care and treatment in alignment with your wants and beliefs, but you will also gain peace of mind knowing that your loved ones and assets will be taken care of after you are gone.
The three documents that everyone needs are: a last will and testament, advanced directive for healthcare, and a power of attorney—or POA. These documents are crucial to setting out a plan for how you want your healthcare and assets handled.
Last Will and Testament
The last will and testament is a legal document that expresses how a person wants their estate to be distributed upon their death. If you have no will, it is called dying “intestate,” and a local probate court will determine how your assets are distributed. While the courts follow state laws to distribute your assets, your actual final wishes will be unknown. The only way to ensure your final wishes are followed through is by having a last will and testament.
Advanced Directive for Healthcare
The advanced directive for healthcare is a 2-part document and contains a living will and medical power of attorney, or healthcare proxy. The living will states what you do or do not want if you become incapacitated or injured to the point where you can or cannot survive without advanced measures. For example, your living will might state that you do not want a feeding tube, or to breathe with assistance. By setting out these instructions ahead of time, it will save your family a lot of stress and heartache, and they won’t have to wonder if they’re doing what you would have wanted. The medical POA names someone to help make these medical decisions. This person will work with your medical care team to make sure that your wishes are being granted, as well as ensuring that you’re receiving the best care possible.
Power of Attorney
A power or attorney, or POA, is designed to give someone else the authority to make financial decisions on your behalf while you are still alive. A POA will give someone else the ability to take care of your estate by doing such things as paying bills, signing important documents, selling assets, and more.
These three estate planning documents tell others what to do if you are incapacitated or pass away, leaving no questions or issues regarding your assets if drafted effectively. If you are looking for peace of mind knowing that your estate and health will be taken care of when you’re not able to physically make those decisions, then contact Miller Estate & Elder Law or register for one of our free estate planning workshops.
Bringing up the subject of estate planning with your aging parents can be difficult. No one wants to have a conversation about what will happen when they are gone, but it is a conversation that needs to be had. Estate planning is about empowering your parents to make decisions for themselves, and ensuring their affairs are in order. However, many people feel like they come across as greedy when tasked with asking their parents about their estate plan.
If you find yourself in need of broaching the subject of estate planning with your parents, the following guidelines can help provide strategies for how to start the conversation with your parents, regarding both their estate and their plan for long-term care. By having a solid legal plan in place, you will have comfort in knowing that your parents will receive the best care possible, and that their final wishes will be handled the way they want.
Estate Planning: Having “The Talk”
Discussing estate planning with your aging parents can be intimidating. No one likes to think about a time when their parents may be too old to care for themselves, or what will happen to their assets once they pass. It is important, however, to make informed decisions—not just about inheritance, but about long term care options as well. By making these decisions together, you can ensure that your parent’s age on their own terms.
Once you have decided you are ready to sit down and speak with your parents, make sure you do some of the initial legwork ahead of time. It’s important to research the questions you may need to ask, have a goal for the conversation, and prepare yourself for their reluctance to discuss the topic altogether. Perhaps put together some talking points or a checklist, so if the conversation does go awry, you can steer it back on track.
If you are still nervous about starting the conversation, a good segue is to ask your parents about their plans for retirement. As the discussion progresses, ask questions that include whether they have a current will, a power of attorney appointed, or a living will. You may come to find that they have already started the estate planning process. If they haven’t, this would be a great opportunity to offer to help them search for an estate planning attorney.
The discussion about estate planning is not something that can be accomplished in one sitting. Listen to your parent’s needs and desires, accompany them to meetings with the estate attorney, and make sure to involve the whole family. By making it a family conversation, you can alleviate some of the pressure you may be feeling. Additionally, by going over everything as a family, everyone will be on the same page, and this can prevent issues when the plan needs to be put in motion in the future.
Remember that you are not alone when it comes to tackling this difficult conversation, but it is so important that you address it sooner than later. Anything can happen at any time, and by taking care of it today, you can make sure that you and your parents are protected if something happens.
For more tips on talking to your aging parents about estate planning, contact Miller Estate & Elder Law today.
Anyone who tells you they are excited about estate planning is either an estate planning attorney, themselves, or a liar. After all, nobody looks forward to paperwork, and even less than nobody enjoys contemplating their own death. This explains why, despite being a crucially important task, less than half of U.S. adults have taken any kind of step towards organizing their estate. Not only is this bad news for individuals whose financial and medical well-being remain unprotected from unexpected tragedy, but it is also bad for an individual’s loved ones, who face enormous hurdles should they be required to administer your affairs without a plan.
Estate Planning is an Act of Caring
Yes, an estate plan exists to protect your life’s work, but more than that it serves to protect your family and loved ones. Besides your advance directives and financial power of attorney—documents that protect your health and finances should you suffer incapacitating illness or injury—the documents which compose your estate plan act to ensure the proper and efficient distribution of your assets when you die. Naturally, then, you won’t reap their benefit…but those people that matter most to you in the world will. Here’s how:
1. An Estate Plan Saves Your Family Conflict
One of the first and most important steps to organizing your affairs is sitting down with loved ones and explaining your goals. Not only does this ensure no detail is overlooked, but it also presents an opportunity for conversation that, when you are gone, may otherwise be sorely missed. All too often, overlooking the need to talk loved ones through your last wishes gives rise to irreparable conflict that, beyond being wholly preventable, also represents the precise opposite of the legacy you wish to leave.
2. An Estate Plan Saves Your Family Time and Money
Among the principal reasons people execute an estate plan is to reign in the cost and complication of probate court. Should you die with no Last Will and Testament or trust agreement in place, your assets will pass according to your state’s intestacy laws. Often, this means an arduous probate court hearing that not only comes at a cost, but also leaves your estate vulnerable to legal challenges by loved ones who may disagree with the dictates of the law.
3. An Estate Plan Protects Your Family’s Financial Future
While every adult needs an estate plan, this is especially true of adults with dependents. After all, parents or caretakers will want to make arrangements that ensure their dependents’ continued well-being even when they are gone. Setting up a trust is a common solution, as doing so allows you to control the conditions under which an inheritance is received, thereby relieving worry about irresponsible spending or inadvertently interfering with access to public benefits.
4. An Estate Plan Helps Your Family Protect You
As mentioned above, advance directives and financial power of attorney documents ensure your health and finances are looked after even if you, yourself, lose the ability to do so. Beyond this, these documents also protect your family as they provide clear instructions concerning how to attend to your well-being and thus diffuse both anxiety and any possible conflict that might arise around the subject.
While only a partial list of estate planning’s many advantages, the above points show that the issue not just one of fiscal responsibility but simple kindness.
To learn more about protecting yourself and your loved ones or to address any other matter related to estate planning, do not hesitate to call Miller Estate and Elder Law at 256 251-2137 or to reach out using the contact form on our website.
Less than 50 percent of U.S. adults have any kind of estate plan in place, and this is in large part due to a general misunderstanding of what an estate plan does. Estate planning is not— despite popular misconception—a task you attend to in old age or ill health. On the contrary, it is a set of documents that protect you and your loved ones for the duration of your adult life. Most people think about the Last Will and Testament when they think about estate planning. While that document plays an important role, so too do power of attorney (POA) documents, and because these are less well-known, this article will center on explaining exactly what they are.
The Two Types of Power of Attorney
POA refers to the legal authority one person (the principal) grants another (the agent) to act on their behalf. In general, this authority pertains to either financial or medical matters, and separate legal documents exist for each purpose. A medical POA acts to ensure you receive proper care should you suffer incapacitating injury or become incompetent, while a financial POA serves a range of purposes all of which relate to your financial well-being. Both types of POA are discussed in detail below.
Medical Power of Attorney
As just mentioned, a medical POA—sometimes referred to as a healthcare proxy—acts as an important protection against incapacitating injury or incompetency. In addition, it plays a crucial role should complications arise during surgery, or if you need regular help due to a long-term condition. The authority granted by a medical POA is usually broad, though you can provide as specific of care instructions as you wish when drafting the document. These are usually paired with a Living Will and the two documents together are known as an Advance Directive for Healthcare.
When you sign a medical POA you designate an agent to act on your behalf. Any competent adult may serve in this role, though some states exclude your physician, residential healthcare provider, or any of either’s employees from being eligible. When choosing an agent, it is important that you consider a person whom you both trust and believe is capable of making difficult choices and advocating strongly on your behalf.
Financial Power of Attorney
Just like the above, a financial POA allows you to appoint an agent to handle your affairs in your stead, though in this instance the authority granted pertains to financial rather than medical matters. A financial POA can be limited or general and, further, its powers can be designed to terminate or remain in force should you suffer an incapacitating accident or become incompetent.
1. Limited Power of Attorney
This type of POA is used when, for instance, you are out of town and need someone to sign a real estate purchase or perform some other type of transaction on your behalf. When drafting a limited POA it is critical that its purpose be clear. Once this purpose is complete, the authority granted by the POA ends.
2. General Power of Attorney
A general POA grants broad powers. Your designated agent gains the authority to perform virtually any financial transaction on your behalf, including conducting business deals, buying life insurance, settling claims, paying bills, and so on. A general POA is used if you will be out of the country for an extended period or are physically or mentally incapable of managing your affairs. Should you suffer incapacitating injury, the authority granted by a general POA automatically terminates.
3. Durable Power of Attorney
A durable POA is much like a general POA except that the authority it grants remains valid even if you do become incapacitated or incompetent. Indeed, a durable POA acts to protect you in this precise situation. If you end up hospitalized, your bills will still need to be paid and your finances managed, after all. A General Durable Power of Attorney is on of the most important estate planning documents you can have. It allows a trusted loved one to make financial decisions for you if you are no longer able to do so.
4. Springing Power of Attorney
A springing POA also grants your agent general authority over your finances but, unlike the previous examples, only comes into effect when a triggering event such as incapacitating injury occurs. This feature makes a springing POA a good option for those uncomfortable with granting durable POA that goes into effect immediately, and yet it is not without risk. Unless described in unambiguous, clear language, the triggering event may not be recognized as such, leaving you without the protection of a POA just when you need it most. The most common “triggering event” is that your doctor writes a letter explaining that you no longer have the mental capacity to make decision on your own and you need someone else to do so.
To learn more about the different types of power of attorney or to simply talk about any matter related to estate planning, do not hesitate to call Miller Estate and Elder Law at 256-251-2137 or to reach out using the contact form on our website.
