How Does Power of Attorney Work?

Questions often arise about how different estate planning documents work together, and they are frequently very good questions. Powers of Attorney (POA) are some of the most commonly used estate planning documents and they are also some of the most misunderstood estate planning documents, says nwi.com in a recent article “Estate Planning: Do Powers of Attorney lapse?”

A POA is a document that authorizes another person to act on behalf of the person making or signing the document. The person named in a POA can also be referred to as the Attorney-in-Fact, or AIF. The authority granted to the AIF is usually spelled out in the document itself. Some POA documents grant a wide range of authority, while others are limited to a specific action. An estate planning attorney can create a POA that suits a person’s particular needs, which is far better than a generic document that may not be accepted because it is too broad.

There are also different types of POAs. Durable POAs usually do not terminate upon a person’s incapacity and are frequently drafted for the purpose of caring for a person in case they are incapacitated. There are also other limited or special POAs that only work for a specific date or time frame. At the end of that time frame or upon that date, the POA terminates.

It’s important to note, however, that all POAs terminate upon the death of the maker or principal. The only power that can survive after the death of the maker is the authority to dispose of the maker’s remains, and that varies by state. This means that the POA will not nominate an executor, and cannot do anything to give someone authority over your body or your property after you die.

A POA can also be terminated at any time by the principal. This termination should be in writing, and it can be terminated by revoking the POA within the terms of a new POA, or by execution of a revocation. Either way, the person should notify the AIF that they no longer have the authority to act under the revoked POA, and any entity who may have a copy of the revoked POA should be notified that it is no longer valid. The revocation can also be recorded at the county recorder’s office. An estate planning attorney in your state will know what rules apply in your area.

When a POA was created is also important. Although a POA signed years ago is still legally valid, estate planning attorneys often look at the date of execution for the simple fact that banks and other financial institutions are reluctant to accept POAs that were created too long ago. In that case, institutions sometimes will require an affidavit affirming that the document is still valid and that the AIF has the authority to act under it.

However, it is recommended that when you have your estate plan reviewed every three or four years, you also have your estate planning attorney update the Power of Attorney. This way there is less of a chance that a bank or other institution will balk at the document. The same goes for your health care proxy, also known as a Health Care Power of Attorney.

Reference: nwi.com (November 3, 2019) “Estate Planning: Do Powers of Attorney lapse?”

Do Name Changes Need to Be Reflected in Estate Planning Documents?

When names change, executed documents with the person’s prior name can become problematic. For example, what about a daughter who was named as a health care representative by her parents several years ago, who marries and changes her name? Then, to make matters more complicated, add the fact that the couple’s daughter-in-law has the same first name, but a different middle name. That’s the situation presented in the article “Estate Planning: Name changes and the estate plan” from nwi.com.

When a person’s name changes, many documents need to be changed, including items like driver’s licenses, passports, insurance policies, etc. The change of a name isn’t just about the person who created the estate plan but also their executors, heirs, beneficiaries and those who have been named with certain legal powers through power of attorney (POA) and health care power of attorney.

It’s not an unusual situation, so there are some different solutions that can address this situation. It’s pretty common to include additional identifiers in the documents. For example, let’s say the will says, “I leave my house to my daughter Samantha Roberts.” If Samantha gets married and changes her last name, it can be reasonably assumed that she can be identified. In some cases, the document may be able to stay the same.

In other instances, the difference will be incorporated through the use of the acronym AKA—Also Known As. That is used when a person’s name is different for some reason. If the deed to a home says Mary Green, but the person’s real name is Mary G. Jones, the term used will be Mary Green A/K/A Mary G. Jones.

Sometimes when a person’s name has changed completely, another acronym is used: N/K/A, or Now Known As. For example, if Jessica A. Gordon marries or divorces and changes her name to Jessica A. Jones, the phrase Jessica A. Gordon N/K/A Jessica A. Jones would be used.

However, in the situation where the sisters-in-law had such similar names, most attorneys want to have the documents changed to reflect the name change. First, the names are too similar, as are their relationships with the testator. It is possible that someone could claim that the person wished to name the other person. It may not be a strong case, but challenges have been made over smaller matters.

Second, the document being discussed in the case above is a healthcare designation. Usually, when a health care power of attorney form is being used, it’s in an emergency. Would a doctor make a daughter prove that she is who she says she is? It seems unlikely, but the risk of something like that happening is too great. It is much easier to simply have the document updated.

In most matters, when there is a name change, it’s not a big deal. However, in estate planning documents, where there are risks about being able to make decisions in a timely manner or to mitigate the possibility of an estate challenge, a name change to update documents is an ounce of prevention worth a pound of trouble in the future.

Reference: nwi.com (October 20, 2019) “Estate Planning: Name changes and the estate plan”

Did Groucho Marx Have Estate Planning and Elder Care Problems?

Julius Henry Marx, better known as Groucho, died 42 years ago on Aug. 19, 1977, at age 86. Groucho teamed with three of his four brothers—Harpo, Chico, and Zeppo—to become stars of vaudeville, Broadway, film, radio and television. (A fifth brother, Gummo, wasn’t part of the act).

PBS News Hours’ recent article, “How Groucho Marx fell prey to elder abuse” reports that the legal battles over Groucho’s money and possessions went on long after he died. The unrest of his last few years is familiar to adult children concerned with the well-being of their elderly parents.

Groucho’s relationships with his son Arthur and daughter Miriam (children from his first marriage) were also strained for various reasons. To add flame to the fire, Arthur wrote several books based on life in the Marx family, and Groucho threatened litigation over his portrayal in one of Arthur’s memoirs.

In the last few years of his life, Groucho had a companion, Erin Fleming, who was accused of elder abuse. Fleming was Groucho’s secretary-manager and was responsible for his popular comeback in the early 1970s. Fleming successfully campaigned for the Marx Brothers to receive a special Academy Award in 1974. In his acceptance speech, Groucho thanked “Erin Fleming, who makes my life worth living and who understands all my jokes.” However, some of Groucho’s friends thought that Fleming was pushing him too hard to perform, given his age and memory loss.

In 1974, Fleming was appointed his guardian and temporary conservator of an estate worth an estimated $2-$4 million. In 1975, Groucho even tried to adopt her, until a psychologist said he was not mentally competent.

Arthur Marx, Groucho’s son, sued Fleming for having a harmful and destructive influence on his father, including threatening his well-being and being abusive. He also claimed that she pushed Groucho to perform, against his best interest, for her own financial gain. In Groucho’s final days, a judge appointed the 72-year-old Nat Perrin, a close pal of Groucho’s and co-writer of the Marx Brothers’ 1933 film, “Duck Soup,” as temporary conservator of Groucho’s well-being and estate. Later, his grandson, Andrew, was named permanent conservator.

Even after he died, litigation concerning Groucho’s estate went on into the early 1980s. Groucho left most of his estate to his children but gave control of his name, image and movie rights to Fleming—an issue of dispute that led to substantial legal battles.

The court found in favor of Groucho’s children and ordered Fleming to pay $472,000, which she bilked from Groucho’s bank accounts, while she worked for him. Fleming committed suicide in 2003 at the age of 61.

In the 1970s, the term “elder abuse” had not been used, even though it existed. Today, elder abuse is a growing problem. There’s a long list of harmful activities, including physical, sexual, emotional, and psychological forms of abuse and neglect, as well as the theft or withholding of financial assets needed to live.

In identifying when elder abuse may be happening, it is important to keep in mind that some elders may be more susceptible than others due to risk factors. These include functional dependence or disability, poor physical health, cognitive impairment and dementia, low income, financial dependence, race or ethnicity, gender, and age.

Perpetrators also have their own set of risk factors, which include mental illness, substance abuse, relationship status (spouse/partners are often the most common perpetrators of emotional and physical elder abuse), and the abuser’s potential dependency on their victims for emotional support, financial help, housing and other forms of assistance.

Get some expert legal and medical advice on estate planning and the creation of a living will so that your wishes are known, and you and your estate are protected properly.

Reference: PBS News Hour (August 19, 2019) “How Groucho Marx fell prey to elder abuse” 

Dark Side of Medicaid Means You Need Estate Planning

A woman in Massachusetts, age 62, is living in her family’s home on borrowed time. Her late father did all the right things: saving to buy a home and then buying a life insurance policy to satisfy the mortgage on his passing, with the expectation that he had secured the family’s future. However, as reported in the article “Medicaid’s Dark Secret” in The Atlantic, after the father died and the mother needed to live in a nursing home as a consequence of Alzheimer’s, the legacy began to unravel.

When the mother was placed into a nursing home, a guardian of the state signed her up for the state’s Medicaid program, MassHealth. Just weeks after entering the nursing home, her daughter received a notice that MassHealth had placed a lien on the house. The daughter called MassHealth; her mother had been a longtime employee of Boston Public Schools and there were alternatives. She wanted her mother taken off Medicaid. The person she spoke to at MassHealth said not to worry. If her mother came out of the nursing home, the lien would be removed, and her mother could continue to receive benefits from Medicaid.

The daughter and her husband moved to Massachusetts, took their mother out of the nursing home and cared for her full-time. They also fixed up the dilapidated house, treating it as if it was theirs because that’s what they believed it to be. To do so, they cashed in all of their savings bonds, about $100,000. They refinished the house and paid off the two mortgages their mother had on the house.

Her husband then began to show signs of dementia. Now, the daughter spent her days and nights caring for both her mother and her husband.

After her mother died, she received a letter from the Massachusetts Office of Health and Human Services, which oversees MassHealth, notifying her that the state was seeking reimbursement from the estate for $198,660. She had six months to pay the debt in full, and after that time, she would be accruing interest at 12%. The state could legally force her to sell the house and take its care of proceeds to settle the debt. At this time, her husband had entered the final stages of Alzheimer’s.

Despite all her calls to officials, none of whom would help, and her own research that found that there were in fact exceptions for adult-child caregivers, the state rejected all of her requests for help. She had no assets, little income, and no hope.

State recovery for Medicaid expenditures became mandatory, as part of a deficit-reduction law signed by President Bill Clinton. Many states resisted instituting the process, even going to court to defend their citizens. The federal government took a position that federal funds for Medicaid would be cut if the states did not comply. There are even some states who took a harder line, even allowing pre-death liens, taking interest on past-due debts or limiting the number of hardship waivers. The law gave the states the option to expand recovery efforts, including medical expenses. Many did, collecting for every doctor’s visit, drug, and surgery covered by Medicaid.

Few people are aware of estate recovery. It’s disclosed in the Medicaid enrollment forms but buried in the fine print. It’s hard for a non-lawyer to know what it means. When it makes headlines, people are shocked and dismayed. During the rollout of the Obama administration’s Medicaid expansion, more people became aware of the fine print. At least three states passed legislation to scale back recovery policies after public outcry.

The Medicaid Recovery program is a strong reason for families to meet with an elder law attorney and make a plan. Assets can be placed in irrevocable trusts, or deeds can be transferred to family members. There are many strategies to protect families from estate recovery. This issue should be on the front burner of anyone who owns a home or other assets, who may need to apply for Medicaid at some point in the future. Avoiding probate is one part of estate planning, avoiding Medicaid recovery is another.

Since the laws are state-specific, consult an elder law attorney in your state.

Reference: The Atlantic (October 2019) “Medicaid’s Dark Secret” 

Can the Golden Girls Model Work for Families?

Multi-generational living is not exactly new, and as people are living longer, it may start becoming more common. Shared households bring many benefits, including convenience. Why should a nurse’s daughter travel 20 miles a day to take her mom’s blood pressure when living together works better, asks The Mercury’s article “Do shared living arrangements make sense?”

There’s also the benefit of increased financial security. Two households merged into one can share expenses, including mortgages, property taxes, utilities and more.

Whether this works in each case depends upon the situation and the relationships of the individuals involved. If there is flexibility and the relationships are good, it can be a blessing. Imagine grandparents and grandchildren who are part of each other’s lives on a daily basis, rather than a twice-a-year visit. That’s a gift.

The arrangement needs to start with a lot of discussions and understanding the wants and needs of each participant. It needs to be based on reasonable expectations. A happy joint living arrangement can swiftly be derailed, for instance, if parents assume that grandparents are willing to be 24/7 babysitters, or if grandparents consider household chores something only for their children and grandchildren to do.

Joining living arrangements must also address financial considerations, estate planning and everyone’s personal experiences and convictions. What works for one family may not work at all for another. Each family must work through their own details.

Here are some examples where a joint living arrangement works.

Parents and children buy a house together. When parents and children live too far away, and the parent’s house would require too much modification for them to continue to live there, both sell their homes and buy a much bigger home that can be made handicapped accessible. The parents make most of the down payment. The house is titled in joint names. Titling is critical. One half is owned by the father and mother, the other half is owned by the adult child and their spouse. Each half would be tenants by entireties (in states where that form of ownership between spouses is available) as between the spouses, but joint tenants with rights of survivorship as to the whole.

Parent moves in with adult child. A widow or widower comes to live with a son or daughter and their family. The parent makes contributions to the monthly expenses. There is a written agreement, which is very important for Medicaid rules regarding gifting. If modifications need to be made to the house—a mother-in-law suite—a written agreement details who contributed what, so that it is not considered a “gift” by Medicaid.

Adult child moves in with parent. This is a “buy-in,” where an adult child obtains a home equity line of credit to purchase an interest as a joint tenant with right of survivorship. The house can be inherited by paying one-half of the value.

None of these strategies should be done without the help of an elder law attorney who is knowledgeable about Medicaid, estate planning and real estate ownership. When it works, this arrangement can benefit everyone in the family.

Reference: The Mercury (AuG. 28, 2019) “Do shared living arrangements make sense?”

How Do I Discuss My Parents’ Long-Term Financial Goals With Them?

A recent study by Ameriprise Financial found that more than one-third of adult children say they haven’t had a conversation about their parents’ long-term financial goals. Even though discussing this delicate topic may seem uncomfortable, addressing it now can help avoid challenges and uncertainty in the future. To that end, the Ameriprise Family Wealth Checkup study found that individuals who talk about money matters feel more confident about their financial future.

The Enterprise’s recent article, “Four financial questions to ask your parents,” provides some questions that can help you start the dialogue.

“What do you want to achieve in the next five or 10 years?” Understand your parents’ aspirations for the next few years. This includes their personal and financial goals and when they plan to retire (if they haven’t already). Do they want to move closer to their grandchildren or to warmer weather? Getting an idea of how they want to spend their time will help you know what to expect in the years ahead.

“Where is your financial information located in case of an emergency?” An incident can happen at any time, so it’s essential that you know how to access key personal, financial and estate planning documents. You should have the contact info for their financial adviser, tax professional, and estate planning attorney, and be sure your parents have the right permissions set, so you can step in when the need arises. You should also ask your parents to share the passwords for their primary accounts or let you know where you can find a password list.

“How do you see your legacy?” Talk to your parents about how they want to be remembered and their plans for making that happen. These components can be essential to the discussion:

  • Ask them if they have an updated will or trust, and if there’s anything they’d like to disclose about how the assets will be distributed.
  • Health care choices and expenses are often a big source of stress for retirees. Talk to your parents about their current health priorities and the future and have them formalize their wishes in a health-care directive, which lets them name a loved one to make medical decisions, if they’re unable to do so.

“How can I help?” Proactively offering to help may get rid of some of the frustrations or relieve stress for even the most independent and well-prepared parents. The assistance may be non-financial, like doing house projects or giving them more time with their grandchildren. You should also look into including an attorney in the discussion, in case your parents have estate planning questions.

Retirement and legacy planning can be complex. However, taking the time to have frequent conversations with your parents can help you all prepare for the future.

Reference: The Enterprise (August 19, 2019) “Four financial questions to ask your parents”

Elder Law Estate Planning for the Future

Seniors who are parents of adult children can make their children’s lives easier by making the effort to button-down major goals in elder law estate planning, advises Times Herald-Record in the article “Three ways for seniors to make things easier for their kids.” Those tasks are: 1) planning for disability; 2) protecting assets from long-term care or nursing home costs, and 3) minimizing costs and stress in passing assets to the next generation.

Here’s what you need to do, and how to do it.

Disability Planning

Disability planning includes signing advance directives. These are legal documents that are created while you still have all of your mental faculties. Naming people who will make decisions on your behalf if, and when, you become incapacitated gives those you love the ability to take care of you without having to apply for guardianship, conservatorship, or other legal proceedings. There are many names for these advance directives, which include financial powers of attorney, health care powers, health care proxies, and living wills.

Your agent named in the financial power of attorney will make all and any legal and financial decisions on your behalf. In addition, if you use a power of attorney that is specifically drafted for long term care and benefits planning, the agent will have unlimited gifting powers that may save about half of a single person’s assets from the cost of nursing home care.

The agent named in the health care directive can make medical decisions, and you can also have language that advises your agent about how you want your body to be taken care of in the event you are incapacitated. If you want to list these separately, you can also use a health care proxy to name the person who can make medical decisions, and use a living will, to convey your wishes for end-of-life care, including resuscitation and artificial feeding.

When advance directives are in place, you spare your family the need to have a judge appoint a legal guardian to manage your affairs. That saves time, money and keeps the judiciary out of your life. Your children can act on your behalf when they need to, during what will already be a very difficult time.

Protect Assets

Goal number two is protecting assets from the cost of long-term care. Losing the family home and retirement savings to unexpected nursing costs is devasting and could be minimized or avoided with the right planning. The first and best option is to purchase long-term care insurance. If you don’t have or can’t obtain a policy, the next best is the Medicaid Asset Protection Trust (MAPT) that can be used to protect assets in the trust from nursing home costs, after the assets have been in the trust for five years.

Have a Trust

The third thing that will make your adult children’s lives easier, is to have a trust that dictates where you want your assets to go after you die. A trust lets you leave assets to the family as you want, with the least amount of court costs, legal fees, taxes and family battles over inheritances. It also allows for the estate to be settled quicker, which will in turn also be easier for your children. Work with an experienced estate planning attorney to have a trust created.

Think of estate planning as part of your legacy of taking care of your family, ensuring that your hard-earned assets are passed to the next generation. You can’t avoid your own death or that of your spouse, but you can prepare so those you love are helped by thoughtful and proper planning.

Reference: Times Herald-Record (July 13, 2019) “Three ways for seniors to make things easier for their kids”

Why Estate Planning is Essential for Small Business Owners

For the entrepreneurial-minded person, nothing beats the excitement of having a vision for a business and then making that dream come true. However, have you ever wondered what will happen to that business after you are gone?

A comprehensive estate plan says Bakersfield.com, in the recent article “Estate planning tips for small business owners,” provides a plan that can protect your life’s work.

It makes sense. You’ve likely spent decades building your business throughout your working life. You’re proud of what you have accomplished, and you should be. You should then protect it with a well-thought-out plan. Your estate planning attorney will be able to help you design a plan for your business and your personal life that considers three questions. For business owners, the answers to these three questions are usually intertwined.

1) Can you avoid taxes?

Reviewing the tax consequences of your personal and business assets as part of your estate plan is the best way to minimize the tax exposure of your estate. This review should also include considerations that come up when trying to facilitate an organized sale or succession plan for your business. You can’t completely avoid taxes, but good planning will help them from being excessive.

There are a number of IRS sections that can help, and your estate planning attorney will know them. For example, Internal Revenue Code (IRC) Section 6166 gives your loved ones more time to pay the tax by having it paid in ten annual installments. Another provision, IRC Section 303, lets your family redeem stock with few tax penalties. Talk with your attorney and CPA to find out if your business is eligible for either of these strategies. Create a plan and talk about it in detail with survivors to help them navigate the transition.

2) Do you have a buy-sell agreement in place?

This is critical, particularly if more than one person owns the business. The buy-sell agreement dictates how a partnership or LLC is distributed upon the death or incapacity of one of the owners. Without an agreement, family members may be stuck owning a company they don’t want or don’t know anything about. Alternatively, your former partners may find themselves partnered with people with whom they never intended to go into business.

The buy-sell agreement creates a plan for what happens when an owner passes. Frequently, the terms state that the shares of the company must be bought out by the other owners at a fair market price. The agreement can even establish a sale price, so family members will know exactly what they can expect to receive from the sale. In addition, a buy-sell agreement can be used to block certain individuals from taking a role in the business. For many family businesses, that’s enough of a reason to make sure to have a buy-sell agreement.

3) Should you purchase a life insurance policy?

Maybe you want the business to die with you. Some small businesses provide a stable income for the owner, but there’s no plan for the business to be passed to another family member or to survive the passing of the owner. If that is your situation, then you should consider having a life insurance policy so that your family can continue to have income after your death.

In the event you want the business to continue for your partners, but not for your family, a life insurance policy can also be used to help partners with the capital they’ll need to purchase your shares, if that is how your buy-sell agreement has been set up.

As a small business owner and a family breadwinner, you want to be sure your family and your business are prepared for your passing. Talk with your estate planning attorney to make sure both are protected.

Reference: Bakersfield.com (July 15, 2019) “Estate planning tips for small business owners”

You’ve Received an Inheritance. Now What?

Inheriting money puts a whole new spin on your outlook on money, says The Kansas City Star in its article “Coming into some money? Be wise with it.”

The first thing you should look at is, do you have debts? Make a list of your debt balances and their interest rates. If the interest rate is high, pay it off. If it’s low, you may be better off investing the funds.

Next, check on your emergency fund. If you don’t have three to six months’ worth of living expenses on hand, use your inheritance to ramp up that fund. Yes, you can use credit cards sometimes. However, having at least two months’ worth of living expenses in cash is critical and can make a big difference when an unexpected circumstance arises.

The third step is to contribute the most you can to a health savings account (HSA), particularly if your employer does not contribute to it and if you have a qualifying health plan. That’s $3,500 if you are single, $7,000 for families and an additional $1,000 if you are over 55. This gets you a nice tax deduction and withdrawals are tax-free, as long as they are used for qualified medical expenses.

If you still have money left over after these three big categories have been addressed, then it might be time to “tax-shift” your portfolio.

Let’s say you regularly contribute $3,000 to a 401(k). If you can, increase that amount by $22,000, to the maximum, if you’re 50 and older. Since your paycheck decreases, so does your tax. If your tax rate is currently 22%, you’ll only need to add $17,160 from your inherited account to reach the same spendable dollars. The tax-deferred account in your portfolio will grow faster, while the current taxable account shrinks.

Another thing to think about is whether to commingle funds with your significant other or not. You can spend it on joint assets now, maybe to pay down your house. Let’s say you and your spouse have a retirement portfolio. The inheritance may also help you to retire earlier. An alternative is to save the inheritance and keep it in a separate account with only your name on it, in which case it remains your asset alone in case of a divorce. Most states will consider this money a non-marital asset, and not subject to division between divorcing parties.

One smart way to use the inheritance is as a way to avoid tapping into retirement accounts for a longer period of time. Withdrawals from IRAs are taxable. If you’re not worried about commingling funds or investment gains, then use the inherited account to minimize the tax losses from retirement accounts. Most people don’t have enough saved to keep spending during retirement as they did while working. Skip the spending spree that often follows an inheritance and enjoy the money over an extended period of time.

Receiving an inheritance is one of the times when a review of your estate plan becomes a wise move. A new financial position may require more tax planning and more legacy planning.

Reference: The Kansas City Star (June 27, 2019) “Coming into some money? Be wise with it”

Filing Taxes for a Deceased Family Member

If you are the executor of a loved one’s estate, and if they were well-off, there are several tax issues that you’ll need to deal with. The article “How to file a loved one’s taxes after they’ve passed away” from Market Watch gives a general overview of estate tax liabilities.

Winding down the financial aspects of the estate is one of the tasks done by the trustee or executor. That person will most likely be identified in the decedent’s trust or will. If the family trust holds the assets on behalf of the deceased, the trust document will name a trustee. If the person died without a will or trust, also known as “intestate,” the probate court will appoint an administrator.

The executor is responsible for filing the federal income tax for the decedent’s estate in cases where a return needs to be filed. Income generated by the estate, even after the death of your loved one, is subject to income tax. The estate’s first federal income tax year starts immediately after the date of death. The tax year-end date can be December 31 or the end of any other month that results in a tax year of 12 months or less. The IRS form 1041 is used for estates and trusts and the due date is the 15th day of the fourth month, after the fiscal tax year-end.

For example, if a person died in 2019 and the trustee chooses December 31, 2019 date as the tax year-end, the estate tax return deadline is April 15, 2020. An extension is available, but it’s only for five and a half months. In this example, an extension could be granted for September 30.

There is no need to file a Form 1041 if all of the decedent’s income producing assets are directly distributed to the spouse or other heirs and bypass probate or trust administration. This is the case when property is owned as joint tenants with right of survivorship, as well as with IRAs and retirement plan accounts and life insurance proceeds with designated beneficiaries.

The trustee also needs to keep in mind transfer tax issues, such as the estate tax and the gift tax. For recent years, this is not as much of a concern because no federal estate tax will be due unless the estate is valued at more than $11.2 million for a person who passed in 2018 or $11.4 million in 2019.

However, the trustee also needs to find out if there were large gifts given. That means gifts larger than $15,000 in 2018-2019 to a single person, $14,000 for gifts in 2013-2017; $13,000 in 2009-2012, $12,000 for 2006-2008; $11,000 for 2002-2005 and $10,000 for 2001 and earlier. If these gifts were made, the excess over the applicable threshold for the year of the gift must be added back to the estate, to see if the federal estate tax exemption has been surpassed. Check with the estate attorney to ensure that this is handled correctly.

Whether or not a person died leaving property to a spouse also impacts whether or not tax will be due. The unlimited marital deduction privilege permits any amount of assets to be passed to the spouse, as long as the decedent was married, and the surviving spouse is a U.S. citizen. However, the surviving spouse will need good estate planning to pass the family’s wealth to the next generation without a large tax liability.

While the tax consequences and tax planning strategies are more complex where significant assets are involved, an estate planning attorney can strategically plan to protect family assets, when the assets are not so grand. In fact, estate planning is more important for those with modest assets, as there is a greater need to protect the family and less room for error.

Reference: Market Watch (June 17, 2019) “How to file a loved one’s taxes after they’ve passed away”