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Picture of a family smiling under an imaginary roof
Picture of a family smiling under an imaginary roof

Did the SECURE Act Ruin Your Child’s Trust?

The SECURE (“Setting Every Community Up for Retirement Enhancement”) Act was signed into law by President Trump on December 20, 2019. Among other things, the Act significantly curbs the ability of owners of Individual Retirement Accounts to leave benefits to their surviving children in a manner that minimizes income tax consequences.

 

Prior to the enactment of the SECURE Act, owners of IRA’s and certain other retirement plans could designate most of their children as death beneficiaries in a more tax efficient manner. Payments to the children could be “stretched” over their life expectancy. For example, in the case of a 50-year-old son or daughter the life expectancy is 34.2 years. The life expectancy of a grandchild or great grandchild could be as long as 80 years. Because of the long life expectancy, assets in the plan could grow tax-deferred and be slowly distributed to the surviving children for decades after the death of the plan owner, minimizing the income tax consequences to the child beneficiaries.

 

Rather than directly name a child as a plan beneficiary, many people with IRA’s designated a special type of trust known as a “see-through” trust to receive the plan proceeds at their death. There are a variety of reasons for this, including a desire to protect the proceeds from being squandered, the need to have the proceeds managed by a suitable person, and to protect the proceeds from creditors.

 

In most instances, the SECURE Act replaces the possibility of a stretch payout with a flat 10 year payout. This compressed payout means that in many cases the tax deferred benefits of leaving a plan to a see-through trust are largely curbed. Worse, depending on how the trust was drafted, it may no longer deal with the assets properly, or in the worst cases, function properly at all.

 

If, as part of your previous planning, you executed a trust leaving retirement benefits to your family members, it is very important that you have that trust reviewed by an estate planning attorney. In some instances, the trust may continue to work properly, in others amendments will be needed, and in some cases the trust will need to be revoked and other planning options utilized. Special provisions applicable to minor and disabled children, spouses, chronically ill people, and beneficiaries close in age to the plan owner must also be considered.           

 

Contact the North Shore Planning to schedule a review of your existing trust planning.   

 

Contact us with questions about this topic.
Contact us with questions about this topic.

How Can I Minimize My Estate Taxes?

An estate tax is a type of death tax that is imposed on the decedent’s estate before any distributions are made to beneficiaries. Estate taxes are different from inheritance taxes, which actually are imposed on the beneficiaries themselves. Estate taxes can be a burden because some people still might have to pay them after their death, which can put a financial strain on your family. However, there are some ways that you can maintain and even minimize your estate taxes.

What Are the Different Ways I Can Decrease My Estate Tax Amount?

– Leave assets to your spouse: If you are married upon your death, you can leave an unlimited amount of money to your spouse without acquiring any tax (as long as your spouse is a US citizen). Each of you, as taxpayers, will also receive the tax exemption, which is excluded from the federal estate tax. However, in order to ensure that both spouses can use the full exemption amount, you should probably create a will or living trust.

– Contribute to charity: Money that goes to a charitable organization at your death can also be exempt from federal estate taxes.

– Start giving away money during life: Instead of leaving all of your assets to be distributed after your death, you can start giving away your money to your beneficiaries now while you’re still alive. Removing assets from the estate before your death will result in huge estate tax savings because they will be included in the gift tax exclusion.

– Create a good estate plan: Meet with our skilled estate planning attorneys to help you implement estate planning options. Creating an estate plan will help minimize the impact of your estate taxes on your family and loved ones.

– Take away life insurance proceeds from your estate: If you own your own life insurance, the proceeds are included in your taxable estate. This means that you could create an irrevocable life insurance trust that will hold that insurance policy and remove the death benefit from your estate. This trust will also allow you to remove the value of your life insurance from the estate.

Massachusetts is one of the states that collects estate tax, so it’s crucial that you know how much you’re expected to pay and how you can start saving. Contact the law office of Brandon L. Campbell today for a free phone consultation.

How to Organize Your Online Accounts for Your Estate Plan

An important aspect of your estate planning that many people might overlook is your digital legacy. You should start considering what you want to happen to all of your online accounts that you have created and maintained over the years. You don’t literally own any online blogs, social network accounts, or digital files, but you are permitted to leave detailed instructions for your executor on what you would like your digital legacy to be after you die.

What is Included in Your Digital Legacy?

While considering your digital legacy and online identity, look through your social networks (Facebook, Twitter, Instagram, and LinkedIn), blogs, domain names, any listservs or online communities you were a part of, music, photos, selling accounts (Amazon or eBay) and any financial or banking accounts. Any networking accounts are yours by licensing rights only, but they are not technically your actual property, so they will not be included in your will or any other estate plans.

What Instructions Should I Leave for My Executor?

Social media accounts: Each social media company has its own policies on what to do with deceased accounts. You can tell your executor to post a status update, tweet, or post after your death.

Email: What happens to your email accounts will also depend on the individual policies of the company in charge of your account. Eventually it will be deleted, but you can tell your executor to send, print or save any important email before the account expires.

Blogs and domains: You can tell your executor to post on your blog about your death, delete the blog account, or archive its posts. You can also tell your executor to transfer, delete or continue paying for your domain license.

Photos, music, and digital files: Decide how your executor will access any digital files, and you can use your will to leave these items to your friends and loved ones with detailed descriptions.

Sellers accounts: Leave instructions on what you want done with your account; usually you can leave any items you were selling to your loved ones through your will.

Financial accounts: It’s important that your executor has clear access to your financial accounts in order to pay bills and execute your estate plans.

The North Shore Planning can continue to help you through this process. Contact us today to start organizing your estate documents and plans.

How Can Undue Influence Affect Your Estate Plans?

Elder abuse is an unfortunately common occurrence that happen in multiple scenarios, especially during estate planning. People will try to manipulate others who are in vulnerable positions in order to gain some sort of physical or financial benefit. Undue influence is a legal term that explains this improper manipulation. Relatives of the deceased person who had suspicions that the deceased was taken advantage of can try to prove undue influence in probate court.

How Do I Prove Undue Influence?

If you suspect that there was undue influence involved in an estate plan, you must bring a will contest into probate court, after the will-maker’s death. As the suspicious relative, it will be up to you to prove that the will was written under someone’s undue influence. One way you could prove this is by explaining that the will leaves property or assets in a particular way that you wouldn’t expect, such as unusually leaving out close family members without any obvious explanation. You could also establish undue influence by demonstrating a close and trusting relationship between the manipulator and the deceased. You may also need to prove that the will-maker was mentally and/or physically vulnerable during this time, due to illness, weakness, or generally unhealthy circumstances. Lastly, you must prove that the manipulator took advantage of the will-maker and benefited from their will by substituting his or her own interests for those of the will-maker.

Proving undue influence can be difficult in an undue influence lawsuit, because the court must rely on other witnesses since the person who made the will cannot come to court and speak for themselves. If you believe that a vulnerable family member could be taken advantage of in the future and cannot make rational estate planning decisions, you should contact the North Shore Planning.