Time to Brush Up on Your Estate Planning Etiquette

Important Probate Rules You Should Know:

When a person dies, what happens next depends on whether the deceased person had any foundational estate planning documents such as a last will and testament (otherwise known as a will) or trust, who the living relatives are, and their relationship to the person who died. If the deceased person did not have a trust or will, the state where the deceased person resided has rules for overseeing how the deceased person’s money and property are to be distributed. If the deceased person died owning accounts and property in their sole name and had a will, it will contain instructions for what is to happen to the decedent’s money and property and must be filed with the probate court. Probate is a formal legal process of proving that a will is valid (if the person had a will), appointing someone to carry out the deceased person’s wishes (known as a personal representative or executor), and supervising the distribution of the deceased person’s money and property.  

While probate rules can vary by state, there are some important ones that you should be aware of should you need to wind up a loved one’s affairs. 


Deadlines are important rules that must be followed during the probate process. Failing to meet these deadlines could get you in trouble with the court.

When and if to file the last will and testament. If and when a will must be filed with the probate court can vary by state, but it is important that you understand when this task needs to be completed. Some states require that your loved one’s will be filed with the probate court within a certain number of days after your loved one’s death, while others only require that a will be filed if a probate is necessary. This usually occurs when the decedent died owning accounts and property in their sole name that need to be transferred. Once the will is filed, the court will generally begin by reviewing the will to ensure that it was properly made and signed. If the court is satisfied, it will appoint the personal representative.  

Collecting and securing items. The personal representative must locate and secure the deceased person’s money and property and create an inventory of all items. Deadlines for filing an inventory with the court are calculated from the date you were appointed as personal representative, and they vary greatly among states, from sixty days in Florida to six months in New York. The inventory will include a valuation of the items as of the date of death. During this period, the personal representative may also need to establish a tax identification number for the estate and open an estate checking account for depositing estate funds.

Notifying creditors. The personal representative must notify known creditors and attempt to find unknown creditors. Generally, at the direction of the probate court and with the assistance of an experienced estate administration attorney, the personal representative is required to publish notice of the deceased person’s death in appropriate newspapers to run for a specified length of time. This notice is typically published in the local newspaper where the person died. The purpose of this notice is to allow creditors, both known and unknown, time to make a claim to the estate for any debt owed. The personal representative must then determine the validity and priority of all creditor claims received and pay those claims as appropriate.

If the personal representative follows the correct steps regarding notice to creditors, any debts not brought to the personal representative’s attention during the applicable time period may be barred, and the estate may not be responsible for paying them. The creditor deadline gives creditors an opportunity to come forward with their claims, but it also provides a cutoff point for the personal representative so they can wind up the deceased’s affairs in as efficient a manner as possible.

Maintaining and providing estate accounting records. The personal representatives must maintain accounting records as proof of monies coming into and going out of the estate. Depending on the circumstances, the accounting records may need to be filed with the court, and interested parties may need to sign releases at certain intervals.

Filing and paying taxes. A personal representative must ensure that the deceased’s final tax return is filed by the personal income tax filing deadline of the year following the deceased’s death. If the estate earns income after the deceased’s death, the personal representative must file estate income tax returns (sometimes referred to as fiduciary income tax returns). Finally, a personal representative may have to file an estate tax return if required by law or for further tax planning. Each of these returns will have a specific deadline.

Who Has to Know

During the probate process, there are a lot of steps that are involved, and there may be multiple individuals who need to be kept informed about what is happening. If the deceased had a will, this would include those named in the will (beneficiaries). In some states, the deceased’s relatives and the deceased’s creditors can also be interested persons. When dealing with individuals other than those the deceased named in a will, it may be tempting to leave them in the dark, especially if there has been bad blood. However, personal conflicts do not absolve the personal representative of the duty to keep an interested person informed and to provide them with the information they are legally entitled to.

Who Can Be in Charge

Another important probate rule is who can be appointed as a personal representative. The personal representative can be almost anyone. Many states require that the personal representative be an adult or emancipated minor. However, some states may not appoint a personal representative who is a non-US resident, nonstate resident, or a felon. Most often, a personal representative is a surviving spouse, a family member, a close family friend, or an attorney. There is no requirement that the personal representative have any experience or expertise in handling estate matters nor is the person required to have any financial or legal experience or background. 

We Are Here to Help

Probate is a process with many rules. We understand that this can be very overwhelming for many people. We are committed to working with named and appointed personal representatives to ensure a smooth estate administration. If you would like to learn more about the probate process and what is involved, please give us a call.

Infusing the Principles of Etiquette into Your Estate Plan

May is National Etiquette Month, and the goal is to encourage all people to act with consideration, respect, and honesty in their interactions with others and in their everyday lives.

Etiquette can also play a role in estate planning. A well-crafted estate plan ensures that your wishes are respected and that your loved ones are taken care of. Estate planning can also address what happens when you become ill and are unable to make decisions for yourself prior to death. Good manners and decorum can help minimize potential conflicts and disputes that may arise among family members during the planning process. As such, it is important to observe proper etiquette when planning and executing your estate plan to ensure a smooth and peaceful transition of your money and property to your loved ones. This involves communicating openly and honestly with family members about your plan and considering their feelings and opinions. Showing respect and sensitivity to family members can prevent future potential legal challenges that could arise from disagreements.  

The following are some ways that you can bolster your estate plan by incorporating the key elements of etiquette.  

Consideration. An estate plan can create a sense of stability and calm in times of loss or uncertainty. No matter what level of wealth you currently enjoy, if you do not leave detailed instructions for the type of medical care you want, you will be putting those you love most in the position of being mind readers. They will have to do their best to figure out what you would have wanted and then deal with the consequences, such as unhappy family members who disagree with them. A well-crafted estate plan shows consideration for your loved ones by preventing confusion about what to do and helping them avoid the pressure to make rushed choices.

Additionally, a carefully prepared estate plan can allow you to customize a plan that provides for your loved ones in a unique way that takes into consideration your loved one’s personal circumstances. They can find solace in the love and consideration you showed them by ensuring that your estate plan was not just a one-size-fits-all document.

Another way you can demonstrate consideration in an estate plan is by carefully considering who you are choosing as your trusted decision makers. Each role in an estate plan is important and is best handled by individuals with the right skills. When you are choosing a decision maker, it is important that you pick the right person for the job and that the person you are choosing can handle the responsibilities. In some instances, the person may not be able—not for a lack of skill, but because their plate is already full. Choosing an already overcommitted loved one could leave them feeling burdened and resentful during a time when they need to be grieving.

Respect. Estate planning makes it easier for your loved ones to respect your wishes because they know exactly what you want. Trust-based estate plans can respect your and your loved ones’ right to privacy by keeping private matters out of the public eye. Without a comprehensive trust-based estate plan, your estate may need to go through court in a proceeding called probate. This means that your choices become visible to the public, as does any information that needs to be filed with the court (like a list of everything you owned). 

Honesty. An estate plan can bring a family together. News stories are rife with examples of beneficiaries arguing over a deceased loved one’s money and property or instances of a person’s care and end-of-life wishes being ignored. But an estate plan can avoid those types of emotionally draining situations. You should communicate your wishes for end-of-life care to your loved ones. While creating an advance directive document like a healthcare power of attorney is important, it is equally essential to have open and honest conversations with your loved ones about your wishes. These conversations can be difficult, but they can provide clarity and peace of mind for everyone involved. And these discussions can provide a wonderful opportunity for you to show those same people how much you care for them and appreciate them while strengthening the bonds of family love. Many people also take the opportunity to write something personal to their family members – passing along hopes, dreams, stories, and wisdom.

By crafting an estate plan that is considerate of one’s loved ones, respectful of privacy, and honest about wishes for care and end-of-life decisions, you can ensure that your wishes are carried out in the most respectful and dignified manner possible. If you are interested in learning more about our estate planning process, or to update your existing plan, please schedule a meeting with us.

Slicing Your Estate Planning Pi(e)

What? You didn’t know that March 14 (3/14) is National Pi Day? We didn’t either until recently, but now we know this celebratory day was established (you guessed it!) by a physicist (Larry Shaw) to recognize the mathematical constant (𝛑) whose first three digits are 3.14—probably as an excuse to devour lots of pie. National Pi Day is a great occasion to come to our office and discuss how you would like to slice your financial pie when you pass your wealth on to your children and loved ones. No complicated mathematical formulas are necessary to determine whom you would like to leave your money and property to, but it is an important subject that requires some serious thought.

How Should You Slice Your Pie?

With only a few possible exceptions, you are free to use your estate plan to slice up your wealth for the benefit of anyone you choose. Some common beneficiaries you may choose are spouses or other significant others—such as your boyfriend, girlfriend, or partner—and children. More and more people are also leaving money in trust to be used for the care of their pets. Others want to provide a gift to one or more close friends when they pass away. You may choose to include institutions as well as people or pets in your estate plan: if you have a strong relationship with a favorite alma mater, charity, or church, you may choose to leave money or property for its benefit.

It is crucial for you to create an estate plan to ensure that each person or institution gets the slice you intend. Without an estate plan, your money and property will be divided up according to state law, which may not provide the result you would have wanted. The state’s intestacy statute typically provides that if you die without a will, your surviving spouse will inherit everything, but if you had children from a prior relationship, the estate will be divided between them and your surviving spouse. If you do not have a surviving spouse or children, the estate may go to your parents or siblings. In the absence of any surviving family members specified in the statute, your money and property go to the state. This means that if you had stepchildren or foster children who were beloved but not adopted, or a significant other who was not a spouse, they will receive nothing. In addition, without an estate plan, you will lose out on the opportunity to leave your wealth to a nonfamilial loved one or charitable organization of your choice; instead, your wealth will go into the state’s coffers.

By creating an estate plan, you can specify not only to whom you want to leave a slice of your pie, but also the size of that slice. For example, you may want each of your children to receive an equal inheritance, or you may choose to divide up your wealth among your children based upon what you think each one needs. Children who are disabled and unable to provide for themselves may need more than other children who are able bodied or independently wealthy. There is no right answer: it is up to you to determine those to whom you want to leave your money and property and the size of each gift.

Depending on state law, there may be a couple of exceptions that have at least some impact on your ability to specify the size of the slices of your pie:

  • Spouse’s elective share. Nearly every state has a statute that protects a surviving spouse from complete disinheritance by allowing them to elect to take a certain portion, such as one-third or one-half, of their deceased spouse’s estate. In some states, the size of the elective share may depend on whether the deceased spouse left behind children, grandchildren, or parents in addition to their spouse. The surviving spouse’s elective share may be smaller if there are other surviving relatives who would benefit from the deceased spouse’s estate.

Some states’ elective share statute applies only to the probate estate, that is, accounts and property that are held in the deceased spouse’s individual name. However, other statutes also subject money and property the deceased spouse had transferred to a revocable living trust during their lifetime to the surviving spouse’s elective share. Elective share statutes are generally a default rule, so a surviving spouse may contractually waive or modify their right to an elective share if they sign a premarital or postmarital agreement to that effect.

  • Family allowance. Under state law, the surviving spouse, minor children, and adult children with special needs may be entitled to an amount from the deceased person’s estate necessary for their maintenance if they are able to demonstrate their need to the probate court. The money and property considered in determining the amount to which the spouse or children may be entitled vary depending on state law. Often, if the family allowance is determined to be available, it will be paid to the spouse or children before gifts are made to other beneficiaries named in the deceased person’s estate plan or most other claims against the estate, and if there are insufficient funds in the estate to cover the family allowance, the court may order the sale of estate property.

We Can Help You Slice Your Pie How You Want

Celebrate National Pi(e) Day by setting up an appointment to create or update your estate plan. We can help you design a plan to ensure that your pie is divided up in a way that achieves your goals. Give us a call today!

Do Not Leave Your Minor Children’s Future to Luck

We associate March with St. Patrick’s Day and Irish traditions such as searching for four-leaf clovers, which are thought to bring good luck. One thing that parents should never leave to luck is providing for their minor children. Young parents work hard to create a wonderful life for their children and pass on wealth to them in the future, but they also need to create a plan for their children’s care if something happens to them. If you are a parent, it is difficult for you to think about having your young children grow up without you, but you need to recognize that lack of planning for this possibility could be disastrous for your children. 

Choose someone you trust to provide day-to-day care for your children. If one parent dies or becomes incapable of caring for your children, their other parent will likely continue to have physical custody of the children and responsibility for their care. However, it is crucial for you to name a guardian who will step into your shoes to provide day-to-day care for your children in the event that something happens to both of you. If you do not name a person you trust, a court will step in to appoint someone. Because the person the court chooses to be your children’s guardian may not be the person you would have chosen, it is vitally important to designate this person in advance in your will or in a separate document. Although the court will still have to appoint the guardian, it will typically defer to your wishes.

There are two types of guardians you should consider nominating in your estate plan:

  • Permanent guardian. A permanent guardian is appointed by the court to care for children whose parents are both deceased or are otherwise no longer able to care for them. The permanent guardian steps into the parents’ shoes to provide for the children’s educational, religious, legal, medical, and day-to-day care until they reach the age of majority in your state (often age eighteen or twenty-one). As mentioned, to avoid leaving your children’s fate to a court with no input from you, you can name the person you want to care for your children in your will or a separate document specifically addressing guardianship.
  • Temporary guardian. You can choose a person you trust to act as a caregiver for your children for a limited time period by choosing a temporary guardian in writing. That person will care for your children if you are temporarily unavailable, for example, if you become very ill and need to be hospitalized or are away for an extended trip. You can authorize the guardian to make decisions and take actions that you, as their parent, would normally handle, such as consenting to medical treatment or enrolling them in school. A temporary guardianship is usually only effective for a period of six months to a year, depending on state statute. If you would like to have it effective longer, you will need to sign a new form when the original one expires.

Make plans for your children’s inheritance. If you fail to plan ahead, the court may have to appoint a conservator (sometimes called a guardian of the estate) to manage your children’s inheritance until they reach the age of majority. This is necessary because minors legally cannot own money or property on their own. 

To avoid the appointment of a conservator, sometimes a custodial account under the Uniform Transfer to Minors Act or the Uniform Gifts to Minors Act is created through the probate process to hold the money and property your minor children inherit from you. The court will choose the custodian of the account who will manage the funds for the benefit of your children. However, when your children are legally recognized as adults at the young age of eighteen or twenty-one, the account will terminate. Your children will gain full access to their inheritance and can use it in any way they choose, even if they lack the maturity to make wise financial decisions or are addicted to drugs or alcohol. In addition, any present or future creditors could try to reach your children’s inheritance to satisfy their claims.

Although a custodial account is less expensive and easier to set up, a trust is often preferred over a custodial account because it is more flexible and can be designed to protect the funds against your children’s future creditors and their own imprudent spending. You can name someone you trust who is skilled at handling money to manage and distribute the funds for the benefit of your children if you die before they reach adulthood. This could be the same person who will act as the children’s guardian, but you can name another individual as the trustee if you choose. You can determine the age at which or the circumstances under which you feel comfortable having the remaining funds distributed to your children and provide those instructions in your trust document.

Give Us a Call

Your children are too important for you to leave their futures to chance. Call us today to set up an appointment to create an estate plan that will safeguard their future and give you the peace of mind that comes with knowing you have done everything in your power to care for them.

March: A New Month and a New Beginning

Ladies, You Need a Plan

In 1987, Congress passed a law recognizing March as Women’s History Month—a time to honor the contributions and achievements of women throughout American history in a variety of fields. Women have played a vital role in building the United States into a strong and prosperous nation. Likewise, women are often the backbones of their own families, frequently focusing on meeting the needs of others rather than their own. However, it is important for women to take care of themselves through financial and estate planning designed to provide for their own future needs, which may differ from those of their male family members, as well as family members who may be dependent on them.

Planning Considerations for Women

Longer life expectancies. According to Social Security Administration data, in 2021, women had an average life expectancy of 79.5 years compared to 74.2 years for men. As a result, it is important for women to create an estate plan that accounts for additional years of living expenses during retirement, healthcare costs, and possibly long-term care costs. As women age, there may be a greater possibility that they could become incapacitated and need someone to act on their behalf to make financial and healthcare decisions. Documents such as financial and healthcare powers of attorney and living wills authorize a person they trust to make decisions or take action for them if they are not able to act for themselves. Some women may not only own their own assets but also inherit wealth from both their parents and a spouse who dies before them, and if so, they need a financial and estate plan to optimally preserve and transfer this wealth. Because women may outlive their spouses, they also may be responsible for administering their spouse’s estate or become the sole surviving trustee of a joint trust. These duties may be difficult for a woman who is experiencing health issues that often occur at an advanced age, and this possibility should be addressed in their estate planning. For example, a woman concerned that she will be unable to handle administering her trust at an advanced age can name a co-trustee or successor trustee to administer it if she is no longer able to do so.

Lower earnings. According to U.S. Census Bureau data, women continue to earn less than men, and the pay gap widens as they age. In addition, because some women have shorter employment histories due to time off to raise children or care for aging parents, they may have less saved for retirement. As a result, it is important for them to take steps to protect their money and property from lawsuits or creditors’ claims. For example, a woman could transfer her money and property to an irrevocable trust. Because she is no longer the legal owner of the property, a creditor cannot reach it to satisfy claims against her so long as the trust is properly drafted to include appropriate distribution standards and administrative and other provisions. The woman may be a discretionary beneficiary of the trust, and the trustee may distribute the funds she needs for living expenses. Additionally, because they have less money and property during their retirement, women need to have a solid plan in place to make sure that they are able to financially provide for their loved ones upon their death and that unnecessary costs and expenses are minimized to the extent possible.

Care for loved ones. Many women are caregivers for minor children, adult children with special needs, or aging parents. As a result, they are often concerned about who will care for their loved ones if they are no longer able to do so. If a spouse or sibling is not available to provide care, they need to make sure that another family member or trusted individual can be the caregiver (sometimes called a guardian of the person) for their loved one. The same individual—or someone else—can serve as the guardian of the loved one’s estate (sometimes called a conservator or guardian of the estate) to manage the inheritance for their benefit. In the case of a child with special needs, if no family member is able to take on the responsibility of their care, a group home or assisted living facility may be the best choice. A special needs trust may need to be established to ensure that funds are available for the child’s care but do not decrease the amount of government benefits they are eligible to receive.

We Can Help You Plan Ahead

You have accomplished a lot in your life! Celebrate your accomplishments and contributions during Women’s History Month by contacting us to set up an appointment to create an estate plan that provides for your own future needs and those of the people you love. You deserve the peace of mind that comes with knowing your future is secure.

Winter Planning for a Great Spring

Retirement Planning Update

Although we are still in the midst of winter, spring is on its way. It is important to remember upcoming April deadlines for retirement contributions and required minimum distributions (RMDs), but there have also been some recent developments that may impact your retirement planning. 

IRS Proposed Regulations for Required Minimum Distributions

In 2020, the Setting Every Community Up for Retirement Enhancement (SECURE) Act created a ten-year payout rule for most inherited retirement assets, such that the account must be fully withdrawn by the end of the calendar year that includes the tenth anniversary of the date of the participant’s death. Although many initially believed that no RMDs were required in years one through nine following the death of the plan participant, in February 2022, the Internal Revenue Service (IRS) issued proposed regulations clarifying that RMDs are, in fact, required each year during the ten-year period under many circumstances. This caught many beneficiaries by surprise, especially those who opted not to take distributions in 2021 or 2022 in good faith based on the information they had. 

However, on October 7, 2022, the IRS issued Notice 2022-53, which states that the IRS will not penalize beneficiaries for not taking those RMDs. However, beneficiaries will have to ask for a refund of any excise tax already paid; the IRS will not automatically reimburse it. This relief applies only for the 2021 and 2022 distribution calendar years. In contrast to the February 2022 proposed regulations, which stated that the final regulations would apply to 2022 and later distribution calendar years, Notice 2022-53 also indicated that any final regulations issued by the IRS regarding required minimum distributions will apply no earlier than the 2023 distribution calendar year.

The proposed regulations also clarify the age of majority under the SECURE Act: the child of an employee with an individual retirement account is considered to have reached the age of majority on the child’s twenty-first birthday. However, defined benefit plans that have used a pre-Secure definition of majority may continue to use that definition.

SECURE 2.0 Act 

On December 29, 2022, President Biden signed the $1.7 trillion omnibus spending bill, which included the SECURE 2.0 Act of 2022. SECURE 2.0 increases the age at which individuals must begin taking RMDs from retirement plans from 72 to 73 starting on January 1, 2023, if they reach age 72 after December 31, 2022. Starting on January 1, 2033, for individuals who reach age 74 after December 31, 2032, the date at which RMDs must be taken is increased to age 75. The original SECURE Act, passed in late 2019, increased the age at which individuals must begin taking required minimum distributions from 70 ½ to 72 starting in 2020. 

SECURE 2.0 also allows a surviving spouse to elect to be treated as the deceased employee for purposes of the RMD rules, effective for calendar years after December 31, 2023. As a result, if you are a surviving spouse and your deceased spouse was younger than you, you should consider making the election to delay the date at which RMDs must begin, allowing additional time for tax-deferred growth of your retirement account.

In addition, SECURE 2.0 increases the amount of tax-advantaged contributions older workers can make as they approach retirement age and expands opportunities for retirement savings for longer term part-time workers. You may be able maximize the growth of your retirement accounts by taking advantage of these new opportunities.

The retirement planning landscape has been evolving over the past several years, and we are committed to keeping you up to date on the latest developments and how they will impact your estate plans.

The Deceased Spouse’s Unused Exemption Amount: a Spouse’s Final Gift

Spouses often work together to build wealth for themselves and their children. Congress recognized this by enacting the gift and estate tax portability election as part of the 2010 Taxpayer Relief, Unemployment Insurance Reauthorization, and Job Creation Act and making it permanent in the American Taxpayer Relief of 2012, providing married couples with a relatively simple way to potentially shield much more of their wealth from federal gift and estate taxation. If you have recently lost your spouse, it is important to consider whether you should take advantage of the portability election.

What Is Portability of the DSUE?

In 2023, the federal estate tax exclusion amount is $12.92 million for individuals and $25.84 million for married couples, and only gross estates that exceed these amounts are subject to estate tax. Due to the unlimited marital deduction, married couples with large estates are usually able to avoid estate taxes at the death of the first spouse. However, at the death of the surviving spouse, their estate, including the amount that they inherited from their spouse, will be subject to estate taxes if the gross estate of the second spouse to die exceeds the estate tax exclusion amount. Prior to the enactment of the portability election in 2010, in the absence of complex planning, for example, forming a credit shelter trust with the deceased’s accounts and property equal to their remaining lifetime exclusion amount, the unused exclusion amount of the first spouse to die was lost, meaning that the couple’s children would inherit less of the couple’s wealth at the second death because only the second to die’s remaining lifetime exclusion amount was available to reduce the estate tax that had to be paid. The portability election allows the surviving spouse to add the deceased spouse’s unused exclusion (DSUE) amount to their own exclusion amount to reduce or eliminate estate tax liability when they die.

How Do You Elect Portability?

To take advantage of portability of the DSUE amount, after one spouse dies, the surviving spouse must file an estate tax return (Form 706) and make a portability election that allows the DSUE amount to be applied to the surviving spouse’s subsequent transfers during life or at death. Portability must be elected properly or it will be ineffective, so it is important to seek the help of a tax professional. 

If the deceased spouse’s gross estate exceeds the basic exclusion amount ($12.92 million), a federal estate tax return must be filed within nine months of the date of death (although a six-month extension is available). To take advantage of the DSUE amount, the executor of the deceased spouse’s estate must elect portability and compute the DSUE amount on the timely estate tax return. No extension of time to elect portability is available in this situation.

Even if the deceased spouse’s estate does not exceed the basic exclusion amount and the executor is not otherwise required to file an estate tax return, an estate tax return must be properly and timely filed to elect portability. Regulations issued by the US Department of the Treasury provide that in such cases, the due date of an estate tax return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension. 

n 2017, the IRS provided a simplified method for obtaining an extension of time to be used instead of the private letter ruling process that was available for a period extending to the second anniversary of the decedent’s date of death. In July 2022, the IRS extended the time for estates that are not otherwise required to file an estate tax return to make a portability election from the second to the fifth anniversary of the decedent’s date of death and allows a simplified method for obtaining the extension. Using the simplified method, an executor who wants to elect portability and has not yet filed an estate tax return—and was not otherwise required to do —only needs to file a “complete and properly prepared” estate tax return (Form 706) that states at the top that it is “FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A).” The five-year deadline and simplified process make it easier and less expensive for the surviving spouse to take advantage of their deceased spouse’s unused exclusion amount, and in some cases, this could reduce or even eliminate federal estate taxes upon the death of the surviving spouse.

Why Should You Consider Electing Portability?

Although preparation of the estate tax return may seem like an unnecessary expense if your deceased spouse’s money and property are not currently subject to estate tax, keep in mind that your wealth could grow substantially before your death, and the DSUE amount could be used to shield wealth that otherwise would be subject to estate taxes. In addition, although the current estate tax exemption amount is historically high, it is scheduled to be reduced by half at the end of 2025, so in only a few years, many more estates will be subject to estate tax liability unless the law is changed. In addition, some states have their own estate or inheritance taxes applicable to estates of a much lower value. 

We Can Help

Portability is an important and valuable strategy to minimize your estate taxes. Please contact us if we can help you to determine if you should take advantage of a portability election, especially in light of the sunset of the doubled gift and estate tax exemption amount at the end of 2025.

Spring Break Checklist

After a long, cold winter, many of us—from the young and to the more mature—are ready to make plans for spring break. Here are a few important reminders, whether you plan to travel to take advantage of warmer weather by traveling or enjoy your spring break at home. 

Tips for Traveling

1. If you are planning a spring break trip, gather the following important documents you that may need during your travels:

  • Passport. If you plan to travel internationally, you will need a valid passport. If you need a new passport or to renew your existing passport, you should plan ahead: routine processing can take six to nine weeks, although expedited, urgent, and emergency processing is available under some circumstances.
  • Health insurance card. You should bring your health insurance card with you on your trip. If you are traveling within the United States, you should contact your health insurance company to ask if the state you are visiting is within your plan’s network. If you are traveling to a state outside of your plan’s network, you should ask which services are covered. In general, routine care is not covered in states that are outside of a plan’s network, but emergency services are covered. However, plans may differ, so it is important for you to check with your insurance company. 
  • Powers of attorney. If you have property, accounts, or a business that needs to be monitored or managed while you are away, you should have a financial power of attorney granting someone you trust the power to take care of your affairs until you return. In addition, you should consider having a power of attorney that authorizes someone you trust to handle emergencies while you are away, for example, repairs and insurance claims in the event of a flooded basement or a roof damaged by hail. The document can specify exactly what the individuals appointed under the power of attorney are authorized to do and the time period during which they may act on your behalf.
  • Auto insurance information. In general, auto insurance policies cover drivers in all fifty states and sometimes Canada and Mexico. In addition, if you have auto insurance, it will cover a rental car. However, there may be some gaps in your coverage if your rental car is damaged or stolen. If you do not have auto insurance, you will need to obtain rental car insurance if you plan to use a rental car during your travels. If you will be driving in a foreign country, you may also need to obtain rental car insurance and an International Driving Permit, which is a document that translates the information on your driver’s license into at least ten languages.
  • Travel insurance. You should also consider obtaining travel insurance, which can include trip cancellations, disruption insurance, or travel health insurance. If your trip is expensive, you could lose a lot of money if you get sick and cannot travel or an incident occurs that prevents the trip from occurring as planned. In addition, if you are traveling internationally, your health insurance may only cover emergency care. Travel health insurance may cover out-of-pocket costs that are incurred for medical care. In addition, medical evacuation insurance is available to cover transportation expenses if you travel to a country whose healthcare is not as good as the care you would receive if you return home or are transported to another location.

2. Make sure your family and loved ones have your contact information in case of emergency. Although you will likely have your cell phone with you during your travels, some areas, even in the United States, have poor cell phone coverage. As a result, you should provide your family with landline telephone numbers and addresses of the hotels or resorts where you plan to stay during your trip.

Tips for Staying Home

If you are taking a staycation, you can take advantage of your free time by reviewing your existing financial and estate plans. If you have changed jobs, gotten married, had children, or experienced other life changes, it may be time for an update. If your estate plan is outdated, the people who you want to receive your money and property may not receive it as you intend. You should also regularly review the people you have named as executor, trustee, caregiver for your children, and agent under a power of attorney to ensure that they are still willing and able to fulfill those roles—and that you still have confidence in their abilities to do so. Further, if you have experienced financial changes, such as a substantial increase or decrease in the value or composition of your estate, buying or selling a home or other property, changing jobs, buying or selling a business, or receiving an inheritance, there may be tax and other consequences that could impact your estate plan. Although this may not sound like a relaxing activity for your spring break, you may be surprised at the peace of mind you will gain by ensuring that your estate plan accomplishes your goals and protects your family as you intend.

Give Us a Call

We hope your spring break plans refresh you after a long winter. Regardless of whether you are traveling or staying home, if you need to create or update your estate plan, give us a call to schedule an appointment.

Tax Season Is Just around the Corner

For everything there is a season, and it will soon be the season for taxes. Although it always seems to arrive too quickly, you will start to receive important tax documents by January 31. Whether you are filing as an individual or administering an estate or trust, you should start to prepare for tax day, April 18, 2023.

Filing as an Individual

Individuals (and married couples) use Form 1040 to file their annual income tax return. Starting in January, watch for the arrival of forms stating the amount of income you earned during 2022. Here are several of the most common forms you may need to complete your Form 1040:

Form W-2, Wage and Tax Statement. If you are a full-time employee or work part-time but are classified as an employee, your employer is required to send you a Form W-2 by January 31, 2023, showing the amount you were paid in wages, tips, and other compensation; the amount withheld by your employer for taxes; and the amount withheld for Social Security and Medicare. This form is not sent to independent contractors or self-employed workers.

Form 1099-NEC, Nonemployee Compensation. If you earned at least $600 in income as an independent contractor, the party or business who hired you must provide you with a Form 1099-NEC (in the past, Form 1099-MISC was used) by January 31, 2023. Form 1099-MISC is still used for prizes, awards, and other income payments, and the business must also provide this to you by January 31, 2023.

Form 1099-INT, Interest Income. Any entity that has paid you interest income of at least $10 must send you a Form 1099-INT by January 31, 2023. This could include banks or other financial institutions. For example, it will be issued for interest paid on savings bonds or savings and checking accounts. You should use this form to report all interest income you have received during the tax year to the Internal Revenue Service.

Form 1099-DIV, Dividends and Distributions. Financial institutions such as banks, credit unions, and mutual funds that have issued you at least $10 in dividends or other distributions must send you a Form 1099-DIV by January 31, 2023. This form supplies you the information you will need to report the income you receive from investments in the form of dividends. 

It is also important to gather and maintain records of IRA contributions, health savings account contributions, and other items that can reduce your taxable income, as well as documentation that will allow you to take advantage of tax deductions or credits, such as charitable contributions and mortgage interest.

Filing as an Executor or Trustee

If you are the executor of an estate or a trustee for a trust, you must report income of more than $600 earned by the estate or trust on Form 1041. If there is a beneficiary who is a nonresident alien, it must be filed regardless of the amount of income earned. However, if the beneficiaries of the estate or trust are entitled to receive the income, they are responsible for actually paying the income tax rather than the estate or trust. A few examples of assets held by an estate or trust that may earn income include mutual funds, rental property, savings accounts, stocks, or bonds. 

The date the return is due depends on whether the estate or trust follows a calendar year or a fiscal year. Calendar year estates and trusts must file the return by April 18, 2023, but fiscal year estates and trusts must file the return by the fifteenth day of the fourth month following the close of the tax year. The executor or trustee can choose whether to use a calendar or fiscal year. Many executors and trustees file a form electing a fiscal year, which begins on the date of the individual’s death and ends on the last day of the month before the anniversary of the date of death, because it allows more time for tax planning. In contrast, if the executor or trustee chooses to use a calendar year, the tax year begins on the date of death and ends on December 31 of the same year.

Executors and trustees must report all distributions of income made to beneficiaries on a Schedule K-1 (1041). In addition, you must send a copy of their respective Schedules K-1 to each beneficiary who has received a distribution of income, and the beneficiaries must report the amount of the distributions on their personal income tax returns. The deadlines for Schedule K-1 are the same as those for Form 1041 and depend on whether a calendar year or fiscal year is being used. Because the beneficiaries need to report this income on their own income tax returns, it is important to send the Schedule K-1 to them as early as possible.

As the executor or trustee, you should gather and maintain records of your fees, fees paid to professionals such as lawyers or accountants, administrative expenses, and distributions to beneficiaries so you can report them on Form 1041 to support tax deductions you claim for the estate or trust.

We Can Help

It is crucial to consider the implications of income taxes for estate planning and administration, whether you are an individual who needs to create or update your own estate plan or if you are administering an estate or trust. Please give us a call if you have any questions about how income taxes should affect your planning or administration decisions.

New Business Succession Strategy: The Purpose Trust

The beginning of a new year is when many of us reflect on where we have been and what we would like to accomplish in the future. If you are a business owner, you may be tempted to succumb to the tyranny of the urgent and fail to take the time to consider the future of your business. However, it is important to think about what you would like your life’s work to accomplish in the future. If you would like to help make the world a better place for future generations, you should consider a relatively new and perhaps unfamiliar planning tool: the purpose trust.

What Is a Purpose Trust?

A typical trust is an agreement involving several parties: the grantor, the trustee, and the beneficiary. After the trust is created, the grantor funds it with money or property, and the trustee is responsible for managing the money and property as specified in the trust for the benefit of specific named beneficiaries. One exception recognized under the law is a charitable trust that is created for a charitable purpose but has no specific beneficiaries. In recent years, however, some states have enacted statutes that allow the establishment of noncharitable purpose trusts (generally known as purpose trusts). In some states, they can be established only to care for pets or maintain a grave site. However, other states (for example, Delaware, New Hampshire, South Dakota, Utah, and Wyoming) allow purpose trusts for most lawful purposes, as long as they are reasonable, attainable, and do not violate public policy. Because there are no beneficiaries to ensure that the trustee is carrying out the purpose of the trust, the grantor must designate an independent trust “enforcer” who can petition the court if the trustee fails to perform its duties under the trust. The same or a different party could also be appointed as a trust protector who can modify the trust if necessary, for example, to add beneficiaries if the purpose of the trust has ended, change the situs of the trust, or even terminate it. The goal of a purpose trust is different from that of more common estate planning tools in that it is not aimed primarily at minimizing taxes or transferring wealth efficiently (although it may achieve those goals) but instead at ensuring that the grantor’s stated purpose is carried out.

The Patagonia Purpose Trust

In September 2022, Yvon Chouinard, the founder of Patagonia, a $3 billion clothing company, transferred the voting stock of the company to a purpose trust designed to further his lifelong goal of fighting the environmental crisis. In a message from Chouinard on Patagonia’s website, he explained that his desire was for the company to continue to pursue its stated purpose: “We’re in business to save our home planet.” After learning that his children were not interested in running the business, he considered his options. Although he could have sold the company and donated the proceeds to other organizations that would continue to pursue the company’s goals, he worried that a new owner of Patagonia would have different values and that his employees would not have job security. The voting stock of the company was transferred to the Patagonia Purpose Trust, which, guided by the family and their advisors, will ensure that the company’s values are pursued and that its profits further their goals. All of the nonvoting stock was contributed to a 501(c)(4) nonprofit organization that will be funded by Patagonia’s dividends, worth an estimated $100 million a year, which it will use in its efforts to protect the environment. Because the business interests were not donated to a charity, the gift will be subject to an estimated $17.5 million in gift tax, and no charitable deduction will be available to Chouinard. However, he will avoid $700 million in capital gains taxes, and when he dies, Chouinard’s estate will avoid substantial estate tax liability.

Why Would You Want to Transfer Your Business to a Purpose Trust?

If you own a profitable company, there are a number of reasons why you may be interested in a purpose trust as you consider business succession planning. Like the Chouinard family, you can ensure that in addition to providing job security for your employees, the values underlying your business continue to be pursued for many decades into the future. Especially if you do not have children who are interested in running the business, or if your children do not share your values, the terms of a purpose trust can require future management to adhere to the purpose of the trust. Transferring the business to a purpose trust will also ensure that it remains a private company and that the pursuit of profits will never replace your cherished values as its main goal.

What are your goals for the future of your business? If you have a desire to use the wealth you have acquired for the benefit of others, you may be interested in learning more about a purpose trust. Give us a call if we can help you determine if you would like to explore this planning opportunity.


1  Yvon Chouinard, Earth Is Now Our Only Shareholder, Patagonia, https://www.patagonia.com/ownership/ (last visited Dec. 22, 2022).

2 David Gelles, Billionaire No More: Patagonia Founder Gives Away the Company, N.Y. Times (Sept. 14, 2022), https://www.nytimes.com/2022/09/14/climate/patagonia-climate-philanthropy-chouinard.html.

3 Patagonia Billionaire Ducks $700 Million Tax Hit by Giving It Up, Bloomberg Law (Sept. 16, 2022), https://news.bloombergtax.com/daily-tax-report/patagonia-billionaire-ducks-700-million-tax-hit-by-giving-it-up.

Important Things to Do As You Begin 2023

January Is National Mentoring Month: Three Creative Ways to Use the Estate Planning Process to Be a Mentor

Celebrate National Mentoring Month this January by becoming a mentor to the people in your life who have less life experience, whether they are your children or other loved ones. Mentors can have a huge positive impact on a young person’s life by sharing the wisdom, knowledge, and experience they have gained to help their mentee develop skills and goals that will enable them to succeed in life. 

What does mentoring have to do with estate planning? You may think that estate planning is only relevant when a person dies or is preparing to pass on their money and property upon their death. However, estate planning can also involve strategies you implement during your lifetime and provides a great mentoring opportunity. Here are three ways you can use estate planning to guide your younger loved ones toward a more successful life: 

(1) Give small gifts during your life to help your mentee reach a goal. First, help your mentee learn why setting goals is important and how to set goals for their own life. For example, if your mentee would like to start a business or pay for college, you could assist them in creating a bank or investment account to save money for that purpose. You could use gifts to create an incentive for them to deposit money regularly in that account by contributing a certain amount, perhaps fifty cents, for every dollar they deposit. Or, if they would like to contribute to a charitable organization that is important to them, you could encourage them by providing a matching gift for every contribution they make. By helping them reach these goals themselves instead of merely giving them all of the money needed to achieve them, they will learn valuable lessons. You can further facilitate their success by sharing life lessons you learned when you tried to achieve similar goals.

(2) Educate your mentee about a particular item that you plan for them to inherit one day. For example, if you have a family cabin that you plan to pass on to your son and daughter, document all of the steps needed to maintain it and create a schedule for who will fulfill those chores on a regular basis. If you and your sibling have been in charge of taking care of the cabin, you can share the knowledge and experience you have gained over the years about the best ways to work together to care for the property. In addition to providing information about the nuts and bolts of maintaining the cabin, you can share stories and memories about your own experiences there to communicate why it means so much to you and why you want them to have those same positive experiences in their lives.

(3) Teach your mentee about a skill you have developed and believe is important. Perhaps your mother or father taught you important lessons about how to save money or contribute to good causes. You can pass these same lessons on to the next generation as well. If you learned money management skills that have enabled you to build a sizable estate and allowed you to benefit your family and others, invest time in teaching those skills to your younger loved ones. Similarly, if you have discovered methods for determining whether a charity is being run responsibly and is a worthy organization for a donation, share that knowledge with your mentee so they can make good decisions when they make their own charitable contributions. Communicate to your mentee how these skills have had a positive impact on your own life and the lives of others to reinforce their importance and why it is important for them to gain the same skills.

Creative mentoring can provide a great opportunity for you to share more than just your money and property with those you love: you can share your important values and the skills and experiences gained as you have put them into practice. If you want to leave a lasting legacy for your family and loved ones and need assistance creating or updating your estate plan, please give us a call.