Saying Goodbye Is Hard: How a Comprehensive Estate Plan Can Help

When people think about estate planning, they usually focus on who will receive their money and property when they pass away and how it will be received. However, estate planning can also address your end-of-life wishes—the considerations and expenses involved when it is time to say goodbye to your loved ones. The following are important questions to ask yourself, as the answers are a critical part of creating a comprehensive estate plan.

How Do You Want Your Remains Handled at Death?

Addressing your final wishes for your body may be uncomfortable, but planning ahead can save your loved ones time and give them peace of mind, knowing that they are carrying out your wishes. There are many common options available, such as

  • being buried in a casket, 
  • being cremated, or 
  • donating your body or organs. 

Alternatively, some people choose more unique ways to dispose of their remains, such as by having them turned into a diamond.

Depending on your state’s laws, these wishes may be included in your last will and testament, healthcare power of attorney, advance directive, or a separate document.

Do You Want a Service or Celebration?

When it comes to commemorating your passing, a variety of options are available to achieve your specific wishes.

Funeral

Some people prefer to plan a more traditional funeral at their place of worship, complete with music, scripture readings, and a meal afterward. A funeral can also include a gathering before the church service or a graveside service. The focus of the funeral is to allow your loved ones the opportunity to mourn your passing. 

Memorial Service

A memorial service can be like a funeral in terms of formality, but typically the deceased’s remains are not present at a memorial service; usually photos of the deceased are displayed instead. However, a memorial service can also be informal, similar to a celebration of life.

Celebration of Life

“Celebration of life” events are an increasingly popular way to celebrate your life experiences and accomplishments. Pictures and videos can be displayed during the event as your loved ones tell stories of you. The celebration can be tailored to reflect your personality and highlight what matters most to you.

Nothing

You may decide that you do not want a funeral, memorial service, or celebration. This could be for any number of reasons: you may not have many friends or family who could attend a local service, you prefer to avoid funeral expenses and would rather have your money pass directly to your loved ones, or you are a private person who does not want the details of your passing shared with the public.

It is important to note that documents with instructions for funerals, celebrations, or the disposition of your remains may not be legally binding in your state. Every state has different rules. However, by letting your loved ones know your wishes, they can use that information when making decisions for your final arrangements.

Do You Have a Final Message?

While you may focus on the official documents that address your money and property such as a last will and testament and a trust when creating your estate plan, you can also include documents with personal messages to help you say goodbye to your loved ones. 

Letter

If you love to write or find it easier to communicate through writing, leaving a letter to your loved ones can allow you to thoughtfully convey your wishes and last sentiments. You could write one letter addressed to all of your loved ones if the information you want to communicate is the same for each person. Alternatively, you could write a separate letter to each loved one if you have specific things to say to each person.

In these letters, you can talk about your relationship and valuable lessons that you have learned and provide advice and guidance to pass along to future generations. Not only will the information in the letter be meaningful to the recipient but it will also provide them with a tangible gift to help them through the mourning process that can be saved for years to come.

Video

Another way to speak from your heart is through video, which can allow you one last opportunity to speak to your loved ones. Just like writing a letter, you can address friends and family as a group in one video or address each person with individual videos. Videos can convey the same information as a letter and give the recipient the added joy of hearing you speak and seeing your face.

How Will You Pay for Your Final Expenses?

Depending on the extent of your end-of-life wishes and the anticipated cost, there are many ways to allocate money to cover these expenses.

Funeral Trust 

Although a funeral trust is uncommon in some jurisdictions, it may be an option. A funeral trust holds money for funeral costs until you pass away. Then, at your death, the trustee pays the beneficiary (typically the funeral home providing services) with the funds held in the trust. A funeral trust allows you to set aside money to cover the following expenses:

  • casket or urn
  • burial vault 
  • cemetery plot 
  • embalming or cremation 
  • funeral service and accompanying gathering
  • obituary
  • death certificate

Final Expense or Burial Insurance 

Final expense or burial insurance is a special type of life insurance policy that is purchased to pay for funeral costs, medical bills, and other end-of-life expenses. It usually pays a small death benefit, such as $5,000 to $25,000, meant to cover funeral expenses rather than provide financial support for loved ones.

Separate Savings Account 

Finally, if you have enough financial resources, you could set aside money in a savings account to pay for your end-of-life expenses. The savings account would be in your own name and would have a trusted individual as the payable-on-death beneficiary, who would then use the funds to pay for your final expenses.

We understand that planning for death is not easy. Our attorneys can help ensure that your wishes are carried out and your legacy lives on. Give us a call to begin a thoughtful discussion about your end-of-life wishes and expenses.

What Is the Difference Between a Probate and Trust Administration Attorney and an Estate Planning Attorney?

Estate planning attorneys and probate and trust administration attorneys play crucial but distinct roles in the legal processes involving legacy planning, asset distribution, and wealth preservation. 

Estate planning attorneys focus on creating a plan to manage a person’s money, property, and affairs upon their death or if they are unable to manage it themselves. Probate and trust administration attorneys, on the other hand, deal with settling an estate or trust after the person has passed away. While there can be some overlap between these roles, not every attorney handles both. 

As part of the estate planning process, you should discuss with your attorney the role they will play during your lifetime and whether they can also assist your loved ones with estate and trust administration when you pass away. 

What Does an Estate Planning Attorney Do? 

An estate planning attorney can help you create an estate plan when you are alive and offer ongoing plan reviews and guidance throughout your lifetime. 

An estate plan provides answers to the most important questions about how your affairs should be settled, not only when you die but also if you become unable to manage your own affairs. These questions include the following: 

  • Who gets my money or property when I am gone? 
  • Who will take care of my minor children if I am unable to? 
  • How can I pay less in taxes and keep more money for my loved ones? 
  • Will people know where to find my important records (e.g., estate planning documents, account information, or life insurance policy information)? 
  • Are the right beneficiaries listed on my accounts? 
  • Does it make sense to put some of my accounts and property into a trust? 
  • Is there somebody to act on my behalf if I am alive but unable to make or communicate decisions about my health or finances? 
  • How do I document my end-of-life care preferences? 
  • What are some ways to provide additional financial security for my loved ones?

Generally, estate planning attorneys recommend that every adult establish an estate plan, especially if they have loved ones they want to provide for. This means at least having a last will and testament (also known as a will) that specifies how your money and property should be distributed and to whom, including items with financial value and those with strictly sentimental value. A will also does the following:

  • Names a trusted decision-maker (also known as an executor or personal representative) to settle your affairs and manage the court-supervised probate process, which validates the will and oversees distribution of your money and property 
  • Appoints a guardian (and backup guardians) for your minor children
  • Directs the executor or personal representative on how to pay the costs of the estate, such as your outstanding debts, taxes, and probate fees
  • Names your beneficiaries and states how your money and property should be distributed to them 

In addition to preparing a will and helping you decide whether you might need one or more trusts, an estate planning attorney can assist with the following tasks: 

  • Selecting an executor and trustee
  • Minimizing estate taxes
  • Transferring accounts and property to a trust or naming a trust as a beneficiary 
  • Helping you choose the right beneficiaries and structure their inheritances to meet their needs
  • Choosing agents under financial and medical powers of attorney
  • Creating medical directives

Effective estate planning can minimize the time and complexity of the probate process and give your loved ones faster access to your money and property. An estate plan may not be able to eliminate probate entirely; however, without an estate plan, your money and property will be distributed according to state law—which may not align with your wishes. 

The state may also have to get involved with choosing guardians for your children, authorizing others to act on your behalf, and deciding other important matters. The state’s decisions may be very different than what you would have chosen. In addition, a lengthy probate process can cause delays, increased expenses, and a loss of privacy. Having an up-to-date estate plan makes your wishes known and makes things easier for your loved ones. 

What Does a Probate and Trust Administration Attorney Do? 

A probate and trust administration attorney assists your loved ones with the estate or trust administration process after you pass away. They help your loved ones through the legal processes that your death sets in motion. 

Probate Attorney

A probate attorney can work on behalf of the representative (i.e., the executor or personal representative) who you name in your will, or the person appointed by the court if you die without a will, to settle your financial affairs and carry out your final wishes. A probate attorney can also represent your beneficiaries in the probate process. 

Some common duties that a probate attorney performs for clients include the following: 

  • Collecting life insurance proceeds 
  • Giving legal advice regarding the client’s responsibilities and rights
  • Identifying and creating an inventory of what you owned at the time of your death 
  • Locating your will 
  • Managing the probate estate’s finances  
  • Overseeing appraisals for your property
  • Making sure the executor pays any estate and income taxes owed and any of your outstanding debts that must be paid
  • Preparing and filling necessary court documents 
  • Retitling accounts and property as necessary
  • Transferring accounts and property to appropriate beneficiaries   

Trust Administration Attorney

A trust administration attorney guides a trustee through the administration of a trust. Trusts are not subject to the probate court process, allowing the trust’s accounts and property to be distributed quickly and privately. However, the trustee may need assistance fulfilling their legal obligations. Trust administration attorneys may provide services to beneficiaries as well. 

A trust attorney may be needed in the following situations: 

  • Reviewing the trust document and state law to guide the trustee through the steps that must be taken to ensure they are performing all required legal duties, such as keeping records, filing taxes, making distributions, and fulfilling their fiduciary responsibilities to act in the best interests of the trust’s beneficiaries 
  • Preparing legal documents necessary for the transfer of ownership of the trust’s accounts and property
  • Identifying and resolving potential issues (e.g., conflicts of interest or improper beneficiary influence on the trustee)
  • Helping a trust beneficiary assert their rights, including the right to be informed about the trust and its administration, the right to a trust accounting, the right to receive timely trust distributions, and the right to challenge how the trustee is administering the trust 

What Type of Attorney Do You Need? 

Some attorneys are qualified to perform estate planning as well as probate and trust administration services. 

At the Like Law Group, we handle both the estate planning work, as well as the probate and trust administration work but not all lawyers or firms do the same. If you or a loved one needs assistance with creating or updating an estate plan, handling the estate of a deceased loved one, or administering a trust, please give us a call.

What Happens to Real Estate With a Mortgage When I Die?

Your mortgage, like the rest of your debt, does not simply disappear when you die. If you leave your home that has an outstanding loan to a beneficiary in your will or trust, your beneficiary will inherit not only the property but also the outstanding debt. They may have the right to take over the mortgage and keep the home, or they may choose to sell it and keep the proceeds. A few different scenarios can unfold, however, depending on the mortgage terms and the estate plan instructions. 

Ultimately, planning for the transfer of real estate upon your death can make the process much easier for your loved ones. 

American Housing Debt Exceeds $12 Trillion

The US homeownership rate stood at around 66 percent in 2022, according to the US Census Bureau.1 The Federal Reserve Bank of New York reported at the end of September 2023 that Americans were carrying $12.14 trillion in mortgage balances.2

Housing debt makes up over 72 percent of all US consumer debt.3 A home is the largest purchase that most people will ever make, and many borrowers pass away before receiving the deed to their house free and clear. A survey from CreditCards.com found that 37 percent of Americans died with unpaid mortgages.4 

The number of Americans who have received or expect to receive an inheritance has increased in recent years.5 At the same time, 73 percent of Americans are likely to die with debt, including unpaid mortgages.6 

Unpaid Mortgages on Inherited Homes

A 2023 Charles Schwab survey revealed that more than 3/4 of parents intend to leave a home to their children in their estate plan. However, nearly 70 percent of those who expect to inherit a home from their parents say they will sell it due to increasing real estate costs.7 

Deciding what to do with a family property that is passed down to the next generation can be an emotional as well as a financial decision. While the sentimental value of a home is typically a strong motivator for holding on to it, beneficiaries may move on from an inherited home because of financial considerations. 

If a couple co-signed a home loan together and one spouse predeceases the other, the surviving spouse must continue making mortgage payments. A surviving spouse may also be responsible for paying back a mortgage taken out by the deceased spouse alone if the couple lives in a community property state such as Arizona, California, Texas, or Washington.8 

Outside of co-signers and community property spouses, the loved ones of a decedent are not typically personally responsible for making mortgage payments on the decedent’s home unless they receive ownership of the property, as in one of the following scenarios.

One beneficiary inherits the property through a will, trust, or deed.

A person can leave a house to a loved one after their death under the terms of a will or trust, or with the use of a transfer-on-death deed or Lady Bird deed (in those states that permit these forms of deeds to enable real property to avoid probate and pass automatically to a beneficiary). When the home transfers, a mortgage or loan secured by the home also transfers. The person who inherits the home must pay off the mortgage with other funds or sell the property and apply the proceeds to pay off the mortgage. In certain cases, they may be able to take over (or assume) the existing mortgage and have it transferred to them, with the beneficiary continuing to make the monthly mortgage payments. Additionally, some lenders might work with the new borrower to refinance the loan and change the terms. 

Multiple beneficiaries inherit the property through a will, trust, or deed.

Multiple beneficiaries who inherit a property through a will, trust, or the appropriate deed have the same options for an inherited mortgage as a single beneficiary: they may be able to assume the mortgage (as co-borrowers), use other funds to pay off the mortgage, or sell the property and use the sales proceeds to pay off the mortgage. Any option requires all beneficiaries to be on the same page. One or more beneficiaries can buy out the shares of the other beneficiaries, although higher home prices and mortgage rates could make it impractical for one or more beneficiaries to buy out the other beneficiaries. If a consensus cannot be reached, the court may order the sale of the property and a division of the proceeds. 

Heirs inherit the property through the probate process.

Gifting a home to a beneficiary or beneficiaries assumes that the original homeowner had a will or trust as part of an estate plan. This is an unreliable assumption, though, since roughly 2/3 of Americans do not have an estate plan.9 

Dying without a will or trust means that the court will appoint an executor or personal representative to distribute the decedent’s money and property and settle their debts. Because the home is part of the unsettled probate estate, the mortgage on the home becomes part of the probate estate as well. The executor may use other money and property from the probate estate to make mortgage payments until the home is sold or transferred to the rightful heir. If the mortgage is not paid off during the probate process, the heir will take ownership of the home subject to the mortgage, and the options discussed in the two scenarios above will apply.

Make a Plan to Pass on Your Home

A parents’ home is often a place of cherished family memories. Leaving a home to children is a common way to keep a family legacy alive and transfer wealth. However, rising costs and evolving preferences are contributing to declining interest among children in keeping their parents’ homes. 

A home with a mortgage presents additional challenges that should be accounted for in an estate plan. For example, your plan can contain provisions that dedicate funds to help loved ones pay for an inherited home or provide additional instructions about how to distribute home sale proceeds among beneficiaries. As part of your estate plan, you can even refinance your mortgage now to secure more favorable terms for your beneficiaries after your passing. 

An estate planning attorney can offer advice that aligns with your legacy goals and family situation. To make the transfer of a home as seamless and efficient as possible, contact our attorneys to schedule an appointment. 


Footnotes

  1. Robert R. Callis, Rate of Homeownership Higher Than Before Pandemic in All Regions, US Census Bureau: America Counts: Stories (July 25, 2023), https://www.census.gov/library/stories/2023/07/younger-householders-drove-rebound-in-homeownership.html.
  2. Fed. Res. Bank of N.Y., Ctr. for Microeconomic Data, Q3 2023, https://www.newyorkfed.org/microeconomics/hhdc.html (last visited Jan. 29, 2024).
  3. Id.
  4. Bill Fay, What Happens When People Die with Debt: Who Pays?, Debt.org (May 16, 2023), https://www.debt.org/family/people-are-dying-in-debt/.
  5. Mary Ellen Cagnassola, More Americans Are Leaving Inheritances — and It’s Not Just Wealthy People, Money (Apr. 12, 2023), https://money.com/more-americans-leaving-inheritances/.
  6. Bill Fay, What Happens When People Die with Debt: Who Pays?, Debt.org (May 16, 2023), https://www.debt.org/family/people-are-dying-in-debt/.
  7. Veronica Dagher, The New Math on Inheriting Your Parents’ House, Mansion Global (June 1, 2023), https://www.mansionglobal.com/articles/the-new-math-on-inheriting-your-parents-house-6fd575cf.
  8. Rebecca Lake, What Are the Community Property States?, SmartAsset (Aug. 25, 2023), https://smartasset.com/financial-advisor/community-property-states.
  9. D.A. Davidson Survey Finds That Two-Thirds of Americans Do Not Have an Estate Plan, D.A. Davidson: Perspectives, https://dadavidson.com/News/Perspectives/ArticleID/3646/D-A-Davidson-Survey-Finds-That-Two-Thirds-of-Americans-Do-Not-Have-an-Estate-Plan#:~:text=Return-,D.A.%20Davidson%20%26%20Co.,compared%20to%2059%25%20of%20men (last visited Jan. 29, 2024).

Inspiring Action: The Guide to Creating or Updating Your Estate Plan

Creating or revising an estate plan can feel overwhelming, causing many people to procrastinate. But the longer you put it off, the more potential there is to be caught unprepared in an emergency. So how can you motivate yourself and your loved ones to begin the process? Here are some strategies to help you overcome some of the negative feelings associated with this process and meet the challenge head on.

Reward Yourself for Your Accomplishments

While the benefits associated with updating or creating a new estate plan are a reward in and of themselves, we can all use an extra push. Sometimes the promise of a small indulgence as a reward can change your frame of mind when initiating the process. However, your idea of a reward may be more substantial and might involve a more significant gift for the entire family to enjoy. What other projects have required extra motivation in the past? How much easier might they have been to complete if you rewarded yourself or your family for their completion? Get inspired with a few meaningful ideas that could serve as a reward:

  • Plan a well-deserved vacation
  • Make a reservation at your favorite restaurant
  • Book a family photo session
  • Buy the new phone, laptop, or computer you have been eyeing

The key to an effective reward is personalization. Choose something that resonates with you and can serve as a reminder of the importance and the effort you put into completing the estate planning process, which is essential to protecting your family’s future.

Break Your Estate Planning Project Down into Smaller Steps

Estate planning can be a complex process and facing it as a whole may seem impossible. To make it more manageable, break the process down into smaller, more achievable steps.

Identify the first three steps you need to take using these suggestions: 

  1. Learn more about estate planning tools and how they work. Find out what is typically included in a comprehensive estate plan, such as wills, trusts, powers of attorney, and advance directives. 
  2. Collect financial information. Gather and organize your financial information, including a detailed inventory of your money, property, debts, and sources of income. List bank accounts, investments, real estate, insurance policies, personal belongings, and more. 
  3. Set specific goals for your estate plan. Establish clear goals based on the following factors: 
  • Family structure
  • Business and personal financial objectives
  • Intentions for protecting and supporting your loved ones after your passing
  • Desired lifestyle in retirement
  • Wishes for how you would like to be cared for as you age
  • End-of-life wishes
  1. Choose your beneficiaries, personal representatives, trustees, and agents. Determine the beneficiaries you want to inherit your money and property and the individuals you want to be responsible for managing and distributing these accounts and property after your death. Think about the people you would trust as guardians for your minor children and whom you feel comfortable choosing to make financial and medical decisions for you if you become unable to make those decisions for yourself. 
  2. Ask for the help you need. Throughout this first phase of preparing your estate plan, identify estate planning attorneys as well as tax and financial professionals in your area. Schedule consultations to discuss your needs and assemble a reliable team.
  3. Review and update an existing plan. If you already have estate planning documents in place, review them for accuracy and relevance. Life circumstances such as marriages, divorces, or births, as well as changes in financial status, usually require updates. Ensure that beneficiary designations on accounts and insurance policies are current. 

By following these initial steps, you will lay a solid foundation for participating in the estate planning process. Each step keeps you on track and moves you toward the larger goal of completing your estate plan.

Tell Someone about Your Plan 

Accountability can be a powerful motivator. Share your intention to create or update your estate plan with a trusted friend or family member. This person can offer support and encouragement. They can also check in on your progress so you will be more likely to follow through on your commitment. For some people, simply saying the words out loud or putting them on a calendar also makes the project a priority. Choose the best way to hold yourself accountable.

Use Positive Affirmations 

Still feeling reluctant to engage in estate planning? This may stem from deeper concerns or anxieties about the future and your mortality. Counteract negative thoughts and shift your mindset by using positive affirmations to focus on why you may not want to proceed with preparing an estate plan. The following affirmations may help you take the worry or fear out of estate planning by focusing on the positive benefits. You may even want to write out one or two and post them in a place where you commonly look.

  • I am taking proactive steps to protect the future of my loved ones if something happens to me.
  • Planning my estate is an expression of love and support for my family.
  • I value the peace of mind that comes with having a detailed and thoughtful estate plan.
  • My estate plan provides critical information and instructions that my spouse and children may need in emergencies.
  • I recognize the importance of making decisions now to ease the burden on my loved ones later.
  • My estate plan reflects my commitment to responsible financial planning and is a tangible expression of love and protection.
  • Taking control of my financial and healthcare decisions throughout life is empowering.
  • I approach estate planning with confidence, knowing it is a positive and necessary step for a happy and healthy family.

Repeating these affirmations regularly can help cultivate a positive mental attitude to get you through the estate planning process. And by combining these strategies, you can develop the motivation for establishing or revising your estate plan. 

Making an appointment with an estate planner is often the first step. Contact us to get started.

I’m a Survivor . . . and Now I Have My Own Trust?

Many married couples share almost everything, including finances. This may be reflected in their estate plan by using one joint living trust instead of two separate trusts. Separate trusts can provide greater flexibility, but a joint trust can be structured so that when one spouse passes away, the trust is split into two subtrusts: a survivor’s trust and a decedent’s trust. 

This arrangement provides the surviving spouse with the same versatility that separate trusts offer. The surviving spouse has full control over their survivor’s trust, but may have limited control over the deceased spouse’s accounts and property that make up the decedent’s trust. 

Decedent’s Trust and a Survivor’s Trust

A survivor’s trust is a middle ground between a joint trust and separate trusts. 

If a couple chooses to combine their assets (accounts and property) into a joint revocable living trust, both spouses will usually be named as trustees and beneficiaries. The joint trust can further stipulate that when one spouse passes away, the trust divides into subtrusts. 

One of those subtrusts can be a survivor’s trust. A second subtrust, the decedent’s trust, will also be created to hold and manage assets owned by the decedent. 

How a Survivor’s Trust Works

A typical joint trust arrangement lists four types of property, depending on the state in which you live: 

  • Joint assets
  • Community property
  • First spouse’s separate property
  • Second spouse’s separate property

When the first spouse dies, the survivor’s trust receives one-half of the community property, one-half of the joint property, and all property identified as the separate property of the surviving spouse. The deceased spouse’s half of the community property and joint property, along with their separate property, may be funded into the decedent’s trust with its own set of instructions. The trust agreement could also state that all of the deceased spouse’s property will go into the survivor’s trust instead of going into a separate subtrust. 

Reasons to Have a Survivor’s Trust

Regardless of exactly how the joint trust assets are allocated, a crucial distinction is that a survivor’s trust is revocable, while the decedent’s subtrust is irrevocable

This means that the surviving spouse retains full control over the survivor’s trust. They can alter the terms of the trust however they want. For example, they can add and remove assets, change beneficiaries, appoint new trustees, or terminate the trust. The surviving spouse can also completely change the terms of the survivor’s trust in its entirety. 

While the surviving spouse may be the beneficiary of the decedent’s trust, the surviving spouse will likely have less control over the management of assets in the decedent’s trust. This allows the deceased spouse to put protective measures in place while they are alive to make sure that their assets are managed the way they want and that someone cannot change the rules after they pass away. This can be helpful for clients who are worried about their spouse remarrying after their death and to ensure that assets that remain at the surviving spouse’s death go to a predetermined person.

The purpose of any trust is to take care of loved ones and protect assets from costly probate and taxes. To discuss an estate plan that meets your goals, schedule an appointment with our estate planning attorneys.

What Is the Last Surviving Spouse Rule?

Estate planning can be a significant part of successful financial management, especially for married couples. One key consideration is minimizing estate taxes, which can substantially affect the distribution of money and property to a married couple’s loved ones. 

What Are Gift and Estate Taxes?

In 2024, a $13.61 million federal exemption per person for gifts and estate taxes means many individuals with a high net worth will not owe federal estate tax if they die in 2024. An individual can give away up to $13.61 million in 2024 to children or other nonspouse beneficiaries during their lifetime or after their death. They will pay 40 percent in estate taxes only on gifts that exceed that amount.

You may believe you or your spouse will never have more than $27.22 million combined; but the current exclusion will revert to the pre-2017 amount—$5 million adjusted for inflation—on January 1, 2026, if Congress does not act. 

That means the 40 percent estate tax rate could apply to gifts over approximately $6.4 million come 2026, requiring many families with high net worth to reevaluate their estate plan and adjust legal strategies to preserve and protect more of their property and investments. Changes may include taking advantage of the deceased spousal unused exclusion amount (DSUEA) if they pass away prior to January 1, 2026.

What Is the Deceased Spousal Unused Exclusion Amount? 

The Tax Relief Act of 2010 introduced the concept of portability—the ability of a surviving spouse to use their deceased spouse’s unused exclusion amount—and made it permanent in 2013. Before then, if a person died with wealth below the federal estate tax exemption amount and did not use their exemption, it was lost forever. 

Today, the DSUEA can be used to increase the estate tax exemption for the surviving spouse. When the first spouse dies, the other can elect to port their spouse’s unused exemption within five years of the spouse’s death and add the unused exemption to their own. To have the DSUEA available for the surviving spouse to use, a representative of the decedent’s estate, possibly the spouse, must file a federal estate tax return (Form 706) to report the DSUEA. 

Widows and Widowers Cannot Collect Estate Tax Exclusions

If you are a widow or widower who has been married before, the portability rule lets you use the DSUEA of your last deceased spouse to offset the tax on any transfer during your life or at death. If you have more than one predeceased spouse, you can use the DSUEA of multiple spouses, but the decedent whose DSUEA is being used must be the survivor’s last predeceased spouse when their DSUEA is being used. A surviving spouse may not use the sum of DSUEA from multiple predeceased spouses at one time or apply the DSUEA after the death of a subsequent spouse.

How It Works

Portability can make a significant difference when it comes to the taxation of an estate.

Remarriage with Second Spouse Dying

Example. Bob and Sue were married with jointly titled property and a net worth of $16 million. Bob died first in 2020 with a federal estate tax exemption of $11.58 million. Sue inherited all of Bob’s property, and because of the unlimited marital deduction, none of Bob’s exemption was used. Sue elected portability by filing an estate tax return on time, and was able to add Bob’s $11.58 million to her own exemption of $12.92 million. Sue gets remarried to Dan in 2021. Dan dies in 2022, and after an estate tax return is filed, he has a DSUEA of $6 million. Sue then dies in 2023 with an estate worth $16 million. At her death, she has her estate tax exclusion amount of $12.92 million and Dan’s $6 million since he was her last predeceased spouse.

If Sue had a larger estate or wanted to make gifts during her lifetime, she may be able to make large lifetime gifts over the annual exclusion amount ($17,000 in 2024) during her lifetime while Bob was her last predeceased spouse (before Dan dies) and use Bob’s DSUEA to prevent having to pay gift tax on the large lifetime gifts. As soon as Dan dies, however, he becomes her last predeceased spouse and she will no longer be able to use Bob’s DSUEA.

Tax Planning Can Get Tricky

We understand that trying to navigate the tax rules can be a daunting task. We are here to assist you in better understanding the options available to you and crafting the best estate and financial plan to meet your unique situation. To learn more about strategies to protect yourself, your loved ones, and your life savings, give us a call.

Watch Out for Stolen Items in Your Loved One’s Estate

Your family member went through a meticulous estate planning process to organize and distribute money and property for the benefit of their loved ones, including you. But you may suspect that some of the high-value items in their estate originated as stolen property. The possibility of discovering stolen items within an estate is often overlooked, but it can have legal, financial, and emotional complications. How does it happen?

Example: Stolen Artwork

A New York Times article published in 2023 reported that the New York Metropolitan Museum is carefully combing through its art collections after the government seized dozens of art pieces that were suspected of having been stolen or looted in the past. It is widely known that art collections have mysteriously disappeared over the centuries, especially during wartime, and that ownership should be researched to avoid purchasing an item that belongs to someone else. The Art Loss Register alone lists 700,000 stolen items. Many items find their way into legitimate markets through underground dealers where criminals can exploit innocent buyers. 

When putting together your estate plan, any significant collections you own should be taken into consideration. If your loved one receives stolen items from you at your death, they may not receive legal title to the item, exposing the estate to financial and tax implications. If artwork or other high-value property is removed from the estate, it can affect the liquidity necessary to meet potential estate tax and administrative costs as well as the inheritance of beneficiaries. An estate planning attorney can prepare for different scenarios to protect you and your family.

Private Letter Rulings and Seized Assets 

According to a private letter ruling, if your family discovers stolen items after a loved one’s death, the Internal Revenue Service could include the fair market value of the property in the deceased’s estate for estate tax purposes, even after it has been seized and returned to the owner. This could leave the family owing an estate tax but unable to sell the item in order to pay the estate tax.

The government can seize property it believes has been involved in illicit or criminal activity. Even if your family member purchased an item from a reputable dealer or inherited the item decades ago, it can still be taken. 

How People Come into Possession of Stolen Items

Understanding how individuals unknowingly acquire stolen items is crucial for recognizing potential risks. Innocent parties often purchase items through estate sales or auctions or receive gifts from friends or family members. A lack of transparent ownership or a historical record can make it challenging for the unsuspecting owner to identify stolen items.

Every year, over one million homes are burglarized and almost one hundred billion in store merchandise is stolen. Billions in stolen property is circulating, leaving innocent buyers liable. Those possessing stolen items can serve time in jail or be forced to pay a fine.

Common places to come across stolen goods are online marketplaces such as Craigslist, eBay, or Facebook Marketplace that have lax regulations for selling items. Pawn shops can often be unsure of the origins of their inventory, but they are required to research ownership or face prosecution.

Can You Be Held Accountable?

Not everyone is held accountable for being in possession of stolen goods. There is no statute of limitations for prior owners to claim their stolen property, but there are legal defenses used for possessing it. The defense of laches asserts that prior owners who unreasonably delayed asserting their rights may not be entitled to bring a claim against the person or estate in possession of their property. After all, the property may have already been sold and the proceeds divided among heirs, making it very difficult to recover. 

Whether you can be prosecuted or convicted of possessing stolen property depends on several factors:

  • Knowledge that the item was stolen. Suspected stolen items should be reported to law enforcement, or you could be held accountable. However, if it was nearly impossible to know it was stolen, you will likely not be held accountable.
  • Knowledge that the item was in your possession. You can unknowingly be in possession of a stolen item. If you are honest, open, and prompt, you should not be held accountable.

What Should You Do If You Suspect Ownership of Stolen Property?

You can take steps during your family member’s lifetime to address your suspicions. Be proactive. If there is a hint of uncertainty about the legitimacy of an item, your estate planning attorney can take the following steps:

  • Research the item’s history and provenance to trace its ownership back to its origin to see whether it has ever been reported as stolen.
  • Seek guidance from professionals such as art historians, appraisers, or legal experts who specialize in stolen art and property. They can validate legitimate ownership.
  • Report the situation to law enforcement in a timely manner to contribute to the recovery of stolen property and prevent legal complications down the line.

There is a risk of discovering stolen items within a loved one’s estate, especially with high-value collections. Do not overlook this when doing your estate planning. By being vigilant, understanding the legal implications, and taking proactive steps, you can mitigate the risks of inheriting or owning stolen property and ensure a smoother estate settlement process for you or your loved ones. Contact our estate planning attorney today.

A Proper Estate Plan Can Protect You and Your Family

Proper estate planning can protect you from the risks of owning stolen property through due diligence and research, ensuring that the prior owner’s rights are extinguished. Unfortunately, research into the origins of property can be expensive, often costing more than the item’s value. However, where there is one suspicious item, there may be more. 

If you are the beneficiary of gifts with suspicious origins, you can disclaim them. If you have questions about something in your collection or your recent inheritance, you can contact our office.

Testamentary Trusts: The Best of Both Worlds

You have several different options when it comes to creating the right estate plan. Some people believe that a revocable living trust is the best way to go, while others think that a last will and testament (commonly known as a will) is best under certain circumstances. Others may find that a combination of both—through the use of a testamentary trust—provides the right amount of control and protection for themselves and their loved ones.

A Testamentary Trust Can Provide a Solution

A testamentary trust will own accounts and property owned by you in your sole name without beneficiary designations, upon your death and enables you to instruct how your money and property will be handled in advance. Unlike a revocable living trust, the testamentary trust is created at your death, and ownership of your accounts and property are transferred to the trust through the probate process. 

You Can Protect Your Loved Ones

Depending on your circumstances, your loved ones may need the extra protection that a testamentary trust can provide. 

  • Surviving spouse. Some couples are hesitant to leave everything to their surviving spouse out of fear that the surviving spouse could be taken advantage of, remarry, or otherwise lose the money and property that was left to them. A testamentary trust can allow a surviving spouse to access the money and property while including extra protections to safeguard it.
  • Minor child. In most states, minor children cannot legally own anything. If money and property are left to a minor, the court may need to appoint someone to manage the inheritance and make sure that it is used appropriately. A testamentary trust allows you to select the person to manage the inheritance and provide specific instructions about how the money and property should be used.
  • Special needs individual. If you have a loved one who is currently receiving or may need to avail themselves of certain government benefits due to a disability, a poorly structured inheritance can jeopardize their ability to qualify or keep those government benefits that they need to survive. A properly structured testamentary trust can provide funds to your loved one to supplement what they are receiving from the government without disqualifying them from government assistance.

Your Loved Ones Will Still Have to Go Through Probate

Although you are using a trust to manage and distribute money and property to your loved ones, the probate court will still have to be involved. As opposed to a revocable living trust that is created during your lifetime, a testamentary trust comes into existence at your death during the probate process. The person you name as the executor or personal representative will oversee changing the ownership of your accounts and property from you as an individual to the trustee of the testamentary trust. Once ownership of accounts and property has been changed, the trustee will manage the trust according to the instructions in the will for the trust’s duration. When all of the accounts and property have been given to the intended beneficiaries, the trust terminates. During the administration, the trustee may be required to provide annual reports to the court and other important parties and may have to periodically appear before the judge.

Although the probate process can be time-consuming, expensive, and public, it may be the right option in some circumstances. Some people find that it provides stability and harmony by allowing a third party (the probate court) to oversee the process. This can help families who may otherwise argue over the details to remain cordial and on their best behavior.

Do Not Forget Other Important Documents

Even if you choose to include a testamentary trust as part of your will, there are other important estate planning tools you must have to properly protect yourself and your loved ones. Because a will only covers what happens to your money and property when you pass away, we must also plan for a situation in which you are alive but unable to make your own decisions, which is known as incapacity.

Financial Power of Attorney

A financial power of attorney allows you to choose a trusted person (the agent) to handle your personal financial matters without court involvement. The amount of authority your agent has is determined by the type of financial power of attorney you have prepared. It can be as limited or as broad as you would like. Another important consideration when preparing a financial power of attorney is choosing when the agent can act. One option is to enable the agent to act immediately once you have signed the document. A second option is to have a springing financial power of attorney that only becomes effective once it has been determined that you cannot manage your affairs. It is important to note that some states do not allow springing powers of attorney. 

Medical Power of Attorney

A medical power of attorney allows you to appoint a trusted person as a decision-maker to communicate on your behalf or make healthcare decisions for you without court involvement. 

Advance Directive or Living Will

An advance directive or living will allows you to convey your wishes regarding end-of-life decisions, such as how long to continue artificial hydration and nutrition or how long to continue artificial respiration when you are in a persistent vegetative state or have a terminal condition and with no chance of recovery. This document will help the decision-maker under your medical power of attorney make informed choices for your care. 

HIPAA Authorization

A Health Insurance Portability and Accountability Act of 1996 (HIPAA) authorization form allows you to grant specific individuals access to your confidential and protected information (e.g., to get a status update on your condition or receive your test results) without giving those individuals the authority to make decisions on your behalf. Providing this information to your loved ones can help all parties stay on the same page even if only one person is authorized to make medical decisions on your behalf.

Nomination of Guardian

Some states have a separate document that allows you to nominate a guardian for your minor child. Some people prefer the separate document because they can change guardians with ease and without having to update their entire will or pour-over will. This document can be referenced in your will so that your nomination will be known during the probate process.

Temporary Guardianship

Some states allow for a separate document in which to name a person to make decisions for your minor child when you are unable, such as if you are incapacitated or traveling without your child and need to give someone authority to make decisions for your child in your absence. It is important to note that this document is only effective for a short period (typically six months to a year), and a temporary guardian cannot agree to certain actions, such as the child’s adoption or marriage. 

Let’s Choose the Right Option for You and Your Loved Ones

There are many different options when it comes to crafting a plan that is right for you. We are committed to developing a plan that protects you, your loved ones, and your legacy. If you are interested in learning more about testamentary trusts or reviewing your existing estate plan, please give us a call.

Should You Share Your Estate Planning Details With Loved Ones?

When you decide to create a comprehensive estate plan, there are many things to consider. One is whether to tell your loved ones about your plan and how much information to share with them. Estate planning can be a complex and sensitive matter, so your choice may depend on your unique relationships with loved ones and your family dynamics. 

Sharing your estate plan with your loved ones can compromise the privacy of your financial and personal information. Some people therefore prefer to keep these matters private, especially when it comes to distributions of significant amounts of money or property. There are both advantages and disadvantages to revealing private information related to your estate plan. You can choose to communicate details relevant to specific individuals or offer a broader explanation to everyone involved.

Advantages of Sharing Your Estate Planning Details

Everyone Knows What to Expect

Estate planning deals with personal, family-specific situations. By discussing estate planning with your family, you can ensure that your loved ones are aware of how you have structured the money and property that may be transferred to them. Discussing matters up front will also give notice regarding who will be in charge if you cannot handle your affairs or when you die. This transparency can reduce confusion and conflict that can lead to disputes, disagreements, and even legal challenges later. Your loved ones will have the advantage of being prepared for what is to come.

Loved Ones Understand Your Wishes

Your estate planning documents, including your will, trust, and other directives, can sometimes be complex and subject to interpretation. When your loved ones know your wishes, there is less room for misinterpretation of your intentions. This is critical, especially in medical emergencies when decisions must be made quickly.

By sharing your intentions, you can explain your perspective and the reasoning behind your decisions, such as why you have chosen certain beneficiaries, trustees, or executors. This personal touch can help your loved ones appreciate the thought you have put into your estate plan.

When communicating your rationale for distributing money and property in a particular way, you can reduce resentment and promote understanding while you still have the opportunity. This can be particularly important if your plan includes provisions that may seem unequal at first glance. If a problem arises, you may be able to find resolutions and compromises in advance.

If you happen to have beneficiaries with special needs or specific financial requirements, sharing your estate plan ensures that your loved ones are aware of their responsibilities in caring for these beneficiaries and following your instructions to provide for them after you pass away.

You also have the chance to convey your values, beliefs, and objectives regarding your estate. This can be particularly important if your estate plan includes charitable contributions, specific bequests, or arrangements that reflect deeply held principles.

Administration Goes Smoothly

When your loved ones are informed about your estate plan in advance, those involved may be more likely to accept your wishes and cooperate during the administration, making the entire process more efficient. They will know who to contact and what to do. Being aware of the details reduces delays related to identifying your property and beneficiaries and allocating responsibilities. Your chosen decision-makers will already know their roles, which will minimize uncertainty and allow them to step in without hesitation when needed.

Your loved ones will also have contact information for professionals, such as estate attorneys, financial advisors, and accountants, who may need to be involved.

Loved Ones Can Ask Questions

When your loved ones know that you are willing to discuss your estate plan, it can create an environment of openness and trust, which extends beyond estate planning matters. Your loved ones may have questions or concerns, and this is the best time to address them. Together, you can work to find solutions or compromises that align with your wishes and address their needs and expectations for the best possible outcome.

You also have an opportunity to educate your family members about your financial and other estate matters. This knowledge can empower them to be better-prepared for their own financial futures and estate planning decisions. This can offer an additional layer of protection, knowing that your loved ones are proactively protecting themselves and their loved ones as well.

It is also possible that during your conversation with your loved ones, you might realize that important details or beneficiaries were inadvertently left out of your estate plan. Sharing your plan allows you to address any oversights and make necessary adjustments now.

Disadvantages to Sharing Your Estate Planning Goals 

Estate Plans Are Not Set in Stone 

In most circumstances, you have the legal right to change or update estate planning documents such as your will, trust, or beneficiary designations whenever you like, so long as you are mentally capable of doing so. Over time, your financial situation, family structure, or personal goals may change, prompting adjustments to your estate plan. Sharing your plan with loved ones today might create expectations, leading to confusion if you make changes later that affect their inheritance or role in handling your affairs. When loved ones anticipate different outcomes, it can result in temporary disputes or permanently strained relationships.

If you choose to discuss your current estate plan and make changes in the future, ensure the appropriate people are updated of the changes. Loved ones who are unaware can be caught off guard, creating conflicts during the administration phase.

Emotions and Disappointments

Sharing your estate plan may lead to disappointment among your loved ones. When a loved one is upset about the way you have structured your plan, their unhappiness can create emotional strain between you.

In some cases, sharing an estate plan can bring unresolved issues to the surface. When family dynamics are complex or strained, it can exacerbate the situation. Loved ones may have differing opinions about your choices, and these conflicts require difficult conversations to understand their concerns and work toward resolutions. This can be emotionally draining and time-consuming.

Knowing that your loved ones are upset can also disrupt healthy communication. They may be hesitant to express their concerns or objections, fearing that it could lead to further problems. This can also hinder your estate planning decisions. If this happens, you can work with a qualified estate planning attorney or mediator to help guide productive discussions among your loved ones.

Manipulation Tactics 

Your loved ones may express their opinions or desires regarding your estate plan and try to pressure you to make changes that you may not necessarily agree with. While it might be important to you that you consider their input, it can be tough to balance their wishes with your own, especially if you have specific reasons for your chosen plan.

They may use guilt, emotional appeals, or even threaten to cut ties with you if you do not modify your estate plan for them. You may feel significant pressure, particularly if you have a close or dependent relationship with the person trying to influence your decisions.

Attempts to manipulate your estate planning decisions can challenge your autonomy and the principles behind your estate planning goals. Your estate plan should reflect your own values and wishes, and you should make decisions based on what you believe is fair. Stand firm in your decisions and maintain the integrity of your estate plan.

Boundaries must be set with your loved ones to protect your own wishes and well-being. If you are influenced by emotional manipulation, it can lead to regrets and raise complex legal and ethical issues with the validity of your legal documents. It may be necessary to consult with an attorney or mediator to determine the best course of action.

Doing What Is Best for You and Your Loved Ones

Sharing your estate planning details with loved ones can offer several advantages, such as transparency and a smoother transition when you die or are unable to manage your own affairs. However, there are potential downsides, including possible disagreements between family members and pressure to change your plan. The decision to share your estate plan should be made carefully, taking into account your specific objectives and family dynamics. 

We can help ensure that your plan aligns with your goals and discuss with you the potential consequences of sharing your plan details with loved ones. Contact our estate planning attorneys today.

The Passing of Senator Dianne Feinstein: Estate Plan Lessons for Blended Families

Dianne Feinstein, the longest-serving female United States senator in history, passed away in September at the age of 90. First elected to the Senate in 1992, Feinstein leaves behind a political legacy that spanned nearly 31 years. She also leaves behind an estate that is thought to be worth tens of millions of dollars. 

Although a large amount of her wealth came from her marriage to the late billionaire financier Richard C. Blum, Senator Feinstein was also successful in her own right. During their marriage, Feinstein and Blum established a marital trust that is now the subject of a fierce legal battle between Feinstein’s daughter and Blum’s three daughters. 

A judge has ordered the dispute to be resolved in private mediation. While this could keep the final resolution outside public view, the legal drama offers lessons illustrating the need for careful estate planning in blended families. 

Feinstein’s Assets and Estimated Worth

One of the Senate’s wealthiest members, Feinstein had a personal net worth that is estimated at around $70 million. A financial disclosure form filed in May showed that she owned millions in a blind trust, several large bank accounts, and a multimillion-dollar condo in Hawaii. She also owned a mansion in Washington, DC, worth more than $7 million and a private jet that averages more than $61 million if purchased used.. 

Marital Trust and Legal Dispute

Feinstein and Blum married in 1980 and lived together in California, a community property state, until Richard’s death in 2022. Feinstein had one daughter, Katherine, with a previous husband. Blum had three daughters from a prior marriage. 

As the only daughter of Senator Feinstein, Katherine is set to inherit all of her mother’s personal wealth. She also stands to benefit from one-quarter of the estate left by Feinstein and Blum. But how much of that Katherine receives may depend on the outcome of a messy estate dispute. 

Upon Blum’s death, the trustees were required to fund assets into a marital trust to provide for Feinstein during her lifetime. The marital trust would be for the benefit of Dianne until her death, at which point Blum’s daughters would receive the remaining money and property. 

Three lawsuits were filed prior to Dianne’s death, with Katherine serving as agent under a power of attorney. Even after Dianne’s death, the lawsuits continue. They contain allegations of elder abuse, failure to properly fund the marital trust, and failure to reimburse Senator Feinstein for her medical expenses. One of the specific allegations is that the Stinson Beach home should have been sold but was instead used by Blum’s daughters at Feinstein’s expense. 

The lawsuits could be put on hold temporarily while Feinstein’s estate is probated. Katherine, however, should be able to continue her claims, possibly in a new role as executor of Feinstein’s estate. Shortly before the Senator’s death, a California judge ordered the lawsuits to be settled through mediation. 

Estate Planning Takeaways from the Feinstein-Blum Family Feud

Blended families, or stepfamilies, are increasingly becoming the norm. Around half of US families are now remarried or recoupled. 

While any family can succumb to infighting over inheritances, blended families may be more prone to disputes, especially when one spouse dies and the surviving spouse and children have differences of opinion. Significant assets, like those in the Feinstein-Blum estates, can further raise the stakes among heirs. 

The Feinstein-Blum estate plan is what estate planning attorneys characterize as a “yours, mine, and ours” plan, which deals with respective children differently and is common in blended families. However, careful planning is needed to prevent conflicts of interest in this type of arrangement. 

The trust at the center of the Feinstein legal dispute, for example, was set up so that, after Blum’s death, Feinstein received trust income during her lifetime, and remaining assets went to Blum’s daughters after her death. This created competing interests between Dianne, who needed money from the trust to pay for current expenses, and the Blum daughters, who had a motivation to preserve more trust assets for themselves. Leaving assets outright to Dianne, or to a trust where the remainder went to Katherine, while leaving other assets to Blum’s children, could have prevented this situation. 

In every family, blended or not, it is important to be as clear as possible about the terms of distributions. Here are a few other estate planning lessons from the Feinstein lawsuits: 

  • Be careful about naming trustees. If even some of the lawsuit allegations are true, it would mean that the trustees breached their fiduciary duties and that Blum may have made poor trustee choices. Trustees have a lot of power and should be chosen accordingly. Naming former business associates as trustees when Blum had a wife and stepdaughter might have raised questions about objectivity. 
  • The importance of communication. If heirs have no idea what to expect from an estate plan, they could be taken by surprise and be more likely to challenge the administration in court. Consider informing children, spouses, and parents about the structure of your estate plan to prevent any unexpected outcomes that might increase the chances of litigation. People could have strong feelings about certain assets. It is better that they voice them up front and make appropriate arrangements. 
  • Distribute trust assets promptly. Perceived delays in distributing trust assets appear to have deepened beneficiary suspicions about trustee management in this case. The trustee should administer the trust as expeditiously as possible after the death of the trustmaker. Legitimate delays can happen, and if they do, transparency and communication with beneficiaries may stave off a lawsuit. 

Protect Your Legacy and Loved Ones

Trust and estate litigation only makes things worse for grieving families. It can make a private family situation public—which undermines a major benefit of placing assets in trusts—drain away estate assets in legal costs, and irreparably damage relationships. 

Whether you have a blended family or a traditional family, careful estate planning can help prevent issues similar to those raised in the Feinstein-Blum matter. A thorough estate plan that includes provisions such as a statement of intent that explicitly describes goals for trust assets can reduce the chance of tensions between beneficiaries and ensure that your legacy is honored in the way you intend. 

For trust planning, administration, and litigation assistance, please contact our office.