If You Own Cryptocurrency, It’s Time to Update Your Estate Plan!

Traditional estate planning is daunting enough for the average individual, family, or small business owner, but now there is an additional curveball to deal with: cryptocurrency. More and more individuals and business owners are acquiring digital assets such as cryptocurrency, a digital asset that is generated online and can be traded.

Cryptocurrency and other digital assets were not considered in many older estate plans. If you currently have any cryptocurrency or plan to acquire any in the future, make sure you discuss it with your estate planning attorney and update your estate plan documents accordingly. It is imperative that your estate plan documents include language that covers your digital assets, just as it covers your more traditional assets. Your trust or will should specifically mention digital assets and cryptocurrency and how they should be distributed to your beneficiaries. The provisions in your will or trust can make a big difference in who will inherit the asset.

Cryptocurrency can be extremely difficult to discover after an owner’s death or incapacity. Make sure you leave your successor fiduciaries detailed instructions on how to access your cryptocurrency. Fiduciaries are the individuals, or in some cases, companies, you name in your estate plan to handle your assets in the event of your incapacity or death. A fiduciary can be a trustee, executor, personal representative, or attorney-in-fact. Failing to provide information on your digital assets can result in losing those assets entirely after your death or incapacity if no one knows you have such assets or where to find them. Continue reading »

Using LLCs to Hold Investment Properties: Asset Protection and Estate Planning

We recently discussed the benefits of putting real estate investment properties into LLCs in “Asset Protection and Estate Planning Perspective on the Importance of Holding Investment Properties in an LLC.”

More individuals and families are turning to rental properties as an investment strategy and are essentially small business owners. It is critical that you protect your personal assets from liability by setting up a legal entity to be the owner of the properties.

The best option for most of these types of small businesses is to form a Limited Liability Company (LLC). Continue reading »

Estate Planning Misconceptions of Small Business Owners

Estate planning is the process of making advance arrangements regarding your assets if you become incapacitated and determining asset distribution upon your death. It sounds simple, but many misconceptions about estate planning exist.

Misconception #1: I will avoid probate because I have a will.

A will only applies to your assets without named beneficiaries and does not help you avoid probate after your death. Assets held solely in your name without named beneficiaries must go through probate, a court-supervised process to inventory your assets, pay your debts, and distribute the remainder of your assets to your heirs or beneficiaries. Assets that pass-through probate are subject to court costs, attorney’s fees, and personal representative or executor fees. The process typically takes at least one year.

Misconception #2: My will alone determines how my assets will be distributed after my death.

Many people believe that their wills ultimately decide what happens to their assets after death. However, regardless of the terms of your will, your assets will pass to the joint owner or named beneficiary(ies) (a/k/a Payable On Death or Transfer On Death) on any bank account, life insurance policy, retirement plan (401k), or similar account with a named beneficiary designation.  A good estate plan ensures that such assets are distributed as you wish.

Misconception #3: My trust will allow my estate to avoid probate without being funded.

Merely creating the trust is not sufficient to avoid probate. It is important to meet with an estate planning attorney to discuss ways to avoid probate, such as creating a revocable living trust, and to make sure your plan is consistent with your wishes. Your attorney can also help ensure that the trust is properly funded, with your assets placed into the trust or with the trust named as the beneficiary of your assets.

Misconception #4: Estate planning only deals with my assets after my death. Continue reading »

Special Needs Trusts and Medicare Cost-Savings Programs Eligibility

The Qualified Medicare Beneficiary (QMB) program is a Medicare cost-savings program that helps low-income Medicare beneficiaries pay their monthly premiums, deductibles, copays, and coinsurance for Medicare Parts A (when applicable) and B. 

Medicare beneficiaries who qualify for the QMB program automatically qualify for the Medicare Part D Extra Help Program, which pays for 85% or more of the monthly premium, deductibles, and costs associated with the Medicare Part D Prescription Drug Program.

To be eligible for the QMB program, an individual must:

1. Be enrolled in Medicare Part A (hospital insurance);
2. Have monthly income less than 100% of the federal poverty level ($1,032 for single individuals or $1,392 for married couples); and
3. Have assets and resources less than $7,560 (for single individuals) or $11,340 (for married couples).

Note: Medicare allows for a standard deduction of $20 from monthly income before income is compared to the federal poverty level.

Assets and resources that do count in determining eligibility for the QMB program include checking accounts, savings accounts, and investments such as stocks, bonds, and mutual funds. Continue reading »

Death to Death Taxes: The Future of the Estate Tax Under the Proposed Tax Plan

“Death will no longer be a taxable event in America,” said U.S. Vice President Mike Pence during a speech to a Michigan crowd in late September 2017.  Among the many proposed tax revisions, the House (“Tax Cuts and Jobs Act” or “H.R.1”) and the Senate’s proposed bills have increased the credit against the estate, gift, and generation-skipping transfer tax. The House eventually repeals the estate and generation-skipping transfer tax; however, the Senate allows the estate tax and gift tax to remain intact.

Under current law,

• Property in an estate is generally subject to a top tax rate of 40% before it passes to the estate’s beneficiaries.
• Additionally, property that is transferred beyond one generation, whether by bequest or by gift, is subject to an additional generation-skipping transfer tax, also with a top tax rate of 40 percent.
• The first $5 million worth of transferred property is exempt from the estate, gift, and generation-skipping taxes, in any combination thereof. This amount is known as the basic exclusion amount and is indexed for inflation ($5.49 million for 2017).
• Transfers between spouses are excluded from these taxes, and when an individual dies without his or her assets exhausting the basic exclusion amount, any unused basic exclusion amount passes to his or her surviving spouse, with a top basic exclusion amount of $10.98 million for 2017.
• When a beneficiary receives property from an estate, the beneficiary generally takes a basis in that property equal to its fair-market value at the time the decedent dies, which is known as taking a step-up in basis. However, when a donee receives a gift from a living donor, that donee generally takes the donor’s basis in that property, which is known as taking a carryover basis.

As proposed in H.R.1 and the Senate Bill, Continue reading »

2017 Planning for the Future Newsletter for the Special Needs Community

Here’s the latest issue of “Planning for the Future,” a newsletter for the special needs community.

Inside this issue:

• It’s Official: ABLE Accounts Now Available in Missouri & Illinois
• Understanding the Special Needs Trust Fairness Act
• Medicaid Eligibility Expands for Elderly, Blind, Disabled
• Importance of Care Plans & Appointed Successor Guardianships
• Spotlight: I Can Go to College: The SUCCEED Program at University of Missouri–St. Louis

It’s Official: ABLE Accounts Now Available in Missouri & Illinois

After much anticipation, Achieving a Better Life Experience (ABLE) accounts may now be opened in both Missouri  (where they are called STABLE accounts) and Illinois.

These new accounts are designed for individuals with disabilities who developed their disability before age 26. Individuals who meet the age criteria and are currently receiving Supplemental Security Income (SSI) or Social Security Disability Income (SSDI) benefits are automatically eligible for an ABLE account. Individuals not currently receiving benefits but who meet the age requirement can open an ABLE account if they satisfy SSI criteria for “functionality limitations.”

The ABLE Act allows an individual with a disability – and his or her family – to put funds into a tax-advantaged account. ABLE account funds may be used for qualified expenses of living with a disability. In addition to medical expenses, funds may be used for basic living expenses, education, housing, transportation, employment, assistive and personal support services, health care, legal fees, health and wellness, financial management, and administrative services. Continue reading »

Understanding the Special Needs Trust Fairness (SNTF) Act

With the passing of the Special Needs Trust Fairness (SNTF) Act, individuals with a disability under the age of 65 may establish a first party special needs trust on their own behalf. Prior to the SNTF Act, special needs trusts could only be established by a parent, grandparent, legal guardian, or court.

Special Needs Trusts

Special needs trusts are established for the benefit of individuals with a disability to supplement the financial assistance they receive from government programs, namely Medicaid. Special needs trusts are valuable tools for maintaining Medicaid and Supplemental Security Income (SSI) eligibility, as funds held in a special needs trust are not considered when determining an individual’s eligibility for financial assistance under such programs.

Eligibility

To establish a SNT on their own behalf, the individual must be capable of making financial decisions and be under the age of 65. If eligible, individuals with disabilities enjoy increased autonomy and self-direction under the SNTF Act, especially in cases where living relatives or guardians are unable or unwilling to establish a trust on the individual’s behalf. Continue reading »

Rights of Will and Trust Beneficiaries

After the death of a family member, people are often left wondering what interest they have in the deceased’s assets. At a time of grieving, it can be difficult to know where to begin. Lack of information or misinformation can leave potential beneficiaries in the dark as to the manner in which the deceased’s assets will be transferred.

Obtaining Wills, Trusts, and Other Documents

Fortunately in Missouri, and many other states, potential beneficiaries have rights allowing them access to information regarding the estate. In Missouri, if a will exists for a decedent, the original will must be filed with the probate court upon the death of the creator of the will. The will becomes public record at that point. If a family member believes that a will exists but has not been filed, that family member can open a probate estate with the court in order to try and require production of a will or other estate plan documents.

Similarly, trust beneficiaries often have rights to obtain copies of trust documents. Trusts do not have to be filed with the court but instead may be maintained privately by the named trustee. However, in most circumstances, trust beneficiaries are entitled to a copy of the relevant trust documents and can require production of them through a lawsuit, if necessary.

Accounting of Assets

Trustees, executors, administrators, and agents under a power of attorney all have some duty to account as to the assets and liabilities of the probate estate or trust.  After being appointed by the probate court, executors and administrators of wills have an obligation to file an inventory of assets and a corresponding obligation to advise the court concerning the liquidation or disposition of those assets.

Trustees of trusts have similar accounting requirements and are required by law to provide periodic accountings to the beneficiaries showing the assets, liabilities and expenses of a trust. If any of these fiduciaries fail in their accounting obligations, certain categories of heirs and beneficiaries have rights to compel the executor, personal representative, or trustee to prepare accountings and either file them with the court or provide the accounting to beneficiaries. Continue reading »

Special Needs Trusts Can Now Be Created by Individuals

On December 13, 2016, the long awaited amendment to the Special Needs Trust Fairness Act was signed into law by President Obama.

For more than 20 years, individuals who had a disability were unable to create a self-settled special needs trust without a parent, grandparent, or legal guardian participating in the process. The only other option for an individual with a disability was to have the court create the trust on his or her behalf. This was often an incredibly costly process. Continue reading »