Tag Archives: Estate Planning

A major issue related to divorce of same sex couples – Defeat of DOMA doesn’t solve every problem

Although DOMA has been overturned by the U.S. Supreme Court, there is a major issue related to the divorce of same sex couples.

This issue is exemplified by the plight of Adam Cardinal, a gay man.  More than four years ago, Mr. Cardinal married his love, who happened to be of the same sex.  They were married in New Hampshire where same sex marriages are legal.

The couple subsequently moved to Florida, where their marriage is not considered legal and it is in Florida where the problem arose.

Several months ago, they separated and wanted a divorce.  However, since their marriage was not recognized in Florida, they could not obtain a divorce there.

The other option, returning to New Hampshire where they were married, was not feasible.  Although you just need a short visit to marry in New Hampshire, that state requires at least a one year residency before it will grant a divorce.  Since the former couple did not have the flexibility to pick up their lives and move back to New Hampshire, they are stuck.

They cannot divorce or remarry.  They are in limbo.  If one of them dies in a state where same sex marriage is legal, and he does not have a will, their still legal spouse may inherit everything.  Even though Mr. Cardinal and his spouse did not merge their funds, the lack of legal paperwork signifying the end of their marriage may cause financial issues in the future.

Six of the states that recognize same sex marriage, including Delaware and Vermont, allow nonresident couples who married in the state to divorce under some circumstances, but those circumstances are not clear cut.

DOMA was just recently overturned and a lot of details about the related wide ranging issues remain to be addressed.  States have a lot of work ahead of them as they figure out how to handle all of the specific issues related to same sex marriage and divorce.

To learn more about estate planning and other issues related to end of life issues, go to www.diesmart.com.

Defeat of DOMA – More federal benefits for same sex married couples

One of the many changes that that will affect gay and lesbian married couples is in the area of income taxes.

A February report by the Williams Institute,  a UCLA law school think tank that studies sexual orientation and gender identity law, found that “most married lesbian, gay, bisexual and transgender workers pay more in income taxes than they would if allowed to file as ‘married, filing jointly’, especially for spouses with very different incomes.  For example, a working parent with taxable income of $60,000 a year and a stay-at-home spouse with no income would pay $2,900 more as individuals than as a couple. ”

The report goes on to say that “until now, working LGBT parents couldn’t establish legal ties to their spouses’ children, so generally were not able to claim child-related exemptions, deductions and credits.”  In this new post DOMA world, they will probably be able to establish legal ties and claim the tax benefits.

Another area in which they may benefit is that of Social Security.  When the first spouse dies, the surviving spouse most likely will be able to collect the deceased spouse’s Social Security if the amount is higher than theirs.

As mentioned in an earlier blog, estate tax is a third area in which these couples should see a major benefit.  In the past, when one person died, the other partner had to pay taxes on any inherited assets.  Now, as a legally married couple, when one spouse dies, all their assets could go to the surviving spouse without any tax penalty being imposed .

Finally, legally married gay couples should review any tax returns they filed since their weddings.  They may be eligible to amend their returns to file jointly and take other deductions that were not previously available to them.

There are more than 1,000 federal statutes related to benefits that, until now, were only available to married couples consisting of a man and a woman.  They will now be available to same sex married couples as well.

For more information about estate planning and other issues related to getting your affairs in order, go to http://www.diesmart.com.

 

Defeat of DOMA has major estate tax implications

The Supreme Court today made a decision to strike down DOMA (Defense of Marriage Act); this will dramatically expand the access of married gay couples to many federal benefits related to tax, health and pension that have been denied to them until now.  This decision affects same sex couples in the 12 states and the District of Columbia which allow gay marriage; these couples represent about 18% of the U.S. population.  With the addition of California, the percentage will shoot up to 30%.be even higher.

DOMA was signed into law by President Bill Clinton in 1996, and prevented the government from granting marriage benefits in more than 1,000 federal statutes to same-sex married couples in the states that allowed gay marriage.

One very important benefit of today’s Supreme Court decision is related to estate taxes.  Until now, same sex married couples could not benefit from married couple estate tax laws.  Now they will have the same benefits as all other married couples.

According to Yahoo News,  ” Eighty-three-year-old New Yorker Edith Windsor brought the DOMA suit after she was made to pay more than $363,000 in estate taxes when her same-sex spouse died. If the federal government had recognized her marriage of more than four decades, Windsor would not have owed the sum. ”

With the Supreme Court’s decision to strike down DOMA with a 5-4 vote, Windsor will finally be eligible for a tax refund, plus interest.

For more information about estate taxes and settling an estate, go to www.diesmart.com.

Wills

WHAT IS A LAST WILL AND TESTAMENT?

A will is a written document, signed by the author and witnesses, that meet the requirements of the state in which the author resides.

  • The author can document the beneficiaries whom he or she wants to get his probate estate.
  • The author can designate a personal representative to administer the estate and follow out the author’s wishes.
  • In many states, parents must name a guardian of minor children in a Last Will and Testament.
  • The author can request the probate court waive the requirement for a surety bond for his or her estate representative.
  • The author can include instructions to set up a testamentary trust to manage beneficiary assets rather than giving assets directly to the beneficiary.

Wills usually require a probate process assuring the instructions in the will are carried.

Q.   How does the probate court determine the will is authentic?

A.  In many states, the estate representative must be able to show the original will.   If the original will cannot be found, some states will consider the author to have die intestate.

Some states require the witnesses who originally signed the will to attest they watched the author sign the Last Will and Testament.

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Q. What is the difference between a Will and a Trust?

A. Both a Will and a Trust allow you to name someone to manage and distribute your property to your beneficaries when you die.     You can find out the difference here.

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Q.   How do you make a Last Will and Testament?

A.   You can visit an attorney who specializes in estate planning.   Some people prefer to do it themself and use web-based or PC-based software to create their last will and testament.

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Beneficiary basics

WHY IS PROPERTY TITLE AS IMPORTANT AS YOUR WILL OR LIVING TRUST?

When you die, the way in which your beneficiaries are determined depends on whether the property is titled or not.

Property with a title includes real estate, vehicles, boats, airplanes, bank accounts, savings bonds, stock certificates, life insurance policies and retirement accounts.   If you don’t have a will or a trust, state intestate laws will determine who inherits property with a title.

Property without a title includes jewelry, art, antiques, and your digital assets.  Unlike titled property, there are no default laws that determine who inherits property without a title.

Property with a title

Title is the manner in which both real and personal property is owned.  Title may be proven by certificate, deed, bill of sale, contract, signature cards or other documents.  The title documents may also designate a beneficiary.  The title may state that an individual owns the property or multiple people own the property, i.e., joint tenants with rights of survivorship, or a trust owns the property.

Title can indicate whether the property is owned by an individual, by joint tenants, or a trustee.

It turns out that a title is more than just a piece of paper conveying ownership of a house, a car or a safe deposit box.  Property title determines whether contract law governs the inheritance of the property or whether the wishes written in your will or trust govern the inheritance of the property.

Q. What are asset buckets and why do they matter?

A. When you die, someone will make an inventory of your estate.  Think of your titled assets as going into three buckets: the probate bucket, the trust bucket and the automatic inheritance bucket.  Which bucket the asset belongs in is determined by the way the property is titled.

Probate assets:

  • Property owned by an individual
  • Property owned as joint tenants with rights of survivorship, no living joint tenant
  • Property where “Estate” is the named beneficiary or becomes the default beneficiary because the designated beneficiary died before the owner.
  • The decedent’s share of property owned as tenants in common

Trust assets

  • Property owned by a trustee

Automatic inheritance assets:

  • Joint tenants with right of survivorship, a living joint tenant
  • Community property with right of survivorship, a living joint tenant
  • Property owned by an individual, or more than one person with a designated living beneficiary:  life insurance policies, retirement account, pay on death bank accounts, transfer on death brokerage account, tranfer on death real estate deeds and transfer on death vehicle registration forms.

Q. Why do the buckets matter?

A. Once you know in what bucket the asset belongs, you will know who has the authority to empty the bucket.

Probate assets

Probate assets will be managed by the executor named in your will or by a personal representative appointed by the court if you do not have a will.

  • Instructions in your will generally determine the beneficiary of your probate assets.  If you do not have a will, state intestate secession rules determine the beneficiary.
  • The executor or personal representative must determine what type of probate procedures are required to get authority (Letters of Affidavits) to manage the property.
Trust assets
  • Trust assets will be managed by the successor trustee named in your trust.
  • Instructions in your trust determine who are the beneficiaries of assets owned by your trust.
  • The trust gives the successor trustee the legal authority to manage trust assets.
Automatic inheritance rights

Assets with automatic inheritance rights will be managed by the beneficiaries who automatically inherit the property.

  • The law automatically determines the beneficiaries and overrides any instructions contained in a will or trust.
  • A beneficiary has the authority to immediately claim their property with a certified death certificate and an affidavit or other claim form.

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Untitled property

Even if you die without a will or a living trust, default state and federal laws will determine who inherits your titled property.  Untitled property is different.  There are no default laws determining who inherits your untitled property.

Q. What happens to your untitled personal property?

A. For many families, deciding who will inherit personal property is a big emotional event.  Memories are sometimes more important than money.  Your heirs are more likely to argue about personal property than anything else you own.  There are several ways to deal with personal property and keep the peace at the same time.  First, you should decide who is going to get what.  Just your children? Other close relatives?  Friends?  You can decide.  It’s your property, after all.

If you have a will or trust, specify in your will or trust who gets what.  Your will or trust should also reference a specific Personal Property Attachment which lists who gets what.

Q. What is the best way to document your personal property and how you want it divided when you die?

A. Many products are available to help make a list of your personal property.  The information can be completed by hand or stored in electronic records.  Most products provide a way to inventory your house room to room and list and photograph personal property in each room.

  • You can provide detailed information such as what it is, where you got it, if it’s an heirloom, etc.  You can also include who you would like to receive it when you die.
  • You can also use a digital recorder and make an audio tour of your house, recording items as you walk through each room

The important thing is that you document what you have, where it is and who gets it when you die.  Be aware that simply making a list of your personal property may not be deemed valid and legally enforceable upon your death unless the list is referenced within your will or trust.

Q.  What happens to your e-mail, blog or other business processes stored on hosted site on the Internet??

A.   If you own a small business and your accounting or sales systems are managed on hosted web sites (for instance, Yahoo, Google, Ebay, etc.), it is critical someone knows how to access these accounts.  Digital assets are considered personal property.  There are no default laws determining who has rights to access thee assets or state statutes an Internet Service Provider (ISP) must follow when someone dies.

The result:  Each ISP has set their own policies on whether they will provide passwords or user IDS to your spouse, executor or trustee when you die.  Some ISPs may not.

If you work in a small business, your chief executive officer or chief financial officer may not be able to access company files without your passwords.

When you set up accounts on hosted services, ask what their policy is regarding user IDs and passwords when someone dies.  Plan accordingly.  Create and maintain a list of URLs, user IDs and passwords for important data.

Q.  How will your employees, executor or spouse gain access to data files stored on your personal computer.

A.  You own the data on the PC.   You have the right to leave instructions on who inherits any intellectual property stored on the PC.  If you have data you don’t want someone to see after you die, be sure to delete it on a scheduled basis.  Don’t forget to leave any user IDS or passwords someone will need to log onto your computer.

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