Tag Archives: Estate Planning

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.



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.


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.


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.


Beneficiary basics


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.


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.


Plan For Death

"Just a little bit of planning made my live so much better."

"Just a little bit of planning made my life so much better."


Dying is not just an emotional event in our life, it is a major financial event as well.  Consider the following possible financial consequences of your death:

  • The paperwork and legal procedures required to settle your estate can cost your family four to eight percent of your net worth.
  • If probate is required, your family’s inheritance can be delayed for months, and in some cases, several years.  During the probate process, the courts decide when your family can sell your personal residence.  Even though your children can’t afford to pay the mortgage.
  • Contract law may override the instructions in your Will or Living Trust
  • Giving your share of your estate directly to your spouse may cost your family hundreds of thousands of dollars.
  • If you or your surviving spouse die without a will, most state intestate laws do not provide for stepchildren.
  • Naming a minor child as a beneficiary can subject the supervision of their money to the probate court.  For a fee.
  • Giving money directly to a minor child with special needs can make the child ineligible for government benefits.
  • Your business may go out of business because no one know how to access digital records.
  • The beneficiary choice of per capita or per stirpes may accidentally disinherit a grandchild
  • Your choice of a beneficiary for your 401(k) or IRA retirement accounts can dramatically change the after death tax deferred value of these accounts.
  • If you don’t have long term care insurance, you must use your assets to pay for long term care.  There may be no assets when you die.
  • Life insurance proceeds may be part of your taxable estate.  If your estate is subject to the federal estate tax, almost half of the life insurance proceeds may be needed to pay the estate tax on the insurance proceeds.


When someone dies, a series of laws and rules determine who has the legal authority to manage the decedent’s financial affairs.

These rules and documents also determine your beneficiaries and the cost, time and effort it will take to settle your estate when you die.  Planning now will save your family money later.

These resources are useful when making plans to keep your money when you die: