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Help Prevent Post-Mortem Identity Theft

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The National Funeral Directors Association recommends notifying the following when someone dies to help avoid post-mortem identity theft:

– Social Security Administration
– Veteran’s Administration (if the decedent formerly served in the military)
– Defense Finance and Accounting Service (military service retiree receiving benefits)- =Office of – – — Personnel Management (if the decedent is a former federal civil service employee)
– U.S. Citizen and Immigration Service (If the decedent was not a U.S. citizen)
– State Department of Motor Vehicles (If the decedent had a driver’s license)
– Credit card and merchant card companies
– Banks, savings and loan associations and credit unions
– Mortgage companies and lenders
– Financial planners and stock brokers
– Pension providers
– Life insurers and annuity companies
– Health, medical and dental insurers
– Disability insurers
– Automotive insurer
– Mutual benefit companies
– All three credit reporting agencies: Experian, Equifax, and TransUnion
– Any memberships held by the decedent (ex: health clubs, professional associations, clubs, library etc.)

Use a Qualified Personal Residence Trust to Avoid Federal Estate Tax

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A qualified personal residence trust (“QPRT”) is a special type of trust that can be used to avoid or minimize Federal Estate Taxes. The QPRT is used to remove the value of your personal residence from your estate, thereby reducing the size of your estate that is subject to Federal Estate Tax.

With the QPRT, you create an irrevocable trust, and convey ownership of your personal residence to the Trust. However you, also, reserve the right to live in the residence for a specified period of time. When the time expires, the residence is transferred to the beneficiaries you have named in the Trust. Under the right circumstances, using the QPRT can result in significant Federal Estate Tax savings for your estate, while ultimately transferring your residence to your heirs.

When coupled with an appropriate long-term lease arrangement that kicks in when the residence transfers to your heirs, you can, even, keep the right to continue living in the residence even after the QPRT ends.

When Does Your Durable Power of Attorney Become Effective?

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A Durable Power of Attorney can be drafted to become effective upon signing, or only if you become incapacitated. If drafted to become effective upon signing, your named agent can immediately take charge of your assets. If, on the other-hand, you only want your Agent to be able to take charge of your assets upon your incapacity, then be sure to have your DPOA drafted to only become effective upon your incapacity.

Get Your Estate Plan Arranged Before You Get Remarried

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I will often have a client call and tell me that he/she planning to get remarried and will see me afterwards to revise his/her estate plan. My advice to them…see me before you get remarried because your planning options might be very limited once you say “I do”.

The problem is that Michigan law provides a spouse with certain rights of inheritance from a deceased spouse’s estate. In the case where you want your entire estate to go to your children, you do not want your spouse to have any rights to inherit from you. If he/she does inherit anything from you, he/she does not have any obligation to give it to your children.

The good news is that these rights can be waived before you get married. While they can, also, be waived after marriage, it is too late if your new spouse is unwilling to waive them once you are married. Both of you have to agree to waive them. Obviously, if your spouse to be is unwilling to waive them before you get married, then you could decide not to get married.

Men who are about to get married have another matter to consider. When he gets married his spouse acquires a dower right in his Michigan real estate. This means that he cannot transfer his real estate without his spouse’s consent. If he transfers the real estate before he gets married, then his spouse does not have any dower rights to it.

Don’t Forget Your Safe Deposit Box!

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Often, the reason clients will have a living trust is to avoid probate. And, we talk about the need be sure that assets are properly “funded” to the living trust, since assets not in the trust might still have to be probated.

If you hold a safe deposit box as an individual, separate from your living trust, what happens when you die?  No one will have access to your safe deposit box until a probate estate is opened with the probate court, and a personal representative has been appointed. Thus, you will not have avoided probate.

On the other hand, if you hold the safe deposit box in the name of your trust, your successor trustee can access the box and its contents without probate. And, unlike a joint holder of a safe deposit box, your successor trustee is under a fiduciary duty to follow the terms of your trust in managing and distributing your assets, including those in the safe deposit box.

A Limited Liability Company (LLC) can be a good arrangement for keeping a cottage in the family

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Do you have a family cottage that you want to keep in the family? If so, consider the befits of using an LLC. With the LLC you can restrict transfers to family only, (i.e. not to ex-spouses of children, etc.) and provide a process for managing the cottage (i.e. who gets to use it on 4th of July weekend, how will costs of repairs be handled, etc.).(/p>

To learn more, watch our video “Protecting the Family Cottage”

 

Be Sure to File Your Gift Tax Return…the IRS is Watching

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If you give anyone more than $13,000 during the year, then you are required to file a gift tax return with your income tax return. Unfortunately, many do not know about this requirement, choose to ignore it, or do not realize that they have made a gift. Whenever you give someone something that they did not pay for, that is a gift.

Currently, the IRS is actively looking through registered deeds in various states to find deeds where parents have added children to their homes but have not filed a gift tax return. If you are caught, the consequences can be severe, and it will be too late to “fix it”.

If you have made gifts, but not filed gift tax returns, talk to your tax adviser to see what you need to do before the IRS comes calling.

Don’t trust your children to do what they say they will do

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Of course, we all want to trust our children. For many, their estate plan is trusting a child to do what they know the parent would want them to do. It might be making a bank account joint with one child who “knows” it is to be split between all of the children. Or a house owned with a child who “agrees” that it is to be sold with proceeds divided between the children. But, what if they don’t? Or, what if they planned to, but died before they were able to?

I am reminded of a money magazine article from a couple of years ago. When asked if it would be OK not to do what they promised the parents they would do, 75% of the adult children said it would be OK not to keep their promise! Are your children part of the 25% who can truly be trusted? Do you want to bet your other children’s inheritance on it?

Finally, if your children do, in fact, do what they agreed to, have you considered the negative tax consequences that they might incur?

Having a Will does not avoid probate!

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When asked why they want have a Will, many people tell me it is because they want to avoid probate.  A Will, however, never avoids probate. It only becomes effective once you have died and a probate estate has been opened with the Probate Court. The Will then serves as your instructions to the Court as to how you want your estate distributed.

Not everyone needs to avoid probate. However, if you want to avoid probate you need to do something other than having a Will.