Today is a good day to start thinking about your estate planning. Who should have a will or trust in place? Do I need this now or can I put it off? Do I need some kind of health care document? What about powers of attorney? There are lots of questions to consider.
- No Estate Planning. If you have never done any estate planning, you should consider at least creating a will and putting in place a health care power of attorney and a regular power of attorney. A will allows you to name a relative or friend you trust to handle your affairs after your death. It also gives you the opportunity to direct how your estate will pass at your death; you can omit disfavored relatives, or include relatives or friends who would not otherwise inherit from you if you died without a will. You can also direct that beneficiaries receive a different share than what the law would otherwise provide, or that certain persons receive particular assets.
If your assets are more significant (neighborhood of $200,000 or more), you should also consider creating a trust in which to hold your property. This can minimize taxes, and if properly funded, will avoid the expense of a court supervised probate proceeding—which is generally required when only a will is in place.
You should have a health care power of attorney in place to nominate the person(s) you want to make decisions for you if you become unable to do so, and to express your wishes as to what kind of medical treatment you want and whether or not you desire food and water even after medical treatment has ceased. A power of attorney for financial matters is also helpful and can avoid the necessity of a guardianship should you become incapacitated.
- Minor Children. If you have minor children, you should definitely have a will in place. Even if your assets are not significant, a will can (and should) contain a clause that appoints a guardian for your children should you die. This allows you to plan for your children so that there will be a smooth transition at your death. Under Nevada law, the only place to nominate a guardian for minor children is a will. You should, of course, ask the persons you wish to nominate in advance to make sure they are willing.
- Outdated Estate Planning. If your estate planning was done a long time ago, you should review it to see whether there are any changes you would like to make to those you have designated to take care of trust or estate business after your death, and to those who will receive your property. Also, tax, real estate and other laws affecting trusts and estates change over time, sometimes quite dramatically. Even if you have no changes to the substantive provisions of your estate planning documents, you should have a lawyer review your documents every couple of years or so to recommend any updates.
- Major Life Change. If you have recently been through a major life event such as marriage or divorce, or if there has been a death or a birth in your immediate family, you should get your estate planning in place or have it updated. A new spouse should either be included in your estate planning as receiving something, or should be mentioned in a way that makes it clear the spouse is not intended to be included. In Nevada, there are statutory provisions that revoke a will or beneficiary designation made in favor of a spouse upon divorce from that spouse; but it is best to re-do your estate planning after divorce rather than to rely upon the statutory revocation. Similarly, the law makes certain provisions for what happens to gifts when the intended beneficiary has died before the person making the will, and for additional family members who are later born; but the law may or may not express your preference.
In sum, seize the day! You do not know how long you will live or when you will die. You will buy yourself peace of mind and you will save your relatives and loved ones a lot of trouble by doing proper estate planning now. To begin the process, contact a qualified estate planning attorney today.
The lakefront home, the mountain cabin or the ocean-side estate all require special planning to protect and enhance these legacy homes. From Lake Tahoe to Donner Lake, from downtown city condos to Pacific Ocean properties, we advise our clients to give special attention to these legacy homes. These special properties need the “four P’s:” protection, privacy, probate avoidance and planning.
These types of properties need comprehensive insurance coverage for potential damage to the structure, adequate liability coverage and an ownership structure that provides protection from outside creditors. Under Nevada law, limited liability companies (LLCs) offer tremendous protection, particularly if you or your family rent or lease the legacy home. A Nevada LLC may not prevent a lawsuit, but it will certainly deter potential creditors.
You and your family may not want to divulge the ownership of the real property. Nevada counties have very transparent real property records. Anyone with basic internet search skills can locate the owner of real property, past and present, and the price paid for the real estate. To provide a privacy shield, ownership of the legacy home can be held by a legal entity such as a trust or LLC, with a name unconnected to the family. You should consult with a lawyer to determine which device, trust or LLC, will best meet your objectives as simply titling your legacy home into an existing business entity is not a great solution. Doing so could subject your legacy home to the claims of existing or future business creditors.
Many people understand the primary benefit of a revocable living trust is probate avoidance. What many do not understand is that a revocable living trust can hold title to real property, like legacy homes, in other states. Families with real property in more than one state must have a trust to avoid probate. An existing revocable trust could be a ready-made device to hold title to your legacy home.
Plan now if you want to keep the legacy home in your family. If you do not provide directions or instructions to your family, anxious beneficiaries can force the sale of the legacy home. You must establish a clear succession plan establishing how the property will be managed, maintained and eventually distributed to the next generation or beyond. Please contact a qualified estate planning attorney to discuss how to preserve and protect your legacy home.
Posted in Estate Planning, Irrevocable Trust, Probate, Wills
Tagged Asset Protection, Condo, Estate Planning, Lake Tahoe, LLC, Nevada, Retirement, Vacation Home
Some married couples enjoy living together while keeping their financial assets separate. Separate ownership of assets can be advantageous in some instances, but oftentimes loving couples misunderstand the results of holding separate assets. The Wall Street Journal recently highlighted four potential pitfalls for couples maintaining separate accounts:
- The assets are not necessarily separate under Nevada law.
Simply having your name on an account does not mean the account is yours alone. Under Nevada law, pursuant to community property principles, all of your earnings and wages after marriage are the property of both parties. This is true even if you have your paycheck deposited into a separate account.
Nevada inheritance laws can surprise couples. If you die without a will and leave a surviving spouse, no children and surviving parents, your parents are entitled to a portion of your estate. Many spouses intend for their entire estate to go to a surviving spouse. However, unless that desire is set forth in a will or trust, the state may direct otherwise.
- Separate accounts most often mean lack of communication.
Communication between spouses is critical. Many spouses have separate retirement accounts and manage those accounts in isolation. This isolated planning can undermine the couple’s financial objectives and their combined risk tolerance. Regularly, I meet with clients where both spouses are unaware of accounts or policies that one spouse possesses. These omissions could cause the account proceeds to go missing or remain unclaimed for long periods of time.
In addition, holding similar investments in two separate accounts can be more costly. Combining the separate holdings may result in lower advisory fees.
- Separately-owned property may be at greater risk in bankruptcy or a lawsuit.
Nevada has very liberal exemptions for bankruptcy purposes. These protections can be utilized best by conferring with an attorney who focuses on asset protection planning.
Joint ownership can make your assets less appealing to creditors. Creditors loathe joint assets in which they will hold only a one-half interest. Separately-owned property is less-protected from creditors. The home is the primary asset to hold jointly or through a trust.
- Separate accounts are more difficult to administer.
The death of a loved one causes plenty of heartache. Maintaining separate account causes needless headaches too. The time delay in accessing separately-owned accounts can lead to draining financial stress. Many financial institutions demand formal court orders before allowing access to financial accounts, even when such orders are not necessary. At a minimum, couples should maintain a joint checking or savings account to make sure the day-to-day expenses can be satisfied.
Posted in Asset Protection, Community Property, Probate
Tagged Asset Protection, Bankruptcy, Community Property, Estate, Finances, Inheritance, Probate, Trusts, Wills