Richmond Virginia Estate Planning, Elder Law, And Asset Protection

How Does an Inherited IRA or 401(k) Work?

The rules for inherited retirement assets are complicated—just as complicated as the rules for having 401(k)s and IRA accounts to begin with. Mistakes can be hard to undo, warns the article “Here’s how to handle the complicated rules for an inherited 401(k) or IRA” from CNBC.

The 2019 Secure Act changed how inherited tax deferred assets are treated after the original owner’s death. The options depend upon the relationship between the owner and the heir. The ability to stretch out distributions across the heir’s lifetime if the owner died on or after January 1, 2020 ended for most heirs. Exceptions are the spouse, certain disabled beneficiaries, or minor children of the decedent. Otherwise, those accounts must be depleted within ten years.

Non-spouses with flexibility include minor children. That’s all well and fine, but once the minor child turns 18 (in most states), the 10-year rule kicks in and the individual has 10 years to empty the account. Before that time, the minor child must take annual required minimum distributions (RMDs) based on their own life expectancy.

These required withdrawals typically begin when a retiree reaches age 72, and the amount is based on the account owner’s anticipated lifespan.

Beneficiaries who are chronically ill or disabled, or who are not more than ten years younger than the decedent, may take distributions based on their own life expectancy. They are not subject to the ten- year rule.

Beneficiaries subject to that ten-year depletion rule should create a strategy, including creating an Inherited IRA and transferring the funds to it. If the inherited account is a Roth or a traditional IRA, the process is slightly different. Distributions from a Roth IRA are generally tax-free, and traditional IRA distributions are taxed when withdrawals occur. One point about Roths—if you inherit a Roth that’s less than five years old, any earnings withdrawn will be subject to taxes, but the contributed after-tax amounts remain tax-free.

If an heir ends up with a retirement account via an estate, versus being the named beneficiary on the account, the account must be depleted within five years, if the original owner had not started taking RMDs. If RMDs were underway, the heir would need to keep those withdrawals going as if the original owner continued to live.

For spouses, there are more options. First, roll the money into your own IRA and follow the standard RMD rules. At age 72, start taking required withdrawals based on your own life expectancy. If you don’t need the income, you can leave the money in the account, where it can continue to grow. However, if you are not yet age 59½, you may be subject to a 10% early withdrawal penalty if you take money from the account. In that case, put the money into an Inherited IRA account, with yourself as the beneficiary.

IRAs and 401(k)s are complicated. Speak with your estate planning attorney to make an informed decision when creating an estate plan, so your inherited assets will work with, not against, your overall strategy.

Reference: CNBC (April 11, 2021) “Here’s how to handle the complicated rules for an inherited 401(k) or IRA”

 

What’s the Best Thing to Do with an Inherited House?

Beneficiaries must consider a number of possibilities when they inherit a home, especially if they’re sharing that gift with others. There are tax implications whether they keep or sell the home, emotional attachments to the house and the items within the house, along with potential estate planning issues, according to MarketWatch’s recent article.

MarketWatch’s recent article entitled “Inheriting a house? Read this before you make any rash decisions” explains that there’s no right or wrong answer, when choosing to keep or sell an inherited home. In some cases, the property can be used as rental income, whereas in other situations, it could be a source of cash after it’s sold, especially if the real-estate market is doing well. However, prior to deciding, consider this:

Those who sell a home after living in it for two out of the last five years get a tax exemption. For single filers, the exclusion is $250,000, and for married filing jointly, it’s $500,000. This exemption is applied when a home is sold to reduce the capital gains the sellers would have to pay.

Surviving spouses who inherit the full value of their home after their husband or wife dies can still use the $500,000 exemption, if they sell the house within two years of death. Non-spouses should consider if and when they plan to sell the home. Their basis of the inherited home becomes the fair market value on the date of death of the grantor. As a result, they’ll pay very little in taxes, if they sell the property in the short-term. However, they could have significant tax exposure, if they were to sell after a few years, or decades.

Beneficiaries should ascertain the fair market value of the home or get an appraisal on the property. Establishing the value of the property can pay for itself many times over in tax savings. Usually, there’s time to look at the situation and see you want to keep the property and either use it or turn it into a rental property or sell it.

If the home still has a mortgage, beneficiaries should call the lender to see if there were any clauses regarding the change in ownership. If the existing rate is favorable, they might be able to keep the loan, instead of refinancing.

An inheritance of a home can get more complicated, if there are multiple beneficiaries. This is especially true if it is children and grandchildren. If there’s no agreement, the only solution may be to sell. There are several options, such as selling the home and dividing the proceeds; renting the home and sharing the income; or coming to an agreement if one sibling wants to keep the house, like buying out the other owners, or trading other inherited assets for the property.

Reference: MarketWatch (April 13, 2021) “Inheriting a house? Read this before you make any rash decisions”

 

Who Owns Marilyn Monroe’s Estate?

Marilyn Monroe’s photos and likeness are used to sell t-shirts, posters, coffee mugs, and, well, you name it. When she died in 1962, she left no family and had a net worth of $800,000, which is equivalent to about $7 million today. Monroe spent her money freely, and gave some to relatives, employees and strangers. After her estate was settled, her fortune had declined to about $370,000. (That’s a 54% reduction in her estate during probate!)  In her will, Marilyn gave $10,000 each to her longtime assistant and to her half-sister. She put $5,000 in a trust fund for the education of her assistant’s child, and she left a $100,000 trust fund for her mother. Where did the money in her estate go?

Celebrity Net Worth’s recent article entitled “How A Random Venezuelan-Born Actress Ended Up Owning The Rights To Marilyn Monroe’s Estate” says that her physical property was left to her acting coach Lee Strasberg. In her will, Monroe gave Strasberg 75% of her intellectual property rights. The remaining 25% was given to her therapist, Dr. Marianne Kris.

Dr. Kris died in 1980, and her stake in the Monroe estate was given to the Anna Freud Centre for the Psychoanalytic Study and Treatment of Children in London. However, what happened to the Strasberg 75% share?

Just a few years after Monroe died, in 1966, Paula Strasberg died. In 1967, Lee re-married actress Anna Mizrahi, a 28-year-old from Venezuela. Lee died in 1982, so the actress was then the owner of 75% of Monroe’s estate.

After taking over Lee’s 75% share of the Monroe estate, she signed deals that used Monroe’s name, signature and image on thousands of products and endorsements. Over time, Anna made Marilyn one of the highest-paid dead celebrities in the world, generating tens of millions in revenue and profits.

Eventually, Anna partnered with the celebrity management company called CMG. Years later, a lawsuit revealed that the CMG deal reportedly guaranteed Anna a minimum of $1 million a year. However, as it turned out, Anna made more than $7.5 million in licensing revenue in just the four years between 1996 and 2000, when she created Marilyn Monroe, LLC.

In January 2011, Anna sold her 75% stake in the Monroe estate to Authentic Brands Group for an estimated $20-30 million.

Reference: Celebrity Net Worth (April 2, 2021) “How A Random Venezuelan-Born Actress Ended Up Owning The Rights To Marilyn Monroe’s Estate”

 

Inheritance and Children

What Is the Best Way to Make Sure Children Can Handle an Inheritance?

One strategy to prepare your children for what they will inherit in the future, is to have them meet with your professional advisors now. They can explain what you’ve been doing. Reach out to us at Nance Law Firm to see how we can assist with your children and their inheritance.

FedWeek’s recent article entitled “Preparing Your Heirs for Their Inheritance” suggests that your children should meet with your accountant for an explanation of any tax planning tactics that you have been implementing. That way those tactics can be continued after your death. If you have a broker or a financial planner, your heirs should meet with this adviser for a review of your portfolio strategies. All of this can help preserve your legacy and values and may stem future surprises and conflicts.

Know that if you hold investment property, it might pose special problems.

While your investment portfolio can be split between your children, who can follow their individual inclinations, it’s tough to divide physical property. Your kids might disagree on how the property should be managed.

With any assets—but especially rental property—you have to be realistic. Ask yourself if your children can work together to manage the real estate.

If they cannot, you may be better off leaving your investment property to the one child who really can manage real estate and leave your other children non-real estate assets instead. You might also provide that some of your children can buy out the others at a price set by an independent appraisal.

Another way you can help is by proper handling of appreciated assets, such as stocks.

If you purchased $20,000 worth of XYZ Corp. shares many years ago, those shares are worth $50,000. If you sell those shares to raise $50,000 in cash for retirement spending, you’ll have a $30,000 long-term capital gain.

You might raise retirement cash, by selling other securities where there’s been little or no appreciation.

That will allow you to keep the shares and leave them to your children. At your death, your shares may be worth $50,000, and that value becomes the new basis (cost for tax purposes) in those shares. If your children sell them for $50,000, they won ‘t owe capital gains tax.

All of the appreciation in those shares during your lifetime will not be taxed.

Reference: FedWeek (March 31, 2021) “Preparing Your Heirs for Their Inheritance”

 

Should I Discuss Estate Planning with My Children?

US News & World Report’s recent article entitled “Discuss Your Estate Plan With Your Children” says that staying up-to-date with your estate plan and sharing your plans with your children could make a big impact on your legacy and what you’ll pay in estate taxes. Let’s look at why you should consider talking to your children about estate planning.

People frequently create an estate plan and name their child as the trustee or executor. However, they fail to discuss the role and what’s involved with them. Ask your kids if they’re comfortable acting as the executor, trustee, or power of attorney. Review what each of the roles involves and explain the responsibilities. The estate documents state some critical responsibilities but don’t provide all the details. Having your children involved in the process and getting their buy-in will be a big benefit in the future.

Share information about valuables stored in a fireproof safe or add their name to the safety deposit box. Tell them about your accounts at financial institutions and the titling of the various accounts, so that these accounts aren’t forgotten, and bills get paid when you’re not around.

Parents can get children involved with a meeting with their estate planning attorney to review the estate plan and pertinent duties of each child. If they have questions, an experienced estate planning attorney can answer them in the context of the overall estate plan.

If children are minors, invite the successor trustee to also be part of the meeting.

Explain what you own, what type of accounts you have and how they’re treated from a tax perspective.

Discussing your estate plan with your children provides a valuable opportunity to connect with your loved ones, even after you are gone. An individual’s attitudes about money says much about his or her values.

Sharing with your children what your money means to you, and why you are speaking with them about it, will help guide them in honoring your memory.

There are many personal reasons to discuss your estate plans with your children. While it’s a simple step, it’s not easy to have this conversation. However, the pandemic emphasized the need to not procrastinate when it comes to estate planning. It’s also provided an opportunity to discuss these estate plans with your children.

Reference: US News & World Report (Feb. 17, 2021) “Discuss Your Estate Plan With Your Children”

Why Is Dr. Oz Suing Sister over Inheritance?

Scott Fitzgerald wrote, “The rich are different from you and me.” And Hemingway reportedly responded, “Yes. They have more money.” Well, the rich and famous are once again in the news for their family money squabbles, perhaps proving that we are more alike than different after all. The Wealth Advisor’s recent article entitled “Inheritance lawsuit pits famed Turkish ‘Dr. Oz’ against sister” reports that Öz’s lawyer Erhan Baki Selek filed a criminal complaint against the sister.

The TV star doctor alleges that his sister, Nazlım Suna Öz, forged documents concerning their father’s inheritance.

Their father, Mustafa Öz, died in 2019. He named his wife and three children as his heirs in 2003. However, he changed his will in 2008 to give all his assets to the Mustafa Öz Foundation in the U.S. He designated Dr. Oz as the person in charge of the foundation.

However, Nazlım Suna Öz presented a new will dated 2018 in a lawsuit against Mehmet Öz.

Dr. Oz countered with a legal action, claiming that the new will “was a forgery.”

The lawsuit against the sister calls for her to be imprisoned for forgery and calls for a ban on travel abroad. The complaint also seeks the confiscation of any assets she inherited.

Nazlım Suna Öz holds dual U.S.-Turkish citizenship.

This isn’t the first time the siblings took their apparent conflict to court.

In 2019, Dr. Öz filed a complaint against his sister after an alleged stabbing attempt. He filed the complaint at the Istanbul Chief Public Prosecutor’s Office, accusing his sister, whom he said suffers from psychological issues, of threatening to stab him on July 1, 2019.

At the time, Dr. Oz expressed concern for the well-being of his mother, who lived with Nazlım and suffered from Alzheimer’s disease.

Dr. Öz said he was afraid to enter his house in Istanbul because his sister owns firearms, the report said.

At the time, employees who’d been working with their mother for 20 years were abruptly fired by Nazlım. The employees contacted him after the incident.

The famous cardiologist said he took legal action to appoint a guardian for his sister, in an effort to provide her with the necessary medical treatment.

Would you like to avoid family squabbles? This is a good time to get your estate plan in order. Book a call now to discuss your plan.

Reference: The Wealth Advisor (April 5, 2021) “Inheritance lawsuit pits famed Turkish ‘Dr. Oz’ against sister”

 

Congratulations on Graduation… Now What?

Congratulations to you, the Class of 2021, the thousands of new high school graduates in our area this year, and your families! Whether you are heading to college, a first apartment, a new job or the military, there are important legal documents everyone over 18 should have. A Forbes magazine article – “You’ve Turned 18, Now What?” — explains what you need now.

That’s right. Part of “Adulting” is talking to a lawyer.

That’s because once you are eighteen, your parent is no longer able make health care decisions for you, or even talk to a doctor or other medical provider without your specific authorization. Not even if you are in an accident, an assault, or come down with a sudden serious illness. Not to freak you out, but when the Virginia Tech mass shooting took place in 2007, the closest hospitals were quickly overwhelmed, and victims were carried to other trauma centers miles away. Even when families found their loved ones, some relatives were told they could not get any information due to privacy laws designed to protect health confidentiality. You can address this with a basic legal document everyone over 18 needs, as the article outlines.

And, not to be “Debbie Downer” here, but medical decisions aren’t the only ones hamstrung in the event of a serious injury or illness. I know a man in Richmond who was having the time of his life as a young adult on a skiing trip when he accidentally skied into a tree, causing a serious head injury. He was unable to make any business or financial decisions on his own for a time until someone he chose – his mother – was legally authorized to act for him. That’s what a power of attorney can do for you – allow a trusted person such as a parent, legal guardian or older sibling to make important decisions if you become incapacitated. This is one of the essential documents every adult should have. Lacking one is one of the big mistakes people make legally.

Here’s another shocker. The Family Educational Rights and Privacy Act (FERPA) is a Federal law that protects the privacy of student education records. The law applies to all schools that receive funds under an applicable program of the U.S. Department of Education – and that’s most of them.

FERPA gives parents certain rights with respect to their children’s education records. These rights transfer to you, the student, when you turn 18 or attend post-secondary education. Discuss this with a parent or responsible adult in your life. Without a FERPA release, your parents may be authorized to send many thousands of dollars to your school, but may not be able to discuss your status at the school with officials there, or ask your school to correct records which they believe are inaccurate.

These forms are more than something you just download off of the internet. They are important legal documents that impact you as a new adult, and you deserve a chance to be counseled about their meaning and in many instances, customized to your particular situation. If possible, speak to an experienced estate planning attorney about them.

If you have a family lawyer who is experienced in these matters, by all means ask to talk to her or him. If not, ask around for someone who is an estate planner. The process doesn’t have too difficult or expensive. Many attorneys will do them for young people at a very modest cost, especially for the children of existing clients. Ask your attorney about this.

And remember: under state bar ethics rules, no matter whether you or your parent pays the fee, you are the client. The attorney will need to respect your wishes and confidentiality.

Whoever you use, you or your parent can stay up on this and other areas of the law but signing up for out newsletter or following our blog at www.nancelawfirm.net/blog.  And if we can help, give us a call.

 

What Paperwork Is Needed after Someone Dies?

Tax return issues, family matters, business associates, partners, trustees, bankers, investment advisors and tax collectors from the IRS to state and local taxing authorities all require attention after someone has died. There is a lot of work, and often a grieving family member finds it helpful to enlist the aid of a professional to lighten the load. There is so much paperwork. A recent article, “Checklist for Working With a Decedent’s Estate” from Accounting Web, contains a list of the tasks to be completed.

General administration and legal tasks. At the very earliest, the executor should create a timetable with the known tasks. If you’ve never done this before, there’s no shame in enlisting help from a qualified professional. Be realistic about your familiarity with tax and legal issues and your organizational skills.

Determine with your estate planning attorney whether probate is necessary. Is the estate small enough for your state’s laws to allow you to expedite the process? Some jurisdictions can do this, others do not.

If an estate plan was created and executed properly, many assets may not need to go through probate. Assets like IRAs, joint tenancies, accounts that are POD, or Payable on Death and any assets with named beneficiaries, and assets owned by a living trust do not require probate.

Gather information about family owners or others who may have a claim to the estate and who may have useful information about the assets. You’ll need to locate and notify heirs of the decedent’s passing.

Others who need to be notified, include charities named in the will. You’ll need to identify prior transfers to charities that were partial transfers, such as Charitable Remainder Trusts. If there is a charitable remainder trust with a retained lifetime income interest, it will need to be in the estate tax return, albeit with an offsetting estate tax charitable deduction.

Locate the important documents, including the will, any correspondence relating to the will, any letters explaining the decedent’s wishes, deeds, trusts, bank and brokerage statements, partnership agreements, prior tax returns, federal and state tax forms and any gift tax returns.

An estate planning attorney will be able to help determine ownership issues, including identifying assets and liabilities. This includes deeds, vehicle titles, club memberships, personal possessions and business assets, including copyrights and patents.

Social Security will need to be notified, as will Medicare, pension administrators, Department of Veteran Affairs, the post office, trustees, and any service providers.

Filing taxes for the last year of the person’s life and their estate tax filing needs to happen on a timely basis. Even if an estate tax return may not be required, it is useful to file to establish date of death values for assets. It is important to resolve income tax statute of limitation issues and any IRS or state examination issues.

Estate administration is a big job, especially if you’ve never done it before. Having the help of an experienced estate lawyer can alleviate much of the worry that comes with settling an estate.

Reference: Accounting Web (March 19, 2021) “Checklist for Working With a Decedent’s Estate”

 

Long-term_Care_in_Richmond_Virginia

What Is Private Duty Care?

Private duty care is necessary, if a senior requires more care than a family caregiver can provide. Private duty care can be quite affordable.

A source of professional quality home care is a strategy to assist the elderly in living safely and independently, says Florida Today’s recent article entitled “One Senior Place: Private duty care may be answer for some families.”

A great first question to ask a senior, is where they see themselves aging. If the answer is “at home as long as possible,” then private duty care may be worth considering. This type of care can include:

  • Meal planning and prep
  • Companionship, conversation and socialization
  • Grocery shopping and running errands, like picking up prescriptions at the drugstore
  • Alzheimer’s and dementia care
  • Calendar management
  • Light housekeeping, laundry and changing linens;
  • Medication reminders
  • Going with the senior to appointments, such as the doctor, church and salon; and
  • Assistance with bathing, dressing, feeding and walking.

Private duty care can be provided in a number of home settings, including private homes, independent living communities, assisted living facilities, as well as long-term care facilities. The cost is typically not covered by medical insurance, but long-term care insurance policies often will cover the cost of private duty care.

Here are a few of the benefits of private duty care:

  • Private duty care can help with these daily living activities.
  • Seniors who get help with meal planning and preparation are more likely to maintain good nutrition, which means a better chance of remaining active and independent longer.
  • It’s hard for seniors to get out and socialize as they’d like. A caregiver provides the opportunity for continued socialization, by providing transportation to events or just visiting.
  • Private duty can give a family caregiver some down time.

Seniors, if you plan to stay at home, consider making private duty care part of your plan.

Reference: Florida Today (March 16, 2021) “One Senior Place: Private duty care may be answer for some families”

 

long-term care planning

Court Victory for Adults Caring for Parents at Home

An appeals court in New Jersey recently reaffirmed the state’s regulation that allows older adults to transfer their homes to adult caregiver children without Medicaid penalty, reports an article titled “Major Victory for Adults Who Provide Home Care for Parents” from The National Law Review. The regulation permits the home to be transferred with no Medicaid penalty, when the adult child has provided care to the parent for a period of two years. This allows the parents to remain at home under the care of their children, delaying the need to enter a long-term care facility.

Virginia has a similar rule.

New Jersey Medicaid has tried to narrow this rule for many years, claiming that the regulation only applies to caregivers who did not work outside of the home. This decision, along with other cases, recognizes that caregivers qualify if they meet the requirements of the regulation, regardless of whether they work outside of the home.

The court held that the language of the regulations requires only that:

  • The adult child must live with the parent for two years, prior to the parent moving into a nursing facility.
  • The child provided special care that allowed the parent to live at home when the parent would otherwise need to move out of their own home and into a nursing care facility.
  • The care provided by the adult child was more than personal support activities and was essential for the health and safety of the parent.

In the past, qualifying to transfer a home to an adult caregiver child was met by a huge obstacle: the caregiver was required to either provide all care to the parents or pay for any care from their own pockets. This argument has now been firmly rejected in the decision A.M. v. Monmouth County Board of Social Services.

The court held that there was nothing in the regulation requiring the child to be the only provider of care, and the question of who paid for additional care was completely irrelevant legally.

It is now clear that as long as the child personally provides essential care without which the parent would need to live in a nursing facility, then the fact that additional caregivers may be needed does not preclude the ability to transfer the home to the adult child.

The decision is a huge shift, and one that elder law estate planning attorneys have fought over for years, as there have been increasingly stricter interpretation of the rule by New Jersey Medicaid.

While Medicaid is a federal program, each state has the legal right to set its own eligibility requirements. This New Jersey Appellate Court decision is expected to have an influence over other states’ decisions in similar circumstances. Since every state is different, adult children should speak with an elder law estate planning attorney about how the law of their parent’s state of residence would apply if they were facing this situation.

Reference: The National Law Review (March 22, 2021) “Major Victory for Adults Who Provide Home Care for Parents”

 

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