Remember how, starting a few years ago, you had to sign a “HIPAA” form when you went to the doctor’s office? HIPPA stands for the Health Insurance Portability and Accountability Act of 1996.
One of the things that HIPAA does is strictly enforces the privacy of patients’ medical records. So, if a doctor releases your medical records to the wrong person, the doctor can face harsh penalties.
What does all of this have to do with estate planning? If you have an Advance Medical Directive that does not have HIPAA-friendly language in it, your healthcare agent might not be able to get access to your medical records if you become incapacitated. What’s worse, your healthcare agent might not even be able to get your doctors to talk to him or her about your medical condition. In fact, in order to get access to your doctors or medical records, your healthcare agent might have to go through the courts.
So, without the right HIPAA language, your Advance Medical Directive might not be very helpful. What can you do?
Simple – just have your estate planning attorney take a look at your incapacity planning documents. Your attorney can let you know in a matter of minutes whether your documents contain the appropriate HIPAA language. If they don’t, you can have new, HIPAA-friendly documents drawn up. And you’ll have the peace of mind of knowing that your incapacity plan will work when you need it.
The answer to this question is “it depends.” The federal gift tax is assessed on property that’s given from one person to another, for which full market value is not paid in return. The exception to this is that gifts of a present interest in property to a spouse who is a citizen of the United States are exempt from the gift tax. This is because citizen-spouses are eligible for the “unlimited marital exclusion.”
Non-citizen spouses, on the other hand, are eligible for an annual exclusion that’s greater than the annual exclusion afforded to non-spouses. For 2010, the annual exclusion for a spouse who is not a U.S. citizen is $134,000. On the other hand, the regular annual exclusion amount for this year is $13,000.
So, we’ve established that if you’re married to a non-citizen, you may have to pay tax on a gift you’ve given to him or her.
But what about the term “present interest”? The IRS differentiates between giving a “present interest” and a “future interest” in property. If you give a present interest, it means you give the whole gift, right away. A future interest, on the other hand, means that you’re giving your spouse a gift he or she won’t have full control over or use of until some point in the future.
For example, if you give your spouse a home, outright, then you’ve given him or her the gift of a present interest in the home. On the other hand, if you give your spouse a home, but give your mother the right to live in the home for her lifetime first, then you’ve given your spouse the gift of a a future interest in the home. Your spouse does not get full use of the home until your mother passes away.
Whether or not your spouse is a U.S. citizen, gifts of a future interest in property are subject to gift tax. Who pays the tax? The person giving the gift.
It’s called green burial, and it’s a relatively new alternative to the traditional options of being buried in a casket or vault with a headstone, or being cremated.
The goal of green burial is to make sure that the burial site stays as natural as possible and that the body is allowed to recycle as naturally and efficiently as possible. This includes planting native trees or shrubs around the grave instead of erecting a headstone or other man-made monument. It also includes using a biodegradable casket or a burial shroud instead of the traditional concrete vault.
Not all cemeteries allow green burial methods, so a number of green – or natural – cemeteries have been established to accommodate those who want to be buried without being embalmed and without the traditional casket and monument. The first modern green cemetery was established in South Carolina in 1998. Since then, green cemeteries have been added from coast to coast.
Supporters of green burial point out not only the environmental benefits to this method of making your final arrangements, but also its cost-effectiveness. Without the need for embalming, pricey coffins and expensive headstones, the expense of a funeral and burial can be reduced by thousands of dollars.
If you’re considering a green burial, you may want to discuss your plans with friends and family members. A green burial has to occur quickly after death, and generally does not allow for the traditional viewing or visitation. It’s a good idea to let your loved ones know what to expect – especially if they’re not familiar with the philosophy behind your choice.
While many people choose a family member or friend to serve as Successor Trustee for their Revocable Living Trust, this is not the only option. Especially for larger trusts, a better option might be to name an institution, such as a bank trust department or a trust company, as Successor Trustee. Why? There are several potential benefits.
First, although these institutions charge fees for their services, they also generally employ or have access to a variety of pre-screened experts to assist in managing your trust. A family member or friend may serve for free, but especially if your trust involves a large number or variety of assets, he or she will likely have to hire experts – from financial planners to tax advisors – to help with the job. And he or she may not choose the most qualified experts.
Also, an institutional trustee has the advantage of years of experience in managing a variety of trusts. An individual trustee is less likely to have this kind of experience and may be more prone to making mistakes, especially when it comes to handling complicated financial transactions.
One of the things an institutional trustee’s fees include is generally some type of professional insurance. So, if a mistake is made, your beneficiaries have recourse and can be compensated for any damage caused by a potential mistake.
Finally, an institutional trustee is a neutral third party who won’t be drawn into family conflict, or show undue favoritism to one beneficiary over another. On the other hand, an institutional fiduciary is likely less flexible and may be slower-acting than an individual trustee.
The size of your trust, the number of beneficiaries, and who your beneficiaries are – as well as the qualities of the potential individual trustees available to you - all have bearing on whether you select an institutional or an individual trustee.
By now, nearly everyone is aware that, as part of the 2001 Bush tax cuts, the Federal Estate Tax was phased out this year – for one year only. Now that 2010 is more than halfway over, anxiety is growing as to what will happen to the estate tax starting on January 1st of next year.
If Congress does nothing, then the estate tax will come back at pre-2001 levels, meaning that the rate of taxation will be 55%, and the exemption amount will be $1 million. Compare this to the 2009 estate tax, with a 45% rate and a $3.5 million exemption, and it becomes clear that many more Americans will be affected by the tax in 2011 if Congress does not do something soon.
So, what is Congress planning? At this point, that’s anyone’s guess. Several different proposals have been introduced that would phase in a permanent exemption in the $ 3 million to $5 million, with an estate tax rate of 35% to 45%, depending on the proposal. However, at the moment, it doesn’t look like any action is planned on Capitol Hill until this fall, or maybe until the end of the year.
Where does this leave you in terms of your estate plan? If you have assets, including your home, retirement accounts, and life insurance policies, with a total value of more than $1 million, then you’re in need of a good estate planning attorney. If Congress doesn’t take action by December 31, then the law will change automatically, and people who may never have expected to pay estate taxes will be in need of sound tax planning advice.
Because of the uncertainty surrounding this issue, it’s important that you have a flexible plan so that your estate can absorb the impact, regardless of what Congress decides to do.
Periodically, it’s important to review your estate plan, and make the necessary adjustments to ensure that your plan keeps pace with developments in your life and with legal developments. So, how do you go about making changes to your Will? The answer is that it depends on the types of changes you want to make.
If you need to make a minor change, like adding a specific bequest or updating the last name of a beneficiary who’s gotten married, then you may want to use a Codicil. A Codicil is a legal document that changes a specific provision of a Will, while leaving all of the other provisions exactly as they originally were. A Codicil needs to be signed and witnessed with the same formality as your original Will, so you’ll need to get the help of your estate planning attorney.
On the other hand, if you need to make a big change to your Will, such as disinheriting one of your beneficiaries; or if you need to make several small changes, you’ll likely want to have your estate planning attorney draw up a new Will for you to sign. This will make it easier for your executor to follow your intentions when the time comes to probate your Will and distribute your assets. The easier your Will is to read and follow, the less likely a Will contest becomes, saving time and money during the probate process.
There is no hard and fast legal rule that dictates when a Codicil should be used as opposed to when a new Will should be made. If there’s any doubt, the best thing to do is to check with a qualified estate planning attorney.