Uncategorized – Page 4 – Kling Law Offices

E-Wills: Electronic Estate Planning May Be In Your Future

July 20, 2017/in Uncategorized/by Michael Kling

You have likely seen a dramatic “reading of the will” portrayed on TV, or in the movies. In reality, this scene rarely plays out. It may become more likely, however, as estate planning increases its reliance on technology. As electronic estate planning laws expand, we will move to comprehensive digital documents and video recording of wills and trusts being executed. These electronic documents and video evidence will be allowed to show the testator’s intent, mental capacity, and the authenticity of a will or trust. Instead of keeping paper documents in a binder, electronic documents and video recordings will be presented to beneficiaries visually, in a new digital world of “reading the will.”

Nevada is a leader among the states, having statutorily allowed electronic wills since 2001. Presently, the rules apply only to wills and testamentary trusts (created within a will), not other trusts or ancillary estate planning documents. While electronic wills are still not widely used, we are seeing a shift toward expanded acceptance of electronic documents, which may broaden our ability to rely upon technology as an integral part of both basic and comprehensive estate plans.

The Nevada statute allowing electronic wills, N.R.S. 133.085, maintains the traditional requirements that a testator must be of sound mind and at least 18 years old, and adds requirements aimed specifically at creating a valid electronic document, including:

The electronic will must be written, created, and stored in an electronic record;
It must contain the date, the testator’s electronic signature, and at least one authentication characteristic;
Is stored so that:
Only one authoritative copy exists;
The authoritative copy is maintained and controlled by either the testator or a person the testator designates as the custodian of the authoritative copy;
Any attempted alteration of the copy is readily identifiable; and
Any other copy is readily identifiable as a copy that is not the authoritative copy.
Under the current law, authentication may be a fingerprint, retinal scan, voice recognition, facial recognition, or a digitized signature. By inference, Nevada’s electronic will statute maintains the two, in-person witness requirement, but this may be changed in the future to allow video-presence. Other jurisdictions allow witnesses to be present with the testator via video conference and allow for the creation of electronic trusts. This means attorneys can facilitate signings when it is not practical for a testator to come to the attorney’s office or otherwise sign with proper formalities. The use of electronic wills, video witnessing, and the potential digital conversion of all of your estate planning matters creates an interesting future in which your estate plan can precede you into the cloud(s).

As life progresses, your needs will change, as will the technology available in creating your estate plan. Regardless of the technology used, consulting a knowledgeable attorney will insure you understand your options and plan in accordance with your goals and desires. At Kling Law Offices, we meld up-to-date legal opportunities with traditional relationship building to help you plan well now and well into the future.

Legal Access to Your Digital Assets and Property

June 15, 2017/in Uncategorized/by Michael Kling

Whether we realize it or not, most of us have substantial amounts of “digital property” or “digital assets” (such as email accounts, social media accounts, blogs, and even investment accounts). Do you know what happens to that property when you pass away? Federal legislation regarding digital property does not yet exist and most states rely on the terms of service or privacy policy of the service that manages the asset to determine what should be done when the owner dies.

In Nevada, as well as 25 other states, legislators have stepped in to create laws that will protect people’s digital assets, giving the decedent’s family the right to access and manage those accounts after the owner has died. Providing even more options is the Fiduciary Access to Digital Assets Act (revised in 2015). This Act allows personal representatives, trustees, or a person appointed by a court complete access to the deceased’s digital assets. Nevada will likely adopt this Act during the 2017 legislative session, which will add significantly to the tools available for accessing and managing a decedent’s digital assets.

Existing Nevada law, NRS 143.188, allows a personal representative to terminate a decedent’s accounts on electronic mail, social networking, messaging, and other similar web-based services. The law specifically does not authorize a representative to cancel financial accounts or to alter contractual obligations the deceased account holder had with the service provider. The law is also silent regarding access to, or use of, personal property that can access the decedent’s digital assets and media, which can be very limiting to a personal representative trying to identify and collect assets of an estate.

With adoption of the Revised Fiduciary Access to Digital Assets Act, the owner of a digital asset will be able to authorize his/her fiduciary to fully manage digital assets. This Act is designed to work in conjunction with Nevada’s existing laws on probate, guardianship, trusts, and powers of attorney. It simply extends a fiduciary’s authority to include digital assets, while maintaining the same fiduciary duties to act for the benefit of the represented person or estate. Under the new Act, authority can be conferred through a power of attorney, allowing the agent to:

1.Have access to any catalogue of electronic communications sent or received;

2.Have access to any other digital asset to which the individual has an interest;

3.Have the right to access any tangible personal property of the individual that is capable of receiving, storing, processing, or sending digital assets;

4.Take any action concerning the assets to the extent of the account holder’s authority, including the termination of the account holder’s account; and

5.Have access to the content of electronic communications sent or received.

It is important to consider both the risks and benefits of authorizing access to your digital assets and the content of your electronic communications. At Kling Law Offices, we would be happy to consult with you regarding your options for addressing digital assets as part of your estate plan.

A Spouse’s Right to Unused Tax Exemption Amounts

May 18, 2017/in Uncategorized/by Michael Kling

Are you married? Is it your first marriage, or a subsequent one for either you or your spouse? If you can answer “yes,” or if you have an idea you may be married in the future, you should become informed about the spousal right to transfer unused portions of the federal gift and estate tax exemption upon death.

In 2010 we gained the “Portability Rule” that allows one spouse to transfer at death the amount of any unused gift and estate tax exemption to the surviving spouse. Before this Portability Rule, any unused portion of the exemption remaining at death was lost under a classic “use it or lose it” framework. Portability allows the surviving spouse additional tax savings on later gifts, and upon death. In a recent decision favoring surviving spouses in second (or any) marriages, the Oklahoma Supreme Court required the Personal Representative of the estate to transfer the decedent spouse’s unused federal gift and estate tax exemption to the surviving spouse.

In the Oklahoma case, the Personal Representative was the decedent’s son by a prior marriage, the stepson of the surviving husband. It is also notable that through a Prenuptial Agreement, the surviving husband waived his right to any share of the decedent’s estate. The son, as the Personal Representative, refused to make the election required for transferring the unused exemption amount despite the fact the surviving husband offered to pay any costs and to prepare the necessary Federal Estate Tax Return. The son argued that the estate should be allowed to charge for the value of the unused exemption. He also argued that the Prenuptial Agreement prevented the surviving husband from receiving the unused exemption’s value as a share of the decedent’s estate.

The Court ruled in favor of the surviving husband, establishing several interesting points. It found that the surviving husband’s right to Portability of the decedent’s unused exemption amount was a beneficial interest in the estate held independently of any rights as an heir. As such, the Prenuptial Agreement had no bearing on transferring the exemption. The Court also held that the fiduciary obligations of the Personal Representative to preserve assets of the estate applied, requiring him to preserve and transfer the decedent’s unused federal gift and estate tax exemption to the surviving spouse. Since the 2006 Prenuptial Agreement significantly pre-dated the 2010 Portability Rule, the Court determined it failed to address Portability simply because the concept was not part of the law at that time.

Every married couple should discuss the Portability election and consider how it may influence gifting choices and estate tax planning efforts. To avoid uncertainty, your estate planning documents should address the Portability election. If you have a Pre or Post Nuptial Agreement that is silent on Portability, revisiting its terms to address the issue would be wise. At Kling Law Offices, we believe making informed decisions is the key to having an estate plan that truly reflects your goals and desires. Call us today for your free consultation.

What is Undue Influence in Estate Planning?

April 13, 2017/in Uncategorized/by Michael Kling

Stories abound regarding the “unfair” treatment of beneficiaries under a loved one’s will or trust. The reason someone received favored treatment is often identified as “undue influence.” The complaint generally sounds like, “but for his/her influence, I would have received a better inheritance.” However, we all know beneficiaries do not have to be treated equally. In light of this, you might be asking, what is “undue influence” and when does it concern me?

Undue influence occurs when someone exerts pressure on an individual, causing that individual to act contrary to his or her wishes and to the benefit of the influencer or the influencer’s friends. The pressure can take the form of deception, harassment, threats, or isolation. Often the influencer separates the individual from their loved ones in order to coerce. The elderly and infirm are often more susceptible to undue influence.

To prove a loved one was subject to undue influence in drafting an estate plan, you have to show that the loved one disposed of his or her property in a way that was unexpected under the circumstances, that he or she is susceptible to undue influence (because of illness, age, frailty, or a special relationship with the influencer), and that the person who exerted the influence had the opportunity to do so. Generally, the burden of proving undue influence is on the person asserting undue influence. If the alleged influencer had a fiduciary relationship with your loved one, however, the burden may be on the influencer to prove that there was no undue influence.

In 2011 Nevada strengthened its undue influence laws by creating a presumption invalidating certain bequests by will or trust. Under NRS 155.097(2) a transfer is presumed to be void if made to a person who: (a) drafted the will or trust; (b) is the caregiver to a dependent adult; (c) made arrangements for or paid for the will or trust to be drafted; or (d) is related to, affiliated with, or subordinated to someone described in (a), (b) or (c). Rebutting this presumption requires clear and convincing evidence that the transfer was not the result of fraud, duress, or undue influence.

Of course, there are exceptions to the undue influence rule. The primary exception is for transfers to a spouse. Another exception applies if a beneficiary inherits less than that beneficiary would receive through intestate succession (as if the person died without a will), including probate and non-probate assets, then the presumption will not apply. Lastly, obtaining a Certificate of Independent Review from an attorney will overcome the presumption.

Thoughtful planning and a good relationship with your attorney can help you protect yourself and your assets during life. It also helps ensure your estate is eventually distributed according to your wishes—free from the undue influence of a wrong-doer. At Kling Law Offices, we offer complimentary consultations regarding these matters so you can have the peace of mind you deserve. Call us today for your appointment.

Eliminating Capital Gain Taxes: Here’s How

March 16, 2017/in Uncategorized/by Michael Kling

Although it is often said that nothing is certain except death and taxes, informed planning can help you avoid or minimize capital gains taxes. Talking to your estate planner about options can result in significant savings.

What is capital gain? Capital gain is the difference between the “basis” in property and its selling price. The basis is usually the purchase price of property. If you purchased a house for $250,000 and sold it for $450,000 you would have $200,000 of gain. It is important to note that basis can be adjusted to include capital improvement expenditures.

How much is the tax? Most taxpayers fall into the 15% capital gains tax rate. There are three main exceptions. First, property owned for less than a year is subject to short-term capital gains tax rates, which mirror income tax rates. Second, earners in the 10% or 15% income tax brackets (for 2016) have 0% federal tax on capital gain. Third, earners in the 39.6% income tax bracket (for 2016) are subject to a 20% federal capital gains tax rate.

The personal residence exclusion. Up to $250,000 of gain on the sale of your personal residence can be excluded ($500,000 for married couples). To qualify, you must have lived in and owned the house for at least two out of the five years prior to the sale. If you are a nursing home resident, the two-year requirement is reduced to one year.

Carry-over basis. If someone gives you property, you receive it with his or her basis. Thus, if your parents give you the vacation home they bought years ago for $25,000 and its fair market value is now $500,000, your basis will be $25,000. If you sell it at market value, you will have a taxable capital gain of $475,000 and no personal residence exclusion, unless you move in for two years before selling.

Offsetting losses. Each year you can offset capital gains with capital losses to minimize taxes. For example, if you sell the vacation house for a gain, you could also sell stock that has gone down in value, creating a loss that offsets the gain on the house sale. In some instances, you can carry over loss from one tax year to the next to offset future gains.

Step-up in basis. By comparison, the basis of inherited property is its date of death value. Thus, inheriting that vacation home from your parents would result in its basis being adjusted to $500,000. If you sell the house for market value, you will not have taxable capital gains. An advantage of basis step-up is also administrative. It is often easier to determine the value of assets upon death than it is to establish what the deceased originally paid for the property.

To learn more about eliminating capital gain taxes with proper estate planning, please contact Kling Law Offices for a free consultation. By understanding and considering these rules, you can save on capital gains taxes and avoid possibly expensive mistakes.

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