Uncategorized – Page 8 – Kling Law Offices

Why Advance Directives Matter

November 17, 2015/in Uncategorized/by Michael Kling

In mid-October news broke that basketball player Lamar Odom was found unconscious in a brothel and hospitalized in Las Vegas. In the early days of his hospitalization, it was determined that Odom’s divorce from reality TV star Khloe Kardashian was not yet final, leaving her as the statutorily determined decision maker regarding her husband’s health care, even though the couple had been estranged for several years after their December 2013 divorce filing.

Watching this somewhat tangled situation play out in the media gives us the opportunity to point out an important estate planning lesson: advance directives matter. Without an advance directive, the patient’s spouse has priority to make medical decisions, followed by adult children, parents, adult sibling(s), and the nearest other adult relative. If you prefer to choose who will be making decisions on your behalf, your estate planning should include advance directives that specify your desires for medical treatment under certain specified conditions. In Nevada, we generally use two documents for this purpose: a Durable Power of Attorney for Healthcare Decisions and a Living Will.

Durable Power of Attorney for Healthcare Decisions

This document allows you to appoint an agent to make healthcare decisions for you if you are unable to do so for any reason. It becomes effective once your incapacity is certified by a physician and allows you to make detailed choices about the care you should receive and what decisions your agent is allowed to make on your behalf. As you choose, your agent may consent, refuse to consent, or withdraw consent for medical treatment, and can make decisions about life-sustaining treatments. Unless you state otherwise, your agent will have the same authority to make medical decisions as you would.

Living Will

The Living Will, which is also known in Nevada as a “Declaration,” requests a physician to withhold or withdraw life-sustaining treatment. However, a Living Will only goes into effect if (i) you have an incurable or irreversible condition that without life-sustaining treatment would result in death; and (ii) you are unable to communicate.

The Living Will provides what steps should be taken concerning life-sustaining treatment while a Durable Power of Attorney for Health Care can be much broader in scope as it can cover any medical condition, not just decisions concerning life-sustaining treatment.

Nevada’s Secretary of State’s office has an electronic Living Will Lockbox where you can lodge a copy of your advance directive. This creates a simple and secure means to ensure that your medical wishes are followed. You choose who has access to your Lockbox documents and your agent or physician can retrieve a copy of your Living Will during an emergency or illness.

Please call our office about creating or updating your advance directives to give you the peace of mind you deserve.

Inherited IRAs: Key Points & Deadlines You Need to Know

November 15, 2015/in Uncategorized/by Michael Kling

During your lifetime, you can designate the beneficiary of your choice to inherit your IRA. For most people with families, this would include your spouse, your children, and other individuals. However, you can also name a charity, a trust, or your own estate as a beneficiary of your IRA. In most instances, the beneficiary you designate will not affect how quickly your retirement plan must be paid out during your lifetime.

Upon your passing, the beneficiaries who inherit your IRA will be forced to take “Required Minimum Distributions” once they own the assets. The payout options available to individual beneficiaries generally depend on (1) whether you died before your own “Required Beginning Date,” and (2) who remains a designated beneficiary on September 30^th of the year following your death. For most retirement account owners, April 1^st of the year after you turn 70-1/2 will be the your “Required Beginning Date”—so it matters to your beneficiaries whether you die before or after this date.

If you die before your “Required Beginning Date,” your beneficiary can stretch the payout over his/her lifetime. If you die after your “Required Beginning Date,” the age of the beneficiary will determine how quickly the assets must be paid out. If you name young beneficiaries, the tax-deferral of your retirement assets could be stretched out over decades because IRS rules allow individual beneficiaries to use their own life expectancies in calculating payouts for inherited IRAs. If you named multiple individuals as beneficiaries and the account is not split into separate accounts, the oldest person’s lifetime will control the payout schedule.

If you have named non-individuals as primary beneficiaries, this could limit the payout options available to individual beneficiaries. Non-individual beneficiaries can be removed by disclaimer or distribution if handled properly and accomplished by September 30^th of the year after your death.

These are the key dates you and your beneficiaries should keep in mind:

December 31^st of the year of death: Deadline for the decedent’s final Required Minimum Distribution.

Nine Months after date of death: Deadline for beneficiaries to make qualified disclaimers.

September 30^th of the year after death: Deadline for determining Designated Beneficiary. Before this date, undesirable beneficiaries can be eliminated from the pool of persons eligible to become the Designated Beneficiary by distribution or disclaimer.

October 15^th of the year after death: Deadline for re-characterizing the decedent’s Roth IRA conversion or for re-characterizing a regular contribution to a Traditional or Roth IRA.

October 31^st of the year after death: Deadline to provide Trustee documentation to qualify a trust beneficiary as a retirement account’s Designated Beneficiary for purposes of making Required Minimum Distributions after the account owner’s death.

December 31^st of the year after death: Deadline for setting up separate accounts so each beneficiary can make Required Minimum Distributions over his/her life expectancy.

December 31^st of the year after death: Deadline for making first Required Minimum Distribution (with the exception of when the decedent died before reaching his/her own Required Beginning Date and the decedent’s spouse is the beneficiary).

Accumulating retirement assets takes time and hard work. For your beneficiaries to maximize the gift of inheriting an IRA, there are many important deadlines and rules to be followed. We strongly suggest you seek professional advice about naming your IRA beneficiaries and on managing an IRA inheritance.

Choosing a Guardian for Your Minor Children

October 16, 2015/in Uncategorized/by Michael Kling

One of the most important estate planning decisions you will make is choosing guardian(s) for your minor children. The key issue is deciding what will happen if both parents pass away. If one parent survives, he or she will generally have primary authority over minor children. Without a parent, minor children will be raised by a guardian—someone you nominate in your estate plan, or someone selected by the Court. Choosing a guardian is hard for the obvious emotional reasons, but addressing some practical issues will lead you to a sound and comforting decision.

Parenting Philosophy: What are the potential guardian’s religious, political, and moral beliefs? Ask the person(s) whom you would be trusting to shape your child’s beliefs about their parenting philosophy. While no one can replace you, having someone with similar personal beliefs raising your child would be better than the alternative.

Relationship With Your Kids How well does the guardian know your kids? Selecting someone who knows your kids and has a parenting style similar to yours would help your children feel more comfortable as they assimilate to a new environment. If the person is not already a parent, consider what you know about how they were raised, as that will influence how they act as a parent.

Age of the Guardian. The impact of the guardian’s age is difficult to assess. An older guardian may be an experienced parent, but could also be out of touch with educational trends and parenting styles. An older guardian could also possibly become ill and die before your children reach adulthood. A younger guardian, however, might struggle raising your children while starting a career or their own family, and an older adult child might not be ready to take on parenting in your absence.

Family Situation: Is the guardian married with minor or adult children? Is he/she single, with or without kids? A guardian who does not yet have children might find it difficult to become an instant parent. If the guardian already has children, you need to consider how your children will fit into the existing family. Considering the guardian’s family situation is key to understanding how the household environment will influence your children.

Where They Will Live. It is unlikely a guardian will move into your home to raise your minor children after you are gone. Rather, the minor children generally go live with the guardian, or the guardian buys a larger home in their current location to add your children into their family. You will need to consider whether you want your children raised in that location.

At Kling Law Offices, we will work with you to create an effective estate plan, including selecting appropriate guardians for your minor children. We focus on comprehensive and personal planning that addresses your family situation, your unique needs, and your wishes. Please contact our office for a consultation so you can put your plan in place.

5 Rights of Trust Beneficiaries

September 15, 2015/in Uncategorized/by Michael Kling

As a trust beneficiary, you may feel like you are at the mercy of the trustee. Depending on the type of trust, however, trust beneficiaries may have rights to ensure the trust is properly managed.

A trust is a legal arrangement through which one person, called a “settlor” or “grantor,” gives assets to another person (or an institution), called a “trustee.” The trustee holds legal title to the assets for another person, called a “beneficiary.” The rights of a trust beneficiary depend on the type of trust and the type of beneficiary.

For a revocable trust—meaning the person who set up the trust can change it or revoke it at any time—the trust beneficiaries have very few rights. Because the settlor can change the trust at any time, he or she can also change the beneficiaries at any time. Often a trust is revocable until the settlor dies and then it becomes irrevocable. An irrevocable trust cannot be changed except in rare cases by court order.

Beneficiaries of an irrevocable trust have rights to information about the trust and to make sure the trustee is acting properly. The scope of those rights depends on the type of beneficiary. “Current” beneficiaries are presently entitled to income from the trust. “Remainder” or “contingent” beneficiaries have an interest in the trust after the current beneficiaries’ interests expire. For example, a wife may set up a trust that leaves income to her husband for life (the current beneficiary) and then the remainder of the property to her children (the remainder beneficiaries).

State law and the terms of the trust determine exactly what rights a beneficiary has, but following are five common rights given to beneficiaries of irrevocable trusts:

Payment. Current beneficiaries have the right to distributions as set forth in the trust document.
Information. Current and remainder beneficiaries have the right to be provided enough information about the trust and its administration to know how to enforce their rights.
An accounting. Current beneficiaries are entitled to an accounting, which is a report of all income, expenses, and distributions from the trust. Usually trustees are required to provide an accounting annually. Beneficiaries may also be able to waive the accounting.
Remove the trustee. Current and remainder beneficiaries can petition the court to remove the trustee if they believe the trustee is not acting in their best interests. Trustees are obligated to balance the needs of current beneficiaries with those of remainder beneficiaries, which can be difficult to manage.
End the trust. In some circumstances, if all current and remainder beneficiaries agree, they can petition the court to end the trust. State laws vary on when this is allowed. Usually, the purpose of the trust must have been fulfilled or be impossible.
If you are a beneficiary in need of advice, we would be happy to consult with you about your rights. Please call Kling Law Offices for an appointment.

Who Should Be Your Executor and What Will They Do?

July 16, 2015/in Uncategorized/by Michael Kling

In creating your estate plan, you will select several individuals to help carry out your wishes. The person you choose to be your Executor* will be responsible for making sure your will and trust documents are administered properly after you have passed away.

The Executor can be any person of your choosing, and the first choice is often a spouse. Since your spouse presumably knows the details of your estate plan, assets, and your wishes, this can be an easy and wise decision. It is important to name successor Executors, however, in the event your spouse is not able or willing to serve as Executor upon your death. Other choices for your Executor may be a trusted friend or colleague. Selecting someone who has financial, accounting or legal experience can make the administration process smoother. The Executor can, and often should, be someone different from the person(s) you name as guardian over minor children. It is important to note that if you do not name someone, the Court will appoint an Executor for you—who may or may not be a relative or a person whom you would have chosen.

Your Executor has an obligation to preserve your estate’s assets, pay your debts and pay taxes due, as well as provide an accounting of actions taken and payments made. Eventually, the Executor will distribute estate assets to your heirs. The Executor owes a fiduciary duty to the estate and to the beneficiaries, meaning he/she could be held personally liable for failing to properly perform their duties. At any point in the process, your Executor can consult an attorney to assist in the administration process.

Immediately following your passing, your Executor will begin taking action by obtaining multiple copies of your death certificate and taking control of estate assets (“marshalling the assets”). The Executor will need to verify the value of assets, including financial accounts, personal and real property.

Your Executor must also notify all known creditors of your passing and verify debts. The Executor will prepare an Inventory of your estate and take action to preserve the value of your assets. This may include continuing insurance coverage for estate property. The Executor must also file (or hire an attorney to file) any applicable tax returns. Depending on the decedent’s residence and the location of assets, this might include multiple estate tax returns (state and federal).

The Executor is also responsible for preparing an Accounting that details all estate assets the Executor handled, any appreciation or depreciation of assets, all amounts paid for administration expenses, taxes owed by the estate, payments for the decedent’s debts and distributions made to the beneficiaries. The Executor is entitled to payment from the estate for performing these duties, which will be deemed ordinary income and should be included on the Executor’s personal tax return.

Our office routinely works with Executors to insure the necessary actions are timely and appropriately handled. Please call for an appointment if you would like a consultation about any of these matters.

*We are using the term “Executor” generically, to encompass all types of personal representatives, for purposes of this article.

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