Wills, Trusts & Estates Archives - Page 7 of 10

The Howard Hughes Estate: A Cautionary Tale

Estates & Estate Planning, Wills, Trusts & Estates

I was scrolling through Netflix the other night and finally landed on The Aviator, which I haven’t seen in a while. The 2004 Scorsese film starring Leonardo DiCaprio tells the story of the eccentric aviation magnate and movie producer, Howard Hughes, who tragically battled OCD, paranoia, and chronic pain (from a near-death plane crash) and spent his later life as a hermit. That led me down a rabbit hole of internet research into the real Howard Hughes. As an estate planner, I naturally wondered what happened to his estate when he passed away in 1976. (Perhaps fittingly the aviator passed away in an airplane.)

Even if You’re Not a Billionaire, You Need an Estate Plan

Unfortunately, the tale of the Hughes estate is a cautionary one of what NOT to do.

Terrible, horrible, no good, very bad idea of NOT having a Will

Hughes—who was reputed to be one of the wealthiest men in the world—died intestate, meaning he died without a valid will. That can cause chaos, confusion, and cost ample time and money for regular folks. But, when your estate is worth billions like Hughes’ was, it causes a mass tangle of court proceedings. In the case of the Hughes estate, debate and disputes lasted a total of 34 years.

In the aftermath of his death, several documents were brought forth alleging to be the magnate’s will. All were deemed to be forgeries. A Nevada court determined Hughes died intestate, meaning the law determines how assets are distributed to heirs-at-law. However, Hughes died divorced (allegedly) and without any close relatives; he left no clear heir(s). This debacle of no will meant that many people came out of the woodwork claiming to be relatives.

5 Celebrities With Crazy Estate Plan Provisions

A Messy Web of Forgeries, Fraud, & Litigation

So, after years of attorneys, courts, and dubious claims, what actually transpired?

Eventually, $2.5 billion was split between 22 of Hughes legal cousins in 1983. (Undoubtedly he didn’t know some or even the majority of these people. It’s also been said he didn’t want his money to go to his distant relatives, but without an estate plan, his wishes were steamrolled by probate law.) In an interesting twist, a woman named Terry Moore came forth claiming she married Hughes on a boat in international in 1949 and that they were never divorced. She didn’t produce any proof of the marriage (like a marriage certificate), but the estate paid her a $400,000.

The Supreme Court even had to step in. They ruled in the messy dispersion of assets that the Howard Hughes Medical Institute owned Hughes Aircraft, which it then sold off in 1985 to General Motors for more than $5 billion. The Court also rejected lawsuits brought by Texas and California, claiming they were owed inheritance taxes, but the suits were eventually put to rest with settlements of $50 million and $150 million respectively in property and/or cash.

In 2010, more than three decades after Hughes passed, the last slice of Hughes pie (Summerlin residential development community near Las Vegas) was liquidated.

Think Estate Planning is Just for the Wealthy? Think Again!

Leave a Valuable Legacy

Undoubtedly, Hughes left his mark on 20th century American history. However, his legacy could have been cemented in the way he wanted (probably giving the bulk of his estate to the Howard Hughes Medical Institute and nothing to long lost cousins) if he would have had a proper estate plan created completed with valuable strategic tools like different trusts and charitable giving vehicles. While most of us will never have an estate valued even close to the likes of Hughes, we can be smart with what we do have and make certain what we choose is dispersed to whom we choose, when we choose. There’s no need for your assets to be tied up in red tape or be dispersed in a way that’s not fitting with your wishes.

5 Celebrities Who Died Without a Will

Contact me with your estate planning questions, or get started with my free, no-obligation Estate Plan Questionnaire, which will help you organize important information needed for the plan in one place.

February 15, 2019/by Gordon Fischer

Valentine’s Day For Married Couples: Give your Spouse a Worthwhile Gift

Estates & Estate Planning, Wills, Trusts & Estates

You’ve been perpetually reminded by commercials, Facebook ads, and the candy aisle at the store that everyone’s favorite pink, red, and chocolate-dipped holiday is coming up quick. In this #PlanningForLove series through February 14, I’m featuring different aspects of how estate planning oddly but perfectly fits in with a day all about love. For this post, I’m going to focus on married couples because, despite the commercialization and overpriced flowers, Valentine’s Day seems as good as time as any to celebrate your spouse!

Let’s face it, it’s a miracle any of us find a soul mate, a best friend, a partner in crime…whatever you call them…that not only tolerates all your weirdness on the daily, but also still loves you “for richer or poorer” and “through sickness and in health.” I can think of no better way to honor that kind of long-term commitment than to take the appropriate estate planning steps with your sweetheart in mind. I realize it may not be the most romantic gesture, but it’s WAY more valuable than stale chocolates or a heart-holding teddy bear. And, like your love, there is no expiration date on an estate plan.

For richer or poorer makes a lot of sense when put in the context that someday you are going to pass away and you probably want to pass your assets to your spouse (and heirs at law) while also minimizing the burdens. If you die without a will it will cost your beloved a lot of time and money, on top of anxiety and even heartache.

Estate Planning: On Valentine’s Day Skip the Heart Box & Go for Secure Storage

In sickness and health also directly relates to one of the main estate planning documents. For instance, say you were in an accident and were severely incapacitated. You would want to have your health care power of attorney established and kept updated (many spouses choose one another as the designated representative), so that important medical decisions could be made by someone you trust to do what’s in your best interest. The same goes for a financial power of attorney. There are many aspects of your separate finances you may want to designate to your spouse so they could settle or manage specific assets in the case that something happened to you.

Beyond the numerous benefits that come with the six main estate planning documents that all Iowans need (yes, all Iowans, young and old; rich and not wealthy!), what are the other considerations of spouses should have in regard to estate planning?

What’s Mine is Yours: Common Law Property

The majority of states, including Iowa, are called “common law property” states. (As opposed to the alternative—community property states—which applies to eight states.)

In this case, “common law” is simply a term used to determine the ownership of property acquired during the marriage. As in, the common law system provides that property acquired by one member of a married couple is owned completely and solely by that person. Of course, if the title or deed to a piece of property is put in the names of both spouses, then that property would belong to both spouses. If both spouses’ names are on the title, each owns a one-half interest.

If your spouse were to pass away in a common law state, his or her separate property is distributed according to his or her will, or according to intestacy laws without a will. The distribution of marital property depends on how the spouse’s share ownership—the type of ownership.

If spouses own property in “joint tenancy with the right of survivorship” or “tenancy by the entirety,” the property goes to the surviving spouse. This right is actually independent of what the deceased spouse’s will says. However, if the property was owned as “tenancy in common,” then the property can go to someone other than the surviving spouse, per the deceased spouse’s will. Of course, not all property has a title or deed. In such cases, generally, whoever paid for the property or received it as a gift owns it.

The Best Valentine’s Date Isn’t What You Think

‘Til Death do us Part: Forced Share Law

If married, technically your spouse cannot disinherit you. An Iowa statute allows spouses to take a “forced share” against the will. In short, the surviving spouse has a choice; the spouse can inherit any property bequeathed to him/her under the will, OR the spouse can take a forced share. So, even if a will leaves nothing for the surviving spouse, the surviving spouse can take a forced share against the will.

Under Iowa law (specifically, Iowa Code § 633.238), a surviving spouse that elects against the will is entitled to:

One-third of the decedent’s real property;
All exempt personal property that the decedent held; and,
One-third other personal property of the decedent that is not necessary for payment of debts and other charges.

In other words, a surviving spouse can choose (elect) after your death to basically ignore your will or trust that doesn’t provide for said surviving spouse, and take approximately one-third of your estate.

For example, if you left your entire estate to your children and not your spouse, your spouse can say, “You know, I don’t like this at all. I’ll take one-third of my dead spouse’s estate. Thank you!” And, pretty much just like that, boom, the surviving spouse can do so.

Preferred Portability: Unlimited Marital Deduction

The unlimited marital deduction is a money-saving must for married couples. The unlimited marital deduction is an essential estate preservation tool because it means an unrestricted amount of assets can be transferred (at any time, including at death) from one spouse to the other spouse, free from taxes (including the estate tax and gift tax). Note that the marital deduction is available only to surviving spouses who are U.S. citizens. If your spouse is not a U.S. citizen, look at other tools, such as a qualified domestic trust (QDOT), which may act to minimize or eliminate taxes.

Property Passage

If you acquired property (like a house or other significant asset) before getting married, take a look at re-titling property (such as a home) from sole ownership to joint tenancy. This means that if one spouse were to pass, the other would get the property without it passing through probate. (Depending on your situation, you could also consider “tenancy in common” as another option for holding property titles under multiple names.)

Joint Representation is Optional

Married couples often seek joint representation in estate planning, meaning they both utilize the same estate planning lawyer. (And, yes, you most definitely want to hire a qualified, experienced estate planner.) The benefits are obvious; joint representation can be cost-effective and can be more efficient since you can work together on a single Estate Plan Questionnaire in preparation to meet with the estate planning lawyer. Another advantage is that the joint representation somewhat forces open and honest communication between you as a couple as you make decisions on beneficiaries (such as children and grandchildren), executors, and disposition of property.

However, individual representation is, of course, an option and can help couples avoid conflicts of interest.) There are times when it is best for each spouse to seek separate legal counsel. One such time is when there are different interests that are at odds with each other. For example, if one or both people have children from a previous marriage/relationship that will be named as beneficiaries. There can be conflicting interests between stepparents and stepchildren when it comes to the estate. Additionally, if you both have your own individual estate planning lawyer, you may have more freedom to voice individual concerns, without having to audit your opinions in accordance with your partner’s desires.

All You Need is Love…and an Estate Plan

You’ve worked hard for the life you’ve built together with your spouse. This Valentine’s Day, give a gift that ensures your commitment will carry on even after one of you passes on. The best way to get started is with my free, no-obligation Estate Plan Questionnaire. You can also email or call (515-371-6077) me at any time. I’d love to explain more how an estate plan says, “I love you,” way better than a card ever could!

February 10, 2019/by Gordon Fischer

4 Major Reasons YOU Need a Will

Estates & Estate Planning, Wills, Wills, Trusts & Estates

Yes, YOU need a will. If you don’t have a will, it can cost your family and friends not only a lot of time and money, but also lots of anxiety and even heartache.

Here are four major (and certainly not the only) reasons wills are one of the most essential estate planning documents that you should most definitely have.

#1 Without a will, probate courts and the Iowa Legislature decide everything about your estate.

If you die without a will, you are leaving it up to the legislature/courts to decide who will receive your property. In some situations, even who will get to raise your children.

#2 Without a will, you cannot choose a guardian for your children.

You read that right. Without this essential estate planning document, the court will choose guardians for your children. One of the most important aspects of a will is that it allows you to designate who will be the guardian for minor children. This can ensure your children are cared for by the person that you want, not who the court chooses for you.

The Kids are Alright: Guardianship for Children

#3 Without a will, the probate court will choose your estate’s executor.

If you die without a will, the probate court is forced to name an executor. The executor of your estate handles tasks like paying your creditors and distributing the rest of your assets to your heirs. Of course, if the probate court has to pick who will be your estate’s executor there is always a possibility that you would not have approved of that person if you had been alive.

However, if you have this ever important document, it will name an executor who will be responsible for carrying out all of your final wishes, pay your bills, and distribute your assets just as you wanted.

#4 Without a will, you can’t give your favorite nonprofits charitable gifts from your estate.

If you die without a will, your estate assets—your house, savings, automobiles, property—will pass to your heirs under Iowa’s statute. This excludes you from the enormous potential to do good by donating charitable gifts to your favorite nonprofits in your will. Testamentary gifts can help ensure causes you care about are supported well into the future.

Do you have a will? Why or why not? I’d love to hear from you in the comments below.

For Iowans looking for a place to start their estate planning, check out my estate plan questionnaire. It’s free, and provided to you without any obligation. I’m also happy to discuss your individual situation to help determine what estate planning tools are best for you. Reach out via email or phone at any time.

February 1, 2019/by Gordon Fischer

Top 10 Estate Planning Goals

Charitable Giving, Estates & Estate Planning, Powers of Attorney, Wills, Trusts & Estates

An estate plan is simply a set of legal documents to prepare for your death or disability. The specific documents you’ll need depends on various factors, including the number, size, type of your assets, and your overall estate planning goals.

If forced to list the top 10 major components and the associated goals of a comprehensive estate plan, I’d list the following (in rough order of importance):

A plan for orderly disposition of all your property of your choosing.
Naming guardians to raise and care for minor children.
Naming fiduciaries to handle minor children’s assets.
A plan to help fund the charities you supported during your lifetime.
A financial power of attorney so you can name an agent to manage your financial decisions, if you are ever unable to do so, with as specific (or non-specific) directions to the agent as you desire.
A healthcare power of attorney so you can name an agent to manage your financial decisions, if you are ever unable to do so, with as specific (or non-specific) directions to the agent as you desire.
A plan for succession or sale of a business (often a close corporation or family business).
A plan to dispose of property in a tax advantaged manner.
Planning for life insurance to support those economically dependent on you and/or to provide liquidity for the estate.
Making known your wishes (whether simple or complex) regarding the disposition of your final remains.

Of course, any order of importance is unique to that individual. Someone with, say, minor children will find items #2 and #3 incredibly important. Someone else with adult children, or no children at all, but with a very large estate may look at #8 as quite significant. One list doesn’t fit all, just like there’s no one-size-fits-all solution for estate planning.

What are your estate planning goals? Feel free to share with others in the comments below.

Estate planning is a smart step you can take today. The easiest way to get started is with my free, no-obligation estate plan questionnaire. If you have questions or want to discuss your individual situation, don’t hesitate to reach me by phone (515-371-6077) or email.

January 10, 2019/by Gordon Fischer

(Legal) Word of the Day: Trust

Legal Word of the Day, Trusts, Wills, Trusts & Estates

In my ongoing efforts to break down the legalese barriers that tend to separate lawyers from the real world, and have increased quality communication, here’s another Fun with Legal Words post. Today’s word is “trust.”

In this context, and in the simplest terms, a trust is a legal agreement between three parties: settlor, trustee, and beneficiary. Let’s look at each of these three parties, and then delve more into how a trust works.

Settlor

All trusts have a settlor, sometimes called the “donor” or “trustor.” The settlor creates the trust, and also has legal authority to transfer property to the trust.

Three Parties to a Trust & the Doctrine of Merger

Trustee

The trustee can be any person or entity that can take title to property on behalf of a beneficiary. The trustee is responsible for managing the property according to the rules outlined in the trust document and must do so in the best interests of the beneficiary.

Beneficiary

The beneficiary is the person or entity benefiting from the trust. The beneficiary can be one person/entity or multiple parties (true also of settlor and trustee). Multiple trust beneficiaries do not have to have the same interests in the trust property. Also, trust beneficiaries do not have to even exist at the time the trust is created (such as a future grandchild, or charitable foundation that hasn’t been set up yet).

Trust Property

A trust can be either funded or unfunded. By funded, we mean that trust property has been placed “inside” the trust. This property is sometimes called the “principal” or the “corpus.” A trust is unfunded until property are transferred into your name as trustee of the trust.

Any Asset

(Legal) Word of the Day: Property

Any asset can be held by a trust. Trust property can be real estate, intangible property, business interests, and personal property. Some common examples of trust property include farms, buildings, vacation homes, money, stocks, bonds, collections, personal possessions, and vehicles.

“Imaginary Container”

We speak of putting assets “in” a trust, but assets don’t actually change location. Think of a trust as an “imaginary container.” It’s not a geographical place that protects something (such as a garage protects your car), but a form of ownership that holds it for your benefit. For instance, on your car title the owner blank would read “The John Smith Trust.” It’s common to put real estate (farms, homes, vacation condos) and entire accounts (savings, checking, credit union, and brokerage accounts) into a trust.

After the trust is funded, the trust property will still be in the same place before the trust was created—your land where it always was, your car in the garage, your money in the bank, your stamp collection in the study… The only difference is the property will have a different owner: “The Jane Jones Trust,” not Jane Jones.

Transfer of Ownership

Putting property in a trust transfers it from personal ownership to the trustee, who holds the property for the beneficiary. The trustee has legal title to the trust property. For most purposes, the law treats trust property as if it were now owned by the trustee and trusts have separate taxpayer identification numbers.

But, trustees are not the full owners of trust property. Trustees have a legal duty to use trust property as provided in the trust agreement and permitted by law. The beneficiaries retain what is known as equitable title: the right to benefit from trust property as specified in the trust.

Assets to Beneficiary

The settlor provides terms in a trust agreement as to how the fund’s assets are to be distributed to a beneficiary. The settlor can provide for the distribution of funds in any way that is not against the law or against public policy.

Types of Trusts Almost Limitless

The types of trusts are almost limitless. Trusts may be classified by their purpose, duration, creation method, or by the nature of the trust property.

Benefits of Trusts

The potential benefits of trusts are immense. The benefits include avoiding probate (and other costs savings), privacy, and helping with every family’s unique needs.

Avoid Probate

A major benefit of trusts is avoiding probate. This is because, upon death, the trust dictates how trust property will pass. Avoiding probate saves your loved ones both time and money as the probate process is time-consuming, taking anywhere from several months to a year to complete. Sometimes, depending on the size of the estate, it can take even longer. Probate can also be expensive. Attorney’s fees alone can amount to two percent of the total estate, or even more in extraordinary cases. For some, two percent of their assets can be a very high number. Often, the cost of creating a trust is considerably less expensive than the cost of probate would have been.

Privacy

When a will is filed with an Iowa court upon death, the will becomes a public record. Trusts, on the other hand, remain private documents. Many folks, especially in small towns, have a strong desire to keep business affairs private.

Second Marriages and Blended Families

Trusts are also helpful in situations involving second marriages or blended families. When married couples have children from previous relationships, the surviving spouse has the ability to disinherit stepchildren. A trust can remedy this situation by providing lifetime benefits to the surviving spouse but, after his or her death, leaving assets to children and stepchildren.

Special Needs Trusts

Families with members who have special care needs must take a careful estate planning approach. For example, when a person receives government assistance due to a disability, a gift or inheritance might result in denial of benefits. However, assets can be left in certain types of trusts (for example, a special needs trust), to provide for supplemental needs while still allowing persons with disabilities to continue to receive benefits.

Smart Estate Planning: Special Needs Trust

Let’s Get Started

You probably still have some questions on trusts…which is why I’m here! Don’t hesitate to contact me. I offer a free one-hour consultation at which point we can discuss your personal situation, see if a trust is right for you, and set up the steps to take for success.

January 5, 2019/by Gordon Fischer

What Is a Trustee & What Do They Actually Do?

Trusts, Wills, Trusts & Estates

Three Parties to a Trust

There are three parties to a trust: (1) the settlor (sometimes called the donor or grantor); (2) the trustee; and (3) the beneficiary. Let’s talk about the “middle man” of this arrangement – the trustee.

(Legal) Word of the Day: Settlor (AKA Donor or Grantor)

Definition of Trustee

The trustee is the person who receives the property and accepts the obligation to hold the property for the benefit of the beneficiary. There can be one, two, or many trustees.

General Duties of Trustees

A person who accepts the role of trustee has numerous responsibilities. In particular, trustee owes several duties, which may be fairly summarized as follows:

The duty to be prudent, especially with respect to the investment of trust assets.
The duty to carry out the terms of the trust.
The duty to be loyal to the trust and administer the trust solely for the benefit of the beneficiaries.
The duty to give personal attention to the affairs of the trust.
The duty to provide regular accounting to the beneficiaries.

Court Can Choose Trustees

If the trustee chosen by the settlor is unwilling or unable to serve, and if the settlor has not chosen a successor trustee, a court will appoint a trustee to carry out the terms of the trust. ”A trust will not fail for want of a trustee.”

Individual Trustees & Corporate Trustees

A trustee can be one or more people or can be what is known as a corporate trustee. Many banks, other financial institutions, and even a few law firms have trust departments to manage trusts and carry out the duties of the trustee. These are professional trustees and, of course, charge fees for services rendered. But, there are no formal requirements for being a trustee, and individuals still often serve as trustee for family members and friends.

Questions? Let’s Talk.

This hopefully clarified the important role of the trustee to assist your estate planning decisions, but you may have questions…which is great! Contact me to discuss further the status of your estate plan and your trustee decisions. Reach me by email at gordon@gordonfischerlawfirm.com or phone at 515-371-6077.

January 3, 2019/by Gordon Fischer

Young People Should Be the Most Concerned with Estate Planning

Estates & Estate Planning, Powers of Attorney, Taxes & Finance, Trusts, Wills, Wills, Trusts & Estates

So, WHO needs an estate plan, anyway?

Who needs to be most concerned with estate planning? What age group? Ask Iowans this question, and I’ll bet most would conjure up the image of a retiree who just spent 50+ years working hard to acquire significant assets. Of course, it’s important for this demographic to have a quality estate plan, that’s fairly obvious.

But, imagine a young, married couple. They both have good jobs, live in a fine starter home, and have a baby.

This young couple tries to put away a little bit of money for savings, in a 529 college fund, and for retirement. Why should they worry about estate planning?

The truth is, this young couple should be just as concerned–arguably, even more concerned–with estate planning as the retiree.

Here are four reasons why:

Choosing guardians for minor children. In an estate plan, you can choose the guardians of minor children (e.g., children under age 18). If you should become incapacitated, or even die without any estate plan, an Iowa court would have no choice but to appoint a guardian for your children – but it may not be who you wanted or would have chosen. Better to have plenty of time to consider and make a careful, well-reasoned choice.

Show Your Kids You Love ‘Em with a Testamentary Trust

Save on fees, court costs, and taxes. A good estate plan can save you and your estate money on fees, court costs, and taxes. These savings can be even more critically important for a smaller estate (more likely when you’re younger), than for larger estate (more likely as you grow older). Often, young folks actually have the greatest need to save money to pass along the greatest amount they possibly can to family and loved ones.

Help favorite charities. Having an estate plan means that you can put into place immensely helpful donations for your favorite charities. Without an estate plan there’s no opportunity for you to help your favorite charities

Let’s Head Back to School! First Lesson is on Planned Giving

Life is uncertain. It may be awkward to talk about, but life isn’t guaranteed for any of us, young or old. There’s an old saying in estate planning circles that goes, “People don’t always die when they are supposed to.” Wives usually outlive their husbands, parents usually outlive their children, and so on, but not always. It is best to be prepared for anything and everything.

Who should be most concerned with estate planning? I actually think young people should be!

Whatever your age, if you are interested in estate planning (as everyone should want to check it off their list), a good place to start is my free Estate Planning Questionnaire. Questions? Want to discuss you personal situation? Contact me for a free consult!

November 28, 2018/by Gordon Fischer

What We Talk About When We Talk About Estate Planning

Estates & Estate Planning, Wills, Trusts & Estates

Gordon Fischer Iowa City At Desk-Estate Plan

Estate planning.

Not exactly material for scintillating conversation. In fact, I’d bet most of us like to avoid this topic because it can be confusing, and requires lots of decision-making. And, well, yes, it forces one to think about one’s own mortality. Estate planning, after all, is a roadmap about what you want to happen after you move on from this life. While it may not be a fun topic, it is indeed a necessary one.

Estate plan: you almost surely need one

Almost everyone needs some kind of estate plan. If you’re young, healthy, unmarried, have no children, and have no significant or unusual assets…perhaps you could talk me into the idea that you don’t entirely need an estate plan. Even in such (rare) cases, I strongly recommend making sure your beneficiary designations are completed and up to date (for example, on your bank/credit union savings accounts and retirement benefit plan). But, if you are married, and/or have kids, and/or have significant or unusual assets, and/or own part or all of a business, you most definitely need an estate plan!

What IS an estate plan, anyway?

What do we talk about when we talk about estate planning? There are six documents that should be part of most everyone’s estate plan. Plus, you should keep them updated and current. Also, don’t forget about assets with your beneficiary designations. For most Iowans, that’s good – six documents, keeping them current, and also remembering about those assets with beneficiary designations.

Sure, estate planning is complicated, but not that complicated. I’ll show you.

Six “must have” documents of your estate plan

There are six documents that should be part of most everyone’s estate plan:

We’ll go through each document briefly, so you have a sense of what each entails.

Estate Plan Questionnaire

Estate planning involves facing heavy questions, and depending on the amount of assets and beneficiaries you have, may take quite a bit of time and thought. I recommend clients (and even those who aren’t my clients) complete an estate plan questionnaire.

An estate plan questionnaire is an easy way to get all of your information in one place, and it should help you understand and prioritize estate planning goals. (I must also admit a questionnaire makes it easier for your attorney to build your estate plan!)

As with any project, it helps “to begin with the end in mind.” A questionnaire can help get you there.

Last Will and Testament

Now let’s get to the will. The will is the bedrock document of every estate plan, and it’s a little more complicated than other documents.

With your will, you’ll be answering three major questions:

Who do you want to have your stuff? A will provides orderly distribution of your property at death according to your wishes. Your property includes both tangible and intangible things. (An example of tangible items would be your coin collection. An example of an intangible asset would be stocks.)

Who do you want to be in charge of carrying out your wishes as expressed in the will? The “executor” is the person who will be responsible for making sure the will is carried out as written.

Who do you want to take care of your kids? If you have minor children (i.e., kids under age 18), you’ll want to designate a legal guardian(s) who will take care of your children until they are adults.

Power of Attorney for Health Care

A power of attorney for health care designates someone to handle your health care decisions for you if you become unable to make those decisions for yourself. This essentially gives another person the power to make decisions on your behalf. For example, if you don’t want to be kept alive with machines, you can clearly outline that in your power of attorney for health care. But keep in mind that power of attorney for health care isn’t just about end-of-life decisions – it can cover any medical situation.

Power of Attorney for Finances

The power of attorney for financial matters is similar, only your designated agent has the power to make decisions and act on your behalf when it comes to your finances. This gives them the authority to pay bills, settle debts, sell property, or anything else that needs to be done if you become incapacitated and unable to do this yourself.

It might be obvious by now, but I’ll say it just in case: choosing an agent for a power of attorney requires that you think long and hard about who would be best suited for the job and who you trust.

Disposition of Personal Property

Now, let’s get to the disposition of the personal property. This is where you get specific about items you want particular people to have. If you’re leaving everything to one or two people, then you may not need to fill this out. But, if you know you want your niece Suzie to have a specific piece of jewelry, and your nephew Karl to have that bookshelf he loved, then you’d say so in this document.

Disposition of Final Remains

We come to the disposition of final remains. This document is where you get to tell your loved ones exactly how you want your body to be treated after you pass away. If you want a marching band and fireworks shooting your ashes into the sky (that’s a thing, by the way), then this is where you make it known. It can be as general as simply saying “I want to be cremated,” or it can be specific and include details of plots you’ve already purchased or arrangements you’ve already made.

Choose your Final Resting Place & Maybe Plan a Party

Keep updated and current

OK, so you’ve gone to an estate planning lawyer, and these six “must have” estate planning documents have been drafted and signed. What else? You need to keep these documents updated and current.

If you undergo a major life event, you may well want to revisit with your estate planning lawyer, to see if this life event requires changing your estate planning documents.

What do I mean by a major life event? Some common such events would include:

The birth or adoption of a child or grandchild
Marriage or divorce
Illness or disability of your spouse
Purchasing a home or other large asset
Moving to another state
Large increases or decreases in the value of assets, such as investments
If you or your spouse receives a large inheritance or gift
If any family member, or other heir dies, becomes ill, or becomes disabled

This is just a short list of life events that should cause you to re consider your estate plan. There are many others.

Happy Pi Day: The One Constant in Estate Planning is Change

Don’t forget about your beneficiary designations

There are six “must have” estate planning documents, plus you need to keep them current. Also, don’t forget about your beneficiary designations. For example, savings and checking accounts, life insurance, annuities, 401(k)s, pensions, and IRAs are all transferred via beneficiary designations. These beneficiary designations actually trump your will.

Regarding assets with beneficiary designations, you must make sure that designations are correctly filled out and supplied to appropriate institution

What other documents might you need resides these six “must have” estate planning documents?

For most Iowans, probably the vast majority, what I’ve outlined above is enough. There may be folks who have more that $5 million in assets, or who have complex assets (for example, more than one piece of real estate), or own part or all of a robust business, or otherwise have unusual situations. In such cases, a trust may be helpful. But that will be more “advanced” estate planning. What I’ve described above is an excellent start.

See? That wasn’t so bad!

There it is in a nutshell. This is what goes into an estate plan.

Whether it’s complicated or simple, it does require some thought and time. But, it’s worth the investment – a proper estate plan can save you and your estate costs and fees; help your family and friends; and provide you peace of mind.

Perhaps most importantly, through proper estate planning, you can help your favorite charities in ways large and small. Really, without estate planning, it’s not possible, at your death, to help nonprofits you care about.

Begin today

Why not start right now on your own plan for the future with my free estate plan questionnaire? It’s provided to you free, without any obligation. I would love to discuss your estate plan with you; reach out at any time by email, gordon@gordonfischerlawfirm.com, or cell phone, 515-371-6077.

November 27, 2018/by Gordon Fischer

Retirement Benefit Plans and Charitable Giving

Charitable Giving, Wills, Trusts & Estates

Iowans’ retirement benefit plans hold tremendous wealth. Your IRAs, 401(k)s, 403(b)s, and so on, could have a huge impact on the charities you care about most.

Nonprofits should be aware that retirement benefit plans are incredibly underutilized for charitable giving. It’s in nonprofit stakeholders’ best interest to educate themselves and potential donors about the benefits of charitable giving of retirement benefit plans.

Categories of Charitable Giving

There are several ways to categorize charitable giving. For example:

Cash versus non-cash gifts
Planned giving versus “unplanned” giving
Income producing charitable gifts (such as charitable gift annuities and charitable remainder trusts) versus non income producing gifts
Gifts of different types or classes of assets

When discussing gifts of retirement assets, perhaps the most helpful categorization is lifetime gifts versus gifts at death. Lawyers sometimes call charitable gifts made during lifetime as inter vivos gifts and gifts at death as testamentary gifts.

Let’s start with testamentary gifts of retirement plan assets. This can be an easy and convenient way for your clients to support their favorite causes.

Testamentary Gifts of Retirement Plan Assets

Name charity as beneficiary

You can make a very meaningful gift simply by naming your favorite charity or charities as beneficiary of an IRA, 401(k), 403(b), or other retirement plan. Giving retirement assets in this way is quite easy. Just contact the institution holding your retirement plan, request a change of beneficiary form, fill the form out completely and correctly, and return the form. Typically naming a beneficiary in this way does not require drafting or amending a will or trust.

Keep in mind, however, that if the account holder is married, the spouse should be informed. Depending on the type and terms of the plan, the spouse may have to consent to the gift.

YOU Are a Super Hero: Charitable Giving Through Estate Planning

Tax rules may make testamentary gifts of retirement plan assets more favorable

Retirement plan assets are a good choice for testamentary gifts for tax reasons, too. In fact, the interplay of a few tax rules may make charitable gifts of retirement plan assets more attractive to you than charitable gifts of other kind of assets.

To understand why this might be so, we need to look at three important concepts:

Inheritance generally is not income.
Income in respect of a decedent (IRD)
Step-up in basis (also called, stepped up basis)

Inheritance is not income

Generally speaking, inheritance is not income, for federal tax purposes. Most inherited property passes tax-free.

(It’s true there is an Iowa inheritance tax. To keep this simple, I’ll focus on federal tax.)

Income in respect of a decedent (IRD)

Most inherited property passes tax-free, but not all. IRD is income that the deceased was entitled to, but had not yet received, at the time of death. IRD can come from various sources, including:

Unpaid salary, fees, commissions, and/or bonuses;
Deferred compensation benefits;
Accrued but unpaid interest, dividends, and rent; and
Distributions from retirement benefit plans

That’s right—retirement benefit plans are IRD.

Federal tax law provides for IRD to be taxed when it’s distributed to the deceased’s beneficiaries. IRD retains the character it would have had in the deceased’s hands.

Step-up in basis

Step-up in basis refers to the readjustment of the value of an appreciated asset for tax purposes upon inheritance. With a step-up in basis, the value of the asset is determined to be the higher market value of the asset at the time of inheritance, not the value at which the original party purchased the asset.

Interplay Between Tax-Free Inheritance, IRD, and Step-Up in Basis

There can be interesting interplay between tax-free inheritance, IRD, and step-up in basis, which may make testamentary gifts of retirement benefit plans very attractive. Here’s a simple example:

Alex dies, with three surviving children, Brett, Casey, and Dana. At her death, Alex owned three major assets: a house, stock, and an IRA. She bequests each child one asset. What result?

Assume:

Alex’s house is worth $100,000. She purchased it for only $20,000.
Alex owns shares of stock in Acme Company, worth $170,000. She purchased the stock for just $50,000.
Alex’s IRA is worth $200,000.

Alex’s house is inherited by Brett. There’s no federal tax on this transfer. Brett sells the house shortly thereafter. Still no federal tax. Although Alex purchased the house for only $20,000, Brett receives a step up in basis. Brett’s basis is $100,000, the value of the house. Since she sells it for $100,000, there’s nothing to tax.

When Casey inherits the stock, no tax—as there’s no taxable event. Later, Casey sells the stock. Although Alex purchased the stock for only $50,000, Casey receives a step up in basis. Casey’s basis is $170,000, the value of the stock. Since Casey sells the stock for $170,000, there’s nothing to tax.

How about Dana and the IRA? The IRA was registered with Dana as beneficiary, but no money is taken out of it immediately, so no taxes. When Dana withdraws money from the IRA, however, Dana must pay federal income tax of up to 39.6 percent. (It is true that Dana could defer withdrawals from the IRA for a long time, and of course such deferral reduces the impact of taxes.)

To sum up, in this hypothetical, the house and stock passed to the beneficiaries without any taxable event. The IRA passed to the beneficiary, but the beneficiary will have to pay taxes when she withdraws funds.

As can be seen, testamentary gifts of retirement benefits to a worthy charity can be tax-savvy. Let’s move on to inter vivos gifts of retirement benefits to charity.

Inter Vivos Gifts of Retirement to Charity

A helpful way to discuss charitable gifts of retirement plan assets during lifetime is to break them down into three categories:

IRA Charitable Rollover;
Required Minimum Distributions (RMDs), and
Non–RMDs

IRA Charitable Rollover

The federal law known as the IRA Charitable Rollover allows individuals aged 70½ and older to donate up to $100,000 from their IRAs directly to charities without having to count the distributions as taxable income. This gift transfer is called a “qualified charitable distribution” or “QCD.”

To be a valid QCD, there are two threshold requirements. First, you must be age 70½ or older. Second, the retirement plan account must be an IRA.

Age requirement of 70½

Taxpayers who are 70½ and older are required to make annual distributions from IRAs which are then included in the taxpayers’ adjusted gross income (AGI) and subject to taxes. The IRA Charitable Rollover permits those taxpayers to make donations directly to charitable organizations from their IRAs without counting them as part of their AGI and, consequently, without paying taxes on them. You can be either an IRA participant donating from your own IRA, or a beneficiary donating from an inherited IRA.

Again, the IRA Charitable Rollover requires you (whether owner or beneficiary) to be age 70½ or older. This is based on the year you reach age 70½, not the day you reach that age.

IRA Charitable Rollover is for IRAs only

QCD can only be made from traditional IRAs or Roth IRAs. Charitable donations from 403(b) plans, 401(k) plans, pension plans, and other retirement plans are not eligible for the IRA Charitable Rollover law.

Annual cap of $100,000

Your total combined IRA Charitable Rollover contributions cannot exceed $100,000 in any one year. The limit is per IRA owner, not per IRA. Also, this amount is not portable between spouses.

Eligible charities

Under the IRA Charitable Rollover, charitable contributions from an IRA must go directly to a public charity that is not a supporting organization. Contributions to client-advised funds and private foundations, except in narrow circumstances, do not qualify for tax-free IRA rollover contributions.

I must emphasize that QCD must go directly to charity. You can’t withdraw the money, and then give it to charity – rather, the IRA administrator must send QCD straight to the charity.

IRA Charitable Rollover & quid pro quo

What about gifts to your client from a charity, in return for QCD? You cannot receive any goods or services in return for QCD to qualify for tax-free treatment.

IRA Charitable Rollover and IRS substantiation

The IRA Charitable Rollover requires substantiation for the IRS. You must obtain written receipt of each IRA rollover contribution from each recipient charity.

Specific tax advantages of QCD

Keep in mind the specific tax advantages of QCD under the IRA Charitable Rollover. For Iowans who don’t itemize deductions, and so thereby don’t get to deduct their charitable contribution, the IRA Charitable Rollover obviously helps. This is even more applicable after the passing of the new tax law.

For Iowans who are “itemizers,” it may also be tax-advantaged, particularly for those who practice strategies like “bunching” donations.

IRA Charitable Rollover and QCD can’t fund split interest gifts

QCD must be a contribution that would be 100 percent deductible if paid from the owner’s non-IRA assets, so a split-interest gift will not qualify. Therefore, IRA Charitable Rollover funds generally cannot be made to a charitable remainder trust, charitable gift annuity, or pooled income fund.

No federal income tax charitable deduction with IRA Charitable Rollover

QCD, from the IRA Charitable Rollover, are excluded from your gross income for all purposes. Of course, there is no charitable deduction for any IRA Charitable Rollover funds.

IRA Charitable Rollover helps with three notable challenges to lifetime giving

Speaking very generally, there are three notable challenges to lifetime giving:

First, consider taxpayers who don’t itemize. Most fundamentally, a taxpayer has to itemize to take advantage of the charitable deduction. A taxpayer who uses the “standard deduction,” rather than itemized deductions, of course wouldn’t see any tax benefit from the charitable deduction.

Second, look at AGI percentage limits on charitable deductions. The federal income tax charitable deduction is limited to a certain percentage of adjusted gross income. The percentage is either 30% or 50%, depending on the type of property given and the type of donee charity.

Third, remember the Pease limitation. The “Limitation on Itemized Deductions” (known as the “Pease limitation,” after Donald Pease, the Ohio congressman who helped create the law), reduces most itemized deductions by 3 percent of the amount by which AGI exceeds a specified threshold, up to a maximum reduction of 80 percent of itemized deductions. The income thresholds for Pease vary by filing status.

You can readily see these three potential obstacles are just not at issue at all with the IRA Charitable Rollover. Again, simply put, QCD does not increase AGI.

IRA Charitable Rollover can fulfill RMDs

QCD, from the IRA Charitable Rollover, can fulfill RMDs. So, it’s an excellent way for Iowans over 70½ to both fulfill RMDs and help favorite causes.

Don’t confuse RMDs and QCDs

QCD and RMDs are actually completely different. It’s true that QCD counts toward RMDs, to the extent RMDs have not already been taken. But QCD can be taken, regardless of whether RMD for the year is more or less than $100,000; regardless of whether the plan participant has already taken RMD; and regardless of any other distributions from the IRA.

Charitable Giving and RMDS

The IRA Charitable Rollover applies only to IRAs. Generally, a retirement plan participant, aged 70½ or older, must take annual RMDs – whether the plan is an IRA, or a 401(k), another type of plan.

These RMDs would seem to be an ideal charitable gift. After all, if a plan participant must take an RMD anyway, why not use it to support her favorite causes?

A beneficiary who inherits a retirement benefit plan is also generally required to take annual RMDs. The same analysis would presumably apply.

Charitable Giving and Non-RMDs

Depending on individual circumstances, taxpayers may also choose to make lifetime charitable gifts using funds withdrawn from retirement benefit plans. Individuals over age 59½ may generally withdraw funds from retirement plans without penalty, make a gift with these funds, and then claim an offsetting charitable deduction. In most cases, charitable gifts made in this manner will be a “wash” for tax purposes.

Let’s Talk About Retirement

Whether you are a donor or a donee charity, I would be happy to visit with you about increasing your charitable giving. Please feel free to contact me any time for a free one-hour consultation. I am always available at gordon@gordonfischerlawfirm.com or 515-371-6077.

November 24, 2018/by Gordon Fischer

9 Reasons You Need a Lawyer to Write your Estate Plan

Estates & Estate Planning, Wills, Trusts & Estates

“The first thing we do, let’s kill all the lawyers.” —Shakespeare, Henry VI

This line is oft-quoted to suggest the Bard felt contempt for lawyers. But, it’s notable that Will, one of the most acclaimed writers of the English language, hired a lawyer (Francis Collins of Warwick) to craft a very detailed will.

DIY Will?

Still, a common question I get all the time is, “Can I write my own will? Do I really need an attorney?” It’s a fair question.

In this age, you can watch a YouTube video, read a DIY blog post, or ask your network on Twitter, to fix or build or make almost anything. There’s limitless information, which makes it feel like you can bypass the “pros” for a cheaper, simpler fix. So, yes, you can write your own will or use an internet service like LegalZoom.

The question, though, isn’t whether you can write your own will, with some research surely you can. The question is instead: should you write your own will? And, if so, will it be valid and hold up in court?

To this point, hypothetically, with lots of study, you could perform oral surgery on yourself, but should you do so and will it turn out well?

Terrible, horrible, no good, very bad idea of NOT having a Will

Economic Self-Interest?

Before I provide nine reasons you should hire a lawyer to draft your estate plan, let’s deal head on with the idea that my conclusion is based on my own economic self-interest. “Of course you want people to hire an estate planning lawyer, because you are one!”

But, I’m not saying you should hire a lawyer only if that lawyer is me, Gordon Fischer of Gordon Fischer Law Firm…although, if you’re interested, we can certainly schedule a free consultation with no obligation. Rather, I’m just saying you should hire a competent lawyer well-versed in estate planning and probate law. There are many fine Iowa attorneys. This is not about me and my money, this is about you and your money.

The plain truth is you need a lawyer to help you with your estate planning. Here are nine reasons why.

Reason #1: You need more than just a will

Always remember, and never forget, you don’t just need a will, you need an estate plan. While the two terms “will” and “estate plan” are often used interchangeably, this is wrong, as they are two different things. An estate plan is a set of legal documents to prepare for your death or disability. A will is just one of those legal documents, albeit an important one.

In fact, there are at least six “must have” estate planning documents you need. So, you don’t need to draft just one legal document and get it right, but several.

Reason #2: Save time and energy

Handing off the complex task of drafting a thorough estate plan to a responsible professional will alleviate an immense burden on you. It’s simply a lot of work to write an estate plan.

Reason #3: Save money

Without an estate plan, you and your estate may end up paying more in the long run in professional fees, court costs, and taxes. Using a flat rate with an attorney will be much more straightforward and to your long-term economic advantage.

Reason #4: Save more money

An experienced attorney knows where to look and what questions to ask to help you secure additional tax and financial benefits.

Reason #5: It’s complicated

I’ve mentioned this before, but this stuff is hard. It’s part art and part science. Every phrase, every word, can undo an estate plan.

Plus, the law is dynamically changing all the time. The federal government, Iowa government, agencies like the IRS, and courts at every level are changing the rules of the game constantly. It’s almost a full-time job keeping track of the current play of the rules, let alone learning the rules to begin.

Reason #6: One Shot

After you shuffle off this mortal coil, how many chances do you get to get your estate plan right? One! There is no second chance. Don’t get me wrong, you can always invest in a new estate plan if you realize your DIY attempt at an estate plan stinks. But, you shouldn’t have to if you get it right the first time! And, if something happens to you before you have the chance to make said second estate plan you’re out of luck. It’s done.

Plus, your estate plan will probably need updates and revisions following any big life or applicable legislative changes that you’ll want an attorney to help you address. (See reason #8 for more on this.)

Back to School: Political Science- How Changes to Legislation Impact Your Estate Plan

Reason #7: Objectivity

Along with expertise, lawyers offer objectivity. By working with a lawyer, you’re going to bring that extra voice of reason to bear on current and future estate planning needs. Is it a good idea to leave your entire estate to your dog Buster? Is your 18-year-old kid truly mature enough to handle your IRA worth a million dollars? A lawyer can give you direct, unvarnished, and unbiased advice.

Reason #8: The only constant in your life is change.

As your life changes, your estate plan must adapt. Perhaps you move to a new state. Maybe you have a kid and then some more kids. The kids grow up and have kids of their own. Throughout, perhaps you marry or divorce. Your financial situation significantly changes. All these life events, and many more, necessitate changes to your estate plan. You need a lawyer to tell you when your estate plan needs a tune-up and to perform the tune-up.

Reason #9: Lawyers themselves!

It’s funny to think about, but nonetheless true. After you die, who will determine if your estate planning documents are valid? Lawyers! State judges (who will, of course, be attorneys) are going to review your estate plan documents. These judges will determine whether your documents meet the necessary requirements. You don’t want to leave it up to a judge, trained as a lawyer, to try to figure out if your DIY documents are valid under the Iowa Probate Code.

Closing Argument

Have I convinced you? Or do you still want to go it alone?

Feel free to contact me any time to discuss further why you need a lawyer to draft an estate plan. I offer a one-hour free consultation, without any obligation. I can be reached any time at my email, gordon@gordonfischerlawfirm.com, or on my cell, 515-371-6077.

November 9, 2018/by Gordon Fischer