If you’ve taken the time to create a will, revocable trust, powers of attorney (for financial decision making and medical care), a living will, and or one or more irrevocable trusts, you’re already ahead of the curve.

But here’s the hard truth: even a well-thought-out estate plan can unravel over time, or in the face of challenges from disgruntled heirs, legal technicalities, outdated documents, or questions about your capacity. 

And while we all hope that our wills and plans don’t get challenged (or fail to work properly) you never know about relationships of children, their spouses or others who might influence them.

And any one or all of these factors can all place your legacy, and your family’s financial future, at risk. Worse yet, often, the greatest threats come not from poor planning, but from inattention, the passage of time, and a failure to coordinate beneficiary designations and asset ownership with your estate planning documents.

In our many decades of experience advising high-net-worth families, we’ve been very successful in helping them to avoid problems. But we’ve also seen too many court cases involving plans that falter, not because the intentions were wrong—but because the execution wasn’t bulletproof and the ongoing attention just wasn’t there.

And when plans fail, it’s not generally the lawyer or the judge who suffers—it’s your family, your wishes, and your legacy that pay the price.

This article is your step by step guide to doing what you can to protect what matters most and making sure that you’re getting great advice from your estate planning team.

Think of it as an insider’s “secret” checklist based on years of trust and estate experience, psychological insight, and enhanced communication strategies to prevent the most common (and most devastating) will challenge problems.

Key Areas Where Estate Plans Break Down (And What to Do About Them)

• Outdated Documents and Uncoordinated Planning
• Challenges to Mental Capacity or Undue Influence
• Informal or Improper Execution of Documents
• Failure to Update After Life Changes
• Poorly Chosen or Unprepared Executors, Trustees, Agents and Trust Protectors
• Lack of Clarity and Specificity in Key Provisions
• Missing or Incomplete Documentation of Formalities
• Lack of Coordination Between Estate Plan and Asset Titles/Beneficiaries
• Including a No Contest Clause – What you need to know
• Using the “wrong” approach for the situation

The ways to make the success and survival of your planning more likely: careful and regular planning, strategic thinking, documenting your “testamentary capacity” and health issues, as well as training and mentoring of trustees, executors, agents, and trust protectors, attention to coordinating TOD and beneficiary designations with your estate planning documents, are often ignored but can mean the difference between a successful and a flawed or failed plan.

Let’s take each one of the bullet points and issues one at a time and do a deeper dive to help to to protect your legacy.

1.Outdated Documents and Uncoordinated Planning Estate planning is not a one-and-done endeavor. Laws change. Tax rules shift. Your assets evolve. Children and grandchildren are born. Relationships and your thinking change.

Yet too often, people create a will or trust and put it in a drawer, untouched for years—or even decades.

An outdated estate plan is like an old map—it may have once been accurate, but now it could lead your loved ones straight into confusion, disputes about your intentions, and the legal quicksand of will disputes and litigation. Even the most thoughtfully crafted plan can fail if it isn't reviewed and aligned with real-life changes and financial accounts.

What you should do:

• Review your plan at least every 5 to 7 years—or sooner if there’s a major life event.
• Work with your financial advisers following the execution of your planning documents to ensure your will, trusts, powers of attorney, healthcare directives, and Joint ownership/TOD/beneficiary designations are in harmony.
• Consider using a coordinated asset alignment checklist with your estate attorney and other advisers to ensure your trust and titling are synchronized. This is always important but even more so if you’ve created a revocable or living trust where assets may need to be moved into the trust (or where you have created an irrevocable trust that also needs a tax return each year)

Admittedly, these things can take time (and most clients don’t want or need to pay lawyers to help them with beneficiary designations), but that review by you, and or with your advisers is a vital step to ensuring your plan works as you desired.

2. Challenges to Mental Capacity or Undue Influence This is one of the most common ways a will or trust gets challenged—particularly in affluent families. Allegations that you “lacked the capacity to execute the documents,” “weren’t of sound mind,” or were otherwise pressured into changes can devastate a plan.

The solution? Think like an attorney—and a psychologist.

• Use cognitive assessments contemporaneous with plan execution to document that you were able to act. Again, this is an additional expense, but we use these reports – especially where there is a known danger of a challenge – to minimize the likelihood of a challenge and/or to prevent a successful challenge.
• Document the reasons for your decisions—especially if you’re excluding or reducing a beneficiary’s share.
• Include professionals—such as doctors or psychologists—if you anticipate challenges.
• We also document planning meetings (and the execution) thoroughly, showing your clear reasoning, active participation, and awareness of implications.

3. Informal or Improper Execution of Documents Even the most beautifully crafted plan can be rendered invalid by sloppy execution. State law governs how documents must be signed and witnessed, and deviations create fertile ground for litigation.

• Always sign with proper witnesses and notaries present. Here at the firm, we make witnesses and a notary available to you for your convenience.
• Consider using neutral professional witnesses who can testify if needed.
• We also create a formal execution memorandum that includes date, location, attendees, and notes about the client’s demeanor and cognitive state.  This type of documentation can be vital if one or more of the witnesses or notary are deceased or otherwise unavailable when a will is challenged.

In short, we go beyond the minimum: We make sure the witnesses and notary are there for you and then document the formality of execution meticulously.

4. Failure to Update Following Life Changes Marriage, divorce, births, deaths, disability, financial changes, business succession, the growth or diminishment of asset values—should trigger a full review of your estate plan. Failure to adapt your plan to the passage of time, can leave unintended heirs in control, outdated fiduciaries in charge, or assets flowing where you never intended.

Worse, beneficiary designations or jointly titled accounts often supersede what’s in your will or trust.

If beneficiary designations or titling of assets through TOD designations haven’t been updated, your plan can be overridden without your heirs ever knowing.

What to do:

• Build a regular review cycle into your planning process.
• Create a “Life Event Checklist” for annual use.
• Proactively educate adult children and fiduciaries about changes (where appropriate). NOTE:  We offer regular training programs and customized “Family Meetings” and Training Sessions.
• Align beneficiary designations and joint ownership with your estate planning documents.

5. Poorly Chosen or Unprepared Executors and Trustees Selecting the wrong person can cause more harm than good. Even trustworthy individuals may lack the knowledge, temperament, or time to handle fiduciary responsibilities. And, even if you pick the right people at one point in your life, the time may come when that selection no longer makes sense.

What to do:

• Carefully select and perhaps even vet estate planning job holders & fiduciaries (executors, trustees, trust protectors and agents) with your attorney’s help.
• Consider using professional and or independent co-trustees for checks and balances.
• Prepare fiduciaries with clear instructions, tools, and education well before they’re needed.

6. Lack of Clarity and Specificity in Key Provisions Ambiguity is the enemy of good planning. Vague language around distributions, discretionary powers, or asset management leads to disputes, delays, and potentially court involvement.

And while ambiguity can never be completely eliminated, carefully reviewing the documents with your attorney and over time, can help to minimize ambiguity and to ensure higher levels of clarity.

What to do:

• Use precise language in trusts and wills and review “dispositive” clauses with your attorney.
• Include a “Letter of Wishes” or side memorandum that can help to clarify your intent and give important background information and context.

7. Missing or Incomplete Documentation of Formalities Courts place enormous weight on documentation. In litigation, our ability to point to our own and your own planning records, client memos, cognitive evaluations, and signed execution protocols often makes the difference between success and failure.

What to do:

• Verify that your legal counsel and that you maintain execution records, meeting notes, and planning memos.
• In cases of advanced age or where a you are excluding heirs, be sure that your legal counsel maintains good records and that a professional creates a written “Statement of Capacity and Intent” or other reports documenting mental state and abilities.
• Consider a secure, cloud-based archive for planning records. At UTBF we make one available (without additional cost and as part of your plan).

8. Lack of Coordination Between Estate Plan and Asset Titles/Beneficiaries   This is a silent killer of even the most sophisticated estate plans. If your assets are not titled correctly or your beneficiary designations contradict your trust or will, your plan will fail—plain and simple. It’s one of the most common—and most preventable—mistakes we see.

• Review asset titling and beneficiary designations with your estate attorney every five to seven years or sooner if there are significant changes.
• Create a written asset inventory/Personal Financial Statement and update it regularly.
• Coordinate beneficiary forms, TOD designations, and joint ownership of assets with the estate plan.
• Ensure all assets intended to flow through a trust are properly titled in the trust’s name.

9. Including a No Contest Clause – What you need to know   Some states, and Pennsylvania is one of them) allow you to include a clause in your will to disinherit a beneficiary under a will or trust if they challenge the will, trust or other aspects of your plan (and if that challenge is unsuccessful).

These clauses are known as “No Contest “ clauses and they can be a deterrent to a challenge.  However, the law around the use of these clauses is varied and complicated so be sure to discuss the many variations with your estate planning attorney.

10. Using the “Wrong” approach for the situation  While there’s almost never a “right” or “wrong” approach to estate planning but rather a series of options with different pros and cons, certain strategies can be way better than others depending on your personal circumstances and especially if you’re disinheriting a child or grandchild (or simply treating them differently than they might expect).

For example, if a will challenge seems highly likely, we might consider the use of a number of ways of transferring assets outside of the will even if that makes the planning more complicated or expensive.

Think of it this way, while wills can be challenged rather simply, living trusts, funded during life time are much harder to challenge.  Hey can be challenged but it is more complicated and often more expensive.

If the use of a will and revocable (and funded) living trust are also combined with the use of beneficiary designations to transfer assets to some heirs while intentionally excluding others it creates a more complicated overall plan, but one that is harder to challenge.

Conclusion: Bulletproofing Your Plan Isn’t Paranoia—It’s Smart Stewardship

Creating a thoughtful estate plan is a wonderful gift.

But keeping it updated, defensible, customized, carefully coordinated with other assets and legally solid is the only way to ensure that your wishes are honored—and your loved ones protected—when it matters most.

Because even the most well-intentioned estate plan can be undone by the passage of time, inattention, and uncoordinated asset ownership, proactive updates and comprehensive coordination are essential to ensure your plan stands when it’s needed most.

The good news?

With the right legal guidance and strategic thinking, you can anticipate and eliminate the most common threats. You can turn your estate plan from a document into more of a fortress.

In short, there are ways to make the success and survival of your planning more likely: careful and regular planning, strategic thinking, documenting your “testamentary capacity” and health issues, as well as training and mentoring of trustees, executors, agents, and trust protectors, attention to coordinating TOD and beneficiary designations with your estate planning documents are often ignored but can mean the difference between a successful and a flawed or failed plan.

If you’d like to explore how we help clients strengthen and protect their plans—and document every critical step along the way—reach out to us for a confidential review.

Because peace of mind isn’t just about having a plan. It’s about knowing that your plan will stand the test of time, scrutiny, and challenge.

If any of the following are true, call for a strategic review:

• Your estate is over $5 million dollars (including any and all assets and life insurance) if you’re single or over $10 million dollars if married,
• There have been changes in your wealth and or family relationships (such as births, deaths, divorces) since your last review
• Your last review was more than five years ago
• The executors, trustees, agents, and/or trust protectors that you nominated are no longer available or appropriate,
• You’ve purchased or already own life insurance policies and your assets exceed $5 million dollars,
• You have a family business, closely held business, or real estate that you want to consider moving to heirs now, rather than at death,
• Your heirs are now older and you wish to start educating them about their trusts, or other roles under your estate plan.

To schedule a telephone, Zoom, or in person review or strategy session, just call 610-933-8069 and speak to one of our friendly and helpful UTBF scheduling team members.

NOTE: If your estate (or combined estate with your spouse) is over $5 to $7 million dollars, this might especially interest you. 

In 2023, Pennsylvania Governor Josh Shapiro signed Senate Bill 815 (S.B. 815) into law, marking a significant shift in the state's treatment of grantor trusts for income tax purposes. If that sounds boring, you may want to keep reading as this opens an even better estate tax planning techniques for Pennsylvania citizens.   

Effective for taxable years beginning on or after January 1, 2025, this legislation aligns Pennsylvania's tax code with federal provisions, recognizing irrevocable grantor trusts and altering the tax responsibilities of grantors, trustees, and beneficiaries.

This article explores the nuances of the new law, its practical implications, and provides illustrative examples to show its impact on estate planning in Pennsylvania, and to help you know if this type of trust might be for you.

Background: Grantor Trusts and Previous Pennsylvania Tax Treatment

Federal Perspective on Grantor Trusts

Under federal tax law, a grantor trust is one in which the grantor (the trust “creator”) retains certain powers or interests, causing them to be treated as the owner of the trust's assets for income tax purposes. In many cases, these trusts are “out” of their estate, for estate tax purposes but they income tax liability remains for the grantors.  Consequently, all income, deductions, and credits of the trust are reported on the grantor's individual tax return, regardless of whether the income is distributed to beneficiaries. This treatment allows the trust's assets to grow without the burden of income taxes, as the grantor pays these taxes personally. It simultaneously shrinks the taxable estate of the grantor.

Pennsylvania's Previous Stance

Prior to the enactment of S.B. 815, Pennsylvania did not conform to the federal treatment of irrevocable grantor trusts. Instead, the state taxed these trusts as separate entities. Trustees were required to file a Pennsylvania Fiduciary Income Tax Return (Form PA-41), and the trust itself was liable for taxes on undistributed income, while beneficiaries were taxed on any distributed income. This discrepancy between federal and state tax treatments led to administrative complexities and potential double taxation issues, especially when grantors moved to states recognizing federal grantor trust rules.

Key Provisions of Senate Bill 815

Senate Bill 815 amends the Pennsylvania tax code to recognize irrevocable grantor trusts in alignment with federal tax provisions. The key aspects of the new law include:

• Taxation of Trust Income: Income received by a resident or nonresident trust, where the grantor is treated as the owner under Internal Revenue Code (IRC) Sections 671 to 679, will now be taxable to the grantor for Pennsylvania personal income tax purposes. This applies irrespective of whether the income is distributed to beneficiaries or retained within the trust. So, the growth of the trust can remain in the trust or be distributed.
• Relief for Trust Entities: Such trusts are no longer subject to Pennsylvania personal income tax on income or gains not distributed or credited to beneficiaries. This shifts the tax liability entirely to the grantor, simplifying the tax reporting process for trustees.
• Effective Date: The new provisions take effect for taxable years beginning on or after January 1, 2025.

Implications for Grantors, Trustees, and Beneficiaries

For Grantors

Grantors of irrevocable grantor trusts will now be responsible for reporting all trust income on their personal Pennsylvania tax returns. This change necessitates careful planning, as grantors must account for the additional income in their tax calculations and estimated payments. While this may increase the grantor's immediate tax liability, it offers the advantage of allowing trust assets to grow unencumbered by income taxes, effectively reducing the taxable estate.

NOTE: Your attorney can still draft a trust that is liable for its own taxes.  Be sure to get help deciding what’s best for you.

For Trustees

Trustees of grantor trusts will experience a shift in their administrative responsibilities. Previously, trustees were required to file Form PA-41 and handle tax payments on behalf of the trust. With the new law, the obligation to report and pay taxes on trust income transfers to the grantor. Trustees will no longer need to make estimated tax payments for the trust or issue tax documents to beneficiaries for income distributions, streamlining trust administration.

For Beneficiaries

Beneficiaries of grantor trusts will also see changes in their tax obligations. Under the previous system, beneficiaries were almost always taxed on income distributed to them from the trust. With the enactment of S.B. 815, the grantor assumes tax liability for all trust income, regardless of distribution. Consequently, beneficiaries will receive distributions free of Pennsylvania income tax, as the income has already been taxed at the grantor's level.

Estate Planning Considerations

The recognition of grantor trusts in Pennsylvania presents several estate planning opportunities and considerations:

• Income Tax Planning: Grantors should assess the impact of additional taxable income on their personal tax situation. Strategies such as adjusting withholding or making estimated tax payments may be necessary to avoid underpayment penalties. Speak to your lawyer and accountant.
• Interstate Tax Implications: For grantors residing in or moving to states other than Pennsylvania, it's crucial to understand how different states' tax laws interact with Pennsylvania's new provisions to prevent unintended tax consequences or overpaying taxes.
• Review of Existing Trusts: Trusts established prior to 2025 should be reviewed to determine if modifications are beneficial under the new law. This may involve amending trust documents or decanting existing trusts into new ones that align with the grantor's objectives and the current tax landscape.

Addendum: Illustrative Case Studies

The following examples might help to reduce any confusion about how the new law will work.

Case Study 1: The Business Owner’s Legacy Plan

Scenario: John, a successful business owner in Pennsylvania, sets up an irrevocable grantor trust in 2025 to transfer ownership of his closely held company to his children while maintaining some control over income distribution. Under the new law, all income generated by the business inside the trust is now taxable to John personally. His children, as beneficiaries, receive distributions free of Pennsylvania income tax.

Outcome:

• John pays the trust’s income tax liability, reducing his taxable estate over time.
• The trust assets grow without erosion from tax payments, benefiting future generations.
• Trustees are relieved of filing Pennsylvania tax returns for the trust, simplifying administration.

Case Study 2: Real Estate Investor’s Dilemma

Scenario: Susan, a Pennsylvania resident, owns multiple rental properties and places them in a newly created irrevocable grantor trust for asset protection and estate planning benefits to her heirs. Under the new law, all rental income is reported on Susan’s personal Pennsylvania tax return, rather than being taxed at the trust level.

Outcome:

• Susan’s taxable income increases, requiring adjustments to her estimated tax payments.
• The trust's principal grows without tax leakage, preserving real estate assets for her heirs.
• Beneficiaries can receive distributions without Pennsylvania tax liability, improving their net inheritance.

Conclusion

Pennsylvania’s new law recognizing grantor trusts represents a major shift in state taxation, aligning it with federal law and simplifying tax compliance for estate planners, trustees, and beneficiaries. While this change presents opportunities for wealth preservation and transfer, it also requires careful tax planning to mitigate increased grantor tax liabilities. Reviewing and adapting estate plans to accommodate this legislative update is crucial for maximizing tax efficiency and ensuring smooth wealth transitions for future generations.

What To Do Next:

If you are a grantor, trustee or beneficiary of an irrevocable grantor trust that was established prior to 2025, reach out to your estate planning attorney to review the document to determine if modifications are beneficial under the new law.  Our clients can reach the office at 610-933-8069 to set up a consultation.

If your estate exceeds $5 million dollars and you’re interested in passing assets to your heirs in this way, be sure to consult legal counsel and your income tax advisors.

The Central Premise: Maximizing Life Experiences

Perkins argues that the ultimate goal of wealth should be to fund a life rich in memories and fulfillment—not to leave behind a massive fortune.

In my experience, working with families of all levels of wealth, many people work tirelessly to grow their wealth, but they may sacrifice meaningful experiences or delay spending until it’s too late to fully enjoy it. In wealthy families, there is a drive to leave behind “generational wealth” and in more moderately wealthy families, there is a desire to make sure that the surviving spouse is provided for and that the parents do not “outlive” their money or become a burden on their children.

In an alternative take on these traditional views, Perkins suggests:

• Spending money during your most active years to fund your own personal experiences and shared family experiences.
• Gifting strategically during your lifetime to see your wealth make an impact.
• Reframing the idea of leaving a large inheritance as the only way to leave a legacy.

This perspective encourages a proactive approach to gifting, estate planning, and even philanthropy.

Note:  Gifting and actually doing what Perkins suggests should be simple, but there are a few traps and pitfalls that can be avoided with great estate planning and understanding the gift tax laws.  Here are two links that might help:

Navigating Gift Taxes: What You Need to Know About Large Gifts for Education, Weddings, and Home Purchases - What You Don’t Know Can Cause Trouble For Your Estate Plan and Your Heirs

Gifting and Other Vital End of the Year Estate Planning Ideas and Updates.

Also, if you already know that you want to make strategic gifts or to help with weddings, homes, educational expenses and more call 610-933-8069 for an estate planning & gifting strategy session.

Gifting: The Joy of Giving While Living

One of the most practical applications of Die With Zero is its approach to gifting. Perkins argues that instead of waiting to pass wealth down through an estate, parents should consider giving money to their children when it will have the most impact—during their 20s, 30s, and 40s, when they are building careers, buying homes, and raising families.

For mass affluent and wealthy families, this means:

• Helping Children Early: Providing financial support for weddings, down payments, or educational expenses when it matters most.
• Witnessing the Impact: Seeing how your gifts improve your children’s lives can be deeply rewarding and creates memories for both giver and receiver.
• Reducing Estate Tax Burdens: Strategic gifting during your lifetime reduces the size of your taxable estate while making the most of annual exclusions and lifetime exemptions.

Spending: Aligning Money With Your Life Stages

Perkins emphasizes the importance of aligning spending with the stages of life when you can enjoy it most. For example:

• In Your 50s and 60s: Spend on travel, experiences, and family time while you’re active and healthy.
• In Later Years: Shift focus to comfort and legacy projects, like philanthropy or supporting causes that matter to you.

This approach ties into retirement planning, as it encourages rethinking how much money is “enough” for a fulfilling retirement. Instead of over-saving, focus on funding a life filled with meaningful experiences.

Retirement Planning: Breaking the Over-Saving Mindset

Many affluent individuals save far more than they need for retirement. Perkins challenges this mindset by encouraging people to calculate what they need to live comfortably and then plan to spend or to share the rest.

Key takeaways for retirement planning:

• Spending With Purpose: Avoid sacrificing your best years to over-accumulating wealth you may never use.
• Longevity Planning: Consider tools like annuities or careful drawdowns to ensure you don’t run out of money while still maximizing spending on experiences.
• Health and Enjoyment: Understand that time and health are your most valuable resources; money can’t buy back lost opportunities.

Estate Planning: Rethinking Legacy and Timing

For families focused on estate planning, Die With Zero offers a provocative perspective: why wait until death to leave a legacy? Perkins advocates for distributing wealth in ways that create joy and meaning during your lifetime. This could include:

• Lifetime Gifting: Make use of annual exclusions and lifetime gift exemptions to transfer wealth tax-efficiently.
• Philanthropy Now: Fund causes you care about while you’re alive, so you can see the impact of your generosity.
• Downsizing Early: Simplify your estate to reduce future complexities for your heirs and focus on meaningful living.

This doesn’t mean neglecting traditional estate planning tools like trusts or wills. Instead, it’s about complementing them with actions you can take now.

Integrating the Die With Zero Philosophy Into Your Financial Plan

If Perkins’ ideas resonate with you, here are steps to start integrating them:

1. Reassess Your Priorities: Reflect on what experiences or memories you want to create and how your money can support those goals.
2. Engage in Strategic Gifting: Work with a financial advisor or attorney to structure gifts that are impactful, tax-efficient, and align with your values.
3. Create a Spending Plan: Shift your focus from accumulation to purposeful spending during your prime years.
4. Update Your Estate Plan: Ensure your plan reflects both your desire to provide for heirs and your wish to live a rich, fulfilling life and that it aligns with your gifting and complies with the law.

Closing Thoughts

Die With Zero is not about reckless spending or neglecting your responsibilities. It’s about living intentionally, using wealth to enhance your life and the lives of those you care about. For affluent families, this mindset shift can lead to more rewarding relationships, a greater sense of purpose, and a balanced approach to money and legacy.

Whether you wish to follow a traditional planning of growing your estate and assets or, you’re ready to rethink your gifting, spending, retirement, or estate planning strategies, our team is here to help. Contact us today to at 610-933-8069 for an estate planning strategy session and start building a plan that aligns with your goals and the principles of Die With Zero.

If you’re even considering a large gift to fund a wedding or help with a down payment or home renovation, it’s important to understand the potential estate and gift tax implications and reporting requirements before you make the gift.

Bonus:  If you’re interested in the idea of trying to help your loved ones now (when they need it) rather than just at your death, read the book Die With Zero by Bill Perkins.  It’s much different than it sounds and it’s thought provoking and gets you thinking about how and when to spend and to gift wealth and resources.

Real-Life Examples: Weddings and Home Purchases

1. Paying for a Wedding:

Imagine giving $55,000 or more to cover your child’s wedding expenses.

While this is a generous gesture, it exceeds the annual gift tax exclusion for 2025, which allows individuals to give up to $19,000 per person tax-free each year. Each spouse can make this gift so that the total sheltered amount would be $38,000.

If, for example, the wedding cost $78,000, and both spouses were alive, the excess over the annual gift tax exclusion would be $40,000.  And, while there would be no tax, you would need to report the gift to the IRS.  While there would be no tax due for most people (because you also have a $13,990,000 total lifetime and death exemption (due to reduce back to $ 5 million at the end of 2025) you would need to report the gift and use part of that exemption.

The long and short of it that this seemingly simple transaction (giving money to a child or children for weddings) can trigger some important actions and possible tax issues.

INSIGHT:  If you’re making gifts to any one person that exceed $19,000 then consider getting some advice from your tax advisers and coordinating with your estate planning attorney.

2. Helping with a Home Purchase or Remodel:

Now consider a $100,000 gift to help your child buy or renovate a home.

If the gift is from both you and your spouse, you can exclude $38,000 (the 2025 combined annual exclusion for a couple). The remaining $62,000 would also need to be reported to the IRS and deducted from your lifetime exclusion amount. Again, if you’d already used those exemptions (many people are to avoid the loss of this bonus exemption if the law changes at the end of 2025) then you would actually owe a 40% tax on the gifted amount not covered by that annual gift tax exclusion.

While these gifts may not result in immediate taxes, for most people, they do require careful planning—and proper reporting (on the 709 gift tax return).

3. Helping With Tuition:

These same rules apply to gifts for the educational expenses of children and grandchildren with one big and very important exception.  If you make tuition payments directly to the institution, those payments don't count against your annual gift tax exclusion.

That brings us to…

The Often-Overlooked Requirement: Filing Form 709

Many people don’t realize that gifting amounts exceeding the annual exclusion triggers a requirement to file IRS Form 709: United States Gift (and Generation-Skipping Transfer) Tax Return.

This form ensures the IRS tracks how much of your lifetime exclusion has been used. And, it was recently revamped and expanded for 2024 returns to require much more detail and reporting information.

For 2024, the lifetime gift and estate tax exclusion was set at $13.61 million per individual (or $27.22 million for a couple) and, in 2025 it grew to 13,990,000 per person and double that for a married couple. As long as your total lifetime gifts remain below this limit, you won’t owe gift taxes, but you must still report any gifts above the annual exclusion on Form 709. Failing to file can lead to IRS scrutiny and complications for your estate plan later (and your heirs and executors/trustees).

Strategies to Minimize Tax Impact

While large gifts may require reporting, there are strategies to reduce or even avoid gift tax consequences.  They are often quite complicated, and generally you’ll benefit from good advice.  But here are a few to get started:

• Gifting by Both Spouses: If you and your spouse both give, you can double the annual exclusion for a single recipient. For example, gifting $38,000 to your child’s wedding can be divided as $19,000 each from you and your spouse, avoiding the need to file Form 709.
• Gifting to Multiple Recipients: Consider dividing gifts between your child and their spouse or other family members to maximize annual exclusions.
• Direct Payments: Payments made directly to educational institutions for tuition or to healthcare providers for medical expenses are not considered taxable gifts and do not count toward the annual or lifetime exclusion.
• For much more detail on gifting strategies, click here to see our content on advanced gifting strategies and ideas…

Why Proper Planning Is Essential

Gifting is an excellent way to help your children achieve their dreams while reducing the value of your taxable estate, but it requires thoughtful planning and attention to IRS rules. Filing Form 709 ensures compliance and helps protect your long-term financial strategy.

Take Action Today

If you’re planning a significant financial gift, our team can help you navigate the complexities of the gift tax system. From ensuring proper reporting to developing a strategy that aligns with your goals, we’re here to assist. Contact us today at 610-933-8069 to schedule a consultation and create a gifting plan that works for you.

I’d also like to thank you all for being clients of the firm.  It is an honor serving you (we now have multiple families where we are representing two and three generations!) and we look forward to many more years of advising you and the next generation about protecting your assets and preserving your family values and legacy.

And now, with all of that said, on to the end of year and 2025 business of estate planning. 

As most of you know, the federal estate tax law is currently set to change radically at the end of 2025 and we have been working with many families to anticipate and to plan for that possibility.

However, the pending changes and estate planning landscape have recently changed with the election and it seems unlikely that radical changes will actually occur.  However, the implications are more complicated than we can easily discuss here.  So, we created a longer form article on gifting and estate planning that you can read. And get more detail.  To get access, just go the end of this article.

The short version (way too simplified – if you need to update, speak to your advisers) is that the federal estate tax exemption is currently at historically high levels, ($13.61 million per individual or $27.22 million per married couple). This amount is set to increase in January of 2025 to $13,990,000 per individual. In 2026, the exemption is set to revert to an estimated $5 million per individual, adjusted for inflation, potentially subjecting many estates to significant tax obligations.  However, following the election, its now highly likely that the large exemptions under current law may be extended.

We will keep you posted, but this situation gives us more time to thoughtfully do estate tax planning or liquidity planning and to do updates to estate plans that serve your interests and that are not related to or driven by federal estate taxes.

So here are a few ideas to consider for 2024 and 2025 and more detailed analysis is available for each idea.

 1. Maximize Annual Gift Exclusions

In 2024, the IRS allows you to gift up to $18,000 per recipient without reducing your lifetime gift exemption. If you’re married, both spouses can contribute, totaling $36,000 per recipient. Gifting under this exclusion allows you to reduce your taxable estate gradually, while transferring assets to children, grandchildren, or other beneficiaries. Remember, to count for 2024, gifts must be completed by December 31.

 2. Utilize the Lifetime Estate & Gift Tax Exemption

In addition to the annual exclusion, the lifetime gift tax exemption is $13.61 million per individual in 2024, with an inflation-adjusted increase to 13,990,000 in 2025. By making substantial gifts now, you can lock in today’s high exemption, which could reduce your estate’s taxable value significantly if asset values increase over time.

 3. Contribute to 529 Plans for Education

529 college savings plans allow you to reduce your taxable estate while funding future education costs. Contributions qualify for the annual gift tax exclusion, and plan funds grow tax-free if used for qualified education expenses.

4. Establish or Update Trusts for Family Protection

Trusts can help protect assets and reduce estate taxes while allowing you to set specific provisions for how and when assets are distributed. Options like Dynasty Trusts and Intentionally Defective Grantor Trusts (IDGTs) enable long-term asset preservation with tax advantages.

Qualified Personal Residence Trusts (QPRTs) are particularly useful if you wish to transfer your home out of your taxable estate.

And, trusts established during your lifetime or even under your will can provide asset, creditor and divorce protection for your heirs.

 5. Review Beneficiary Designations and Estate Documents

Designated beneficiaries on accounts like IRAs, 401(k)s, and life insurance policies override your will, making it essential to update these designations regularly. Year-end is an ideal time to ensure that your designated beneficiaries reflect your intentions. Additionally, review your will, power of attorney, healthcare directives, and other essential documents to verify accuracy and alignment with your goals.

 6. Plan for Long-Term Care and Elder Law Concerns

If you or family members are over 65, consider long-term care planning to protect your assets from rising care costs. Strategies may include Medicaid planning, long-term care insurance, or asset protection plans, which can help ensure that the assets you’ve worked hard to build are preserved for your family. Consult an elder law attorney to explore these options, especially if qualifying for Medicaid benefits or nursing home costs is a concern.

Click here for more details on gifting and estate planning ideas for 2024 and beyond.

Reduction of the Estate Tax Exemption

The federal estate tax exemption would be reduced from its current level ($13.61 million per individual in 2024) to $3.5 million per individual.  If your estate exceeds $3.5 million, your assets could be subject to estate tax upon your death.

Increase in the Estate Tax Rate

The federal estate tax rate would increase (from the current rate of 40% on estates over $13.61 million) based on a graduated scale, starting at 45% for estates over $3.5 million and going up to 55% on estates valued up to $13 million, 60% on estates over $13 million but not exceeding $93 million, and 65% on amounts over $93 million.  Such an increase could significantly reduce the amount of wealth passed on to your loved ones.

Elimination of the Step-Up in Basis

The step-up in basis at death would be eliminated, meaning inherited assets would retain the original purchase price as their basis for capital gains calculations (potentially with some exceptions, e.g., for surviving spouses).  Without a step-up in basis, your heirs could face substantial capital gains taxes if they sell inherited assets.

Reduction of the Annual Gift Exclusion Amount

The annual gift exclusion amount would be reduced from the current $18,000 per recipient to $10,000 per recipient and the cumulative number of tax free annual gifts restricted to $20,000 per tax payer.  With a lower annual gift exclusion, your ability to transfer wealth tax-free each year would be limited.

Expansion of the Generation-Skipping Transfer (GST) Tax

The GST tax would be structured for broader application, including a proposed lower exemption amount and higher tax rates.  If your plan includes passing assets to your children, grandchildren, or future generations in trust, or outright to your grandchildren or future generations, this expansion could increase the tax burden on those transfers.  

Limitation on Grantor Trusts

Grantor Trusts would be subjected to estate tax inclusion rules, thereby significantly reducing their efficacy as an estate planning tool.  If you currently utilize a grantor trust(s) as a part of your estate plan, these changes could undermine their intended benefits, potentially increasing your estate’s tax liability.

What Should You Do Next?

These proposed changes could drastically alter the landscape of estate planning. While the legislation is not yet law, it is essential to be proactive.

We encourage you to get in touch with our office to schedule a Strategy Session to discuss planning for a reduction in the federal estate tax exemption, as well as approaches to utilize in response to the other above proposals, in the event they become law. 

See details about what is included, the associated fees, and how to schedule a Strategy Session in our recent blog article, “Estate Tax Planning Playbook For Uncertain Times and Changing Tax Laws”

Proactive planning today can go a long way in helping to secure your family’s future tomorrow.

Simply call 610-933-8069 to schedule an in-person or Zoom session.

The Millionaire, Deca Millionaire, and Centa Millionaire Estate Tax Planning Playbook For Uncertain Times and Changing Tax Laws (For Individuals or couples with a net worth of $5 Million Dollars or More – Who Want To Minimize or Avoid The 40% Federal Estate Tax)

This article doesn’t apply to very many people in the United States.

But it does apply to many many people who work with us and who want to protect their legacy, make sure it goes to the right people at the right time, and that the inheritance has the right level of asset, creditor and divorce protection.

There are quite a few families in Southeastern Pennsylvania (many who are our clients) and who have amassed very valuable estates through technology, pharmaceuticals, closely held businesses, farming, and/or real estate.

And many of you who have these large or extremely large estates could be subject to very high federal estate taxes and to Pennsylvania Inheritance taxes.

So, who specifically does this article apply to?

Well, if you’re single and your estate is $ 5 Million dollars or less (and not likely to grow rapidly) OR you’re married with a combined and stable net worth of $10 million dollars, there are ideas here that might appeal to you.  You might do one or more.

However, if you are over those limits or your estate may grow rapidly, then this article is vital and contains numerous topics that could radically alter how your planning is done and when and where you put attention on this vital issue.

Why?

Well, that’s a story you need to know. 

Because the government might be ready to take away some important tax protections that could truly alter your family business, your family’s life, and your financial legacy.

Here’s why…

The current federal estate tax exemption is, for the moment, set at a historically high level of $13.61 million per individual ($27.22 million for married couples). But, that high level of protection (or technically the amount of assets and life insurance you can leave your heirs without tax) is a double-edged sword.

While it provides significant relief from estate taxes for many affluent and ultra-high-net-worth families, this generous exemption is scheduled to sunset automatically on December 31, 2025.

That’s right, on January 1, 2026, the exemption amount will (unless congress and the newly elected president act) revert to a much lower level of approximately $5 million per individual (adjusted for inflation). 

So, barring any legislative action to extend or modify the current exemption levels, one day you can leave $13,610,000.00 (or double that if you’re married), and the next it could be less than half as much.  And whatever value of your estate that’s over that amount will be taxed at 40%.

Worse yet?  That tax is generally due within 9 months of the date of death.

This impending reduction in the estate tax exemption creates a critical window of opportunity for those with substantial assets to take advantage of available estate planning strategies to minimize their potential estate tax liabilities.

But failure to act within this time frame could result in missed opportunities and substantial tax consequences for estates exceeding the future lower exemption threshold.

The Urgency of Estate Tax & Liquidity Planning

For individuals and families with net worth approaching or exceeding the future $5 million exemption level, the need for proactive estate tax planning cannot be overstated.

Procrastination or inaction could lead to a significant portion of your hard-earned wealth being eroded by estate taxes upon your passing.

Effective estate tax planning is not a one-size-fits-all solution. And it can take quite a bit of time.

It requires a comprehensive evaluation of each family's unique circumstances, risk aversion, financial goals, charitable intent, and asset composition.

However, several proven strategies can be employed on an ongoing basis or over the next few months to leverage the current high exemption amounts and transfer wealth to beneficiaries in a tax-efficient manner.

Here are a few. 

But before we go over each one, remember that these techniques require individual evaluation and planning. 

This also isn’t legal advice or tax advice. 

This article is designed to help you to become aware of the issues.  Be sure to consult your own tax, legal, insurance, and financial advisers.

With all of that said, here are a few…

Spousal Lifetime Access Trusts (SLATs)

Who is this for? 

Generally, for clients who are married with combined estates of over $10 million dollars.

What is it & How does it work? 

One powerful tool in the estate planner's arsenal is the Spousal Lifetime Access Trust (SLAT). A SLAT is an irrevocable trust created by one spouse for the benefit of the other spouse and potentially their descendants.

By gifting money or assets to a SLAT, the donor spouse can remove those assets and their future appreciation from their taxable estate, utilizing the current high $13.61 million exemption amount.

Importantly, the beneficiary spouse can receive distributions from the SLAT during their lifetime, providing access to the trust assets while still achieving estate tax savings. Upon the death of the beneficiary spouse, the remaining trust assets can pass to the couple's children or other beneficiaries without incurring estate taxes.

SLATs are particularly well-suited for married couples with significant wealth who wish to provide for each other while minimizing estate taxes for their beneficiaries. They offer flexibility, access to trust assets during the beneficiary spouse's lifetime, and the potential for substantial estate tax savings.

But most couples don’t use this technique until their combined estates are large enough to provide for the spouse’s lifestyle even if the other spouse passes away and the assets go to the children or other heirs.

Grantor Retained Annuity Trusts (GRATs)

Who is this for?

GRATs are well-suited for individuals (or couples) with a net worth individually of $5 million dollars or $10 million jointly and with highly appreciating assets who are willing to transfer a portion of that appreciation to beneficiaries in a tax-efficient manner. They can be an effective way to reduce the value of an estate while retaining an income stream during the GRAT term.

What is it and How Does it Work?

A GRAT is an irrevocable trust to which the grantor contributes assets while retaining the right to receive annuity payments from the trust for a specified term, typically 2-10 years.

At the end of the term, the remaining assets in the GRAT are distributed to the grantor's beneficiaries, such as children or trusts for their benefit.

If the assets in the GRAT appreciate at a rate higher than the prescribed IRS interest rate (known as the 7520 rate), the excess appreciation passes to the beneficiaries free of gift or estate taxes.

This leveraging effect makes GRATs particularly attractive in low-interest rate environments and when funded with assets expected to experience significant growth, such as closely held business interests or concentrated stock positions.

Optimizing Annual Gift Tax Exclusions

What is this?

The internal revenue code provides for the ability of each individual, including a husband and wife, to make a gift to any beneficiary of up to $18,000 per year without the need to file a federal estate tax return (Form 709). 

These gifts can be combined with minority discounting and other estate planning techniques to move significant wealth from your estate to individual children or grandchildren, or to trust for their benefit that could protect them from divorces lawsuits, and other dangers. 

The particulars are described below, and in the series of blog articles on our website. However, feel free to call us before committing to a gifting strategy.

Who is this for?

Many people (even those with the states below $5 million individually or $10 million as a couple) will use gifting in order to share the benefits of their wealth with their children or grandchildren during their lifetime’s.

However, there are better and worse ways to make gifts. This article is just designed to raise your awareness and you should be sure to get particular advice if you’re considering paying for a child or grandchild’s expenses, including but not limited to lifestyle, health support, maintenance, and education. There are many nuances to the ability to gift and your estate, attorney, and income tax advisors as well as your financial advisors should be able to help you.

By making annual exclusion gifts to children, grandchildren, or trusts for their benefit, individuals can gradually transfer wealth out of their taxable estates while leveraging the power of compound growth over time.

These gifts can be made outright or to appropriately structured trusts, providing additional control and asset protection benefits.

Again, annual gift tax exclusion planning is suitable for individuals of all wealth levels who wish to gradually transfer assets to beneficiaries in a tax-efficient manner. It can be particularly advantageous for those with longer life expectancies, allowing for greater wealth transfer through compounding over time.

However, making gifts can disqualify you from receiving Medicaid long term care benefits so if your net worth is below the federal estate tax limit be sure to get advice to protect you and the gift recipient.

“Defective” Grantor Trusts

What is this?

Defective trusts, also known as intentionally defective grantor trusts (IDGTs), offer a unique opportunity for significant estate tax savings. With a defective trust, the grantor is treated as the owner of the trust for income tax purposes but not for estate tax purposes.

Who is this for? 

Typically, these trusts are created for those with larger estates (over $5 million individually or over $10 million dollars per couple) with highly appreciating assets, or in certain elder law planning to protect smaller estates from the high cost of long-term care.

How do they work?

By contributing appreciating assets to a defective trust, the grantor makes a gift and removes the assets from his or her estates but remains responsible for paying the income taxes on the trust's earnings, effectively allowing the trust assets to grow without being eroded by income taxes.

Paying the tax is not considered a gift and does not use your annual gift tax exclusion ($18,000) or any of your lifetime/death tax exemption of $13,610,000.

This tax-efficient compounding can result in significant wealth transfer to the trust beneficiaries without incurring gift or estate taxes.

Defective trusts are well-suited for individuals with highly appreciating assets and sufficient cashflow to pay the income taxes on the trust's earnings. They can be an effective way to maximize the growth and transfer of assets to beneficiaries while minimizing income and estate taxes.

They can also be used (with advanced planning) to remove assets from your estate in order to qualify for Medicaid long term care benefits while protecting the assets for your heirs.

Charitable Gift Tax Planning

Who is this for?

Charitable planning strategies are used by people with any level of wealth who want to make philanthropic contributions.  However, they are well-suited for individuals with significant wealth, charitable goals, and a desire to minimize income and estate taxes.

They can be an effective way to support philanthropic causes while also achieving tax benefits and transferring wealth to beneficiaries.

How do they work?

For those with philanthropic inclinations or a desire to support charitable causes, incorporating charitable planning into their overall estate strategy can yield substantial tax benefits.

Techniques such as charitable remainder trusts (CRTs) and charitable lead trusts (CLTs), family foundations, and donor advised funds can facilitate the transfer of assets to beneficiaries while generating income tax deductions and removing assets from the donor's taxable estate.

These techniques are often used to shift assets that would otherwise be paid to the government as Federal Estate Taxes into charitable contributions that are deductible for income tax or estate tax purposes.

Estate Tax Liquidity Planning

Who is this for?

No matter the size of your estate, planning for the liquidity to pay inheritance taxes to the state, federal estate taxes, and mortgage and debt obligations is vital.  But because the federal estate tax can be so large, and is due so soon after death, liquidity planning for estates over $5 million dollars is vital.

Even with effective estate tax mitigation strategies and charitable giving strategies in place, some estates may still face significant tax liabilities of millions, tens of millions or even more of estate tax upon the owner's passing.

In these cases, liquidity planning becomes crucial to ensure that sufficient liquid assets are available to pay estate taxes without the need to sell illiquid assets, such as closely held businesses or real estate, at inopportune times or at discounted values.

Life insurance can play a vital role in liquidity planning by providing a tax-free death benefit to the estate or an irrevocable life insurance trust (ILIT).

Alternatively, strategies like lifetime gifts of appreciating assets, gifts, or installment sales to intentionally defective grantor trusts (IDGTs) or leveraging low-interest rates through promissory notes can be employed to “freeze” the value of appreciating assets and facilitate the transfer of future estate growth to the beneficiaries.  Trusts for the beneficiaries can also be used to limit future estate taxes, and to protect the assets from lawsuits and divorces.

Liquidity planning strategies are essential for individuals with significant illiquid assets, such as closely held businesses or real estate, to ensure that estate taxes can be paid without disrupting or devaluing those assets. They can provide peace of mind and preserve the value of the estate for beneficiaries.

The Potentially “Closing” Window of Opportunity

The impending reduction in the federal estate tax exemption from $13.61 million to approximately $5 million per individual creates a sense of urgency for those with significant wealth to review and update their estate plans.

Failing to take advantage of the current high exemption levels could result in substantial (and potentially avoidable) estate tax liabilities.

It is essential to work closely with experienced estate planning professionals, including attorneys, accountants, and financial advisors, to evaluate the suitability and implementation of these strategies within the context of your unique financial situation, goals, and family dynamics.

Procrastination or inaction in the face of this looming deadline could prove costly, as opportunities to transfer wealth tax-efficiently may be lost forever. The time to act is now, while the window of opportunity remains open, to preserve your hard-earned wealth for future generations.

What should you do now?

1. You already know that your estate is over $5 million dollars ($10 million dollars for married couples) and you need to review it. 

If that’s the case, call 610-933-8069 and get set for a strategy and review session to update your planning and to discuss possible gifting, trusts, and liquidity planning.

2. You’re not sure that this applies to you and you need more information.

In that case, just look at the insert to the UTBF summer 2024 newsletter…or look below if you’re reading this elsewhere for the Estate Planning Tax Reduction Quiz.  That quick quiz will let you know how urgent it is for you to get a review/strategy session.

The Window May Be Closing…

Remember, while congress and the President may act, (before or after the election) the window is set to close, and these techniques take time to consider and to implement.

To ensure that you’re thinking about and understand the solutions that are right for you book a strategy session before the end of 2024.  After that it might be too late.

What To Do Next:

If you’re interested in reviewing or updating your existing plan, making gifts, or creating trusts while the window is still open (remembering that congress and the president could still solve this problem before 2025), then read on…

What You Get: 

You will have a customized 75 to 90 minute review of your estate (you prepare our Estate Planning Questionnaire in advance) and your existing documents and you’ll receive a specific set of recommendations and a roadmap to reducing federal estate taxes, protecting your spouse and/or heirs, and a written review of the proposals and strategies that you can review with your other advisers as well.

The Price:

No one wants to pay legal fees, but in this case, the protection of assets and tax savings could be massive or worth many times the cost of implementing these techniques.

The cost of the update/tax strategy session is $1,750 for new clients and is discounted to $750 for existing clients.  It will be billed to your card at booking or can be paid by check.

NOTE:  If we recommend any trusts or other strategies or techniques requiring legal services, you’ll be quoted a flat fee for such work.  However, some techniques require appraisals, consultations with accountants and other hard costs.

Again, these costs usually pale in comparison to the benefits your heirs receive.

This sounds like a lot but remember that at a 40% tax rate even one good strategy can save your heirs hundreds of thousands or even millions of dollars.

Any reduction in these taxes coupled with planned liquidity to pay the remaining tax due could save your estate from having to sell assets in a bad market or from selling assets you wanted your heirs to keep.

WANT THE STRATEGY SESSION/CONSULTATION FOR FREE?

This strategy session/consultation fee will be applied to any legal fees billed by this firm for work you select and moving forward as a result of the consultation.

But you are under no obligation to act after the consult.

You’ll decide, knowing any and all costs for legal services in advance…and not based on an hourly fee that could go out of control.

To Book A Strategy Session/Consultation With David M Frees, III JD or Douglas L. Kaune, JD:  Simply Call 610-933-8069 to set up an in person or Zoom session.

However, many couples put off essential estate planning conversations (about wills, living wills, powers of attorney, and trusts) until it's too late.

Don't make that mistake - addressing these four essential questions with your spouse today can provide invaluable peace of mind, prevent both economic and family issue, and help to secure your legacy.

Question 1: Do We Have An Estate Plan With Up-to-Date Wills/Trusts and Powers of Attorney in Place?

One of the most important first steps in estate planning is ensuring you have a comprehensive, and well thought out plan and the documents to carry out those estate planning strategies.  That foundational set of documents, typically starts with an up to date and legally-binding will.

Your will outlines how you want your assets and property distributed after you pass away. It also allows you to name an executor who will be responsible for carrying out your wishes.

Unfortunately, research shows that over 60% of Americans do not have a will in place. Many assume their assets will automatically go to their spouse or children, but without a will, the state's intestacy laws will determine the distribution - which may not at all align with your preferences and desires.

Furthermore, administering an estate without a will means that state law determines not only who gets what, but who is in charge of the estate and distributions.  You should be the one to make such determinations, and a will (or in some cases a will and a revocable trust) is the way to make such decisions and elections.

Beyond a will, it's also critical to have durable powers of attorney for both healthcare and finances. These legal documents empower someone you trust (your "agent") to make important decisions on your behalf if you, or you and your spouse become incapacitated and unable to do so yourself.

A healthcare power of attorney gives your agent the authority to make medical decisions, while a financial power of attorney allows them to manage your finances and assets. Failing to have these documents in place can lead to costly and heartbreaking legal battles for your loved ones down the line.

"So many families get blindsided when a parent or spouse becomes incapacitated and they don't have the proper legal documents in place," says estate planning attorney David Frees with Unruh, Turner, Burk and Frees. "It can create enormous stress and conflict as family members struggle to make decisions and take care of their loved one's affairs. That's why getting your will and powers of attorney squared away is the first essential step."

Question 2: Have We Carefully Considered All Our Asset Titling and Beneficiary Designations?

Beyond having a comprehensive will (and or trust), you also need to carefully review how your assets are titled and who you have designated as both primary AND contingent beneficiaries. This is crucial for ensuring your wishes are carried out and your loved ones are provided for. Failing to do this step right can also have very negative income tax, inheritance tax, and even estate tax consequences. 

There’s no one right approach to these issues, so make sure to consult your estate planning attorneys and your accountant as the title and beneficiary designations control rather than the will.

Many common assets, like bank accounts, retirement accounts, and life insurance policies, allow you to name specific beneficiaries. And again, these beneficiary designations supersede what's outlined in your will. So if you have an ex-spouse named as the beneficiary on a life insurance policy, that money will go to them regardless of what your will states.

It's important to review all your assets and make sure your beneficiary designations are up-to-date and align with your current wishes. This is especially important after major life events like marriage, divorce, or the birth of children or grandchildren.

According to Douglas Kaune of Unruh, Turner, Burke and Frees, "I've seen too many cases where people forget to update their beneficiaries to match their estate planning and it leads to really messy and heart-wrenching situations for the family and it’s easy to understand why.  It takes time and often seems complicated. But, taking the time to review and update those designations can save your loved ones a lot of stress and conflict down the road."

In addition to beneficiary designations, you'll also want to review how your assets are titled. Jointly-owned property, for example, will automatically pass to the surviving owner upon your death, regardless of what your will states. Understanding the nuances of asset titling is crucial for effective estate planning.

Question 3: Have We Considered the Role of Various Types of Trusts in Our Estate Plan?

While wills are a critical foundation, many retirees can benefit from incorporating trusts into their estate plan as well.

Trusts are legal arrangements that allow you to place assets under the management of one or more trustees, who are then responsible for administering those assets according to your specified terms and conditions.

Trusts can offer several key advantages over a traditional will-based plan:

- Avoiding Probate: Assets held in a trust don't have to go through the often lengthy and expensive probate process. This allows your loved ones to access those assets more quickly and privately.

- Protecting Assets: Certain types of trusts, like irrevocable trusts, can protect your assets from creditors, lawsuits, or even Medicaid spend-down requirements. And trusts drafted during your lifetime, or under your will, can be created in a way to give your heirs divorce and creditor protection during their lifetime.

- Controlling Asset Distribution: Trusts give you more control over how and when your assets are distributed to your beneficiaries, which can be especially useful if you have concerns about their financial responsibility or ability to manage an inheritance.

- Tax Planning: Some trust structures, like charitable trusts or qualified domestic trusts, can provide tax benefits and help minimize the impact of estate taxes.

According to attorney David Frees, "Trusts are incredibly powerful estate planning tools, but they require careful consideration and set-up”, and "It's essential to work with an experienced professional to ensure your trust is structured properly, that taxes are filed properly, and that the trust or trusts are aligned with your specific goals and circumstances."

Question 4: Have We Sufficiently Planned for the Potential Need for Long-Term Care?

As you enter retirement, the possibility of requiring long-term care at some point becomes increasingly likely.

In fact, about 70% of individuals aged 65 and older will need some form of long-term care during their lifetime.

The costs associated with long-term care can be staggering, with the average annual cost of a private room in a nursing home exceeding $125,000.00 dollars. This can quickly deplete your retirement savings and assets if you don't have a plan in place. And that asset depletion can be extremely difficult when one spouse remains at home while the other spouse needs long term care.

That's why it's crucial to have open discussions with your spouse, your children, and your advisers about your long-term care preferences and how you plan to cover those costs.

Key considerations include:

- Long-Term Care Insurance: Purchasing a long-term care insurance policy can help offset the costs of in-home care, assisted living, or nursing home stays. However, these policies can be costly, so it's important to evaluate your needs and budget carefully.

- Medicaid Planning: For those with limited assets, Medicaid may be an option to cover long-term care expenses. But navigating Medicaid eligibility rules requires strategic planning, often years in advance. And generally, elder law attorneys with experience will be needed to help you to establish the right kinds of trusts to protect assets while you remain eligible to receive care.

- Home Modifications: Investing in home modifications like grab bars, ramps, or stair lifts can help you age in place for as long as possible and delay the need for more intensive (and expensive) care.

- Family Caregiving: Relying on family members to provide in-home care can be a cost-effective solution, but it's important to have honest conversations about the emotional and physical toll this can take.

Doug Kaune, who chairs the elder law section of Unruh, Turner, Burke and Frees reminds us "Long-term care planning is absolutely critical, yet it's an area that many retirees neglect. Taking the time to thoughtfully consider your options and put a plan in place can make an enormous difference in your later years and protect your hard-earned savings for a spouse and for your children and heirs."

Conclusion:

Obviously, protecting your ability to live life in retirement on your own terms requires thought and financial planning.

But, securing your legacy and ensuring your loved ones are cared for is also one of the most important responsibilities of retirement.

By addressing these four essential estate planning questions with your spouse today, you can provide invaluable peace of mind and take a crucial step towards a lasting, prosperous legacy.

Don't wait until it's too late - have these crucial conversations now, and work with experienced legal and financial professionals to get your affairs in order. Your future self and loved ones will thank you.

What’s next?

Need more information on estate planning?  Download our reports here.

Ready to get started on your plan or to update an older estate plan now that you’re nearing or in retirement?  Call 610-933-8069 for information on the cost and the process.

Bonus 1:  Discover what the trustee(s) need(s) to know to avoid danger/tax liabilities, and to optimize the value and purposes of the trust.

Bonus 2: For a bit more information on the types of irrevocable trusts used to shelter assets from federal estate tax, or to protect them from long term care costs, see Exhibit 1 below.

And now onto the topic…

As a trust lawyer with over thirty years of experience, I've navigated the complexities of estate planning with thousands of amazing clients. The journey of selecting the right type of trust for the right job—under will, revocable or irrevocable—and to select the trustee or trustees who will carry out its terms is fraught with decisions that can have lasting implications for your own and your family's financial and emotional well-being.

While this short article can’t possibly cover all that you need to know, it can provide you with the essentials.  And, at the end you’ll learn how to register for our first ever trust and trustee educational event.

The Foundation: Revocable vs. Irrevocable Trusts

Understanding the fundamental differences between these trusts is a crucial first step.

A revocable trust offers flexibility, allowing the trust creator (grantor) to alter or dissolve the trust during their lifetime. This adaptability is its strength, providing the grantor with control over assets and the ability to respond to changes in life circumstances or goals.

Note however, that this type of trust generally offers no estate tax savings OR creditor protection.  That’s generally a myth.

Conversely, the terms of an irrevocable trust are generally fixed upon creation. As the name implies, you can’t personally amend or change the trust after it’s created.  There may be ways to make it adaptable to change.

The grantor relinquishes control over the assets and the trust’s terms, which generally cannot be changed without the beneficiaries' consent, through court intervention, or by a trust protector (more on that role at the live event). This loss of control is balanced by significant benefits, including protection from creditors and estate tax advantages, making it a powerful tool for wealth growth and preservation.

The Trustee’s Role and Responsibilities

The trustee's role extends beyond merely following the trust document's instructions.

For revocable trusts, trustees often step into a more active role upon the grantor's incapacity or death, managing and distributing assets according to the trust's terms.

They will need to secure the assets, get them valued, file inheritance tax and possibly federal estate tax returns, insure them, and diversify the investments depending on the needs of the beneficiaries and the trusts terms.

Typically, annual income tax returns are then also due for filing.

Failure to perform these duties (under a fiduciary duty) can subject the trustee to personal liability.

In short, making sure that the trust is well drafted, the appropriate trustees are selected and empowered by the document is essential to success.

In contrast, trustees of irrevocable trusts are engaged from the outset, managing the trust's assets, navigating complex tax laws, and ensuring the trust's objectives are met, often without the grantor's ongoing input.

The trustees of irrevocable trusts also operate under a fiduciary duty to the beneficiary or beneficiaries of the trust and can require both extensive training and help to fulfill their duties.

For more on the many types of irrevocable trusts, and why they are used see Exhibit 1 below.

The training that we are offering below (and on the insert to this newsletter) is one of the first steps in making sure that you select the right type of trust, the best trustee(s), and to train them to understand their duties.

Challenges and Risks

Both trustees and grantors face numerous legal, tax, and practical challenges.

Grantors must carefully consider the choice between trust types, balancing control against protection and tax implications. They need to understand their options and to get guidance in making the selection of trust types.

Trustees must be ready to navigate legal obligations, potential conflicts among beneficiaries, and the intricate tasks of trust administration. Errors or missteps can lead to financial loss, litigation, and strained family relationships.

With so many issues both for you as the person working with your lawyers to create the trust, AND for your trustee in administering the trust (either now or in the future) it’s easy to get confused.

We created two great programs that we’re running back to back this summer.  And, in a few short hours you can learn which types of trust are right AND what the trustee(s) need to understand to both optimize the trust AND to avoid dangers and personal liability.

The Seminar: Empowering Trust Choices and Trustee Success With 1) Revocable Lifetime Trusts and 2) Irrevocable Trusts for Tax and Long Term Care Planning

Recognizing these challenges, we've designed a seminar to demystify these complex issues.

In just three hours this summer, you can learn everything needed to make informed decisions about the right trust for your family, select the appropriate trustee, and understand the critical duties that come with this role. Trustees will gain insights into optimizing trust performance, avoiding tax pitfalls, and fulfilling their legal responsibilities effectively.

Why Attend?

- Clarity: After attending, you’ll understand the distinct advantages and limitations of revocable and irrevocable trusts.

- Confidence: At the seminar you’ll equip yourself with the knowledge to choose the right trust type for your estate planning goals.

- Trustee Selection and Improved Capability: You can bring a child or other person who might act as a trustee so that they learn the essential duties of a trustee and how to execute them with competence, avoiding common legal, tax, and financial pitfalls.

Your Next Step

The decisions you make today regarding your trust and choice of trustee have the power to protect your legacy and ensure your family's future prosperity.

I invite you to join us at our upcoming seminar.

There will be limited spaces to ensure that everyone gets the information that they need and gets their questions answered!

To save your spot, please call 610-933-8069.

In just a short time, you can gain the insights and tools needed to navigate the complexities of trusts with confidence. Register now to secure your place and take the first step towards informed, empowered trust planning and administration.

Exhibit 1

Estate Tax Planning Trust Strategies For Large Estates AND For Those Worried About The High Cost Of Long Term Care

1. Irrevocable Life Insurance Trust (ILIT)

   - Use: To hold life insurance policies outside of the federally taxable estate.

   - Why: Proceeds from life insurance owned by the grantor at death are includible in the estate. An ILIT prevents this inclusion and can reduce the taxes substantially while creating the liquidity to pay them

   - Example: Purchasing a life insurance policy within an ILIT, the death benefits of which are not counted within the estate, providing tax-free funds for beneficiaries.

2. Grantor Retained Annuity Trust (GRAT)

   - Use: To transfer asset appreciation to beneficiaries tax-free.

   - Why: Allows the grantor to receive a fixed annuity for a term, with remaining assets passing to beneficiaries, often with little to no gift tax.

   - Example: Transferring appreciating stock into a GRAT, receiving an annuity for 10 years, after which the appreciated stock passes to the children outside of the estate.

3. Family Limited Partnership (FLP) or LLCs Held Within Trusts

   - Use: To transfer business interests or real estate to family members at reduced tax rates.

   - Why: Allows for estate reduction and asset protection, with potential discounts for lack of marketability and minority interests. These trusts can also provide creditor and divorce protection not otherwise available to individuals.

   - Example: Parents transferring real estate or minority interests in a family owned business into an FLP, gifting limited partnership interests to their children at a discounted value.

4. Dynasty Trusts

   - Use: To extend estate tax benefits across multiple generations.

   - Why: Protects assets from estate taxes for as long as state law allows, potentially indefinitely.

   - Example: Establishing a trust that benefits children, grandchildren, and subsequent generations, with trust assets not subject to estate taxes at each generation's passing.

5. Qualified Personal Residence Trust (QPRT)

   - Use: To remove a personal residence from the estate at a reduced tax cost.

   - Why: Freezes the value of the residence for gift tax purposes at the time of transfer.

   - Example: Transferring a home to a QPRT, retaining the right to live in it for a term of years, after which it passes to heirs at a reduced gift tax value.

6. Intentionally Defective Grantor Trust (IDGT)

   - Use: To freeze the value of transferred assets for estate tax purposes while selling assets to the trust without capital gains tax.

   - Why: The grantor pays income taxes on trust income, allowing the assets within the trust to grow tax-free for the benefit of the beneficiaries.

   - Example: Selling appreciating assets to the IDGT in return for a promissory note, effectively transferring wealth without using the gift tax exemption.

7. Elder Law Medicaid Trusts

- Use: To protect assets from being spent down for the high costs of long term care (whether used alone or in conjunction with long term care coverage.

- Why: These trusts can be used to protect investments, and homes from a forced sale and use before you qualify for Medicaid.

These strategies, while powerful, require careful planning and legal advice to implement correctly, considering the complexities of tax laws and potential changes in legislation.

Understanding the Importance of Third Person Special Needs Trusts

1. Preserving Government Benefits: Individuals with disabilities often depend on crucial government benefits, such as SSI and Medicaid, for their daily living expenses and healthcare. An outright inheritance, however, can jeopardize these benefits due to income and asset limits. A Third Person Special Needs Trust serves as a protective shield, preserving eligibility for these vital programs.
2. Avoiding Disqualification: The eligibility criteria for SSI and Medicaid typically include strict income and asset thresholds. An inheritance, if received directly, could exceed these limits, leading to disqualification from the much-needed government assistance. By placing assets in a Third Person Special Needs Trust, the beneficiary can continue to receive benefits without risking disqualification.
3. Mitigating the Risks of Poor Financial Management: Beneficiaries who lack the capacity to manage financial assets effectively are susceptible to financial exploitation and mismanagement. Without proper safeguards, an outright inheritance might be squandered, leaving the individual without the necessary resources for a secure and comfortable life.

The Multifaceted Role of the Trustee

1. The Role of the Trustee: In a Third Person Special Needs Trust, a trustee is appointed to oversee the management of assets, investments, and distributions. This impartial individual acts as a fiduciary, making decisions in the best interests of the beneficiary. This not only protects the individual from financial mismanagement but also ensures a sustained source of support throughout their lifetime.
2. Investment Management: Trust assets, often including financial assets and real estate, need skilled management to ensure they grow over time. The trustee is responsible for making informed investment decisions, considering the long-term financial needs of the beneficiary while minimizing risks.
3. Tax Planning and Compliance: The trustee plays a crucial role in navigating the complex landscape of tax regulations. From filing annual tax returns to implementing tax-efficient strategies, their expertise ensures that the trust remains in compliance with all applicable tax laws, maximizing the financial benefits for the beneficiary.
4. Distributions and Decision-Making: Determining when and how trust funds are distributed requires a nuanced understanding of the beneficiary's needs and the impact on government benefits. The trustee acts as a gatekeeper, making judicious decisions that align with the beneficiary's well-being, while avoiding any adverse effects on benefit eligibility.

Crafting a Comprehensive Estate Plan

1. Collaborative Planning with Estate Planning Attorneys: Crafting a Third Person Special Needs Trust necessitates collaboration between estate planning attorneys, clients, and potential trustees. Legal professionals play a pivotal role in tailoring the trust to the specific needs and circumstances of the beneficiary, ensuring a comprehensive and effective plan.
2. Regular Review and Adaptation: The circumstances of the beneficiary and the legal landscape may evolve over time. Regular reviews of the trust provisions are essential to ensure that the plan remains aligned with the beneficiary's best interests and continues to comply with relevant laws and regulations.

Conclusion:

In the intricate landscape of estate planning, a Third Person Special Needs Trust emerges as a powerful tool for securing the financial future of individuals with disabilities. By preserving government benefits, mitigating the risks of poor financial management, and appointing a trustworthy trustee, this specialized trust ensures a legacy of support and care for those who need it most. Douglas Kaune and the other estate planning attorneys at the law firm of Unruh, Turner, Burke & Frees play a pivotal role in guiding clients through the complexities of creating special needs trusts.  If you would like to schedule an initial consultation in either of our office locations or via video conference, please call the Phoenxiville office at 610 933 8069. 

We have put together several resources for you, including a list of local shops to find unique, thoughtful gifts and support local small business at the same time. Click the picture below to check out our recommendations. 

If online shopping will save you some time, click below to see where we shop year after year for fun, yet practical gift ideas:

If you are looking for something a little bit special that is delicious, here are some homemade goodies to gift.  

Also included are good recipes for pot lucks and to gift to busy relatives that might enjoy a homemade meal.

If you are a huge fan of pumpkin, have you tried pumpkin pancakes?  

Here is a recipe blog crafted by David Frees that you don't want to miss!

Finally, here is a collection of holiday recipe ideas - we  hope you find one of your future favorites here (and feel free to share the recipe)!

I know that this site is usually dedicated to bringing our clients high-quality and easy to understand estate planning information and solutions to estate planning and asset protection problems.

But I recently attended a conference on AI and in particular, what is changing, how it is being used (either alone or in conjunction with virtual robots – BOTS), and the implications for our clients’ businesses, and our ability to serve our clients in the best possible ways.

Since many of you own or lead significant businesses or professional practices, I thought I’d share an article I wrote followed by one written by ChatGPT 4.0 (the AI currently being used for a variety of business purposes).

Here’s the article…

Artificial Intelligence (AI) has become a hot topic in the business world over the last few years, and for good reason. It is predicted to have a significant impact on the way businesses and professional practices operate, and those that embrace it early on will likely have a significant competitive advantage over their peers.

Conversely, failing to understand what’s happening and to find uses within your own business or professional practice could be devastating or, in the best case scenario, can suppress profits and make hiring and efficiency much harder to achieve and to maintain in a rapidly changing business environment.

In this blog post, we will explore 5 ways AI will affect businesses over the next two years. Of course, as the pace of change is so fast, there will be many others, and many unexpected changes so understanding, staying current, and cultivating flexibility and an agility are all essential to thriving as AI becomes more integrated into all aspects of business and life.

1.  Automation of Routine Tasks

One of the most significant benefits of AI is its ability to automate routine tasks. This will free up employees to “oversee” AI uses, and output in marketing, sales, pricing, design, packaging, and client/patient/customer service and to focus on higher-value tasks that require human expertise, such as problem-solving and human forms of creativity. This should (when done thoughtfully and strategically), lead to increased efficiency, customer value, productivity, and cost savings for businesses.

2.  Improved Customer Service & Sales

AI-powered chatbots and virtual assistants (virtual robots) will become more prevalent in the next two years, and they will have a significant impact on both sales and customer service.

For example, they will be able to handle routine customer inquiries, such as order status and shipping updates, which will free up customer service representatives to focus on more complex issues.

As these Bots will be way more thoughtful, responsive, and acceptable/pleasing to users, this most likely will result in faster response times, improved customer satisfaction, and reduced costs for businesses.

3.  Deeper Personalization and Responsiveness of Marketing

AI will enable businesses to personalize their marketing efforts based on customer data and behavior. This will allow businesses to tailor their marketing messages to individual customers, resulting in higher engagement rates and increased sales. Personalized marketing will become the norm in the next two years, and businesses that fail to embrace it will be left behind.

This personalization could, if properly executed, result in higher levels of customer satisfaction, faster movement from prospect to buyer (shorter sales cycles), and other benefits to a well-run business that will give AI powered companies a massive edge over those who fall behind.

4.    Improved Data Analytics

AI will also enable businesses (even small businesses who could never previously have afforded such processes) to both collect and to analyze vast amounts of data quickly and accurately. AI is now even capable of suggesting strategies and actions based on such data and can assist in developing plans to act on the recommendations developed.

These newly “democratized” AI enabled abilities will provide forward thinking businesses and professional practices with valuable insights into customer behavior, market trends, and operational efficiency.

With AI-powered analytics, businesses will be able to make data-driven decisions that will lead to improved performance, customer satisfaction, and higher profitability.

In turn, this will allow those businesses to dominate certain well thought out markets giving those businesses and practices higher entity value and making their owners wealthier.

5.  Enhanced Cybersecurity

AI is likely to also play a significant role in enhancing cybersecurity for businesses and in defending against AI enhanced cyber-attacks.

AI-powered systems will be able to identify and respond to cybersecurity threats in real-time, which will reduce the risk of data breaches and other cybercrimes. As cybersecurity threats become more prevalent, businesses that invest in AI-powered security solutions will be better positioned to protect their assets and reputation. And that in turn will be more highly sought after by the buying public.

CONCLUSION

The five topics discussed are just the very tip of the AI iceberg.  They are just a few of the ways in which AI and robotics will profoundly and rapidly change our world and our businesses within the next 12 to 24 months.

In short, AI is set to revolutionize the way businesses and professional services practices operate. Indeed, the pace of change is happening so quickly, and so much thought and so many resources are being applied, that new possibilities arise almost every day.

Businesses that embrace AI early on will have a significant competitive advantage over their peers.

It is therefore essential for business leaders, owners, and operators (of even very small and traditional businesses) to become more aware of the potential of AI and to seek out more information on how it can benefit their organizations. To stay ahead of the curve, it is crucial for businesses to start exploring AI-powered solutions today.

And falling behind the new leaders who understand and apply AI across many different essential business functions will both happen quickly and with potentially devastating results.

Just to help you to understand what we’re talking about, the following article was produced by ChatGPT4 (in response to a quick prompt that I wrote) in under 35 seconds. 

Ordinarily, I’d review and edit it, but I want you to see what it’s capable of doing.  So, here’s GPT’s unedited output.

Having read my work above take a quick look and consider the implications…

The Rapid Pace of Change in AI and the Risk of Falling Behind

Artificial Intelligence (AI) is evolving at an unprecedented pace. It is transforming the way we live and work, and businesses that fail to stay up to date risk falling behind their competitors. In this blog post, we will explore the rapid pace of change in AI and the dangers of businesses failing to stay up to date.

The Pace of Change in AI

The pace of change in AI is remarkable. In just a few years, AI has gone from a novelty to a mainstream technology that is transforming entire industries. New advancements are being made every day, and businesses that fail to keep up risk becoming obsolete.

One of the key drivers of this rapid pace of change is the vast amounts of data that are now available. AI algorithms are becoming more sophisticated and accurate, thanks to the vast amounts of data that are now available to train them. This means that AI is becoming more useful and applicable to a broader range of tasks and industries.

Another factor driving the pace of change in AI is the increasing availability of computing power. The cloud computing revolution has made it possible for businesses of all sizes to access vast amounts of computing power without having to invest in expensive hardware.

The Danger of Falling Behind

Businesses that fail to stay up to date with AI risk falling behind their competitors. AI has the potential to transform entire industries, and businesses that fail to adopt it risk becoming obsolete. This is particularly true in industries where AI is already making a significant impact, such as healthcare, finance, and manufacturing.

Businesses that fail to adopt AI also risk missing out on significant cost savings and productivity gains. AI can automate routine tasks, reduce errors, and provide valuable insights that can lead to improved performance and profitability. Businesses that fail to adopt AI risk being left behind their competitors who are reaping these benefits.

Furthermore, businesses that fail to adopt AI risk losing valuable talent. AI is transforming the job market, and businesses that fail to adopt it risk losing talent to their competitors who are investing in AI-powered solutions. This can lead to a talent gap that is difficult to overcome.

CONCLUSION

The pace of change in AI is remarkable, and businesses that fail to stay up to date risk falling behind their competitors. AI has the potential to transform entire industries and provide significant cost savings and productivity gains. Businesses that fail to adopt AI risk becoming obsolete and losing valuable talent to their competitors. To stay ahead of the curve, it is essential for businesses to invest in AI-powered solutions and to stay up to date with the latest advancements in the field.

WHAT TO DO

If you need more information on how to apply AI in your own business or professional practice, there are hundreds of great resources available just by googling or searching online.

But if you’d like to be included on our list of friends and clients who want our AI updates or to attend our Business AI events, please call 610-933-8069 and ask to be added to our AI list.

The 8 Essential Questions To Ask When Hiring Your Estate Planning Lawyer

Estate planning involves a number of deeply personal topics such as family relationships, finances, and future goals and aspirations for both your own lifetime, and about your legacy.

It’s technical and often complicated. So having someone to help you who is able to clearly explain the law, your options, and the documents that carry out your plan is essential.

Because it involves so many personal, tax and related issues, it's also therefore crucial that you choose an estate planning lawyer and law firm who are knowledgeable, experienced (in the type of planning that you need), and with whom you feel comfortable discussing these personal details.

Your legacy and protecting all that you’ve worked for as well as those that you love, is just too important to leave in the hands of someone less qualified.

To help you navigate this critical decision, we’ve listed eight essential questions that will guide your selection process and to make it more certain that you’ll get the right help.

1. What is your personal and firm’s specific experience with estate planning?

When engaging potential lawyers, ask the lawyer or their staff helping to answer your questions, about their experience, how long they've been practicing, and if they work extensively or exclusively in estate and trust planning.

An attorney or law firm with a deep background in estate planning is more likely to stay abreast of the regularly occurring tax and legal changes that could affect your estate plan. The ability to handle complex situations like closely held real estate, business interests, multiple trusts or unique assets is a must-have.

It can also be valuable to ask how experienced the lawyer and the firm are with administering trusts and/or estates like yours. 

We find that we are better at drafting documents that anticipate and solve for common or specific problems in part because of our experience or representing executors and trustees as they work through the estates.  That kind of experience can be extremely helpful in avoiding problems through effective drafting.

Finally, finding a lawyer that has a great team and a “deep bench” of experienced lawyers, paralegals, legal assistants and receptionists can make the experience of completing your estate plan both more efficient and effective. 

And, finding a firm (or any professional practice) that actually answers the phone and is focused on your care can be tough in the modern business world. Attention to little things can really matter.

2. What documents will be used in your foundational or Phase 1 estate plan?

Any well-designed estate plan includes essential or “foundational” documents such as a last will and testament, a possible living and revocable trust, durable power of attorney for finances, and a living will and medical power of attorney.

No plan is complete without a discussion of all of these documents. And those documents should be completed and put into place as soon as possible. 

Depending on your situation, you may also require, or benefit from, additional documents such as Irrevocable Life Insurance Trusts, Irrevocable Grantor Trusts, SLATS, Personal Residence Trusts, or various types of charitable trusts.

A seasoned and experienced estate planning attorney can guide you through the intricate estate planning process and your various options, ensuring a plan that is tailored to your unique needs.

We typically call these more in depth and specific techniques “Phase 2 estate planning.  By breaking the process into its essential and more detailed components it can be less intimidating and the documents get driven to completion rather than trying to do too many things at one time.

3.How long will it take to create my estate plan?

The duration of the estate planning process can range from weeks to months, depending on the complexity of your estate. After meeting with you (either in person or by video conference) a knowledgeable attorney should provide you with a personalized and clear timeline, setting the right expectations from the onset.

At Unruh, Turner, Burke and Frees, our process is designed to complete the foundational estate plan and documents with three well prepared meetings over a three to six week period. 

Additional planning typically requires additional time and/or meetings.

However, even more advanced planning designed to protect your surviving spouse and/or heirs from divorce, lawsuits and other legal and tax risks can be completed quite quickly.

4. What types of estate planning do you offer?

The size of your estate, the types of assets that make up your estate, and your estate planning goals will ultimately dictate the options that are available to you.

But finding a knowledgeable attorney or firm that offers a variety of customized estate planning alternatives should be a goal.

For example, some clients need a will with trusts designed to protect young children or grandchildren while they’re learning and developing financial abilities and knowledge while other clients are seeking trusts that can protect their heirs from losing an inheritance to divorce, a business failure or to litigation/creditors.

For example, not every client has a family business with all the issues that such assets pose.  But if you do have one or more such businesses, then achieving fairness can be tricky and require very specific tools. 

So making sure that the law firm is capable and offers such services is important before you get started.

5. How do you charge for your estate planning services?

Transparency is key. A good estate planning attorney should clarify their pricing model – be it flat fee, hourly rate, or a combination of both – and explain any potential additional costs, such as filing fees and court expenses.

Here, at Unruh, Turner, Burke and Frees’ Wealth Preservation Section, after we meet with a client and clarify what they truly want and need in their estate planning, we can then outline their options and respective costs on a flat fee basis.

Some additional services (that clients often avoid by working with their financial, real estate and CPAs) might include help with beneficiary designations (to align them with the estate planning goals), family meetings to explain the documents and strategies to other beneficiaries and family members, help funding trusts, etc. are charged on an hourly or supplemental flat fee basis.

There is no right or wrong way. Rather, you want to select an attorney that uses a pricing system that works for and is comfortable to you. Most of our clients, throughout the years like the idea of a clearly established fee…right from the start so that they are not worried about hourly fees that are unpredictable.  In that way, the client can determine if the price is more than justified by all of the values and benefits.

6. Does your practice include “probate” and non-probate of wills, and administration of trusts and estates?

As mentioned previously, estate and trust administration or  “probate” and estate planning are two sides of the same coin.

A comprehensive understanding of both is vital to minimize estate taxes and prevent probate from becoming a burden for your loved ones.

And we believe that the vast experience of administering many trusts and estates each year means that we stay current with the law and learn about issues to avoid or how to either avoid and or to mitigate common problems and even to avoid most of the negatives of the probate process itself.

For that reason, getting to know your proposed lawyers’ experience in trust and estate administration and probate is essential.

7. Will your firm be communicating with my other advisors?

Estate planning often and ideally requires a collaborative approach with other advisors like financial consultants and tax professionals.

Your estate planning lawyer should be ready to work in tandem with these experts, ensuring a well-rounded estate plan.

But, because of the attorney client privilege, there may be meetings that you have alone with your legal counsel, and it may be up to you to suggest and to authorize that collaboration.

At this firm, we recognize the importance of “getting everyone on the same page” and in making sure that the advisors all know what is being done.

Whether you do that OR your lawyers handle that interplay of advisors, it’s a great idea.  You should verify with counsel that they understand that you view your estate planning holistically or comprehensively and want the input or knowledge of other advisers such as a financial, insurance, or tax adviser.

8. Will my estate plan be updated if my circumstances change?

Life, estate planning, and tax laws all change, and your estate plan needs to change, adapt and update with them.

For those reasons, it’s important to seek an attorney committed to working with you through time, conducting periodic reviews of your plan, and who is ready to adapt your planning to your evolving needs and goals.

After all, if you want your life’s work to be preserved, protected and passed on in the right way and to the right people, keeping it up to date is essential.

Now be sure to note that you should also instigate a review from time to time based on your changing desires, circumstances, and decisions.  But it can be very helpful to select a lawyer and a firm that has a well done and updated blog, a client newsletter, and regular notices and email/letters regarding changes so that you can assess what changes may apply to you.

At UTBF we are committed to providing you information about new strategies, laws, and changes through blogs, articles, client educational events, our newsletter, notices, and regular emails.

In closing, choosing the right estate planning attorney is one of the first and most essential and vital steps in safeguarding your legacy.

Remember, every individual's needs are different.

A one-size-fits-all approach will not work for everyone. Instead, a tailored plan will ensure that your unique goals, objectives, and requirements are met.

If, from your research, referral or the information above, it seems like we are a good match for your own planning needs, feel free to call us at 610-933-8069 to set up a consultation.

We look forward to helping you navigate this important step in life planning.

Planning for the future is a crucial step in ensuring that your loved ones are taken care of, your legacy is protected, and that your wishes are honored. When it comes to legal matters concerning older adults, two terms are often used to refer to this strategic process: estate planning and elder law planning.

While these two concepts do share some similarities, it is important to understand their differences and recognize where traditional estate planning ends and when elder law planning becomes essential. In this article, we will shed light on the distinctions between estate planning and elder law planning, highlight situations where the latter becomes indispensable, and provide information on what you’ll need to know to proceed.

Estate Planning: Estate planning primarily focuses on the planned and thoughtful distribution of assets and property after an individual's passing or who handles their affairs if a person is incapacitated. It involves creating legally binding documents such as wills, trusts, financial power of attorney, medical power of attorney and living wills. The objective is to safeguard your assets, minimize taxes, and ensure that your beneficiaries receive their rightful inheritance. Estate planning also often includes establishing guardianships for minor children and planning for potential incapacitation through documents like living wills and power of attorney documents.

Elder Law Planning: Elder law planning, on the other hand, encompasses a broader range of legal concerns specific to older adults(Typically over the age of 65 and depending on personal health). It addresses issues beyond asset distribution and concentrates on the challenges that may arise as one ages. Elder law planning provides legal strategies to protect the rights, finances, and well-being of older individuals. It covers areas such as healthcare planning, long-term care, Medicaid eligibility, guardianship, and protection against elder abuse and exploitation.

It also often focuses on trying to preserve assets for the aging individual AND for the family.

SITUATIONS REQUIRING ELDER LAW PLANNING:

Long-Term Care Planning: Elder law planning helps individuals prepare for the financial costs associated with long-term care, including nursing homes, assisted living facilities, or in-home care. It involves exploring options to finance long-term care, such as Medicaid planning and the proper use of trusts, to preserve assets while still qualifying for government assistance.

Medicaid Planning: Elder law attorneys assist individuals in navigating the complex Medicaid eligibility rules and developing strategies to protect assets while qualifying for Medicaid benefits. This may involve transferring assets, establishing trusts, or implementing other legal techniques to meet the program's stringent requirements.

Incapacity Planning: As we age, the risk of cognitive decline and incapacity increases. Elder law planning addresses these concerns by helping individuals establish durable powers of attorney, healthcare proxies, and living wills. These documents designate trusted individuals to make financial and medical decisions on your behalf if you become incapacitated.

Elder Abuse and Exploitation: Sadly, older adults are susceptible to various forms of abuse, including physical, emotional, and financial exploitation. Elder law attorneys can help protect seniors by implementing safeguards, pursuing legal action against perpetrators, and assisting with guardianship proceedings if necessary.

Special Needs Planning: If you have a loved one with special needs, elder law planning can help establish special needs trusts to ensure they are financially secure while maintaining eligibility for government benefits like Supplemental Security Income (SSI) and Medicaid.  The goal in such cases is to preserve the help that you may have been providing during your lifetime, and in a way that does not disqualify the individual from benefits.

CONCLUSION AND WHERE TO TURN:

While estate planning and elder law planning share common goals of protecting assets and ensuring wishes are carried out, the latter extends beyond inheritance matters. Elder law planning specifically caters to the unique needs and challenges faced by older adults. By seeking the guidance of an experienced elder law attorney, individuals can navigate issues related to long-term care, Medicaid eligibility, incapacity planning, elder abuse, and special needs planning. Engaging in comprehensive elder law planning empowers older adults and their families to face the future with confidence, knowing that their interests are protected, and their rights upheld.

RESOURCES:

For this reason, UTBF has both an estate planning department or practice section AND a separate practice group that works extensively in elder law planning.

If you already know that you want a consultation on elder law, please call 610-933-8069 to schedule.

If you’d like more resources and information to help you in your quest to do elder law planning, look below to access our many elder law resources.  We periodically offer complimentary elder law webinars.  If you are not a client but sign up to receive our elder law e-newsletter, you will be notified when the next webinar is scheduled.

Click here to go to our Elder Law website.

Sign up for our Elder Law E-Newsletter

Download our Elder Law Reports

In the course of more than three decades of representing clients and families at all levels of affluence, we’ve learned quite a bit about best practices and ways of enhancing estate planning to do more of what you truly want. 

We recognize that you’ve worked your entire life and built a great family, financial wealth and a broader legacy of values and things that are important to you.  To help you to think about these issues, and to discuss them with counsel as an informed consumer of legal services, we’ve identified eight of the most important aspects of a well-designed estate plan. 

There are many more and this site is filled with more specific ideas, topics and resources. 

But if you’re thinking about updating your estate planning, here are some of the most important elements of any well-done planning:

A Clear And Properly Executed Will: A will is the foundation of any well done estate plan, and it's important that it clearly outlines how your assets should be distributed after your death. A will should be regularly reviewed and updated as your circumstances change and it should be coordinated with how you own your property or assets AND with the beneficiary designations of your annuities, life insurance, and IRA/401(k) accounts.

A Clear Strategy for Protecting What Matters Most: If there’s one thing that we’ve also learned, it’s that every client has their own specific goals for the estate planning process.  They seem to share many values, but the specifics of what clients want and are willing to do vary.  However, your legal team should be able to help you to shape the planning and documents that will carry out your specific goals such as protecting younger heirs through trusts, protecting our adult children and grandchildren from losing inherited assets to divorce and lawsuits, and minimizing taxes, costs and fees.  Not everyone wants the same thing but having clarity of what is most important to you matters.

A Living Trust and/or Testamentary Trusts: A living trust is a legal document that outlines how your assets should be managed and distributed during your lifetime and after your death. In some cases (and in some states) a living trust can help you avoid probate and keep your affairs private. In Pennsylvania, where resorting to, or involvement of the probate court can be minimized through a well drafted will, use of a Living Trust may not be as important.  But, in many circumstances (where, for example, you own real estate in multiple states or a will contest is likely) such a trust, in addition to your will, could be extremely important.

Power of Attorney: A power of attorney is a legal document that grants someone else the authority to make financial or medical decisions on your behalf in the event that you become incapacitated. It's important to choose someone (and successors) you trust to act as your power of attorney and to discuss how and when the document would be used.

Healthcare Directive or Living Will/Medical POA: A healthcare directive is a legal document that outlines your wishes for medical treatment in the event that you become unable to make those decisions for yourself. This document can provide guidance to your loved ones and healthcare providers in difficult situations. It is also often paired with or combined with a medical Power-Of-Attorney through which you decide and designate who will make medical decisions about your care if you no longer can.

Business Succession Plan: If you own a business, it's important to have a well drafted and strategic plan in place for what should happen to the business in the event of your death or incapacity. This can help ensure that your business continues to operate smoothly and that your loved ones are taken care of. This plan may include documents such as buy/sell agreements and other documents related to corporate or business entity governance in the event of death or incapacity.

Estate and Inheritance Tax Planning: Estate and inheritance taxes can significantly reduce the value of your estate, and since they are due within a short time after death, such taxes can place a real liquidity burden on even a healthy and large estate.  However, there are numerous strategies that can help minimize this impact. An experienced estate lawyer can help you identify and implement the strategies and match with your goals and your willingness to turn over assets and control of assets at various points in your life.

Regular Review: Finally, it's important to regularly review and update your estate plan to ensure that it remains consistent with your wishes and reflects any changes in your circumstances.

In conclusion, a well-designed estate plan is essential for protecting your assets, ensuring your wishes are carried out, and providing peace of mind for you and your loved ones. By working with an experienced estate lawyer, you can design, execute and implement an estate plan that meets your unique needs and goals.

Our firm has a variety of resources to help you to prepare for doing your first comprehensive plan or for updating your existing planning.

If you already know that you want to work with us and/or have questions about how we work, or our fees, just call 610-933-8069 to speak to one of our very helpful client relations managers.

If you’re just starting or want to know more about estate planning and how we approach it, here are links to a few of those very helpful reports and resources:

Enhanced Estate Planning Report – What you need to know about hiring an attorney and planning your estate.

Who has the right to inherit?

Understanding Trust Vocabulary

An Explanation of Revocable and Irrevocable Trusts

This short article will help to clarify your thinking, the issues, and save you time, money, and energy.

Introduction:

As you reach your fifties, sixties, seventies and beyond, your focus often shifts from creating and building a professional practice, business, or investment portfolio and toward protecting assets, planning for retirement, enjoying the fruits of your labor, and carefully optimizing and protecting the legacy you'll leave behind.

Typically, by this point in your life, a "simple will" may still sound enticing but will rarely, if ever, work to achieve your goals or even your basic needs which often require protecting heirs, and carefully selecting agents under a power of attorney for financial and medical decision making in the event of your incapacity. 

Sometimes trusts created under your will or during your lifetime will also be required to achieve your desires and/or to minimize federal or other estate taxes.

In short, a well-crafted estate plan is by this time in your life, often essential to protect your wishes, your hard-earned assets and to ensure that your heirs are shielded from divorce, lawsuits, excessive taxes or even an unfortunate business failure or bankruptcy. A "simple will" will not and cannot achieve any of these goals. 

But the process need not be long and/or painful.

An experienced attorney with years of solving these issues and who has drafted AND administered the estates of affluent families can help you to get exactly what you need in a reasonable period of time.

It's not always uncomplicated or easy, but it can be easier than you ever thought.

How?  Well, experienced attorneys know the major and most effective strategies for each type of estate and tax planning scenario. They know how to help you find exactly what is important and how to achieve those goals in a well drafted plan. Better yet, experienced attorneys that also have a well-developed process and great skills at listening to what you want, explaining your options (in plain English) and then converting your goals into documents that achieve those goals are really the gold standard of achieving your estate planning objectives and can actually make it easy (and often way less painful than you thought).

This article highlights the benefits of enhanced and sophisticated estate planning for individuals in this age group, how to find and to hire the right type of attorneys and underscores the importance of taking action to truly and effectively safeguard your legacy (both during your lifetime and beyond).

The Growing Importance of Estate Planning: As you age, the need for a more comprehensive and customized estate plan becomes increasingly vital.

You may have amassed significant invested wealth, a valuable business, and/or property, making it essential to protect those assets both during your lifetime (for your own use and to protect your spouse) and to secure those assets for your heirs (or in some cases for charitable uses).

Moreover, your family dynamics may have evolved over the years, with adult children, grandchildren, and possibly even great-grandchildren (and their needs) to consider in your planning.

Many of our affluent clients with assets and estates from $2,000,000 and beyond have initially told us that they "...only need a simple will" but later learn that they can do much more than they thought possible.

Those clients seem to often value:

Protection from Divorce – Even When Your Heirs Don't Have A Pre- Nuptial Agreement:

Divorce can have a significant impact on your family's financial well-being. By establishing trusts or utilizing other estate planning tools, you can ensure that your assets remain with your intended heirs rather than being subject to division in a divorce settlement. This protection not only safeguards your children's or grandchildren's inheritance but also provides peace of mind knowing that your legacy will remain intact.

Shielding Heirs from Lawsuits and Business (or even personal) Bankruptcy:

Unexpected lawsuits against your surviving spouse, children, and even grandchildren can put your assets and the financial future of your loved ones at risk.

And litigation is a rising risk and can result from something as simple as a tragic car accident, business failure, or many other unexpected sources.

However, and unknown to many people who have only ever done simple will planning, enhanced and comprehensive estate planning (using trusts and/or other entities) to be funded either during lifetime or only at death, can help protect your heirs from such potential legal claims by placing assets in well-structured trusts or other legal entities that you have created for them.

By doing so, you limit the exposure of your wealth to creditors and litigants, preserving your family's financial stability.

The complexity and/or protective power of these estate planning techniques and strategies can vary depending on the level of risk and can be made flexible so that if the risk profile changes, the strategies can adapt too.

For example, if one of your children or heirs is a physician in Pennsylvania and subject to malpractice lawsuits, you might build a trust for that child that has a higher level of protection.  However, life isn't static (nor is the tax code) so building flexibility into planning through the use of trustees, flexible trusts, and trust protectors can save your heirs time, resources, and money/taxes.

Minimizing Estate Tax and Income Tax Burdens:

A well-crafted estate plan can minimize the tax burden on your heirs by maximizing available tax exemptions and employing flexible and strategic tax planning techniques.

By working with experienced estate planning professionals, you can develop and implement a plan that reduces or eliminates estate taxes, gift taxes, and generation-skipping transfer taxes, allowing your heirs to inherit more of your wealth and to grow that wealth in income tax advantaged ways.

These strategies can include optimized gifting (either outright or in trusts), lending, and helping heirs to create investment plans and businesses that are never even included in your estate.

For more resources related to gifting, uses of trusts, and enhanced estate planning generally, click these links:

2023 Gifting and Estate Planning Tips

How Trust Planning Can Benefit Your Family 

Making Sure That The Plan Works, Survives A Challenge, and That It's Understood: 

An estate plan that gets overturned by a court challenge can undermine all that you've worked to achieve.  For that reason, you want planning (by experienced estate planning lawyers that understand the risks of a challenge and who know how to protect against and to minimize those risks.

In addition, you want to feel like the plan (even if it contains technical tax language) is carefully designed to achieve your goals.  You want to understand it.  Making sure that you have counsel that really listen to you, and are capable not only of creating an accurate and adaptable plan, but who can also explain it to you is essential.

Many of our clients also realize that the documents used to protect their spouse and heirs to efficiently pass their assets, and to achieve tax advantages, often look (on their face) somewhat complicated.

But, in the event of your death or even incapacity, you want your spouse and heirs to understand why they were created, what they do, and how to benefit from them.

For that reason, we often host or facilitate "Family Meetings" designed to give the important and appropriate family members a higher level of understanding and access to the team who might help them in the event of your death or incapacity.

These meetings can go as deeply into the planning as you like or can stay focused on the basics without much disclosure of the assets.  However, over the sixty years of our collective practice, we've found that families who prepare their heirs end up achieving better results and fewer disputes over time.

Keeping The Plan Up To Date And Effective: 

Sophisticated clients know that as their own wealth grows (or changes), and as the tax laws are updated and often become more restrictive (or less advantageous), that they must have a plan and a process in place to keep the planning updated and responsive not just to those changes, but also adapting to the needs and personal circumstances of their heirs.

But most of our clients are busy building and growing their businesses, portfolios, and wealth generally.  For that reason, they truly value our ongoing notices of legal changes, and our process for helping them to update when needed.

Conclusion:

Once you reach a certain age (typically over fifty) and level of wealth (typically over Two million dollars of net worth and life insurance) Enhanced Estate Planning (as opposed to "simple will" or "simple trust" planning) becomes a crucial aspect of securing your legacy and protecting your loved ones from the potential financial pitfalls of divorce, lawsuits, and taxes.

Therefore, as you enter your 50s, 60s, and 70s, take action and prepare to create and to implement a comprehensive and flexible plan that reflects your values and priorities. Find a firm, like ours that is staffed with a team of experienced lawyers, paralegals, and client service representatives who know what you need and how to provide it through systems and a well-designed process that takes you from thinking, to preparing, to executing the plan and then helping to keep it up to date and effective.

By doing so, you not only provide for your family's financial future but also leave a lasting, positive impact on the people who matter most in your life.

You may be doing this for others but protecting your legacy and all that you worked to create and to achieve is also a gift to you.

We look forward to being your partner and guide (or Sherpa*) through this process and to making your goals clear, achievable, and understandable. We understand that you created this legacy on your own terms and, ultimately you should protect it in the ways that matter most to you.

Hire Your Estate Planning "Sherpas" To Help You Climb The Estate Planning "Mount Everest"

*Some clients have said that they were afraid that creating their estate plan would be like "climbing Mount Everest."  It seemed impossible. And as a result, they put it off until the pain was so great that they had to act. 

But remember, that what seems insurmountable to you is a regular Tuesday for us. We "climb the Mt. Everest of sophisticated estate planning every day." And we've helped thousands and thousands of affluent families to do it as well.

In fact, when clients book their first strategy session (to start the planning process) they're often surprised by how clear and relatively easy our process is, how far they get at that first meeting, and how quickly they get to their goal of reviewing, understanding and then implementing the "finalized" plan.

But that's why we're here. 

We're really good at our jobs.  The only "downside" is that, at the moment, there's more demand for us than we have to go around.  So, you might have a short wait to get that first appointment. However, our process is so good that even complicated plans are often completed within six to eight weeks and with only two or three appointments (your needs and mileage may vary).

What to do if you want a more "sophisticated" plan and not just a "simple will" to pass on and to protect your legacy...

Option 1 - I know I'm Ready:

So, if you're over fifty (and single or married with children and grandchildren), have built some wealth you want to protect, and you're already sure that you'd like us to guide you, then call our office at 610-933-8069 and speak to one of our Client Relations Managers.

And we will walk you through our process and how to get the most out of it.

Option 2 - I'm not quite ready yet:

If you're not yet sure, then feel free to access our many videos, reports and resources.

Click here to find out what you need to know about hiring an estate planning attorney. 

Click here to get our Enhanced Estate Plannning Report.

Call 610-933-8069 when you're ready.  Appointments are sometimes booked out 4-6 weeks. 

In Part One of this article, we explored why bad markets and even a recession offer some unique and powerful estate and wealth protection planning opportunities.

Just click here to review that one when you’re done.

And it must have hit home because many of you asked us what else you should consider (and what other techniques might be helpful).

We listen, so here are six more ideas for transferring and protecting wealth in bad economic times…

Here are six more ways to make tax-advantaged gifts to benefit your family members and friends:

·      Use an annual exclusion gift to pay all or part of your child/children or grandchildren’s mortgage or higher interest debt.  When done right, current law provides that you, and your spouse, may give up to $34,000 as an annual exclusion gift to any or all of your children and/or grandchildren. The recipient pays no income taxes on the gift, and the gift doesn’t use up any of your lifetime gift tax exemption (now $12,920,000). Better yet, you can do this each and every year. This is best used in conjunction with a program, lesson or lessons to the next generation on how that beneficiary can maximize the benefit and/or avoid higher interest debt in the future.

·      Give your less wealthy parent or parents (if they are less wealthy than you –typically with an estate smaller than five or six million dollars) some amount of assets worth less than his or her generation-skipping transfer (GST) tax exemption. Your parent bequeaths the property to trusts for your children (his or her grandchildren) either during lifetime or at his or her death, the GST tax exemption (also now $12,920,000) shelters the gift. This preserves your own exemption for gifts to your own grandchildren.

·      Donate appreciated stock to a charity or even your own “donor advised fund” (created through a Community Foundation or a commercial entity such as Vanguard, UBS, etc.).  Don’t sell the stock first and then use the proceeds to make a cash contribution because you’ll trigger the capital gains tax. By making your donation of appreciated stock directly to the 501(c) (3) or donor advised fund instead, you avoid capital gains when your stock has been held for over one year.  Plus, the charitable contribution may be taken as an itemized deduction on your income tax return. Be sure to consult your income tax adviser.

·      Open a custodial Roth IRA account for your child or a grandchild.  You may contribute to a custodial Roth IRA account when your minor child or grandchild has earned income during the year. Income includes cash earned from babysitting, mowing a neighbor’s lawn, or even providing services to your business. Such contributions are limited to the amount of income earned by the child and may not exceed $6,500 for tax year 2023.

The Roth IRA grows tax-free during the child’s lifetime (and at the time of withdraw) and teaches your child or grandchild the value of planning for the future, and the power of compounding in a tax free environment.

·      Create a Spousal Lifetime Access Trust (SLAT) for your spouse. Your spouse may serve as trustee and make distributions to himself or herself and to your kids, if they are also included as beneficiaries. Benefits from the SLAT are also indirectly available to you, the grantor. For example, distributions to your spouse from the SLAT may be used by him or her to cover your joint household costs, mortgage payments, vacation expenses, or car payments. These are expenses you might have otherwise paid directly if the assets transferred to the trust had still been held in your own name.

·      Make “low” interest loans to allow children to create new business that serve your clients, customers, or niche buyers/customer rather than build new profit centers within your existing business.  If you have an existing business, or you’re considering creation of a new business that you’d own, consider allowing and helping the next generation to build that business in a new entity.  There are ways to assist in this process without triggering gifts or taxes, and in this way all of the growth associated with the new enterprise occurs outside of your estate and possibly in an asset protected environment (if it’s combined with the right kinds of trusts).

If you enjoyed this article, be sure to also click here to read part one if you have not already.  Feel free to download our available reports and resources: click here to go right to our page.

Also, most of the techniques described will require tax and estate planning strategic advice and documents.  David M. Frees III and our team at UTBF is available to help you to evaluate these techniques and, when advisable, to implement them.

Call 610-933-8069 to set up a consultation with one of our attorneys.

Introduction To Estate Planning In Bad Economies/Markets

A bear market in stocks and a sub optimal economy battered by multiple negative factors may be painful, but it can create the right circumstances for an estate planning opportunity to pass gains and wealth to the next generation.

And, if done right you can also give your heirs and beneficiaries creditor and divorce protection.

If passing on wealth and protecting it for your heirs from death taxes, lawsuits and possible divorce claims sounds like something that interests you, read on… 

U.S. stocks recently reached “bear market” territory, which is defined as a drop of 20% in value from recent record highs. Then Silicon Valley Bank’s bank failure threatened even more trouble ahead.

While generally no one likes lower stock prices.

But these conditions do enable shareholders to transfer the future growth and appreciation of stocks (or real estate and other investments) into the hands of heirs and out of an estate where they might be subject to death taxes. 

How? Well, when stock prices are lower, any transfer to your heirs uses up less of the federal estate tax exemption, or annual gift tax exclusions which recently increased substantially due to inflation adjustments. Currently, the Internal Revenue Code allows individuals to transfer $17k per year to any individual and up to $12.92 million tax-free over their lifetime or as part of their estate planning process. 

Transferring assets with depressed values to heirs(or to an asset protective trusts for heirs)  is one simple way to capitalize on a bear market (or even a significant recession), but there are also more sophisticated ways, to use these economic conditions to your advantage.

More Advanced Strategies and Ideas To Consider

Considering Asset and Divorce Protection For Your Heirs

Estate planning, by its nature, goes beyond personal wealth to the overall building and protection of family wealth. In addition, the risks of lawsuits, liability exposures and the threat of loss of assets in a divorce are also at historical highs.

These facts are important to consider when there are shifts in the direction of markets and when you are considering gifts or transfers of wealth to your children, heirs and beneficiaries.

Such transfers of assets, with depressed valuation, can be made either outright to the beneficiary of the gift, OR they can be made into special trusts that offer the beneficiary high levels of protection of those assets if the beneficiary gets sued, declares bankruptcy (from a business problem), or gets divorced and faces such claims.

While outright gifts will be available to their creditors, and can be taken from the beneficiary, a well-constructed trust can offer significant “creditor protection” from such risks.

“Freezing” The Value of Assets During Economic Troubled Times

A more complex strategy that wealthy clients can use is a grantor retained annuity trust or GRAT. Another is an outright sale of assets to the beneficiary or a trust (where the client also often takes back financing).  This technique (in all of its variations can allow clients to transfer future growth in the business in a highly tax advantaged manner.

While you’ll need specific legal, estate planning and income tax advice to do these techniques, let’s look at both in a bit more detail.

With a GRAT the initial “gift” value of the assets gets returned to the grantor but, when the trust expires, the appreciation of those assets are out of the grantor’s estate and in the hands of beneficiaries (or in trusts for them).

During the term of the GRAT, the client receives an annuity payment equal to the amount put in the trust plus interest (a rate set by the IRS). Any appreciation over that rate goes to heirs when the trust expires. 

The GRAT strategy is complex (and beyond the scope of this short review – call your legal and tax advisors about it) but historically has been used to transfer Walmart and Meta stock as well as many smaller privately held businesses, and it works well when stock prices are artificially low.

In the case of a sale, many families will obtain a formal valuation of a business (including businesses that own real estate) and will, in addition, get a minority discount appraisal.

The result is that they can then organize a sale to beneficiaries or their trusts, take back financing on that sale and effectively move the growth asset out of the estate leaving only the notes to be repaid.

These sales can be structured in many many ways but should be considered by families owning closely held businesses that have current low valuations but that are poised for growth when the economy improves.

Proceed with caution, however, as these types of transactions can have unintended consequences if they aren’t thought out in advance.

According to David Frees of Unruh, Turner, Burke and Frees, “Clients often have very different views of the same type of transactions. Some of our clients make sales of stock to their children (or to asset protective trusts for their children) when stock prices are depressed and they lock in those values.” 

But, Frees also observed, that such sales “must be carefully considered and analyzed from the stand point of the client’s views on control or loss of control. And they have other income tax consequences so be sure that your entire team is consulted if you want to act while stock prices are low.”

Estate Tax Changes May Be Close

Aside from capitalizing on bear-market or recession level conditions, wealthy clients also have to think about how they will be affected when provisions of the tax reform act enacted in late 2017 expire on December 31, 2025. While the exemption for an individual is US is currently $12.92 million, it is set by law to fall to half that by 2026, if the current provision in the law is allowed to sunset. 

While the future of the law may be unknown, we believe that, it’s important for clients to become educated about the potential changes, to consider advanced estate planning techniques while values are low, and to build flexibility into their planning knowing that the laws are subject to change.

Conclusion

While no one likes a bear market or a recession, both conditions offer wealthy families several opportunities to pass wealth to their heirs and to let the growth in these assets accrue to the next generation.

In addition, the coming changes in the tax law may be significantly less generous so planning should be done now to consider using the low valuation of not only publicly traded stocks but also privately held businesses and even real estate.

Finally, you can take this opportunity to make outright gifts/transfers OR you can consider the use of various trust vehicles that can offer substantial protection of heirs and beneficiaries from law suits, bankruptcy, and even divorce claims against them.

These techniques often have both estate/gift tax as well as income tax consequences so get a team of estate, trust, wealth and tax advisors to optimize the use of any planning strategies.

Click here to read our follow up article with six more tips for transferring and protecting wealth in bad economic times. 

David M. Frees III and the team of business, trust and estate lawyers at Unruh, Turner, Burke and Frees are available to work with you and your advisors on such planning.  Please contact the firm at 610-933-8069.

The turmoil of divorce can be both physically overwhelming and emotionally exhausting.  And the idea that you can’t just focus on the divorce (and your children) but that you also need to think about your estate planning sounds even worse.

However, and counter-intuitively, the time of separation or divorce is a very important moment to either: 1) update an existing estate plan or 2) to create a new one specifically designed by you and rooted in your new life and situation. Waiting until after the divorce means that your thinking and guidance may not be recognized in caring for your children and that your new circumstances and choices for guardians, executors, trustees, agents and health care decision makers may be totally wrong or left to a court.

So far from creating more stress, revising your planning and taking steps over something that you can and do control can be empowering and can protect you and your children/loved ones in many ways.

Yet, many people fail to update their wills/estate plans or simply wait too long, preferring to leave the task until “after the divorce is over.”

Why?

Well, we’ve heard everything from “My divorce lawyer never mentioned it.” and “I just can’t do one more thing.”  to “I’ll just wait until the end to save money or time.”

And we understand. 

BUT…

Your failure to act promptly after you separate or commence your divorce may have many undesirable and even dire negative consequences to you and to those you love and care about.

So, let’s think about this in a better way…and take a few questions, objections and issues one at a time.

1. Should Your “Soon To-Be Ex” Be Making Healthcare and Financial Decisions For You?

Most well-designed estate plans contain durable powers of attorney for both finances and for health care decision making.  And, most married couples give each other power of attorney (in both areas) so that one can manage the other’s financial and healthcare affairs upon incapacity.

Some states also provide that after a divorce is commenced, that such documents may no longer be fully operational. 

However, once you are separated, or after a divorce begins, the only way to ensure your estranged spouse is not making your financial or life and death decisions is by revising your estate planning documents to name someone else more appropriate under both documents.

BONUS NOTE:  If you were both represented by the same lawyer during your marriage, your divorce may create a conflict of interest for that lawyer or law firm.  In many cases, this potential conflict can be waived but the lawyer will no longer be able to share any information between the two of you without your specific permission.  Make sure to discuss this with your counsel.

2. We are Often Asked “Since My Divorce Is Still “On going” (or My Estate Is Now Smaller),

Can I Just Wait Until After My Divorce To Worry About Changing My Estate Plan?”

The quick but correct answer is…No. some actions are required or desirable LONG before a divorce is finalized.

And spending a bit of time focusing on these areas in the beginning could alleviate a lot of heartache for your loved ones.

Understandably, you may feel exhausted by working with attorneys and sick of “legal documents.” However, this is one of the most important times to either update an existing estate plan or create a new one specifically tailored to your needs.

If you were to “wait until the end,” and you were incapacitated, your spouse might still be in charge of both your finances and health care decisions.  He or she might still be entitled to some inheritance, might get your life insurance or other benefits, and might be your executor or a trustee for your children’s inheritance.

And, while that might actually be desirable and the best choice, it might also be a terrible error that can be avoided or mitigated by doing your planning at the outset of the divorce or separation.

3. YOU SHOULD DETERMINE AND GIVE GUIDANCE ON GUARDIANSHIP

AND TRUST PROVISIONS FOR YOUR MINOR CHILDREN

While many divorced parents are comfortable with their ex-spouse assuming both custody of the children and financial supervision of assets that you leave to them in the event of your death, in some cases the ex-spouse is not the best person to serve as custodian of your child or as a trustee of the assets that you would leave to them under your will or trust.

In fact, many divorces seem to be caused by or linked to the financial irresponsibility of one spouse or to a dangerous drug or alcohol addiction.  In such as case, having that spouse named as executor of your estate, a trustee to guard over the funds left to children, or as their custodial parent, seems dangerous and irresponsible. 

However, this situation almost always requires a modification of the estate plan as many spouses leave all of their assets to one another while married but following a separation or the start of a divorce, now want to leave them to children in a trust.

In addition, since more of your estate may be going directly to your children or younger heirs (rather than a spouse) you may think very differently about how, when, and for what purposes they receive funds as well as who should manage those funds and make decisions about their distribution (the trustee).

A revised estate plan at the outset of your separation or divorce can include the designation of guardians for your children upon your passing, which will convey your wishes to the court, family members and other interested persons.

In the unfortunate event of a legal battle concerning your children, your wishes are important to the court when making its ruling.

And, even if your spouse is the best person, you should designate one or more substitutes OF YOUR CHOOSING in the event neither you nor your spouse can act.

Furthermore, your estate planning documents can direct your assets to your children and name a trustee to oversee the assets until the right point in the future.

NOTE:  Many states will not allow a spouse to be disinherited absent a pre or post nuptial agreement or a finalized divorce. 

And, while this should be discussed with your estate planning counsel, that rule should not keep you from revising, executing or updating a plan before your divorce is final.

4. IF You’re Separated Or In The Process of Divorce Should You Update Your Annuity,

Life Insurance, IRA or 401(k) Beneficiary Designations Sooner Rather Than Later?

And What About Joint Accounts With Children?

Most married people will name one another as the primary beneficiary on certain assets (life insurance policies, real property, employer retirement plans, IRAs, investment accounts and bank accounts, etc.).

This beneficiary designation means that those assets are not controlled by a will or trust. Unless you change them, they may go directly to your spouse. 

And, while this is a complex area of the law involving state and federal laws (including in some cases, ERISA) you should get advice from your tax advisers, your will/estate lawyer and your divorce lawyer about your real options at each stage.

If you have joint accounts or custodial accounts for your children, that could also be a problem where your spouse (before or after your divorce is finalized) might get control over those assets as the surviving parent of a minor child (or even an adult child who could be unduly influenced to give or to lend that spouse money from their inheritance if you were to die first).

So correcting those joint or custodial accounts earlier in a separation or divorce might make serious sense…especially if your spouse has an addiction problem, is bad with money, or may not be the best person to mange those assets for your heirs if you predecease your spouse.

This also raises the question of whether or not you should use the same lawyer who is handling your divorce for the estate planning revisions.  So let’s think about that.

5. Who should create or modify my estate plan…the divorce lawyer

or a lawyer versed in the complexities of will, trust and estate law?

This is an interesting question and one that is worth discussing.

While it is true that there are “general practice” lawyers who both handle divorce and who draft wills, trusts, powers of attorney and living wills, it is also true that most estate planning lawyers do not handle divorce cases and vice versa.

Divorce lawyers are very good at protecting you from a spouse during the divorce.  They are excellent at helping you to work out custody of your children in ways that benefit them, and that minimize the stresses of divorced parents.

But, they are not thinking about the best strategies for your will, trusts, estate, and coordinating your accounts and beneficiary designations.  They are rarely called upon to create sophisticated versions of such documents.  They don’t know what a trustee, agent or trust protector does (unless their own planning involves those tools and issues).

In fact, we have through the years represented lawyers who had many different types of practices.  When they decided that it was time to do estate planning, they hired an attorney.  Why? They are lawyers.  Why didn’t they do it themselves?  Well, because estate planning is very different than the type of law they practiced.

The bottom line.  Unless both your divorce AND your estate planning are very very simple, it may make sense to have an estate planning lawyer coordinate with your divorce counsel to update your planning in a way that is consistent with divorce law AND the facts of your case.

Before we finish, here are a few questions that can be helpful in exploring the issues with both your divorce and/or estate planning lawyers…

6. Seven Important Questions To Ask Your Divorce and Estate Planning Attorneys

During The Separation/Divorce Process

1. What happens to my property under my state’s divorce laws and my current estate plan if I die before my divorce is final and how is that effected by my current will?

2. How do I better ensure that my estranged spouse cannot make any financial or healthcare decisions for me if I become incapacitated before the divorce is final?

3. Who will obtain custody or guardianship of my children when I’m gone if my spouse survives me or fails to survive me?

4. Who is the trustee nominated to control the assets for my children if I die before changing my estate plan and when can they get those assets (and/or for what purposes)?

5. How do I coordinate the beneficiaries on my life insurance, retirement and bank accounts with my trusts, will, and estate planning documents?

6. What other documents should I immediately review and update?

7. Which lawyer is responsible for each aspect of my planning update and how will you coordinate your efforts?

 If you were recently separated or divorced and would like to get your existing estate planning documents updated, please contact our office at 610-933-8069 to schedule a consultation and learn more about our process.

A NOTE ABOUT THE LAW:  The above is general information ONLY and is not legal advice, does not form an attorney-client relationship, and should NOT be relied upon to take or refrain from taking any action. Your individual circumstances and the laws applying to both your divorce and your estate plan may vary significantly. In the event you have inquiries, you should seek the advice of competent counsel before taking any action.

Unruh, Turner, Burke and Frees | Wealth Preservation and Asset Protection Section

As required by the current law, the Internal Revenue Service recently announced the 2023 cost of living adjustments for the estate and gift tax exclusion amounts.

These important numbers were discussed in our end of year Newsletter for 2022 (Click to Read Here) and we also reviewed the then current numbers in a great end of year strategy article (Click Here To Read).  If you are interested in protecting your surviving spouse, children or other heirs from the economic effects of taxes, an estate plan that’s too rigid, or the ravages of divorce, creditors or lawsuits, then read on and click those other links to be even better informed.

Gift Tax Exclusion Amount:

The annual gift tax exclusion is the amount an individual may gift to any number of persons without incurring a gift tax or reporting obligation. Recipients are often children or grandchildren but can include any third party such as a son or daughter in law, friends, or other family members.

The Gift Tax Exclusion Amount is currently (for 2022) $16,000 per person and will increase from $16,000 to $17,000 in 2023 (a combined $34,000 for married couples).

The amount you can gift under the current law can adjust annually (it’s dependent on inflation), so an individual who gifted $16,000 to someone in 2022 may now also gift $17,000 to that same person in 2023, without any reporting obligation. For couples (check with your adviser for specifics since they are a bit complicated) that number would be another $34,000).  Also make sure that the 2022 checks are actually cashed in 2022.

However, for any year in which a gift or gifts exceed(s) the annual gift tax exclusion amount a 709 gift tax gift is required to be filed by the individual or married couple making the gift in order to report it to the IRS.

Gifts could also be made of a home, car, or even a business interest.  However, hard to value assets might require an appraisal or other form of valuation that must also be disclosed on a 709 gift tax return.

 Estate Tax Exclusion Amount:

The estate tax exclusion is the amount an individual can transfer estate or gift tax-free during his or her life AND upon his or her death. The Estate Tax Exclusion Amount will increase from $12,060,000 to $12,920,000 in 2023 (a combined $25,840,000 for married couples).

For example, if a single person with two children passes away in 2023 owning $12,920,000 in assets (the exact amount of the exclusion), then the deceased person's two children will inherit the full $12,920,000 as no estate tax is owed.

However, if that same single person with two children passes away in 2023 owning $20,000,000 in assets. The decedent's estate will owe tax on the assets owned that exceeded the $12,920,000 estate tax exclusion ($20,000,000 - $12,920,000 = $7,080,000). The current estate tax rate is approximately 40% which means the decedent's estate will owe estate taxes in the amount of $2,832,000 ($7,080,000 x 40%).

NOTE:  See our article that explains portability and what happens if one spouse passes away leaving the other spouse all of the assets (there’s no tax on the surviving spouse but very specific actions are required to protect the children or heirs.  Click here to read more.

The content of this article is intended to provide a general guide to the subject matter. Consult Unruh, Turner, Burke & Frees or other legal or accounting advisers about your specific circumstances and issues.

I know, that sounds like lawyer “CYA” but the specific facts of your situation really matter and the IRS doesn’t want you to “beat the system” so they make it pretty hard and they look for ways to catch mistakes.

For help contact your estate planning lawyer and or tax advisers to review the specific rules and your specific facts.

If you ALREADY KNOW THAT YOU WANT OUR HELP CALL 610.933.8069 to speak with one of our Client Relations Managers.