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Many & LoCoco Legal Blog

Thursday, April 25, 2013

People. The Essential Component of Your Estate Plan’s Success

 

Properly drafted estate planning documents are integral to the success of your legacy and end-of-life issues. Iron-clad estate planning documents, written by a knowledgeable attorney can make a difference bewteen success and failure of having your wishes carried out.
 
However, there's more to your estate planning than paperwork. As a matter of fact, it may actually be the most important part of your estate plan. And that important thing is "People".

For your wishes to have the best chance of being honored, it is important to carefully choose the people you name in those documents who are entrusted with carrying your wishes out.

Think about that. Your estate planning documents may be in perfect order, yet if the person you choose to carry out its directives fails to follow through with them, then all of your planning was a waste. Thus, in this article, we will look at the importance of picking those right people to name in your documents. 

Your estate plan can assign different responsibilities to different people.  The person who you most trust to raise your children, for example, may not be the person you’d designate to make health care decisions on your behalf, if you are incapacitated.  Before naming individuals to carry out your various estate and incapacity planning wishes, you should carefully consider the requirements of each role and the attributes which each individual has that will allow him or her to perform the duties effectively.

Executor.  You name the executor, (also known as a personal representative), in your will.  This person is responsible for carrying out all the terms of your will and guiding your will through probate.  The executor usually works closely with a probate or estate administration attorney. 

Health care agent.  Your health care agent is the person you name to make medical decisions for you in the event you are incapacitated and unable to do so yourself.  In addition to naming a health care agent (sometimes called a health care power of attorney), most people also create a living will (or health care directive), in which they directly state their wishes for medical care and end-of-life care in the event of incapacity.  When choosing a health care agent, select a person who you know understands your wishes regarding medical care, and who you trust to carry out those wishes, even if other family members disagree.  You should also consider individuals who have close geographic proximity to you as well as persons you believe can make difficult decisions under pressure.

Power of attorney.  A financial power of attorney (or simply power of attorney) is different from a health care power of attorney in that it gives another person the authority to act on your behalf in financial matters including banking, investments and taxes.  You can limit the areas in which the person may act, or you may grant unlimited authority.  A power of attorney may also be limited for a specific time, or it may be a durable power of attorney, in which case it will continue even after the onset of incapacity (until your death).  A power of attorney can take effect immediately or “spring” into effect in the event of incapacity.

Tutors.  If you have minor children or other dependents (disabled adult children or other disabled adults for whom you are the named guardian), then your estate plan should name a person or persons to take over the parental role in the event of your death.  This person is known as a Tutor. The Tutor may also have control over any assets that you leave directly to your minor children or other dependents.  If you create a trust for the benefit of your minor children, then the trust’s trustee(s) will have control over those assets and their distribution.  Important considerations include age of the guardian, compatibility with his or her personality and moral values as well as the extent and quality of the existing relationship with your children.

Trustee.  If you place any assets in trust as part of your estate plan, then you must designate one or more trustees, who will act as the legal owners of the trust.  If you do not wish to appoint someone you know personally, you may appoint a corporate trustee – often a bank – to play this role.   Its important you select individuals who are not only trustworthy but also organized, diligent and detail oriented.

Without a doubt, who you choose to act in all of the above capacities is a very important decision. In our years of law practice in this area, the one fundamental thing that stands out is the person you choose should be the type of person who gets things done—neither a procrastinator nor likely to be flustered and stymied if problems arise - and a person who you have absolute trust in. A knowledgable estate planning attorney can work with you in helping you choose the right individual. Although the decision who to name can really only be made by you, at least the attorney can work with you in giving to you what type of decisions that person will have to make, which hopefully will help you decide who to name in that role.

In cloing, a well drafted estate plan with the right people named who will execute that plan is the key for preparing now for events that will occur in the future.

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Many & LoCoco
 
Attorneys at Law
 
(504) 483-2332

Saturday, March 16, 2013

Common Estate Planning Mistakes Regarding Life Insurance and IRA's

Common Estate Planning Mistakes Regarding Life Insurance and Individual Retirement Accounts (IRAs)

For many people, life insurance and/or retirement savings accounts are among the largest assets they have to bequeath to their children and grandchildren in their estate plans.  Sadly, without professional and personally tailored advice about how best to include life insurance and IRAs in one’s estate plan, there may be a failure to take advantage of techniques that will maximize the amount of assets that will be available for future generations. Here are some key considerations to reflect upon and make sure that they are implemented in your own estate plan.

Failure to Name and Update Beneficiaries

A death benefit of a life insurance policy and the assets in an IRA account usually transfer automatically to the named beneficiaries upon the death of the account holder, outside of the probate process. 

"Outside of the  probate process" are the key words. In other words, the funds pass directly to the named beneficiary, outside the parameters of the Will and succession of the decedent.  Normally, all the beneficiary has to do is fill out a claim form, and they get the funds in a matter of weeks. Usually  this is done without the attorney for the succession being involved, which means less legal fees owed by the Estate. But, this only happens with a named beneficiary. Thus, it is imperative to make sure that you have beneficiaries named for these accounts and to remember that situations do change.

If the account holder’s desired beneficiaries change, due to marriage, divorce, or other major life events, it is critically important to update the named beneficiaries as quickly as possible to prevent the asset from passing to an outdated beneficiary.  Or, in the case of death of the primary beneficiary, it is equally important to name contingent beneficiaries, who stand in the place of the primary beneficiary in case he/she predeceases the decedent.  The account holder should also be aware that circumstances change for the contingent beneficiaries as well.

Let me give an example to show you how important updating beneficiaries can be. I had this issue just  come into my office the other day, and had to inform the family of this horrible result.  

Example:  

Sarah has an IRA in excess of $650,000. Sarah’s IRA documents name her husband, Harold, as the primary beneficiary of her IRA and Harold’s son, George, from Harold’s first marriage, as the contingent beneficiary.

Sarah and Harold divorce.

        After the divorce, Harold's son, George, hates Sarah for divorcing his father, and is very ugly towards her for a number of years, even refers to her publicly as the "devil".

       Harold dies.  

      Sarah, both after the divorce and after Harold's death, forgets to change the beneficiary and contingent beneficiary of her IRA account. She then dies. 

        Guess who gets her IRA. Yep, good old George, Harold's son, will receive the IRA.  

        Sarah, without question, would not have wanted this result. Had she just updated her beneficiary designation, this could have been avoided. But she did not, and this is the result. And no, George will not, out of the kindness of his heart, turn the $650,000.00 over to the family because he should do what Sarah would have wished.  It just does't happen that way.

       So that is how important naming and updating beneficiaries can be relative to your estate plan. 


Failure to Consider Naming a Trust as the Beneficiary When Dealing with Minor Children

 

When minor children are involved, most clients will create a Trust in their will so that the assets that pass down to their children will be controlled by the Trust. After all, if I have a large sum of cash, would I really want my child to control that money, or would it be better to be in aTrust, with a named Trustee who can handle the funds for my child.

The problem is, most people also have IRA's and Life Insurance Policies. And as we have seen above, these funds pass to the beneficiaries outside of their estate. Furthermore, these are usually accumulated and purchased by the client well before a client thinks of writing a Will. Thus, in the normal situation, the spouse is named as the primary beneficiary and the children are named as continent beneficiaries. 

Once the person drafts a Will and creates the Trust inside his Will, it is very important to change the contingent beneficiary of the Life Insurance Policy and IRA from the children and instead to name the Trust. That way, the funds from the Life Insurance Policy and IRA will be filtered to the Trust, again keeping it from going directly to the children. 

I have seen too many times where the deceased person's assets pass into a well created Trust in their will, to only have the children receive a vast amount of funds from a life insurance policy payable directly to them. Then, your estate is involved in Tutorship proceedings and the like to protect assets, all of which costs money, which can be avoided just by simply changing the beneficiary to the name of the Trust created in the Will.

All of the above is just a part of the intricacies of a well established estate plan. Call us today if you would like to review your estate plan with us.

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Many & LoCoco

Attorneys at Law

(504) 483-2332


 

 


Thursday, February 28, 2013

Where do we stand with Estate Taxes

 

2013 Changes to Federal Estate Tax Laws

I have been fielding a lot of questions about the current status of Federal Estate Taxes. I have posted a newsletter about this in January, but thought it might be well to reiterate those changes again.

Changes to income taxes grabbed the lion’s share of the attention as the President and Congress squabbled over how to halt the country’s journey towards the “fiscal cliff.”  However, negotiations over exemptions and tax rates for estate taxes, gift taxes and generation-skipping taxes also occurred on Capitol Hill, albeit with less fanfare.

The primary fear was that Congress would fail to act and the estate tax exemption would revert back down to $1 million.  This did not happen.  The ultimate legislation that was enacted, American Taxpayer Relief Act of 2012, maintains the $5 million exemption for estate taxes, gift taxes and generation-skipping taxes.  The actual amount of the exemption in 2013 is $5.25 million, due to adjustments for inflation.

The other fear was that the top estate tax rate would revert to 55 percent from the 2012 rate of 35 percent.  The top tax rate did rise, but only 5 percent from 35 percent to 40 percent.

The American Taxpayer Relief Act of 2012 also makes permanent the portability provision of estate tax law.  Portability means that the unused portion of the first-to-die spouse’s estate tax exemption passes to the surviving spouse to be used in addition to the surviving spouse’s individual $5.25 million exemption.

Some Definitions and Additional Explanations


The Fedral Estate Tax is imposed when assets are transferred from a deceased individual to surviving heirs.  The Federal Estate Tax does not apply to estates valued at less than $5.25 million.  It also does not apply to after-death transfers to a surviving spouse, as well as in a few other situations.  Unlike sone states, the State of Louisiana does not impose a separate estate tax. The Louisiana Estate Tax has been repealed.

The federal gift tax applies to any transfers of property from one individual to another for no return or for a return less than the full value of the property. The federal gift tax applies whether or not the giver intends the transfer to be a gift.  In 2013, the lifetime exemption amount is $5.25 million at a rate of 40 percent.  Gifts for tuition and for qualified medical expenses are exempt from the federal gift tax as are gifts under $14,000 per recipient per year.

The federal generation-skipping tax (GST) was created to ensure that multi-generational gifts and bequests do not escape federal taxation.  There are both direct and indirect generation-skipping transfers to which the GST may apply.  An example of a direct transfer is a grandmother bequeathing money to her granddaughter.  An example of an indirect transfer is a mother bequeathing a life estate for a house to her daughter, requiring that upon her death the house is to be transferred to the granddaughter.

If your mind is now awash with confusion, don't feel bad. After all, we are dealing with laws passed by Congress. Feel free to call us and we will do our best to make all of this very simple for you to understand.

 

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Many & LoCoco

Attorneys at Law

(504) 483-2332


Wednesday, January 9, 2013

Estate Taxes after averting the Fiscal Cliff

 

On January 1, 2013 the Bush era tax cuts were set to expire. One dire consequence of this event was that the Federal Estate Tax Exemption amount was scheduled to be reduced from five million dollars to one million dollars if Congress and the President did not act.

Well, thankfully, they acted.

What Congress and the President did with regard to Federal Estate Taxes has, at least for the moment, provided us with some certainity, which has been lacking in the estate planning world for sometime now.

They have permantely fixed the Federal Estate Tax Exemption amount at five million dollars. What that means in simple terms is for a married couple, their joint community estate would have to be over ten million dollars for there to be a tax. They did raise the tax rate from 35% to 40% on such estates. And here is the key. They made this change permanent, only with the exemption amount being adjusted for inflation every year.

Now, the word "permanent "in Washington is not defined the same way as you and I would define the word. Congress has a way of always changing or amending "permanent" things. But for now, it seems a fair bet, that the five million dollar exemption will remain with us for sometime, which does provide us with some certainity in dealing with estate planning.

For most of us, Federal Estate taxes will be something we do not have to worry about. But that does not mean that we should not consider our estate planning needs. We should all have a Will, and we should update said Will periodically to keep up with the changes in our life. We should have Power of Attorneys, providing someone with the authority to act on our behalf in all matters. And lastly, we should have living wills, also known as an advance medical directives. If you don't have any or all of these documents in your estate plan, you are not alone. For example, 64% of Americans do not have a basic Living Will.

With proper estate planning, you can rest assured that upon your death, your estate will pass down the way that you want it to pass down. It gives you and your loved ones certainty. And certainity makes everything a lot easier for everyone.

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Many & LoCoco

Attorneys at Law

(504) 483-2332

 

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Thursday, November 29, 2012

The Story of Joseph Mitchell

 

With all the stories of the Saints/Falcons rivalry floating around today, and with it going to a new level with the Saints bus being egged by Atlanta Airport personel, I decided to let you know that not all Atlanta natives are egg throwing Falcon fans.

It's close, but not all. Joseph Mitchell was such a man.

Joseph Mitchell was a devout Catholic Southern gentleman.  He attended Mass regularly at Atlanta’s Cathedral of Christ the King.  He was known around the Parish as a very kind, shy person. People found him to be shy because he did not speak much about himself or his family for that matter. But rest assured, every Sunday, you would always find “Joe” sitting in his pew in the Cathedral.

One day, at the age of 76, the little old faithful church going man went to his eternal reward. After his death, it soon became very obvious to folks that there was more to Joseph Mitchell – a lot more.

You see, Joseph Mitchell was the nephew of Margaret Mitchell, yep the author of Gone with the Wind.

Margaret Mitchell died childless after being hit by a car in 1949 and she left her entire estate to Joseph’s dad. Eventually, one-half of Margaret Mitchell’s entire estate came down to our little church going man, Joseph Mitchell.

Well, Joseph Mitchell wrote a will before he died. It detailed exactly what he wanted to do with his estate.

What he did with his Will has just become public knowledge.

He left his entire estate to the Archdiocese of Atlanta, including a 50% share in the literary rights to Gone with the Wind, valued in the millions, a few signed first editions of Gone with the Wind, personal artifacts of Margaret Mitchell and a sum of money in the 15 to 20 million dollar range. His will established how he wished the Archdiocese to use his funds, spreading out his wealth to each parish in the Archdiocese, but providing a sizable sum for a well needed makeover for the Cathedral where he faithfully attended Mass all those years.

That is quite a windfall for the Archdiocese, all from the little old man sitting in his pew every Sunday.

So after our beloved Saints beat down the Falcons tonight, sleep well knowing that at least the egg throiwng Falcon fans can go to their very wealthy church parishes tomorrow and pray for forgiveness.

Who Dat.

 

Thursday, November 15, 2012

The Fiscal Cliff and Estate Taxes

 

The "Fiscal Cliff". As many of you know, on January 1, 2013 the Bush era tax cuts expire. Now that the presidential election is behind us, all eyes are watching what will occur. The Fiscal Cliff has far reaching and drastic effects on our economy. Today, I will discuss just one of those effects.

On January 1, 2013, the Federal Estate Tax exemption amount is scheduled to be reduced from five million dollars to one million dollars if Congress and the President do not act. What that means in simple terms is if you die and your estate is above one million dollars in value, your estate would owe estate taxes upon your death. And here is the key. With the changes coming, the tax rate on the excess above one million dollars is at 55%. Let me repeat that -- 55%. So if you have a two million dollar esate, your estate will owe taxes on one million dollars, and at a 55% rate that means your estate will owe a tax of $550,000. OUCH!! 

Talk about going over a cliff. Imagine what that would mean for small business owners who may not have a lot of cash on hand, yet have businesses worth in excess of one million dollars. How will the tax be paid? Will the business have to be sold by the heirs just to pay the tax? That is how important these next few weeks are for our Country. Somehow, Congress and the President need to get their act together and figure out a solution. 

Additionally, since the estate tax and gift tax are a unified tax, the excess gift tax amount is also increasing to 55%.

Do I have faith that a solution will be in place by January 1, 2013? No. It is hard to know what the agenda is of all the players. Which is a shame since the agenda of all should be for the financial well being of all of us.

Depending on what happens come January, proper estate planning may become very important for many of us. Trusts, life inurance to help pay the costs of any estate tax owed, etc., will all have to be looked at to see if they should all be part of your estate plan.

It should be very interesting over the next few weeks.

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Many & LoCoco

Attorneys at Law

(504) 483-2332

 

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Thursday, November 1, 2012

Estate Planning: Leaving Assets to a ‘Troubled’ Heir

 

If you have a child or grandchild who is addicted to drugs or alcohol, or who is financially irresponsible, you already know the heartbreak associated with trying to help that child or grandchild make healthy decisions.  Perhaps your other adult children or grandchildren are living independent lives, but this child or grandchild still turns to you to bail him out – either figuratively or literally – of trouble.

If these are your circumstances, you are probably already worrying about how to continue to help your child or grandchild once you are gone.  You predict that your child or grandchild will misuse any lump sum of money left to him or her via your will.  You don’t want to completely cut this child or grandchild out of your estate plan, but at the same time, you don’t want to enable destructive behavior or throw good money after bad.

Trusts are an estate planning tool you can use to provide an inheritance to a worrisome heir while maintaining control over how, when, where, and why the heir accesses the funds.  This type of trust is sometimes called a spendthrift trust.  

As with all trusts, you designate a trustee who controls the funds that will be left to the heir.  This trustee can be an independent third party (there are companies that specialize in this type of work or sometimes banks and their respective Trusts departments are used) or, as in most cases, a member of the family is named as trustee.  Who to name as trustee is usually an agonizing decision for the client. Some clients will often opt for a third party as a trustee, to prevent accusations among family members about favoritism, or avoiding giving one family member a headache to deal with for the rest of their lives. Or other clients will only consider naming family members as trustees and not a thrid party, as they believe the decisions and control of the trust should be in the hands of someone they know and who knows the dynamics of the family. The decision as to who to name as trustee is a personal decision and should be discussed at length with the estate planning attorney preparing your will.

The trust can specify the exact circumstances under which money will be disbursed to the heir.  Or, more simply, the trust can specify that the trustee has complete and sole discretion to disburse funds when the heir applies for money.  It can also establish that funds from the trust be distributed out over time at set intervals to avoid the child or grandchild getting one large lumpsum payment at one time.

If you are considering writing this type of complex trust, it is advisable to seek assistance from a qualified and experienced estate planning attorney who can help you devise a plan that best accomplishes your wishes with respect to your child or grandchild.
 

 

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Many & LoCoco

Attorneys at Law

(504) 483-2332


Wednesday, September 12, 2012

Remarried? Protect Your Children With Proper Planning

 

First, we hope all of you did well with Hurricane Isaac and suffered minimal damage from the storm. 

Next, in today's post, we will look at estate planning and the issues that come up with blended families.

If you are married for the first time and are working on your estate plan, the decisions about where the assets go are usually easy. Most parents in that situation want their entire estate to go to the surviving spouse, and upon the death of the surviving spouse, equally to their children. There may be difficult decisions about who will serve as guardians of the children or trustees over the children’s property, but typically it’s easy to decide where the property will go.

However, in today’s society, there are ever-increasing numbers of blended families. There may be children from several marriages involved, making estate planning more complex.  Couples may bring an unequal number of children into the marriage, as well as unequal assets. A spouse may want to ensure that his or her spouse is provided for at death, but may be afraid to leave everything to that spouse out of fear that at the death of the second spouse, that spouse will leave everything to his or her biological children.

Planning can also be complicated when a couple gets married and either of them brings very young children into the marriage. The non-biological parent may raise those children, but unless formally adopted, for estate planning purposes, they are not considered the children of the non-biological parent. Therefore, if that parent dies without a will, the children will not inherit from the stepparent.

There are many options for estate planning for blended families that will treat everyone fairly. First, it’s imperative that parents of blended families have a will in place. If they don’t, it’s almost inevitable that someone will be treated unfairly. Also, it’s tempting for parents of blended families to create wills in which half of everything is left to the husband’s children and half is left to the wife’s children. However, as explained earlier, this approach can also lead to problems.  Moreover, it’s not at all uncommon for a surviving spouse to change his or her will at the death of the first spouse and cut the stepchildren out of the estate plan.

There are two options often recommended for blended families when doing estate planning. The first is to use a trust. Under this plan, all family assets are usually held in trust. Upon the death of the first spouse, the surviving spouse has the right to use the assets in the trust for support, with certain limits, such as rights to income or limited use of the trust principal for living expenses. However, the surviving spouse will not be able to change the beneficiaries of the trust, and hence stepchildren could not be disinherited. A second option is for a certain amount of money to be left to children at the death of the first spouse. In that situation, the children will not have to wait for the death of the stepparent in order to inherit. This works well in situations when the children are mature adults and there is sufficient money for the surviving spouse to support herself without relying on the extra funds that are inherited by the children.  One way to accomplish this is through a life insurance policy payable to the children.

Estate planning with blended families can be complex and each situation is unique. It’s important to keep the lines of communication open and to be aware that it can be a sticky situation for many families. However, with proper planning, many issues that could arise on the death of a stepparent can be avoided completely.

 

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Many & LoCoco

Attorneys at Law



Monday, July 30, 2012

Retirement Accounts and Estate Planning

 

For many Americans, retirement accounts comprise a substantial portion of their wealth. When planning your estate, it is important to consider the ramifications of tax-deferred retirement accounts, such as 401(k) and 403(b) accounts and traditional IRAs. (Roth IRAs are not tax-deferred accounts and are therefore treated differently). One of the primary goals of any estate plan is to pass your assets to your beneficiaries in a way that enables them to pay the lowest possible tax.

Generally, receiving inherited property is not a transaction that is subject to income tax. However, that is not the case with tax-deferred retirement accounts, which represent income for which the government has not previously collected income tax. Money cannot be kept in an IRA indefinitely; it must be distributed according to federal regulations. The amount that must be distributed annually is known as the required minimum distribution (RMD). If the distributions do not equal the RMD, beneficiaries may be forced to pay a 50% excise tax on the amount that was not distributed as required.

After death, the beneficiaries typically will owe income tax on the amount withdrawn from the decedent’s retirement account. Beneficiaries must take distributions from the account based on the IRS’s life expectancy tables, and these distributions are taxed as ordinary income. If there is more than one beneficiary, the one with the shortest life expectancy is the designated beneficiary for distribution purposes. Proper estate planning techniques should afford the beneficiaries a way to defer this income tax for as long as possible by delaying withdrawals from the tax-deferred retirement account.

The most tax-favorable situation occurs when the decedent’s spouse is the named beneficiary of the account. The spouse is the only person who has the option to roll over the account into his or her own IRA. In doing so, the surviving spouse can defer withdrawals until he or she turns 70 ½; whereas any other beneficiary must start withdrawing money the year after the decedent’s death.

Generally, a revocable trust should not be the beneficiary of a tax-deferred retirement account, as this situation limits the potential for income tax deferral. A trust may be the preferred option if a life expectancy payout option or spousal rollover are unimportant or unavailable, but this should be discussed in detail with an experienced estate planning attorney. Additionally, there are situations where income tax deferral is not a consideration, such as when an IRA or 401(k) requires a lump-sum distribution upon death, when a beneficiary will liquidate the account upon the decedent’s death for an immediate need, or if the amount is so small that it will not result in a substantial amount of additional income tax.

The bottom line is that trusts typically should be avoided as beneficiaries of tax-deferred retirement accounts, unless there is a compelling non-tax-related reason that outweighs the lost income tax deferral of using a trust. This is a complex area of law involving inheritance and tax implications that should be fully considered with the aid of an experienced estate planning lawyer.

 

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Many & LoCoco

Attorneys at Law

 

 


Thursday, July 19, 2012

(Grand)Parenting 2.0

According to the National Census Bureau, grandparent-headed homes are among the fastest growing household types in the United States. Grandparent-headed homes are defined as living arrangements where the primary financial and caregiving responsibilities are held by one or more grandparents rather than a parent. Though the reasons that lead to this type of arrangement vary, many speculate that a difficult job market and bleak economy has led to an increase in the past few years.

At the height of the financial crisis, the Wall Street Journal published an article describing the financial strain placed on grandparent-headed households. For grandparents who have already retired, finding a job at an advanced age can be next to impossible. The unemployment rates for this demographic are disproportionately high as are levels of ‘discouragement,’ or the part of the population so frustrated with trying to find work that they are driven from workforce. The degree of financial hardship is exacerbated by the increase in the price of everyday goods and necessities, like food and clothing.

Beyond the financial strain, taking care of a young child can also have a significant impact on a grandparent’s mental and physical well-being. If an infant is placed in the grandparent’s care, he or she may have disrupted sleep due to nightly feedings. Grandparents raising young children are also frequently exposed to diseases and infections common in childhood. Depression and anxiety disorders are not uncommon and for children with developmental delays or behavioral problems, the demands placed on caregivers are that much greater.

The importance of parents of minor children sitting down together and discussing who they should name in their will as the person who should raise their child in case something would happen to both parents cannot be stressed enough. Too often, the Courts, without direction from a Last Will and Testament, will name the grandparents as the guardians, when in some instances that is not the best case case for the child or for the grandparent.

In some cases, grandparents may become the head of a household even when parents are present. In situations where a parent has become unemployed or otherwise cannot care for the children, he or she may move the entire family into his or her parents’ home. In addition to grandparent-headed homes, other types of arrangements where the parent is not the primary caregiver are on the rise. These may include instances where an aunt or uncle takes responsibility for a nephew or niece.

Fortunately, many federal and state governments have started to recognize this trend and are putting resources in place to assist non-parent-headed homes. The American Association of Retired Persons has also created a comprehensive guide and resource center for grandparents parenting a child.

 

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Many & LoCoco

Attorneys at Law

 

 


Monday, June 18, 2012

Important Issues to Consider When Setting Up Your Estate Plan

Often estate planning focuses on the “big picture” issues, such as who gets what, who should I name as the Executor of my estate, who should be named as Tutors for my minor children, should a living trust be created to potentially avoid probate, and what tax planning should I do to minimize gift and estate taxes. However, there are many smaller issues, which are just as critical to the success of your overall estate plan. Below are some of the issues that are often overlooked by clients and sometimes their attorneys. 

Cash Flow
Is there sufficient cash? Estates incur operating expenses throughout the administration phase. The estate often has to pay filing fees, living expenses for a surviving spouse or other dependents, cover regular expenses to maintain assets held in the estate, and various legal expenses and adminsitration costs and fees associated with settling the estate.

Taxes
How will taxes be paid? Although the estate may be small enough to avoid federal estate taxes, there are other taxes which must be paid. If the estate is earning income, it must pay income taxes until the estate is fully settled. Income taxes are paid from the liquid assets held in the estate, however estate taxes could be paid by either the estate or from each beneficiary’s inheritance if the underlying assets are liquid.

Assets
What, exactly, is held in the estate? The owner of the estate certainly knows this information, but estate administrators, successor trustees and executors may not have certain information readily available. A notebook or list documenting what major items are owned by the estate should be left for the estate administrator. It should also include locations and identifying information, including serial numbers and account numbers. Of course, the location of this information should be known to the personal representatives of the estate or a note in the attorney's file may suffice.

Creditors
Your estate can’t be settled until all creditors have been paid. As with your assets, be sure to leave your estate administrator a document listing all creditors and account numbers. Be sure to also include information regarding where your records are kept, in the event there are disputes regarding the amount the creditor claims is owed.

Beneficiary Designations
Some assets are not subject to the terms of a will. Instead, they are transferred directly to a beneficiary according to the instruction made on a beneficiary designation form. Bank accounts, life insurance policies, annuities, retirement plans, and IRAs allow you to designate a beneficiary to inherit the asset upon your death. By doing so, the asset is not included in the probate estate and simply passes to your designated beneficiary by operation of law.

Fund Your Living Trust
Your probate-avoidance living trust will not keep your estate out of the probate court unless you formally transfer your assets into the trust. Only assets which are legally owned by the trust are subject to its terms. Title to your real property, vehicles, investments and other financial accounts should be transferred into the name of your living trust.

All of these issues form part of an estate plan, and every one of them is a necessary consideration to make your plans for the furture complete. After all, the purpose of any estate plan is to plan today for tomorrow.

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Many & LoCoco

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The Attorneys of Many & LoCoco assist clients throughout parts of Southern Louisiana, including but not limited to New Orleans, Metairie, Mandeville, Convington, Gretna, Arabi, Marrero, Westwego, Harvey, Chalmette, Kenner, and the Parishes of Orleans, Jefferson, St. Tammany, and St. Bernard, LA.



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