by Monte L. Schatz

When the topic of estate planning comes to mind, most individuals think about the distribution of their assets at death.   The increased longevity of our population requires equal attention to diminished cognitive skills caused by dementia or other diseases that affect normal cognitive functioning.

Dementia is a syndrome in which there is deterioration in memory, thinking, behavior and the ability to perform everyday activities.  An estimated 5.5 million Americans of all ages have Alzheimer’s disease.  One in 10 people age 65 and older has Alzheimer’s dementia.  The average survival time for people diagnosed with dementia is about four and a half years, new research shows. Those diagnosed before age 70 typically live for a decade or longer.  The time frame from mild cognitive decline to the onset of dementia averages seven years.   Typically, when an individual is in the moderately severe cognitive decline, assistance may be required for daily activities and management of the person’s financial affairs.

The difficulties that families encounter is determining when the person no longer can manage their own affairs or maintain his or her own physical well-being.  The ultimate question of capacity is a legal determination and in some cases a judicial determination, not a clinical finding. A clinical assessment stands as strong evidence to which the lawyer must apply judgment considering all the factors in the case at hand.  While psychologists and other health professionals may use different terms than lawyers, conceptually the clinical model of capacity has striking similarities to the legal model.

The best estate planning approach is to take proactive legal steps ahead of mental decline to assure adequate personal and financial care and to minimize unnecessary legal costs or litigation expenses.  The legal tools available to circumvent legal capacity issues include:

  • A will drafted in advance of cognitive decline to minimize heirs contesting an estate.
  • A living trust should be considered to assure proper management of assets and continuity of financial management by a trustee for the incapacitated person’s benefit.
  • A durable power of attorney for financial matters designating a trusted and financially responsible individual to manage assets upon the onset of mental incapacity.
  • A health care power of attorney or directive that provides for a designated person to make health decisions in the event of incapacity.
  • A living will that outlines, in advance, the wishes of a person who receives artificial life sustaining treatment.

Thoughtful estate planning in advance of mental decline can help avoid expensive court alternatives that can include court conservatorships or guardianships during life and/or estate litigation after the person’s death.  More importantly, well designed advanced planning minimizes the possibility of disputes among heirs that may disrupt family relationships.

© 2017 Vandenack Weaver LLC
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Are There Any Exemptions to the Estate Tax?

There are exemptions to the estate tax. The federal estate tax exemption for 2014 is $5,340,000 and that pertains to each American citizen; therefore, between yourself and your spouse you have over $10,000,000 in exemption. In addition to that, there is a skip generation benefit equal in value which means that you can not only pass down to your spouse and to children, but also down to future generations by use of the skip generation with it.

© 2014 Parsonage Vandenack Williams LLC

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Nebraska to Authorize Transfer on Death Deeds

Owners of real property will soon be able execute and record a “Transfer on Death” deed enabling an owner to pass property to one or more beneficiaries at the owner’s death without probate or transferring the property to a trust.  In addition to the standard deed requirements, a Transfer on Death deed must (1) state that the transfer occurs on the owner’s death, (2) contain certain statutory warnings, and (3) be properly recorded during the owner’s lifetime.  Until the death of the owner, beneficiaries have no interest in the property solely by being named a beneficiary.  Transfer on Death deeds can be revoked by disposing of the land, recording a revocatory instrument, or recording a subsequent Transfer on Death deed naming a different beneficiary.  LB 536 becomes operative on January 1, 2013.

Keep in mind that trusts may still be a more effective method of transferring property as trust can provide for contingencies such as what should happen to property when a beneficiary predeceases you or is incompetent.  Trusts have other advantages over transfer on death deeds as well but the new law is a welcome improvement for many situations.

© 2012 Parsonage Vandenack Williams LLC

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IRS Provides Relief for Estates that Failed to Elect Portability

Due to lack of early information and guidance by the IRS regarding the portability election and how it is made, the IRS has granted relief to some estates that failed to file an estate tax return or extension thereof in a timely manner. In Notice 2012-21, the IRS has granted the executor of a “qualifying estate” that failed to timely request an extension to file an estate tax return the opportunity to obtain a six-month extension of time until 15 months after the decedent’s date of death. A “qualifying estate” is an estate in which (i) the decedent is survived by a spouse, (ii) the decedent’s date of death is after December 31, 2010 and before July 1, 2011, and (iii) the fair market value of the decedent’s gross estate does not exceed $5,000,000. In order to utilize the relief granted, an executor must file a Form 4768 with the IRS office designated in the instructions to the form within 15 months of the decedent’s date of death. In addition, the executor must enter at the top of the Form 4768 the notation “Notice 2012-21, Extension for Good Cause Shown” or otherwise sufficiently notify the IRS that the extension is being filed pursuant to Notice 2012-12.

Notice 2012-21 can be found at: .

© 2012 Parsonage Vandenack Williams LLC

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