Priority for the Right of Distribution of Remains and Funeral Arrangements

Provisions have been adopted to the Nebraska Probate Code that clarify who has authority to make decisions regarding a decedent’s funeral or disposition of remains. Section 30-2223 provides that by affidavit or will, any person who is eighteen years of age or older may direct the location, manner, and conditions of disposition of his or her remains, as well as the arrangements for funeral goods and services to be provided upon his or her death.

In carrying out the decedent’s directions for disposition of remains or funeral services, the power is vested in any person who is designated by the decedent. If no one is designated or the person designated fails to act, the Legislature has provided a priority list for the exercise of the power. First priority is the surviving spouse, followed by the decedent’s children. If there are no children or surviving spouse, the priority goes to related parties (parents, siblings, grandparents, or the next closest relative). If none of the above are available, the guardian of the decedent, the personal representative, or other representatives will have the power.

Any person entitled to the right of disposition shall forfeit the right if it is not exercised within the earlier of three days after notification of death or four days after the decedent’s death. The right of disposition is also forfeited if the person was estranged from the decedent, as determined by a county court. There are also provisions allowing a court to handle disputes over the right of disposition and notwithstanding the priority listed above or the designation by the decedent, the court has the power to award the right to a person who the court determines to be most fit and appropriate.

For additional information see, Neb. Rev. Stat. 30-2223, available at http://nebraskalegislature.gov/laws/statutes.php?statute=30-2223.

© 2015 Houghton Vandenack Williams
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Are There Any Lifetime Planning Options Available to Me to Reduce My Exposure to Estate Taxes?

A Video FAQ with Mary E. Vandenack.

There are a variety of techniques that can be used to reduce your exposure to estate tax. A really simple one is an annual exclusion. Every year you can make a gift to any individual for up to a certain amount–that amount changes from year to year. You can also make lifetime gifts to your heirs/beneficiaries that are going to add up to the maximum amount you can pass during your lifetime. Next you want to go ahead and set up a trust or consider other lifetime planning strategies. There are a variety of trust techniques that will allow you to reduce your exposure to estate taxes. There are also some newer techniques that just using portability in your estate plan that can minimize your exposure to estate taxes.

© 2014 Parsonage Vandenack Williams LLC

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What Does a Proper Estate Plan Include?

A Video FAQ with Mary E. Vandenack.

A proper estate plan should include your goals, they should be incorporated into the plan. Some examples of those goals may be to take care of yourself and your spouse, if you have one, for life. If you have a disabled child, you are going to want to make sure your disabled child is taken care of. If you have minor children, you should be considering your minor children. After that, you are going to want to look at how you want assets disposed of. Do you want to keep things in trust for the life of your children, do you want distributions over a period of time or are they able to manage significant distributions at one point in time? The next thing you should look at is minimizing estate taxes or income taxes in terms of distributing your estate.

© 2014 Parsonage Vandenack Williams LLC

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Power Point-Skills for The Estate Planning Process

To view our Power Point Presentation on Skills for the Estate Planning Process, please follow the attached link:

http://www.pvwlaw.com/CM/Articles/Power%20Point-Skills%20for%20The%20Estate%20Planning%20Process%20(00058118).PPT

 

© 2009 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com

CURRENT RULES GOVERNING POWERS OF APPOINTMENT

Under IRC § 2041(b), the term “general power of appointment” means a power which is exercisable in favor of the decedent, his estate, his creditors, or the creditors of his estate; except that– a power to consume, invade, or appropriate property for the benefit of the decedent which is limited by an ascertainable standard relating to the health, education, support, or maintenance of the decedent shall not be deemed a general power of appointment.

 The value of all property that is subject to a general power of appointment exercisable by the decedent will be included in the decedent’s estate pursuant to § 2041.  A general power of appointment means a power that is exercisable in favor of the decedent, his estate, his creditors or the creditors of his estate.  The term includes all powers that are, in substance and effect, powers of appointment, regardless of the nomenclature used in creating the power and regardless of local property law connotations.  A power to consume, invade, or appropriate income or corpus, or both, for the benefit of the decedent which is limited by an ascertainable standard relating to the health, education, support, or maintenance of the decedent is, by reason of § 2041(b)(1)(A), not a general power of appointment.  A power is limited by such a standard if the extent of the holder’s duty to exercise and not to exercise the power is reasonably measurable in terms of his needs for health, education, or support (or any combination of them).  As used in this subparagraph, the words “support” and “maintenance” are synonymous and their meaning is not limited to the bare necessities of life.  A power to use property for the comfort, welfare, or happiness of the holder of the power is not limited by the requisite standard.  Examples of powers which are limited by the requisite standard are powers exercisable for the holder’s “support,” “support in reasonable comfort,” “maintenance in health and reasonable comfort,” “support in his accustomed manner of living,” “education, including college and professional education,” “health,” and “medical, dental, hospital and nursing expenses and expenses of invalidism.” In determining whether a power is limited by an ascertainable standard, it is immaterial whether the beneficiary is required to exhaust his other income before the power can be exercised.

 If the power of appointment may be exercised by the decedent only in conjunction with (1) the creator of the power, or (2) a person who has a substantial interest in the property that is subject to the power and such interest is adverse to an exercise of the power in favor of the decedent, the power is not considered to be a general power of appointment.

 The following powers are defined by Regs. § 20.2041-1 as not constituting a power of appointment for § 2041 purposes:

 The power to amend only the administrative provisions of the trust, which cannot substantially affect the beneficial enjoyment of the trust property or income;

  1. The power of management, investment, custody of assets, or the power to allocate receipts and disbursements as between income and principal, exercisable in a fiduciary capacity where the holder has no power to enlarge or shift any of the beneficial interests except as an incidental consequence of the discharge of the fiduciary duties; and
  2. The right of a beneficiary of a trust to assent to a periodic accounting, thereby relieving the trustee from further accountability, as long as such does not consist of any power to enlarge or shift the beneficial interest.

 

The common element in each of the above is that the power cannot be used to enlarge or shift any of the beneficial interests. Thus, powers that may be thought of as administrative in nature will not result in estate tax inclusion under § 2041.

© 2009 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com

Minimum Required Distributions Not "Required" for 2009.

On December 23, 2008 the “Worker, Retiree, and Employer Recovery Act of 2008” was signed into law by President Bush. One key provision of the Act temporarily suspends the requirement for taxpayers age 70 ½ and older (and their beneficiaries) to make annual minimum required distributions (MRDs) from their retirement plan accounts.

The Internal Revenue Code normally requires individuals over age 70 ½ with retirement accounts to make MRDs annually based on the size of the account balance at the beginning of the year and the age of the account holder (or the account beneficiaries in some cases). The new law suspends the MRD requirement for 2009. The law attempts to avoid the significant depletion of account assets that may result if MRDs were required following significant market losses in 2008 and allows the funds to be kept in the account and possibly recover some losses. This waiver is available to all defined contribution plans, including 401(k), 403(b), 457(b) and Individual Retirement Accounts (IRAs) regardless of the total account balance. The new law does not affect 2008 MRD requirements regardless of whether the distribution is made in 2009 for tax year 2008.

The new law also makes numerous technical corrections to the Pension Protection Act of 2006. The most significant is that, for tax years beginning after 2009, plan sponsors must offer non-spouse beneficiaries a rollover option. This gives much-needed flexibility to those who inherit retirement plan accounts from someone other than their spouse.

© 2009 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com

Estate Planning During Economic & Tax Uncertainty

Given the turn in the economy and the uncertainty related to the incoming administration, the focus of this post will divert to estate planning issues in a time of economic and tax uncertainty.  This post focuses on the review and consideration that should be given to your plan at this time.

Reconsider fiduciary appointments.  Who is your personal representative?  If you have a trust, who have you named as trustee?  Are you completely confident in your appointments?  Consider naming co-fiduciaries, especially if you have individual appointees.  Review your documents to be sure there are provisions allowing beneficiaries to make appropriate changes in the event of mismanagement by a fiduciary or the failure of a bank named as trustee.

Consider being more specific in your directions to fiduciaries.  Fiduciaries are governed by a variety of rules regarding investment of assets and dealing with beneficiaries.  A fiduciary is required to invest and manage estate assets as a prudent investor would and to balance the interests of the beneficiaries.  You can and should provide specific directions to the fiduciaries if you desire special consideration be given to the needs of one beneficiary as compared to others.  If you own a closely held business and want your estate to be able to continue to won the business, add a direction to your documents specifying that the fiduciary do so.

Review dispositive schemes.  Your current scheme of asset distribution is likely based on the value of assets at the time you established the plan.  A change in value or structure of your estate impacts your ability to accomplish the goals of your estate plan.  Revisit your estate planning goals and establish a priority.  Then, review your estate plan structure to ensure that your goals will still be acheived.  Adjust your plan as necessary.  Typical goals may include providing for yourself and a spouse as long as either is living, for an ailing parent, for minor children, or for a disabled child.

Review gift plans.  If you are currently making gifts to reduce your estate as a tax planning strategy, consider whether such gift plan should be deferred, accelerated, or expanded.

Many proposals for the estate tax system are being bandied about.  We are unlikely to have certainty for many months.  At present, there remains the ability to make a lifetime transfer to your heirs up to one million dollars without estate tax consequenses.  To the extent you remain comfortable with making a significant gift, the present economy offers an opportunity to achieve such a gift while asset values are low.

If you have concerns about your estate sustaining a sufficient level of income for your needs following a downturn in value, consider discontinuing gifts for the present time.  Also consider a possible reallocation of gifts if one of your beneficiaries has been impacted by the economy more than others.

Be proactive.  As difficult as it may be to open your account statements, do so.  Be proactive in making appropriate revisions to your planning.

 

© 2009 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com

 

THE FAMILY FOUNDATION FOR CHARITABLE GIVING

Giving to charity is rewarding in many ways.  There are many approaches to making charitable gifts. The best approach for a particular individual is depends upon  the motivation for the charitable giving, the charities to be benefited, the type of charitable gift, and the size of the charitable gift.  Giving through a family foundation may enhance the rewards of charitable giving and create an ongoing legacy of charitable giving for a donor.

 

The family foundation makes sense for a donor who plans to make significant charitable gifts to more than one charity, desires to create a permanent fund for charitable giving, and wants the donor’s family to be actively involved in the charitable giving process on an ongoing basis.

 

An important benefit of charitable giving is that the donor can obtain significant tax deductions related to the donations.   The tax savings opportunities include income and estate tax deductions.   To the extent that assets remain in the family foundation, growth on the assets is tax-free, which avoids capital gains and estate taxes.

 

There are different types of family foundations for tax purposes.   Contributions to a family foundation are generally deductible but there are various limitations on contributions to a family foundation that do not apply to other types of charitable gifts.  There are various distribution requirements and excise taxes that apply.  A donor considering a family foundation should be well advised of the achievable tax benefits of each type of family foundation. 

 

While tax benefits are important to most donors, the family foundation is most often chosen by those who are interested in the non-tax benefits of this charitable vehicle.  The family foundation offers many non-tax benefits that cannot be achieved with other charitable gift techniques.

 

Many donors establish a family foundation to encourage family involvement in charitable giving. A family foundation offers the opportunity for family members to work together to benefit charitable causes.  Often, foundations are set up so that family members meet to discuss management of foundation investments and desirable charitable gifts.  The foundation may help perpetuate the family unit by creating the opportunity for ongoing interaction of a positive nature.

 

A family foundation may bear the name of the donor or his or her family.  The family foundation then serves as an enduring memorial to the founder.   The philanthropic efforts of the founder can continue beyond his or her life.  

 

The family foundation offers ongoing control and flexibility.  The foundation board can monitor charities change charitable beneficiaries when doing so makes sense.

Because there is significant expense and ongoing maintenance related to a family foundation, the foundation will make sense only for charitable donations of significant size.  There is no specific threshold as to the size of gift that makes sense.  Whether the approach makes sense for a particular donor depends on the overall facts of the donor’s estate and philanthropic desires.  The non-tax benefits must outweigh the ongoing cost and expense.

 

A family foundation is an excellent technique for achieving ongoing family involvement in the community.  A foundation may be funded during the life of a donor or upon the donor’s death.  The family foundation should be considered by any charitably inclined individual as part of the estate planning process.

 

 

© 2009 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com

CHARITABLE GIVING – Lifetime vs. At Death

Charitable Giving

 

Lifetime vs At Death

 

 

1.        Lifetime Giving

 

·                     You get to see the impact

·                     Control

·                     Income Tax Savings

·                     Estate Reduction

 

 

2.        Giving at Death

 

·                     Leaves a legacy

·                     Preserves principal while you are alive

·                     Estate tax benefits

 

 

3.        What is your Motivation?

 

·                     Give to society

·                     Benefit a cause/organization you feel strongly about

·                     Become involved

·                     Tax savings (income or estate)

 

 

 

1.      Lifetime Giving

 

Option #1 – Write a Check

 

·                     Easy

 

·                     Immediate

 

·                     Income Tax Deduction

 

·                     Removed from Estate

 

·                     You see the charity benefit while you are here

 

 

Option #2 – Donate Appreciated Asset

 

Example – You bought stock for $100.  It is now worth $10,000.  You donate to Do Good Charity.

 

·                     Simple

 

·                     Income tax deduction of $10,000

 

·                     Charity can sell without paying tax on the gain

 

·                     Asset is removed from your estate

 

·                     Possibilities – stock, real estate


 1.      Lifetime Giving

 

Option #3 – Transfer Life Insurance

 

·                     You have charitable deduction equal to “interpolated terminal reserve value.”

 

·                     Charity ultimately can receive face value.  (Consider lifetime transfer versus naming charity as beneficiary.)

 

·                     Additional payment of premiums by donor is additional charitable deduction for income tax purposes.

 

·                     Face value of life insurance is removed from your estate.  (Be aware of three year rule.)

 

 

          Other Options – can also be accomplished at death

 

Charitable Remainder Trusts

 

·                     Charitable Lead Trusts

 

·                     Private Foundations

 

·                     Charitable Gift Annuities

 

·                     Donor Advised Funds at Community Foundation

 

·                     Charitable Funds at Investment Firms

 

 

 

2.      Death Giving

 

Option #1 – Bequest

 

·                     Gift is made by Will

 

·                     Gift occurs after death

 

·                     Gift can be made to one or more charities

 

·                     Gift can specify an endowment fund

 

·                     Estate tax deduction

 

·                     You do need a will (or trust)

 

 

Option #2 – Name Charity as IRA Beneficiary

 

·                     IRAs are “double” taxed at death in the sense of being included in your estate and being subject to income tax as distributed.

 

·                     If an IRA is part of your estate and you desire to make a charitable gift at death, this is one of the most tax effective techniques.

 

·                     This approach is also SIMPLE.  All that is required is a beneficiary designation.

 

 

Additional Tax Effective Death Giving Options

 

·                     Interest on U.S. savings bonds

 

·                     Accounts receivable

 

·                     Deferred compensation

 

·                     Payments on installment obligations

 

·                     Death benefits from annuities

 

·                     Accrued royalties under a patent license

 

3.      Other Considerations

 

Income Tax

 

            Not all charities are the same –

 

·                     50% of AGI v. 30% of AGI

 

·                     Appreciated property – Full market value to 30% of AGI vs. Cost Basis up to 20%

 

·                     Unused contributions can be carried forward 5 years

 

 

Estate Tax

 

Federal Estate Tax applies at $1.5 million

 

·                     Nebraska State Estate Tax applies at $1 million

 

·                     Nebraska State Inheritance Tax – $10,000

 

 

Appraisals required for non-tax gifts over $5,000.

 

 

Delivery of gifts must be accomplished to obtain deduction.

 

© 2009 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com