2024-04-08 by Sue Hunt
Many people believe that estate planning is only about planning for their death. But planning for what happens after you die is only one piece of the estate-planning puzzle. It is just as important to plan for what happens if you become unable to manage your own financial or medical affairs while you are alive (in other words, if you become incapacitated).
What happens without an incapacity plan?
Without a comprehensive incapacity plan, if you become incapacitated and unable to manage your own affairs, a judge will need to appoint someone to take control of your money and property (known as a guardian of the estate) and to make all personal and medical decisions for you (known as a guardian of the person) under court-supervised guardianship proceedings. The guardian may be the same person, or there may be two different people appointed to these roles. Depending on state requirements, the guardian may have to report all financial transactions to the court annually, or at least every few years. The guardian is also typically required to obtain court permission before entering into certain financial transactions (such as mortgaging or selling real estate). Similarly, the guardian may be required to obtain court permission before making life-sustaining or life-ending medical decisions. Court-supervised guardianship is effective until you either regain the ability to make your own decisions or you pass away.
Who should you choose as your financial agent and healthcare agent?
Guardianship statutes are the state's default plan for appointing the person or people who will make decisions for you if you cannot make them for yourself. This default plan, however, may not align with the plan you would have put into place on your own. Most importantly, state statutes may give priority to someone to act as your guardian who is not the person you would have selected had you engaged in proactive planning.
Rather than having a judge appoint these important decision-makers for you, your incapacity plan allows you to appoint the trusted individuals you want to carry out your wishes. There are two very important decisions you must make when putting together your incapacity plan:
The following factors should be considered when deciding who to name as your financial agent and healthcare agent:
What should you do?
If you do not proactively plan for incapacity before you become incapacitated, your loved ones will likely have to go to probate court to have a guardian appointed. This would be a hassle, taking time and costing money during what is already likely to be a very stressful and emotional time.
Part of creating an effective incapacity plan means carefully considering who you want as your financial and medical agents. You should also discuss your choice with the person you select to confirm that they are willing and able to serve. This would also be a great opportunity to discuss with them your wishes as to the medical and financial issues that are most important to you.
Our firm is ready to answer your questions about incapacity planning and assist you with choosing the right agents for your plan.
2022-04-04 by Sasha Hartzell
It's that time again - just days away from the tax filing deadline. Although many strategies to save on your income taxes must be locked in before the end of the year, there are still numerous ways you can reduce your tax bill right up until the filing deadline, which has been pushed back to Monday April 18th due to a holiday on April 15th.
Some of these strategies are time tested and available every year. Pandemic-based legislative changes from these past two years have also created several new, though temporary, opportunities. While there are dozens of potential tax breaks you may qualify for, here are seven of the leading moves you can make to save on your 2021 tax return.
The lower your income is, the lower your taxes will be. Tax-advantaged retirement plans, such as 401(k)s, 403(b)s, and individual retirement accounts (IRAs), are a great way to reduce your taxable income while saving money. As you have until the April tax-filing deadline to add money to your plan for the previous tax year, you still have time to contribute.
For 2021, those with workplace retirement plans, such as a 401(k), 403(b), and most 457 plans, can contribute up to $19,500. And for 2022 the max contribution has increased $20,500! Anyone 50 and older can also make additional 'catch-up' contributions of up to $6,500 (for both 2021 and 2022).
For those with IRAs, both traditional Roth, you can contribute up to $6,000 in both 2021 and 2022, or $7,000 for those 50 or older. However, the ability to deduct your traditional IRA contributions from your taxes comes with certain limitations, depending on your adjusted gross income (AGI) and workplace retirement. Roth contributions are not tax deductible, since they are made after taxes are taken out. Withdrawals from a Roth in retirement, however, are tax-free.
Although you are typically required to take an annual required minimum distribution (RMD) from your traditional IRA, 401(k), or other tax-advantaged retirement account starting in the year you turn 72, the CARES Act waived the RMD requirement for 2020 due to the pandemic. The waiver also applied if you reached age 70 ½ in 2019, but waited to take your first RMD until 2020.
However, RMDs were reinstated in 2021, so if you are 72 or older, you were required to make a withdrawal from your retirement account before the end of 2021. Similarly, if you reached age 70 ½ in 2019 and your RMD in 2020 was waived, your 2021 RMD was also required to occur by Dec. 31, 2021. And if you reached age 72 in 2021, your 2021 RMD is required to occur by April 1, 2022.
If you failed to distribute the RMD, you may owe a 50% penalty on the amount not distributed. That said, you may be able to avoid the penalty by requesting a waiver from the IRS. You can request a waiver if your failure to take the RMD is due to a reasonable error, and you take steps to make the required distribution. To request a waiver, submit Form 5329 to the IRS, with a statement explaining the error and the steps you are taking to correct it.
As with tax advantaged retirement plans, if you have a high-deductible health insurance plan, you may be able to reduce your taxable income by contributing to a health savings account (HSA), which is a tax-exempt account you can use to pay medical expenses. The deadline for making a 2021 contribution to your HSA is April 15, 2022.
HSAs offer three different tax breaks: Contributions are tax-deductible, they allow for tax-free growth, and withdrawals are tax-free if they are used to pay for qualified medical expenses.
For 2021, if you had self-only health coverage, you could have contributed up to $3,600. For 2022, the individual coverage contribution limit is $3,650. If you have family coverage, the limit was $7,200 in 2021 and is $7,300 in 2022. And if you're 55 or older, you can add an extra $1,000 catch-up contribution to your HSA.
To be eligible, you must have a high-deductible health insurance plan with a minimum deductible of $1,400 for self-only coverage or $2,800 for family coverage. The maximum out-of-pocket expenses cannot exceed $7,000 for a self-only plan or $14,000 for a family plan.
The American Rescue Plan's expanded child tax credit was made fully refundable in 2021, and it was increased up to $3,600 per child through age 5 and up to $3,000 per child aged 6 to 17. Dependents who are 18 can qualify for $500 each. Dependents aged 19 to 24 may also qualify, but they must be enrolled in college full-time.
Eligible families automatically received half the total of the payments in advance monthly payments between July and December 2021, unless they opted out. When eligible parents file their taxes in 2022, they'll get the remainder of the benefit they didn't receive through advance monthly payments. If you did not receive the advance payments because you opted out or didn't receive them for some other reason, you can claim the full credit when you file in April.
Because the IRS based these payments on your 2020 tax return, a change in income or the number of qualifying dependents in 2021 could have resulted in an overpayment. If so, you'll have to pay that back when you file in April.
Even if you made little to no income, you are still eligible for the child tax credit, though payments begin to phase out when your AGI reaches $75,000 for single filers, and $150,000 for joint filers. To find out where you stand with this credit, visit the Child Tax Credit Update Portal on the IRS website.
The CARES Act allowed for up to a $300 deduction per tax return for charitable donations in 2020, even for those taxpayers who don't itemize. For 2021, this benefit expanded to up to $300 per person.
This means if you are a married couple filing jointly, you could be eligible for up to a $600 deduction for your charitable giving last year, even if you take the standard deduction, which increased to $12,550 for single filers and $25,100 for joint filers in 2021.
If you care for a child under age 13, or a spouse, parent, or another adult dependent who is unable to care for themselves, you may be able to get up to 50% back as a tax break or refund for your care-related expenses. For 2021, the amount you can claim maxes out at $8,000 for one dependent and $16,000 for two or more.
For 2021 only, this credit is fully refundable, meaning that you can receive money even if you don't owe taxes. Note that this credit is different from the child tax credit mentioned above, and qualifying for the child tax credit does not affect your eligibility for this credit and vice versa. Learn more about the requirements for the Child and Dependent Care Credit on the IRS website.
The American Opportunity Tax Credit (AOTC) provides undergraduate college students or their parents with an annual tax credit up to $2,500 for eligible education expenses incurred during the first four years of college. The credit can be used to cover 100% of the first $2,000 spent on tuition, books, school fees, and other supplies (excluding living expenses or transportation) plus 25% of the next $2,000 for a total of $2,500.
To qualify, the student must be pursuing a degree or credential and be enrolled at least half-time for one academic period (semester, trimester, or quarter) beginning in 2021 or the first three months of 2022. The credit can be claimed for a maximum of four years, and it can be claimed by the student or their parents provided they paid the expenses and the student is listed as a dependent on their tax return.
The full credit is available for individual filers with an AGI of $80,000 or less or $160,000 or less for joint filers. A reduced credit is available for individuals with an AGI over $80,000 but less than $90,000, or over $160,000 but less than $180,000 for joint filers. Taxpayers who earn more aren't eligible for the credit. The credit is also partially refundable, so you can still receive 40% of the credit (up to $1,000) even if you had no income or owed no taxes.
The Lifetime Learning Credit (LLC) is another tax credit for qualifying educational expenses, but it's slightly different from the American Opportunity Credit. The credit can be used to cover 20% of the first $10,000 spent on tuition and school fees for a maximum of $2,000. Unlike the AOTC, the LLC does not generally cover books or other supplies (unless those books or supplies were required to be purchased to take the course), and it also does not cover living expenses or transportation.
The LLC is not just for undergraduates; it applies to undergraduate, graduate, and non-degree or vocational students, and there's no limit on the number of years you can claim it. To qualify for the LLC, the student must be enrolled in at least one course for an academic period beginning in 2021 or the first three months of 2022. The credit can be claimed by the student or their parents provided they paid the expenses and the student is listed as a dependent on their tax return.
The full credit is available for individual filers with an AGI of less than $59,000, or less than $118,000 for joint filers. A reduced credit is available for individuals with an AGI between $59,000 and $69,000, or between $118,000 to $138,000 for joint filers. Those who earn more than $69,000 or $138,000 can't claim the credit.
The LLC is not refundable, so you can use the credit to pay any taxes you owe, but you won't get any of the credit back as a refund. Additionally, you can't claim both the American Opportunity Tax Credit and the Lifetime Learning Credit in the same year.
Maximize Your Tax Savings for 2021
These are just a few of the tax breaks available for 2021! There are plenty of other deductions and credits that your family might qualify for depending on your circumstances.
2025-04-02 by Sue Hunt
Approximately three-fourths of Americans do not have a basic will.[1] Many of the same people also have children under the age of 18, which underscores a major misunderstanding about estate plans: They can accomplish much more than just handling financial assets (money, accounts, and property).
One of the most important estate plan functions for parents of minor children is the ability to provide specific guidance about how their children will be cared for and who will care for them in case something happens to the parents.
To account for all emergency contingencies concerning you and your children, your estate plan should form a comprehensive safety net that addresses your children's care needs and protects them from the unthinkable.
Three Tools You Need If You Have Minor Children
As parents, we instinctively strive to shield our children from harm and set them up for success, now and in the future.
While we cannot predict the future, we can prepare for it. Estate planning is a crucial step in this preparation, especially when minor children are involved. It is not only about distributing your money and property after your death; it is also about establishing ways to care for your children if you no longer can.
Your death or incapacity (inability to manage your affairs) from a sudden illness or accident is a situation that you would likely rather not think about but must consider in preparing for worst-case scenarios that could lead to a court deciding who cares for your child.
Data on parental mortality is sobering: More than 4 percent of minor children have lost at least one parent.[2] If you wait too long to create your estate plan, it could be too late. More than any other reason, Americans cite procrastination as the reason they do not have an estate plan.[3] Procrastinating on creating your estate plan could mean it will not be there when you—and your children—need it.
To safeguard your children's future, three estate planning tools are particularly important: a will, a power of attorney for minors, and a standalone nomination of guardian.
Last Will and Testament
A last will and testament (also known as a will) is a cornerstone of any estate plan, but it takes on added importance when you have minor children. Your will outlines your wishes regarding the distribution of your money and property after your death. It also allows you to do the following:
Power of Attorney for Minors
A power of attorney for minors, sometimes called a designation of standby guardian or something similar depending on the state, is a legal document that empowers a chosen individual (your agent or attorney-in-fact) to act for your minor child on your behalf. This person steps in to make decisions regarding your child's care if you become incapacitated or unavailable.
The power of attorney can grant the agent broad authority to handle various aspects of your child's life, including the following:
Although the power of attorney grants the agent significant authority, there are limits to what it permits. The agent cannot consent to the child's marriage or adoption. In addition, many state laws impose expiration dates on these documents (e.g., six months, one year), so it is important to review and update them regularly to ensure that they remain valid.
Revocable Living Trust
In addition to a power of attorney, nomination of guardian, and will, the parents of minor children might consider a revocable living trust that holds their accounts and property during their lifetime and distributes them after their death.
You (the parent) maintain control of the accounts and property in the trust while you are alive as the current trustee. You can change the trust's terms as needed because you are the trustmaker, and this type of trust is revocable. A revocable living trust can help avoid probate and give your children faster access to the resources they need. You can also specify how and when your children receive their inheritance, name a successor trustee to continue management of the trust if you suffer incapacity, and provide financial support for the guardian, further synergizing your estate plan.
How These Tools Work Together—and What Can Happen If You Do Not Plan
These three estate planning tools are not interchangeable; they are complementary and designed to work together to address immediate and long-term needs in a range of potential scenarios.
Imagine a scenario where both parents are in a car accident. One parent dies, and the other is severely injured and temporarily incapacitated. The agent named in the temporary power of attorney or delegation of standby guardian immediately steps in to temporarily care for the children.
If the injured parent passes away, the designated guardian (who may be the same person as the agent under the temporary power of attorney) named in the will or standalone document can provide the children with a stable permanent home. The will can be structured so that the children's inheritance is managed through a trust that specifies how and when their inheritances should be spent and distributed.
Failure to have any one of these estate planning tools can lead to complications and unintended consequences for your minor children. For example:
Other Planning Tools and Tips for Parents
Parents should understand that they can only nominate a guardian for their child, not legally appoint one; the court has the final authority to decide, though it gives significant weight to the parents' nomination.
If there is evidence that your chosen guardian is unfit or unable to provide proper care, the court may appoint a different guardian in the child's best interest, even if it goes against your wishes. There is also the chance that a family member could contest your guardianship choice or your first choice of guardian is unavailable.
These outcomes are unlikely, but since they could undermine your wishes, there are additional steps you can take to minimize the risk and strengthen your case.
Fitting Together the Pieces of Your Estate Plan
Each part of an estate plan has a role to play, but they work best when considered as parts of a larger plan that addresses big issues such as the well-being of your minor children.
A will, temporary power of attorney, and standalone guardian document are not interchangeable; they are complementary. Incorporating all three into your plan, alongside other strategies such as a revocable living trust and a letter of intent, addresses the immediate and long-term needs of your minor children in any eventuality.
If you have minor children, estate planning is a necessity. Do not leave your children's future to chance. Consult with us to create a multipoint plan that protects you and your family.
[1] Victoria Lurie, 2025 Wills and Estate Planning Study, Caring (Feb. 18, 2025), https://www.caring.com/caregivers/estate-planning/wills-survey.
[2] George M. Hayward, New 2021 Data Visualization Shows Parent Mortality: 44.2% Had Lost at Least One Parent, U.S. Census Bureau (Mar. 21, 2023), https://www.census.gov/library/stories/2023/03/losing-our-parents.html.
[3] Lurie, supra note 1.
2024-04-04 by Sue Hunt
Probate is the court-supervised process of either (a) carrying out the instructions laid out in the deceased's will or (b) applying state law to distribute a deceased's accounts and property to their family members if the deceased did not have a will. The main purpose of the probate process is to distribute the deceased's money and property in accordance with the will or state law. Not all wills, and not all accounts and property, need to go through probate court. And just because a will is filed with the probate court does not mean a probate needs to be opened. But whether or not probate is necessary, most state laws require that a will be filed when the creator of the will (testator) passes away.
Estates, wills, and probate are distinct, yet interrelated, estate planning concepts.
Assuming that a decedent does have a will, here is how probate typically proceeds:
The length of a probate can vary depending on many factors, including the size of the estate, state laws, and whether the will is deemed invalid or contested.
In some cases, avoiding probate altogether can cut down on the amount of time it takes to wind up a deceased person's affairs. There are also other reasons to avoid probate, such as keeping probate filings out of the public record and saving money on court costs and filing fees.
Beneficiary designations, joint ownership, trusts, and affidavits are common ways to avoid probate, but only if they are done correctly. Here are some examples of these probate-avoidance tools in action:
Filing a will with the probate court and opening probate are separate actions. A will can be filed whether or not probate is needed. Remember that probate is needed only under certain circumstances, such as when the decedent passed away while owning probate assets. Further, not only can a will be filed with the court when a probate is not needed, some state laws actually require it. Some state laws require the person who has possession of a decedent's will to file it with the court within a reasonable time or a specified time after the date of the decedent's death. The consequences for failing to file a will vary by state but may include being held in contempt of court or payment of fines. Additionally, the person in possession of a will might also be subject to litigation by heirs who stand to benefit from the estate under the terms of the will. The latter also applies if the will-holder files a will but does not file for probate. Failing to file for probate (when probate is necessary) prevents inheritances from being properly distributed.
These legal consequences are usually imposed only on a will-holder who willfully refuses to file a will. If someone you love has passed away and you have their will in your possession, we recommend that you work with an experienced probate attorney who can assist you in determining whether a probate must be opened and whether the will needs to be filed.
Probate avoidance may be one of your goals when creating an estate plan. You should also consider implementing tools in your estate plan to minimize issues that may arise if your estate does require probate.
Your will may have been written years ago and might not reflect current circumstances. You could have acquired significant new accounts or property, experienced a birth or death in the family, left instructions that are vague or generic, or chosen an executor who is no longer fit to serve. An outdated or unclear will can spell trouble when it is time to probate your estate, making it important to identify—and address—issues that could lead to problems, including will contests and disputes.
It is recommended that you update and review your estate plan every three to five years or whenever there is a significant life change or a change in federal or state law. You cannot be too careful when stating your final wishes. For help drafting an airtight will that avoids possible complications, please contact us.
2024-06-24 by Sue Hunt
When most people think about creating an estate plan, they usually focus on what will happen when they die. They typically do not consider what their wishes would be if they were alive but unable to manage their own affairs (in other words, if they are alive but incapacitated). In many cases, failing to plan for incapacity can result in families having to seek court involvement to manage a loved one's affairs. It does not matter who you are, how old you are, or how much you have—having a proper plan in place to address your incapacity or death is necessary for everyone. Recently, comedian and late night talk show host Jay Leno had to seek court involvement to handle his and his wife's estate planning needs due to his wife's incapacity.
A conservator is a court-appointed person who manages the financial affairs for a person who is unable to manage their affairs themselves (also known as the ward). The conservator is responsible for managing the ward's money and property and any other financial or legal matters that may arise. They are also required to periodically file information with the court to prove that they are abiding by their duties. To have a conservator appointed, an interested person must petition the court, attend a hearing, and be appointed by a judge. This can be very time-consuming, and there are court and attorney costs that must be paid along the way.
In January 2024, Jay Leno petitioned the court to be appointed as the conservator of the estate of his wife, Mavis Leno, so that he could have an estate plan prepared on her behalf and for her benefit. Unfortunately, Mrs. Leno has been diagnosed with dementia and has impaired memory.[1] Her impairment has made it impossible for her to create her own estate plan or participate in the couple's joint planning. According to court documents, Mr. Leno wanted to set up a living trust and other estate planning documents to ensure that his wife would have "managed assets sufficient to provide for her care" if he were to die before her.[2] Right now, Mr. Leno is managing the couple's finances, but he wanted to prepare for a time when he is no longer able to do so.
On April 9, 2024, the court granted Mr. Leno's petition. According to the court documents, the judge determined that a conservatorship was necessary and that Mr. Leno was "suitable and qualified" to be appointed as such. During the proceedings, the judge found "clear and convincing evidence that a Conservatorship of the Estate is necessary and appropriate."[3]
Although there was a favorable outcome in this particular case, it still took several months for Mr. Leno to be appointed by the court. In addition to the initial filings and court appearances, there will likely be ongoing court filing requirements to ensure that Mrs. Leno's money is being managed appropriately. Had they prepared an estate plan ahead of time, much of this time and hassle would likely have been avoided.
While many people may dismiss the Lenos' experience as something that applies only to the rich and famous, the truth is that you could find yourself in the same situation (although with a smaller amount of money and property at play) if you are not careful. Let's use this opportunity to learn from their mistakes.
We can help you and your loved ones regardless of where you find yourself in the estate planning process. Whether you are looking to proactively plan to ensure that your wishes are carried out during all phases of your life, or if you need assistance with a loved one who can no longer manage their own affairs, give us a call.
[1] Nardine Saad & Meg James, Jay Leno Clarifies Why He Set Up Conservatorship Amid Wife Mavis' Dementia Battle, L.A. Times (Jan. 30, 2024), https://www.latimes.com/entertainment-arts/tv/story/2024-01-30/jay-leno-conservatorship-mavis-leno-dementia-will.
[2] Id.
[3] Alli Rosenbloom, Jay Leno Granted Conservatorship of Wife Mavis Leno's Estate, CNN (Apr. 10, 2024), https://www.cnn.com/2024/04/09/entertainment/jay-leno-granted-conservatorship-of-wife-mavis-lenos-estate/index.html.
