I often hear from younger clients, "Why do I need an estate plan?" Many of them assume that "estate planning" deals only with planning for transfer of assets. A comprehensive estate plan deals with much more than assets. In this post, I'll briefly discuss the common objections I hear, and explain why estate planning should be a priority for people of all ages and asset/income levels.
"I don't have any children. Everything will just go to my spouse anyway."
While this statement seems intuitive, it is factually inaccurate. Under Indiana's law of intestacy, if a childless person passes away without a Will, and leaves a surviving spouse and one or more surviving parent(s), then the surviving spouse is entitled to 75% of the decedent's estate, while the surviving parent is entitled to 25%. This is obviously an invitation to conflict between the surviving spouse and the in-laws. Even a simple Will can relieve this potential problem.
"I don't really have a lot of assets."
As I mentioned before, estate planning encompasses much more that asset planning. A solid estate plan will include not only asset planning, but also crucial documents for planning your health care and maintenance of your assets in the event that you become incapacitated by illness or injury and are unable to manage your own affairs. I often recommend that clients include in their estate plan Power of Attorney documents to designate an attorney-in-fact to deal with financial issues and also health care issues in such an event. These documents not only lend peace of mind in knowing that you've designated someone you trust to manage your affairs, but can also help to avoid a costly formal guardianship proceeding in a probate court in the event of incapacity.
"I have children, but if something happens to me, my spouse will just take over."
This is a shortsighted statement, as it's entirely possible that a common tragedy could result in both parents being unable to provide care for the children. A comprehensive estate plan will enable you to clearly express your preferences for who will care for your children as their guardian(s) in the event that both natural parents are unable provide that care for any reason.
These are common issues that face young families and couples. No young person wants to think about their own mortality, but the addition of a spouse and children creates a responsibility to plan for potential unforeseen events. I strongly recommend that all young families and couples sit down with an attorney and discuss their plans for passing control of their assets and responsibilty for providing care for their themselves, their spouses and children in the event of an incapacitating injury, illness or death.
If you have questions about estate planning, wills, trusts, powers of attorney, guardianships or the like, please feel free to contact me at (317) 575-8222. I take great pride in being accessible to my clients and providing clear and practical advice in the areas of estate planning, probate, guardianships, business and real estate law.
Saturday, January 22, 2011
Saturday, March 13, 2010
Is 2010 Really a Federal Estate Tax "Holiday"?
You may have heard or read that there is no Federal Estate Tax for estates of those who pass away in 2010. If you believe the news of a suspension of the Federal Estate Tax sounds too good to be true, your suspicions are well warranted. There are two major drawbacks of this Estate Tax "holiday":
(1) Your heirs will not receive a "stepped-up" basis for their inherited property, and
(2) The Estate Tax comes back with a vengeance in 2011, with a punitively low $1 million exclusion per person.
The "stepped-up basis" that was part and parcel of the Estate Tax scheme of years past allowed heirs to inherit property with a new basis based on the fair market value of the property as of the date of death of the decedent. For example, if you purchased a vacation home for $200,000 in 1990, your cost basis for that property would be $200,000. If you sold that property in 2007 for $300,000, you would be subject to capital gains tax on the $100,000 difference between the sale price and your basis. However, if you passed away in 2007 leaving that property to your child, and at the time of your death the property had a fair market value of $300,000, your child would inherit the property with a new "stepped-up" basis of $300,000. Therefore, if your child were to sell the property for $300,000 in 2008, he or she would incur no capital gains tax as a result of the sale because the sale price did not exceed his or her basis for the property.
This scenario is now drastically different for those dying in 2010. If you pass away in 2010, there would be no Federal Estate Tax on the property passing to your heir(s), however, he or she would receive "carry-over" of your basis for the property. The heir's basis would be your original $200,000 basis, meaning he or she would face the looming capital gains tax burden upon the sale of the property if it had appreciated in value. Keep in mind that this basis issue applies to all assets, not just real estate.
The second and most frightening problem with this Estate Tax "holiday" is that like all "holidays," it will come to an end. Under the current tax code, the Estate Tax is scheduled to return in 2011 like a grizzly bear that hasn't eaten for a year. In 2009, the Estate Tax excluded estates under $3,500,000. This $3.5 million is referred to as the "exclusion amount." In 2011, the Estate Tax returns, and the exclusion amount is only $1 million. This means that thousands more Americans will be subject to the Estate Tax and its oppressively high rates which can exceed 50 cents on the dollar. Factoring in that this tax must be paid by your heirs within nine months of the date of death, it is easy to see how this new lower exemption amount will deal a crushing blow to many small businesses and family farms.
There has been much speculation amongst estate planning experts as to whether Congress will act to amend the Estate Tax laws prior to the coming 2011 calamity, but no bill has passed both the House and Senate. Thus we're left with more uncertainty, and a very pressing need to address the estate plans of our clients whose assets may exceed $1,000,000 in value.
I would urge you to discuss these issues with an estate planning attorney, as there are many tools available to help minimize the tax burden on your estate and your heirs while protecting the assets you've worked so hard to accumulate.
If you have questions or would like discuss estate planning or other legal issues facing you and your family, please contact our office. We're here to help.
Gregory M. Halcomb
(317) 575-8222
***Please be advised that nothing in this blog should be considered legal advice. In order for me to give legal advice, it would be necessary for me to meet with an individual and discuss his or her unique situation before rendering a legal opinion or strategy.
Please also be advised that any comment or communication posted here will not be considered confidential and does not create an attorney-client relationship with me or our firm. Also note that I do not seek to practice law in any jurisdiction in which I am not licensed to do so.
(1) Your heirs will not receive a "stepped-up" basis for their inherited property, and
(2) The Estate Tax comes back with a vengeance in 2011, with a punitively low $1 million exclusion per person.
The "stepped-up basis" that was part and parcel of the Estate Tax scheme of years past allowed heirs to inherit property with a new basis based on the fair market value of the property as of the date of death of the decedent. For example, if you purchased a vacation home for $200,000 in 1990, your cost basis for that property would be $200,000. If you sold that property in 2007 for $300,000, you would be subject to capital gains tax on the $100,000 difference between the sale price and your basis. However, if you passed away in 2007 leaving that property to your child, and at the time of your death the property had a fair market value of $300,000, your child would inherit the property with a new "stepped-up" basis of $300,000. Therefore, if your child were to sell the property for $300,000 in 2008, he or she would incur no capital gains tax as a result of the sale because the sale price did not exceed his or her basis for the property.
This scenario is now drastically different for those dying in 2010. If you pass away in 2010, there would be no Federal Estate Tax on the property passing to your heir(s), however, he or she would receive "carry-over" of your basis for the property. The heir's basis would be your original $200,000 basis, meaning he or she would face the looming capital gains tax burden upon the sale of the property if it had appreciated in value. Keep in mind that this basis issue applies to all assets, not just real estate.
The second and most frightening problem with this Estate Tax "holiday" is that like all "holidays," it will come to an end. Under the current tax code, the Estate Tax is scheduled to return in 2011 like a grizzly bear that hasn't eaten for a year. In 2009, the Estate Tax excluded estates under $3,500,000. This $3.5 million is referred to as the "exclusion amount." In 2011, the Estate Tax returns, and the exclusion amount is only $1 million. This means that thousands more Americans will be subject to the Estate Tax and its oppressively high rates which can exceed 50 cents on the dollar. Factoring in that this tax must be paid by your heirs within nine months of the date of death, it is easy to see how this new lower exemption amount will deal a crushing blow to many small businesses and family farms.
There has been much speculation amongst estate planning experts as to whether Congress will act to amend the Estate Tax laws prior to the coming 2011 calamity, but no bill has passed both the House and Senate. Thus we're left with more uncertainty, and a very pressing need to address the estate plans of our clients whose assets may exceed $1,000,000 in value.
I would urge you to discuss these issues with an estate planning attorney, as there are many tools available to help minimize the tax burden on your estate and your heirs while protecting the assets you've worked so hard to accumulate.
If you have questions or would like discuss estate planning or other legal issues facing you and your family, please contact our office. We're here to help.
Gregory M. Halcomb
(317) 575-8222
***Please be advised that nothing in this blog should be considered legal advice. In order for me to give legal advice, it would be necessary for me to meet with an individual and discuss his or her unique situation before rendering a legal opinion or strategy.
Please also be advised that any comment or communication posted here will not be considered confidential and does not create an attorney-client relationship with me or our firm. Also note that I do not seek to practice law in any jurisdiction in which I am not licensed to do so.
Wednesday, January 20, 2010
If you have questions, or need legal advice...
Please feel free to contact me. My office contact info is as follows:
HALCOMB SINGLER, LLP
718 Adams Street
Carmel, IN 46032
(317) 575-8222
Also, see our firm website at:
http://www.halcombsingler.com
HALCOMB SINGLER, LLP
718 Adams Street
Carmel, IN 46032
(317) 575-8222
Also, see our firm website at:
http://www.halcombsingler.com
Welcome to my Indiana Estate Law Blog!
I hope you'll find this blog informative and entertaining as I'll attempt to keep you apprised of interesting developments and topics in Indiana estate planning and probate law.
By way of introduction, my name is Greg Halcomb and I'm an Indiana attorney with my primary office in Carmel.
My primary practice areas include estate planning (wills, trusts, etc.), probate and estate administration, real estate, business formation and civil litigation.
I was raised in Versailles, Indiana where I graduated from South Ripley High School in 1998.
I earned my bachelor's degree from Butler University in 2002, where I was an active member of the Phi Kappa Psi fraternity.
I earned my law degree from Indiana University School of Law - Indianapolis, and was admitted to the Indiana Bar in 2005. I am also admitted to practice before the U.S. District Court for the Southern District of Indiana. I'm a member of the Hamilton County, Indiana State, and American Bar Associations.
In my spare time, I'm an avid runner and fitness enthusiast with a passion for outdoor adventure. I will attempt to occasionally inject into this blog anecdotes from my life outside the office, if for nothing else, to dispel the impression that estate lawyers are a dull, stodgy lot.
By way of introduction, my name is Greg Halcomb and I'm an Indiana attorney with my primary office in Carmel.
My primary practice areas include estate planning (wills, trusts, etc.), probate and estate administration, real estate, business formation and civil litigation.
I was raised in Versailles, Indiana where I graduated from South Ripley High School in 1998.
I earned my bachelor's degree from Butler University in 2002, where I was an active member of the Phi Kappa Psi fraternity.
I earned my law degree from Indiana University School of Law - Indianapolis, and was admitted to the Indiana Bar in 2005. I am also admitted to practice before the U.S. District Court for the Southern District of Indiana. I'm a member of the Hamilton County, Indiana State, and American Bar Associations.
In my spare time, I'm an avid runner and fitness enthusiast with a passion for outdoor adventure. I will attempt to occasionally inject into this blog anecdotes from my life outside the office, if for nothing else, to dispel the impression that estate lawyers are a dull, stodgy lot.
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