Continue reading »]]> Examples of Situations Where Gifting in 2012 Can Reduce Estate Taxes

This post is a follow up to my post earlier this week on the unique opportunities available in 2012 to reduce your estate tax liabilities through gifting strategies. I have included a few examples below to illustrate how individuals or couples might be able to take advantage of the estate and gift tax laws in place this year to reduce their taxable estate and lower the federal and state estate taxes due upon their death by making a one-off large gift in 2012. These examples are for purposes of illustration only and are not meant as a complete how-to guide nor are they attorney advice. If you have a potentially taxable estate or are considering any of these methods, I urge you to talk to an estate planning attorney to more fully assess your options and get appropriate recommendations.

Example 1: The Moderately Wealthy Baby Boomer Couple

In this example, as in all of the examples that follow, we must make several assumptions in order to illustrate how and why a gifting strategy can reduce estate taxes. All of my examples assume that the parties are Washington state residents and have the primary goal of reducing estate taxes for their estate plan.

• Married couple in their 50s to 60s with 2 grown (mostly) independent children.
• Significant liquid assets, substantial retirement savings, large life insurance policies.
• All assets are community property and will pass to the surviving spouse upon the death of the first through their established estate plan utilizing credit shelter, A/B, or disclaimer trusts to maximize tax benefits.
• Total taxable estate (which includes all assets, retirement accounts, home equity, life insurance proceeds, etc.) are $5 million
• Couple believe that the income from savings, retirement benefits, etc. will be sufficient to sustain them in retirement but total assets at their deaths could be slightly lower or higher due to a number of factors such as unexpected expenses or investment gains/losses; accordingly they would like to hold as much liquid assets as is tax efficient as a surplus or emergency fund.

A very simplified version of the need for and gifting strategy example follows:

1. Why is a gifting strategy needed? Although the current federal estate and gift tax laws allow a married couple to exempt the first $10 million of their combined estates and any gifts they made during their lifetime, Washington state only allows an exemption for the first $2 million per person, but it does not currently assess a tax on lifetime gifts. So a couple with more than $4 million in assets (that already has a comprehensive estate plan in place that uses one of a variety of trusts to take advantage of both individuals $2 million exemption) can gift some of their assets away during their lifetime (with various conditions and restrictions on what counts as a gift and how long before death a gift must be made – an important reason to turn to a professional to assist with a gifting strategy) to move those assets outside their taxable estate and thus take advantage of the higher federal exemption and the fact that Washington state does not tax lifetime gifts.
2. What type of gift could be made? Generally, any asset or interest in property can be gifted but there are some conditions for the gift to count as a completed gift and the gift must be made at least 3 years before the death of the “donor” (the gift giver). In the example here of the Baby Boomer Couple, one recommendation might be to gift any life insurance into an “irrevocable life insurance trust” for the benefit of the children. This is useful for both whole and term life policies, since normally the death benefit proceeds are includable in the estate of the insured; however if the life insurance policy is owned by the irrevocable life insurance trust, then the proceeds are not included in the estate of the insured. The Baby Boomer Couple could also choose to gift other assets, such as investments or even cash, to their children or into a trust for their children.
3. What is the result of the gift? The Baby Boomer Couple reports a taxable gift tot heir children in the amount of the assets gifted less the applicable annual deduction for gifts ($13,000 per person, per year). So if the Boomers gift $1 million into a trust for their children, they would submit a gift tax return to the IRS in the following year reporting the gift in the amount of $948,000 ($1 million minus an excludable amount of $13,000 per kid per donor or $52,000). There is no tax due on the gift amount because the Boomers have a $5 million unified gift and estate tax exemption each that they haven’t exhausted yet (indeed, they have not ever used it until now). So now the Boomers have a taxable estate of $4 million, which will avoid Washington state estate taxes if their estate plans are drafted appropriately to utilize both $2 million exemptions and is less than their current combined federal exemption of $9,052,000 ($10 million minus the $948,000 gift).
4. What happens if the laws change in the future? This is one of the key reasons that this type of gifting strategy should be undertaken this year. The current $5 million unified gift and estate tax exemption ($10 million per couple) is set to expire at the end of this year. While it is likely that congress will not let the law sunset and revert back to a $1 million per person exemption, it is very possible that any future estate and gift tax exemptions will be somewhere between the $1 million and $5 million marks. Indeed, President Obama’s proposed budget includes provisions to decrease the estate tax exemption to $3.5 million and the gift tax exemption to $1 million per person. It is also possible that Washington state may lower their exemption amounts or impose a state gift tax which would also reduce the viability of this type of large gift in the future.

Example 2: The Young Professional

• Single or Married Young Professionals with Children
• Large current incomes expected to increase over time, current assets may not currently be very sizable but it is anticipated that over time the estate of the professional could be quite large and easily over $2 million upon their death.
• Life insurance contract naming spouse or children as beneficiary owned for purposes of providing for children in case of an early and unexpected death of a parent.

Unlike in the first example, this person or couple has a realistic expectation of large future earning potential that will result in a significant estate at the time of their death (whether in 10, 20 or more years). Perhaps they have recently purchased a house that will be paid off by the time they die and they are saving a significant amount of money every year in a retirement plan (401k, 403b, SEP or SIMPLE IRA, etc). They may also own assets that have the potential to appreciate significantly, such as ownership interests in a small business or stock in an employer. The issue facing the person(s) in this example is how to move money out of their estate and avoid estate taxes even if they don’t have much in the way of liquid assets. Here are a few assets that could be gifted into an irrevocable trust for the benefit of their children:

1. Life Insurance Policies. As in the first example, transferring ownership in a life insurance policy or purchasing term life using a gift of cash into an irrevocable trust can move the proceeds out of the taxable estate and result in estate tax savings.
2. Stock. Appreciable assets are perfect for gifting because they are taxable as a gift (but you get an exemption on the first $5 million) at the present value and are removed from your taxable estate, but they would be taxed at the future value at your death if they remained in your name. So $250,000 worth of stock today could be worth millions 20 or 30 years down the road.

In addition to the ability to make a large one-time gift under the beneficial tax regime currently in place, our Young Professionals should likely continue making annual gifts up to the annual exemption amount ($13,000 per person per year) to continue to fund the irrevocable trust (to pay life insurance premiums or purchase appreciable assets) and keep moving assets out of their taxable estate over their lifetime. Implementing such an annual exemption gifting strategy early in their lives can result in removing hundreds of thousands or even millions of dollars of assets (particularly in the case of life insurance) from the taxable estate at both the federal and state levels.

Example 3: Older Widow Whose Spouse Left Them A Sizable Estate

• Older Widow/Divorcee who has a large estate, due to inheritance, property appreciation, investments, etc. There are plenty of liquid assets to both pay for all expenses (including any unforeseen health expenses) and to make gifts of property.
• Individual would like to leave a large inheritance to certain people, but their taxable estate is greater than $2 million, so Washington estate tax would have to be paid first.
• As the individual is not married, there is no opportunity to take advantage of credit-shelter or disclaimer trusts to exempt $4 million of the estate for Washington state taxes.

Here, the individual should act immediately to look into the possibility of gifting assets directly to their beneficiaries (or into a trust for their benefit) to take advantage of the $5 million federal estate and gift tax exemption before it ends at the end of the year. In addition, gifts generally must be completed 3 years prior to the donor’s death to count as a gift and be removed from their taxable estate. If the estate was worth $5 million, by gifting $3 million during 2012, the individual could potentially save $390,000 in Washington state estate taxes (and even more as those gifted assets increase in value over time).

It is extremely important to talk to an estate planning professional if you have any questions about the 2012 estate and gift tax laws and the large gift opportunity available to Washington state residents.

Ryan Velo-Simpson is an attorney licensed to practice in Washington state who has a solo practice focused on estate planning. To contact Ryan regarding your estate plan, please call at (206) 660-9401 or email at ryan@ryanvelo-simpson.com. This article constitutes attorney advertising and is meant only for Washington residents. This article is for educational purposes and should not be construed as attorney advice. IRS Circular 230 requires me to advise you that, if this communication or any attachment contains any tax advice, the advice is not intended to be used, and cannot be used, for the purpose of avoiding federal tax penalties. A taxpayer may rely on professional advice to avoid federal tax penalties only if the advice is reflected in a comprehensive tax opinion that conforms to stringent requirements, of which this does not qualify.

Continue reading »]]> Due to current federal and Washington state gift and estate tax laws, along with uncertainty with respect to future changes in these tax rules, this year represents a potential once-in-a-lifetime opportunity for many Washington families to reduce their taxable estate and pass on more of their assets to their beneficiaries. If you are a Washington resident and have a moderate to high net worth, there may be unique opportunities available to you to utilize the federal gift tax exemption to move assets outside of your taxable estate for both federal and state taxes. There are several important basic rules related to estate and gift taxes to keep in mind:

1. Your “taxable estate” includes ALL of your assets such as retirement accounts, life insurance death benefits, separate property, one-half of community property, assets held in a revocable living trust; however, it does not include any gifts that you have made during your lifetime. It is important to remember that just because something passes outside of probate (retirement accounts, life insurance) it does not mean that it is not part of your taxable estate. If you think you do not have sufficient assets to consider estate planning, but own large term life insurance policies or have significant retirement accounts, you should carefully review your situation to better assess the true value of your “taxable estate”.
2. The federal tax laws currently allow you to exempt the first $5 million of the combination of lifetime gifts and taxable estate. This is referred to as the “unified credit” since it unifies the gift tax exemption and estate tax exemption into one amount.
3. Washington state taxes only your estate at your death and does not currently have a tax on gifts made during your lifetime.

While the current estate tax laws allow an exemption of the first $10+ million per couple at the federal level, and $4 million per couple at the Washington state level (assuming you have a tax efficient estate plan in place), these exemptions are very likely to change in the near future. The federal laws expire at the end of this year and, absent congressional action, will roll back to exemptions of  only $1 million per person and tax rates of 55% on the amount in excess of $1 million. While it is impossible to guess what congress will do these days (especially in an election year) it is very possible that the estate tax scheme going forward will fall somewhere in between what we currently have and what will happen in 2013 absent a new law. In fact, President Obama’s recently proposed budget included provisions regarding estate and gift taxes which will reduce the estate tax exemption to $3.5 million per person but drastically cut the gift tax exemption to only $1 million per person (a “de-unification” of the credits). While the Washington state estate tax has not changed for some time and there are currently no proposals to make any changes, it is perhaps only a matter of time until someone in Olympia makes a grab for some extra revenue for the state -  in fact, just last week a bill was introduced to create a Washington state capital gains tax.

So what does all this mean for Washington residents who currently have assets, or the potential for assets at their death, close to the Washington state exemption amount of $2 million? First of all, you should have a conversation with an attorney about your estate plan. This actually goes for anyone that owns assets, has children, or is concerned about who will get what upon their death. Your 2012 estate planning should include a discussion about tax and gift planning and the potential to gift assets away this year to your children (e.g. into a trust that manages the money, pays for necessary expenses, and keeps the children and potential creditors from accessing the principal until later in their life) – this is because of the combination of the current very large unified federal exemption (remember it is over $10 million for a couple for the combination of lifetime gifts and taxable estate) and the fact that Washington does not currently tax lifetime gifts. Making gifts this year allows you to move assets outside your taxable estate at both the federal and state level and take advantage of a large federal gift exemption and no state gift taxes. This is a rare opportunity, especially considering the fact that testate and gift tax exemption levels will be changing at the end of this year.

What sorts of gifts would be ideal and how to accomplish such gifting should be analyzed very carefully by an estate planning professional during an in-depth conversation concerning your financial needs, resources and goals in conjunction with an analysis of your personal giving and planning desires. No situation is the same in estate planning and careful planning is vital to reach both your tax goals as well as your personal goals for your estate plan.

Ryan Velo-Simpson is an attorney licensed to practice in Washington state who has a solo practice focused on estate planning. To contact Ryan regarding your estate plan, please call at (206) 660-9401 or email at ryan@ryanvelo-simpson.com. This article constitutes attorney advertising and is meant only for Washington residents. Any advice in the article is only for illustration purposes and does not constitute attorney advice.

Continue reading »]]> I would like to share a few local Washington state news articles related to estate planning and death taxes. I have talked about the current estate tax system for both Washington State Estate Taxes as well as the IRS imposed federal Estate Taxes in previous posts, but in summary, the current exemptions are $5 million per person at the federal level and $2 million per person at the Washington state level, however the federal exemption is set to revert back to $1 million per person at the end of 2012. The uncertainty surrounding what congress will eventually settle on (the estate tax exemptions and rates at the federal level have changed multiple times in the last few years already) increases complexity and uncertainty into the estate planning process. both of these articles underscore the need to have a flexible estate plan, particularly if your assets (including life insurance) are close to or greater than the state exemption amount of $2 million.

The first article, “Estate planning a thing of the past? Think again” is from the Auburn Reporter and can be found here: http://www.auburn-reporter.com/business/134794923.html. The article discusses the current estate tax system and the problem with the uncertainty of what the tax system will look like in the immediate future.

The second article, “McDermott tries again to rewrite estate tax” is from the Seattle Times and can be found here:  http://seattletimes.nwsource.com/html/localnews/2016927967_estatetax04m.html.  This article discusses the possibility that congress may actually lower the exemption amount from 2012 on. The article also discusses the Washington state estate tax.

Continue reading »]]> Estate Plan Check-Up

It is always a good idea to review your existing estate plan on a regular basis to ensure that it still accomplishes your goals and reflects your current situation. Even if you don’t have a will yet, you still probably have an “estate plan” of sorts – retirement accounts, life insurance, living will or powers of attorney are all elements of your estate plan. Over time, many aspects of your life can change requiring modifications to your estate plan documents to reflect those changes. Such changes can be internal (e.g. your desires regarding who gets what inheritance can certainly change constantly or the decision on who the best person is to act as your personal representative or guardian of your children) and changes can be external (e.g. your estate may have changed in value requiring analysis from a tax perspective or you might have purchased property during the year). What is most important is that you consider the changes that have occurred to you and your family during the previous year or two, re-evaluate what the goals of your estate plan are and then sit down and review your estate plan documents to make sure they are consistent with your goals. These steps can be done on your own or with the help of an attorney knowledgeable in estate planning matters.

Below I have provided a checklist of issues to keep in mind when reviewing your estate planning goals and documents.  It is by no means exhaustive nor detailed but provides a number of starting points of issues to explore when conducting an estate plan check-up.  When is the best time for a check-up? It may be a little more time-efficient to do so right after you have done your taxes so you have a really good idea of what your financial situation is like, however, you might also be burnt out from doing your taxes and never get around to the estate plan check-up and having a perfectly accurate picture of your finances is not necessary to perform nearly any of the steps below. So here is my checklist (also available in PDF format here)

ESTATE PLAN CHECK-UP CHECKLIST

Taxes – Always seek the advice of financial professionals (CPA, financial planner) when considering tax implications.

1. Do you want to make any gifts this tax year? Must be made by Dec. 31^st
1. Charitable donations
1. Make donations
2. Collect all receipts from the year for tax returns
2. Non-charitable donations
2. $13,000 per year, per person ($26,000 for a couple) tax exempt
3. Gifts in excess of $13,000 are “taxable” and reduce your unified gift & estate tax exemptions at federal level.
4. No Washington State tax on inter-vivos gifts. This creates an opportunity for gift-planning if your estate is greater than $2 million
2. Retirement Account Contributions – IRAs, SEPs, Roth IRAs
3. Education Savings Plan Contributions – 529 plans, GET, Coverdell ESA
4. Capital gains/losses recognition
5. Trust management – do you have existing trusts set up?
1. Trustee should pay out distributions for the tax year
2. Do you need to make contributions to existing trusts?

Estate Plan Review

1. Beneficiary designations of all relavent documents – Who are beneficiaries? Do they need to be changed? Have the account balances changed so that one beneficiary now receives more of your estate than intended?
1. Life Insurance Policies
2. Bank Accounts (POD)
3. Brokerage Accounts/Mutual Funds (TOD)
4. Retirement Accounts – IRAs, 401(k), Pensions
5. Joint Accounts – especially bank accounts with an added account owner for convenience only (no ownership in account)
2. Life Insurance Policies
1. Are you premiums paid for the year?
2. Is the amount of coverage still adequate for your needs? Is it too much?
3. When will the policies lapse?
3. Estate Plan Documents – Do the documents need to be updated? Do you know where the documents are?
3. Who are your named executors, trustees, guardians, attorneys-in-fact? Are they still the best/most appropriate choice?
4. Does your executor know where estate plan documents are stored?
5. Do specific gifts listed in your will still exist? (cars, real estate)
6. Do amounts and/or recipients of gifts in your will or trusts need to be changed/updated?
   1. Change in financial situation of beneficiaries or testator?
   2. New family members? Deaths of beneficiaries?
   3. Charitable organizations need to be changed?
7. Have you purchased real property that needs to be accounted for? (Especially if out-of-state property = Revocable Living Trust)
8. How old are your existing Power of Attorney documents? If more than 2-3 years, consider executing new documents.
9. Health Care Directives/Living Will – any new medical conditions that need to be specifically considered?
10. Changes to burial/cremation instructions?
11. Personal Property Memo – Is it current? Is it lost? Is there new property to be included in the list?
12. Business Buy-Sell Agreements
1. New owners to be included in new versions?
2. Updates to valuation necessary? Insurance policies current?

Miscellaneous

1. Safe deposit box
1. Are contents necessary and current (e.g. old versions of wills or other legal documents can be removed and replaced with current versions)?
2. Does your executor/spouse know about the existence of the safe deposit box or is it otherwise listed in your will?
2. Account number/password index – Do you have a way to provide important account numbers and passwords to others in case of an emergency & afer your death?
1. SECURITY ISSUES are paramount.
2. Software is available to manage all of your online passwords

Continue reading »]]> What happens when you die without a will in Washington State?

In basic terms, instead of your last will specifying how your estate is to be handled, Washington State law determines what happens to your property. Additionally, a court will decide who will act as the guardian of your minor children in the absence of specific directions usually found in a will.  To illustrate how the courts will handle your estate under Washington law if you die without a will (“intestate”), I have provided a “Intestate Will” below. The “intestate will” is essentially a substitute where there is no other will for a Washington resident.

Washington State is a community property state, so as an initial matter, the deceased’s estate must be segregated into what is community property and what is separate property. As a general rule, separate property is all property acquired prior to marriage (as well as any individual gifts or inheritances received during marriage and anything purchased during marriage with separate property) and community property is all property acquired during marriage. Agreements between spouses can alter this general rule (pre-nup, post-nup, community property agreement). Keep in mind these are very generic statements of the community property scheme in Washington State and not the hard and fast rules for determining if property is separate or community. There are numerous other factors beyond the scope of this article to take into account to determine if specific property is separate or community.

The “intestate will” provided below is a general interpretation of the Washington State rules regarding intestacy. There are numerous exceptions and different applications under the law depending on certain circumstances. Generally wherever the term “spouse” is used below, such provisions shall also apply to state registered domestic partners. The “intestate will” below is provided merely as a summary of what generally happens if a Washington resident dies without a will under Washington law – it is not actually a will. Please do not use it as a form of a basic will! I encourage you to discuss any questions concerning the following or related to estate planning with an attorney.

 The Washington State “Intestate Will”

First

 All community property shall pass outright to my surviving spouse.  If my spouse predeceases me then all of my property shall be treated as separate property.

 Second

 If my spouse survives me:

• My separate property shall pass one-half (1/2) to my surviving spouse and one-half (1/2) to my issue (children and/or grandchildren);
• If I am not survived by any issue, then my separate property shall pass three-quarters (3/4) to my surviving spouse and one-quarter (1/4) to my parents if they survive me otherwise their one-quarter share shall pass to my siblings (or their issue) who survive me.

If my spouse does not survive me:

• My separate property shall pass entirely to my issue (children and/or grandchildren);
• If I am not survived by any issue, then my separate property shall pass entirely to my parents if they survive me, otherwise to my siblings (or their issue) who survive me.
• If neither of my parents or their issue survive me, then my separate property shall pass entirely to my grandparents who survive me otherwise to the issue of my grandparents (any descendants of my grandparents).
• If no one takes under the provisions above, I give all of my property to the State of Washington.

 Third

Any descendant of mine who would take under the Second Section above who is only a half-blood relative shall take as if they were a full-blood relative. Any stepchild or foster child of mine shall have no rights to inheritance under the Second Section above.

Any wishes I may have expressed orally to my spouse, children or others regarding the disposition of my property or handling of my estate is rendered null and void. I hereby disinherit any charities, friends or others that I might otherwise have wished to receive a portion of my estate as only my family members as specified in the Second Section shall inherit.

 Fourth

The administrator of my estate responsible for settling my affairs as soon as possible without loss shall be the following person (in order of priority) provided they are of sound minor and otherwise not disqualified from performing as a fiduciary:

1. My surviving spouse;
2. The next of kin – in this order: children, parents, siblings, grandchildren, nieces or nephews;
3. A trustee, guardian or attorney-in-fact named by me during my lifetime;
4. Any beneficiary of my assets;
5. A principal creditor of mine;
6. Any other court-appointed person.

Such administrator shall post appropriate bond as determined by the court, unless they are my spouse or the court waives bond.

 Fifth

If my spouse does not survive me, then the court shall appoint a guardian for my minor children. Anyone may serve as guardian of my minor children who is determined by the court to be suitable, of sound mind and who has not been convicted of a felony (or misdemeanor of moral turpitude). When my children turn 18, they shall be entitled to the full amount of their inheritance immediately and without any limitations on its use.

 Sixth

All property given by me to my spouse under this will shall be theirs to dispose of as they wish during their life and upon their death. They shall be under no legal obligation to give any amount to my children and should they choose to give it all to a subsequent spouse, charity, friends or otherwise, there is nothing my children can do.

Continue reading »]]> As an estate planning attorney you would expect me to say that “everyone needs a will!” and, in fact, I do believe that pretty much everyone should have an estate plan in place. I am going to provide my reasoning for making such a statement and I would like to stress a few additional things at the outset of this post which are: 1) Estate plans are much more than just your will and 2) Estate plans are not just for old people.

The “Estate Plan”:

An “estate plan” is generally comprised of 3 basic elements: the will, powers of attorney and an advanced health care directive.

1. The Will: Everyone knows in general terms what a will is: a document which states how you want your belongs divided up when you die. In addition to establishing the disposition of your assets, a will also names several very important people to handle your estate and affairs, including your personal representative (or executor) and guardians for your minor children. A will can also establish the terms of any testamentary trusts you would like to establish for a variety of reasons, including minimizing estate taxes (federal and state), providing for expert management of assets for you spouse or children, providing support for a spouse while also making sure your assets eventually go to children from a previous marriage or a charity, protecting your children from their creditors, etc.
2. Powers of Attorney: A power of attorney is a legal document which names someone else to act as your “attorney-in-fact” if you are unable to act for yourself. Your attorney-in-fact steps into your shoes and handles your financial affairs and makes health care decisions for you if you are otherwise unable to do so. A power of attorney is a very powerful and extremely helpful document to have around just in case something should happen to you and you are incapacitated for a short or long period of time. It avoids the need for a loved one to go to court to be named your guardian to do the same sorts of things that your attorney-in-fact can do to take care of you when you most need help.
3. Advanced Health Care Directive (or living will or POLST): This document states your legally binding preferences regarding life-sustaining treatment in case you are in a “permanent unconscious condition or have a terminal illness”. It does not allow someone to “pull the plug” on you unless you fall into these narrowly defined situations and you have specified that you do not want to have such life saving treatments provided for you.

These elements of your estate plan should all be consistent in laying out your desires and goals. For many young people, the emphasis of their estate plan will not be the division of their assets upon their death but rather establishing the legal protections that are most important in rare situations, such as medical incapacity as well as naming a guardian for their young children. Since most young people do not have to incorporate complicated estate tax planning or trust drafting in their estate plans, they can have an estate planning attorney draft a comprehensive estate plan for a relatively affordable fee.  The value of a power of attorney or health care directive is immeasurable in those rare cases when they are necessary, but they can generally only be prepared ahead of their need. I certainly do believe that nearly everyone should have an estate plan and I always firmly believe in providing affordable, convenient and quality service to my estate planning clients in Washington.

Continue reading »]]> I am often asked about the taxes that could be levied on an estate by the IRS. While the federal estate tax can be significant for those with very large estates, changes to the law at the end of 2010 exempted nearly all estates from such taxes as well as allowing spouses to give their exemptions to the other that survives them when it might otherwise be wasted, the Washington State estate tax is levied on much more modest estates. In simple terms, the IRS does not tax an estate less than $5 million, or $10 million if it is the combined estate of a married couple. This very generic description of the federal rules may not apply to all situations and will also expire at the end of 2012 unless another law is passed, I have provided a more complete description of the current estate tax scheme here. Washington State is not nearly as kind in its taxation of estates, particularly for married couples. The Washington State exemption is only $2 million, and if proper estate planning techniques are not utilized before and after a spouse’s death, then the total exemption for all of a married couples combined assets is only $2 million (the first spouse’s exemption is wasted).  I have provided below a chart showing the current Washington State estate tax rates. The “Washington taxable estate” is the total assets of the deceased person (probate as well as non-probate, which includes retirement accounts and property held in a Revocable Living Trust) less the amount given to a surviving spouse and less the $2 million Washington State exemption.

For example, if a Washington resident has a $4.5 million dollar estate, they would pay no federal estate tax since there is a $5 million dollar exemption making their federal taxable estate $0, but the Washington State exemption is only $2 million, thus their Washington taxable estate is $2.5 million. The first million is taxed at 10%, the second million is taxed at 14% and the final $500,00 is taxed at 15% making for a total Washington State estate tax bill of $315,000.

Continue reading »]]> Get an online will prepared by a Washington State attorney without the inconvenience of going to an attorneys office or trying to find time to schedule an appointment.

My Virtual Law Office offers my clients the ability to work with me online at their convenience to prepare a customized estate plan to meet their specific needs without the need to meet in person. Like many other services that offer online wills, I utilize a series of questionnaires to figure out your individual planning goals, circumstances and needs. However, I also emphasize the use of online and telephone discussions to complement the questionnaires to make sure that any issues or questions are resolved promptly and professionally by an attorney. I do not use paralegals or customer service representatives at any point in the provision of my legal services.

To promote my online legal services I am offering my estate planning services conducted through my Virtual Law Office at a $50 discount for a limited time. You can now get an attorney prepared estate plan, including your will, powers of attorney and health care directive (living will), for $250 for an individual or $450 for a couple. I also can prepare a will only for $150 for an individual or $275 for a couple. If you also require trust or tax planning incorporated into your estate plan, I can provide those services as well for an additional fee. The online services I offer through my Virtual Law Office are the same services I offer to all my clients and I am just as dedicated to provide excellent service and an estate plan specifically tailored to meet the needs and planning goals of my online clients. To get more information, obtain a quote for services or sign-up please register through my Virtual Law Office. If you have any questions regarding my legal services please email me at ryan@ryanvelo-simpson.com or call me (206) 660-9401.

Scan with a QR Code application to get more information on my VIrtual Law Office

Click to register on the Virtual Law Office

I am very committed to client confidentiality and I am the only one to review my online client’s information. Additionally, I utilize a secure web-based application to host my Virtual Law Office that is specifically designed for attorneys.

Continue reading »]]> Congratulations! You have an existing estate plan in place to protect yourself and your loved ones should anything happen to you. Shockingly, you are in the minority (yes, the majority of Americans do NOT have a will, powers of attorney or health care directives in place) but you can’t control what other people are doing so you are focusing on your own plan. Also, you are taking the initiative to review your existing estate plan to see if it needs to be updated. There are a variety of reasons to update your estate plan but it also makes sense to occasionally review your documents to make sure they accomplish what your current goals and needs are (which may have changed over the years).

Here are a few things to consider when reviewing your estate plan documents:

• Changes to the law. Federal estate tax laws changed dramatically at the end of last year both increasing the exemption amount for estates (and lifetime gifts and generation skipping gifts), changing the tax rates, and allowing for the portability of unused portions of your exemption to your spouse. If your estate (combined value if you are married) is worth close to or greater than $2 million there are some unique opportunities now available to reduce potential state and federal estate taxes.
• Bequests. Many people include bequests of specific property or cash amounts in their wills for a variety of reasons. If you have specific bequests in your will you should consider whether they are still justified and whether you still own the specific property. For example, if you have included a gift to your niece of your 1958 Ford Mustang convertible (and cash gifts to your other nieces and nephews) and you have subsequently sold the Mustang, the niece will receive nothing under your will (however the others will receive their gifts). Or perhaps you have written into your will a gift to your son of $100,000 to balance out the fact that you paid for your daughter to go to Medical School. Suppose since your will was initially drafted, you have paid tuition for your son to go to Law School. Your son would still receive the $100,000 under the old will if it is not changed and your daughter would likely feel she was treated unfairly. You should review the gifts included in your existing will to check that no changes are necessary.
• Funding of your estate. Remember that your will only controls the disposition of your probate assets, which does not include anything with a beneficiary designation such as life insurance, retirement accounts, Joint Tenancies, etc. If you have made gifts to heirs or are establishing trusts in your will, these must be “funded” by assets that are actually included in your estate as probate assets. It may be necessary to check that your probate assets are sufficient to “fund” all of the gifts and transfers to trusts outlined in your will. This might be a particular issue to those that have been retired for a while and hold most of their assets in retirement accounts and have little in the way of “cash” or those with large life-insurance policies.
• Executors, trustees, attorneys-in-fact and guardians. One of the most important pieces of information found in your estate planning documents is the naming of who you want to be in charge of handling your affairs in the event of sickness, incapacity or death. The person(s) you name as your executor, trustees, attorneys-in-fact and guardian of your minor children have a great deal of responsibility and power. Are the people you trusted to handle such matters in your original will still the ones you would choose today? Perhaps they have moved away, taken on greater responsibilities with work or their families, have died or shown they are no longer trustworthy or able to handle your affairs as well as their own.  It may be time to change the designations in your will, powers of attorney and health care directive.

If you do need to make changes to your estate planning documents either because of the above reasons or simply to update them to correspond to your current and expected situation and goals then you may be able to accomplish that through amendments, or “codicils”, but may require completely new documents. You should use an attorney to review your options and draft appropriate changes to meet your changed circumstances. You should NOT simply make the changes to your documents in pen and then sign or initial next to them. This is not legally sufficient in most cases and will only result in confusion and potentially unintended results.