Monthly Archives: October 2023

October brings fall, pumpkin-spiced everything, and macabre things. Ghosts, ghouls, and goblins may Monster Mash through your mind; however, when I think of something truly terrifying, it’s dying without an estate plan…it’s the trick in Trick or Treating. Although everyone knows that they should treat their family to a comprehensive Estate Plan, many folks experience feelings of superstition and dread when considering planning for the end of their life, as if by planning for death, they invite it. The chilling truth is that most of us have no idea how much time we have and when we will depart our mortal coil. Accidents happen, and an alarmingly high number of people die without an Estate Plan, which can have disastrous results.

The excuses for failing to create a plan run the gamut, from being young or childless to being single or refusing to face mortality. Many people believe that if their assets do not exceed a certain amount, then they needn’t worry about an estate plan. Whatever the reason, failing to create an Estate Plan causes chaos at your death, leaving your loved ones in the lurch. Inevitably, those loved ones will need to attend to your legal affairs such as paying your debts and transferring your assets, and, without a clear set of instructions that a comprehensive estate plan provides, you are leaving a mess for those grieving your demise.

If you die without a Will or Revocable Trust, that’s called dying intestate. It’s so common that states have created statutes to address the issue of intestacy. Wills and Revocable Trusts address numerous issues such as who will care for minor children or pets, how and when assets will be distributed, who will oversee distribution of those assets, and how taxes will be paid. If you die without any Estate Planning documents in place, state statutes will determine how and to whom your assets will be distributed without any input from you or the loved ones you leave behind. Many states’ intestacy laws give only a portion of assets to the surviving spouse, making no provisions for anyone to whom you were not legally bound. Those same statutes give the remainder to descendants, without regard for the needs of individual recipients. This includes those who may have special circumstances, such as receiving governmental benefits, often leaving these individuals in the lurch.

If you die intestate, then your estate would need to go through probate. An individual would petition a court for appointment as executor, personal representative, or administrator, which would give that individual legal authority to collect and distribute your assets. That individual likely would need to retain an attorney to understand and navigate the complex court system. A judge oversees the many steps involved in this public probate process. The judge would issue Letters of Administration or similar documents that give the executor power to marshal the assets of your estate. If your family disagrees about who should serve in that capacity, then the court would make that decision and could appoint a total stranger. Usually, statutes entitle the executor to take a commission or fee as compensation for their services. Imagine, a stranger and the public knowing your personal business and then that stranger being paid out of your money to give your assets to the people whom you didn’t even select. There’s something incredibly unsettling about that.

The treat in this tale of woe is that you control your destiny, at least with respect to your Estate Plan. By contacting an attorney, you can accomplish your goals, keep your estate out of probate with an Estate Plan that includes a Revocable Trust and a Will, and preserve your legacy. As part of the estate planning process, your attorney will guide you through the perils of failure to plan and make suggestions and recommendations about the legal documents necessary to accomplish your goals. Most people feel relief and well-being upon executing their Estate Planning documents. Creating an estate plan allows you to determine who will care for your minor children, how your assets will be distributed to those children, who will control those distributions, when those distributions should be made, and whether distributions should be made to individuals, charities, schools, or museums. A comprehensive Estate Plan prevents disputes among beneficiaries and provides for tax planning, if appropriate. With a properly created and funded estate plan, you (not a Court) controls what happens to your children, your pets, and your property after your death.

Dying without a Will can haunt your family years after your demise. Even if this ghoulish endeavor gives you the chills, it’s important to undertake this task before it’s too late. Financial trouble, delayed distribution of assets, and stress are just a few of the frightening things in store for your loved ones if you die intestate. Most individuals find the probate process as torturous as touring a sanitorium; however, you can circumvent it. Avoid the tragedy of intestacy by creating a set of instructions regarding what you want to happen when you die, otherwise known as an Estate Plan.

Most folks know that the federal government imposes an estate tax on estates with total assets that exceed $12.92 million in 2023. The Internal Revenue Code (“Code”) Section 2010 calls that amount the “Applicable Exclusion Amount” (“AEA”) and adjusts it for inflation annually. Even if individuals do not have that number etched in their memory, they understand that they need not worry about estate taxes at the federal level unless their estate includes assets well into the millions. Some might even understand that the temporary doubling of the AEA sunsets on January 1, 2026, or understand that portability permits the surviving spouse to “port” or use the amount of their decedent spouse’s unused AEA. Most people require only a cursory understanding of estate taxes at the federal level to make decisions with respect to their Estate Plan. If you live in a state that imposes a state estate tax or an inheritance tax, then you need to understand estate taxes at the state level, as well.

Death taxes at the state level fall into one of two categories: estate taxes which are those imposed upon the estate itself, like those at the federal level, or inheritance taxes which are taxes imposed on the individuals inheriting the property. Twelve states plus the District of Columbia impose a state estate tax. Six states impose inheritance taxes. Maryland stands alone in imposing both and is one of only two states that allows portability. Hawaii also gives its residents the benefit of portability.

Most of the states that impose a state estate tax impose a progressive tax which means that the tax rate increases as the value of the estate increases. In 2023, two states, Connecticut and Vermont, impose a flat tax. Connecticut taxes resident decedents whose estates exceed $9.1 million a flat tax of 12% on the value that exceeds the exclusion whereas Vermont taxes resident decedents whose estates exceed $5 million a flat tax of 16% on the value exceeding its exclusion. Seven of the ten remaining states that impose a state estate tax and the District of Columbia all impose a top tax rate of 16%. Hawaii and Washington have the highest estate tax rate at 20%. Maine imposes the lowest rate of 12% for estates whose assets exceed the state exclusion amount of $6,410,000. These states vary in the amount of estate assets that they exclude from tax. Oregon comes in at the lowest, with a mere $1 million exclusion whereas Connecticut follows the federal amount and allows $12.92 million to escape taxation under state law beginning in 2023.

Some states like Illinois, Maine, Maryland, Massachusetts, Minnesota, Vermont, and Washington also recognize a state Qualified Terminable Interest Property (“QTIP”) deduction. The state QTIP deduction, like the federal QTIP deduction found in Code Section 2056, provides an estate with an unlimited marital deduction for property passing to the surviving spouse in trust if the trust meets certain requirements. But for the QTIP deduction granted in the Code, property passing in trust to the surviving spouse ordinarily would not qualify for the marital deduction. Interestingly, while neither Kentucky nor Pennsylvania has a state estate tax, both recognize a state QTIP.

Of the states that impose an inheritance tax, Kentucky and New Jersey have the highest rate of 16%. Iowa has begun to phase out its inheritance tax, with full repeal scheduled for 2025. It has a top rate of 6% in 2023. All the states that impose an inheritance tax exempt surviving spouses from the tax and others fully or partially exempt other immediate relatives. In 1926, the federal government began offering federal credit for state estate taxes. This provided a way to equalize the amount of tax paid by anyone regardless of their state of residence. Some estates paid taxes at the state level, while others paid it at the federal level, but no estates paid it at both levels, which happens now that the federal government has phased out the state estate tax credit and instead gives a deduction for state estate taxes paid. When that happened, many states, like Florida, stopped collecting state estate taxes because their state provisions were linked to the federal credit, while others, like Indiana, repealed their estate tax retroactively.

Obviously, this article only began to scratch the surface of this complex topic. Everyone worries about tax implications both for their estate and their beneficiaries. When residents understand how their state taxes estates and beneficiaries, that could drive high-net-worth individuals to states with lower estate and inheritance tax burdens. If you have questions regarding the implications for your estate and beneficiaries, reach out to me and I can help you understand the impact that state estate and inheritance taxes could have on you and your loved ones.

It’s important to understand that elder abuse, neglect, and exploitation happen frequently across all socioeconomic levels, in every culture.  According to the National Council on Aging, one in ten Americans over the age of 60 has experienced elder abuse.  In almost 60% of those cases, a family member perpetrates the abuse, most of whom are adult children or spouses.  That’s a frightening statistic.   The ones who have an existing long-term relationship with the elder are the ones most likely to abuse that same elder.  Abuse most often occurs in the elder’s home, another’s home, or in a nursing home.  Whatever preconceived notions you have about elder abuse, throw them out.  Elder abuse can occur by anyone, to anyone, anywhere for any number of reasons, none of which excuse the abuse.

Not too long ago, this blog explored the multiple lawsuits initiated by Katherine Feinstein, on behalf of her mother, Dianne Feinstein, the Senior United States Senator from California, Exploring the Many Issues Surrounding the Estate and Trust of Richard Blum – Part I, Part II, and Part III.  The most recent lawsuit alleged the acts and lack of action on the part of the Trustees constituted elder abuse by depriving Dianne of property rights granted to her in the Trust of her late husband, Richard C. Blum.  I read a recent article that used the Feinstein matter to dive deeper into the many facets of elder abuse and thought it would be an interesting topic to explore.

The National Center on Elder Abuse prepared a study identifying seven types of elder abuse:  Physical abuse, sexual abuse, emotional or psychological abuse, financial or material exploitation, neglect, self-neglect, and abandonment.  As an estate planning attorney, I encounter these situations in my daily practice.  Elder abuse takes many forms, but I see it when a family member or caregiver gains access to funds through a Power of Attorney or by gifts or transfers in exchange for care or transportation to medical appointments.  It could even take the form of the senior revising their estate plan to provide a larger share to a family member who handles care for the senior.  Maybe the elder updates the estate plan to leave a modest bequest to a caregiver that continues to grow in a short period of time.  Perhaps a family member removes the senior from their home and takes them to a bank, or worse, a new attorney.  While we want to believe that every client walking through our door is there of their own accord, that’s not always the case.  If the attorney notices a senior’s apprehension in speaking in the presence of the individual who brought them to the appointment, that could be a sign of elder abuse or mistreatment.  Even those with feisty personalities may find themselves the subject of abuse.  Many elders experience embarrassment that it happened to them.

If you pay attention, you can spot signs of potential elder abuse.  Look for things such as bruises on the elder’s body, withdrawal from loved ones, poor hygiene, weight loss, untreated health issues, dehydration, unusual changes in financial accounts, hesitation when speaking, a caregiver that interferes with visitation, fearful behavior, anxiety or depression, and unexpected changes in estate planning documents or property ownership.  While any one of these things may occur as part of the aging process, several of these signs together could signal a problem.  If an attorney notices one or more of these issues, speak to the elder individual alone, ask questions, and listen to the answers.

In addition to paying attention to our elderly clients when they visit us, we have other tools at our disposal that we can pass along to others.  For example, each state administers its own ombudsman program established through the Office of the Ombudsmen.  It serves as a neutral third party for nursing home residents.  Look for your local Consumer Voice office. The National Adult Protective Services Association lists local offices that investigate suspected elder abuse.  Finally, the National Center on Elder Abuse provides guidance on reporting elder abuse.  It’s possible to obtain a protective order if an elder lives with the abuser or call 911 if the senior is in immediate danger.

We can combat elder abuse by learning to recognize the signs of elder abuse, educating our clients on scams aimed at the elderly, alerting trusted individuals, such as family members and authorities when we suspect it, and understanding the resources designed to prevent, intervene, and investigate elder abuse.  This area will continue to gain importance as our population ages and technology continues to improve.  It’s important that we continue to evolve with technology and remember that we all have a duty to protect the elderly.