Estate Planning Prior to Divorce

Businessman showing a document to a couple

Divorce often requires a complete reorganization of a person’s life. Reconsidering previous decisions regarding estate planning is an often overlooked part of the separation process. Before the divorce, a couple may have curated an estate plan that integrated life insurance policies, trusts, wills, and retirement accounts or plans. In a time of separating lifelong assets, individuals need to consider several factors when revisiting estate planning upon divorce finalization. 

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What is a Business Valuation and Why Is This Necessary?

By: Melissa L. Exline, Esq.

First, if there is a business involved in the divorce, it is important to strongly consider hiring an expert.  A business valuation is nothing more than getting someone with the right background to say what the business is worth and why.  Generally, it is distilled down to a report that can be introduced into evidence in a case. A lawyer cannot guess and without knowledge, everyone is shooting in the dark wondering what that business is worth.  In community property states like Nevada, the business is usually a community asset subject to equal division at divorce.  Often, one spouse is going to keep the business and the other is not – but that other spouse that is walking away is entitled to know what the business is worth to address what is fair for that spouse’s interest.  Even if only one spouse “worked” the business, if it was started during the marriage, the business is likely community property.

If you are facing a divorce and a business is involved, expect to hear from your attorney that a forensic accountant or other expert is required to address the value.  It is not uncommon for the spouse that is on the “outside” of the business to be extremely concerned that the other spouse is undervaluing the business, hording assets or cash in the business’ name improperly, or running lots of personal expenses through the company, all of which can impact cash flow and valuation.

Over the years, I have been told “the business has no value – its just me.”  But every business has a value.  If you and your spouse have been living off the income, in whole or in part, you can expect to have the business valued in a divorce. If the parties do not agree on the value, then there is really no choice but to have someone provide an opinion on this. And, no, your regular bookkeeper or accountant cannot set the value.  This is a completely different analysis than what you look at in court during divorce.

I know, hiring an expert is frustrating because that is just one more bill.  But it is not the end of the world.  Paying an expert can be handled efficiently.  For example, if the business is not extremely complicated and cost is a big concern, then both sides can agree to use one neutral expert to give everyone an idea of what the business is worth.  This cuts down on the cost and it diminishes the suspicious that the other side has a hired gun to come up with an inflated or deflated value in a self-serving way.  That alone can help settle a case.  Instead, both sides are paying the same person to give a fair number.  The parties can still argue over whether that number is too high or too low, and if that happens, then costs could increase.  But, many times, by putting some light on the business value I creates a starting point for negotiations to proceed.

Whether you have a business that is modest, like a small lawn service or solo-contractor, to a more complicated business with interests in copyrights, trademarks or patents – you should be ready for the lawyer to recommend a valuation in one form or another.  At Surratt Law Practice P.C., we work closely with experienced forensic accountants to address business valuations on a regular basis.  If you need help in this area, call us to discuss strategies right away.

Revocable Living Trusts The Basic Explanation

First and foremost, this topic is generally misunderstood and is much simpler than folks are led to believe. Really, it is not that complicated – I promise! Below is a basic explanation for general use on what is often referred to as a “Will Substitute” type of revocable living trust.

What ?is ?a Revocable Living? Trust?

According the Black’s Law Dictionary, A Revocable Living Trust is, “[t]he agreement that relates how the property of an individual is to be distributed during their life and after their death.” See Black’s Law Dictionary Free Online Legal Dictionary 2nd Ed. (http://thelawdictionary.org/revocable-living-trust/). A person creates this while alive (hence the word “living”) and can exercise complete control over it while alive. At death, the distribution plan kicks in and the persons or entities that are going to inherit will take according to the plan the trust maker puts in place.

Generally, an individual (or couple in a joint trust) will make a Revocable Living Trust as a substitute for his or her Will. In the typical probate avoidance revocable trust, the Maker of the trust (sometimes called “Grantor” or “Settlor”) will usually be the beneficiary and the Trustee. As the name implies, the beneficiary gets the benefit of the assets placed into the trust. The Trustee is in charge of the trust. The biggest benefit is the Successor Trustee(s) named in the Trust document will be able to efficiently assume control of everything in the Trust and has a fiduciary obligation to honor the trust terms. The Trust will have a name and become the title holder over the Maker’s assets. For a trust to be valid, it must have a Maker, beneficiary and trustee. The other essential element is the trust must have something in it – i.e. it must be “funded” by taking some asset. This is called the “corpus” of the trust.

I hope I have not lost you yet! In summary, a person makes a trust, benefits from it, and is in charge of it while alive. They put their own “stuff” into the trust, such as a house, checking/savings accounts and other personal property. The Trust has a name, such as “My Will Substitute Trust”, and there is proper evidence of transferring the assets into the trust. The house went in by deed transfer and the checking and savings were modified when the Certificate of Trust was shown to the banker at ABC Bank and the request was made to put the accounts into the trust. After that, you live life like a normal person.

Because I am placing my own assets into the trust (this is called a “grantor’s trust”), according to IRS regulations and rules, the assets have not left my control so it is as if I still have them. The IRS will not treat this any different order proscar than if I never made the trust to begin with. Why? Because, like I said, I have control and can revoke the trust entirely. So, while I have a stack of paper that creates the trust, and I have evidence that my assets are in the trust, the IRS will not treat this as independent from me. An individual with a Revocable Living Trust as a Will Substitute is going to file their normal 1040 and other tax documents.

What are the benefits of having a Revocable Living Trust as a Will Substitute?

Avoid Having a Judge Decide

The key benefit is that it will avoid probate over assets that are held in that trust. Nevada may be remarkably efficient in getting an estate through probate, but a Revocable Living Trust could make it so that family members can automatically assume control. The Successor Trustee(s) shows a banker the Certificate of Trust and viola! – magic happens and that trusted individual can start handling the estate. With real property, a notice is filed with the county recorder’s office. Does that sound better than going to a lawyer (and who wants to go to a lawyer – let’s be honest) to find out what Probate is, how long it will take, and likely pay more fees to get through the process? Yes – I thought you might agree.

Avoid an Adult Guardianship

If someone has a properly drafted trust, it can prevent guardianship (or conservatorship in other states). I have seen this first-hand and the notice provisions (called “citation” in the guardianship context) of an adult guardianship, mandatory hearings, together with all the documents that go to the court can be cumbersome. If an accounting is required, it is even more cumbersome; and by that I mean expensive because it takes a lot of legal time and effort. All of that can be avoided with a trust and other related powers of attorney!

Other Key Benefits

I have to mention that doing a trust allows the family to keep the matter out of the court system with means it is generally a bit less public. The terms of the trust may require notice to beneficiaries, but that is quite a bit different than a public document on file with the local district court. Your family maintains complete control in a time of stress and, likely, mourning the loss of a loved one.

There are many other important things to learn about estate plans and trust – and I will go into this later on. However, the assets that are placed into the trust can make life so much easier for the loved ones left behind. If you have been thinking of making one of these Will Substitute trusts, think of us at Surratt Law Practice Estate Planning.

By Attorney Melissa L. Exline, Esq.

Estate Planning: Post “Doma” and The Impact On Same Sex Couples

Estate palnning money on scale

Ensuring your assets are there for your same-sex spouse with Estate Planning tools will be much easier, and fairer, given the 2013 DOMA decision. It is clear we are still in a transition period, but, in Nevada, which only mandates filing a federal tax form, there are broader protections for higher wealth same-sex spouses.

For those that may not be as familiar with this issue, there was a recent decision by the U.S. Supreme Court in US v. Windsor that significantly impacts same-sex married couples. “DOMA” (the Defense of Marriage Act) was impacted by the Windsor decision when the Supreme Court, in a 5–4 decision this summer, found Section 3 of DOMA was unconstitutional, declaring it “a deprivation of the liberty of the person protected by the Fifth Amendment.” This has special tax and estate planning implications for same-sex married couples. While Nevada does not allow same-sex marriage, couples that marry in other states now living in Nevada are impacted under federal rules. Under Windsor, same-sex married couples are treated the same as heterosexual married couples in certain jurisdictions.

Each person can give another person thousands of dollars each year without current tax consequences (for 2015, the tax-free gift limit is $14,000, usually adjusted each year based on inflation). The gift recipient does not have to pay tax on the gift. The giver must report the amount given if it exceeds the annual limit. These excess amounts go toward the lifetime total of money each taxpayer may give without facing any gift tax penalty. In addition, an important tax break for married couples, called the marital deduction, permits spouses to transfer as much as they want to each other without having to pay any federal estate or gift tax if the recipient spouse is a U.S. citizen. For 2015, the lifetime limit is $5.43 million (also adjusted each year for inflation). This buy proscar singapore lifetime limit is taken into consideration by Estate Planning professionals when looking at how spouses intend to provide for each other in their final Will or Trust documents.

The annual and lifetime gift limits mean that few people have to worry about the tax implications of gifts. However, married couples recognized by the Internal Revenue Service get a break. Heterosexual married couples were subject to no limits, annual or lifetime, on gifts or transfers of property of any amount to their spouses. With the DOMA decision, now same-sex married couples who were legally married in one of the states or jurisdictions that recognize their marriage will be given the same federal estate and gift tax benefits as heterosexual married couples. This is not necessarily the case for a domestic partnership, so the marriage distinction is important in this situation.

The DOMA decision impacts other areas of law that are considered when drafting Estate Plan documents. To name just a few, same-sex married couples should consider the implications the law change will have on:

  • The right to be named the sole primary beneficiary on ERISA qualified retirement accounts.
  • The right to roll over IRAs and other qualified retirement plans, rather than be subject to mandatory withdrawals.
  • The right to collect spousal benefits under Social Security Benefits.
  • The right to be treated as a spouse with all military benefits.
  • The right to COBRA continuation health insurance benefits.
  • The right to protections for an “innocent spouse” under Medicaid and the impacts with long term nursing home care.
  • The right to take time from work under the Family Medical Leave Act.

There are many professionals still figuring out where the same-sex spousal rights fit in to various areas of law, but, overturning DOMA vastly expands the estate planning resources available for same-sex couples as they plan for how to ensure the one they love is afforded appropriate legal protections.

By Melissa L. Exline, Esq.

Melissa L. Exline, Attorney

ESTATE PLANNING: POST “DOMA” AND THE IMPACT ON SAME SEX COUPLES

Ensuring your assets are there for your same-sex spouse with Estate Planning tools will be much easier, and fairer, given the DOMA decision.  It is clear we are still in a transition period, but, in Nevada, which only mandates filing a federal tax form, there are broader protections for higher wealth same-sex spouses.

For those that may not be as familiar with this issue, there was a recent decision by the U.S. Supreme Court in US v. Windsor that significantly impacts same-sex married couples.  “DOMA” (the Defense of Marriage Act) was impacted by the Windsor decision when the Supreme Court, in a 5–4 decision this summer, found Section 3 of DOMA was unconstitutional, declaring it “a deprivation of the liberty of the person protected by the Fifth Amendment.”  This has special tax and estate planning implications for same-sex married couples.  While Nevada does not allow same-sex marriage, couples that marry in other states now living in Nevada are impacted under federal rules.  Under Windsor, same-sex married couples are treated the same as heterosexual married couples in certain jurisdictions.

Each person can give another person thousands of dollars each year without current tax consequences (for 2013, the tax-free gift limit is $14,000, adjusted each year based on inflation).  The gift recipient does not have to pay tax on the gift. The giver must report the amount given if it exceeds the annual limit. These excess amounts go toward the lifetime total of money each taxpayer may give without facing any gift tax penalty. In addition, an important tax break for married couples, called the marital deduction, permits spouses to transfer as much as they want to each other without having to pay any federal estate or gift tax if the recipient spouse is a U.S. citizen. For 2013, the lifetime buy proscar australia limit is $5.25 million (also adjusted each year for inflation).  This lifetime limit is taken into consideration by Estate Planning professionals when looking at how spouses intend to provide for each other in their final Will or Trust documents.

The annual and lifetime gift limits mean that few people have to worry about the tax implications of gifts.  However, married couples recognized by the Internal Revenue Service get a break. Heterosexual married couples are subject to no limits, annual or lifetime, on gifts or transfers of property of any amount to their spouses.  With the DOMA decision, now same-sex married couples who were legally married in one of the states or jurisdictions that recognize their marriage will be given the same federal estate and gift tax benefits as heterosexual married couples.

The DOMA decision impacts other areas of law that are considered when drafting Estate Plan documents.  To name just a few, same-sex married couples should consider the implications the law change will have on:

  •  The right to be named the sole primary beneficiary on ERISA qualified retirement accounts.
  •  The right to roll over IRAs and other qualified retirement plans, rather than be subject to mandatory withdrawals.
  •  The right to collect spousal benefits under Social Security Benefits.
  •  The right to be treated as a spouse with all military benefits.
  •  The right to COBRA continuation health insurance benefits.
  •  The right to protections for an “innocent spouse” under Medicaid and the impacts with long term nursing home care.
  •  The right to take time from work under the Family Medical Leave Act.

There are many professionals still figuring out where the same-sex spousal rights fit in to various areas of law, but, overturning DOMA vastly expands the estate planning resources available for same-sex couples as they plan for how to ensure the one they love is provided for.

Nevada Law Allows for a “Deed Upon Death” to Transfer Real Property

A “Transfer on Death” Deed, or more accurately a “Deed Upon Death” as it is referred to in NRS 111.671, is a way to transfer property to your designated beneficiary. Rather than relying on a traditional will or revocable living trust to pass your real property, a transfer-on-death deed can be created in advance, signed by the property owner, and, designates who the property will go to upon the owner’s death.  The up-side is these are always modifiable before death while the owner of the property has capacity.  The last recorded deed governs, and, if the property is sold to a third party, the transfer-on-death deed is void so it will not impact the sale. When the owner dies, the property is automatically transferred to the beneficiary through the deed documents.  This can be better than putting adult beneficiaries on title or jointly buy proscar for hair loss titling property.  There are often overlooked tax ramifications to adding future heirs to title now – so be wary of those “good ideas” you hear about from folks who “know”.

Certainly, the beneficiary will have to provide a death certificate, but the property should pass outside of the Probate process.  In fact, avoiding probate is one of the primary reasons to utilize a transfer-on-death deed, which usually just costs money and time no one has to spare.

Not all states allow for a “Deed Upon Death” automatic transfer, but in 2011, Nevada law clarified this means of transferring real property.  While normally a revocable living trust is the most effective means of avoiding probate for your estate, depending on the type of assets in your estate, and your goals, this is a low cost way to handle real property transfers to heirs.

Nevada’s Living Will Lockbox

During the Surratt Law Practice radio show hosted by Kim Surratt with guest Melissa Exline, the attorneys recently talked about the Living Will Lockbox provided as a free service to Nevadans.  You can easily access the information available on the “Living Will Lockbox” by visiting Nevada’s Secretary of State online.  This service provides an accessible location for doctors to obtain documentation on your stated desires in the case of incapacity.  The “living will” also known as an advance directive/declaration to physicians, explains what you want to do for life prolonging measures (feeding tubes/hydration).

In light of the recent tragedies that have forced people from their homes, threats of flood locally, and our not to distant memory of fires that swept through Northern Nevada, it is always a good idea to store your important where to buy proscar forum papers in a safe place.  The “lockbox” is a resource that is easy to use.  Also, please make sure you get a fire rated and water resistant document holder and/or scan and store your most important documents in the “cloud” or in some sort of offsite but accessible location.  Not only that, you need to have the right documents created in the first place!  For those of you out there interested in talking about your estate plan, options, and the other documents besides a Will or Trust that are part of the estate plan which we talked about in depth in the radio program, please call our office, mention the “disaster planning”, and we will give you a free half-hour consultation.  Don’t wait any longer – get your estate plan completed!

Estate Tax and Me Where Do You Fit?

My estate planning clients often ask me about the estate tax, coming from the perspective that they want to avoid this if they can.  In most cases, my “normal” income clients are nowhere near at risk of having their estate subject to any estate tax.  What it does show me is that there is a lot of talk about the “death tax” but a lot less actual information being conveyed about what that tax really is, who is at risk of paying, etc.

I just read: Estate Planning in the Age of Obama: Where Is Tax Law Headed?, a blog article by Robert Denham, Esq. on CEB.com.  Most of this information only applies to people whose overall estate is at risk of being at or above $1 million per person.  I feel like this is a very low number for people.  What makes you say that, you ask?  Well, it could improperly impact people that have lived in a home for their entire lives, have a home worth something like $750,000, with a “modest” or “normal” amount of saved retirement or other assets that puts them over the $1 million mark, but, they are cash poor.  The estate may be forced to sell a family home buy proscar online europe simply to cover the taxes.  I feel like lawmakers will understand this, and don’t want to have any cases where the media grabs onto this and shows the horrible story about how the family home or farm was forced to be sold to cover a “death tax”.

Thus, I agree with this blog post that puts the estimate of the estate tax exemption at or near the $5 million mark.  We will only know more when law makers actually start working on this, but, the bottom line is this – if your total estate is less than $1 million (per person), this tax law change is not likely to impact you.  If you’re at or above $5 million, there is a chance it could impact your estate, but, the exemption is probably still going to be substantial enough to cover a full five million before a tax kicks in.  Therefore, not only will the well off be okay (i.e. not taxed), but the very well off will also be okay, leaving an anticipated future tax hike to impacting only the extremely well off and dipping into the pockets of the super duper filthy rich.  Hold on for the ride and let’s see what happens!

Estate Planning During and After Going Through a Divorce

So, you are in the middle of a divorce.  The Decree of Divorce is near, after months of dealing with the nuances and details.  Perhaps you were unfortunate enough to have to go through a Trial to accomplish your divorce.  After all that, you may not be up to it, but now is the time to get your estate plan re-evaluated.  If your spouse was named as the designated beneficiary on most, if not all, of your important documents (IRA and life insurance beneficiaries, to name just a couple), while you are familiar with your estate, you should get your will and/or revocable living trust established and name the actual beneficiaries you want to take in the event of your death.  Now is one of the best times to get this done.  In fact, while your divorce is pending, beneficiary designations on life insurance policies, and certain types of IRAs can sometimes be changed without your spouses consent.  It may be as simple as contacting your bank and filling out the necessary forms.

If you do not have any existing estate planning documents, there is no better time to deal with this, since you have spent so much time combing through all of your assets.  Even during the divorce process, you can take action to be sure your desires are accurately stated.  What would happen if you were to die or become incapacitated while the divorce action was pending?  More than likely, your spouse is going to take over control and receive the bulk of your where to buy proscar in singapore estate.  In Nevada, a party’s marital interest in an asset or debt will remain in effect until the divorce is final.  Some divorce actions can take many months, if not years.  Therefore, even if your case is in pending litigation, if you die while that legal action is pending, your estranged spouse would continue to have a marital interest in your assets, and would, under the law, be the natural beneficiary of your possessions, with some limitations.

Under Nevada’s intestacy statutes (the rules that govern if you do not have a will or trust), the spouse of a divorcing party with no children would be entitled to receive 100% of the deceased spouses assets.  You may not have lived together or shared anything for years, but that will not have any bearing on the applicability of this rule. This is but one reason to get your will revised or drafted while you are in litigation awaiting your divorce.  After the divorce is final, you have some statutory protection that would apply to bar an ex-spouse from receiving from your estate.  However, it is best to take control and put your desires in place.

Don’t make the mistake that so many people make – they move on after a divorce with stale and outdated documents.  We know you are emotionally spent after a divorce, but taking this time now to establish a your own will and trust will truly give you the fresh start you are seeking!

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