Although estate planning documents may be signed, the estate planning process is not complete until asset titles are changed so that they can be controlled by those documents. The act of retitling assets is called funding. So, when the estate planning attorney or your financial advisor speaks of funding your trust, for example, he or she is talking about changing the title to assets which may currently be owned individually or in joint tenancy, or may be controlled by contract, into the name of the trust.
One of the biggest mistakes made in the estate planning process is to spend a lot of time and money to create great documents, but then fail to complete the funding process. A good funding strategy is to make a comprehensive list of all assets and how they are currently titled. Next, the attorney can advise how things should be titled to fit with the estate planning documents that have been created. Then the attorney or a financial advisor can help to shepherd the asset through the ownership change paperwork.
If some asset is overlooked, or if you pass away before a recently-acquired asset can be properly funded, most plans will include a safety net called a pour over will. This is a special will that has one primary function – to take mistitled assets and pour them over into the trust or other planning entity where they belong. But you should never depend on the pour over will to handle funding. It should only be used as a last resort because, like any other will, the pour over will is required to go through the probate process…one of many things you were trying to avoid when you established your estate plan. Of course, as mentioned above, even a pour over will won’t help with assets that are controlled by contract or are owned in joint tenancy at the time of death.
Funding is not necessarily fun, but it’s also not terribly complicated. It is primarily a matter of contacting financial institutions and providing the proper paperwork to get the account and other asset titles changed. It can be tedious and time-consuming, and most institutions need to be followed up to ensure they get the work done, but it’s not hard. Professional advisors should have processes and procedures to help you accomplish this important task, but it’s up to you to avoid procrastination and to persevere until the funding is complete!
David Frisse spoke at Vincennes University Foundation’s Education event held on April 26, 2018.
Watch WVUT’s Newsbreak video for more information.
Coles-Cumberland Bar Association Offers Law Student Scholarship
The Coles-Cumberland Bar Association is pleased to announce that it has established the Coles-Cumberland Bar Association Law School Scholarship Program.
The Coles-Cumberland Bar Association is a private organization composed of attorneys practicing in Coles County and Cumberland County, Illinois. The organization has established this scholarship program to recognize and assist law students who have a close connection to the Coles County and/or Cumberland County, Illinois communities. One or more scholarships will be awarded annually, based upon academic and extracurricular achievements, background and financial need.
The Coles-Cumberland Bar Association anticipates awarding one or more scholarships in the amount of $1,000.00 following the application period. The Coles-Cumberland Bar Association reserves the right to modify the amount and number of scholarships awarded based upon the number and suitability of applications received.
The Coles-Cumberland Bar Association Law School Scholarship Program is open to law students having a close connection to the Coles County and/or Cumberland County, Illinois communities who will be enrolled at an accredited United States law school during the 2016-2017 academic year. Applicants are evaluated for their academic and extracurricular achievements, for their background and financial need, and for their
connection to the Coles-Cumberland communities.
An application form can be obtained via Facebook on the “Coles County Bar Association Scholarship Committee” page or by calling the Bar Association’s Secretary at 217-639-7800. Applications are due by February 1, 2017.
The 2016-2017 recipient or recipients will be announced at the Bar Association’s winter “Guest Night” meeting in February.
Beginning April 28, 2014, The Social Security Administration implemented its “Trust Centralization Project” to improve the quality and efficiency of its review and approval of special needs trusts. This Project is the result of efforts by a group known as the “SNT Advocates,” primarily attorneys who work with special needs clients and had concerns about how their special needs trusts were being viewed by the Administration.
As a result of the Project, many cases, including cases in our area, are being reviewed. In some instances, trusts which were previously approved by the Administration are now being rejected. If you or someone you know has received a notice about a trust, you should see an Elder Law Attorney immediately to determine what steps to take to protect eligibility for SSI benefits. It is important to remember that Medicaid benefits follow the same rules, so loss of benefits could mean loss of needed medical care and treatments.
There is a short deadline of only 60 days for appealing a Social Security decision, and the deadline may be shorter for Medicaid. It is important to seek help right away, because an attorney needs time to analyze the case and prepare the necessary appeal documents, something which may not be possible on day 49 or 53 or 59.
A little background:
The Project affects disabled people who receive SSI, which is a needs-based benefit. It does not affect people who receive SSDI, which is an insurance program. SSI rules require that recipients have no more than $2,000 in “countable resources,” which includes cash and accounts which can be liquidated, regardless of cost, penalties or taxation. Recipients are also very limited as to income.
Because of the restrictive SSI rules, families sometimes set up trusts for SSI recipients. These trusts, often called special needs trusts or supplemental needs trusts, are designed to protect the person’s benefits by creating restrictions on the control and use of trust funds such that those funds are not considered as countable resources.
SSI rules require that a recipient who is the beneficiary of trust submit the trust to the Administration for review. The Administration then determines if the trust meets the requirements and is an exempt resource. In the past, the reviews could take many months or a year or two, and the decisions across the country and even within single field offices was inconsistent. So, it is important to remember that, just because the government sends you a notice doesn’t mean the notice is correct.
If you have received such a notice, Kaye Dent at Frisse & Brewster Law Offices will be happy to provide you with a free consultation to help you determine what, if anything, you may need or be able to do.
Read more here.
Once again, Kaye DeSelms Dent has the honor of presenting at an NBI Continuing Education Seminar, titled Protecting Assets While Qualifying for Medicaid. More information and a link to register are available here.
How and When to Stop an Elderly Parent from Driving
by L. Kaye DeSellms Dent
There’s a growing buzz about new IRS regulations that will affect a family-owned business’ ability to save on taxes by using careful estate planning, and we’re doing our best to keep our clients, associates, and colleagues in the know. We think you may find the following articles from WealthManagement.com of interest:
- Major Components of New Section 2704 Proposed Regs: A brief summary of the three sets of new rules
- Strategies to Prepare for Implementation of Proposed 2704 Regulations
- Proposed 2704 Regulations: “Commercially Reasonable Restriction Exclusion”
We will be holding workshops in Paris, Effingham, Arcola, and Terre Haute during the month of September, so contact one of our offices to reserve your seat or schedule your own meeting with one of our attorneys. January 1, 2017 is the potential start date for the new laws, so time is of the essence.
New Federal Tax Regulation That Can Significantly Increase Estate Tax On Participants In Family-Owned Businesses and Farms
Many of our clients and colleagues participate in family businesses. And even those who don’t — know people who do. The material described in this memorandum will be relevant to any family business or farm participants who are at all concerned about estate taxes. Feel free to share this information with others if you think it might be useful.
Background. On August 4, 2016, the U.S. Treasury Department issued proposed regulations under Internal Revenue Code Section 2704 that, when finalized, may substantially increase your wealth transfer taxes by blocking a common estate planning strategy. Essentially, it means that for people with an interest in a family farm or business, the ability to reduce estate tax valuation of the business interests will be significantly impaired. This means more families will pay more estate taxes.
Historically, taxpayers could reduce the value of their taxable estates by placing assets in partnerships, Limited Liability Companies or closely held corporations and claiming lack of marketability and/or lack of control discounts. These discounts typically reduced the value of the ownership interests, for tax purposes, by 15% to 45%.
For example, placing $10 million worth of assets inside a closely-held entity (such as a corporation or LLC) might reduce the value of the estate by $2.5 million to $4.5 million and, given the current 40% estate tax rate, reduce the estate tax payable by as much as $1.8 million.
The IRS has been working on these rules for years. Every informed commentator we’ve heard from says that something close to these proposals will be put in place, as early as December 1, 2016, and in any event, not much after that date. Congressional action is not likely and court challenges will take years to unravel. SO WE BELIEVE THIS IS A REAL ISSUE for many of our clients.
During the election season, tax proposals can be found everywhere. But one proposal that is likely to get serious attention “rolls back” the Federal Tax exclusion from $5.45 Million to $3.5 Million. For Illinois residents, this means the current state threshold of $4 Million would also be reduced. This would dramatically increase the impact of these new regulations.
What Can Be Done About It? Fortunately, families that may be affected have a short window of opportunity to take action before the Section 2704 regulations go into effect. The Treasury Department, for procedural reasons, cannot finalize the regulations until December 2016 at the earliest. In the meantime, we believe you can make gifts or sales to your family taking full advantage of the current law, which allows valuation adjustments.
If you are in our Annual Family Heritage Protection (Maintenance) Plan and believe your family farm or business could be affected: We believe your situation calls for attention. For general information, consider signing up for one of our free SEMINARS on the subject. A schedule of times and locations will shortly be posted here. As a member of our Family Heritage Protection (Maintenance) Plan, you can also call our office to schedule a free personal consultation. Having a recent financial statement or asset spreadsheet available will be helpful.
If you are not in our Annual Family Heritage Protection (Maintenance) Plan and you believe you and your family might be impacted by these changes, consider signing up for one of our free SEMINARS on the subject. A schedule of times and locations will shortly be posted here. We can arrange for a preliminary assessment of your situation in a private appointment, for which there will be a fee.
Frankly, because we only have until early December to develop and complete these complex plans, time is at a premium. While we will do all we can to help our friends and clients, it will be a “first to the table” situation.
We will also post, as time allows, other information on this subject here, on our website.
Family Business planning will remain important and feasible. Planning for succession in control and economic interest is a good idea regardless. It is only the estate tax implications that are changing. But these may change plans.
Again, please feel free to share this information.
David M. Frisse, Rick A. Brewster and L. Kaye DeSelms Dent
FRISSE & BREWSTER LAW OFFICES
This letter is offered for educational and informational purposes only. It is not intended as directed legal advice to any person receiving it.