Iowa Estate Plan

Anna Nicole Smith was not a stranger to the court system during her short life and it appears that her legal disputes will continue on beyond her early death. Her will , which was filed in a California court, is generating some controversy in the news and legal community under its provisions as drafted. While it isn't even clear what state's (or country's) laws will apply, the will as currently filed specifically inherits any future children or spouses and leaves everything to her now deceased son. This 2001 will apparently was not updated since the tragic death of her son and birth of her daughter. As a result, the circular question now remains: if the sole beneficiary predeceased her, and her infant child (& husband Howard Stern) are specifically disinherited, who is entitled to receive her estate? The first step is going to be to try and find what court the fight should take place. Was she a California resident? Or was she a Bahamian as she had her house and ...

Normally if you own a life insurance policy, the death benefit proceeds are included in your taxable estate. Depending on your financial situation this may or may not create a taxable estate for you. With estate tax rates topping out at 45%, it is certainly worth considering some options to avoid having your family pay taxes on those insurance proceeds. One option is to have the insurance policy owned by an irrevocable trust (sometimes called an irrevocable life insurance trust or "ILIT"). Properly structured, you can provide a mechanism to pass those insurance proceeds to your intended beneficiaries and not included in your taxable estate. There are different rules if it is an existing policy versus whether you are purchasing a policy. However, the downside with an ILIT is that it is irrevocable...you can't change the trust. Generally speaking with estate taxes, the more control and "strings" you control over an asset the more likely it will be included in...

A common inquiry I receive is "who should be the guardian for my children?" and "who should be the trustee for my children's funds?" There is not a right or wrong answer to these questions. Typically, for a guardian, you'll want to name a family member or close friend who would be willing and able to assume the responsibilities. Make sure that you discuss this issue with them and that they are comfortable with the possibility. While that certain person you select as a guardian might be a great "substitute parent" (maybe even better than you) they may not be able to hold onto a nickel without blowing it. If so, then they might not be the best person to handle the money for your kids. It is not uncommon to have one person as the guardian and another as the trustee. While this may add an additional level of complexity to the situation, it also provides for a "check and balance" system. The trustee can make sure that the funds are pro...

Cross one more item off the New Year's Resolution list--from 1999--THE WILL IS DONE. Now everything is done, right? Maybe not. Getting your will or trust is only piece of the puzzle. Equally as important is reviewing you assets that have named beneficiaries: life insurance, 401(k), 403(b), IRA, Keogh and annuities. It may have been some time since you last updated these beneficiaries and your financial advisor or IRA custodian may not have followed up with that assistance. It is not uncommon to see ex-spouses and parents as "surprise" beneficiaries. With large retirement plans and insurance policies, these assets may comprise up a majority of your assets so it is important that you incorporate these beneficiary designations into your global estate plan. There are certain income tax benefits to having your spouse as a named beneficiary of a qualified (retirement) plan, which permits tax deferral . But as to your contingent beneficiaries and other named beneficiar...

I recently attended a seminar sponsored by A.G. Edwards concerning the timing of receiving social security benefits and the impact on retirement planning. Individuals are entitled to begin receiving social security benefits as early as age 62, although at a reduced rate. If the individual waits until the full benefit age (currently 65) the recipient will be entitled to receive their full benefits for the remainder of their life. Thus the question is "do I want some money now, but a in smaller amounts? Or do I wait a few more years and get the maximum monthly payment?" To keep things interesting, there are earnings limitations if a person elects to get their social security benefits prior to their full benefit age. Every situation is different and there isn't a right or wrong answer as to when you should choose to start receiving social security benefits. Your financial planner can guide you on the ideal timing issues for your particular situation and the impact for ...

During this time of season, families are gathering together and talking about sports, kids, families, work and other topics. While estate planning, wills, and death aren't exactly raucous discussion topics, it is a good opportunity to go over some topics with your families, whether it be your parents or your adult children. Communication over the plans that have been made or will be made is important in keeping a harmonious family. Take this occasion to be thankful for the family that you have and tell them that you care enough to make plans to make transitions as easy as possible. Whether it is a discussion over who and why you picked a particular person as a guardian for your children or why you are leaving a particular property to someone, you can potentially help avoid disputes at a later point. Verbalizing your intentions and plans will reinforce the written documentation that you, hopefully, have in place. Without this communication, you just have words on paper that so...

While a revocable trust can be changed after it is created, an irrevocable trust is a trust that cannot be changed or amended after it is created. In other words, the terms are "written in stone". A careful drafter of an irrevocable trust will be able to implement some provisions which provide for some flexibility in the future, but there are limits as to how much can change and you will lose control over the trust assets, generally speaking. So why would you create an irrevocable trust if you can't change anything? People and plans change, right? A properly drafted and operated irrevocable trust will be excluded from your taxable estate. Thus, for example, you could purchase a large life insurance policy to be owned by the trust, have the death benefits paid to the trust and then to your selected beneficiaries. While normally life insurance proceeds are included in a taxable estate, by having the irrevocable trust own the policy, those proceeds are fully excluded...

Life insurance can be an important part of your estate plan and can be utilized in many different ways. For example, if your estate is subject to estate tax, life insurance provides liquidity for the payment of taxes without necessarily having to sell your assets if you don't have the cash available. Life insurance can also be helpful if you have a small business with another partner and you want to create cash for either the business or your partner to purchase your share of the business, such as through a buy-sell agreement, which then provides cash for your family. Life insurance with a buy-sell agreement enables the business to hopefully continue. And, of course, life insurance provides income replacement and cash for your spouse and kids in the event of your death for payment of bills and maintenance of a lifestyle. A good estate plan is more than just a will or a trust, but also may include life insurance for various purposes.

"Okay, I'm lying in a hospital bed, comotose, hooked up to a machine. Who's going to pay my bills, get my mail, file tax returns, cancel my subscription to Cats'R'Us magazine, . . ." Good question. Have you made adequate plans? Estate planning is more than just planning what happens to your assets at your death, but also what happens to your assets during your disability. That planning should include executing a power of attorney document. A General Power of Attorney form authorizes an individual (called the attorney-in-fact, but they don't have to be an attorney, thankfully) to act on your behalf. There are different situations when you may want this. For example, you are going to be out of town but you want someone to sign documents on your behalf in your absence. A power of attorney (POA) form can handle that simple assignment. Or, you can have a Power of Attorney authority that "springs" into existence only when you are disabled, as de...

As the only things in life that unavoidable are death and taxes, what better way to produce tax revenue than to tax someone at their death? While there are no such thing as "death taxes" (that term is a political term conjured up by politicians), there are some potential taxes that may be paid shortly after a person's death. In short, there are two "death" taxing systems for Iowa residents: the state imposed Iowa Inheritance tax and federal imposed estate tax. The Iowa inheritance tax is actually a tax assessed against the person receiving an inheritance (and not the estate of the deceased person) and is based on their relationship to the decedent and the amount they receive. Spouses and lineal descendants and ascendants (children, grandchildren, parents, etc.) receive their inheritances 100% inheritance tax free. Inheritances by siblings, friends, cousins, nephews, etc. would have to pay inheritance taxes. Proper planning by a knowledgeable estate plan...