Iowa Estate Plan

Gifting can be an easy way to transfer your wealth to the next generation. Currently, each person is entitled to gift up to $12,000 per individual, per year, without incurring any gift tax or having to file a gift tax return. Gifts that are less than $12,000 per donee per year are typically called "annual exclusion gifts". Also, during your life, you can gift up to $1,000,000, on top of your annual exclusion gifts, to others without having to pay gift tax. However, any gifts in excess of the annual exclusion will require a gift tax return. Furthermore, dipping into the $1,000,000 "bucket" reduces the amount that you can pass at your death free from estate tax. If you would like to reduce the size of your taxable estate and see the appreciation from transferring your wealth to kids, grandkids, or others, gifts can be a great solution.

Dying is such a bad thing that the IRS has a couple of ways to help your loved-ones deal with the loss. One of the tax benefits is a concept called "stepped up basis" which applies in the area of capital gains tax . What this means is that assets you own at your death, with a few exceptions, will have a new tax basis equal to the value on your date of death. In order to understand the benefit of this tax benefit, consider this illustration: You bought shares of a stock for $10,000. That is your cost basis. Your investment does great (unlike my selections) and it has increased in value to $15,000. You decide to take cash out and take your money. You will be capital gains tax on the increase of $5,000. (Market value less your cost basis.) However, let's say right before you were able to sell the stock, you step on a rake in your yard, stumble backwards and get hit by a Hummer and killed instantly. Your estate would be able sell the stock and the new cost basis wou...

Your Last Will and Testament or Trust will determine who inherit your assets. However, the innocent situation arises in many cases where those other assets-like life insurance, POD accounts, retirement accounts, or jointly owned assets-pass outside and irrespective of your testamentary documents. This can potentially seriously disrupt your estate plan and create several issues such as questions on the payment of estate/inheritance taxes on those transfers, insufficient assets in the estate to pay administration/funeral costs. Estate planning is more than just drafting and signing a will and trust. It is a comprehensive review of the financial situation and the assets and how those assets are owned. Your planner should guide and assist you with this review. Remember: how those assets are owned will dictate who owns them in the end.

If you have a revocable trust (sometimes called an inter vivos trust or living trust)one of the key steps is the proper funding of that trust. This entails the transfer and assignment of your assets to your trust. For example, you will need to change the ownership and title on your bank accounts and brokerage accounts to the name of the trust. Any real estate that you own should also be transferred to your trust. So what if you don't get something transferred or forget about something? Depending on the laws of your state and the particular type of asset, it may be necessary to have your entire estate go through the probate administration process. Obviously, this negates one of the primary benefits of using a trust in the first place. In summary, after you execute your trust document, it is just as important to make the necessary changes in the ownership status of your assets. Consult with your attorney to make sure the proper changes are made.

A recent story on MSNBC.com provides good advice about the need to organize your financial information for your loved ones. Dealing with the stress of the loss of a loved family member is difficult enough, but leaving a financial mess for them further compounds their stress level. Communication is important in making your estate plans and letting your key contacts know where the information is located and keeping it easy to pull everything together, along with a list and contact information for your advisors, such as your attorney, accountant, insurance agent and financial advisor. The article also noted that a recent survey indicated that 70% of the population does not have a will, and that many parents with young kids -- who critically need an estate plan -- continue to put off getting a will completed. Planning for that scenario is important .

When you are drafting your estate plan, one of the items that you'll have to decide is who will be the executor or trustee. The person or entity you choose has several certain important decisions and obligations. For example, they will decide whether certain tax elections are made in your estate, whether an allowance is paid to the surviving spouse, where the funds are invested and when distributions are made. Naming more than one individual as a personal representative may be a solution that avoids any potential deadlock, but it also creates some complexity in the administration of the estate. Naming only one child as the personal representative also creates a potential source of disgruntlement from the other kids. Meanwhile, naming a corporate trustee avoids many of the issues...at a cost. If you have any potential concerns about how your kids will handle the administration issues, leave the power to a third party alone to decide these questions, or provide for a mechanism fo...

When it comes to money and stocks, it can be fairly easy to divide up your wealth. Giving a percentage of your cash or portfolio to your beneficiaries is straight forward as it doesn't matter which fraction they receive as those types of assets are fungible. However, when you only have one family photo album or one grandfather clock, these assets are typically not able to be easily divided and quite often can lead to bitter disputes over what mom and dad would've wanted. A recent case involving a bitter dispute between siblings is reminding me that these fights happen all too frequently despite easily being able to be avoided. To avoid those types of fights, planning ahead enables you to potentially resolve the fight with limited "bloodshed". Iowa Code section 633.276 (2007) provides that an individual can leave a signed and dated list to dispose of certain types of personal property. Thus you can determine who gets grandma's wedding ring, mom's fine chi...

A common document executed in the estate planning process is a Power of Attorney document. That document confers authority to another person, or persons, to act on your behalf either because you are unable or just want that person to handle certain matters for you. For example, you are in a car accident and can't handle payment of your bills, cash checks, etc., someone can handle those affairs for you. That person's title is the "attorney-in-fact" even though they are not typically an actual attorney in the ordinary sense. You can limit the authority of what the attorney in fact may do, or you can give them broad general powers to do generally anything necessary. There is a also a Medical Power of Attorney in which you appoint someone to handle your medical and personal decisions, such as what medical treatment you receive or what facility you are placed at. This power only comes into play if you are unable to communicate your wishes. These aren't required d...

If you have assets that you own jointly, whether it is with a spouse, a child, grandchild or someone else, that asset will typically pass automatically to the surviving joint owner. It doesn't matter if you have a super-duper-deluxe will/trust, the joint ownership designation bypasses your estate plan and potentially short circuits any plan you may have. For some situations, holding assets jointly might be sufficient for transferring your assets upon your death. For example, a husband and wife with no kids from a prior relationship and with modest assets. However, consider the following scenarios and the unexpected result: Scenario 1 - John Washington has two kids. He loves them both and wants to make sure they are treated equally with their inheritance. One of his kids, Chris, lives nearby and helps John out with payment of his bills and expenses. To give Chris some flexibility, John adds Chris as a joint owner on his bank accounts so that Chris can help out without John...

Trusts can be an important part of your estate plan. A trust is not just for the "uber-rich", but rather it is a basic procedure to control who, how and when your beneficiaries inherit your assets. For example, if you have young kids that would inherit your estate upon you and your spouse's passing, you can delay their receipt of those funds until a later point in time when they are hopefully more mature. Otherwise, without a trust, they could get a large lump sum at the ripe old age of 18 in Iowa. While it may seem hard to believe, 18 year olds are not known for being particularly frugal with their funds; whether it is $10.00 or $100,000. With a properly structured trust, you could delay receipt of those funds until later in their life, or upon achieving a milestone or some other identifable point in their life that you choose. Plus you can control how much they have access to of the trust funds until that point. If you have young children or young grandchildren, t...