December 2021

Lawyer for Life
 

There are many reasons you might consider giving your adult children a portion of their inheritance now, while you’re alive and well. Maybe you’ve seen your nest egg grow thanks to a robust stock market, and you have more in savings than you thought you would at this stage of your life. Perhaps you and your spouse enjoy excellent health and have received nothing but good checkups for years, so you’re not overly concerned about medical expenses. Or maybe just want to be there to experience how your financial assistance helps your children pursue their dreams and achieve their goals.

 

While many parents would like to help their adult children financially as much as possible, before acting on your generous inclinations you should consider a number of potential problems.

 

For instance, what if one of your children could use some help right now, perhaps with paying off student loans or starting a business, while your other children don’t need any help? If you give one child money, are you required to give the same amount to each of your children, regardless of need? Your other children may very well think so. Do you really want to set the stage for the family drama that could unfold by violating the “fairness principle?”

 

Of course, you could tell the recipient of your gift, along with your other adult children, that the gift will be deducted from the recipient’s inheritance when you pass away. This might solve the problem, but then again, it might not. As you’ve no doubt learned by now, your “kids” may be grown up but that doesn’t mean sibling rivalries and other powerful emotions from childhood simply disappear.

 

Another factor to consider, particularly with respect to large gifts, is whether your children are mature enough to handle a sizable amount of money on their own. It’s one thing to watch your children make sound financial decisions and achieve success as a result of your generosity, but quite another to watch them squander the money you worked so hard to attain and preserve. If your children use your gift in ways you never intended, will you resent it? Will they resent you for having “strings attached” to the gift?

 

Finally, while you and your spouse might be healthy now, people are living longer than ever before. The majority of us will require long-term care at some point in our lives. Long-term care is already expensive, and costs are expected to increase significantly in the future. Even basic services are expensive: According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2021 may need approximately $300,000 saved (after taxes) to cover health care costs in retirement.

We never really know what the future holds. Change is the essence of life, and your situation could change dramatically in the years ahead, hopefully for the better but maybe for the worse. The last thing you and your spouse want is to discover five, ten, or twenty years down the road that you no longer have the money to support yourselves, let alone afford the lifestyle you have now.

 

What you do with your money is your business, of course. Just think long and hard before giving your adult children a significant financial gift. As always, we are here to help.

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Approximately 3 million Americans move to another state each year, while last year alone the number was 4.7 million. Given the stress and myriad changes that come with such a move, it’s not surprising that many people forget to review their estate plans. However, differences between states regarding taxes, ownership of property, inheritance, and more make it extremely important to review, and if necessary, update your planning documents with an attorney who focuses on estate planning.

 

Let’s look at some of the legal issues involved when moving to a new state and the changes that may have to made to your plan.

 

Estate Taxes

With the current exemption on federal estate taxes set at $11.7 million for individual filers and $23.4 million for married couples filing jointly, most of us don’t have to worry about federal estate taxes (at least this year). Unfortunately, as of 2021, 11 states levy their own estate taxes, and exemption amounts are considerably less than the federal level. In addition, six states levy an inheritance tax and Maryland imposes both. The good news is that with proper planning, you may be able to minimize or even eliminate your estate’s vulnerability to state “death” taxes. You can find a complete list of states with estate and/or inheritance taxes here.

 

Key Planning Documents

Contrary to what many people believe, a will that is valid in one state may not be valid in another state. The same is true of other important legal documents, including living wills or advance directives, health care proxies, powers of attorney, and more. (It is worth noting that the Uniform Power of Attorney Act, which was designed to help eliminate conflicting laws between states regarding powers of attorney, has not been enacted in all 50 states.)

 

Consider, for example, what might happen if health care providers in your new state won’t recognize and accept the medical power of attorney or health care proxy you made in another state? Your agent or attorney-in-fact might not be able to make the decisions you empowered him or her to make on your behalf in a medical emergency. Your loved ones might even need to take the matter to court to enforce a document’s validity so that your wishes will be carried out. A medical emergency is not the time to be worried about, or trying to enforce, the validity of key legal documents.

 

Your “Helpers”

When moving to a new state, it is not realistic to expect your helpers, such as your agent, attorney-in fact, or executor, to continue to serve in this capacity. We’ve mentioned the issues surrounding powers of attorney. In addition, the vast majority of states do not allow a non-resident to serve as an executor, and of those that do, the executor must be related to you directly. Other states have additional restrictions as well.

 

Finally, states differ with regard to the laws governing community property, titling (which could impact your trusts), tenants by the entirety, and joint tenancy with or without right of survivorship.

The bottom line is this: If you are planning to move to another state, or you’ve already done so, be sure to speak with a qualified estate planning attorney to review and update your plan.

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Season's greetings to you and yours!

 

The team Cocheco Elder Law Associares, PLLC would like to wish you a Happy Holiday season. Thank you for your continued support and we hope that you are able to enjoy the holidays with family and stay safe.


Season's greetings!

Tom