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Estate Law Report Page 2
Distributing Heirlooms (continued)
But how do you properly plan the distribution of small ticket items with big ticket sentimental value? Planning the distribution of these items is often a difficult chore that requires re-evaluating your estate planning goals.

The best way to evaluate your estate plan is to consider the basic values that should be it's building blocks. By emphasizing what you value rather than what you own, you can better align your monetary objectives with your personal ideals.

For example, many of our clients have expressed their intent to distribute certain family heirlooms to specific family members who will best understand and appreciate the item. While these item's fair market value may not be high, they often encapsule a lifetime of achievement, and are in this sense, priceless. Determining the proper family heirloom recipient may be a difficult choice. However, once your recipient has been chosen, it can generally be documented without the law firm's knowledge or assitance. B attaching a signed "letter of instruction" addressed to the "Then Acting Trustee in Office," you will notify your heirs of these distribution wishes.

When writing these letters, please be mindful that it is particularly important to never contradict what you have formally stated in your trust documents. Proper modification of trust distributions requires a formal procedure in order to prevent weakening the documents and opening them to potential future contestation.

One clear method to specify which heirloom will be distributed to which individual is to reference an attached photograph of the item in your letter of instruction. Since these letters are not legally binding, only items of minor economic value should be dealt with in this manner.

Heirloom centered estate planning such as this will help you rest assured that your estate will be settled according to your stated wishes while respecting important feelings of sentimentality.
No one wants to plan for their own incapacity, but as we grow older, incapacity is something that we all must think about. That is why our office offers a Uniform Statutory Form Power of Attorney for finances. This document will help protect you and your family from the unnecessary steps it takes to have your agent (usually your successor trustee) handle your financial affairs once you have become incapacitated. These documents cost $100 and are well worth the money spent to protect yourself and your estate.
If one of our clients realizes that they are no longer capable of handling their own finances, and they have not executed a Uniform Statutory Form Power Of Attorney, they can at any time, resign as a Trustee. This would leave the spouse, (or the successor trustee) as the current acting trustee.
If a spouse, or a successor trustee is worried about the mental capacity of their loved one, and the client is not capable of resigning as trustee (as in many of the cases we see), our trusts require two letters from two liscenced physicians stating that the client is incapacitated and cannot handle their own affairs. Once this has taken place the successor trustee can be appointed as the current acting trustee.
Please remember to update your Schedule "A" of assets, If you have not done so recently, and mail us a copy of to the office to be added to your file. An up-to-date Schedule "A" not only helps your successor trustee locate assets, but helps us to spot changes in your estate values that may require revision or your estate plan.
Curious about how the gift tax really works? The gift tax was first created in 1924 to close the "gifting" loop-hole in the Federal Estate Tax. The tax was first set at 40% Gifting Money can be one of the most effective estate tax saving tools. It is a way to transfer substantial amounts from your estate, free from taxes, to your children or other loved ones. This can drastically reduce the tax liability on your estate after your death.

Each year, you are allowed up to $11,000 worth of gifts per each individual. If you are married, you and your spouse may jointly give away $22,000 annually to each donee. (If given jointly, IRS Form 709 must be filed.) For example, you may transfer gifts ammounting to $11,000 to each of your 4 children for a total of $44,000 every year. Your spouse can transfer another $44,000 per year! By keeping your gifts below this amount you do not have to pay any gift taxes, and your estate tax exemptions remain intact

However, you may want to make additional gifts above and beyond the $11,000 annual limit. While these gifts would be called "taxable gifts", you don't actually have to pay any gift taxes until your lifetime gift tax exemption has been completely used up. This is a great way to give gifts at a low basis. For example, one might want to gift real estate property to a child. On a property currently worth $100,000, your estate tax exemption is used up by $89,000 ($100,000-$11,000), and is now $911,000. However, the property and all it's future appreciation have been taken out of your estate and away from the risk of being taxed. An appraisal and an IRS 709 gift tax return would be required with this approach.

Other ways to avoid the gift tax include spousal gift giving and the gifting of tuition or medical care payments directly to a provider. There is no limit on the value of a gift you give to your spouse, and therefore you may give unlimited amounts of assets to your spouse, if your spouse is a U.S. citizen (if your spouse is not a US citizen, special rules and limitations may apply). While the gift tax does not apply to payments made for tuition or medical care, this exeption has specific requirements and must be done with care.
There has been a great deal of discussion in the past few months regarding privacy issues and access to another's medical records. Under the newly enacted Health Insurance Protability and Accountability Act (HIPAA), doctors, hospitals and other health care providers may not freely discuss a patient's status or health with a spouse or other family members unless the providers have a signed consent form from the patient. There are some limitied exeptions to this rule, which might Include emergency situations or when the patient is incapacitated. Executing a currently drafted Advance Medical Directive or Power of Attorney For Health Care, which specifically names an agent to manage or consent to a patient's medical treatment, is usually adequate to handle these issues. Most of our clients have such documents, but they should be updated based on this new law.
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