Author Archives: John

Top 10 Estate Planning Mistakes: First in a Series

It’s January 2019, and as is usually the case, I have a number of new clients with “resolutions” to make or update their estate planning paperwork.  With that in mind, I felt it would be useful to mention the top 10 mistakes many people make when creating a Will or other planning documents.  So here is the first common estate planning mistake – leaving your assets to your surviving spouse outright

How can this be a mistake?  Shouldn’t I want my assets to be available to take care of my spouse?  Of course most people want to make sure their spouse is taken care of after they die.  However, it isn’t always a good thing to leave your assets outright to your spouse. 

If your combined assets create a taxable estate, then estate tax could be due when the surviving spouse dies.  This isn’t often a problem with the federal estate tax because the exemption limits are so high, however, Washington State has a much lower exemption amount.  As an example only (and using easy round numbers), if you have a combined estate of $3,000,000, there would generally be no tax on the death of the first spouse.  But when the surviving spouse dies, that spouse will have all $3,000,000 in his or her estate.  That figure exceeds the roughly $2,000,000 per person exemption limit.  So tax would be due on the amount over the exemption limit. 

A standard technique to address this is by using a credit shelter trust.  When the first spouse dies, his or her share of the total assets is placed in trust for the benefit of the surviving spouse.  When the surviving spouse dies, the trust assets are not subject to estate tax. 

Even if you don’t have a taxable estate, it may still be prudent to use a trust for your spouse instead of having your assets pass directly to him or her.  For example, say you and your spouse have combined assets of $1,000,000.  You are below the state and federal estate tax exemption limits so no tax is likely to be due at any time.  However, there is another problem that you may want to anticipate – the cost of long term care.  For many working people this expense, not estate taxes, is the new problem that must be addressed.  With the cost of care ranging from lows of $3,000 per month up to more than $12,000 per month assets can get wiped out quickly. 

The planning technique in this case is also a trust.  A spouse leaves his or her assets in trust for the surviving spouse.  This trust, often called a special needs trust, is somewhat similar to the credit shelter trust, but different in certain key ways.  These differences will allow the surviving spouse to retain assets in trust while helping to qualify for public benefits which help pay for long term care.  The trust assets can then be used to supplement and improve the life of anyone receiving long term care. 

Almost any way you slice it a trust for your spouse may be better than giving him or her everything outright.  If you believe these strategies may be right for you, give us a call.    

“I Love the 70’s . . .”

“I Love the 70’s . . .”  Or so the slogan of the VH1 TV series goes.  That show has a number of celebrities reminiscing and poking fun at all kinds of things that came out of the 1970’s.  Things such as bell bottoms, disco, mood rings, the Brady Bunch, Watergate, exploding Ford Pinto’s andContinue Reading

Dude, Where’s my Estate Plan?

Do you have an estate plan?  Statistics show that many people do not have any basic estate planning documents.  A recent survey found that only 14% of adults aged 18-29 have an estate plan, 35% of 30-49 year olds have one, 56% of those aged 50-64 and 68% for those over 65. Clearly the issue ofContinue Reading

Seniors Flunk a New Retirement Quiz

Most seniors who took a retirement quiz did not score high. Not long ago I wrote on a Wall Street Journal debate where one side said there is no retirement crisis and the other said there was.  My point was that neither party addressed the potential need for long-term care and increasing medical expenses.  HadContinue Reading

Elder Law Planning:  Definitely Worth Pursuing

Many people have the false impression that Elder Law planning is not worth finding out about because they think they are not eligible for Medicaid.  They feel they have too much income, money or other assets to qualify, or believe that some specialized trust strategies used for asset protection are only for rich people. WithContinue Reading