Wednesday, June 20, 2018

The Indiana Department of Education Can Help in Charitable Planning

The concept is an interesting one, and very much in keeping with the charitable planning goals of certain of our Geyer law estate planning clients - helping both corporations and the well-to-do help their low-income neighbors.

The Indiana legislature established the School Scholarship Tax Credit Program to incentivize private donations that fund educational choice for low-income families, while the Indiana Department of Revenue and the Indiana Department of Education adopted the rules for implementing the program.

How does the program work?
Private donations fund SGO scholarships. The State of Indiana provides funds for School Choice Scholarships, which are vouchers that enable students from low-to-middle-income families to attend non-public schools in Indiana.
Donors (either individuals or corporations) can take advantage of a 50% state tax credit when they make contributions to a qualifying SGO (scholarship granting organization). Donors’ gifts also qualify as charitable contributions for federal income tax purposes.  Contributions of appreciated stock or mutual fund shares, plus qualified charitable distributions from IRAs can create even greater federal tax savings.

Parents apply for scholarships for their children who want to go to a participating non-public school of their choice. (The student must be member of a household with annual income of no more than 200% of the amount required to qualify for reduced or free federal lunch program.)

Overall cap – There is no limit on how much a donor can contribute to a qualified SGO, but the entire program has a limit of $12,500,000 for the fiscal year beginning July 1, 2017, and ending June 30, 2018 (just over a week from the publishing of this blog post).

As Indiana estate planning attorneys, we offer no tax advice, instead working together with our clients’ tax and financial planning advisors, we find that charitable giving is an important element in many of our clients’ overall estate plans.

It’s good to know: the Indiana Department of Education can be a partner in charitable and estate planning!
- by Ronnie of the Rebecca W. Geyer & Associates blog team

Wednesday, June 13, 2018

Cases in Canada Shed Light on U.S. Estate Planning No-Nos

A court ruling in Canada presents an important reminder for our blog readers. Canada, of course, has a different law system from that of the United States, but the issue itself is one that often comes up in our discussions with Geyer Law estate planning clients, having to do with treatment of property held jointly by parents and children…
In this 2007 ruling (Pecore v. Pecore), the Supreme Court (of Canada) acknowledged that there are legitimate reasons why parents transfer property into joint names with children, including
  • assistance with financial management
  • simplification of estate administration
  • avoidance of probate fees payable on death
But holding property with children can be risky, the Pallettvalo newsletter points out, and “parents should never add a child's name onto bank accounts or other property without proper legal advice, as few other issues cause as much conflict in the administration of estates”.

Why does adding a child’s name often cause conflict? ”Whenever property owned by a parent is transferred into joint names with one of his or her children, it raises questions about whether the parent intended to have the property go to the child/joint owner alone, or intended to have such property distributed according to his or her will.” (What if the will divides the parent's estate among all of his or her children equally, and now the child who is joint owner believes the property was intended to be theirs alone?)
As estate planning attorneys in Indiana, it is very interesting to us that, because of the Pecore case and others like it, it is now the law in Canada that whenever a parent gratuitously transfers property into joint names with an adult child, the court will presume that the property is not intended to pass to such child on the death of the parent, but is intended to form part of the deceased parent's estate to be distributed in accordance with his or her will.

Proper estate planning, we explain to our Geyer Law clients, does more than put you in charge of your finances. It can also spare your survivors misunderstandings and bitter disputes.

- by Ronnie of the Rebecca W. Geyer & Associates blog team

Tuesday, June 12, 2018

Pre-Nups Avoid Messy Issues that Develop on Death

One high-risk factor for probate litigation is the so-called “second marriage” situation, Karen Gertsner writes in the American Bar Association’s Law Trends and News. Many people, including the media, the author points out, mistakenly believe that the sole purpose of a pre-nuptial agreement is to specify how assets will be divided if the couple divorces. But estate planning lawyers, she says, are more concerned with the “messy issues” that develop upon the death of one of the spouses. Not to be too harsh, Gertsner says, but it appears irresponsible for persons who own any significant assets to enter into a second marriage without a pre-nup. A classic “mess” that can result is probate litigation where the children of the first marriage are fighting the spouse of the second marriage for assets.

At Geyer Law, we highly advise people entering into a second marriage to consider using a premarital or prenuptial agreement.  Not only will that enable them to pass assets to children from a prior marriage (or to retain assets should the marriage end), there are many other details that are best handled through a well-thought out and properly drafted agreement that specifies:
  • how debts will be handled (upon separation, divorce, or death)
  • how spousal maintenance (for an ex-spouse or this one) will be handled
  • how medical and long term care costs not covered by insurance will be handled
  • how funeral costs will be handled
The process of developing the prenuptial agreement may inadvertently raise concerns regarding trust in the relationship or comfort with the broader family, acknowledges Abbot Downer in A Thoughtful Approach to Prenuptial Agreements, but good communication is key to a good marriage.

As estate planning attorneys, we strongly agree. The very process of discussing the points to be covered in the prenuptial agreement document forces the couple to get to know each other better and to think about how they plan to handle life together.

Each partner must consider his/her own general attitudes towards money, including spending and savings habits, as well as accepting that the other partner’s goals and attitudes may differ. The goal is not to have the same views, says Abbott Downer, but to come to a place of understanding, empathy, and agreement regarding how differences will be addressed.

Negotiate lovingly is the advice, focusing on “the value of agreeing in advance to financial guidelines that will serve you for many years to come”.

Prenuptial agreements avoid those messy issues that tend to develop upon death!

Wednesday, May 30, 2018

Don't Be Part of the "I-Dunno" 72% Business Owner Statistic

72% of small businesses don’t have a succession plan, reports Isaac O’Bannon, Managing editor of the CPA Practice Advisor. What’s more, O’Bannon found, 87% of small business owners were unaware that there are documents that can be created to specifically protect their businesses.

“Meanwhile, the new tax bill changes the rules for pass-through entities (Limited Liability Corporations, sole proprietorships, partnerships, and S-Corporations), which make up 90% of all businesses in the U.S.,” the law firm Petefish reminds us.

Even more startling is a statistic released by CNBC showing that some 10 million small business owners are planning to sell or close their businesses over the coming ten years, yet most of those have no succession or exit plan in place in order to cash out for retirement.

And, yes, the new tax law roughly doubles the federal estate tax exemption, Eleanor Laise writes in Kiplinger. But, far from meaning that you should “take your estate planner off speed dial”, she says, be aware that the law doesn’t address creditor protection and maximizing bequests.

At Geyer Law, we do know. That’s why, working in cooperation with our clients’ tax, insurance, and financial planning advisors, we counsel on business matters, including:
  • choice of business entity
  • internal corporate documents
  • liability issues   
  • succession planning
Don’t make the mistake of being part of that 72% statistic!

Wednesday, May 23, 2018

Yes, Bylaws and Operating Agreements ARE Part of Estate Planning

Bylaws? Operating agreements? Choice of business entity?  Those may not sound like estate planning topics, but they most definitely are. In fact, all too often, entrepreneurs are so busy developing and then running their businesses, they don’t take the time to address legal issues that can make the difference between failure and success.

What are some of those important legal issues?
  • choosing the proper organizational structure (C- corporation, S-Corp partnership, LLC)
  • buy-sell arrangements
  • corporate restructuring
  • tax reduction
  • succession planning (in the event of the death, disability, or retirement of a current owner)
“If you own a business or a professional practice, it is even more important that your estate planning begin today,” Entrepreneur Press cautions.  “As a business owner, it’s quite likely that a significant portion of your wealth – and your family’s source of income after your death – is tied up in the family business…The success of your estate plan is dependent upon the business being transitioned to the next generation or sold to someone outside the family for a fair price. Either result takes years of planning and preparation, sometimes as much as 10 years.”

The fact that a business will literally die when the owner retires or dies does not mean the business can be ignored for estate planning purposes. For one thing, as so rightly points out, liability does not die with the owner, and the family will need to consider procedures to reduce the applicable statute of limitations. Steps can be taken to avoid estate tax on a business that no longer exists.

While many entrepreneurs are focused on growing the business, they often neglect to consider what will happen if they are injured, writes Fred Cohen in “By failing to have a plan that enables the business to continue operating, partners, owners, and family members will be left scrambling to manage the business assets, and disputes are likely to arise.”

“Without a plan in place for how various scenarios should be dealt with, the continuity of that business can be compromised,” Tamara Schweitzer observes in Inc.

The attorneys of Rebecca W. Geyer & Associates, PC counsel clients on a range of business issues, including choice of business entity, preparing and filing the organizational documents, business record keeping, succession planning, and advising clients on critical planning issues which entrepreneurs face.

All these things are, we know, very much a part of estate planning!

Wednesday, May 16, 2018

You're Legally Married Until You Aren't - Divorce and Estate Planning

“It doesn’t matter how far along the divorce is or how long the action has been pending, the law considers you to be legally married until the judge signs the final decree ending the marriage,” writes  Patti Spencer in That means your spouse may still have legal control over you and your estate, and may be entitled to most, if not all of it.

What happens to all the spousal rights when a divorce is pending but one party dies before the final divorce decree is entered? In most situations, practitioner Kent A Jeffirs writes in ICLEF’s Law Tips, not much.  You’re still husband and wife. That means that even if one spouse changes the documents while the divorce is pending, the other spouse’s right to elect against the will remains until the divorce is finalSurviving spouses are also entitled to a $25,000 surviving spouse allowance, even if a divorce was pending.

There are five estate planning documents to be updated when you’re planning a divorce, Spencer points out:
  • your will
  • your trust
  • your power of attorney
  • your living will
  • your beneficiary designations
“If you’re going through the emotional and financial turmoil of a divorce, estate planning may be the last thing on your mind,” concedes attorney Mary Randolph in Don’t count on state law to automatically revoke the naming of your spouse as executor – in your new will, appoint a new executor and an alternate.

At Geyer Law, we’ve come to realize, many people don’t know that it is not only marital assets that are divided in a divorce; marital debt is also divided between the spouses.  Some serious things to think about include:
  • Can you afford to take on half of the debt you and your spouse have incurred over the course of the marriage?
  • If you do take on half or part of the marital debt, what impact will it have on your credit score?
Estate planning may indeed be the last thing on your mind during a divorce, but don’t neglect your planning if you want your wishes to be followed!

Wednesday, May 9, 2018

Now-and-Later Charitable Giving

“With markets up and a desire to make an impact strong, charitable giving is growing,” says Pamela Norley, President of Fidelity Charitable. There are four factors driving this generosity, she posits:
  • the strong stock market
  • increased awareness of issues (due to the 24/7 news cycle)
  • the desire to make an immediate difference by giving
  • the desire to minimize taxes
Carrie Schwab-Pomerantz, CFP®, President of Charles Schwab Foundation, lists four ways to incorporate charitable giving into your estate plan:

1. Include a contribution to a charity in your will
2. Designate a charity as beneficiary of an IRA
3. Create or participate in a split interest trust (you receive part of the benefit; the charity  receives  part of the benefit)
5. Use a donor-advised fund to give during your lifetime and beyond

Donor-advised funds are charitable investment accounts that individuals or families can use exclusively for the support of charities they care about. These funds can be opened with a minimum gift of $5,000 and have significantly lower administrative burden and costs than trusts.

Donor advised funds are ideal if you have not already committed a specific dollar amount to a charity in writing and you want to give substantially to more than one charity,” explains Deborah L. Meyer, CPA/PFS, CFP®. The way it works is that you donate assets or cash to the fund, but don’t decide how much is going to one or more charities until later on. Your charitable tax deduction applies now, but the distribution decisions can come later.

“You likely have a big heart and want to give to several different causes.  Yet there are so many valuable causes in the world.  Your contribution will go further if you select a few causes and give meaningfully to them,” Meyer suggests.

At Geyer Law, we generally recommend that our clients periodically review their estate plan, just to make sure nothing major has changed since their planning was originally drafted. One of the topics to discuss might be charitable planning. Are you in a different position when it comes to donating certain assets to charity than perhaps a year or two ago? Has your tax situation changed? Has “increased awareness of issues” made getting involved with the right charity seem more important? Have you learned of a charity that seems to be in better accord with your principles than the ones to which you’ve donated in the past?

Do you have a strong desire to make an impact? Let’s talk about now-and-later charitable giving!