San Antonio, TX Estate Planning

Joan Rivers May Get the Funeral She Always Wanted ... Minus the Tax!

"Joan Rivers 2010 - David Shankbone" by David Shankbone - Cropped from Joan Rivers at Musto's 25th Anniversary. Licensed under CC BY 2.0 via Wikimedia Commons.

Rivers would have probably gotten a kick out of the fact that the expenses associated with her funeral are tax deductible for federal estate tax purposes – though as a smart business woman, I suspect she already knew that.

Are funeral expenses tax deductible? I wonder if the late Joan Rivers had this in mind when expressing wishes for an elaborate Hollywood funeral service of her own.

The recently deceased Joan Rivers was almost a larger than life figure. She was an iconic comedian who loved the Hollywood lifestyle and she made no attempt to hide her wealth. She even spoke about the type of funeral that she wanted, which was to be large with paparazzi and Meryl Streep crying in five different accents.

In "Saying Goodbye to Joan Rivers: The Bigger The Funeral, The Bigger The Tax Deduction," Forbesnotes that an elaborate funeral could be paid for by Rivers' estate and the amount could be deducted from the estate tax. Rivers, who famously hated paying taxes, would be very happy to have known about this. The IRS actually has very few rules about tax deductions for funeral expenses. The deductions are allowed as long as they comply with state and local laws and they are reasonable in light of the deceased's lifestyle. An ordinary person could not have a funeral like Rivers wanted and have the estate deduct it all. However, for someone like Rivers, the full deduction appears to be appropriate.

If you are administering an estate that might have to pay the estate tax, then you should speak to an estate planning attorney about deducting funeral expenses and what other types of expenses can be deducted. It can save the estate a lot of money, leaving more money for the heirs.

Reference: Forbes (September 7, 2014) "Saying Goodbye to Joan Rivers: The Bigger The Funeral, The Bigger The Tax Deduction"

Senator Proposes Increase in Estate Tax

This legislation would exempt more than 99.7 percent of Americans from paying any estate tax while ensuring that the wealthiest Americans in our country pay their fair share.

Is there another estate tax change around the corner? It's hard to say what the future holds, but one politician is proposing an estate tax increase.

Most of the time when politicians announce that they are seeking increases in the estate tax, they state that they are doing so to make the wealthy pay their fair share of taxes or something similar. Senator Bernie Sanders, however, has announced that he is seeking an increase in the estate tax for the specific purpose of dealing with wealth inequality in the United States. The Senator wrote about it himself in The Huffington Post. The article is titled "A Progressive Estate Tax."

As the name of the article suggests, the proposal is for a progressive estate tax. The more wealth an estate has, the higher the rate of tax paid on the estate. For example, in the proposal estates valued between $3.5 million and $10 million would pay a 40 percent estate tax while estates valued between $10 million and $50 million would pay a 50 percent estate tax. The full details are in the article.

Given the current political climate in Washington, it is unlikely that Senator Sander's proposal will be passed, if it even makes it to a vote. However, it is important to note that legislators do propose changes to the estate tax and these proposals do sometimes pass. For this reason it is important to stay in touch with your estate planning attorney to make sure that your plan is up to date.

Reference: The Huffington Post (September 8, 2014) "A Progressive Estate Tax"

Planning Ahead for Mental Health

Having a say in your own mental healthcare may be very important to you. But what if someday you’re unable to make decisions about your treatment? A psychiatric advance directive (PAD) is a document written while you’re mentally healthy that can speak for you if you become incapacitated by mental illness.

Almost everyone who has an estate plan prepared by a professional has standard documents in place, including general durable powers of attorney and health care powers of attorney. Respectively, these documents appoint someone to handle an incapacitated person's finances and health care decisions. However, there is another, similar document that far fewer people have. What is it? The psychiatric advance directive.

CNNrecently discussed this important topic in an article titled "A Guide to Psychiatric Advance Directives."

A psychiatric advance directive allows you to appoint someone to oversee and direct treatment if mental illness prevents you from being capable of doing so yourself. In some cases, you can even direct certain techniques, treatments or medications that should or should not be used to treat your mental illness. About half of the states have specific laws or forms that can be used for psychiatric advance directives. In states that do not have specific laws, the normal power of attorney documents can often be used to accomplish the same thing.

A specific psychiatric advance directive may not be for everyone. However, if you want something different done should you become mentally ill, then talking to an estate planning attorney about a psychiatric advance directive is a good idea.

Reference: CNN (Last Review Date: Feb 17, 2014) "A Guide to Psychiatric Advance Directives"

Gifting Advice for Grandparents

Helping out family members is to be encouraged, but can raise a number of legal issues involving taxes and eligibility for public benefits, as well as questions of fairness among family members. Here are six issues grandparents should consider before making gifts to family members.

Are you planning a gift to your grandchildren? Grandparents normally have a strong desire to take care of their grandchildren. They want to make sure that the grandchildren have everything they need. Often this means that grandparents will make ill-advised gifts to the grandchildren. There are some things that need to be considered to make sure that any gift you want to make is appropriate. In an article titled "Six Things to Consider Before Making Gifts to Grandchildren," JD Suprapublished a list of things to consider.

The list includes:

• Gift or Loan - Make sure you really want to give a gift. If you expect to be paid back, it is a “loan” and you should get the terms in writing.
• Equal Treatment - If you give more to one grandchild than another, it could cause resentment within your family.
• Tax Requirements - Consider whether the gift is taxable and make sure you report any gifts that need to be reported.
• 529 Plans - If the gift is primarily for educational expenses, then it might be a better idea to use a 529 college savings plan.
• Keep What You Need - Make sure you do not give so much money to your grandchildren that you are unable to meet your future expenses.
• Long Term Care - When deciding how much to give, include the potential costs of your own long term care in a nursing home as part of the money you might need in the future to meet your own expenses.

The above list is not exhaustive. There are many other things you might want to consider before making a gift to grandchildren. Talk to us about gifting and how it can fit into your overall estate plan.

Reference: JD Supra (September 4, 2014) "Six Things to Consider Before Making Gifts to Grandchildren"

Never Assume a Will is Enough

The information family and friends will need when a loved one dies goes far beyond those much-talked-about documents, and having them can make the end of life just a little less painful for those who remain behind.

Properly planning an estate requires that you think about all of the little things someone might need to know to effectively administer your estate and wrap up your affairs. This planning goes beyond the basic estate planning documents, such as a will, trust and powers of attorney. In a recent article titled "There's More to Estate Planning Than Just the Will," the New York Times details some other information you might need to gather and make accessible to someone administering your estate.

The list includes:

• Passwords and Login Information - For someone to administer your estate, they need to know how to access your accounts.
• Tax Documents - If the IRS decides to audit you or your business after you pass away, it will be important to have your tax documents and receipts.
• Medical History - Younger relatives may someday need to know about what illnesses run in the family.
• Regular Bills - If a company routinely debits your bank account or credit card, an administrator needs to know about this so the payments can be stopped.
• Keys - Make sure someone will know how to open everything in your home.

While the list from the New York Times is not exhaustive, it certainly is a great start. Every estate is different. However, every estate is similar in that the estate plan needs to include more than just the standard legal documents. It also needs to include information about how to effectively administer your estate.

An estate planning attorney can assist you with how to make sure that your estate plan includes everything that is truly needed.

Reference: New York Times (September 5, 2014) "There's More to Estate Planning Than Just the Will"