This article in Investment News discusses what Jobs’ trustees or heirs might choose to do with his valuable investments. According to the article Jobs had billions of dollars invested in Apple and Disney stock. Now, “under the U.S. Tax Code, his heirs may sell shares of Apple and Disney, and avoid $867 million in capital gains taxes. If Apple’s late co-founder left his estate to his wife, Laurene Powell Jobs, the family won’t be liable for the 35% estate tax until she dies or gives money to others, according to estate planners.”

An executor or trustee has a responsibility not only to follow the wishes of the grantor of the trust, but also to look out for the best interests of the beneficiaries; which in this case may include selling or diversifying investments Jobs had chosen to hold onto for sentimental reasons.

Additionally, any executor or trustee will have tax laws to consider–not only the laws in place right now, but any changes to the estate or capital gains tax laws being considered by Congress for 2013. “The capital gains tax is set to rise to 20% in 2013, from 15%, and high-income Americans also will be subject to a 3.8% levy on unearned gains.” This means that advisors and heirs won’t want to wait too long before making any decisions.

The estate of Steve Jobs may be larger than most, but the same issues and questions will face the executors, trustees, and heirs of estates of all sizes. Whether you are a grantor, executor, heir or trustee, our office can help you through any questions or concerns you may be facing. Don’t be afraid to contact us.

This is why it’s so important after the death of a loved one to have the support you need to get through the detail-oriented and often emotionally draining probate process, which includes tasks such as sorting through a financial history, submitting legal documents to the probate court, contacting creditors and family members, and more. Some people have family or friends to help with these time-consuming tasks, others enlist the help of an estate planning or probate attorney, but one thing is clear: no one should do it alone.

Every family or couple will have a different experience with the probate process, but our firm would like to offer a basic list of universal “to-do” items to remember after the death of a spouse. We hope this will help give our readers a little bit of security during a very emotional and stressful time.

* Obtain multiple copies of the death certificate
* Gather any and all estate planning documents
* Contact an estate planning attorney. Even if you don’t plan to retain an attorney, a brief initial consultation can help you understand the task ahead and prevent you from skipping important steps
* Notify the person named as executor or trustee
* Notify the necessary institutions or agencies (the deceased’s employer, social security administration, insurance company, creditors, post office, etc.)
* Remove spouse’s name from all joint accounts or ventures, such as bank accounts, utility companies, credit card accounts, etc.
* Pay final bills
* Cancel accounts, subscriptions, etc.

Depending on your situation and location, there may be many more tasks to be done. Additionally, if you are serving as executor or trustee (as many spouse’s do) there will be a great number of administrative tasks to be performed in addition to the ones on this list. Under these circumstances even the strongest and most capable people can feel overwhelmed. Remember that you don’t have to go through the process alone.

While it’s true that Crummey trusts can be a very convenient and reliable estate planning tool, they do require a certain amount of annual attention and maintenance, and may not be the right strategy for everyone.

Crummey trusts can be used for many different kinds of assets, but they are most commonly used to protect life insurance policies from estate taxes. Your estate planner can help you set up the Crummey trust and use it to purchase a life insurance policy. Then you “fund the premiums with annual gifts… That gets money out of the estate while skirting the gift tax. Since the trust owns the policy, the death benefit ultimately goes to the trust, shielding it from federal estate taxes.”

Once the initial work of setting up the trust and buying the insurance policy is done, “The trustee must send out ‘Crummey letters’ each year, informing beneficiaries that they can withdraw the gifted amount during a window of time, say 30 days. Usually, the beneficiary leaves the money in the trust. But the IRS considers it a tax-free gift only if the person has the right to take it in the short term, and the Crummey letter proves that he has that right.”

Sending letters once a year isn’t a difficult task, but forgetting even once can lead to consequences with the IRS. Our advice is to be very careful to select a trustee you can count on to be timely and detail-oriented with the Crummey letters. Alternatively, the estate planner who set up your trust will often be willing to take over the administrative task of sending annual Crummey letters as well. Contact our office for more information.

As executor or trustee a person has a legal duty to manage the property in the decedent’s estate for the benefit of the trust or estate beneficiaries. This means that while the executor/trustee should be compassionate, he or she must act in an equal and unemotional manner toward ALL the beneficiaries.

A beneficiary, on the other hand, is often by definition emotional. Even those beneficiaries who are not concerned with the monetary aspect of their inheritance (and let’s be honest, many heirs are more concerned with the dollar amount than they might let on) will likely be emotionally invested in the heirlooms of the estate. Many family feuds are sparked when siblings can’t agree on who gets the family silver or great grandma’s engagement ring. And the potential for conflict only increases when real estate is involved.

If you are creating your will or trust, the best way to avoid this conflict is to be as specific as possible in your instructions to your executor and beneficiaries. Spelling out in no uncertain terms who gets the family silver will decrease the chances that the executor will be tempted to take advantage of his or her position. You may also want to consider naming a disinterested party as a trust advisor or co-executor to provide checks and balances throughout the administration process.

If you are a beneficiary who is also serving as executor/trustee there are a few things you can do to ensure you keep your executor and beneficiary roles separate:

* You may want to consider contacting a probate or estate planning attorney to mediate or oversee the process.

* Rely on random but fair methods (such as flipping a coin, drawing straws, or organizing a round robin) to distribute unassigned personal property with emotional value.

* Be sure to involve an impartial appraiser if real property is involved.

* If all else fails, an executor or trustee is always permitted to step down and hand the role over to a qualified and disinterested party.

As noted by this article in the Wall Street Journal, “The new, higher threshold for the federal estate tax has many heirs happily thinking they won’t have to surrender a big piece of their inheritance.” But these heirs “may need to think again if they’re in line to receive a lot of money from tax-protected retirement accounts like 401(k)s and IRAs.”

Many (if not most) retirement assets these days are IRD assets, this is “income in respect of a decedent,” and it means that the assets are income earned by a person, but not taxed or received before that person passed away. These IRD assets can be wonderfully beneficial to the investor… but they can be an unpleasant surprise for heirs, who will end up paying the taxes on these assets.

“Heirs who receive retirement accounts often pay far more tax on IRD than they have to, collecting payments from the plan but failing to take an annual deduction that is available to beneficiaries. Sometimes that’s because the tax attorney who planned the estate knew about the deduction, but the accountant who prepares the heir’s taxes doesn’t.”

Some of the solutions suggested in the article are to take advantage of a recent rule change which allows many IRD savings accounts to be converted to Roth 401(k)s. Taking advantage of this and converting the money to a Roth allows the owner to pay any applicable taxes now, so that heirs won’t be liable. Another option is to move money from the IRD retirement account into an irrevocable life insurance trust, thus removing it from the taxable estate.

“People need to refocus their thinking on what heirs are truly inheriting.” Our office can help you do just that. A little bit of thought and action now can save your heirs a lot of taxes and confusion down the line, and this is especially true if you are lucky enough to have a significant amount of savings that you anticipate passing on to your children or grandchildren.

According to this article by Bonnie Kraham, how you dispose of these assets can be extremely important to the administration and taxation of your estate. One particularly dangerous method is referred to as “the empty hook” method, wherein “When the collector dies, the beneficiaries simply remove the artwork (from the hooks) in accordance with name tags on the items for the intended recipients. Thus, the estate is left with “empty hooks” of what may be part of a sizable taxable estate for estate tax purposes.”

The problem that arises with the “empty hook” method is that wealthy families who collect artwork or antiques as investments often have records of their purchases and sales, as well as a list of valuable items for insurance purposes. Any of these documents and records would be reviewed during probate or administration of the estate. “If you don’t fully disclose the value of your art collection, or don’t properly plan to gift art in compliance with estate tax rules and regulations, you can pass on tax fraud, instead of art, to your beneficiaries.”

Perhaps the best way to hold and legally dispose of your art or antiques collection upon your death is to transfer ownership of these valuable assets into a trust. “Transferring your art collection to a trust may be the most effective, efficient and transparent way to administer your estate after death . . . Trusts are private documents and, although the tax reporting remains the same for trust assets, trusts protect the privacy of an art collector or artist, which can be an emotional protection for the beneficiaries.” Additionally, keeping valuable artwork in trust provides an extra layer of protection from divorce or frivolous lawsuits during your lifetime.

Contact our office, or your own local estate planning attorney, for more information.

You can save your executor (and your family) time and money later by organizing your important documents and finances right now. If you’re not sure where to begin, or what information an executor would need to know, we’ve assembled a list of information and documents an executor might need quick and easy access to if anything were to happen to you:

* Instructions and letter to trustee: Contact information for your EP attorney and trustees, instructions on how to begin the process.
* Minor children: Information about your minor children, nearby guardians or relatives, medical and health insurance information.
* Personal Information: Birth and marriage certificates, passports, family, friends and contact people.
* Estate Planning Documents: Trust, wills, any amendments, personal property memorandum.
* Employment/Business Information: Contact information for supervisors, client information if you are a small business owner.
* Health Care: Advanced Health Care Directive, HIPAA, emergency contact information, phone numbers for doctors, health insurance particulars.
* Financial Powers of Attorney
* Real Estate and Tangible Property: Deed to your home, mortgage information, homeowners and fire insurance, vehicle records, artwork and antiques.
* Bank Accounts and Investments: Account numbers and locations, contact information.
* Monthly Expenses and Bills: A copy of one monthly statement for each.
* Information about recent Taxes
* Retirement Accounts/Government Benefits: Account numbers, beneficiary information.
* Life Insurance: Account numbers, beneficiary information
* Memorial and Burial/Cremation: Preferences, pre-paid arrangements, phone numbers.
* Memberships/Secured Accounts/Passwords

Once you are organized, keep your information in an accessible place and make your executor aware of the location. This simple act of organization will not only benefit you right now, it will save your family and your executor much time, money and frustration later on.

After the death of a parent, children and heirs often receive calls from debt collectors looking for someone—anyone!—to pay off the debts of the deceased, even if the heirs have no obligation to do so. In most situations relatives are not required to pay the debts of the deceased from their own assets. “Spouses, children or other loved ones don’t ‘inherit’ credit card debt unless they co-signed the card… When someone dies, credit card companies have to wait near the back of the line to receive payment. If what’s left over after settling the estate isn’t enough to pay the bill, credit card debt is written off.”

Probate or administration of an estate is a process which follows established steps; heirs and credit card companies alike must wait their turn in line. “Administrative fees (like executors’ fees, filing fees, appraisals of property and tax-preparer fees), mortgages, reverse mortgages, taxes and even funeral expenses have to be paid off before heirs can inherit anything from the estate.” Unfortunately, most bereaved relatives aren’t aware of the laws on this subject, and debt collectors take advantage of that ignorance.

The best way to avoid this painful interaction is to have a proper estate plan. “Most of the headache can be avoided with a will… If you make it well known who owns what, both in terms of assets as well as liabilities, you can prevent a lot of this from taking place outside of your control.” The article also recommends taking preemptive action. “After the death of a parent, send a letter or call the banks and credit card companies to cancel cards and let them know that the cardholder has died.”

The repeal of the estate tax in 2010 also brought with it a repeal of the “step up in basis,” meaning that heirs selling inherited assets were taxed based on the original acquisition cost of the assets, not on their value as of the date of the taxpayer’s death. This generally resulted in a higher tax paid on assets than the normal estate tax rate—not good for taxpayers. But 2010 estates don’t have to go by these rules. The legislation passed in December of 2010 gave 2010 estates the opportunity to elect whether they wanted to use the 2010 estate tax laws, or the new laws for 2011. This article in Forbes explains what this means:

“The 2010 Tax Relief Act restored the estate tax for individuals dying in 2010 with a $5 million per person exemption and a maximum rate of 35%. It also repealed the modified carryover basis rules for property acquired from a decedent who died in 2010. However, estates of individuals dying in 2010 can elect zero estate tax and the modified carryover basis rules that would have applied before they were repealed. That means the basis of assets acquired from the decedent would be the lesser of the decedent’s adjusted basis (carryover basis) or the fair market value of the property on the date of the decedent’s death.”

In general this tax election is a good thing, it allows executors to choose which tax formula will cost the beneficiaries the least in taxes; but it does mean a lot more paperwork and a lot more attention to detail. If you are the executor of an estate of a decedent who died in 2010, don’t hesitate to call us. We can answer your questions and help you explore your options.

If you have been nominated (or are currently serving) as an executor or trustee there are a few things you’ll want to remember as you go about your duties:

1. The will or trust is your guide, the mission statement by which you should operate; read and understand the document completely, and have an attorney help you, if necessary.

2. You need to be pro-active—to an extent. If you are managing a large amount of money or assets over a period of time it is probably not in the best interests of the beneficiary to let those funds sit in a savings account. Create (with an advisor, if necessary) a financial plan for the trust assets.

3. Although you may be handling the estate assets, you should not have any personal financial dealings with the trust. You should under no circumstances borrow from or lend money to the trust. Keep your finances separate!

4. Communication and transparency is key! Keep detailed records of all of your actions and transactions regarding the will or trust, and send regular reports to the beneficiaries. Regular communication prevents unhappy surprises or angry lawsuits in the future.

5. You don’t have to do it alone. If you were picked as a trustee because of your financial knowledge and experience—great! But if you were picked because you are the oldest, or the most responsible, or the favorite you may feel overwhelmed by the job ahead of you. Don’t try to muddle through alone, get the help and support of an experienced attorney or advisor.