@CountingDown, I retired from a municipality 6 months ago, which is not a participant in the state’s LTC plan anyway. H is a federal retiree but never looked into the subject. There are so many things we could have and should have looked at, even with investments, should have done it a little differently, hindsight is 20/20. Better late than never, I am now taking on a bit at a time.
As @AttorneyMother suggested, definitely some cost analysis will need to be done regarding LTC situation.
Though this thread is intended to be directed towards financial estate planning, it’s worth including this link to AARP’s downloadable advanced directives:
I find it hard to force what medical care I would wish for myself. I appointed a trust worthy person to decide on my behalf, a medical doctor BIL and later my D. They know where I stand in general.
"I’d love to know where to begin and how you actually find a good lawyer. We did our will ourselves years ago. The lawyer who did our real estate deals said it was okay though it could be better - and we’ve meant to do something ever since… "
If I were you, I’d want to start by making sure the complicated real estate ownership is “understood” by your children so that your heirs know precisely the nature and extent of your ownership interest. If you and your H are in a community property state, your fractional interests are affected by each spouse’s community share first, then you’d want to make sure your children get what they are entitled to. Your heirs should also understand the extent of their liabilities relating to ownership of the properties. The attorney who structured your real estate deals is a good starting place for referrals to a good wills and estates attorney.
EDITED to add: I would also worry about the nature of the joint tenancy of the real properties. If they are owned JTWROS, then after the death of each joint owner, his/her share is extinguished and the joint ownership shares of others increased. You’d have “nothing” to pass along to your heirs.
As for the other accounts, you can consider consolidating or you can certainly implement TOD arrangements and designate beneficiaries, both which will provide ease of access.
Then wills for you and H to make sure that assets that don’t pass outside of probate are addressed, especially in light of the real estate interests. Or look into a living revocable trust because you own multiple real property interests.
@mamabear1234, you can google the title “the new rules of estate planning” by Laura Saunders and get it that way, @AttorneyMother suggested doing it that way for an earlier article.
@AttorneyMother, referring to #163, I am confused, if our house is jointly owned by husband and wife, can we not leave the house to our children by way of a will? Our state is not a community property state. Thanks.
It depends, and I can’t give you definitive advice, but guidelines only.
In non-community property state: House jointly owned by you and H - I assume that means JTWROS but check to make sure in your state.
– generally, surviving spouse takes entire title because deceased spouse’s interest is extinguished
–> each H & W’s will should address who gets house if spouse predeceases the other spouse
– caveat: surviving spouse is free to decide what to do with house, such as selling house or executing new will
If you want to ensure that your children get “your” half of the house, you’ll need other legal arrangements like a trust that holds title to the house.
Actually despite the complexity - I’m not too worried about the vacation properties. One my older son won’t be part of because he’s not a shareholder in the outfit that owns the land. (Younger son will be voted in this summer.) I actually don’t know what the deal with the cabin is - but it’s not possible to sell. I think it just reverts back to common ownership if we wanted to give it up. The other property is currently owned by my Mom, her sister and one cousin of that generation. We had a meeting in the spring of most of the next generation to determine what we all wanted with the lawyers and they are writing up some sort of real estate trust that will reflect what we want. (We were all on the same page thankfully.) It’s hard to explain, but I don’t think anyone in the family thinks of them as investments - they are more like privately own nature preserves. One of them pays taxes through selective logging. The other is more worrisome. But until the trust agreement is put together - we won’t know what to do about it.
It sounds like the properties are set up for generational use and transfer, so that’s one great way to deal with mutli-generational ownership and transfer – through corporate, LLC or trust ownership, whereby family homes or retreats are held by entities that survive. Sounds like a lovely rustic place.
Thank you to all who have contributed to this thread. It’s informative and motivating. I haven’t looked at our estate documents since 2001 and (obviously!) need to review them.
Under present law, capital gains on inherited property are considered LONG-TERM capital gains regardless of how long the inheritor has held the property before selling:
“Inherited property. If you inherit property, you are considered to have held the property longer than 1 year, regardless of how long you actually held it.”
All the more reason that the step-up basis the inheritor gets for inherited assets is a wonderful advantage. Really hoping that this feature stays in the tax code for the indefinite future.
I’m merely pointing out the existing tax rule covering the calculation of gains/losses on inherited assets. Essentially the present law allows the sale of inherited assets within a year of death and still have the asset count as a long-term asset. Tax rates on LT cap gains are generally lower, as most know.
Just one clarification from an earlier part of the discussion: if there are assets like stocks in the estate, the executor doesn’t necessarily have to liquidate them; they can be divided and distributed to the hears. Of course, if there is just one big asset (like a farm, say), it might have to be liquidated in order to divide the estate.
Yes, for most investment assets at brokerages, they can be split into as many accounts as there are beneficiaries and each will get his/her own account to handle the assets as each prefers. Real estate is challenging to hold for multiple owners and often has to be sold so each beneficiary can get his/her share. The other option is for the property to be rented (if suitable) and the net proceeds to be shared while the new owners figure out what they want to do. One owner can buy out the other if desired or there can be a 1031 like-kind, tax-free exchange of investment property for other investment property.
I think the executor has the option to divide assets unequally, such as real estate to one heir and cash or other investments to other heirs, as long as the net value is equivalent. At least that is what my attorney said could be done. However I read somewhere that if the trust states that everything is divided equally and one person wants to keep a parcel of real estate then the other beneficiaries need to quit claim their interest in the parcel. This would mean it would count as a gift and not an inheritance for the fraction of the value that was originally to be divided. I’m not sure how much freedom the executor has to divide the estate if it’s not spelled out in the trust.
Yes, with H & my BIL, they reached agreement about what they wanted and the executor and estate attorney worked to make it work out. The CPAs helped as well. The division was somewhat unequal but what they wanted and everyone is fine with it. On paper it looked more equal. Yes, executors do have considerable leeway, but they are fiduciaries and have a fiduciary duty to all the beneficiaries so can’t favor one over others.
Thank you Hunt and HImom, I’m glad to know that flexibility is allowed for the executor. I’m not even sure who would be monitoring the details of estate settlement as long as all the heirs are in agreement. Perhaps the IRS could audit the trust tax return, or the returns of any of the heirs. However I doubt the IRS would become involved in details of property division unless it appeared something fraudulent was occurring.
Given the different methods of how one can distribute estate property, it is all the more important to have a good sense of what one HAS to distribute. Knowing what you have and how much you have of it (revisiting this matter periodically), is the only way you set things up properly–be it through the use of a will, a trust or POD/TOD or a combination of all three. It’s all to easy to focus on “the house,” or the IRA accounts and forget about something else.
This is certainly why it’s recommended that the first step of estate planning is taking inventory and housekeeping–that’ll prompt you to think of how you want to dispose of your assets and any division of your estate. Otherwise, your executor or the trustee of your trust will have that job.