End of an Era for Estate Tax Exemption?

02.05.2024 Written by: Henningson & Snoxell, Ltd.

The end is in sight for the federal estate tax exemption to sunset. Unless Congress makes the current law permanent, it will revert to the pre-2018 amount of $5 million, adjusted annually for inflation, on January 1, 2026. Although no one knows what Congress will or will not do, inaction makes for poor planning—especially when it comes to estate and tax considerations.

Federal estate and gift tax laws provide for a certain amount of wealth to pass free from estate or gift tax either as gifts made during life or upon a decedent’s death. This amount is called an “exemption” or “exclusion.” The current federal estate tax exemption is $13.61 million per person. The tax rate on assets that exceed the exemption amount is 40 percent. Estate and gift tax laws are tied together—if a person makes a gift to another individual during life in excess of the annual exclusion amount (currently $18,000/person/year), and assuming such gift is not a gift payable to an educational institution or medical provider for such person’s benefit, such gift “eats into” that person’s ability to pass wealth free from tax at death.

In other words, hefty estate tax must be paid on a decedent’s assets that exceed the amount that can pass free from estate tax in the year of death, and the amount of wealth that can pass free from this tax is set to decrease. The estimated exemption amount for 2026 is $7 million for individuals and $14 million for married couples.

This upcoming change in the law presents an opportunity. If a person gifts away significant wealth between January 1, 2018, through midnight on December 31, 2025, and then later dies with a taxable estate, such gifts made in 2018-2025 over the exemption amount do not adversely affect the decedent. This means that if a person makes large gifts now, when the estate tax exemption is high, and dies post-2025, the person can pass more wealth tax-free. There may be other tax avoidance or tax minimization strategies to consider as well.

Although December 31, 2025, seems far in the future, it is important to understand how this change could affect your current estate plan and how long it may take to update or change your planning. Our team at Henningson & Snoxell is happy to review your estate plan and discuss options for additional planning! Contact us today.

SCARY TALES OF ESTATE PLANNING GONE WRONG

10.31.2023 Written by: Henningson & Snoxell, Ltd.

It’s that time of the year again, Halloween. With that brings trick-or-treating, costume parties, visits to the pumpkin farm, haunted houses, and scary movies. These things don’t necessarily trigger thoughts about estate planning, but it is a great time of year to remind people of horror stories that can transpire from not having a proper estate plan in place.

Most people I meet with regarding estate planning tell me they have a “simple estate,” “everyone gets along,” “there won’t be any issues,” or “we don’t need those documents because we have all talked about what will happen.” My usual response is, “I would love to show you all the files of people who said the same things and then because they didn’t have adequate estate plans, left scary situations for their families to navigate.”

Some nightmares I have seen develop from improper estate plans include:

Using a health care directive in lieu of a Will, which lead to a family dispute over who should receive assets;
Telling a child he would get the family cabin (because “we talked to our kids about it”) but not putting it into writing, leading to years of litigation;
Writing changes/edits on a Will (rather than executing a Codicil), thereby invalidating the document because it could not be determined who actually wrote on it; and
Creating a Revocable Trust but not actually funding the Trust with assets, thereby forcing the family to do a costly probate.

We often hear about celebrities and the battles that ensue after their deaths. The horror stories that develop from these situations should give everyone cause to update their estate plan.

Here in Minnesota, we are all aware of Prince’s situation. Prince died intestate in 2016, meaning without a will or trust. Many people came forward to claim the estate as Prince’s heir or as a creditor. As of the writing of this blog, the probate case in Carver County is still open. This has cost the Estate thousands, if not millions, of dollars. A will or trust identifying who his heirs were would have saved lots of attorney time and dollars.
Larry King died in 2021. Two years prior to his death, he wrote a note that he wanted his estate divided between his children. A battle ensued between his wife (from whom he was divorcing) and his children. This horror story situation can often develop between a surviving spouse and stepchildren if estate planning is not done properly. Years and years of costs and litigation can result.
Marilyn Monroe is a horror story of not taking tax planning into account when she prepared her estate plan. Her probate took 39 years, and half of her estate was paid to the IRS in estate taxes, not to mention the person administering the estate made over $30 million.

This is, of course, just a brief look at scary situations that can develop from improper or no estate planning. Knowing these horror stories should give everyone a reason to start their estate planning or check if their current plans need a refresh.

If these estate horror stories have spooked you into working on your estate plan, please contact our office to schedule an appointment.

Dementia & Guns: A Deadly Combination

01.12.2022 Written by: Henningson & Snoxell, Ltd.

There is a side to gun ownership that is not often discussed: what happens when a gun owner is no longer capable of safely owning or using his or her guns?

It is tragic when an individual with dementia ends up shooting a loved one.

Individuals who develop dementia frequently experience hallucinations or have times where they do not recognize the people around them. This can be especially problematic if the individual has access to guns. The individual may incorrectly believe someone they know is a stranger and that he or she needs to defend themselves. It is tragic when such an individual ends up shooting a loved one. In West Virginia, a grandfather with dementia thought he saw intruders entering his home, so he grabbed his Glock that he kept under his pillow and shot his wife and granddaughter. The granddaughter was able to call for help, but the grandmother did not survive.

Unfortunately, this can and does happen not only in other states but also right here in Minnesota. For families of loved ones with dementia, we commonly grapple with the question of when to take the car away. Families should also discuss when the guns should be removed from the home or stored in a secure location for safety purposes. This is a difficult conversation and the loved one may be in the denial stage of dementia. In situations like this, families may need to involve the courts to initiate a proceeding to have the individual’s guns confiscated.

Decide what to do with your firearms.

To prevent court intervention, families should engage in the conversations early on in an individual’s diagnosis so that the individual can be involved in deciding what to do with the firearms, to whom the firearms should go after they pass, or whether to voluntarily give them up. For caretakers and family members, it is best to get this plan in writing and signed by the person when there is a voluntary relinquishment of the firearms. This will be helpful in the future should the individual forget about the arrangement and make accusations that someone stole the guns.

Families may be forced to deal with this situation before they can bring caregivers or home health into the home. Such agencies have policies that require that any firearms or weapons in the home be removed before their employees can come to the home. By having a plan in place and removing the guns before there is a need for home health care or in-home assistance, families can avoid additional stress.

If your family has a loved one who has been diagnosed with dementia, be sure to speak with physicians, elder law attorneys, or care coordinators to help you understand the ins and outs of what is to come.

Our elder law concierge service at Henningson & Snoxell provides family with a personal touch to help navigate the chaos that comes with a loved one with a dementia diagnosis. Please reach out to see how we can help you and your family through this challenging time.

Rachell Henning is an Elder Law attorney that brings a wealth of personal and professional experience to her practice. From an early age, Rachell has been dedicated to assisting elderly individuals and individuals with disabilities to live their lives to the fullest.

Elder Law, Estate Planning, Family Law, Rachell Henning

January 12, 2022

Estate Planning For Snowbirds

12.03.2021 Written by: Henningson & Snoxell, Ltd.

It’s that time of the year when Minnesotans head south for the winter to enjoy the warmer climate in states such as Florida, Arizona, and Texas. If you are one of these lucky people, while you may not be establishing residency in these states, it is still essential to have a proper estate plan in place if something happens while you are on your extended vacation.

If you have a Will, Trust, Power of Attorney, and/or Health Care Directive in place, reviewing those documents before heading south for the winter is a good idea to make sure your plans and wishes are current. If you do not have an estate plan, getting something set up, even if it’s just incapacity documents, is better than having nothing expressing your decisions.

It’s important to remember that even though you may be living in another state for months at a time, you would still be considered a Minnesota resident. Therefore, your estate plan documents should reflect Minnesota law. However, your estate plan should also consider assets and regulations in the state you are wintering in, as that state’s laws may dictate what would happen if you become incapacitated or deceased.

First step: Ensure Incapacity Documents

First, you should ensure that your incapacity documents are up to date. Incapacity documents include Health Care Directives and Powers of Attorney. It’s essential to have a Health Care Directive that is general in nature, meaning it’s not applicable in only one state or with a specific wellness provider. Often health care providers will equip patients with a Health Care Directive, and while that Health Care Directive is helpful, it may not be accepted by another provider. For example, if you are in Florida for the winter and become incapacitated, your primary provider’s Health Care Directive on file in Minnesota may not be recognized at the Florida hospital you are being helped at. A properly executed Health Care Directive should be applicable in states outside of Minnesota and with nearly any medical provider.

Power of Attorney is another vital document to have in place. Minnesota has a statutory power of attorney document that can be utilized anywhere in Minnesota (financial institutions, real estate transactions, etc.). However, if situations arise where the attorney-in-fact (your designated agent) attempts to deal with a financial institution, real estate company, or government agency in another state, in that situation, the Power of Attorney based in Minnesota may not be accepted since it is specific to Minnesota law.

Therefore, it’s also crucial to have a Common Law Power of Attorney that is more general in nature. For instance, if you own real estate or have bank accounts in another state, the Common Law Power of Attorney should be effective in recognizing your attorney-in-fact to handle any transactions in that state where you are temporarily living.

Next step: Ensure Will/Trust

Lastly, you should always have a Will and/or Trust in place regardless of where you are residing. These documents will ensure that your assets will be distributed per your desires upon death rather than be subject to that state’s laws. You also want to make sure and nominate a Personal Representative/Executor who would be in charge of administering your estate. Possessing a Trust could prevent the need for a conservatorship during your life and probate upon your passing.

Whether your assets would be subject to probate would depend on which state they were owned in and the value of those assets; a trust could prevent that regardless of the location and value.

So while it may not be exciting to review or create your estate plan before leaving for the warmer climate, it is crucial to have documents in place so your loved ones can handle any issues that may arise due to any unforeseen event. Therefore, I would encourage you to ensure that everything is in place by contacting an attorney before heading south this winter.

Final step: Talk to an Estate Planning Attorney

Be sure to discuss with your attorney your Incapacity Documents along with your Will and Trust. Without having a Health Care Directive and/or Power of Attorney in place, your family could be left with a lengthy and costly court proceeding to get your affairs in order. These documents allow YOU to decide who you want to handle your medical and financial decisions, not the court.

Adam Kaufman is an attorney at the firm of Henningson & Snoxell, Ltd. located in Maple Grove, Minnesota. Adam helps individuals and families of all sizes and asset levels, by advising them and preparing: Wills Trusts Health care directives; and Powers of attorney.

Adam Kaufman, Estate Planning

What are Transfer on Death Deeds (TODDs)?

08.03.2021 Written by: Henningson & Snoxell, Ltd.

The adage, “if it’s too good to be true, it probably is” often applies to Transfer on Death Deeds (TODDs).

A TODD is a deed that beneficiary designates a property to someone upon the owner’s death. To be valid, a TODD must be signed/dated/notarized and recorded with the county recorder prior to the owner’s death. Because a TODD doesn’t convey title to the property until the owner dies, the owner continues to own the property and can sell, gift, mortgage, and otherwise “enjoy” all aspects of property ownership without involving the beneficiary. Assuming the owner still owns the property at his or her death, the beneficiary clears the owner’s name from title using an Affidavit of Identity and Survivorship and a certified copy of the decedent’s death certificate.

Because the process to clear title from the decedent’s name is simple, expedient, inexpensive, and avoids the need for a probate proceeding, TODDs are used as estate planning tools.

What can go wrong?

The most common problem with a TODD is that the owner beneficiary designates more than one person as the beneficiary. If the owner has 4 children and names all 4 children as beneficiaries, title vests in the names of all 4 children at the owner’s death. This means all 4 children co-own the property and must work together to pay bills relating to the property and make other decisions about the property (e.g. whether the property should be sold or rented). When the time comes to convey title, all 4 children and their spouses must sign conveyancing documents.

If all 4 children are cooperative adults with sufficient assets to cover the expenses relating to the property until it can be liquidated or become income-producing, they can make this work, but if a child is a minor, is an incapacitated or uncooperative adult, is deceased at the owner’s death, is an adult on government benefits, or is an adult in the process of divorcing or bankruptcy, for example, it’s very difficult and expensive to deal with the property.

Another common issue with a TODD is that title and also the financial obligations secured by the property vest in the name of the beneficiary at the owner’s death. Most beneficiaries are happy to inherit the equity in a property, but they don’t want to inherit (and perhaps can’t afford) the financial obligations tied to the property!

For these, and other, reasons, a TODD is a tool in the estate planner’s toolbox, but it is only used when is appropriate, and then, upon good counsel.

If you are interested in a TODD, ask your Henningson & Snoxell, Ltd. estate planning attorney whether it is a good fit for your situation.

Susan T. Peterson-Lerdahl is a shareholder in the Maple Grove, Minnesota Law Firm of Henningson & Snoxell, Ltd. She is Chair of the firm’s Estate Planning Department and has years of experience counseling individuals and families in estate planning, elder law, probate and trust administration as well as family business succession planning.

Estate Planning & Probate Litigation

07.08.2021 Written by: Henningson & Snoxell, Ltd.

Estate proceedings are typically not litigated. Sometimes, however, where there is a need for court oversight, for court approval, or for resolution of a contested dispute, they are. Such litigation matters fall into one of two “camps” depending on the decedent’s estate plan and assets: 1) a contested probate administration, or 2) a contested trust administration. Sometimes both are necessary.

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When Estate Planning, Don’t Forget Incapacity Documents!

06.29.2021 Written by: Henningson & Snoxell, Ltd.

Most people associate “Estate Planning” with creating wills and trusts – in other words, planning for what happens after death. An oftentimes overlooked part of the estate planning process, however, is preparing for incapacity. Incapacity is the physical or mental inability to manage your affairs. As important as it is to plan for your estate upon death, it is equally important to plan for what would happen should you lose mental or physical capacity.

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DIY Estate Planning

05.12.2021 Written by: Henningson & Snoxell, Ltd.

The pandemic has created a huge market for do-it-yourselfers in the home improvement space.

Many people have used extra time at home and the proceeds from stimulus checks to complete updates and remodels to their family’s space. With the help of Google and YouTube, some of us believe that we can gain the necessary skills to go from helpless homeowner to amateur carpenter (and save some money in the process).

Sure, installing a fancy new backsplash can be a learnable skill, but would you want to do your own electrical or plumbing? I think not! These types of specialized skills and tasks are best left to well-trained professionals.

So, why do some people believe in a DIY approach for their estate planning needs? There are a ton of online platforms and other tools available on the internet that market to the DIY estate planner. They offer fill in the blank forms that can be printed, completed, and signed with ease.

So why do you need a lawyer?

Do you know why certain situations require a Trust instead of a Will?
Do you have a solid handle on the ever-changing world of estate taxes?
Can you identify the differences between legal forms that are from one state or another, or perhaps that are current or outdated?
Do you understand the different roles of various agents, such as Personal Representatives, Trustees, Guardians, Health Care Agents and Attorneys-in-Fact?

Did you know that merely signing an estate or incapacity planning document may not be enough to make it legally binding? If not, you could be leaving behind a disaster of a “plan” that costs much more to fix than it would have cost to hire an estate planning attorney in the first place. Typically, a broken estate plan will require additional legal representation and the input of the Minnesota probate court to remedy an error or fill in a missing piece of information. This cost does not account for the frustration, time, and emotional burden placed upon the people you leave behind.

It is an estate planning attorney’s job to educate, plan for the unknown, and to ask questions you may not have known to ask yourself. When it comes to estate planning, there is no such thing as “one-size fits all”. Contact an estate planning attorney at Henningson & Snoxell, LTD for the thorough guidance necessary to develop an estate plan tailored to your family’s circumstances and goals.

Two Important Steps to Take When Your Child Turns 18

03.12.2021 Written by: Henningson & Snoxell, Ltd.

Two important steps to take whey your child turns 18

It is the eve of your child’s 18^th birthday, and you are thinking about all the exciting things that lie ahead—high school graduation, going off to college, that first job, or perhaps even planning a wedding. At Henningson & Snoxell, Ltd. we recommend you take a few minutes to think about what happens, legally, to your relationship with your child the minute your child turns 18.

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When Love is in the Air, a Prenuptial Agreement May be Prudent

02.01.2021 Written by: Henningson & Snoxell, Ltd.

Prenuptial agreements, or “antenuptial agreements” as they are also called, memorialize commitments a couple makes to one another before the marriage relating to rights in property once married.

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End of an Era for Estate Tax Exemption?

SCARY TALES OF ESTATE PLANNING GONE WRONG

Dementia & Guns: A Deadly Combination

It is tragic when an individual with dementia ends up shooting a loved one.

Decide what to do with your firearms.

Estate Planning For Snowbirds

First step: Ensure Incapacity Documents

Next step: Ensure Will/Trust

Final step: Talk to an Estate Planning Attorney

What are Transfer on Death Deeds (TODDs)?

What can go wrong?

Estate Planning & Probate Litigation

When Estate Planning, Don’t Forget Incapacity Documents!

DIY Estate Planning

So why do you need a lawyer?

Two Important Steps to Take When Your Child Turns 18

When Love is in the Air, a Prenuptial Agreement May be Prudent