The New Hampshire Advance Directive deals with health care decision making. It contains two parts. Part one is the Durable Power of Attorney for Health Care. Part two is the Living Will.

The Durable Power of Attorney for Health Care allows you to name another individual (called the “Agent”) to make health care decisions for you in the event that you become unable to make those decisions for yourself. Before the Agent can act, your physician must certify that you are incapacitated. The Agent’s authority begins only after that certification has occurred.

Once the Power of Attorney is activated by your health care provider, the Agent can make a variety of health care decisions for you. This might include everything from a having a flu shot to consenting to surgery to major decisions regarding end of life care. The Durable Power of Attorney allows you to specifically authorize your agent to make decisions regarding the use of life support, organ donation, and Do Not Resuscitate (“DNR”) orders.

If you do not have a Durable Power of Attorney for Health Care, then no one will have the legal authority to make medical decisions on your behalf. Although medical providers may be willing to speak to your close family members for decision making, if there is any disagreement, then it is generally necessary to have a court appointed guardian. The appointment of a guardian involves a lengthy court process, including a hearing and court fees. Guardianship can be avoided by naming the Health Care Agent of your choice in an Advance Directive, while you have the capacity to do so. If you have not designated your Health Care Agent, using an Advance Directive, and you become incapacitated, then it will be too late to sign an Advance Directive, and guardianship may be the only option.

The second part of an Advance Directive is the Living Will. A Living Will is a document which allows you to declare that you do not want your life to be prolonged by life support systems or artificial feeding tubes in the event that you become terminally ill or permanently unconscious. This document provides your Health Care Agent with guidance about your end of life care. It can be a source of great comfort to the Health Care Agent to know something about your wishes so that they can feel confident about the decisions they make on your behalf.

The Advance Directive is an important document which can provide a great deal of information to your family about how to make health care decisions for you. It is important to choose your Health Care Agent carefully, to be sure that they will be able carry out your wishes. Once you have chosen an Agent, you should provide him / her with a copy of the Advance Directive and discuss your end of life care wishes with them. You should also discuss your end of life care wishes with your health care providers to be sure you understand the medical circumstances that may give rise to the need to consult your Agent. Finally, you should confirm that your health care providers are comfortable with your end of life care values. These kinds of conversations may be difficult to initiate but are invaluable in the event of a health care crisis.

© Annis & Zellers, PLLC

This material is introductory and does not constitute legal advice. Please consult with your lawyer for estate planning services based upon your specific circumstances.

Gifts Taxes.

Each U.S. citizen may give up to $11.7 million (combined taxable lifetime gifts and bequests at death, “the exemption amount”) in property without incurring a tax, by using federal estate and gift tax credits. As long as your total gifting stays below the exemption amount, neither you nor the recipient of the gift will need to pay gift tax. This exemption amount of $11.7 million is subject to periodic adjustment related to the cost of living index and is always subject to adjustment, up or down, by Congress.

Gifts to a Spouse.

Gifts of property to a spouse are not taxable because they qualify for the Marital Deduction, unless the use of the gift is too restricted or is to a non-U.S. citizen spouse. In the case of a gift to a non-U.S. Citizen spouse, a limited exemption from the tax is available. Gifts to a spouse which qualify for the Marital Deduction do not count toward your total $11.7 million exemption amount.

Annual Exclusion Gifts.

Every year, each of us can make a gift of cash or other property valued at $15,000 or less (this amount is adjusted periodically based on a cost of living index), to each recipient of our choice (e.g. children, grandchildren, friends). There is no limit to the number of recipients and annual exclusion gifts do not use any of the tax credits mentioned above. Married couples may give up to $30,000 per year, per recipient, when they join in making the gift (though an informational gift tax return may need to be filed). Some property will not qualify for this exclusion.

Gifts to Charitable Organizations.

Gifts of property to qualified charitable organizations are exempt from the Gift Tax and in many cases will give rise to an income tax deduction. The amount of the income tax deduction will depend on a number of factors, including one’s tax bracket and the property given to the charity. The U.S. Tax Code defines which organizations will qualify a gift as tax deductible.

Gifts for the Benefit of Another Person.

Payments made directly to a qualifying educational institution or to a qualifying healthcare provider, for the benefit of another person (e.g. child or grandchild), are not taxable and will not count against the Annual Exclusion Gift amount of $15,000, described above.

Gifts to a 529 Plan.

Tax free gifts may be made to a “529 Plan.” A 529 Plan is a State sponsored, tax favorable way of paying for educational expenses. Qualifying educational expenses include tuition, fees, books, room and board, supplies and equipment (e.g. a computer) necessary for attendance at colleges, community colleges, trade schools and graduate schools which are eligible for federal student aid programs, and even at some accredited international schools. The creator of the Plan may retain control over the form of the investments in the Plan. Income earned on the investments grow on a tax deferred basis. Distributions from a 529 Plan for qualified college expenses are free of gift tax. Named after Section 529 of the Internal Revenue Code, 529 Plans have distinct advantages over traditional college savings plans. Gifts to a 529 Plan count toward the Annual Exclusion limit, which limit is currently set at $15,000 per year (see above). The law does allow for some front loading of the gifts to a 529 Plan.

Income Tax Consequences.

If you choose to make a gift of an asset during your lifetime (rather than leaving it to an heir upon your death), there may be income tax consequences for the recipient, in the form of capital gains tax. When certain assets (such as stock or real estate) are sold, the difference between the sale price and the “tax basis” is a capital gain, which may be subject to tax. The “tax basis” of an asset is generally equal to the original purchase price. When you give an asset away, the recipient of the gift maintains the same “tax basis” that you had before you made the gift. For example, if you bought a lake home 30 years ago for $50,000 and you give it to your child, the child’s “tax basis” in the property will be $50,000. If the child then sells the property for $300,000, the child will need to report a $250,000 capital gain on his/ her personal income tax return. Assets which are inherited after death receive a special “step up,” so that the tax basis is equal to the value of the property as of the date of death. In our example, if you left the lake house to your child in your Trust or Will, and it was worth $300,000 at the time of your death, then the child’s “tax basis” in the property would be $300,000 and if the child sold the property soon after your death, they would likely have little or no capital gain tax to report.

Medicaid Concerns.

Medicaid (not to be confused with Medicare) is the only governmental program that pays for long term nursing home care. When a person applies for Medicaid benefits, they will be asked whether they (or their spouse) have made any gifts within five years of the date of the application (this is the so-called “5 year lookback” rule). If a gift was made within 5 years, then a penalty period will apply, during which time the applicant is not eligible for Medicaid benefits. This can have serious consequences for the applicant in the nursing home and his / her spouse. Regardless of the tax issues, if an individual (or his/her spouse) may need nursing home care in five years, then careful consideration should be given before making a gift in any amount. Only gifts to a spouse are exempt from this rule. Other recipients of such a gift may be personally liable for any unpaid nursing home bills, up to the amount of the gift.

© Annis & Zellers, PLLC

This material is introductory and does not constitute legal advice. Please consult with your lawyer for estate planning services based upon your specific circumstances.

There is one estate planning document which every individual should have, regardless of age, financial status or family situation. It is the “Durable Power of Attorney” for financial matters.

The Durable Power of Attorney is a document which allows you to name another person (called the “Agent”), to act on your behalf regarding property and financial matters. The Agent can be your spouse, child, or other trusted family member or friend. It is important to select your Agent with care, and to name a back-up (or “successor” Agent) to act if the first named Agent is unable to do so.

The Durable Power of Attorney is important because it allows the Agent to manage your financial affairs if you become unable to do so, in the event of disability or incapacity. The document can also be used as a matter of convenience. For example, as an individual ages, he/she may have difficulty getting to the bank. An Agent under a Durable Power of Attorney would be able to handle all banking matters on your behalf, without being a named owner of the bank account in question (naming others as owners on your account can create significant risks to you if the other owner has creditors).

The authority granted to an Agent under a Durable Power of Attorney is usually quite broad, allowing the Agent to handle everyday matters, such as paying bills and depositing checks. The Agent can also carry out less routine tasks such as selling real estate or applying for public benefits. If you would like your Agent to have the authority to make gifts of your assets, your Durable Power of Attorney document must specifically grant that authority.

Without a Durable Power of Attorney, it may become necessary for a family member to go to Court and request to be appointed as a legal Guardian to handle your finances for you. Guardianship proceedings can be expensive and time consuming, as they usually involve filing fees, a formal hearing and detailed annual reports to be completed, with ongoing Court supervision. Given a choice, the vast majority of families prefer to deal with financial matters privately, with a family member appointed as Agent under a Durable Power of Attorney.

You can sign a Durable Power of Attorney at any time, as long as you are competent to sign a legal document. Once a person becomes incompetent, however, it is too late to sign a Durable Power of Attorney, and Guardianship may be the only option. Signing a Durable Power of Attorney now is a simple way for you to plan ahead in order to protect your family and your finances in the event of a crisis.

© Annis & Zellers, PLLC
This material is introductory and does not constitute legal advice. Please consult with your lawyer for estate planning services based upon your specific circumstances.

There are a variety of “digital assets” which you may need to consider as part of your estate plan. Some assets have market value, while others are important to your business or personal life. Examples of digital assets include the following:

PayPal, ETrade, or other online financial accounts;

Websites, Domain Names and Blogs;

Email Accounts;

Social Networking Accounts (Facebook, Twitter);

Music (iTunes) and Photo Accounts;

Digital estate planning relates to both the assets themselves (e.g. cash, digital photos etc.) and to the technology used for accessing the assets (e.g. laptop, smart phone etc.). Most digital assets are accessed with a unique user name and password combination. Everyone knows the importance of guarding passwords carefully and changing them periodically in order to protect against identity theft and hackers. However, when an individual dies, family members may not have access to this information. Lawyers often advise a family to look for the decedent’s “important papers” and collect the decedent’s mail in order to discover information about debts and assets. These actions will not suffice when it comes to digital assets.

There are some key steps you can take toward digital estate planning. First, assemble a complete inventory of all digital assets, including a list of user names and passwords. You should state your wishes with respect to each of the assets, including whether accounts should be maintained, closed or destroyed. You should then consider how to ensure that this information will be available to the appropriate persons, while maintaining security. You may choose to place the list in a safe deposit box or give the information to a trusted family member (parents might consider giving a list of user names to one child and passwords to another, for example). You might also ask your attorney to hold the information with other estate planning documents. These simplistic solutions, however, are not ideal, given the security risks and the need to update passwords frequently.

Recently, new businesses have emerged to help people plan for their digital assets. Online services exist to allow users to securely store passwords and inventory lists, with a “digital executor” authorized to access the information upon verification of the user’s death. Such services may also allow you to indicate your wishes with respect to each digital asset, such as whether the account should stay open, be transferred to someone else, or be deleted.

The lack of uniformity among internet businesses complicates the planning process. Assuming that a family member can access a decedent’s digital assets, providers have different policies regarding the treatment of the asset upon death. With regard to email, some companies, such as Gmail, may grant family members full access to the account. Others, such as Hotmail, will provide family members with a CD of prior emails, but no ongoing access to the account. Still others, Yahoo, for example, will not release any information and will terminate the account upon notification of death. Of course, if the email provider is not notified of the death and a family member has access to the login information, then the account might continue to be accessed. Identity theft is an obvious risk.

Social media services also have varying policies. Facebook will memorialize the profile of a deceased user, which prevents access to the account but leaves the decedent’s “wall” open for family and friends to pay their respects. Alternatively, the family can request that the account be removed entirely. Upon notification of a death, Facebook will remove the decedent’s profile from public search results and prevent future log-in attempts by others. Twitter’s policy is to allow the “next of kin” to both close the account and obtain an archive of all of the decedent’s public tweets. LinkedIn will allow a family member to close a deceased user’s account by submitting an online form.

The treatment of digital assets in the event of incapacity is also important to consider. The same issues regarding access to passwords and accounts apply in the case of someone who has become disabled or incapacitated. We recommend having a durable power of attorney in place, with language that includes the authority for an agent to access your digital assets. If you have extensive or particularly valuable digital assets, you need to be sure that the agent you select is sufficiently tech savvy to deal with the various accounts and online services.

The law has yet to catch up with the digital world. Lawyers and their clients may find themselves charting new territory when dealing with digital assets in the context of estate planning. However, digital assets have become a sufficiently important part of our daily lives that it is necessary to include them in the planning process.

A Last Will and Testament is a formal legal document which allows you to state who should inherit your assets and who should be in charge of your estate after your death.

In your Will, you can nominate one or more persons to be the guardian of any of your children who may be minors at the time of your death. You can also nominate an “Executor,” who would be in charge of filing the Will with the Court and administering your estate through the probate process. The probate process includes identifying the decedent’s assets, paying final bills, and making distributions to the beneficiaries.

Your Will identifies the beneficiaries of your estate. This can be stated in general terms, such as: “I leave my entire estate to my children in equal shares.” It can also be done more specifically such as: “I leave my diamond ring to my sister.” Assets can be left in percentage shares or in specific dollar amounts. You can leave property to individuals or charities. It is a good idea to name back-up (or “contingent”) beneficiaries, to plan for the possibility that your primary beneficiaries may have died before you.

Many people are now including Trusts as part of their estate plan. Even if you have a Trust, you should also have a Will. It is common to create what is known as a “Pourover Will,” which simply states that all of your assets should be transferred to your Trust at the time of your death. In this way, all of your assets are “poured over” into the Trust, to be handled by the Trustee in accordance with the instructions provided in the Trust document.

A Will does not expire with time, though it is a good idea to re-visit the terms of your Will every five years or so. If you wish to make changes to your Will, you can do so by signing a “Codicil” or creating a new Will entirely. You cannot make changes to an existing Will simply by writing new language on the original document itself; that would be invalid under New Hampshire law.

If you die without a Will, then who inherits your property? The answer lies in the New Hampshire “intestacy” law. The intestacy law provides that in the absence of a Will, a decedent’s property will be distributed to various family members, in accordance with the law’s order of priority. People are often surprised by the results of inheritance when there is no Will, so it is best to set forth your wishes in a Will, rather than relying on what the intestacy law would provide for you.

It is advisable to have the assistance of a lawyer when signing your Will, to be sure that it complies with New Hampshire law. The requirements vary by State, and certain formalities are necessary in order for the Will to be valid.

© Annis & Zellers, PLLC
This material is introductory and does not constitute legal advice. Please consult with your lawyer for estate planning services based upon your specific circumstances.

Five Reasons to Include One in Your Estate Plan

Preparing a Will to direct where your property goes after death is a basic step for any estate plan. However, many New Hampshire families are finding that a Will alone is not enough, and that there are significant advantages to creating a Revocable Trust to protect their assets and their family. The usefulness of a Revocable Trust depends upon your estate planning goals, not your age or your asset level.

A Revocable Trust is an agreement whereby one person (the “Trustee”) holds assets for the benefit of another (the “Beneficiary). The person who creates the trust is known as the “Grantor.” Because the Trust is “revocable,” the Grantor can change the terms of the trust at any time, as long as he/she is competent to do so. In most cases, the Grantor is also the initial trustee and the primary beneficiary. This allows the Grantor to maintain control over the assets placed in the Trust.

The Revocable Trust has two basic parts to it. The first part describes how the Trustee should deal with Trust assets while the Grantor is alive (generally, the Trustee is directed to use the Trust assets for the Grantor’s benefit). The second part tells the Trustee how to distribute the property after the Grantor’s death (this part of the Trust operates very much like a Will).

The top five reasons for making a Revocable Trust a part of your estate plan are as follows:

Probate Avoidance. “Probate” is the court supervised process that occurs after a person’s death, in order to transfer property to heirs in accordance with their Will. The process varies by State, and New Hampshire’s probate process is more complicated than most. It involves filing fees, multiple documents to be filed with the Court, and a requirement that the Executor carry a surety bond. The heirs cannot receive distributions from the estate for at least six months (and more often it is a year), in order to allow creditors time to make claims against the estate. Assets which are titled in the name of a Trust (as opposed to being owned individually) are not subject to the probate process. Instead, the Trustee simply deals with the Trust property after the Grantor’s death in accordance with the instructions provided in the Trust document. The Trustee need not report to the Probate Court, which can result in significant savings of time, expenses, and attorney’s fees.

Tax Planning. New Hampshire does not currently impose an estate tax, but the Federal government does. The Federal estate tax applies to certain transfers of assets on death, when the value of the assets exceeds the “exemption” amount ($11.7 million in 2021). For married couples with total assets greater than the exemption amount, a revocable trust can be an important tax planning tool. The trust can direct the trustee to create a “credit shelter” trust after one spouse dies. The credit shelter trust is designed to maximize both spouses’ use of the estate tax exemption amounts. Although new Federal law has made the exemption amount “portable” between spouses, a credit shelter trust allows spouses to shelter the appreciated value from the estate tax when the second spouse dies and may afford greater asset protection.

Beneficiaries with Special Circumstances. If your heirs have special circumstances (they are minors, disabled, in a troubled marriage or simply not good with money), then leaving assets in trust for their benefit may be significantly better than leaving assets to them outright through a Will. When assets are left outright to a minor child, for example, it is often necessary to have a court appointed guardian to manage the assets (this may be true even when there is a surviving parent). Guardianships can be expensive, and they require strict court supervision. Furthermore, the child will generally be entitled to receive the assets at age eighteen. Many eighteen year olds are not well equipped to manage their own money. Alternatively, a trust allows you to name a trustee who can manage the assets for the benefit of the child until the child reaches age 21, 25, 30, or any other age that you deem appropriate.

Lifetime Benefits. A revocable trust will allow you to control and manage your assets as long as you are able. In the event that you become disabled or incapacitated, the successor Trustee named in the document can step in to manage the Trust assets. This can be done seamlessly, and without the need for a court appointed guardian, which typically involves a costly and emotionally draining process.

Privacy. A Will must be filed with the probate court and becomes a public document after a person’s death. A Trust, on the other hand, does not generally need to be filed with any court or registry, thereby protecting the privacy of the Grantor and his/her family.

© Annis & Zellers, PLLC

This material is introductory and does not constitute legal advice. Please consult with your lawyer for estate planning services based upon your specific circumstances.

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