For Two Very Important Reasons:

You, and

Your Loved Ones

Why You?

Because life can be unpredictable. You may not always be able to act for yourself. You may become ill and unable to manage your assets or make health care decisions. You want to maintain control over your life as best you can. Proper planning will allow others to assist you as you age or deal with unexpected health issues.

In short, maintaining a quality of life is important to you. There are steps you can take to protect your assets and preserve your personal values.

Why Your Loved Ones?

Because your loved ones depend on you now.

Through proper planning, you can still be of help to them after you die. Preserving assets for your family will help them. Having a solid estate plan in place that deals with your assets at your death will reduce the stress for your loved ones at a very difficult time, when they are trying to cope with your loss. A proper estate plan will reduce expenses and taxes at your death, leaving more assets for your family, resources that you have worked hard to build all your life. Estate planning is not inexpensive. Living and dying without an estate plan is far more expensive. Estate Planning is a worthwhile investment.

What If You Don’t Plan?

If you don’t have an estate plan that satisfies the requirements of the law, the State has one for you. Individuals dying without a Will or other estate planning instruments may find that the legislature has decided who will inherit your assets when you die, who should make decisions for you during your life when you are not able to do so or who will be the guardian of your children. Seldom does the State’s plan align with the choice an individual would make for him or herself. You have a choice. Will you make it?

Do You Have An “Estate?”

Some people think that they do not have an “estate,” that estate planning is only for the wealthy or that it is too expensive. The fact is you don’t have to have millions, or even hundreds of thousands, of dollars to benefit from estate planning. Almost everyone has personal property and a bank account. Many are fortunate to have a home, a retirement plan, a car or maybe own some stock. All of this is part of your “estate.” “Estate planning” includes nominating a guardian for children should both parents die before the children reach adulthood or designating someone who will make financial or health care decisions for you when you are not able to do so. The laws are complex and it takes training and experience to know how to guide individuals and families through the estate planning process. This training is ongoing in order to stay up to date on changes in the laws and it costs money. So naturally it can seem expensive to have a proper estate plan drawn up for you by a qualified estate planner. However, more often than not, it is far more expensive not to have an estate plan drawn up for you by a qualified estate planner.

© 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.

Probate is the Court supervised process that occurs after a person’s death, in order to transfer certain property of the decedent to his or her heirs. The process itself varies by State, and New Hampshire’s probate process is more complicated than most. Because of the expense and drawn out process, many people want to avoid probate.

The overall goal of the probate process is to identify and value the decedent’s property, to pay the decedent’s debts and expenses, and to distribute any remaining assets to the proper heirs. If the decedent left a Last Will and Testament, the Will names the heirs of the Estate. If the decedent did not have a Will, the heirs will be identified by State law.

A critical point to understand is that only those assets which were owned by the decedent individually are subject to the probate process. Assets which were owned jointly or in trust are generally not subject to probate. Assets for which there is a beneficiary designation (such as life insurance or IRAs), are also not subject to probate, as long as a beneficiary is specifically named.

Upon request, the Probate Court will appoint an individual (the “Executor” or “Administrator”) to complete the probate process. The Executor is often a family member, but could be a professional such as an attorney. Only the Court appointed Executor has legal authority to access the decedent’s property after death.

The Executor will be required to file a number of documents with the Court and others, including Notices to the heirs, an Inventory of the Estate assets, and in some cases, a formal Accounting of all income received and expenses paid by the Estate. The Executor may need to hire one or more appraisers in order to determine the value of the decedent’s assets.

An Executor may, with the consent of the heirs, sell the decedent’s real estate while the probate process is ongoing. If the New Hampshire decedent owned real estate in a State other than New Hampshire, it may be also be necessary to open probate administration in that other State. Typically “primary administration” occurs in the state of domicile (the State the decedent treated as home) and any other administrations is referred as ‘ancillary.”

The Executor is responsible for making sure that the decedent’s income tax returns were up to date, as well as filing the decedent’s final income tax return. The Estate itself is also a separate taxpaying entity and may have to file its own income tax return.

Under New Hampshire law, creditors of the decedent have six months in which to present their claims for payment to the Executor. As a result, the Estate must remain open for a minimum of six months after the appointment of the Executor. It is not uncommon, however, for a New Hampshire probate proceeding to take a year or longer before it is complete. The heirs of the Estate generally do not receive any money until after the Estate is closed.

A Revocable Trust is often used in New Hampshire as a means of avoiding probate. Assets which are titled in the name of a Revocable Trust are not subject to the probate process. Going through the probate process may be worthwhile in some instances. However, generally, because of the expense and delay in distributing a decedent’s assets, people wish to avoid probate.

© 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:

Bitcoin – “crypto-currency”, 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.

Although most people do not wish to place a loved one in a nursing home, it can become a necessity. Certain medical conditions and forms of dementia can make living at home a dangerous proposition for both the individual and his / her caregivers. Nursing homes can be very expensive, and there are limited options for payment. Ordinary health insurance does not pay for long term nursing home care. Medicare (the Federal health benefit we are entitled to at age 65) provides only limited coverage, generally for the first 100 days of a nursing home stay. This leaves three options:

1. Long Term Care Insurance. This is a special kind of insurance which most people do not have because it is quite expensive.

2. Private Pay. This simply means paying for the nursing home out of your own pocket. As the bills can run $5,000 – $10,000 per month, private pay is not a long term solution for many people, who may run through their entire life savings.

3. Medicaid. This is a joint Federal / State benefit which is different from Medicare. Medicaid is technically a “welfare” program, carrying with it strict asset and income limits before benefits are granted.

To obtain Medicaid benefits for nursing home care, a lengthy application process is required. The applicant will need to provide a great deal of financial information to the State. The application will focus on both income (things like social security or pensions) as well as assets (things like real estate, stocks, bank accounts, and retirement accounts such as IRAs). To qualify, a single individual cannot have “countable” assets with a value greater than $2,500.

In the case of a married couple, there are certain protections available to the spouse who is not in the nursing home. The “healthy,” at-home spouse will be entitled to keep a portion of the couple’s assets and, in most cases, will be able to keep the family home. Cars and personal effects are not “countable” assets. There are income rules as well, with the result that some income will be paid to the nursing home, while some can be kept by the healthy, at home, spouse.

If a Medicaid applicant (or his/her spouse) has made gifts to others within five years of the Medicaid application (this is the so called “5 year lookback”), then the applicant may be disqualified from receiving Medicaid benefits for a period of time.

The rules regarding Medicaid eligibility are complex and change frequently. They are also very fact-specific. Clients are advised to review all of their financial information with an elder law attorney to determine what planning options may be available to best protect assets in the event of a nursing home stay.

There are simple steps that you can take in order to make things easier for your loved ones in the event that something happens to you. Consider the following example. A husband and wife have been married for fifty years. The husband has always been the “bread winner” and handled all of the family finances. Sadly, the husband passes away suddenly and, in addition to her sorrow over her husband’s death, the wife finds herself overwhelmed by the need to manage her own finances. She does not know where all of the money was invested and she is not sure who she can call.

In many families, one spouse handles the finances and assumes the role of recordkeeper. When that person dies, the surviving spouse may spend months trying to find the important papers and accounts. A similar problem arises for adult children when both parents pass away. Even more difficult is when a person dies without children, and extended family members are faced with the task of identifying the assets and debts of the decedent.

If you (or someone close to you) is a “financial head of household,” that person should work on “getting their affairs in order.” This could mean a number of things, depending on the particular situation. A good starting point would be to gather the following documents and put them all in one area of “important papers” (a safe deposit box is fine, but only if someone else will have access to it upon death):

(1) Estate Planning Documents (Wills, Trusts, and Powers of Attorney). If these documents don’t exist, seek out your friendly neighborhood lawyer to create them for you.

(2) Deeds to Real Estate

(3) Life Insurance Policies

(4) Financial Account Statements

(5) Stock Certificates

(6) Tax Returns

In addition to the above, it is helpful to make a list of the following information, and
update it annually to keep things current:

Investment Accounts: The account number and financial institution (contact person, address and phone number) for every investment you have. This would include bank accounts, Certificates of Deposit, brokerage accounts, annuities, IRAs, and other retirement plans.

Digital Accounts: Information concerning any digital accounts (PayPal accounts, social networking accounts, blogs, websites, iTunes, photo accounts etc.) which you want others to have access to. Consider whether to provide user names and passwords (having in mind potential security risks).

Insurance: The kind of insurance, policy number, and insurance company (contact person, address and phone number) for every insurance policy you own. Include life insurance, long term care insurance, health insurance, auto insurance and homeowners insurance.

Business Interests: The name and contact information for the Company, the State where the Company was registered, and the number of shares you own in any corporation, LLC or partnership that is not traded on any stock exchange.

Personal Debts: Contact information for any person who owes you money, and copies of any Promissory Notes. The account number and financial institution (name, address and phone number) for every mortgage, loan, credit card or other debt you owe. Include the monthly payment amount and the day of the month on which payment is due.

Income: The amounts and sources of your income (social security, pension, rental income, etc.).Advisors: The name, Company name, address and phone number of your attorney, stock broker, insurance agent and tax return preparer.

Funeral Preferences: The Company (name:, address, and phone number) from which you bought your funeral plan and burial plot.

Safe Deposit Box: The financial institution (name, address, and phone number) where you have a safe deposit box, and a list of what is in it.

Once you have gathered these documents and generated a list, share it with the person who will handle your affairs in the event of your death or disability. Let him or her read the list and ask questions.
Having the above described documents in one place, along with a list of the critical information can save your loved ones from hours of leg and guess work and unnecessary expense. This type of organization is a truly a gift to your 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.

Introduction to Estate Tax Law
New Hampshire

New Hampshire currently has no gift or estate tax. It has had an estate tax in the past and the Legislature has considered reinstating some form of estate tax from time to time. Every other New England State imposes an estate tax, and Connecticut also imposes a tax on lifetime gifts. Many New Hampshire residents own property in one of these States, or in other States that impose an estate tax. If you own property in another State, it is important to seek advice about how to reduce or avoid any such taxes that might apply.

United States

The federal government imposes a tax on certain gifts made during lifetime and on bequests made at death. The U.S. has what is referred to as a “unified gift and estate tax” on the transfer of assets during life and at death, which applies only after an individual has used up their entire lifetime gift and estate tax credit. If the tax applies, the rate is 40%.

For the year 2021, the federal gift and estate tax credit is $11.7 million (under current law, this figure will be adjusted annually for inflation). The existence of this credit means that each of us may give up to $11.7 million (during life and/ or at death) without incurring any estate or gift tax. In addition to the $11.7 million credit, there is an unlimited “Marital Deduction,” so that most property left to a US citizen spouse is entirely exempt from the federal estate tax. Any property left to a qualified tax-exempt charity is also free of federal estate tax.

In 2010, a new feature was added to the federal estate tax law which benefits married couples. This feature is known as “portability,” and it provides that any unused estate tax credit of a decedent may be effectively transferred to the surviving spouse. For example, if the first spouse to die uses only $1 million of his total $11.7 million credit, then the surviving spouse will receive the remaining $10.7 million of unused credit. The surviving spouse can then apply the additional credit to her own lifetime gifts or bequests at death. In order to take advantage of this portability feature, the executor of the estate for the first spouse to die will need to file an informational federal estate tax return (Form 706) with the IRS.

To calculate the value of an estate, the law requires a determination of the “fair market value” of the decedent’s “taxable estate,” which includes all assets such as real estate, bank accounts, tangible personal property, stocks, bonds, business interests, annuities, retirement accounts (such as IRAs and 401Ks), and life insurance. In some cases, it is necessary to hire an appraiser in order to obtain a formal valuation of the assets as of the date of death.

Much of estate tax planning focuses on removing an individual’s assets from their “taxable estate.” This can be done with outright gifts, or with certain gifts or bequests in Trust. There are also a number of sophisticated tools that may reduce the value of one’s property for tax purposes or that create non-taxable “wealth replacement,” for example. If your estate might be subject to the federal estate tax, you should seek advice about how to reduce your taxable estate in order to potentially eliminate the federal estate tax for your heirs.

Income Taxes

The federal estate tax is not to be confused with the federal income tax. These are entirely separate taxes, and in some cases, both will apply. In situations where no estate tax is imposed because the decedent’s estate is less than the credit amount (currently $11.7 million), the heirs may still have income taxes to pay. Although under federal and New Hampshire law, the receipt of an inheritance is not taxable, there may be income earned during the administration of an estate or trust which is taxable. Estates and trusts must file their own federal income tax returns, and the income earned is often “carried out” to the beneficiaries of that estate or trust, to be reported on the beneficiaries’ own personal income tax returns. Beneficiaries who withdraw money from tax deferred assets (such as IRAs and 401Ks), will also need to pay income tax on those withdrawals. At the same time, holding highly appreciated assets until you die may result in a “step-up” in tax basis that could significantly reduce income taxes (in the form of reduced capital gains tax) for your heirs.

Changes in the Law

Over the last several decades, the federal estate tax law has seen many changes. The estate tax credit has been as low as $675,000 in the year 2000 (so that many more estates were concerned about the tax at that time) to as high as the $11.7 million credit we have today. At times, the US gift tax credit has been lower than the estate tax credit, and in one year (2010) there was no federal estate tax at all! Suffice it to say that this is an area of tax law that Congress has frequently amended, so clients are advised to keep track of any such changes, and to seek advice about how new laws might impact their individual estate plan.

© 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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