This is one reason informed estate planning is so important. By planning for what happens when you pass away, you will relieve your family and friends from making difficult decisions regarding things like medical bills and your funeral details and expenses. Your family will have to handle these while also grieving your loss. They will have to deal with probate and everything that comes with it, and that can be a tall order.

What is an estate tax?

The estate tax, also erroneously called an “inheritance tax” and a “death tax,” is a tax on the assets you leave your heirs. It is paid to the federal government upon receipt of money or other assets from the estate of the deceased. In other words, it comes out of your estate before it is distributed to your heirs.

There is an exempted amount that you can pass on to your heirs without being taxed. This amount of $11.19 million for 2019 changes quite often. If you think the federal government will want more of your money in the future, then you have to look at the exemption going down. The $11.19 can change. The current tax rate is between 35 percent and 55 percent for any amount above the exemption, depending on how much you have, so this can amount to a significant loss of assets for your family or other heirs.

The executor of the estate is charged with the responsibility of computing, filing, and paying any and all estate taxes that are due. This is where the difference between estate taxes and inheritance taxes matters. Though they are often confused, there is a clear difference. Estate taxes are charged to and paid by the decedent’s estate while inheritance taxes are paid by the beneficiaries of the estate on the portion of the decedent’s assets they received.

What is an inheritance tax?

There is no federal inheritance tax. States alone charge this. Only 11 states still have an inheritance tax, and Arkansas is not one of them. However, if one of your beneficiaries lives in one of those 11 states, then it could be good to incorporate protections for those taxes into your estate plan. For example, if your heir inherits property in Connecticut or New Jersey, then they will have to pay that state’s inheritance tax on the property if it rises above the amount of exemption in those states. Your estate planning attorney will help you decide this.

Likewise, 17 states exercise their own estate tax laws, so consider this in your estate plan. Most states with an estate tax base their rate on the federal estate tax. Most have an exempt amount that varies from state to state. This is one reason it is important to have an estate planning attorney helping you formulate a plan. They can access this information and incorporate it into your overall plan in a way that limits the tax consequences for everyone.

Since January 1, 2005, Arkansas has not collected a state-level estate or inheritance tax. Prior to that, Arkansas charged a “pick-up” or “sponge” tax that equaled a portion of an estate’s federal estate tax bill, but that has not been the case over the last 14 years.

Why you should still plan for “death taxes”

The fact that Arkansas has neither an inheritance tax nor an estate tax does not mean all Arkansans are exempt when it comes to tax consequences as part of an estate plan. The amount exempted from federal estate taxes is $11.19 million for 2019, but if you do not plan properly, then your family or other heirs could end up getting far less of your assets than you intended.

Remember that the exemption amount fluctuates constantly. The only exemption amount that counts is the exemption after you die.

If you are putting together an estate plan and all of your assets are located in Arkansas, then you are in good shape. You will only have to worry about federal estate taxes. However, if you have assets in one of the 11 states with an inheritance and/or the 17 states (or the District of Columbia) with an estate tax, then you might want to incorporate that into your overall estate plan.

There are other reasons you should consider incorporating tax protections into your estate plan even in Arkansas. Although Arkansas does not collect an inheritance tax or estate tax now, there is a possibility it could put one or both in place between now and the end of your life. It is also possible the exemptions for the federal estate tax could shrink at some point.

Contact

You and your Arkansas estate planning lawyer should do all you can to shield as much of your money as possible from current and potential future taxes. They can do this by helping you create trusts for almost any eventuality, or arrange for gifts to your heirs that are structured to avoid gift taxes now and estate or inheritance taxes in the future. Contact Estate Planners of Arkansas today for a free consultation.

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In generations past, the legal status of same-sex couples was very different from married heterosexual couples. Recent court decisions have changed this, most notably with the 2013 ruling that made same-sex marriage legal in all 50 states. Though the Supreme Court ruling has come down and is enforced, it will take a while for the states to catch up and adjust their estate laws to accommodate same-sex marriage.

Speaking with an attorney can help you navigate the often murky waters of estate planning.

Transfer of Assets

Some states and the federal government impose an estate tax in 2018. To reduce the size of the estate tax, many couples choose to place some assets into a trust. It is also important that both spouses have a will that clearly lays out who gets the assets upon one spouse’s death.

Same-sex couples should also carefully review the terms of any joint accounts, joint assets, insurance policies, and employee benefit plans. Although a same-sex couple may be legally married, the specific terms of the policy may not yet be updated to recognize a spouse as the beneficiary of the plan, policy or account.

Long-Term Health Care

All couples should plan for a time when they may be mentally or physically incapacitated. In the absence of a legal marriage, hospitals or care homes may not recognize a same-sex partner as the legitimate decision maker. Couples should discuss making each other powers of attorney for health care and finances in the event of long-term illness.

Guardianship of Children

More and more same-sex couples have children, but in many cases, there are legal hurdles when it comes to the legal status of both partners as parents. Even when that matter is settled, it is vital to designate a preferred guardian for any minor children should one or both spouses pass away.

Federal and State Benefits

Although same-sex marriage is legal across the United States, individual states may have regulations that specifically prevent same-sex partners from receiving certain government benefits. Speaking with an attorney in Arkansas can help spouses to know who pays estate tax in this state, as well as how a spouse’s rights and responsibilities are impacted by state law.

Work Out the Details with a Lawyer

In order to ensure your spouse and children are protected, it is essential to discuss your estate planning issues with an attorney. Contact Estate Planners of Arkansas to make an appointment today at 501-414-8965.

The post Is Estate Planning Different for Same Sex Couples? appeared first on Estate Planners of Arkansas.

Fortunately, there are legal tools you can use to save on federal and Arkansas estate tax. Here are some potential options that you can discuss with an attorney.

Leveraging a Living Trust

Since you can control the assets in a revocable living trust during your lifetime, those assets usually form part of your estate. However, there is a specific kind of trust that can help you pay less in estate taxes in 2018: the credit shelter trust.

A credit shelter trust is irrevocable and allows couples to save significantly on taxes. Upon the death of one spouse, the assets in the trust transfer to the surviving spouse. Properly drafted, the trust can allow for the surviving spouse to use the assets while still alive. When the last spouse passes away, the assets are passed on to heirs, not subject to estate tax.

Speaking with an estate planning attorney can help you determine whether establishing a credit shelter trust is the best option for you and the future of your estate.

Life Insurance Trust

Life insurance sounds like an odd way to save on estate taxes. Essentially, this is an irrevocable trust that buys the life insurance policy. Therefore, once it’s paid out, the beneficiary is the trust, and the beneficiaries of the trust can be your heirs. An experienced estate planning attorney can work with you to decide whether a life insurance trust is the best tool for the future of your estate and your beneficiaries.

Giving Gifts During Life

One straightforward way to reduce the size of your estate is to give money away during your lifetime. You can give away up to $14,000 a year to whomever you choose. Any gifted amount that is greater than $14,000 and the giver has to file a gift tax return with the IRS.

By giving your children and grandchildren monetary gifts during your lifetime, they can start to get some of their inheritance now, tax-free, and they can use their inheritance to plan for their future themselves.

Charitable donations are another way to make your estate smaller, and many charitable donations qualify for write-offs during tax season.

Talk to an Attorney

The rules change frequently regarding who pays estate tax and under what conditions. The best way to sensibly plan for the future is to discuss your financial options with an estate lawyer trained in these matters. To learn more or to make an appointment, contact Estate Planners of Arkansas P.A. today at 501-414-8965.

The post The 3 Ways You Can Save on Estate Taxes appeared first on Estate Planners of Arkansas.

Estate planning helps you decide how to organize your assets to the benefit of your loved ones after your passing. In Arkansas, the probate process is required for contested estates, or those larger than $100,000.

What is Probate?

In its simplest form, probate is the legal declaration that a will is valid. If you have a will, or like most Americans, you make no plans at all, your will must be taken to Probate Court before your property can be legally transferred to your loved ones.

It also involves the appointment or confirmation of an executor, an account and distribution of assets, and locating heirs.

The probate process is lengthy, expensive, and takes a lot of planning. The old adage is true: luck favors the prepared. Estate planning is no exception—if you properly prepare for the probate of your estate in advance, then the administration of your estate will likely go more smoothly when the time comes.

Do All Assets Go Through Probate?

In general, some assets are excluded from the estate and, thus, from probate proceedings. These include joint assets which are transferred to the other owner through the right of survivorship and retirement plans with named beneficiaries. An experienced estate attorney knows the ins and outs of probate law and can determine which assets are required to go through probate, and which assets are exempt. Additionally, a living trust will allow you to transfer more of your property to your loved ones than you otherwise could while avoiding probate.

Although there is no Arkansas estate tax or inheritance tax, beneficiaries may have to pay federal tax on money they receive. An attorney can tell you about the benefits of a living trust or other legal tools, which may reduce the size of the estate that has to go through probate. Having a knowledgeable estate attorney can help make navigating the probate process less daunting and more successful.

How Does Probate Work in Arkansas?

If the estate is small and uncontested, you can talk to your attorney about filing an affidavit asking to bypass probate. Among the issues you must certify is that debts against the estate have been paid. This can happen no earlier than 45 days after the individual’s passing. In most cases, however, probate is unavoidable. State law will decide who gets your property if you make no plans.

If probate is required because of the size of the estate, the executor files for probate and notice is given to affected parties. At this point, anyone who wants to contest the will can do so.

Where Can I Get Legal Help?

Probate can be a challenging, expensive and long process especially when you are living with the recent passing of a loved one. At Estate Planners of Arkansas, we have lawyers who practice in the area of Arkansas wills and probate everyday. To see how we can help you, contact us at (501) 414-8965 for a consultation today.

The post What is Probate and How Does It Work in Arkansas? appeared first on Estate Planners of Arkansas.

A Living Trust, also known as a Revocable Trust, is not designed to give you protection from creditors. If you have a Living Trust then you are probably in charge of it, it is for your benefit and you can amend it or revoke it at any time. That means your creditors can come after the assets in the trust just like if the assets where owned by you as a person.

If you have an Irrevocable Trust that you are not in charge of and can’t force the person in charge to give you assets from it and you can’t amend or revoke it, then it can protect your assets from some types of creditors. Different types of creditors have different rights to assets in the Irrevocable Trust. The protection from someone getting hurt on your property and suing you is stronger than the protection from the IRS or Medicaid.

If your concern is liability protection, then you have two main defenses against lawsuits. The first is liability insurance. You should talk with your insurance agent to make sure you have an appropriate amount for the type of business you are in and the value of your business. The second main defense is to set up a Corporation, Limited Liability Company or Limited Partnership. These don’t necessarily protect the assets inside the corporation; they are designed to protect your other assets outside the corporation.

Be aware that there are different types of “partnerships” and some don’t give you any protection at all. If you and a buddy are partners and you haven’t filed any papers with the secretary of state, then you have a general partnership. Both or either one of you is responsible to the creditors of the partnership and your personal assets aren’t safe either. Basically, that means if your partner does something wrong while acting as a partner and gets sued and is broke, then the creditor can come after you and your personal assets for the full amount.

Many people set up their own Corporation or Limited Liability Company. They think that solely filing Articles of Incorporation is all they need for the full protection. Every corporation should also have internal rules of operation, often called by-laws, stock should be issued, corporate records and minutes of meetings should be prepared and maintained. All this additional paperwork is extremely helpful in giving you the protection that you want. Without it it is easier to argue that you have a sham company and that the court should ignore the protection that you thought you had.

Estate Planners of Arkansas, P.A. has prepared over 4,000 Estate Plans and hundreds of corporations and Limited Liability Companies. Call 1-501-414-8965 for your FREE initial consultation today.

The post Does a Trust Protect Your Assets From Creditors? appeared first on Estate Planners of Arkansas.

Of course, if the Zombie Apocalypse occurs there will be no need for estate planning. Zombies trying to eat your grey matter don’t care about real estate property rights and legal ownership of bank accounts and investment accounts. But what if something short of a Zombie Apocalypse occurs? What if the economy severely tanks? What if the government defaults on its debts? What if we have hyperinflation? Do you see our whole property rights system that has been around for centuries completely disappearing overnight? Most likely not.

Let’s use Venezuela’s current situation as something short of a Zombie Apocalypse. The Venezuelan government is running low on money to pay government workers, so they only have government offices open half days for only two days a week. This includes the courts. What if our county probate courts did the same thing? If you use a will or haven’t made any plans at all, then your assets at your death have to go through probate. Probate averages one to three years right now and that is with a fully staffed court system with full time judges. If they were forced to only work eight hours a week, how much longer would the process take? My guess is five to eight years. That means that your heirs can’t use the assets you left them for five to eight years.

What if the government defaults on its debts or Congress won’t raise the debt ceiling. Do you think that that would affect the stock market? With a declining stock market, many people would want to sell their investments while they could still get some money for them. If you are dead, then no one has authority over your accounts. It takes significantly longer if you have a will or haven’t made any plans at all to get someone authorized to make trading decisions on your investment account. Remember, the judge who can grant authority is only working eight hours a week now.

What if hyperinflation hits like in Venezuela? Hyperinflation means that your dollar today only is worth $0.85 next week. $0.65 the next month. $0.45 the month after that. People try to spend their money as soon as possible to buy something that will maintain its value like food, gas, gold, silver, etc. If you use a will or make no plans at all, then every day the assets are waiting on the probate to finish is a day the inheritance is going down in value. And now the judge’s law clerk has been let go and the process is slowed down even more.

A Living Trust (Revocable Trust) avoids many of the problems that come with a disruption of government services because the Living Trust avoids the court system. So if you are a prepper, a survivalist, concerned with government shut-downs or simple a prudent planner, then you should seriously consider setting up a Living Trust. Because with a Living Trust, your heirs can literally have access to your assets within days of you having your grey matter eaten for a snack.

Estate Planners of Arkansas, P.A. has prepared over 4,000 Living Trust. Call 1-501-414-8965 for your FREE initial consultation today.

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