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Estate Planning When You Live in Multiple Places

Estate Planning When You Live in Multiple Places

According to a recent study by United Van Lines, millions of Americans packed up and moved in 2020, with South Carolina seeing the second highest percentage of inbound migration in the country at 64%. The Palmetto state came in second only to Idaho, with 70% inbound migration, even with a pandemic raging. The study by United Van Lines found COVID-19 played a part in the move, but the number one reason people sought out South Carolina was retirement, accounting for 38% of inbound migration. Work followed at 26% — although roughly 43% of those who left South Carolina in 2020 did so for the same reason, the study found. Family came next at 19%, and lifestyle with 18%. This recent data shows a longstanding nationwide pattern still persists — people are leaving the north behind and heading south and west. With South Carolina’s rich history, southern hospitality, favorable weather, and a slower way of life, the Palmetto state offers a multitude of opportunities and places for everyone. Whether you prefer the coastline, lowcountry, or majestic mountains, you can build the life you’ve always wanted here.

House prices in South Carolina are also extremely reasonable, with one of the lowest median home values in the United States. Cities like Charleston have a median home value of $316,000, which is still cheaper than the cost of living in other states. If you are one of the many new snowbirds to the Palmetto state, you are not alone. South Carolina is becoming an increasingly popular place for people to live permanently or temporarily, and currently earns $23B in revenue from visitors every year, up $1.4B by recent calculations. And if you are a vacation homeowner, you might have noticed that there is a special 6% tax vs. 4% on homes for those who don’t live here full-time. Moving between residences doesn’t automatically change your domicile unless you take additional steps to make South Carolina your intended full-time home. In addition, the state of South Carolina does not clearly define domicile, however, a recent court ruling helped to establish what the state feels are the most credible elements to be domiciled: residency and a tax return. Under most circumstances, a person must live in South Carolina for 12 consecutive months in order to establish residency and provide a tax return for one to two years to prove domicile. The South Carolina Administrative Law Court (ALC) recently defined domicile as the “the place where a person has his true, fixed and permanent home and principal establishment, to which he has, whenever he is absent, an intention of returning.”  The ALC, citing a prior South Carolina Supreme Court decision, found that intent is the most important element in determining the domicile of any individual and that intent should be evaluated in light of a taxpayer’s conduct. Additionally, residents of South Carolina are required to file an income tax return, even if they do not earn income in the state. 

 

If your domicile is technically in another state, yet you spend most of your time in the Palmetto state, you may be wondering where the best place is to have your estate plan established. Most of the time, property outside of South Carolina will not be governed by Probate proceedings located out of the state. Your South Carolina residence and belongings would pass pursuant to South Carolina Probate proceedings, so it’s a good idea to consider having an estate plan that encompasses your home and belongings here, as-well-as, other locations. Relocating or visiting for an extended period of time to a new state often creates issues affecting estate planning, with complications stemming from where one lives at the time the estate plan is needed for administration. By addressing issues related to relocation or second homes, you can avoid certain problems of your prior state’s specific statues and laws and maximize possible benefits in South Carolina’s governing law. For example, if someone dies in a “new” state, the references in the estate planning documents to the “old” state’s laws can be problematic and cause two separate estate proceedings, in two different states. It’s key to update your estate plan with an amendment to the trust or will that change the old state law references to South Carolina’s state law. If you have property located in multiple states and want to avoid the time and expense of Probate, you may want to consider adding a Revocable Trust to your estate plan. Under a Revocable Trust estate plan, you could title all or some of your assets under the Trust. When you pass away, your Trust property would be distributed pursuant to the terms of the Trust, by the Trustee, and the Trust assets would not have to go through the Probate process, nor would you have to have a multi-state estate proceeding. The reality is, if you don’t have some type of Revocable Trust, LLC or Family Limited Partnership, and you have real estate in multiple states, you’ll have to go through Probate in each state.

 

There is an easier way to plan with multi-state properties and assets, and that’s through a Revocable Trust. “By placing assets (such as a home, cabin or business interest) in a Revocable Trust, or by naming the trust as the beneficiary on non-probate accounts, such as life insurance or brokerage accounts, your assets will be distributed according to your wishes and will do so outside of Probate,” explains Kiplinger. Please note that under most circumstances, a person must live in South Carolina for 12 consecutive months in order to establish residency and provide a tax return. But updating estate planning documents with your new change of address can also help to verify and establish intent to become a SC resident. Other items include, a valid South Carolina driver’s license, registration to vote, ownership or lease of a residence, licensing for professional practice, employment, and even a pet! If you are looking to establish domicile in South Carolina, or if you have a complicated living situation, with different real estate locations, Wiles Law can help you consolidate all properties into one strategic plan that covers you no matter where you live. Careful planning with one of our experiences estate planning attorneys can help you reduce taxes, risks and expenses to your beneficiaries. Call us today for a free consultation and review of your current plan!

 

Sources:

https://www.thestate.com/news/state/south-carolina/article248288360.html

https://lccentral.com/2020/09/30/estate-planning-when-relocating-to-a-new-state/

https://www.amny.com/news/webinar-learn-estate-planning-for-global-families/

https://www.che.sc.gov/CHE_Docs/StudentServices/Residency/QASCResidency.pdf

https://www.jdsupra.com/legalnews/unpacking-your-estate-plan-when-moving-82674/

https://www.kiplinger.com/article/retirement/t021-c032-s014-what-is-a-revocable-trust-and-do-i-need-one.html

Biden Tax Changes

Biden Tax Changes

A new year and a new President could mean potential shifts in estate taxes and tax exemptions. President Biden’s proposed plan could modify tax codes to almost anyone who has something of value to leave to heirs. What does the new Biden tax plan mean for you and your heirs?

These proposals could:

  1. Lower the federal estate tax exemption to pre‑2009 levels, reducing them from $11.7M to 3.5MM to (a.k.a. reduction of gifting amounts)
  2. Eliminate “step up basis” of property transferred at death (a.k.a. increase taxes of assets at death, based on appreciation)
  3. Change and increase the capital gains tax structure through:

a.  tax rates or reductions of certain current income tax benefits affecting charitable deductions

b. phase-outs of IRC Section 199A deductions for higher-income taxpayers (a.k.a. additional tax for increasing value and selling at profit)

Why should you care?

Well, it’s simple. You could owe a lot more taxes in the next several years if you don’t create a plan to liquidate, transfer or protect your assets planned for distribution. Or your heirs may inherit less and be taxed more at the time of your death. Shifting wealth to younger generations is going to be increasingly more difficult moving forward so it’s important to act now. Luckily, the pandemic and market volatility has impacted the valuations of many securities and businesses, making it an opportune time to gift or transfer assets out of your estate when interest rates and asset values are low.

Let’s talk details.

Though President Biden has not officially released his tax plan, his advisors have given some preliminary ideas on what may happen. Here is what we might expect.

  1. Tax Exemptions– Currently, the federal estate, gift and generation skipping transfer tax exemptions are generous and stand to be cut nearly in half. Right now, you may give gift your children or others up to $11.7 million in assets ($23.4 million for a married couple). President Biden’s campaign proposal hopes to reduce the exemption amount to $3.5 million each (for a total of $7 million for a married couple). This could go in to affect in 2021, but definitely by December 31, 2025, when the TCJA provision expires.
  2. Step-Up in Basis Could Be Eliminated- You may have never heard of stepped-up basis before, but you might be familiar with how it works. Step up in basis is when a person receives an asset after the benefactor dies and the asset often receives a “stepped-up basis,” which means the asset is given market value at the time the benefactor dies. Under current law, assets bequeathed to heirs were valued at the time of the owner’s death, even if the value had risen afterwards, and no tax was assessed for appreciation, if passed to heirs. For example: If a stock was bought for $1 and is now worth $10 when the owner dies, the capital gain is $9. But when that asset is passed on to heirs, the embedded gain is wiped out because the base value is now $10 and no capital gains tax is owed. This “step up in basis” practice is most likely going to be eliminated and heirs or the estate will have to pay tax on the appreciation.
  3. Capital Gains– President Biden has also proposed certain changes to the capital gains tax structure. These proposals could have an even greater impact, if accompanied by corresponding increases in taxes from the elimination of step-up basis.

Stepped-up basis continued…

By eliminating the step-up basis, and thereby modifying the way property is taxed after an individual’s death (meaning you will owe more in taxes based on appreciation), the beneficiary would be liable for the capital gains tax on the full amount of the appreciation, as well as, any depreciation recapture if the asset had been an investment subject to depreciation. A second proposal would essentially treat all property owned by the decedent as sold as his or her date of death. Any appreciation or recapture would therefore be taxed at death, but the beneficiaries would thereafter take the assets with a step-up in basis.

Regardless of any new legislation the Biden administration approves, one item is guaranteed by the end of 2025: increased taxes. On December 31st, 2025, 23 provisions from the Tax Cuts and Jobs Act will expire meaning most taxpayers will see a tax hike unless some or all provisions are extended. We aren’t predicting any tax changes be retroactive of January 1st but it could happen. Best planning approach? Make all your changes EARLY, and do not wait until Congress starts talking about the subject. Most frequently, tax changes are in the fall, so all changes should be made prior to Fall 2021, assuming you can avoid retroactivity.

Turn to Trusts to Minimize Tax Exposure:

If you have assets in excess of $7 million, consider your options to shift wealth to others with Annual Gifts (which remain at $15,000 for 2021) and additional gifts paid directly to educational and medical providers above those levels. Also consider making a large gift of a portion of your remaining lifetime credit (your “applicable exclusion amount”). While a large gift will use a portion of your lifetime credit, the IRS has indicated they will not “claw back” the credit amount in your estate if the exemptions fall.

Other options? Grantor Retained Annuity Trusts (“GRATs”) or Spousal Lifetime Access Trusts (“SLATs”) are attractive alternatives. These trusts provide a great opportunity for you to give away most of the future appreciation of assets while still retaining an income stream. The technique works to your advantage, when the assets you give grow in value at a rate larger than the rate the IRS tables assume the assets will grow. Currently the “table rates” are very low, so it is easy to achieve success. The lower the rate, the more effective it becomes in reducing your estate taxes. When valuing your gift, the value of your retained income stream is subtracted from the assets placed, so the taxable gift is only the amount that is assumed to be left for your heirs after your income stream stops.

Family Limited Liability Companies (“FLLC”s) provide another option for you in the event you have closely held business interests or real estate assets (such as rental property). You can include your children and other family members as “minority owners” (i.e. owning less than 50% each) by making “discounted” gifts of your interests to them. If you wish to maintain greater control, consider making gifts of non-voting interests. Finally, an individual could consider making gifts utilizing a formula transfer clause. The donor would make a gift of a fractional interest of an asset where the numerator is the donor’s available exemption on the date of the gift and the denominator is the fair market value of the gifted assets. If the exemption amount on the date of the gift is retroactively reduced, the formula should “self-correct,” so that the donor only gives away an amount equal to the donor’s available exemption on that date.

Next Steps To Preserve Your Legacy

Consider new planning strategies to reduce estate taxes while you can. As some tax exemptions are set to expire soon, it’s important to be proactive in revisiting your estate strategy, before the Biden administration releases their new tax plan. The pandemic and its effect on the economy continue to keep interest rates at historic lows, which makes this an ideal environment to engage in all aspects of estate planning, from the simple to the comprehensive. Now is the time to take stock of what is driving your estate strategy and think through existing choices and new options with the help of our team at Wiles. Our experienced estate planning attorneys can discuss certain techniques that can help you avoid an unintended gift or GST tax and will discuss how best to optimize the strategies going forward. Plan for your family. Protect your assets. Preserve your legacy. Find out how Wiles can help create a custom legacy plan for you. Call us today for a free consultation to review your existing plan or to create a new one. Don’t delay as tax laws could change in just a few months from now. Start planning today!

Sources:

https://www.natlawreview.com/article/2021-biden-plan-estate-planning-advisory

https://www.jdsupra.com/legalnews/post-election-estate-planning-18252/

https://taxfoundation.org/look-ahead-expiring-tax-provisions/

Pandemic Planning

Pandemic Planning

Over the past year, some Americans have been using their quarantine time to master baking, learn new trades, or binge-watching popular shows like, The Crown. But a large part of the population is barely staying afloat amongst caring for aging parents, online schooling, and surviving day-to day. In fact, Kelton Global found that 40% of Americans have said they don’t have the time for self-care at all, with 1 out of 3 feeling guilty for taking any self-care time. Not surprisingly, more parents (45%) vs. childless adults (32%) say that they simply don’t have time to engage in caring for themselves. We understand if you are pushed to your limits without any time to accomplish your own to-do list or self-care. What if we could help you plan and help you achieve something far greater to you and your loved ones? What if we could finally help you set up an advanced medical directive or living will, from the comfort of your own home, with limited time involvement?

Wiles Law offers virtual estate planning, whenever it’s best for you. Estate planning has never been so easy and so convenient. In the time of COVID-19 there are just no guarantees on how your body will react to the virus or the variants, so it’s important to have a medical plan, also known as, an advanced medical directive, set up at a minimum. And for those ready to take the next step, we can help protect your wishes through a simple living will or living trust. Dying without a will or trust in place leaves huge unanswered questions for your heirs. Unfortunately, if you pass with only a will, the state of South Carolina will decide who is legally entitled to inherit your estate through the Probate process. There is an easier way for you to plan and your heirs to inherit your legacy.

Making an estate plan during the pandemic has become the new normal. We’ve met with many clients via phone or video call. We even offer curbside signings, so you never have to leave your vehicle. After we listen to your needs, we’ll collectively strategize on the best route or document for you. Next, our team will build your official estate plan, handle all of the paperwork and review it with you securely, so every decision is personally made by you. Whether you’d like to meet virtually or in-office, our team will walk you through our easy 3-step process to assure you fully understand your estate plan options and feel at ease with next steps. Our goal is to take the additional time burden away and do the work for you, so you have more time to focus on your family. There is no need to worry, every single decision will be made personally by you. We understand that life can get in the way of planning, and that’s where we come in to help. Our estate planning attorneys will plan everything out based your wishes and needs, so you don’t have to worry about the execution. Wiles Law Firm was built so you can embrace the future, not fear it. You’ll immediately have peace of mind knowing that everything has been handled on your behalf. With less worry during these challenging times, you can finally focus back on what’s most important.

We understand your need to think about your wishes in advance. As you prepare, please think about the following, or download our free e-planner as a guide.

•  Identify who is in charge of your affairs and your dependents

•  Decide on arrangements for physical items and keepsakes

•  Identify who receives assets

•  Think about funeral arrangements, burials, or final requests

Have you wondered if you could afford estate planning? You are not alone. In fact, it’s one of our most asked questions. The answer is “yes.” If you don’t have an estate plan, it can cost your heirs far more in the long run through Probate and lawyer fees. At Wiles, we’ll build a plan that works for your lifestyle and budget. Plus, we typically charge flat rate pricing vs. hourly, enabling you as much time as you need to make decisions and ask questions. Some of our estate planning documents start as low as $390, making this the best economical decision you’ll ever make.

Have you encountered a major life event? Many of us have had a major shift in our lifestyle and family dynamic during the pandemic and we’re here to support you. You aren’t alone during this shift and we can help you revisit your existing plan also. Here are some events that could cause you to rethink some of your planning:

Marriage or Divorce

Birth or Adoption 

New Home

Death of Loved One

There has never been a better time to put yourself first. You are important. Your wishes are important. And your estate plan is important. Let us help you take the next step to protecting your assets and preserving your legacy. Call us today for a free consultation. Stop worrying and start living again!

 

Sources: https://edge.birchbox.com/uploads/birchbox-the-you-time-report.pdf

 

 

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Estate Planning After Divorce & Remarriage

Estate Planning After Divorce & Remarriage

A recent study by TD Wealth found that a trend known as “gray divorce,” the increasing rate of those over 50 years old divorcing, is impacting estate planning, coupled with prolonged life expectancy and rising healthcare costs.

“In addition to prolonged life expectancy and rising healthcare costs, this upward trend around couples divorcing over the age of 50 has created a recent swirl among the estate planning industry,” says Ray Radigan, Head of Private Trust at TD Wealth. “Gray divorce is adding another layer of complexity to the estate planning process that already arises with blended families, designation of heirs and the ever changing domestic structures. As a result, it’s more important than ever to proactively review and discuss the estate plans with our clients and their families on an ongoing basis.”

Furthermore, 39% of survey respondents identified retirement planning and funding as a highly impacted factor of estate planning for those divorcing over the age of 50. Gray divorce is also having an impact on determining who will be responsible for enacting power of attorney (7%), determining appropriate social security benefits (6%), and drafting of a will (5%). 

In addition to the impact of gray divorce, the TD Wealth survey also explored the more traditional causes of family conflict when engaging in estate planning and found that not communicating the estate plan with family members is the most common cause of conflict (43%), followed by dealing with blended families (29%). Only 13% of respondents cited designation of beneficiaries as a cause for conflict in 2020, compared to 30% in 2019. 

Pew Research Center shows that remarriages after gray divorces are on the rise too. 40% of new marriages are now remarriages and half of previously married seniors have remarried again. It’s important to remember when you divorce or get remarried, you need to update your estate documents to reflect your new situation. Your current estate planning documents don’t automatically update with your life changes. You need to update them personally, with an attorney. At a minimum, we recommend changing your beneficiaries found in your estate plan to cover your updated heirs properly. If you fail to change the beneficiary, your assets may not go to whom you think.

Please also think about or update the following about post-divorce (or before remarriage):

  • Income taxes documentation
  • Prenuptial agreements
  • Pension
  • 401(k) benefits
  • Social Security benefits
  • Annuities or Life Insurance
  • Cost sharing
  • POA or Healthcare Proxy
  • Guardianship
  • Will or Trust

A new estate plan, post-divorce, can provide you with the opportunity to personally update your instructions, legacy letter, beneficiaries, guardians of children, and trustees of any minors’ trusts. If you are single, with no plans to remarry, you should also think about choosing a Power of Attorney and have an Advanced Medical Directives set up, should you become incapacitated. Having a new POA and health care proxy in place will make it clear who has the authority to act on your behalf should you require assistance. It will also reduce the chance that there will be a court ordered guardianship. A new estate plan will also allow you to address any changing children’s needs, change of heirs and your own personal needs. It will give you the blank canvas to start over and draw out what your new legacy will be. 2021 is a great time for you to take an inventory of your family’s circumstances and begin to build an estate plan that will bring relief and resolutions. Let’s build a new plan for you this year, where you and your family are the priority.

Don’t forget, estate planning should always feel like a customized solution to all of the intricacies of your life and wishes for the future. Steer away from cost saving gimmicks of DIY estate planning, as they may cost you more in the long run. DIY estate planning can be one-size fits all, software based, and may not consider special circumstances or nuances of South Carolina law. Last year has taught us that nothing is promised and to expect the unexpected in life. Don’t chance your estate plan to a DIY pitfall. We can help you create a plan that works for your budget in 2021. Contact one of experts today to help you navigate this next step in life. We’ll visit all important documents and create a new plan for all potential situations. Our goal is to help you protect more than what you thought was possible. Call us today for a free consultation!

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2021 Estate Resolutions List

2021 Estate Resolutions List

“Teach us to number our days, that we may gain a heart of wisdom.” -Psalm 90:12

2020 was a year unlike any other. Our collective consciousness changed. Our needs changed and our awareness changed. We began to understand the finite timeline of life and the importance of protecting one another. As we enter 2021, think about your New Year’s resolutions a bit different this time. Think about how you can restore peace back into your mindset, goals, and life. As you contemplate your resolutions, place a new one at the top of the list: making a Will or Trust.

You may be surprised to know that more than half of all resolutions fail. But yours don’t have to. We can help you create and achieve your goals, through our simplified estate planning process. Our team will seamlessly work with you to plan what’s right for your legacy and your budget. You are more likely to keep your resolution if it is meaningful and achievable, and we’ll help you get there. This year, spark optimism back into your life by creating goals that help you achieve peace of mind and secure your family’s future. With your determination and our simple process, achieving your dream estate plan just became so much easier. Keeping your resolution might be as simple as a small change in describing your resolution as an “approach goal.”

According to Psychology Today, “Researchers from Stockholm University and Linköping University in Sweden published a study they describe as ‘probably the largest and most comprehensive study on New Year’s resolutions conducted thus far.’ These findings (Oscarsson, Carlbring, Andersson, & Rozental, 2020) were published on December 9, 2020. Over the course of 12 months, the researchers examined how “approach” vs. “avoidance” goal-setting affected the likelihood of long-term success.

In general, avoidance goals are about stopping, quitting, and forbidding behaviors. On the flip side, approach goals are about seeking a fresh start, new beginnings, and proactively getting out of a rut. Participants who made approach-oriented New Year’s resolutions had a higher success rate (59 percent) than those who made avoidance-oriented resolutions (47 percent). This research suggests that flipping the script from an avoidance-oriented resolution that uses language such as “I will stop _______” to an approach-oriented script that states “I will start _______,” may increase one’s odds of sticking to a New Year’s resolution.”

That simple shift in thinking is all you need to help make a goal achievable. We can help you fill in your estate planning “approach goals.” We’ll help you ensure they are achieved and protected thoroughly. Contact our experienced estate planning attorneys today to take the first step in building your customized estate plan. Or visit some of our resolution ideas below for inspiration!

 

10 Estate Planning Resolution Ideas

  • Make the call or appointment to learn more about estate planning – We offer a free consultation!Read or fill out our e-planner so you feel empowered about estate planning and your own wishes to consider. This is a great planning tool for beginners!

 

  • Set up a POA, Guardianship, and/or Advance Healthcare Directive at a minimum.

 

  • Learn the differences between a Will and Trust. Think about the level of protection you might need for your family.

 

  • Finalize beneficiaries and update pertinent documents for them.

 

  • Tell your beneficiaries or family members about your plan and where to find it.

 

  • If you have an estate plan already, double check your plans are funded properly.

 

  • Think about next steps for your digital assets (social media, photographs, etc.). Who will handle those when you pass?

 

  • Write a legacy letter to your family or heirs to let them know your wishes for the next generation.

 

  • Set aside a budget to make your estate plan possible this year. At Wiles, we charge a flat rate and will help you avoid the most estate taxes possible.

 

  • Give peace of mind as a gift back to you and your loved ones this new year. At Wiles Law, we’ll help you Protect More than you thought possible. Contact us today!

References

https://www.psychologytoday.com/us/blog/the-athletes-way/202012/want-your-new-year-s-resolutions-stick-flip-the-script

Martin Oscarsson, Per Carlbring ,Gerhard Andersson, Alexander Rozental. “A Large-Scale Experiment on New Year’s Resolutions: Approach-Oriented Goals Are More Successful Than Avoidance-Oriented Goals.” PLOS ONE (First published: December 09, 2020) DOI: 10.1371/journal.pone.0234097

Hengchen Dai, Katherine L. Milkman, Jason Riis. “The Fresh Start Effect: Temporal Landmarks Motivate Aspirational Behavior.” Management Science (First published online: June 23, 2014) DOI: 10.1287/mnsc.2014.1901

 

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