Estate Planning | Merriman

Where To Start With Estate Settling

by Aaron Spencer | Sep 21, 2021 | Aaron Spencer, Caring for Dependents, Estate Planning, Family Talk, Tech Focus, Wealth Transfer

Over the 25 years or so that I have been practicing and serving families, one of the crucial points that has surfaced time and again with clients is one that tends to occur after a spouse or family member has passed away, and they seek out our help. Quite understandably, most people have little or no experience in settling an estate and essentially do not know what needs to be done. There are a myriad of actions to be accomplished, each one of them important, and no one knows in what order tasks need to be completed, let alone how to weave through the legal dynamics. So what can we do to help?

About 10 years ago, I finally grew so frustrated with not being able to help several of my client families settle estate matters after a death that I decided I was going to solve the matter myself. I went back through all of my estate planning books to seek out as many action items as I could locate. In addition, I went through dozens of other legal and financial websites to gain as much knowledge as I could. The problem was not in locating information on estate settling but rather not to drown in the vastness of it. Ultimately, I realized that my task was to consolidate and distill as much information as possible into a short and clear format that we could share. The result was a composition of knowledge written in simple English that went through peer review multiple times to create a master end-of-life checklist.

The “Checklist: After a Death Occurs” was constructed to assist our clients and their families so they could understand most of the basic estate settling matters that must be pursued after a loved one has passed. The document is arranged in a priority-driven format, so from top to bottom, front to back, the most important estate marshalling activities are listed first. The current iteration is about six pages long and contains an additional short checklist at the end for a surviving spouse.

There is also a third checklist that we created in addition to these main two. The third list is a pre-mortem checklist for someone who is ailing or terminally ill, designed to assist family members with estate matter topics while the individual is still alive. We hope these tools will be useful to you and your family, and we would love to hear back if they help.

Disclosure: The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Merriman cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Merriman does not provide tax, legal or accounting advice, and nothing contained in these materials should be relied upon as such.

Filling the Various Estate Planning Roles

by Lowell Parker | Aug 23, 2021 | Advisors, Caring for Dependents, Estate Planning, Lowell Parker, Wealth Transfer

At Merriman, we partner with our clients to ensure no stone goes unturned with respect to their complete Wealth Management plan. One of the more complicated issues clients face is crafting and updating their estate plans.

This is not surprising as estate planning preparation and upkeep come with difficult questions—both qualitative and quantitative. The burden of these questions can often drive folks to put off the discussion and leave their plan vulnerable. The purpose of this brief post is to let you know that it does not have to be so difficult.

This article serves as a starting point to initiate the estate planning discussion. It is a discussion of the various estate planning roles you need to fulfill. Like most things, having a process and a plan will lead to peace of mind and planned success.

Let’s start with the various roles that need to be filled:

Guardian
Trustee
Financial Power of Attorney (POA)
Medical POA
Executor/Personal Representative.

One commonality for all these roles is proximity. If you can find someone close, that is a prudent solution. For example, in selecting a guardian for your children, it is best they are local to avoid changing schools, establishing new friends, etc. Similarly, if there is property to sell in your estate, it is best to have a local executor, as opposed to having someone across the country who is unfamiliar with the local scene and would have to travel extensively to manage the estate.

A Guardian is someone who looks after and is legally responsible for your children until they are adults. This person should embody all the traits you would want in someone who will take care of your kids in the event you are no longer around. Often, this is a family member with close proximity (as outlined above). Keeping your kids in their current environment is so important, especially when they are already trying to deal with your absence.

A Trustee is the person who has control or powers of administration over the trust assets in your estate. The trust assets do NOT belong to the Trustee. Rather, the Trustee is safeguarding the assets per the terms of the trust and for the trust benefactors.

The role of Executor “triggers” if one or both spouses pass away. This person’s job is to fulfill all of the requests and wishes as outlined in your will. This person should have high financial competence and a good understanding of what you own and how you want your assets distributed. Technically, they will follow the wishes as outlined in your estate plan. However, we advise clients to draft a less formal letter of instruction to confirm your wishes are carried out as precisely as possible.

The next two items are in effect during your lifetime. A Financial POA grants that person the ability to make financial decisions on your behalf if/when you no longer have the ability to do so of your own accord. A Medical POA functions the same but is related to medical decisions. Both of these roles should be set up with your initial estate plan.

If you have already crafted your estate plan, take a few minutes to consider who is currently filling these roles. Are they still the right person for the job? If not, who is better suited? If changes are required, let your estate planning attorney know and get to work on updating your documents. If you have yet to complete your estate plan, consider who would best serve in the aforementioned roles. If you already have an estate planning attorney, get to work on crafting your plan. If not, let us know, and we can connect you with one.

Another tool you can use to begin to formulate your plan is our “After Death Occurs” checklist. While this outlines a post-mortem list, it also serves as a great tool to get you thinking about the roles described above.

At Merriman, our goal is to ensure clients’ plans are buttoned up from top to bottom. While we emphasize financial planning and investment portfolio management, we also partner with our clients to ensure they are covered in the areas of estate planning, taxes, and insurance. Ensuring your estate plan is taken care of will provide peace of mind on your journey to Investing Wisely to Live Fully.

For additional reading on this topic, check out our ebook The Transparent Legacy for advice on conversations you must have with your loved ones before it’s too late.

Disclosure: The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Merriman cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Merriman does not provide tax, legal or accounting advice, and nothing contained in these materials should be relied upon as such. Advisory services are only offered to clients or prospective clients where Merriman and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Merriman unless a client service agreement is in place.”

Inheriting an IRA? New Rules to Consider Under the SECURE Act

by Jeff Barnett | Aug 25, 2020 | Estate Planning, Jeff Barnett, Tech Focus, Wealth Enhancement

The Setting Every Community Up for Retirement Enhancement (SECURE) Act passed in late 2019, creating significant retirement and tax reforms with the goal of making retirement savings accessible to more Americans. We wrote a blog article detailing the major changes from this piece of legislation.

We’re going to dive deeper into some of the questions we’ve been receiving from our clients to shed more light on topics raised by the new legislation. We have divided these questions into six major themes; charitable giving, estate planning, Roth conversions, taxes, stretching IRA distributions, and trusts as beneficiaries. Here is our sixth of six installments on inherited IRAs.

I’m about to inherit an IRA. Will these changes mean I pay more taxes?

Before the SECURE Act was signed into law, non-spouse IRA beneficiaries were able to stretch RMDs over their lifetime with annual RMD calculations based on their life expectancy. However, the implementation of the SECURE Act requires non-spouse beneficiaries to distribute an inherited IRA within 10 years following the death of the original owner. Inherited IRAs left to minor children must also be fully distributed within 10 years of the beneficiary reaching the age of majority.

Distributing your inherited IRA balance over 10 years instead of over your lifetime will accelerate your receipt of income. If you inherit a large Traditional IRA, income from your inherited IRA could push you into a higher tax bracket and increase your tax rate. We can help you plan the best way to distribute income from your inherited IRA within 10 years relative to your income and tax situation each year to minimize additional taxes.

For example, an individual who is earning a gross income of $150k per year would fall in the 24% marginal tax bracket after claiming the standard deduction. However, adding annual $100k+ distributions from a $1.0 million inherited IRA balance that must be distributed over 10 years will push that person into the 35% tax bracket. If income fluctuates over that period, there may be opportunities to take additional distributions in lower income years to minimize overall taxes on the inherited IRA.

We can help you avoid running afoul of the new SECURE Act requirements by evaluating your income and taxes to develop the best strategy for adhering to the latest rules for your inherited IRA.

As with all new legislation, we will continue to track the changes as they unfold and notify you of any pertinent developments that may affect your financial plan. If you have further questions, please reach out to us.

First Installment: I’m Planning to Leave Assets to Charity – How Does the SECURE Act Change That?

Second Installment: How to Optimize Your Accounts After the SECURE Act

Third Installment: Must-Know Changes for Your Estate Plan After the SECURE Act

Fourth Installment: How to Circumvent the Demise of the Stretch: Strategies to Provide for Beneficiaries Beyond the 10-year Rule

Fifth Installment: The SECURE Act: Important Estate Planning Considerations

Disclosure: The material provided is current as of the date presented, and is for informational purposes only, and does not intend to address the financial objectives, situation, or specific needs of any individual investor. Any information is for illustrative purposes only, and is not intended to serve as personalized tax and/or investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Investors should consult with a financial professional to discuss the appropriateness of the strategies discussed.

The SECURE Act: Important Estate Planning Considerations

by Paige Lee | Jul 28, 2020 | Estate Planning, Paige Lee, Tech Focus, Wealth Transfer

The Setting Every Community Up for Retirement Enhancement (SECURE) Act passed in late 2019, creating significant retirement and tax reforms with the goal of making retirement savings accessible to more Americans. We wrote a blog article detailing the major changes from this piece of legislation, which we recommend reading prior to this series.

We’re going to dive deeper into some of the questions we’ve been receiving from our clients to shed more light on topics raised by the new legislation. We have divided these questions into six major themes; charitable giving, estate planning, Roth conversions, taxes, stretching IRA distributions, and trusts as beneficiaries. Here is our fifth of six installments on how the SECURE Act could impact you.

I set up a trust to protect this money for my children after I pass. What impact will the SECURE Act have on this?

If you have significant retirement plan assets, you may have considered naming a trust as the beneficiary of your IRA. Trusts can provide asset protection from creditors and ensure that beneficiaries cannot receive all inherited assets at once. This aspect of control is appealing to many parents or grandparents who want assurance their heirs won’t be able to quickly spend down an inheritance. Previously these trusts would have been set up as pass-through or conduit trusts that allowed Required Minimum Distributions (RMDs) to pass through to the beneficiary over the course of their lifetime.

Under the new rules of the SECURE Act, most non-spouse beneficiaries are no longer subject to yearly RMDs, but they are required to distribute all funds by the end of year 10. there are no RMDs for most non-spouse beneficiaries until year 10. Conduit trusts would now hold IRA assets within the trust for 10 years and then distribute the entire account balance at once at the end of the 10 year period. This means that trusts previously set up to protect children or grandchildren from having access to inherited IRA assets all at once no longer serve this purpose. There are also significant tax implications to all assets being paid out as income in one year.

If it is important to you that beneficiaries receive an inheritance over a longer period and not all at once, there are a couple of strategies you might consider:

A discretionary or accumulation trust can retain IRA funds, even after 10 years. The downside is that income retained within these types of trusts are taxed at high trust tax rates. However, this is a potential solution if control of assets is much more important than minimizing taxes.
Some are turning to life insurance products as a way to leave assets to a trust. Since there are no RMDs and the proceeds are tax-free, this option provides a lot more flexibility around how funds are distributed.

If you’ve named a trust as a beneficiary to an IRA, we recommend reviewing your estate plan with an attorney.

As with all new legislation, we will continue to track the changes as they unfold and notify you of any pertinent developments that may affect your financial plan. If you have further questions, please reach out to us.

First Installment: I’m Planning to Leave Assets to Charity – How Does the SECURE Act Change That?

Second Installment: How to Optimize Your Accounts After the SECURE Act

Third Installment: Must-Know Changes for Your Estate Plan After the SECURE Act

Fourth Installment: How to Circumvent the Demise of the Stretch: Strategies to Provide for Beneficiaries Beyond the 10-year Rule

Sixth Installment: Inheriting an IRA? New Rules to Consider

Disclosure: The material provided is current as of the date presented, and is for informational purposes only, and does not intend to address the financial objectives, situation, or specific needs of any individual investor. Any information is for illustrative purposes only, and is not intended to serve as personalized tax and/or investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Investors should consult with a financial professional to discuss the appropriateness of the strategies discussed.

How to Circumvent the Demise of the Stretch: Strategies to Provide for Beneficiaries Beyond the 10-year Rule

by Phuc Dang | Jul 7, 2020 | Estate Planning, Phuc Dang, Wealth Enhancement, Wealth Transfer

The Setting Every Community Up for Retirement Enhancement (SECURE) Act passed in late 2019, creating significant retirement and tax reforms with the goal of making retirement savings accessible to more Americans. We wrote a blog article detailing some of the high-level changes from this piece of legislation.

We’re going to dive deeper into some of the questions we’ve been receiving from our clients to shed more light on topics raised by the new legislation. We have divided these questions into six major themes; charitable giving, estate planning, Roth conversions, taxes, stretching IRA distributions, and trusts as beneficiaries. Here is our fourth of six installments on stretching IRA distributions.

One of the major changes from the SECURE Act was the elimination of the ‘stretch’ IRA, which allowed beneficiaries to take retirement account distribution over their lifetime to spread out the income. While a limited number of beneficiaries still have this option (see blog article referenced above), the act has replaced this option for the vast majority of beneficiaries with a new 10-year payout rule, requiring the retirement account to be emptied by the end of the 10th year following the year of death. This will significantly shortening the distribution period on those retirement accounts and require the beneficiaries to recognize income more quickly than they would have had to do before.

Now that the stretch has been eliminated for IRAs, are there other options for my beneficiary to receive the income over a period longer than 10 years?

Since the law is only a few months old, new strategies are still being considered to address the compressed distribution schedule for non-spouse beneficiaries. A few strategies have gained traction, but they require intentional actions by the account owner before a death occurs. They include:

Designating a charitable remainder trust as the beneficiary on the IRA. The CRT can pay a lifetime income stream to a person (or persons) of the IRA owner’s choice, but any residual balance will be retained by the charity. This option works best for owners who are already charitably inclined.
Consider tactical bequests. For example, leave Traditional IRAs to spouses (since they still have the stretch distribution options) or to charity (since they don’t pay taxes, so the compressed distribution won’t matter to them) but leave Roth IRAs, after-tax accounts, or real estate assets to non-spouse beneficiaries.
Take larger IRA distributions during your lifetime to purchase life insurance which can be paid to a trust. Since the life insurance proceeds are post-tax assets, there would be no time requirement on the trust distribution. The trust can even be set up as an Irrevocable Life Insurance Trust to keep the insurance proceeds out of the decedent’s estate if federal or state estate taxes are a concern.

Each of these strategies require careful consideration but can potentially provide your beneficiaries with income beyond the next decade. We recommend speaking with your financial advisor or estate planner if you think any of these strategies may be appropriate for you.

First Installment: I’m Planning to Leave Assets to Charity – How Does the SECURE Act Change That?

Second Installment: How to Optimize Your Accounts After the SECURE Act

Third Installment: Must-Know Changes for Your Estate Plan After the SECURE Act

Fifth Installment: The SECURE ACT: Important Estate Planning Considerations

Sixth Installment: Inheriting an IRA? New Rules to Consider

Disclosure: The material provided is current as of the date presented, and is for informational purposes only, and does not intend to address the financial objectives, situation, or specific needs of any individual investor. Any information is for illustrative purposes only, and is not intended to serve as personalized tax and/or investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Investors should consult with a financial professional to discuss the appropriateness of the strategies discussed.

Crafting A Family Legacy Letter

by Merriman | Jun 16, 2020 | Estate Planning, Family Talk, Living Fully, Wealth Preservation

As we’re experiencing such a strange and challenging time, many people find themselves wondering what their families did in the past to get through difficult economic times. We may remember little snippets of stories told by our elders or passed on through our family, but often wish we knew more.

As wealth advisors we know firsthand the importance of legacy planning through legal documents and also believe in the value of sharing the essence of who you are for future generations to come. In this document, we provide ideas on how to craft a Family Legacy Letter to share your life story, personal values, beliefs, and advice for future generations.

Now is a great time to pass on your values and share experiences with your heirs.