When the subject of inheritance is being discussed, people almost always ask this question to their Will and Trust lawyer in Cobb County Here’s what you need to know about how you might be taxed on an inheritance.
The IRS expects you to report every source of income. This leads many to believe that they will have to claim an inheritance when they file their annual returns. Good news! An inheritance is not counted as part of your income for tax purposes.
Capital Gains Tax
The capital gains tax kicks in any time a gain is achieved. So, if you buy a dilapidated house to renovate with plans to immediately sell it, the amount of money over the original purchase price would be subject to the capital gains tax.
Inherited assets that appreciated during the life of the benefactor would get a step-up basis. This means that the value of the inherited asset would be subject to capital gains tax from when you inherited them. Good news! You would not be responsible for the gains that took place during the life of the person who left them to you. The key here is to understand that if you do realize a gain in the future, you will be responsible for the capital gains tax from the moment you acquired the asset.
A spouse can transfer unlimited assets to their spouse tax-free. However, there is a federal estate tax that will be applicable to anyone else. Asset transfers that exceed $5.45 million are subject to the estate tax.
One positive I can report is that here in Georgia we do not have a state-specific tax.
So, there you go. You should now have a good idea about whether the money you plan to leave your loved ones will be taxed. The good news is that there are legal methods for reducing your tax burden if you are subject to them. We invite you to call our Cobb County Will and Trust attorneys at 770-425-6060 to schedule an appointment where we can help you create an estate tax plan that best meets your needs.
Trusts lawyers in Atlanta have the important job of helping their clients create a legacy that is compliant with a number of different laws. For the most part, these laws will vary from state to state. Some differences are minor, while others can impact the trust significantly. Someone who already has established a trust in one state may very well want to at least review it with a trusts lawyer when relocating to another.
For example, if you have created a trust in Georgia but then move to Florida for retirement, it’s a good idea to meet with a trusts lawyer in your new city. Likewise, someone moving from somewhere else in the U.S. to metro Atlanta should contact a Georgia trust lawyer to review the documents and potentially amend them to meet the law here.
Most often, when a trust is administered, it is done so under the laws of the state where the person resides. This can get a little tricky if you have residences in two states—say, if you’re a “snowbird.” In those situations, it’s best to work with trusts lawyers in both states. The changes needed may be as small as a little wording, but they could also be more complicated.
There are some estate planning documents that should always be addressed with a trusts lawyer when moving to a new state. Powers of attorney are vital for determining who can represent you should you become incapacitated, and those are administered under state law. Powers of attorney drawn up by a trusts lawyer in Atlanta may be disregarded by the courts in another area.
A final consideration in the discussion of where to establish a trust is the tax implications. By working with a good trusts lawyer, you can uncover which state may hold the best benefits for you, your estate, and your heirs. It is possible to have trusts set up in more than one state, though the complexities of doing so are absolutely something that should be done with the guidance of a knowledgeable professional with plenty of experience in trusts administration.
To schedule an appointment for a complimentary Georgia Family Treasures Planning Session to help you review or create your estate plan, at one of our five metro Atlanta offices, we invite you to call 770-425-6060 to get started
If you’d like to give your loved ones and yourself the gift of peace of mind, please call Steve at 770-425-6060 or 770-421-0808 or email him at firstname.lastname@example.org.
Will and trust lawyers in Marietta see plenty of situations where parents who love their children are not entirely in love with their children’s spouses. This can make the estate planning process a little tricky, because the spouse can add tension and stir up drama that wouldn’t have been there otherwise. While some people include their sons-and-daughters-in-law in the planning process, it’s not all that unusual to leave them out.
For the most part, the son-in-law or daughter-in-law isn’t even mentioned in the will. They don’t really even have any legal standing to inherit from the parent unless they are specifically named. So, the parent would name his or her own child, but not the child’s spouse. If the adult child was no longer living, the property would probably end up being inherited by the grandchildren, rather than the spouse.
That’s not to say that a child’s spouse couldn’t end up with an inheritance. If the parents were to leave assets to the adult child and then the adult child passed away, his or her property would likely go to the spouse, and that includes what was inherited from the parents. One would hope that this property would eventually be passed on to the grandchildren (assuming there are grandchildren), but this is not a given, as the spouse would have the legal right to do whatever he or she wanted with it. In fact, if the spouse remarried, his or her new spouse would be the legal choice to inherit any property that was left behind, including that which was inherited this way.
So, can a Marietta will and trust lawyer keep your child’s spouse out of your plan entirely? Yes! You can work with your attorney to develop an inheritance trust that will protect any money you leave your kids from divorce, lawsuits, and creditors and keeps your money in the family.
Creating an estate plan can be emotional and having the additional drama of a difficult personality certainly won’t help matters any. On the other hand, you may absolutely adore your son-or-daughter-in-law and want to make sure that they are taken care of by your estate. In those cases, you will want to make sure that your Marietta GA estate planning lawyer specifically mentions them and what they are inheriting for your own peace of mind.
It’s always a great feeling when a new client meets with a wills and trusts attorney in Marietta to get started on his or her estate planning. Every day, people in Marietta recognize the importance of putting a plan into place to prepare for their own futures as well as those of their heirs. Wills and trusts are two very important tools that the client and lawyer can create to protect that future. As important as that initial meeting is, however, there is still a need to follow up regularly to keep your wills and trusts updated and reflective of your current situation.
There are some times when it is obvious that your wills and trusts should be updated, but there are other times that are easier to overlook.
Major Life Changes
When there is a major change in your life, it’s time to call your Marietta wills and trusts lawyer. These types of changes, such as a marriage, divorce, or birth of a child may dramatically affect who you want to name as beneficiaries.
Health situations are also another big indicator that it’s time to update your wills and trusts. Medical care can be incredibly expensive, and you may need to rearrange your plans to accommodate the costs. If dealing with a terminal illness or potentially life-threatening treatment, it also makes sense to ensure that your plans reflect your wishes.
Many Purchases Should Trigger Updates
Wills and trusts lawyers are able to help clients lay out a plan based on what the client has at the time. When your situation changes through major purchases (or sales) of real estate or other valuable assets, you should update your estate plan to reflect those changes. You want to ensure that the asset is included in your will or protected by your trust.
Purchases of, or changes in insurance policies, will likely also lead to a call to your Marietta attorney. These purchases will affect what you have to leave behind and will need to be reflected in your estate plan.
While you may not need to make changes with your Marietta wills and trusts attorney every year, it’s still a good idea to do an annual review of all your estate planning materials. In addition to refreshing yourself on what is there, your lawyer will also be able to advise you on any laws that have recently changed that might affect decisions you’d previously made. Just reading over the documents may be enough to notice a change that needs to be made. Not only does this give you an opportunity to make sure your plans still fit your needs, but by keeping them up-to-date, you are strengthening your will against being invalidated later. After all, if you’ve worked with an attorney to keep the wills and trusts fresh and in accordance with the most recent life changes, they are likely to reflect your true intentions.
This is the fourth in a series of articles on what to expect when you work with your Atlanta estate planning lawyer. Each article will cover several of the topics that you will need to consider to make a plan that works for your needs.
In this series, we have covered estate planning considerations for incapacitation and death, and for the most part, they’ve been the more commonly thought-of items. Yet, there are some other ideas that you will want to discuss with your estate planning lawyer in Atlanta, including:
- Service Providers: In your estate plan, you may want to include a section regarding your service providers. Everything from doctors and dentists to property managers and babysitters could be included here. This gives your loved ones the opportunity to contact these service providers to let them know you won’t be working with them any longer, to clear up any outstanding bills, and to make sure that you don’t continue being billed for a service you no longer use. This might be especially important if you have service providers who are automatically paid from your bank account.
- Memberships: Memberships and subscriptions are an area that is really easy to overlook, and as mentioned above, they can cost your estate! Belonging to a gym, country club, or other kind of organization might call for dues to be taken directly from your bank account, and without knowledge to end your contract, your executor and family members won’t even realize they need to discontinue your memberships or subscriptions.
- Credit Cards and Other Debts: Having a list of credit cards and other debts makes it easier for those left behind to follow up. They’ll want to cancel various accounts, as well as to get totals owed in order to make sure your legal obligations are taken care of before the estate is distributed. Estate planning lawyers in Georgia are familiar with the laws of the state and can guide you on what is expected.
- Keys and Passwords: Most of us have areas in our lives that are somehow secured from others. In the case of your death or incapacitation, you may need to be sure that others have access to these areas. For example, you wouldn’t want to share your online banking password with just anyone, but if someone needs that information to go with their power of attorney, it needs to be accessible. Keys to safe deposit boxes, passwords to accounts, and even the code to your home security system should all be kept somewhere that they can be accessed if necessary.
- Personal Letters: The personal letter part of estate planning is really up to an individual. Some people choose to write special letters that loved ones can keep as mementos. This is a time to share your feelings, offer forgiveness if you haven’t done so in life, or to just let those around you know that you love them.
There are a whole lot of facets to estate planning, and a good estate planning lawyer in Atlanta will be able to help you go over all of these aspects and many more to determine what you need to include in your estate plan.
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It will probably cost more initially to set up a well-drafted living trust than to have a will prepared by an Atlanta wills and trusts lawyer. A true cost comparison should include not only the expense to establish the will or trust, but also what it will cost should you become incapacitated and after you die.
The Key Takeaways:
A living trust document has more provisions than a will because it deals with issues while you are living and after you die, while a will only deals with issues that occur after your death.
A properly prepared and funded living trust will avoid court proceedings at incapacity and death. A will provides no such protection and can, in fact, ensure court intervention at both events, which can be very costly (in time, privacy and dollars) to your family.
Instructions at Death and Incapacity
Both a will and a living trust contain instructions for distributing your assets after you die. But a living trust also contains your instructions for managing your assets and your care should you become incapacitated.
A Living Trust Avoids the Costs of Court Interference at Incapacity and Death
A properly prepared and funded living trust (one that holds all of your assets) will avoid the need for a court guardianship and/or conservatorship if you become incapacitated. The person(s) you select will be able to manage your care and your assets privately, with no court interference.
A will can only go into effect at your death, so it can provide no instructions regarding incapacity. In that case, your family would almost certainly have to ask the court to establish a guardianship and/or conservatorship for your care and your assets—a process that is public, time consuming, expensive and difficult to end.
What You Need to Know. The same living trust document that can keep you out of a court guardianship at incapacity can also keep your family out of probate court when you die. But a will must go through probate. Depending on where you live, this can be costly and time consuming.
Costs to Transfer Assets…Pay Now or Later
There may be some minor costs to transfer assets into your living trust when you set it up, and then from your trust to your beneficiaries after you die. But these will be minimal if you and your successor trustee do much of the work yourselves. With a will, the probate court (with its costs and attorney fees) is the only way to transfer your assets to your heirs after you die. So you can pay now to set up your trust and transfer titles, or you can pay the courts and attorneys to do this for you after you die.
Actions to Consider
- Find out what probate costs are where you live. If your state has a fee schedule based on the value of probate assets, this will be fairly easy. If it has “reasonable” fees, ask an attorney to estimate what these fees would be if you die tomorrow and, if you are married, if your spouse dies the next day.
- Similarly, ask your Atlanta living trust attorney to estimate what the costs would be if you become incapacitated tomorrow and, if you are married, if your spouse becomes incapacitated the next day. (Practically speaking, this will be impossible to estimate because no one will be able to predict how long the incapacity will last or what complications might arise. The mere uncertainty of these costs should give you pause—and propel you to plan for incapacity.)
- Add these estimates to the cost of having a will prepared—and compare that to the cost of a living trust. When you make a true comparison, you may conclude that having a living trust actually costs less than a will.
If you’d like to find out whether a will or living trust is the best vehicle for your Atlanta Georgia estate plan, call us at 770.425.6060 and schedule a Georgia Family Treasures Planning Session with us.