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Las Vegas Estate Planning Law Blog

Simple estate planning mistakes could have major consequences

When it comes to getting end-of-life affairs in order, having a thorough estate plan can be one of the best ways to ensure that you have made your intentions clear. You may consider yourself a thorough person when it comes to planning for any type of event, and the fact that many estate-planning options exist may leave you feeling comforted and excited to start the process.

What you may want to remember, however, is that anyone can make mistakes when it comes to this type of planning. Estate plans involve various areas of law and many legal documents, and even a seemingly simple error could cause considerable problems when it comes time to execute your plan.

Why name a trust as an IRA beneficiary?

When people in Nevada plan for the future, IRAs can be an important part of that planning process. This is true whether people are planning for their retirement years or thinking about the distribution of the remainder of the account as part of their estate. Because of the different ways that inherited and individually owned IRAs are treated under the law, some people may wish to consider naming a trust the beneficiary of their IRAs after death rather than an individual person.

IRAs are among the types of qualified retirement funds that have strong protection from creditors under the 1974 Employee Retirement Income Security Act. Up to $1.25 million of assets are protected from the reach of creditors when they are held in a traditional or Roth IRA under bankruptcy law. However, inherited IRAs are viewed differently than IRAs comprised of a person's own retirement savings. When a person receives an inherited IRA as a beneficiary after the original account creator's death, that account is viewed as a regular asset under the law and does not receive special protections from creditors or bankruptcy.

Estate plans could include frequent flyer miles and reward points

The probate process has made public the content of world traveler Anthony Bourdain's will. Besides bequeathing the bulk of his $1.2 million in assets to his only child, his will granted his frequent flyer miles to his estranged wife. People in Nevada who travel extensively might accrue substantial value in rewards from airlines and other companies, so they might want to include them in their estate plans.

Individual airlines establish the rules regarding whether these rewards can be assigned to another party upon death. When they can be passed on, estate planners classify them as tangible assets. Although people tend to overlook rewards programs when evaluating their assets, a large portion of the population participates in them. A credit card study prepared by Nerd Wallet found that 68 percent of adults earn travel rewards on their credit cards.

Determining what's fair when dividing assets

Nevada residents should know that they can control what happens to their assets after they die. It is important to recognize that no two people may have the same opinion as to what is fair. Regardless of how assets are split, a beneficiary may still believe that he or she was slighted. Ideally, parents will talk about their estate planning decisions with their family members in advance.

When deciding how much to leave to family members, it is worth considering their needs and how they may have been helped in the past. For instance, a struggling child or grandchild may have already received money from a parent or grandparent in the past. However, if other family members are financially secure, it may be possible to leave a struggling family member more money. It is also worthwhile to consider whether to leave anything to help a minor child or grandchild.

How special needs trusts work

Some people in Nevada might want to create a trust for a family member with special needs who gets government benefits. These trusts can be a way to continue helping a person who has special needs without jeopardizing that person's access to those benefits.

In general, a trust is a document that is set up to protect assets. Normally, there are three people involved: the person who sets up the trust, the trustee and the beneficiary.

Your parent died without a will. What happens now?

Did you know that more people across the country don't have a will than do? Many of those people without a will live here in Las Vegas. If you recently lost a parent, it's possible that he or she failed to execute a will and died "intestate," which means without a will.

Without a will, Nevada's intestate laws will govern who inherits your parent's property. Even so, a probate may still be required in order to close the estate and distribute your parent's property.

Revoking or changing a will

State laws vary regarding how wills should be changed or revoked. In Nevada, however, a will can be changed by a formal legal codicil or revoked by physical destruction. There are a number of different circumstances that may lead a person to change or revoke a will.

For example, major life changes such as the birth of a child, marriage or divorce all tend to require a change in the estate plan. However, it is important that these changes are done correctly since an improperly changed or revoked will could cause confusion and make the will more vulnerable to challenges. The ultimate result could be that a person's wishes are not carried out.

Suitable trusts for higher interest rates

An integral part of estate planning involves taking into account current interest rates: Certain types of trusts can be beneficial to the citizens of Nevada during times of low-interest rates, while other types of trusts are better suited for times of high interest rates. With that being said, the past few years, past decade actually, have been dominated by low interest rates, yet this is about to change. As a matter of fact, current interest rates are rising, and they are not showing any signs of slowing down.

As a result of this shifting terrain, it is necessary for estate planners to make use of current trusts that won't be suitable a few years down the road. For instance, a grantor retained annuity trust (GRAT) can benefit from the relatively low interest rates of today in order maximize the grantor's retained interest and reduce the taxable portion of the beneficiary's gift. Similarly, a charitable lead annuity trust (CLAT) can be an ideal solution in a low-interest environment.

Creating a rationale for an estate plan

Some people in Nevada who have a will might want to consider whether it is enough to convey their intentions to loved ones. Often, even with a will and other estate planning paperwork in place, families argue about a testator's intentions. No asset is too insignificant to spark this kind of argument. One brother and sister fought over their father's surfboard in court and ended up spending more than $750,000.

However, it is possible to leave documents for family members that explain the reasoning behind will planning and other decisions. The first step is to make a list of documents, including sentimental items, and their value. Next, a person should write a letter of intent and instruction. This letter explains the rationale behind the estate planning decisions and who receives what. It may reduce the likelihood that family members will challenge elements of the plan by saying they understand what the person really intended to do.

Planning to give with charitable remainder trusts

Many Nevada residents want to do something to continue to benefit a cause or charity they hold dear, even after they pass away. A charitable remainder trust, or CRT, can be an important part of an estate plan that continues to provide income throughout the donor's lifetime and can support other beneficiaries before the remainder passes to a charity. By setting up a CRT, people can benefit from their wealth in order to live on the generated income while planning precisely how their funds will go to support the charity of their choice.

All of this means that a CRT can be part of an estate planning vision but also has a role to play in retirement planning and tax management. When a donor sets up a CRT, he or she can contribute to the trust and receive a partial tax deduction. The deduction is based on the eventual passing of the assets in the trust to a charity. However, the irrevocable trust can provide an income stream for up to 20 years to the donor or to his or her designated beneficiaries. After that time, the principal of the trust will be distributed to the chosen charity.