Will State “Death Taxes” Shrink Your Estate?

The federal estate tax has affected relatively few people in recent years, but many states tax estates at death, and your assets could be affected.  Some states impose inheritance taxes, in which heirs are divided into beneficiary classes.  Those with the closest relationship typically receive larger exemptions and pay tax at lower rates.  Other states impose an estate tax similar to the federal estate tax, but with exemptions much smaller than those provided by the federal system.

At last count, 23 states and the District of Columbia had a death tax, meaning 27 states do not.  But keep in mind that taxes may be imposed on real estate or personal property that you own outside your home state (vacation property, for example).  State “death tax” laws change periodically, and you should consult your advisers for the current tax situation in states where any of your assets are located.  Here are the states with “death taxes” at time of publication: CT, DE, DC, IL, IN, IA, KS, KY, ME, MD, MA, MN, NE, NJ, NY, NC, OH, OK, OR, PA, RI, TN, VA, WA.

In general, state death tax laws allow deductions for property passing to qualified charitable organizations.

 

Protecting Against the Costs of Long-Term Illness

The expense of catastrophic illness and long-term nursing home care ranks as one of the major concerns of aging Americans and their families. Most thoughtful people, upon reflection, would prefer not to have health care costs deplete their life savings, effectively disinheriting family members.

What can a person do?  It's important to make your plans as early as possible.  Long-term care insurance is a practical approach.  Policies today cover a wide range of options, from home care and assisted living facilities up to the higher levels of care provided by nursing homes.  Insurance costs depend on many factors, especially the age when you purchase the policy.   Benefits commonly continue for three years, with increases for inflation built in, and would begin after a 90- or 100-day “elimination period.”        
  
You should carefully investigate the companies and policies before buying.  Insurance premiums will vary state to state, as will the costs of care.  The most important step you can take is to see an insurance broker who works with a number of companies and can help you sort through the options and costs.

Note: Recent tax law changes encourage the purchase of long-term health insurance by making premiums deductible as medical expenses up to certain maximum amounts, based on a person’s age.  Deductions are indexed annually for inflation.

 

Check with Charities When Making Estate Gifts
Many gift officers report that three out of four charitable bequests arrive without prior announcement from donors or their advisers.  For the most part, no problems occur, but sometimes “surprise” bequests are ineffective because donors did not have an organization’s correct legal name, or restricted the gift to purposes that could not be carried out.  Here are some famous (or infamous) examples:

• A donor made a will that left a significant bequest “to the University of Southern California, also known as UCLA” (the man had ties to both schools, which eventually divided the gift);
• A resident of a retirement community left funds to the local hospital, restricted to the purpose of establishing a birthing facility (most residents of the area were long past child-bearing age).

Donors who wish to benefit the local chapter of a national organization through their estate plans should inquire whether they need a special will provision to keep their funds “local.” 

We encourage friends to inform our office if they have made, or are planning to make, gifts through their estate plans.  We will be pleased to work with you and your advisers to arrange an estate gift that is purposeful, practical and personally satisfying.    All communications with our office will be kept completely confidential.  Sharing the good news of your bequest will also help us better plan for the future and evaluate the success of our planned giving program – and give us a chance to express our deep gratitude.  A short note, e-mail or telephone call to our office will be much appreciated…and you’ll brighten everyone’s day!

Getting Started in Estate Planning

Most people agree they need a will, but many never get around to doing anything about it.  Will planning generally starts with a call to an attorney, but it’s important to put your thoughts together before that first meeting.  Here is a worksheet that may help:

My Will Planning Objectives

Check the goals that apply to you and assign priorities (1, 2 or 3), with one (1) being the highest.
__ I wish to provide for the financial security of my surviving spouse/partner.  PRIORITY_______
__ I want to ensure that my children or other dependents are cared for and educated. PRIORITY_____
__ I want to make bequests to adult children or others.  PRIORITY _______
__ I want to provide for a family member or friend who has special needs.  PRIORITY ________
__ I want to minimize state/federal “death taxes” and income taxes on my estate.  PRIORITY______
__ I want to arrange for the continuation of my business.  PRIORITY _______
__ I want to leave a personal message to my friends or family (an “ethical will”).  PRIORITY______
__ I want to arrange for healthcare decisions should I become incapacitated.  PRIORITY ______
__ I want to name someone to handle financial matters if I’m incapacitated.  PRIORITY _______
__ I want to provide in my estate plan for the organizations I support.  PRIORITY ______
__ I’m interested in charitable gifts that provide lifetime benefits to me or my family. PRIORITY ______
__ Other: ____________________________________________________PRIORITY_______
__ Other: ____________________________________________________PRIORITY _______
__ Other: ____________________________________________________PRIORITY _______

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