Avoiding Accidental Disinheritance

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Avoiding Accidental Disinheritance

Thomas C. West, CLU, ChFC Thomas West Financial Services

Kimberly A. Fiske, Esq. Fiske & Harvey, PLLC

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Quiz

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TRUE

or

FALSE

(4)

TRUE

or

FALSE

You can avoid probate on an

asset by owning the asset jointly

with heirs.

(5)

TRUE

or

FALSE

Life insurance proceeds are

subject to federal estate tax.

(6)

TRUE

or

FALSE

Assets passed through wills avoids

probate.

(7)

TRUE

or

FALSE

Jointly held property can pass to

(8)

TRUE

or

FALSE

(9)

TRUE

or

FALSE

Wills supersede beneficiary

designations.

(10)

TRUE

or

FALSE

Gifts to charity can minimize estate

taxes.

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State of Nature in Gift

and Estate Taxes

All transfers of wealth to

somebody else are taxable.

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Five Exceptions to Gift & Estate Tax

1. Gifts to your spouse



_{Unlimited amount}



_{During lifetime}

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Five Exceptions to Gift & Estate Tax

2. At Death Exemption

(up to $5 million)

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Five Exceptions to Gift & Estate Tax

3. Annual gifts up to $13,000



_{Can be made to anyone}



_{Couples can gift $26,000 to same}

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Five Exceptions to Gift & Estate Tax

4. Lifetime Gift Exemption (up to $1 million)

 _{In addition to $13,000 per person}

annual amount

 _{Counts against $5 million at death}

exemption

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Five Exceptions to Gift & Estate Tax

5. Transfer to Charity



_{No transfer tax (gift/estate)}



_{Income tax deduction -}

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Common Mistakes

That Can Trigger

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1. Multi-party bank accounts

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The Jacob Family

 Parents Mary and John

 Daughter Susan

 Son David

 David has two children, Michael and Sarah

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The Jacob Family

 John and Mary’s intent is to have children inherit their brokerage account equally

 John dies

 Mary titles brokerage account jointly with son David and daughter Susan

 David dies

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The Jacob Family



_{Problem: All money}

goes to Susan, none

to David’s children

Michael and Sarah



Solution: Align

multi-party account

ownership with

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Accidental Disinheritance Triggers

2. Beneficiary Designations/

Payable on death

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Widower Sam Abbott

 Sam has two granddaughters, Linda and Michelle

 Wanted to treat them equally when they were young

 Linda and Michelle listed as equal beneficiaries of life insurance policies

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Widower Sam Abbott

 Granddaughter Linda – Teacher of special

needs children, struggles to make ends meet, took care of Sam when ill

 Granddaughter Michelle – Founded

internet company, multi-millionaire, self-absorbed, drifted from family

 _{Sam changed his estate plan to make Linda}

a sole heir, wrote letter to Michelle explaining his decision

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Widower Sam Abbott



Problem: Beneficiary forms for life

insurance were never updated,

documents conflict, life insurance

proceeds inadvertently go to selfish

granddaughter Michelle



_{Solution: Update all beneficiary forms,}

Payable on Death designations when

estate plans change

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Mr. and Mrs. Jones

 Married 30 years, but each has children from former marriages.

 Each name the children of first marriage as beneficiary of their home.

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Mr. and Mrs. Jones

 Mrs. Jones dies.

 House passes to Mr. Jones by deed.

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Mr. and Mrs. Jones (cont’d)



_{Problem: Documents conflict}



_{Solution: Make sure all your}

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No Will



_{The Commonwealth of Virginia}

has a Will for you with a plan on

who will receive your assets



_{Commonwealth selects your}

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No Will (cont’d)

 Married, no children – all to surviving spouse

 Married with children of that spouse – all to surviving spouse

 Married, with children of another

person – 2/3 to children, 1/3 to surviving spouse

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No Will (cont’d)

 Not married, with children – all to children

 Not married, no children – all to your parents. If not living, then to parents’ children (your siblings) & their

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No Will (cont’d)

 Problem: No Will

 _{Solution: Prepare a will so you can}

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Divorce



_{What happens if you divorce after}

you sign your will and forget to

update your will?

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Divorce (cont’d)



_{Will – your former spouse will not}

inherit from you and will not

remain your Executor



If you want to leave money to your

former spouse, you must sign a new

will after the divorce

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Mr. and Mrs. Smith

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Mr. and Mrs. Smith

 Mr. Smith remarried in 1990.

 Mr. Smith dies in 2010.

 He never updated his life insurance

beneficiary form.

(43)

Divorce (cont’d)



Beneficiary Forms – If former

spouse is primary beneficiary,

Virginia treats as if they died first.

Secondary beneficiary takes.



_{UNLESS you divorced before}

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Per Stirpes

Distribution

What happens if your child

divorces after you sign your

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Per Stirpes

Distribution (cont’d)

 Problem: Keep your in-laws from becoming out-laws

 Solution: Use the words PER STIRPES

 Not per stripes

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Invalid Will

 Mrs. James moved from Florida to

Virginia to be

near her children

 She did not

update her estate plan

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Invalid Will

 _{Mrs. James dies}

 _{Probate clerk did}

not accept Florida will

 _{Missing the words,}

“of sound mind”

 _{Find witnesses or}

assets pass per Virginia law

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Invalid Will (cont’d)

 Problem: Florida Will not easily accepted in

Virginia

 Solution: Update your Will if you:

 _{Move to a new state}

 _{Add a family member}

 _{Lose a family member}

 _{Inherit money or experience economic loss}

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Properly naming a charity



_{Charitable bequest means}

charitable deduction for your

estate



Be sure the charitable entity is

properly identified



_{Gift to United Way}

 Local Chapter?

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