Meet our writers

 







Money April 2018

Legal Ease

Don't Rush in Changing That Which Congress May Well Do Away With

By Jonathan J. David

 

The increased exemption amount was not made permanent by the new tax law. If Congress lets the exemption expire at the end of 2025, then the exemption amount would fall back to its 2017 level adjusted for inflation, which would put you back into a taxable situation. Also, if your estate is likely to appreciate in value, then the new $11.2 million dollar exemption may not be large enough on its own to avoid estate taxes at your death.

* * * * * * *

Powers of attorney are only designed to allow the appointed individual to act on behalf of the principal while that person is alive; once the principal dies, the power of attorney dies with him or her.

 

Dear Jonathan: I am a widower. I have an estate worth approximately $10 million and last year I took steps to eliminate the estate taxes my estate would have had to pay at my death, which would been close to $2 million if I did not implement this plan. With the new tax law that was enacted at the end of last year doubling the estate tax exemption for an individual to $11.2 million, I no longer have an estate tax problem. Should I undo everything I did last year? I am not sure what to do.

Jonathan Says: Since I don't know what type of plan you put in place to eliminate your estate tax liability, I cannot provide you with a specific answer to your question. Generally speaking, however, I would not rush into revising your estate plan because of an increase in the exemption amount for a couple of reasons. First of all, the increased exemption amount was not made permanent by the new tax law which is known, by the way, as the Tax Cuts and Jobs Act, and that new exemption amount is set to expire at the end of 2025 if Congress doesn't act to keep it in place. If Congress lets the exemption expire, then the exemption amount would fall back to its 2017 level adjusted for inflation, which would put you back into a taxable situation. Also, if your estate is likely to appreciate in value, then the new $11.2 million dollar exemption may not be large enough on its own to avoid estate taxes at your death.

I recommend that you consult with an estate planning attorney to review the new tax law with you in more detail and how it may impact your estate plan. This will allow you to make a more informed decision as to whether any changes should be made to your estate plan now as a result of the new tax law. Good luck.

 

Dear Jonathan: Right before my grandmother passed away, she gave me power of attorney to deal with her homeowner's insurance company regarding a claim that had been made on her homeowner's policy. While talking to the homeowner's insurance agent, I explained who I was, that I had my grandmother's power of attorney and that she had just passed away. Once the agent heard that my grandmother had passed away, he said he could no longer talk with me, and that he needed to talk to the personal representative of my grandmother's estate regarding this issue. My grandmother specifically gave me her power of attorney to handle this on her behalf, so I don't understand why he won't talk to me. Can you explain?

Jonathan Says: The homeowner;s insurance agent is correct in that he cannot address your grandmother's insurance claim with you even though you have her power of attorney. This is because the power of attorney your grandmother gave you for the purpose of dealing with this matter became null and void when she passed away. Powers of attorney are only designed to allow the appointed individual to act on behalf of the principal while that person is alive; once the principal dies, the power of attorney dies with him or her.

If your grandmother's house was titled only in her name, then it will need to be probated. If your grandmother left a will, the person she named as her personal representative, upon being appointed by the court, will have authority to deal with the insurance company regarding the claim. If your grandmother did not have a will, then someone will need to petition the probate court to be appointed her personal representative.

If, on the other hand, your grandmother transferred her home to a trust she created, then whoever is named as the trustee of the trust will be the one who has the authority to deal with the insurance company regarding the claim.

Whoever is named as the personal representative of your grandmother's estate or the trustee of her trust, as the case may be, whether it is you or someone else, should consult with an attorney who practices in the areas of probate and trust administration. Based on the information provided to that attorney, he or she will be able to determine which type of administration would be required, probate or trust, and then provide assistance with that administration, as well as help with the settlement of the insurance claim. Good luck.

 

Jonathan J. David is a shareholder in the law firm of Foster, Swift, Collins & Smith, PC, 1700 East Beltline, N.E., Grand Rapids, Michigan 49525.

Meet Jonathan