In The Media: Dan Ruttenberg Shares 5 Reasons You Should See an Estate Planning Attorney to Avoid Probate Court on ABC 7

ABC 7 reports on how people are losing their property and more in probate court. They turned to SmolenPlevy’s Principal Dan Ruttenberg for tips on how to protect yourself. He advises it’s important to know when it’s time to consult an estate planning attorney to avoid trouble in probate court later.

Here are five signs it may be time to review your estate plan:

  1. If you are older and you do not have a revocable living trust.
  2. If you have a revocable living trust, but your assets are not in it.
  3. If you have assets titled jointly with a sibling or children because you are trying to avoid probate or give them access to your assets in the event you become disabled.
  4. If you have named young children as the beneficiaries on your retirement account or life insurance.
  5. If you have large life insurance policies and they are owned directly by you as opposed to an irrevocable trust.

Watch Ruttenberg on ABC 7 above or click here.

Who should be the guardian of your minor children?

If you have minor children, arguably the most important estate planning decision you have to make is choosing a guardian for them should the unthinkable occur. It’s critical to put much thought into this decision to ensure your children would be cared for as you wish in such a situation.

Evaluating potential candidates
Here are a few issues to consider when evaluating potential guardians:

  • Do they want to serve as guardians?
  • Does your estate plan provide sufficient resources so that caring for your children won’t cause an economic hardship?
  • Do they share your values and parenting philosophy?
  • If they’re married, is the marriage stable?
  • If they have children, do your children get along with them?
  • How old are they in relation to the children? A grandparent or other older person may not be the best choice to care for an infant or toddler, for example.
  • Are their homes large enough to make room for your children?
  • Keep in mind that a court’s obligation is to do what’s in the best interest of your children.
  • The court isn’t bound by your guardian appointment but will generally honor your choice unless there’s a compelling reason not to. It’s a good idea to prepare a letter explaining the reasons you believe your appointees are best equipped to care for your children.

Naming others
It’s also important to choose a backup guardian. Why? If your first choice dies or is unable or unwilling to serve for some other reason, a court will appoint a guardian, and you likely wish to provide some guidance on that as well.

Your estate plan should list anyone you wish to prevent from raising your children. Contact us for more information regarding estate planning for parents with minor children.

Estate Tax Alert: Tax Bill Opens Door to New Options

President Trump just signed the GOP tax bill this morning, which Congress passed on Dec. 20. Officially numbered H.R. 1, and awkwardly dubbed “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” the legislation includes some good news for high-net-worth families seeking to protect and pass along more of their assets tax-free.

The bill essentially doubles the lifetime estate tax exemption, bringing the amount an individual can leave or gift to children or heirs without federal gift or estate taxation to over $11.2 million for an individual and $22.4 million for a couple, thanks to inflation indexing. (Depending on where one lives, however, state estate taxes may still be a factor.)

Timing is key. For those fortunate enough to benefit from these enhanced exemptions, the biggest question is whether or not to take advantage of gifting now. Estate taxation rates are not permanent, regardless of how they are pitched.

This higher exemption applies to tax years 2018 through 2025, but a new administration or Congress is always free to change or eliminate the rate. So, anyone with an estate worth more than $11.2 million — or otherwise more than they need (a difficult call) — should seriously consider the options that are now open to them.

Consulting directly with your tax professional and legal team will help determine what that might mean for you and your family. During these consultations, we recommend talking over questions such as whether and when to make gifts or sales to various types of trusts, how to make gifts go farther, how to fine tune your charitable commitments for maximum win-win to you and the receiving entity, and related issues.

Of course, Jason Smolen and Dan Ruttenberg here at SmolenPlevy are available to assist you in navigating the opportunities and risks created by this latest tax legislation.

Alan Plevy Recognized by Washingtonian in ‘Top Lawyers’ 2017

Mount Kilimanjaro, 2008

SmolenPlevy is pleased to announce Alan Plevy was selected by Washingtonian for its 2017 ‘Top Lawyers’ list in divorce and family law.

The award listing is compiled by Washingtonian’s editorial staff who completes a comprehensive research process and surveys nearly 1,000 attorneys to determine which lawyers should be included on this year’s list. The ‘Top Lawyers’ list is published biennially and recognizes an elite group of Washington, D.C.’s legal talent from 20 select practice areas.

Divorce and Holidays: How to Help the Kids

As seen on Child Mind Institute:

At holiday time we’re inundated with media images of happy families experiencing the holidays together. But the truth is that about 50% of marriages end in divorce; and of the ones that are intact, at least some of them are unhappy. So if those holiday images were more accurate, they’d reflect families that are struggling. In deference to reality, then, here’s some advice for all the families in which the parents don’t get along. You don’t have to be divorced to benefit. You just have to be unhappy with your child’s other parent.

Concept I: Because parents are adults, they need to make sacrifices for their children. And because children are children, they shouldn’t have to make sacrifices for their parents. Think of sacrifices for the benefit of your children as holiday presents.

Present Suggestion No. 1: Be more compromising than you’ve ever been. Give up what you might want or need, and don’t tell the children you’re doing it. Make them think the world is just a good place. So, in the future, they have the confidence to persist at tasks in the face of life’s inevitable obstacles.

Concept II: What’s best for children is not placing them in a loyalty bind, so they don’t have to feel guilty about loving either of their parents. So instead of thinking about how wonderful it would be for you, and your extended family, to have the kids for the holidays, you have to think about what’s going to be best for the kids. And the data here are very clear. The thing that’s best for the kids is to not have the parents fighting with each other. So whatever you can do to avoid a fight is what you should do.

Present Suggestion No. 2: If, as parents, you’re fighting over the specifics of the visitation schedule, one of you might just have to say, “Okay, fine, you can have Christmas Eve and Christmas Day this year, and I’ll make it up next year, because I don’t want to put the kids in the middle of a dispute.” That’s holiday giving. (Plus, you can always consult with your lawyer in January, when things are less hectic.)

Present Suggestion No. 3: Another thing you can do for the kids is to collaborate with your former (or soon to be former) spouse about presents, so there isn’t a competition between you over who gives the best gifts. And please don’t undermine the other parent. If he or she says, “The kids aren’t allowed to have this,” don’t you dare buy it. Be an adult.

Present Suggestion No. 4: To really let your children know that the holidays are about them, each of you should encourage and help them to buy a present or make a card for their other parent. This sends the message that the divorce really was between the adults, and that each parent really, truly wants the children to have a healthy relationship with the other.

FAQ No. 1: Should I, for the sake of the kids, try to celebrate the holidays with my ex?

It works for some couples, but only those who have relatively comfortable, low-conflict divorces. High-tension situations should be avoided, however, which means that if there’s a lot of animosity, don’t pretend there isn’t. That will just confuse your kids—or even worse, if things don’t go well, expose them to conflict. If parents still hate each other, they should definitely celebrate separately.

FAQ No. 2: What about the extended family?

Your parents need to understand that the children are in a difficult situation, caught between two families. If the children want to be with one set of grandparents because they rarely get to see them, the other set shouldn’t take it personally. This isn’t a competition over which parent (or grandparent) the kids love the most—it’s about which parent (or grandparent) most loves the kids. Who is going to make the most sacrifices for the well-being of the children?

FAQ No. 3: Should I ask the kids who they want to spend the holidays with?

If the kids are teenagers that’s probably a good idea, but for kids younger than 12, I think it’s easier on them if you make the decisions.

How you divide up the holidays depends on the age of the kids. Before children are 4 or 5 years old, what they’re going to primarily respond to is the emotional tone of the situation, so what matters is what feels fair, to them and both parents. Kids from 5 to 10 or 12 are pretty literal, so they might be most comfortable spending equal amounts of time with each parent. By the time kids are teenagers, they’re able to think about what’s best in a much broader, more abstract way, and they’re more capable of making their own decisions (not all the time, but most of the time).

So you could think of it this way: For the youngest kids you want to do what feels right, for the next older group of kids you want to do what appears right, and for teenagers you want to do what is right.

A dynasty trust keeps on giving long into the future

With a properly executed estate plan, your wealth can be enjoyed by your children and even their children. But did you know that by using a dynasty trust you can extend the estate tax benefits for several generations, and perhaps indefinitely? A dynasty trust can protect your wealth from gift, estate and generation-skipping transfer (GST) taxes and help you leave a lasting legacy.

Dynasty trust in action
Transfers that skip a generation — such as gifts or bequests to grandchildren or other individuals two or more generations below you, as well as certain trust distributions — are generally considered to be GSTs and subject to the GST tax (on top of any applicable gift or estate tax). However, you can make GSTs up to the $5.49 million (in 2017) GST exemption free of GST tax.

Your contributions to a dynasty trust will be considered taxable gifts, but you can minimize or avoid gift taxes by applying your lifetime gift tax exemption — also $5.49 million in 2017.

After you fund the trust, the assets can grow and compound indefinitely. The trust makes distributions to your children, grandchildren and future descendants according to criteria you establish. So long as your beneficiaries don’t gain control over the trust, the undistributed assets will bypass their taxable estates.

Enhancing the benefits
To increase the benefit to future generations, you can structure the trust as a grantor trust so that you pay any taxes on the trust’s income. The assets will then be free to grow without being eroded by taxes (at least during your lifetime).

Also consider further leveraging your GST tax exemption by funding the dynasty trust with life insurance policies or property that’s expected to appreciate significantly in value. So long as your exemptions cover the value of your contributions, any future growth will be sheltered from GST tax, as well as gift and estate tax.

Is a dynasty trust right for you?
If establishing a lasting legacy is an estate planning goal, a dynasty trust may be the right vehicle for you. Even if an estate and GST tax repeal is passed as part of the GOP’s proposed tax reform legislation, the repeal might be only temporary. So this planning technique could still make sense. Before you take action, consult with us, because a dynasty trust can be complicated to set up. We’ll also keep you apprised of any legislative news regarding an estate and GST tax repeal.

SmolenPlevy Recognized Among 2018 ‘Best Law Firms’ by U.S. News & World Report

SmolenPlevy is honored to announce the firm’s inclusion once again in the 2018 “Best Law Firms” ranking published by U.S. News & World Report and Best Lawyers. SmolenPlevy is recognized for its outstanding work in the areas of family law, family law mediation, business organizations, and trusts and estates.

The “Best Law Firms” ranking complements the 2018 edition of “The Best Lawyers in America,” where four attorneys, Jason Smolen, Alan Plevy, Daniel Ruttenberg and Kathryn Dickerson, are recognized. Jason Smolen is honored as Best Lawyers® 2018 Business Organizations “Lawyer of the Year” for Washington, D.C.

The U.S. News & World Report – Best Lawyers 2018 Best Law Firms rankings are based on a rigorous evaluation process that includes the collection of client and lawyer evaluations, peer review from leading attorneys in their field, and review of additional information provided by law firms as part of the formal submission process.

Asset Valuations and Your Estate Plan Go Hand in Hand

If your estate plan calls for making noncash gifts in trust or outright to beneficiaries, you need to know the values of those gifts and disclose them to the IRS on a gift tax return. For substantial gifts of noncash assets other than marketable securities, it’s a good idea to have a qualified appraiser value the gifts at the time of the transfer.

Adequately disclosing a gift
A three-year statute of limitations applies during which the IRS can challenge the value you report on your gift tax return. The three-year term doesn’t begin until your gift is “adequately disclosed.” This means you need to not just file a gift tax return, but also:

  • Give a detailed description of the nature of the gift,
  • Explain the relationship of the parties to the transaction, and
  • Detail the basis for the valuation.

The IRS also may require certain financial statements or other financial data and records.

Generally, the most effective way to ensure you’ve disclosed gifts adequately and triggered the statute of limitations is to have a qualified, independent appraiser submit a valuation report that includes information about the property, the transaction and the appraisal process.

IRS-imposed penalties
Using a qualified appraiser is important because, if the IRS deems your valuation to be “insufficient,” it can revalue the property and assess additional taxes and interest. If the IRS finds that the property’s value was “substantially” or “grossly” misstated, it will also assess additional penalties.

A “substantial” misstatement occurs if you report a value that’s 65% or less of the actual value — the penalty is 20% of the amount by which your taxes are underpaid. A “gross” misstatement occurs if your reported value is 40% or less of the actual value — the penalty is 40% of the amount by which your taxes are underpaid.

Before taking any action, consult with us regarding the tax and legal consequences of any estate planning strategies. In addition, we can help you work with a qualified appraiser to ensure your gifts are adequately disclosed.

Charitable giving pièce de résistance: Artwork donations

Charitable giving is a key part of estate planning for many people. If you’re among them and own valuable works of art, they may be ideal candidates for charitable donations during your life.

Generally, it’s advantageous to donate appreciated property because, in addition to gaining a valuable tax deduction, you can avoid capital gains taxes. Because the top capital gains rate for art and other “collectibles” is 28%, plus state income taxes, donating art can be particularly effective.

5 tax-saving tips
If you’re considering donating art, here are five tips that can help you maximize your tax savings:

  1. Obtain an appraisal. Most art donations require a “qualified appraisal” by a “qualified appraiser.” IRS rules contain detailed requirements about the qualifications an appraiser must possess and the contents of an appraisal. IRS auditors are required to refer all gifts of art valued at $50,000 or more to the IRS Art Advisory Panel. The panel’s findings are the IRS’s official position on the art’s value, so it’s critical to provide a solid appraisal to support your valuation. There is also a procedure to obtain a Statement of Value from the IRS.
  2. Donate to a public charity. To maximize your charitable deduction, donate artwork to a public charity, such as a museum or university with public charity status. These donations generally entitle you to deduct the artwork’s full fair market value (provided the related-use rule is also satisfied). If you donate art to a private foundation, your deduction will be limited to your cost. There are also percentage limitations on your deduction based upon your adjusted gross income (AGI), which in the best of circumstance is deduction up to 50% of your AGI.
  3. Understand the related-use rule. For you to qualify for a full fair-market-value deduction, the charity’s use of the donated artwork must be related to its tax-exempt purpose. So, for example, if you donate a painting to a museum for display or to a university for use in art history research, you’ll satisfy the related-use rule. But if you donate it to, say, an animal shelter to auction off at its fundraising event, you won’t satisfy the rule and your deduction may be limited to your cost basis.
  4. Transfer the copyright. If you own both the work of art and the copyright to the work, you must assign the copyright to the charity to qualify for a charitable deduction.
  5. Consider a fractional donation. If you’re not ready to give up your artwork but are willing to part with it temporarily, consider donating a fractional interest. This allows you to generate tax savings while continuing to enjoy your art for part of the year. For example, if you donate a 25% interest in your art collection to a museum, the museum receives the right to display the collection for three months of each year. You deduct 25% of the collection’s fair market value immediately and continue to display the art in your home for nine months of each year.

Leave it to the professionals
The rules surrounding donations of art are complex. We can help you achieve your charitable goals while maximizing your tax benefits whether you wish to donate artwork or other valuables.

IN THE MEDIA: SmolenPlevy Principals On Air to Discuss Sharing Your Child’s Expenses After Divorce

It’s back-to-school season, and for divorced or separated parents, the question is: Who is paying for the expensive TI-84 calculator their child needs for class? Alan Plevy is featured on WTOP and Mandy Walker’s popular Since My Divorce blog to weigh in on what is covered with child support and how parents can decide who will pay for out-of-pocket expenses. Kyung (Kathryn) Dickerson shares her own insights on these complex family law issues on WUSA 9’s Great Day Washington.

Child support doesn’t cover the costly tab of #2 pencils, paper, clothes and computers, which runs on average about $600 per child, adding more stress to what can already be a tense situation between parents. Plevy says cooperation goes a long way to helping exes–and their children handle back-to-school season.

Plevy says there are typically two ways parents can decide to handle back-to-school expenses: Split the expenses down the middle, or use the same income ratios often used for reimbursement for medical expenses. “For instance, one parent may have 66 percent of the income, so one parent pays 66 percent of the cost, and the other pays 33 percent of the cost.”

For divorced or separated parents struggling to provide normalcy for their children, “This actually forces the parents to come together and try to talk about these expenses,” Plevy said. “Sometimes they’re able to do it, sometimes they’re not, but if they’re not it’s really the children who suffer.”

Listen to Alan Plevy on WTOP Radio and on the popular podcast Since My Divorce:

Watch Kathryn Dickerson on WUSA 9’s Great Day Washington: