Blog of Utah Laws & Information

IS YOUR ESTATE PLANNING ADEQUATE NOW THAT THE LAW HAS CHANGED?
EVERYONE SHOULD RE-EVALUATE THEIR SITUATION!

Congress has changed the estate tax laws pursuant to the Taxpayer Relief Act of 2012, providing newer and simpler options for many estates. The law may affect your estate plan; and, if you have not yet put such a plan in place, now is an excellent time to take advantage of an opportunity to protect your loved ones and minimize their burdens, expenses, and tax costs associated with your estate. There are also recently adopted Advanced Health Care Directives in the State of Utah, which go much further and cover more needs than the old living wills and special medical powers that were used prior to 2008.

This is an excellent time for you to visit with one of our estate planning attorneys, to evaluate your needs, and help you take advantage of new provisions which could simplify your life, and save on burdens of administration and reduce or eliminate income and estate taxes for your family. For anyone who contacts our firm for an estate evaluation and review, prior to May 1, 2013, we are offering a free half-hour initial consultation, and a $50.00 discount from any new, complete estate plan.

We are eager to explain to you just what the documents are that you should consider for a complete estate plan, and answer your questions, and review your current documents to see if they are adequate and accomplish your present desires for estate planning. If you do have an estate plan currently, let’s review it and bring it current. Often, that may only involve a simple amendment. If you don’t have a current estate plan, let’s help you put things in order, and provide the peace of mind that comes with knowing that you are prepared, and comfortable in having the documents that take advantage of all of the law’s expanded opportunities for you and your loved ones.

Please see the below summary of major changes to transfer taxes in 2013 from the American Taxpayer Relief Act of 2012 (2012 Taxpayer Relief Act):

• Tax Rate. The maximum estate, gift, and GST tax rate is 40 percent.
• Estate and Gift Tax Applicable Exclusion Amount. The applicable exclusion amount for estate and gift taxes is $5 million (adjusted for inflation to $5,120,000 in 2012).
• Exemption Amount for GST Tax. The exemption amount for GST tax is $5 million (adjusted for inflation to $5,120,000 in 2012).
• Portability. Portability of the deceased spousal unused exclusion amount for estate and gift tax purposes is made permanent. Portability allows the estate of a decedent who is survived by a spouse to make a portability election and permits the surviving spouse to apply the decedent’s unused exclusion to the surviving spouse’s own transfers during life and at death.

How Does this Impact Me?

Many of our estate planning clients are breathing a sigh of relief because if Congress had not acted on the sunset provisions, effective January 1, 2013, the maximum federal estate tax rate was scheduled to revert to 55 percent with an applicable exclusion amount of $1 million (not indexed for inflation). The 2012 Taxpayer Relief Act brings some certainty to the Tax Code related to transfer taxes that has been controversial over the last few years.

Do I Need to Take Any Action?

If you and your spouse created separate trusts (or a joint trust that “splits” into a family/marital trust upon the death of the first spouse) then we advise that you speak with an attorney at HAO. A simple amendment to your trust may help your family avoid unnecessary and complicated issues associated with your current trust. Other estates may also be impacted by the 2012 Taxpayer Relief Act. Please contact an attorney at HAO at (435)752-2610 if you have a question about the impact of the 2012 Taxpayer Relief Act on your estate and family.

Business and Succession Planning

Something that I have learned over the years in working with small business owners and with clients’ estate planning is that very often these areas overlap. One of the most common deficiencies is not having a current buy-sell agreement between the owners of a business. The purpose of such an agreement is to provide a mechanism to avoid disputes in the event an owner dies, becomes disabled, or wants to retire or just leave the business. In the absence of an enforceable agreement all of these occurrences can end up in court. The best time to sort out these issues is when all of the owners are actively involved in the business since any of them could either be a buyer or a seller of their interest in the business and that tends to keep the discussion balanced and fair. The climate changes dramatically when the spouse of a deceased owner who is inheriting the business is desperate to get as much money as possible from the business. The other issue that arises at that point is whether the surviving owner(s) can continue to work with the spouse or family of the deceased owner. Most buy-sell agreements contemplate a fair buy-out of the deceased owner’s share so that a problem does not arise. A common method of funding these buy-sell agreements is with life insurance.

Business Upkeep and Maintenance

Another common deficiency is maintaining good records in the business. If it is a corporation or LLC (limited liability company) the annual filing with the state must be maintained or the business could be administratively dissolved and the limited liability protection may be lost. When clients come in for business or estate planning we review the filing records and quite often this has happened. With corporations it is important to maintain the corporation book with updated articles and bylaws as well as copies of shareholder and board of directors meeting minutes. The stock ledger needs to be properly maintained consistent with stock ownership. With LLC’s or partnerships it is very important to review the operating or partnership agreement to make sure it is consistent with the understanding of the owners. These documents can become critically important if there is a dispute among the owners or if one of them dies or becomes disabled.

Business Divorce Litigation

The attorneys at HAO look for these kinds of issues and have many years of experience in formulating solutions for these problems, but the law suits that arise when business owners cannot resolve their differences look and act very much like divorces. We have been involved in a number of cases involving disputes that have arisen in these circumstances and are skilled in litigating them. However, our experience has taught us that it is a lot easier and cheaper to keep our clients out of trouble than it is to get them out once they are in. We would be happy to help you avoid these kinds of problems so give us a call.

Christian Hansen has been listed, in the January 2011 Utah Business magazine, as one of Utah’s Up and Coming Legal Elite. Click here to view excerpt of article.

On Oct. 22, 2010, Herm Olsen received the Utah Minority Bar (UMB) Award for the 2010 Attorney of the Year. The UMB’s Award for Attorney of the Year goes to a member of the Utah State Bar who has demonstrated achievement or dedication to objectives consistent with the purposes of UMB, which include promoting the professional advancement of minority attorneys and the social and civic standing of the minority community; assisting minority attorneys and others in their professional pursuits; to promote the appointment of others in their professional pursuits; and to develop a support system for minority law students and for minority individuals seeking admission to law school. Olsen has contributed to the goals and objectives of the UMB in several areas, including assisting in funding scholarships through American Indian Services, a charitable organization established to provide opportunities through scholarships and out-reach programs for Indian students throughout the United States.

Olsen has, for several years, conveyed food, clothing, and toys to an orphanage in Mexico and also provided a 32-seat bus for the transport of the children. His next orphanage run is scheduled for February 2011. Olsen is a shareholder with the law firm of Hillyard, Anderson & Olsen, P.C., located in Logan, and currently serves as a Utah State Bar Commissioner. Olsen is also an approved Mentor for the Utah State Bar. Olsen has received several awards and made significant contributions in the legal community, including formerly serving as President of the Cache County Bar Association, being named Utah Pro Bono Attorney of the Year (2008) and receiving the Utah Business Legal Elite Award for personal injury litigation (2007 and 2009). Olsen was also named as the Top Professor at Utah State University (2006), where he teaches handball.

Have you ever watched an episode of COPS on Saturday night and wondered how you would respond to that infamous diatribe uttered by law enforcement when they place the alleged wrongdoer in handcuffs? It goes something like this: “you have the right to remain silent; anything you say can and will be used against you in a court of law; you have the right to talk to a lawyer and have him present with you while you are being questioned; if you cannot afford a lawyer, one will be provided for you at government expense.”  While our advice to you would generally be to remain silent, ironically, based on the holding of a recent decision from the U.S. Supreme Court, you must actually first speak to effectively preserve your right to remain silent.

In the recent Supreme Court case Berghuis v. Thompkins, 130 S. Ct. 2250 (2010), Michigan law enforcement officers interrogated Van Chester Thomkins about a shooting.  Before beginning interrogation, law enforcement advised Thomkins of his rights in full compliance with Miranda v. Arizona, 384 U.S. 436 (1966). At no point in time did Thomkins say that he wanted to remain silent, that he did not want to talk to police, or that he wanted an attorney.  For the most part, Thomkins remained silent throughout the three hour interrogation. However, near the end of the interrogation, Thomkins spoke, responding affirmatively when asked if he prayed to God to forgive him for the shooting.

Thomkins sought to have the statement suppressed, arguing that by remaining silent he had invoked his Fifth Amendment right to remain silent, that he had not waived that right, and that his statements were made involuntarily.  The case made its way through State and Federal Appellate Courts and finally arrived before the U.S. Supreme Court.  The U.S Supreme Court held that Thomkin’s silence during the interrogation did not invoke his right to remain silent. The Supreme Court continued noting that a suspect’s Miranda right to remain silent must be invoked unambiguously. Consequently, Thomkin’s answer in the affirmative that he prayed to God to forgive him for the shooting could be used against him in Court.

Accordingly, if you ever find yourself in a situation with law enforcement telling you that you have the right to remain silent, make sure you tell law enforcement that you will not be speaking until you have had the opportunity to retain legal counsel before maintaining your silence. Otherwise, you may discover that you have incriminated yourself by responding to what you believe is a harmless question under the mistaken impression that you have preserved your right to remain silent.

Do you have any of the following?
Individual Retirement Accounts (IRAs)
Life insurance policies
Stocks, bonds, other financial instruments
Retirement plans through your employment (e.g. 401k, defined benefit plan, 403(b), military retirement, federal retirement, etc.)

Do you know who the beneficiaries of these assets are in the event you die? Often, the beneficiaries of these assets are governed by beneficiary designation forms.  If you are completing your estate plan or have been recently divorced, you need to review your beneficiary designations.

Beneficiary Designations and Estate Planning

Even though you have a will or a trust, it may not govern who will receive certain assets when you die.  IRAs, life insurance policies, stocks, and certain retirement plans allow the owner to designate the beneficiary through a beneficiary designation form. This means that the asset may not be distributed by your will or trust.  If you would like an asset to be distributed via your trust, your trust would need to be the named beneficiary of the asset.  Reviewing your beneficiary designations is one of the most important steps in completing your estate plan.

Beneficiary Designations and Divorce

Clients often overlook the importance of reviewing their beneficiary designations after they have been divorced.  This can be a costly mistake.  In a recent United States Supreme Court case, the Court held that plan administrator performed its duty by paying retirement benefits to an ex-spouse, even though the ex-spouse waived the retirement benefits in the divorce decree.   Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 1295 S.Ct 865 (2009).  Here’s what happened:

William Kennedy was a participant in his company’s retirement plan.  While married, William named his wife, Liv Kennedy, as a beneficiary of his retirement plan.  William and Liv later divorced.  In the divorce decree, Liv disclaimed her interest in William’s retirement plan.  William neglected to change his beneficiary designation with his company.  William died.  Even though the divorce decree stated that Liv disclaimed her interest, Liv still received William’s retirement funds, and William’s estate received nothing.

What Does this Mean For You?

Whether you are completing or reviewing your estate planning, or whether you have recently been through a divorce, it is important that you review your beneficiary designations forms to ensure that the desired beneficiaries are named.  You may also benefit from seeking competent professional advice regarding the tax and legal ramifications of naming a beneficiary.

Disclaimer: The above information is a high-level overview of the need to review beneficiary designations.  In many contexts, it is important to seek competent professional advice regarding: (1) who the named beneficiary can or should be (e.g. federal law requires that a spouse of a married individual be a named beneficiary of a 401k plan, unless a waiver is obtained); (2) the tax and legal ramifications of naming the beneficiary (e.g. in the context of an IRA, it may be advantageous to have the spouse named as a beneficiary instead of a trust), and (3) to review the process of appropriately changing the beneficiary designation forms.

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