Avoiding Probate? What Clients Should Know

When going through estate planning, there is always an inevitable question. Should I avoid probate? Let’s start by defining probate. The legal prospective of probate is, the process of clearing title to certain property when someone dies, so that ownership can be transferred to those receiving the inheritance. Probate can be costly, and avoiding it takes time and energy to accomplish the task. It is important to analyze whether this is the best choice for you.

Reducing Cost

Avoiding probate can save money. The cost associated with probate are generally attorney fee, filing fees, and compensation for personal representatives (known as executors). Some states such as California, Florida, and New York impose fee based on the value of the asset subjected to probate. However, in other states, such as Massachusetts, the cost is determines on the types of papers the court requires. It is important to understand the laws that govern assets in your state.

Reducing Complexity

Many people express the desire to simplify things for their family during the estate planning process. IF this desire is expressed it is important for them to avoid probate. This will lessen the time it will take the heirs to gain access to the assets and lessens the steps to transfer ownership of assets.

Increasing Privacy

Most paperwork filed in courts is considered public record. This means that anyone is able to view the will and information about the value of the estate. If the estate goes through probate then a notice has to go out to all interested parties. If you would like to keep the terms of your estate private, then it is a good idea to avoid probate. This allows you to disinherit certain relatives, keep certain aspects of the estate private, and determine how the estate is divided.

Avoid a Will Contest

This goes back to privacy a little. By avoid probate, you can avoid disinherited relatives from contesting the will. If the assets go into probate, a court ordered notice is sent out and assets are transferred into a trust (or something similar). Depending on the state, challenging the non-probate estates can be considerably more difficult, then if the estate went through probate.

Accepting Paperwork

Avoiding probate comes with certain administrative responsibilities. Many times, ownership of accounts need to be changed, beneficiaries need to be updated, and real estate conveyed through deeds. These tasks require time and energy. Some even have fees associated with them. This can be a burden for many people making the idea of avoid probate unattainable, but with the help of a good financial advisor, many of the burdens are eased and you are guided through the paperwork.

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Post DOMA Wealth Management Tips

There have been many changes now that the Supreme Court overturned the Defense of Marriage Act (DOMA). Some of the changes include how same-sex couples are able to manage their wealth in regards to their partner. Couples will need to think about changing or review many aspects to their financial wealth. The following are point to consider reviewing to get a fresh look at how the law changed same-sex couples’ financial plans.

  • Revisit your Financial Plan. Having your marriage recognized by the government is a big deal. There are many points to you financial plan that will need to be reviewed.
  • Update Estate Plans. The biggest benefit of having your marriage recognized by the federal government is there is no penalty of estate tax. Since the estate will be given over to a spouse, there is not estate tax to take 40% of the estate from them. It also give spouses a change to establish trusts, wills, general power of attorney and healthcare powers.
  • Beneficiary Designations for Retirement Accounts. Now that the same rules apply, same-sex couples can revisit beneficiary designations. The survivorship rules apply to IRAs and other qualified retirement plans.
  • Investment Portfolios. Are there any adjustments to investment that need to be made so you are truly investing together? Think about updating account titles or reorganizing the portfolio in a manner that would be more beneficial to both partners.
  • Tax Planning. The ability to file jointly is now a massive win. While you may choose not to change anything, it is worth a look. It may be in your best interest to file jointly and save you hundreds in taxes not paid. You may even want to look at amending the past three year’s taxes to see if filing jointly would be a benefit.
  • Health Insurance Benefits. An overhaul to the family health insurance plan is in order. If you are not already provided with spousal health insurance, it may be cheap to switch.
  • Taxable Estate and Social Security. If your spouse had died in the last three year, amend the estate tax return and have the taxes refunded. There is three years to be able to do this, so act soon. Also married couples are eligible for 50% of spousal Social Security benefits of the spouse’s full retirement age. If it is bigger switch to spousal benefits.
  • Consider the Whole Family. Since estate planning extends to children for most mixed gender couple, it should also extend to children for same-sex couples. Make sure the estate plan also defines the word spouse.
  • PreNuptials. It is important to protect you assets before entering into a marriage. Since the laws apply to everyone, any laws dissolving a marriage also applies.
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Timing Benefits: When to Tap into Social Security

Everyone knows that there is a magic age when a person can begin a new adventure, retirement is just such time. However, when is the right time to tap into social security? Retirement can be drawn as early as 62, but the Social Security Administration has also created an incentive program for workers that choose to wait until age 70 to retire.

Social security is an annuity that is paid out based on the age that you retire. If a person retires at age 62 then their payment will be 25% less than if they retired at age 66. If a person chooses to retire at age 70 they will earn an additional 8% per year which translates into almost $17,000 annually. The standard advice would be to wait to retire as long as possible. With other investment payouts, it is possible to delay social security payout until the time it is needed to supplement funds. By waiting until age 70 and taking advantage of the higher benefits, a person is provided with a kind of longevity insurance thanks to the government.

Now what about couples, well you are not forgotten. Couples can contemplate several options. The first being the “claim and switch” This is designed for a family that claims two incomes where both individuals are 66 years old. The spouse with the lower earnings (the wife) can retire and file for their benefits as long as the other spouse (the husband) has reached his full retirement age. The husband can then file for benefits based on the lower-earning spouse’s benefits and forgo his own benefits until age 70, when he can then retire and collect the maximum benefits. The wife can either switch to the benefit based on that of the husband or choose to keep her own; whichever is more advantageous to the couple.

Another choice would be for the couple to use the file and suspend. This works well for a couple where only one income is claimed. For example the husband works and the wife stays at home. The husband, at his full retirement age, can file and then suspend payments until the age of 70, and then the wife can file for spousal benefits. She could do this to delay taking out her own social security until the age of 70, where she could then switch if the benefit is higher.

There are many options in the vast and confusing world of social security benefits, but it is important to work with someone who can help navigate and analyze the individual situations.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Tips for picking a CPA

Mike Crowley | Crowley Halloran CPA

Michael W. Crowley, CPA - Principal

One of the most critical decisions anyone can make is picking a good-quality, reliable accountant. There are several things to keep in mind when a business owner chooses an accounting firm. Many accountants are excellent, but are they going to meet your business needs?

There are a few basic tips to keep in mind, as a business owner, when choosing a CPA firm:

Certification: The CPA should meet all the states requirements and passed the required exam. It is important that an accountant has met all the requirements and even continues their education to stay certified. It is the best way to know that they are current in all the new procedures and tax laws.

Experience: Make sure the accountant or CPA firm is experienced in the business field that your business specializes in. It is important that they know what the unique business needs are and how to handle any problems that may arise. They should have worked with that business industry before or something very similar.

Size: While the larger, more popular CPA firms may be ok, do not over look the smaller firms. The larger firms can probably take care of all the business needs and more, but the smaller firms will offer a more personalized approach. Many of the larger firms will contract out the smaller firms to work on small accounts anyway, so why not start with the local, smaller firm and go from there. Just make sure they meet the requirements that your business needs.

Get a Referral: One of the most important factors to finding a good, reliable CPA is to get a referral. Ask your friends, family, co-workers and other business owners to see who they would recommend. The best reference usually comes from word of mouth.

Once all the references have been compiled, do some research on the CPA firm and then ask to meet them and conduct an interview. Ask questions and find the right fit for you. Remember your CPA is to be one of your most trusted advisors, so make sure they are the right fit for you and your business.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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