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General Legal

Monday, July 27, 2020

Lady Bird Deed Has Soared into Vermont Statutes

An Enhanced Life Estate Deed (ELED), sometimes referred to as a “Life Estate Deed with Reserved Powers,” “Lady Bird Deed,” “Medicaid Deed,” or “Italian Deed,” graduated from Vermont’s common law into Title 27 of the Vermont Statutes when Governor Phil Scott signed the Vermont Enhanced Life Estate Deed Act into law on July 13, 2020.  Although there are variations of life estate deeds in other states, Vermont has been just one of six states that recognize an ELED.  (The 5 other states include Texas, Florida, Michigan, North Carolina, and West Virginia.)

With the common law life estate remaining intact, the main purpose of the ELED Act was to clarify some of the rights and reservations of the property owner (Grantor), settling title questions raised by Courts, lenders, and title insurance  companies.

The following outline recaps the highlights of previously-existing ELED:

¨ Grantor conveys a property interest to a Grantee that takes effect upon the death of the Grantor

¨ Grantee acquires immediate title to property upon death of Grantor, without probate

¨ There is no Gift Tax return requirement, as there is no present gift

¨ The property receives a step-up in tax basis (for capital gains)upon the death of the Grantor

¨ If used as a primary residence, the property is an exempt asset for Medicaid purposes (with an equity limit of $595,000 if no spouse resides there) AND there is no transfer penalty

As an improvement upon existing common law, the ELED Act adds the following clarifications:

¨ Grantor may revoke or revise the deed without consent of Grantee

¨ Granting of mortgage does not revoke the ELED

¨ If a sole Grantee, or a “tenant-in-common” Grantee predeceases the Grantor, that interest will pass to that Grantee’s heirs or beneficiaries in Probate

 



Read more . . .


Friday, April 24, 2020

Indoor Scavenger Hunt-Estate Edition


There’s no debating that we are living through unprecedented and challenging times right now.  While many are combating this pandemic on the front lines, many more of us are following the “stay home, stay safer” model prescribed by our leaders.  And staying home may be on our agenda for longer than originally expected or what some of us think we can tolerate.  The binge-watching, the banana bread baking, the macaroni necklace crafting, the mask-sewing, the spring cleaning, closet organizing, and the list goes on. Have you run out of ways to spend your time at home?

Here’s another suggestion: indoor scavenger hunt—estate edition.


Read more . . .


Wednesday, February 19, 2020

The SECURE (“Setting Every Community Up for Retirement”) Act of 2019: Why it May Not Impact Your Estate Plan

Many individuals have questions and concerns about the SECURE Act that was signed into law at the close of 2019.  One section significantly changes the rules regarding required distributions from retirement plans (IRAs, 401(k)s, 403(b)s and the like) – not for the plan participant or owner, but for the beneficiary. 

Spouses and a small category of other individuals are not affected by the law – they may continue to stretch the distributions over their life expectancy.  However, for most non-spouse beneficiaries inheriting a retirement account, funds will need to be withdrawn in full no later than ten (10) years after the owner’s death, instead of the previous lifetime “stretch” of those distributions.  Individuals who have been aggressively directing taxable income to retirement accounts, with the assumption that their children and grandchildren would be able to withdraw funds over many decades, are the most affected by the new law.


Read more . . .


Friday, November 8, 2019

Lawyer Joke

Q: What do you get when you cross a librarian with a lawyer?

A: All the information you need, but you can’t understand a word of it.

 


Read more . . .


Wednesday, November 6, 2019

Tip / News: Estate Tax

Vermont remains one of about a dozen states that imposes a state estate tax.  However, during the summer, Governor Scott signed Act No. 71, raising Vermont’s exclusion amount to $4,250,000 in 2020 and $5,000,000 in 2021.

 


Read more . . .


Sunday, November 3, 2019

Dissecting Legalese


Whereas the party of the first part shall prescribe, provide, formulate, and otherwise execute the means, method, and product for the tertiary daily repast for the mutual benefit of the parties; whereas the party of the second part shall evaluate, conduct, and otherwise execute in a timely manner the subsequent restoration of the premises used by the mutual parties in the enjoyment of said repast; now therefor, both parties stipulate to the following: dinner shall promptly commence at 7:00pm.

What if legalese was the common language of all communications?  Would we understand each other better?  Although legalese, in its best light, is intended to provide a uniform interpretation of certain terms or phrases, it often complicates dialog and documents. 

For example, the Latin phrase per stirpes is often used in wills, trusts, and  beneficiary designation forms to describe what happens if the named beneficiary has died.  Its widely accepted meaning directs that the beneficiary’s share passes in equal shares to his/her descendants by right of representation.   A descendant (child, grandchild, great-grandchild and so-on) takes the “representative” share of his/her parent.


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Tuesday, August 6, 2019

Would You Rather Embark on an Unmarked Treasure Hunt or Navigate a Map?


Imagine you are playing the popular “Would You Rather” game on a family road trip this summer.  Would you rather embark on an unmarked treasure hunt or navigate that route to the treasure using a clearly marked map?  While some adventurers may prefer to search without clues, others will certainly accept the map in hopes of reaching that destination faster and with less frustration.

Now imagine that same question, but there is no game.  You have recently lost a loved one and have the responsibility of settling their affairs.

Would you rather figure things out as you go or have some guidance from that lost loved one?  Undoubtedly, most would prefer the latter, but let’s consider some real examples from real estates.
Read more . . .


Monday, February 11, 2019

Wills: Not as Powerful as You Think


Without question, the most common misunderstanding about a Will is that it avoids probate.  THIS IS FALSE.  It’s almost the same as believing the bank will accept your Monopoly money.

Imagine this: your uncle passes, and you are named Executor in his Will.  Can you take a copy of that Will to his bank and access his funds?  Not unless you are the Hulk using your super strength to open the bank vault at night!  The Will on its own carries no legal authority.


Read more . . .


Monday, February 11, 2019

New Numbers for 2019

Estate/transfer tax

Vermont estate tax exclusion:

$2,750,000

Federal estate tax threshold:

$11,400,000

Federal gift tax exclusion (annual):

$15,000

Vermont Medicaid

Community Spouse Resource Allowance: $126,420

Minimum Maintenance Needs Allowance (spousal allocation): $2,114

Home Equity Limit (singles): $585,000

 



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Friday, August 31, 2018

Estate Planning: Not a Game of Hide and Seek


Games are usually a lot of fun, but you don’t really want to play hide and seek with your estate planning documents.  After you have signed and implemented your plan, you may want privacy, but you should not hide your documents from everyone.  If you excel at concealing, it may not be found when needed.  How and with whom you share will depend upon the document and your goals, but here are some considerations:

Will—while this document has no effect until after death, it has zero effect if never discovered; you can store the original:

¨ In a fire-proof safe at home. if someone else knows location and its key

¨ In a safe deposit box at a bank, if someone else has joint access and a key to the box; without a surviving joint owner, no one will be allowed in the safe deposit box after your death without Court authority; if the joint owner cannot locate a key, there will likely be additional procedures and costs involved in accessing the box

¨ At the Probate Court in the county in which you live, for a modest fee (currently $30); however, if you move out of the county or update your will, it will be necessary to either retrieve your original will or replace it with the updated version

 

Trust—a revocable living trust is effective during your lifetime, and the Trustee may need to produce a copy of it, or a Certificate of Trust, when managing its assets.
Read more . . .


Thursday, February 15, 2018

Estate Planning: Taxation of Life Insurance


Life insurance plays a vital role in many estate plans.  Proceeds can provide essential funds to replace lost earnings, pay debts, finance college tuition expenses, or even cover estate tax liabilities.  However, there is confusion about the taxation of these life insurance proceeds.  Contrary to common belief, insurance benefits are taxable to the estate of the insured.   For many Vermont estates, it is inconsequential because they total under $2,750,000.
Read more . . .


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