Is it Time to Visit Your Estate Planner?

August 1, 2007

Changes in New Hampshire and Federal Laws That May Help You Carry Out Your Estate Planning Goals.

Whether you haven’t done any estate planning or it has been a few years since you updated your estate plan, it may be time to visit your estate planning attorney. Recent changes in the New Hampshire and Federal Laws may affect your current estate plan or these laws might help you to carry out your wishes more effectively. Specifically, you might want to consider updating your Health Care Power of Attorney and Living Will, reevaluate whether you need to update or execute Trust documents, and consider whether you should take advantage of the time sensitive charitable giving incentives initiated by the Pension Protection Act of 2006.

  • Changes in New Hampshire Laws Relating to the Health Care Power of Attorney and the Living Will

The most significant change in New Hampshire law, which became effective January 1, 2007, is New Hampshire’s adoption of a new Health Care Power of Attorney and Living Will. The new law does not invalidate previously executed Health Care Powers or Living Wills, but you should consider executing new documents because new options are available in these forms. Amongst the new changes are two significant additions to the new Health Care Power of Attorney. First, an additional question has been added that allows an individual to give his or her agent the authority to administer treatment over the incapacitated individual’s objection. This option is helpful in situations where an individual has advanced dementia and can voice his or her opinion but does not understand the consequences of his or her choices. By exercising this option, your loved ones can avoid a costly and time consuming guardianship hearing in the future. The second significant change to the laws involving the Health Care Power of Attorney is the option to give the agent the power to issue a Do Not Resuscitate Order. Under the new law, an attending physician or a nurse practitioner may issue a Do Not Resuscitate Order, if the person, or the person’s agent, has consented to the order. Therefore, it is important to state whether the person you have appointed has the ability to issue this order on your behalf.

  • Using Trusts to Take Full Advantage of Your Estate Tax Exemption

There are many reasons people use Revocable Trusts in their estate plans, which may range from avoiding probate to asset protection to tax planning. If you currently have a joint Revocable Trust with your spouse, but your assets have grown significantly since your last visit to your estate planner, you might consider creating two separate Revocable Trusts for purposes of tax planning.

Under the Economic Growth and Tax Relief Reconciliation Act of 2001 (the “Act”) each individual has the ability to pass a certain amount of assets, free of gift and estate tax, during their lifetime and at their death. This amount changes from year to year. Currently, if an individual dies before 2009, he or she may pass Two Million Dollars ($2,000,000) tax free. In 2009, the amount will be Three Million, Five Hundred Thousand Dollars ($3,500,000) and in 2010, the amount will be unlimited. After 2010, the amount returns to One Million Dollars ($1,000,000) tax free. If you and your spouse estimate the value of your estate at more than Two Million Dollars ($2,000,000), unless you are “lucky” enough to die in 2010, you should consider establishing a Revocable Trust for each spouse. These Trusts can be structured to take full advantage of each of your estate tax exemptions.

Conversely, many couples whose assets are now below the estate tax exemption amount and no longer need two Revocable Trusts are consolidating the two Trusts into one. This reduces administrative time and expenses.

As important as establishing Revocable Trusts is to transfer all of your significant assets into the Revocable Trusts approximately equally. In this way, your assets will avoid passing through probate (thus, avoiding unnecessary time delays and expenses) as well as minimizing estate taxes. Periodic reviews of the titling of your assets is critical.

  • New Charitable Giving Incentives under the Pension Protection Act of 2006

If you have any interest in charitable giving, you may want to take note of the Pension Protection Act of 2006. There are two notable charitable incentives that can only be taken advantage of for the remainder of 2007.

The first is the IRA Charitable Rollover. This charitable giving incentive is only available to a limited group of individuals, but if you fit in that group you may want to consider taking advantage of this opportunity. The Pension Protection Act of 2006 permits persons who have reached age 70 _ to exclude from income up to One Hundred Thousand Dollars ($100,000), this year, in retirement plan distributions, if contributed directly to a qualifying charity. In making this distribution, the amount contributed is not included in your income and does not increase your adjusted gross income. However, the contribution is not deductible against taxable income. If you are considering charitable gifts this year and you have an IRA, consider making gifts with pre-tax dollars rather than using after-tax dollars.

The second charitable incentive initiated by the Pension Protection Act of 2006 relates to conservation easements. If giving a conservation easement is of interest to you, you may want to consider acting before the end of 2007. The Act increases the percentage of the charitable deduction amount for qualified conservation easements and allows an increased rollover amount for the excess of that charitable deduction amount for an increased number of years.