Text Box: DO YOU KNOW HOW YOUR ASSETS WILL PASS UPON YOUR DEATH? By Melisa M. W. Mysliwiec It is important to realize that just because you have established a will and/or trust, your assets will not pass pursuant to the terms of those documents unless you have properly titled your assets and/or designated the proper beneficiaries to do so. This is because upon your death, your assets will transfer in one of the following ways, and in this order: By operation of law to joint owners of the asset; Contractually to your nominated beneficiaries; Pursuant to the terms of your will; or Pursuant to the terms of your trust. Therefore, regardless of what your will or trust provide, an asset that is owned jointly will pass to the joint owner upon your death. Further, regardless of any beneficiary designation that you have made regarding a particular asset, that asset will pass to its joint owner, if any, upon your death. And, finally, regardless of what your will or trust provide, an asset that designates a beneficiary will pass to the beneficiary upon your death. An Illustrative Example: Assume that Jane executed estate planning documents in 2004. Jane has four children: Adam, Beth, Charles, and David. She would like each of her children to receive equal portions of her estate upon her death. Jane has nominated Beth as her agent under her durable power of attorney. Additionally, Jane has executed a will which transfers her entire estate to her trust; and her trust transfers her entire estate to her four children, in equal shares. Jane has the following assets:  *Jane added Beth as a joint owner on her savings and checking accounts so that Beth could assist her with her banking. So, while Jane may believe that all of her assets will pass to her four children in equal shares pursuant to her Trust, in actuality, her assets will pass very differently. Beth will become sole owner of the savings and checking accounts valued at $26,000 because she was listed as joint owner (even though the trust is listed as beneficiary of the accounts). The certificates of deposit valued at $11,000 and $15,000 will pass through the trust because the trust is designated as beneficiary of these accounts. The life insurance policy will pass to Adam, Beth, and Charles because they are designated as beneficiaries of this policy. And finally, the home will pass through probate (pursuant to the terms of her will) because she was the sole owner of this asset. Because her will transfers her assets to her trust, the home will eventually pass pursuant to the terms of the trust, but first, a probate estate will need to be opened and administered to transfer the home into her trust. In the end, Adam will receive assets totaling $64,000 (1/3 of the life insurance policy, plus 1/4 of the trust), Beth will receive assets totaling $90,000 (the savings and checking accounts, plus 1/3 of the life insurance policy, and 1/4 of the trust), Charles will receive assets totaling $64,000 (1/3 of the life insurance policy plus 1/4 of the trust), and David will receive assets totaling $44,000 (1/4 of the trust). It is likely that Jane did not realize that this is what would occur upon her death. Had Jane removed Beth as a joint owner on her savings and checking accounts, and changed the beneficiary on her life insurance policy to her trust, all of her assets would have passed pursuant to her trust and her children would have each received $65,500. Further, had she transferred title to her home to her trust, either during her lifetime or upon her death, this would have passed pursuant to the terms of the trust upon her death without first requiring a probate estate to be opened. *Note: Removing Beth as joint owner of the savings and checking accounts would not limit her ability to assist Jane with her banking because Beth is Jane’s agent under her durable power of attorney. In conclusion, you should make a list of your assets (like above) and determine whether they will pass to joint owners, designated beneficiaries, or pursuant to your estate planning documents. If the end result is not what you planned, contact us to discuss what needs to be changed to effectuate your estate planning goals. It is important to note that each individual’s situation is different, and special care must be taken when designating primary and contingent beneficiaries on certain assets because of the resulting tax ramifications; therefore, to properly effectuate your estate planning goals please contact our office to discuss these issues before making any changes. COBRA Insurance Changes Impact Employers!!! By J. Kevin Winters and Barbara A. Bialko If your company employs 20 or more people…read on. The New American Recovery & Reinvestment Act of 2009 provides significant help in paying COBRA health insurance premiums to employees. Individuals eligible for assistance are required to only pay 35% of COBRA premiums leaving the employer responsible for 65%. Any employee who was “involuntarily terminated” between September 1, 2008 and December 31, 2009 is eligible. Employers are legally required to locate previous employees and provide them with a detailed notice of their right to COBRA coverage. Subsidy is generally available for nine months. Employers will be reimbursed for their share of the premium through a tax credit on their payroll tax returns. If you have questions on how this might impact your company, call Barbara Bialko at 517-706-5780 or Kevin Winters at 517-706-5772 IRA News: RMDs waived for 2009 & IRA Charitable Rollovers By Marlaine C. Teahan Required Minimum Distributions – WAIVED FOR 2009 The Worker, Retiree, and Employer Recovery Act of 2008 (Act) was signed into law by the President on December 23, 2008. The Act waives 2009 Required Minimum Distributions (RMDs) from Individual Retirement Arrangements (IRAs), 401(k), Profit-Sharing, Money Purchase Pension, 403(b), and certain 457 retirement plans. The Act does not waive any 2008 RMD due by April 1, 2009. Let us know if you have any questions or would like additional information. IRA Charitable Rollovers Give up to $100,000 to Charity and Obtain Favorable Tax Treatment Until December 31, 2009, if you are at least 70 ½, you can give up to $100,000 from your IRA to a qualified charity and avoid paying income tax on the distribution. In a nutshell, you will be able to exclude from gross income up to $100,000, what would otherwise be a taxable distribution of a traditional or Roth IRA, provided you make a qualified charitable distribution in 2009 and provided that you are age 70 ½ at the time of the gift. The IRA Charitable Rollover provision was part of the Pension Protection Act of 2006 and was originally set to expire on 12-31-2007. In October, 2008, the Emergency Economic Stabilization Act of 2008 extended the rollover provision through December 31, 2009. This is a great opportunity for people 70½ and older to exclude up to $100,000 from their gross income for 2009 by making a direct gift from a traditional or Roth IRA to a qualified charity. For the many individuals who do not itemize deductions, and therefore do not obtain a tax benefit from their charitable gifts, making a charitable rollover gift from an IRA is a great way to obtain a tax benefit from making gifts to charity. For those who do itemize deductions, but are limited by the 50% of AGI ceiling for deducting charitable gifts, gifts from an IRA are not subject to the percentage limits, thus allowing you to give more to charity and still obtain favorable tax treatment. Here is how the IRA Charitable Rollover provision works: The gift amount is limited to $100,000; You must be 70½, or older, at the time of transfer; and The transfer must pass directly from your IRA custodian to a qualified charity. Make sure you give your IRA custodian enough time to complete the transfer by year end. There are some limits to how you can use the charitable rollover gift. The transfer cannot be made to a donor advised fund or a supporting organization. In addition, charitable rollover gifts cannot be used to fund a charitable gift annuity or a charitable remainder trust. The IRA Charitable Rollover Provision applies to traditional, rollover, and Roth IRAs, but does not include plans such as 401(k), 457, 403(b), Keoghs, SEPs, SIMPLE IRAs, etc. Certain types of retirement plans, however, may be rolled into a traditional IRA in order to make your gift. Let us know if you have any questions or would like additional information. In addition, your financial advisor should be able to assist you in making the charitable gift.

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