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New Year’s Estate Planning Resolutions for 2025

You're in good company if your New Year’s resolutions included estate planning. Many people who put off creating or reviewing their estate plans in 2024 have resolved, once again, to take care of this vital task in 2025. A recent article from Coeur d’Alene/Post Falls Press, “Estate Planning in 2025: A New Year’s Resolution worth keeping,” reviews the basics of estate planning.

Last Will and Testament. It expresses how you want assets to be distributed and who your executor should be—the person in charge of asset distribution. Suppose you’ve had significant changes in life, like moving to a new state, welcoming a new family member through birth, adoption, or marriage, losing a loved one, or changing beneficiaries. In that case, you’ll need to review your estate plan.

Revocable Living Trust. Many kinds of trusts exist. However, a Revocable Trust is most commonly used to help heirs avoid a lengthy and expensive probate process. Trusts allow assets to pass directly to beneficiaries, and their contents remain private, which many prefer.

Power of Attorney Documents. A POA designates who you want to make decisions for you if you become incapacitated. A Durable Power of Attorney is used to name the person you want to be in charge of your financial affairs and should be drafted to meet your unique needs. For instance, you may want someone to be able to pay your bills and maintain your home but not sell your coin collection. A Medical Power of Attorney allows someone of your choosing to be involved in your healthcare decisions and talk with healthcare providers.

Living Will and Advanced Medical Directives. This is the document where you express your wishes if you are terminally ill and not likely to recover to what we consider a “normal” life. It addresses matters like receiving life support like artificial nutrition, respiration, and other means of being kept alive. These documents spare your loved ones the ordeal of guessing what you would want in a medical crisis and are a kindness to have in place.

Designated Beneficiaries. Regularly reviewing accounts with named beneficiaries should occur while you’re working on your estate plan. Most retirement accounts and pension funds allow you to name a beneficiary. These pass outside of the probate estate, so you’ll want to be sure they are up to date. You may also have bank or investment accounts with beneficiary designations, so check those.

Getting your estate plan done is one New Year’s resolution you’ll be glad to have kept!

Reference: Coeur d’Alene/Post Falls Press (Jan. 5, 2025) “Estate Planning in 2025: A New Year’s Resolution worth keeping”

Changes to Social Security for 2025

A number of rules have been changed for Social Security, including taxes, credits, check amounts and Full Retirement Age (FRA) rules. If you’re planning a budget for 2025, you’ll need to know about these changes, as reported in Kiplinger’s article, “Five Changes to Social Security in 2025.” These changes aren’t just for retirees; some impact wage earners.

Cost of Living Adjustment for 2025. The COLA for 2025 is the smallest increase since 2020—only 2.5%. The average retiree can expect about $49 more in their monthly benefit. The Social Security Administration says the average payment will go from $1,927 to $1,976, and married couples will see their benefits increase by an average of $75.

Full Retirement Age is changing again. Older workers will need to wait a little longer to reach their FRA. In 2025, the FRA is 66 years and 10 months. If you turned 66 in 2024, the FRA is 66 years and 8 months.

If you were born in 1958, your FRA is 66 and 6 months, which you reached in 2024. Congratulations!

If you were born in 1959, your FRA is 66 and 10 months, and you’ll get there in 2025. If you were born in 1960 or later, your FRA is 67, and you’ll be eligible to receive benefits in 2026.

Social Security credits to qualify for benefits. The number of credits needed to qualify for benefits increased in 2025. To become eligible, workers must have 40 work credits and can earn up to four credits per year. In 2025, workers will need wages and self-employment income of $1,810 and earn $7,240 to get four credits.

Social Security tax limits. Social Security caps the amount you pay taxes on. In 2025, the tax limit is $176,100, which increased $7,500 from $168,600 in 2024. The cap is indexed on inflation and is expected to increase again in 2026.

Earnings test. People who work while collecting Social Security benefits reduce their monthly benefits because of the Social Security earnings test. If you haven’t reached FRA, $1 of your benefits will be reduced for every $2 earned over $23,400 in 2025. After reaching FRA, you lose less, forfeiting $1 in benefits for every $3 in 2024 earnings of about $62,160. This increased over the 2024 limit, which was $59,520.

This information isn’t glamorous and may even be discouraging. Still, if you are nearing retirement and considering when to take your benefits or planning your budget for 2025, you need to know it.

Reference: Kiplinger (Jan. 3, 2025) “Five Changes to Social Security in 2025”

Estate Planning Actions for 2025

Changes are coming in 2025, and being prepared isn’t just a good idea—it’s mission-critical for your estate plan to succeed. Key developments are outlined in the article “The 2025 Theme for Estate Planning: Be Prepared” from Forbes. Here’s what you need to know and steps to consider taking in the coming year.

Corporate Transparency Act and Reporting Compliance: As of this writing, a court injunction has been re-instated for Limited Liability Corporations and other legal entities to file detailed ownership reports for Beneficial Ownership Information or BOI. The uncertainty may continue as the Texas Top Cop Shop v. Garland case in the Fifth Circuit continues. Your estate planning attorney will recommend what you should do to comply whether this changes again (and again). In the meantime, gather documents and review trusts, LLCs and any entities you own to see which are subject to CTA reporting.

2017 Tax Cuts and Jobs Act. Whether the tax cuts resulting from this act are made permanent or sunset on December 31, 2025, steps must be taken to protect your estate. Lifetime gifting to irrevocable trusts and the use of Grantor Retained Annuity Trusts should be discussed with your estate planning attorney. Review your current estate plan to see if it is prepared for whatever changes occur. Prepare documents for execution, if needed, to avoid last-minute delays if the law does not sunset.

Possible Economic Changes. Whenever a new president takes office, there are concerns about the impact on the economy. This year is no different. This is the time to stress-test portfolios for market volatility and how it might impact estate liquidity and funding for taxes and charitable bequests. Review asset allocations to ensure that assets are shielded from market fluctuations and creditors.

Emerging Trends in Digital Assets and Technology. Estate planning today must include planning for the management and disposition of digital assets as well as traditional assets. Numerous platforms are now used to centralize and manage digital assets so owners and their executors can more easily manage assets after the owner's death. Estate plans must also address cryptocurrency to avoid losses because of a lack of planning.

Charitable Bequests are on the Rise. Charitable giving is more common than before and is integrated into tax planning for estate plans. An experienced estate planning attorney will work with you to identify qualified charitable organizations with meaning to you and determine your goals for charitable giving. Charitable Remainder Annuity Trusts provide fixed income for beneficiaries and generous donations to nonprofits.

Being proactive about your estate plan protects and preserves wealth, but it must also be strategic, positioning the individual and their family to thrive over time and during changes. Schedule a review of your estate plan to ensure that it meets your needs in 2025.

Reference: Forbes (Jan. 2, 2025) “The 2025 Theme for Estate Planning: Be Prepared”

What You Need to Know about IRAs

Individual Retirement Accounts have been confusing since they were first created in 1974 as a way for people without pensions to save for retirement. The withdrawal rules, in particular, were extremely confusing. Even the experts got things wrong. The rules now continue changing, so keeping track of changes matters, says a recent article, “The Most Confusing Inherited IRA Questions, Answered,” from Think Advisor.

The SECURE Act of 2020 created two distinct classes of IRA beneficiaries: eligible designated beneficiaries and non-eligible designated beneficiaries. The eligible designated beneficiaries are a surviving spouse, minor child, disabled person, chronically ill person, or a beneficiary less than ten (10) years younger than the deceased account owner, and some see-through trusts benefiting the eligible designated beneficiaries. A see-through trust is any trust where income and tax benefits pass directly to beneficiaries.

The non-eligible designated beneficiaries include anyone who is not a designated beneficiary. This means adult children, non-spousal beneficiaries, and some types of trusts.

The rules for Required Minimum Distributions (RMDs) have undergone significant changes. If you inherited an IRA in years before 2020, you don’t need to go back and take RMDs. The IRS has also waived RMDs for inherited IRAs if the original account owner died after their own required beginning date for 2024, which also applies to IRAs inherited in 2020, 2021, 2022, and 2023.

For 2025, you’ll need to look at the life expectancy for the first year after the year when the IRA was inherited, then subtract one year to get to the 2025 factor. By the end of the tenth year, you’ll need to have emptied the account.

Note that these rules apply only if the beneficiary, subject to the ten-year rule, inherited the IRA when the owner died on or after their own RMD date. If you inherit an IRA from someone who died before their RMD, you are required to empty the inherited IRA within ten years.

Spousal beneficiaries have the most options regarding what to do with an inherited IRA. They can transfer the IRA assets to a new or existing IRA or into their own IRA. In some instances, they can transfer the assets into an inherited IRA subject to the ten-year withdrawal limits or take a lump-sum distribution.

These changes have led many to consider adjusting their estate plan, so taxes don’t severely diminish the inherited IRAs. Converting an IRA to a Roth IRA and paying the taxes for the heir is one option. The account owner must live five years after the conversion for the beneficiary to avoid paying income taxes on the inherited IRA. Another is leaving a different asset to heirs and giving the IRA in part or entirety to a charitable organization.

Consult with your estate planning attorney to fully understand how these changes impact your plan for wealth distribution and explore other means of distributing your wealth and minimizing the tax impact on heirs.

Reference: Think Advisor (Dec. 23, 2024) “The Most Confusing Inherited IRA Questions, Answered”

What’s the Difference Between a Living Will and Last Will and Testament?

Estate planning serves to make your wishes known, plan for the future and enjoy peace of mind knowing that you have protected yourself and your family. Young adults, unmarried people and parents juggling family and work also need an estate plan, according to a recent article from Success, “What to Consider When Making a Will—and the Difference Between a Will and a Living Will.”

A Last Will and Testament and a Living Will are essential parts of every estate plan. However, their similar names can lead to confusion. They serve two very different purposes.

A Will provides directions to be followed when administering your wishes. The will names an executor who manages the estate and distributes assets in the probate estate. A guardian for minor children is also part of a will. This is why it’s so important for parents with young children to have an estate plan, including a will. If there is no will, a court will decide who will raise the children if both parents die.

Young adults, who generally believe they are immortal, often engage in high-risk activities and travel to exotic places. They should have a will and, equally importantly, a living will. This document is used to express preferences for medical care if one is seriously ill or injured and cannot communicate their wishes.

Similarly, young adults should also have an Advance Directive or a Medical Power of Attorney so someone they choose can make decisions if they are incapacitated, whether by illness or injury.

A Power of Attorney is needed to allow someone else to handle financial and legal matters in case of incapacity. Taken together, the will, living will and advance directive allow someone else to take over for you while you are living or after you have died.

Digital assets need to be addressed for anyone with an online life—which means almost everyone, especially younger people. Access to bank accounts, utility companies, photos stored online, social media accounts and digital property is a part of contemporary life. Settling an estate without this information will be difficult, if not downright impossible.

Estate plans need to be reviewed every three to five years and when significant life events occur, like marriage, divorce, the birth of a child, or a big change in financial circumstances. An experienced estate planning attorney can guide you through this process, making it far easier than expected.

Reference: Success (Dec. 23, 2024) “What to Consider When Making a Will—and the Difference Between a Will and a Living Will”

Why Cryptocurrency Ownership Demands Estate Planning

A cryptocurrency investor who died in an accident at age 33 had allegedly accumulated about $60 million in Bitcoin, Ethereum, RP, and Cardano. We’ll still never know if this was true because his crypto millions died with him. His estate plan did everything but address his digital assets, reports the article “Estate Planning With Cryptocurrencies” from Think Advisor.

No one knew how to access his cryptocurrency; he left no information about his digital passkeys and lost whatever he may have owned.

As this relatively new asset class continues to grow in value and use, it becomes increasingly important to have a plan to transfer assets to loved ones and protect the wealth from being lost. Many people who are invested in cryptocurrency tend to be younger and aren’t thinking about dying. However, as the example above illustrates, they need to think differently.

Accessing digital investments is impossible without the correct information. Cryptocurrencies are decentralized, so there’s no one to call when the owner dies. Another issue: as investors become wealthier, they are more likely to become targets of scanners who are aware of the vulnerabilities of this asset.

Executors, trustees and heirs must have the information about storage and private keys. Unless someone else knows about private keys and how to access them, the cryptocurrency may be lost forever if you are incapacitated or have died. The cryptocurrency may also be tangible or intangible property, depending upon whether it is stored on an external hard drive, in a digital wallet, or on a cryptocurrency exchange.

Knowing how to access a crypto wallet is critical. However, there’s more to know. Information should not be in a will, which becomes publicly available upon probate. Anyone who has access to the private key can withdraw funds.

A letter of instruction may be the best way to provide information and ensure privacy. For self-custodied wallets, using third parties for security and verification may be a better approach.

It might make more sense to hold cryptocurrencies in trust, making sure the trustees are familiar with digital investments and know how to manage and access the accounts.

As the cryptocurrency sector continues to grow, it becomes more critical to have an estate planning attorney prepare for digital and traditional assets. Smart decisions about how to hold cryptocurrencies will make the difference between a legacy of wealth and millions lost in cyberspace.

Reference: Financial Advisor (Jan. 6, 2025) “Estate Planning With Cryptocurrencies”

Preparing for Life With an Estate Plan

A properly prepared estate plan includes a number of legal documents giving your specific and personal instructions to healthcare providers, financial institutions and the courts in charge of validating your will and overseeing asset distribution after you die.

According to a recent article from Kiplinger, “5 Key Components of an Estate Plan—and 7 Others to Consider,” if you don’t have an estate plan, your state’s government and local courts will make many decisions for you. Worse, your loved ones will need to petition courts to do anything for you, from making healthcare and end-of-life decisions to appointing someone to raise your children or sell your home.

An estate plan is prepared by an estate planning attorney who will know the various legal documents and strategies necessary to protect you and your loved ones. An estate plan includes the following documents:

Living Will. This document expresses your wishes for medical care, with as much detail as you want. For instance, do you want to have artificial nutrition through feeding tubes or blood transfusions if you are unable to give your consent? How do you want doctors to manage end-of-life care, if your body is living but your brain functions have ceased?

Without a living will, doctors will usually take an aggressive stance to keep you alive, even if you have something else in mind. Alternatively, your loved ones might have to make these decisions without knowing what you would have wanted. Having a living will and making sure your loved ones know what you want is a gift to them. Think of the guilt they’ll live with if they don’t know your wishes.

Healthcare Power of Attorney. This POA names someone you trust to make medical decisions when you can’t convey your wishes because of incapacity. They become your healthcare proxy, speaking with your doctors and deciding on treatment for you. Without one, your loved ones won’t be able to be involved in your care without going to court and petitioning to be named healthcare proxy.

You may remember the case of Terry Schiavo, a 26-year-old woman who had a heart attack and was only kept alive through artificial means. Her husband and parents were engaged in a court battle from 1990 to 2005 when a court ruled doctors could remove a feeding tube. Most of these situations don’t make headlines but are no less painful for families.

Financial Power of Attorney. This POA names someone to manage your money, access financial accounts, manage assets and run the day-to-day finances of your life when you are incapacitated. If you don’t have a POA, the court will name someone for you, whether you would have chosen them or not.

There are different kinds of POAs. The Durable POA is in effect the moment it is executed. The Springing POA is only executed when you become incapacitated and may lead to delays. Your estate planning attorney will know which is best for your situation.

Last Will and Testament. A will outlines your instructions for distribution of assets. If you have minor children or other dependents, it names a guardian for them. It also names an executor, the person who will be in charge of managing your estate. Without a will, again, the courts will decide who should receive your assets and raise your children.

An estate plan addresses the use of trusts to distribute your assets without court involvement. If your family includes a disabled individual, your estate plan includes plans for their future. For singles and childless couples, an estate plan spells out who will be able to make financial and healthcare decisions when you cannot.

Consult with an estate planning attorney today to give yourself and your family the peace of mind you all deserve.

Reference: Kiplinger (Jan. 6, 2025) “5 Key Components of an Estate Plan—and 7 Others to Consider”

Do You Need a Will or a Trust?

The start of a New Year is accompanied by wishes to make life better. Planning for the future and protecting the family means addressing your estate plan. A recent article from Parkland Talk, “Start the New Year Right: Why Estate Planning Should Be Your Top Resolution for 2025,” explains the basics of estate planning.

Everyone should have a will, a document setting out instructions for the disposition of your estate after you have died. For many families, a trust is part of an estate plan. This is a document creating a separate legal entity that takes effect once the trust is created. Trusts are used to own and manage assets during and after life. With a trust, you can assign another person to take care of assets in the trust if you become incapacitated.

Wills and trusts are very different legal documents, performing different tasks. The trust is effective while you are living and after you have died, while a will is only executed after you have died. For most people, both a will and a trust make up the foundation of an estate plan. Here are some of the differences:

A will and the property bequeathed in the will are subject to probate, while assets in the trust don’t go through probate.

Wills become part of the public record and can be read by anyone. At the same time, trusts remain private, their contents known only to the estate planning attorney who created them, the grantor—the person who created the trust—and the beneficiaries.

Wills are used to name a guardian for minor children.

Trusts let you control when and how minor children, grandchildren, or other beneficiaries receive assets in the trust.

You manage property in your will, while the trustee manages assets in the trust. An irrevocable trust is managed by the named trustee, while the grantor may be the trustee of a revocable trust.

A court does not get involved with the trust, while the executor, the person named to carry out the instructions in the will, is court-supervised during probate.

A will is only effective upon the death of the testator, the person creating the will. There are no provisions in a will for what should happen if the person should become incapacitated because of illness or injury. The trust is a tool for incapacity.

Both the will and trusts have their uses in a comprehensive estate plan. An experienced and knowledgeable estate planning attorney will help create an estate plan to best suit your needs.

Reference: Parkland Talk (Jan. 6, 2025) “Start the New Year Right: Why Estate Planning Should Be Your Top Resolution for 2025”

Do I Need a Living Will?

Most people have strong feelings about what kind of medical care they want if they are incapacitated but don’t know if they can put those wishes into a legally enforceable document. A living will expresses whether or not you want all means taken to save your life, to refuse medical treatment, or any steps in the middle, according to a recent article from The Wall Street Journal, “A Living Will Covers Your Most Important Asset: You.”

A last will and testament distributes assets, like real estate and investments, and directs what you want to happen after you die. A living will is a separate document addressing healthcare decision-making if you are unable to express your wishes because of being in a coma, having an accident, or being at the end stage of a terminal illness.

There’s a lot of confusion about end-of-life issues in hospitals and emergency rooms. A living will can remove almost all ambiguities.

Everyone should have both a living will and a regular will. However, only about a third of people do. Older people tend to have more living wills than younger people. However, the number of those who have both documents is far too low.

A living will can be very specific. You might want to receive artificial hydration and nutrition but not artificial respiration. You can even add whether or not you want music to be played by your bedside, or whether or not you want to have a visit by a chaplain in the hospital.

Some states have different names for these documents. However, in most states, there is one form called an advanced directive, which includes a living will. You also want to have a healthcare proxy, a document naming a person you want to make medical decisions for you. Your healthcare proxy is also the person who follows the living will directions.

People who are incapacitated and don’t have a living will create confusion and stress for loved ones. Let’s say you have three adult children, and none of them know what kind of care you want. What will they do if the doctor asks them?

Another problem is if you have a living will, but no one knows where it is except you. The living will should be with other estate planning documents. Important people in your life should know where they are located and be able to access them.

If you have a living will, your healthcare proxy should have a copy of it. Ask your doctor if they can include a copy in your patient chart or on the portal they use to communicate and share medical records.

Finally, you’ll want to keep your living will up to date. As you age or illnesses change your health, you may have different feelings about your wishes. The most recent living will with the most recent date will be the one used by medical providers.

The living will is part of your comprehensive estate plan. Like the rest of your estate plan, it is a gift to others so they know what your wishes are.

Reference: The Wall Street Journal (Dec. 2, 2024) “A Living Will Covers Your Most Important Asset: You”

Money Tips for the Coming Year

A fresh start for 2025 should include your financial life and your health and wellness resolutions. A recent article from USA Today, “Start 2025 off right with these 9 money moves,” offers good suggestions to make this new year a good one.

Get out of debt. If you have high-interest debt and high-earning investments, you’re only treading water and not getting ahead. Take care of the high-interest debt first if you want to see your net worth grow.

Try living below your means. Too many of us spend more than we bring in and then try to catch up (See “Get out of debt” above). The more significant the difference between what you earn and spend, the better your savings accounts will grow. If you’re saving for retirement and your kid’s education, changing spending from what you want to what you need will help.

Build an emergency fund. Unless you are lucky enough to have untapped wealth, you need an emergency fund in cash ready to pay for at least three months of non-negotiable expenses. This means taxes, housing, food, transportation, medical expenses, etc. Few people are ready to deal with the economic impact of losing a job, having to replace a car, or needing major surgery. Having an emergency fund protects you from needing to use retirement funds or take on debt to deal with a short-term financial crisis.

Revaluate your portfolio. Investing in great companies for the long haul is how most people set their investment portfolios. However, it makes sense to look at a rebalance every now and then. People who are in their high-earning years may be okay with a 60/40 split between stocks and bonds. However, as you get closer to retirement, you may want to change this. After a few years, when stocks grow faster than bonds, your 60/40 split from a few years ago might have become an 80/20 split.

Maximize retirement accounts. If you can make use of tax-advantaged retirement funds, your future self will thank you. Use IRAs and 401(k)s to build long term wealth. If your company has a matching program, make sure to maximize your contributions using what is essentially free money. Your retirement withdrawals will be tax-free, if you can use a Roth account and pay taxes when you make contributions.

Check beneficiary designations. Make a list of all the financial accounts with beneficiary designations and check to see if the people you named to receive the assets on your death are still the right people. This is especially true if you’ve gone through a divorce, moved, or married.

Get your estate planning documents in order. If you don’t have a will, durable power of attorney, healthcare power of attorney, living will, or advanced directive, make an appointment with an estate planning attorney now to get these documents in order. If you have these documents but they are more than four years old, you’ll want to update them to be sure they still reflect your wishes. If you have young children, be sure your will includes naming a guardian.

Celebrate the New Year by organizing your estate planning and financial life. Next year at this time, you’ll be glad you did.

Reference: USA Today (Jan. 5, 2025) “Start 2025 off right with these 9 money moves”