“Nothing is certain but death and taxes” — right? Taxes are a certainty in the United States, but how much you pay in taxes is far from certain. Ironically, the amount you pay in death taxes is often the most uncertain. In the United States, a decedent’s estate is subject to estate taxes if the total estate assets are greater than the current lifetime exemption amount. That limit is set to make a substantial change in 2013 that all taxpayers should know about and incorporate into their estate plan.

Under the current structure, an estate is entitled to a lifetime exemption amount of $5.12 million. In other words, your estate will not be taxed unless your countable estate assets at the time of your death are greater than $5.12 million. Any assets above that amount are currently taxed at the rate of 35 percent. Unless Congress acts before the end of the year, however, both the lifetime exemption amount and the tax rate will make significant changes. In 2013, the lifetime exemption amount will plummet to just $1 million and the estate tax rate will climb to 55 percent. These changes could mean a substantial loss of estate assets for those who do not revise their estate plans accordingly.

Congress may choose to extend the current limit and tax rate. They could also decide to revisit the issue altogether and come up with a new regime for estate taxes. Taxpayers, however, should consider the impact of the automatic changes that will take place at the end of the year absent action by Congress. If your estate will be affected by the changes, be sure to consult with your estate planning attorney now.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

Actor Gary Sinise, known by many for his portrayal of Lt. Dan Taylor in the film Forest Gump, recently launched a project aimed at building smart homes for America’s seriously wounded veterans. Sinise’s role as Lt. Dan Taylor back in 1994 caught the attention of many veterans at the time. Since that time, Sinise has had a very close relationship with veterans and veteran causes. In 2003, Sinise joined the USO tour where he took the time to visit as many wounded veterans as possible. He was honored and humbled by the service they have given to our country. For years, Sinise’s band, the “Lt. Dan Band” has raised money for veteran causes. Now, Sinise’s foundation, aptly named the Gary Sinise Foundation, will be partnering with the Tunnel to Towers Foundation to build smart homes for severely wounded veterans as part of the Building for America’s Bravest project.

Many veterans who have been seriously wounded in combat cannot perform simple household tasks that most of us take for granted. The purpose of the project is to provide homes for these heroes that they can essentially run off of a smart phone. The keys to the first home were given to the new occupant just last month with many more planned for the future.

If you have a cause that is close to your heart or would like to make a charitable foundation part of your estate plan, be sure to talk to your estate planning attorney about how to make that wish a reality.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

When a power of attorney is not well drafted or when the person executing the power of attorney does not fully understand what the document does, a power of attorney can wreak havoc on a person’s estate. On the other hand, when one is well drafted and used appropriately, it can be a beneficial estate planning tool. For these reasons, think twice before using a boilerplate power of attorney found on the Internet or anywhere else.

In today’s digital age, it is incredibly easy to locate form documents for almost anything on the Internet. Just because you can find one does not mean you should depend on the accuracy of the form, much less use the form. Many boilerplate forms do not take into account state specific laws, recent changes in the law or specific needs of the person using the form. In the case of a power of attorney, many forms found on the Internet are general in nature and may give the agent, or person to whom you are granting authority, much more authority than you intended to grant. At the same time, the power of attorney may not accomplish your desired goals, such as giving the agent authority to make medical or financial decisions in the event you become incapacitated.

As with all legal documents and forms, the best way to avoid making a mistake is to consult with your estate planning attorney before attempting to draft, much less sign, one.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

Careful estate planning includes understanding your tax consequences and minimizing your estate taxes. Generally, the Internal Revenue Service (IRS) uses the value of your “gross estate” to determine your tax liabilities. The fair market value on the date of death determines a decedent’s estate tax liabilities. Your gross estate typically includes your probate property and other non-probate property. It does not include specific types of property, including spousal property jointly owned with a surviving spouse. Furthermore, it does not include some lifetime gifts. You can also reduce your estate taxes by claiming the following top five deductions:

1. Mortgages and excludable debts owed on the date of the decedent’s death.

2. Any expenses paid by the decedent’s estate or executor to administer the decedent’s estate.

3. Charitable deductions, if paid to qualifying charities.

4. Marital deduction for a surviving spouse for property jointly owned.

5. Any losses incurred by the estate during administration of the decedent’s estate.

Talk to your accountant or tax planner to see if any of these deductions apply.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

Also known as Medicare supplemental insurance, “Medigap” is a type of health insurance policy available through private insurance companies. Medigap refers to the type of coverage these policies cover: the difference between what Medicare covers and what it doesn’t cover. The “gap” is the out-of-pocket expenses not covered by Medicare insurance. According to the federal government, almost one-fifth of those covered by Medicare purchase Medigap coverage to cover their unreimbursed Medicare costs.

Medicare insurance covers senior citizens age 65 or older and those with certain serious kidney diseases, regardless of age. Additionally, if you receive Social Security Disability Insurance benefits, you may also receive Medicare benefits, regardless of your age. Depending on the type of Medigap coverage you purchase, you may be eligible to receive prescription drug coverage. Currently, Medigap insurance policies only cover out-of-pocket hospital costs and doctor’s visits uncovered by Medicare. For instance, your Medicare policy may not cover copays or insurance deductibles, in which case purchasing supplemental insurance could save you money, depending on your health care needs. According to federal and state laws, most Medigap providers must provide their enrollees with a standard package of benefits. The federal Centers for Medicare & Medicaid Services provides a free downloadable publication to help you understand the basics of Medigap policies: http://www.medicare.gov/Publications/Pubs/pdf/02110.pdf

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

Elderly people today have more housing options than they had in the past. Elderly individuals who are no longer able to live completely independent lives no longer have to make the tough decision to live with family or friends or live in nursing homes. Now, they can live in alternative housing, including assisted living facilities, board and care facilities and continuing care retirement communities. Thus, you can find supportive housing communities that help you live somewhat independently while providing you with medical assistance and self-care options. The alternative supportive housing communities and institutions range in size and price. If you need specialized medical care and live in a high-cost area, you may have to pay more.

Many elderly individuals choose to live in assisted living facilities instead of traditional nursing homes. Typically, residents enjoy more freedom and space in assisted living centers than nursing homes. Although medical care and other services are available 24 hours a day, patients enjoy more privacy and less medical supervision in assisted living facilities.

Some continuing care retirement communities offer even more options and personal freedoms than assisted living facilities. If you have less serious medical needs and can move around independently, you may want to consider these types of housing arrangements. Whatever you decide, make sure you talk to your friends and family about your needs. They may ask you to live with them instead.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

Helping pay for the education of a loved one is something that will have a life-long impact for the beneficiary. Although simply handing over the funds to pay for education is one way to accomplish your goal, it may not be the best way to do so. Creating an education trust is often a better option, both for you and for the beneficiary.

An education trust operates just like any other trust, except that the sole purpose of the trust is to pay for education. After choosing a trustee and deciding what assets will be used to fund the trust, you should sit down an decide what specific terms and conditions you want to include in your education trust that will best serve both you and the beneficiary.

For example, you need to decide whether the trust assets can be used to fund private elementary or secondary education or only post-secondary education. In addition, do you want your beneficiary to be able to use the trust to pay for trade school, vocational school or community college or only a traditional four-year university? Is your beneficiary free to attend any college or must he or she pick from a list? Do you want to choose the intended major or leave that up to the beneficiary?

In order to ensure that your beneficiary stays on track and that your money is used wisely, you may want to require that the beneficiary maintain a minimum grade point average. Also, you need to decide if things like room and board, books, and monthly expenses can be paid out of the trust or only tuition. By taking the time to make these decisions ahead of time, both you and your beneficiary will get the most out of your education trust.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

If you are planning to make use of one or more living trusts, you may think that a Last Will and Testament isn’t needed. Many people make this mistake, but you do not have to be one of them.

A living trust allows you to transfer assets to the trust while you are still alive. In fact, you can transfer all of your assets into the trust, if you choose to do so. In addition, a living trust becomes effective while you are still alive and can begin to disburse assets as well prior to your death if the terms call for doing so. Because a living trust can do all of this, people often think that a Will is no longer needed. From an estate planning perspective, however, a pour over Will should be included even if you plan to rely heavily on a living trust to distribute your estate assets.

A pour over Will can be thought of as a safety net for your living trust. Mistakes can be made when transferring an asset into the trust. An asset could also be forgotten or acquired just prior to your death. For any of these reasons, an asset could remain in your name at the time of your death. If that happens, chances are that formal probate will be required which will cost your estate money and will take time to complete. In addition, state intestacy laws will decide who inherits that asset.

By executing a pour over Will, you create a safety net to catch anything that was inadvertently left out of the living trust. As the name implies, a pour over Will “pours over” assets from your estate into a trust when you die, taking care of anything that was not already transferred into your trust.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

Passing one of your assets often comes with mixed emotions. On the one hand, it often feels good to know that your hard work and wise investment decisions will provide financial security to future generations. On the other hand, it can be a scary proposition if you are not certain that the intended beneficiaries will manage the assets well. Creating a family incentive trust may be the answer.

Like other trusts, a family incentive trust allows you to choose the trustee and decide what assets will be used to fund the trust. In addition, you have wide latitude in creating the terms of the trust. You can use that latitude to ensure that your beneficiaries will make wise decisions and manage the money well.

If, for example, you established a successful business and want a beneficiary to continue in the business, you can make that a term of the trust. Showing a profit in the business could be a condition of disbursement of trust funds. If your beneficiary is young and education is important to you, a term that requires the beneficiary to complete college is another option.

For a beneficiary that has a history of substance abuse, poor money management or other issues that worry you, include terms in your family incentive trust that address those concerns. For example, you could condition disbursement of trust funds on the completion of a financial planning course or a substance abuse treatment program.

Talk to your estate planning attorney to determine how best to structure your family incentive trust in a way that will benefit your beneficiary and put your mind at ease.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

Estate planning for a married couple generally starts by establishing some important timelines for the couple. For example, a general idea of when children will finish college, when the couple will retire and when long-term care is likely to be needed are milestones that are often important. When the couple has a significant age difference — defined as ten years or more — between them, estate planning can be somewhat more complicated because many of those milestones will not be reached at the same time for the partners in the marriage.

Retirement is a big issue when it comes to estate planning. Making sure that you have enough money socked away when you reach retirement age and making sure that you will continue to have a steady income stream after retirement are important issues in your estate plan. When one partner will be retiring a decade or more before the other partner, this can require some creative estate planning to make sure that your finances are where you want them to be. Some IRAs, for example, will allow you to take out less in your mandatory distribution if your spouse is at least ten years younger than you. Not knowing this is an option, however, can cause you to lose money by overfunding the early years of your retirement.

As with all estate planning obstacles, an age difference can be accounted for in your estate plan as long as you start planning early. Talk to your estate planning attorney now to ensure that your plan reflects the issues that go along with an age gap marriage.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.