The imagination of the country is captured every time the Powerball lottery jackpot accumulates to some mind-blowing number. The largest jackpot in history was recently up for grabs, and the winning ticket was purchased in Florida.

What would you do if you were to walk away with $250 million after paying income taxes?

Given a few minutes to think about it you could certainly come up with quite a few ideas. However, one of the first things that you should do is consult with a licensed estate planning who has a background assisting high net worth individuals.

The federal estate tax carries a maximum rate of 40%. There is a base $5 million exclusion that was put into place in 2011, and it is updated annually to account for inflation. As a result the 2013 exclusion is $5.25 million.

What this means is that if you were in possession of $250 million, only the first $5.25 million could be passed on to your heirs free of this 40% estate tax.

If you were to win this kind of money it is likely that one of the first things that you would want to do would be to give some of it away to your family members. However, there is a gift tax in place, and you can only give $14,000 to any one person in a given year before the tax becomes applicable. It carries the same 40% top rate as the estate tax.

There are ways to position assets in an effort to minimize gift and estate tax exposure. Hopefully the winner of this huge jackpot understands the importance of planning ahead with tax savings in mind.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

Life insurance is a big part of many estate plans. When you’re first starting out in life you need to have a vehicle of income replacement in place to provide resources for your family in the event of your death.

As time goes on the life insurance may be less of an income replacement vehicle and more of an inheritance planning tool.

Life insurance can play a role in balancing inheritances. For example, say wanted to give your house to your daughter and it was by far your most valuable possession.

You have another child, a son. You want to give equal inheritances. It would be possible to accomplish this by taking out a life insurance policy equal to the value of the home and making your son the beneficiary.

Insurance can do a lot of good when you are planning your estate, but it does no good at all if the beneficiaries are not aware of the fact that policies exist. This may seem very obvious, and you may think that nobody takes out an insurance policy without letting the beneficiary know where it is.

In fact, the magazine and website Consumer Reports probed the subject. According to their findings a lot of insurance policies go unclaimed. Their estimate places the value of unclaimed benefits at around $1 billion.

Communication is important when you’re planning your estate. Some people like to keep their financial decisions private, but you can only take this so far if you want your estate planning to be effective.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

A recent news story about potential abuse of powers of attorney provides a cautionary tale for individuals involved in estate planning.  You can read the story here, but here are two important take-aways:

1) A Power of Attorney is an important document to have in place in case you become unable to manage your financial affairs, but you need to be very careful in deciding who should have that power.  Your estate planning attorney should carefully discuss with you your choice of agent and whether that agent should have authority to act for you now or only if you don’t have capacity to manage your finances on your own.

2) Just because you determine in your estate planning that a person would be an appropriate agent does not mean that the person will be an appropriate agent a few years down the road — people change (such as capability) and relationships change (people become closer or grow apart).  It is critical to reassess periodically who has your power of attorney and whether that person is still the appropriate choice.

Please do not let this story discourage you from getting a Power of Attorney in place as part of your estate planning, but do think carefully about your choice and reassess periodically.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

Long-term care insurance can be a solution for many seniors. The cost of nursing home care can be stifling, and making payments out-of-pocket can erode the legacy that you have to leave behind to your loved ones. If you have appropriate insurance coverage, you can minimize your assisted living expenses and preserve your wealth.

While the purchase of long-term care insurance can be useful for many people you must be very discerning about your choices.

The best way to proceed when you are planning for long-term care is to sit down and discuss your circumstances with a licensed and experienced elder law attorney. If you go forward without any legal guidance, difficult circumstances could arise at some point in the future.

With this in mind, there was a court ruling in Kentucky last year that got the attention of some people within the elder law community. A lawsuit was filed by a woman who is suffering from Alzheimer’s disease. She purchased long-term care insurance 17 years before entering a facility that specializes in providing care for Alzheimer’s patients.

She entered this facility with the understanding that her insurance would pay for the care. However, the insurance company did not agree.

The insurer contended that the terms of the policy did not allow for this particular type of facility.

After reviewing the case, the court sided with the insurance company and found that they were not required to pay for the living expenses of the policyholder.

Whether you live in Kentucky or North Carolina, this case underscores why it is important to discuss your situation with an elder law attorney as well as an experienced long-term care agent and take action with the benefit of guidance every step of the way.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

It is a good idea to be aware of the perils that you may face as you age, and elder financial abuse is one of them.

People sometimes dance around difficult topics, and this is understandable. However, the fact is a significant percentage of elder Americans are abused financially in some way. The damages add up to about $2.9 billion per year according to the MetLife Mature Market Institute.

This is a very complicated situation because not all cases of abuse are perpetrated by professional criminals. Yes, seniors do have to be on the lookout for scams and identity thieves — these predators do often target seniors because they are perceived as easy marks.

But this is only part of the problem. What makes it so complex is that seniors in many cases do need others to help them in various ways. As a result, people have close access, and they have opportunities to abuse the elders financially.

Sometimes family members are the culprits. In New York, an appellate court recently upheld a verdict involving Brooke Astor and her son Anthony Marshall. Marshall was convicted of essentially stealing millions of dollars from his elderly mother.

Aside from family members, there may be caregivers who take advantage of their charges for their own financial gain.

While there are no sweeping solutions, estate planning attorneys can advise clients who want to take legal steps to protect themselves. Certain types of trusts could be useful, along with the thoughtful execution of powers of attorney.

If you would like to discuss things with a professional, feel free to contact our office to set up a free consultation.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

The Internet can be a good source of information, but you have to separate the wheat from the chaff. The Internet is also a good place to sell things, so some of the “information” that is out there is circulated with profit motivation holding priority over objective analyses.

This is true with the various websites that sell do-it-yourself estate planning documents and other DIY legal forms. The purveyors of these generic template documents try to convince people that estate planning is so simple anyone can do it alone.

As they say, a little bit of knowledge is a dangerous thing. If you buy into these notions, your family may regret it later on. In fact, last year Consumer Reports magazine advised against the use of DIY estate planning downloads and worksheets.

Our firm is committed to providing sound, objective estate planning information to the members of the communities we serve. To this end we frequently offer free estate planning seminars, and we have some coming up in June.

We also have a library of free special reports on numerous different estate planning and elder law topics. These would include wills, revocable living trusts, trust administration, special needs planning, asset protection, charitable giving, legacy planning, and others.

If you want to get solid information simply download the reports that interest you. They are yours free of charge as mentioned above, and you can browse the entire library by clicking this link: Free Estate Planning Special Reports.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

Certain life events can render your existing estate plan in need of revisions. One of these would be a change in marital status.

Different people are in different situations, but generally people who are entering into a first marriage are relatively young. The people getting married may not have much in the way of financial resources, and they probably don’t have any children.

Young couples in this situation should have an estate plan in place, but they may only require a relatively simple estate plan. In that case, there would be no particular reason for a prenuptial agreement or any advanced type of trust.

Surprisingly, statisticians tell us that there is about a 50-50 chance that a first marriage will fail. Things are much different with second and third marriages. And, people getting married for a second or third time may be older, they may have children, and they may have accumulated significant financial resources.

Exactly how likely is it that your second or third marriage will fail? According to a piece that has been published on the Psychology Today website second marriages fail at a rate of 67%, and the divorce rate for third marriages is 73%.

If you are a parent with considerable financial resources and you are entering into a union that is statistically likely to end in divorce,  you may want to consider a prenuptial agreement. There are ways that you could then subsequently make sure that your spouse was provided for in the event of your passing should the marriage endure.

One possibility would be the creation of a qualified terminable interest trust, which would ultimately provide for both your surviving spouse and your children.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

Different types of trusts serve different purposes. People sometimes assume that a trust is a trust, but this is simply not the case.

For example, let’s look at a commonly utilized trust called a revocable living trust. Some people assume that assets that you convey into any trust are no longer your personal property.  They also assume that resources that placed in a revocable living trust would be protected from creditors and income taxation.

In fact, this is not the case at all. Because the trust is revocable, you have total control over the funds, and you can dissolve the trust and use the money any way want to. As a result, there is no asset protection or income tax protection afforded by a living trust.

What these trusts will do is enable probate avoidance. Probate is a legal process, and depending on the circumstances it can consume a great deal of time, and expenses can add up during probate that reduce the value of the estate.

With these trusts, the beneficiaries receive their inheritances in a more timely and potentially cost effective manner.

The other valuable thing about revocable living trusts is the ability to include an incapacity planning component.

Someone must manage your affairs if you were to become incapacitated. You can hand pick a successor trustee when you draw up the trust agreement, and this individual or entity would be empowered to manage the trust’s assets in the event of your incapacitation.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

The word “intestacy” is used to describe the results when an individual passes away without having executed a last will or some alternate estate planning.

If you don’t state your wishes, what happens to your resources? The answer is that the probate court will order the distribution of the assets. Each state has intestate rules of succession, and they are slightly different state-by-state. In a general sense, those closest to you, such as your spouse and your children, will be first along these lines of succession.

However, there are cases when people who don’t have any relatives die intestate. There is just such a case playing itself out in the state of New York right now.

A wealthy former real estate developer named Roman Blum died last year. He was 97 years old, and according to an article that has been published on the New York Times website he was worth almost $40 million. This is the record for an intestacy case in New York. He has no known relatives.

That kind of money could do a lot of good, and when you read the article, Blum did have friends and neighbors who cared about him. You could also imagine that he had some favorite causes or charities.

But Blum passed away without executing a will or a trust. There will be an ongoing effort to find relatives that will include the estate’s hiring genealogists. But if no one is found, or if no one steps forward within three years, the assets Blum left behind will be taken by the state of New York.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

Individual retirement accounts are important to those who are interested in putting together a financial nest egg for their senior years. However, the correct type of IRA can also be used in an estate planning context.

The standard, conventional individual retirement account, or “traditional IRA,” involves making pretax contributions. You can deduct contributions that you make from your earnings when you’re filing your income tax returns.

This does not mean you will never pay any taxes. The earnings do grow tax-free, but you must pay income tax on the distributions once you begin taking them — essentially, for a while you are allowed to invest and make money off the income you would otherwise have been required to hand over to the IRS immediately. You are allowed to tap into the account without being subject to any penalties once you reach the age of 59.5.

With these accounts you are actually compelled to begin taking distributions when you reach the age of 70.5. Because you have to take the distributions you can’t count on there being much left in those accounts for your loved ones after you pass away.

On the other hand, there is no mandatory withdrawal requirement when you have a Roth IRA rather than a traditional IRA. You can leave the assets untouched, and interest will accumulate without being taxed. Your beneficiary would assume ownership of the account after your passing.  (At that point, the IRS will require your beneficiary to start making withdrawals.)

The reason why you have this ability with a Roth IRA is because you make your contributions with after-tax earnings.

It should be noted that you can start with a Roth IRA from the outset. However, it is also possible to convert a traditional IRA to a Roth IRA, but you will have to pay taxes on the earnings and the previously tax deductible contributions.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.