Michigan Estate Planning Blog

What Is Probate Court?

Probate court is a part of the court system that oversees the execution of wills, as well as the handling of estates, conservatorships and guardianships. This court also is responsible for the commitment of a person with psychiatric disabilities to institutions designed to help them.

Investopedia’s recent article entitled “What Is Probate Court?” also explains that the probate court makes sure all debts owed are paid and that assets are distributed properly. The court oversees and usually must approve the actions of the executor appointed to handle these matters. If a will is contested, the probate court is responsible for ruling on the authenticity of the document and the cognitive stability of the person who signed it. If no will exists, the court also decides who receives the decedent's assets, based on the laws of the state.

Each state has rules for probate and probate courts. Some states use the term “surrogate’s court”, “orphan’s court”, or “chancery court.”

Probate is usually required for property titled only in the name of the person who passes away. For example, this might include a family home that was owned jointly by a married couple after the surviving spouse dies. However, there are assets that don't require probate.

Here are some of the assets that don't need to be probated:
IRA or 401(k) retirement accounts with designated beneficiaries
Life insurance policies with designated beneficiaries
Pension plan distributions
Living trust assets
Payable-on-death (POD) bank account funds
Transfer-on-death (TOD) assets
Wages, salary, or commissions owed to the deceased (up to allowable limit)
Vehicles intended for immediate family (under state law); and
Household goods and other items intended for immediate family (under state law).

Investopedia (Sep. 21, 2022) “What Is Probate Court?”

Top Benefits of Estate Planning

Despite the hard lessons learned during the COVID pandemic, surveys repeatedly show most Americans still don’t have an estate plan in place. According to the article “Five benefits of estate planning” from The Aspen Times, a comprehensive estate plan ensures your assets are distributed according to your wishes when you die, minimizes taxes on your estate and protects your loved ones, especially those who depend on you financially. In addition, estate planning protects you while you are living and ensures that your wishes are followed, if you become incapacitated.

Protect Yourself and Your Assets During Your Lifetime. No one likes to consider themselves at risk of incapacity. However, this happens. If you become mentally or physically incapacitated during your lifetime, you might not be able to earn income, or make decisions for yourself. Part of an estate plan includes documents to address these risks to protect yourself, your family and your assets.

Designating a health care proxy and a power of attorney gives people you choose the ability to make decisions on your behalf. Otherwise, the responsibility for your medical, legal and financial decisions may go to someone you don’t even know.

Asset Distribution. Without a last will, your home state’s laws govern the distribution of your assets. Your intentions to care for certain individuals won’t be relevant, as the law itself decides who gets what. A last will is used to state exactly how you want assets to be distributed. Your last will should be updated as your financial situation and/or family dynamics change. You should also review designated beneficiaries on investment accounts and insurance policies regularly and especially after any major life changes.

Minimize Transfer Taxes. While there’s no way to predict what taxes will take effect in the future, it’s safe to assume there will be taxes on your estate. If you hope to leave wealth of any size to your family, proper estate planning is crucial. There are many different strategies to minimize taxes on inherited wealth, including life insurance, Roth IRA conversions, lifetime giving and trusts. Your estate planning attorney will be able to create a plan suited for your unique situation.

Protect Family Wealth. As people accumulate wealth, they often become the targets of frivolous lawsuits. For this reason, placing assets in certain types of trusts can ensure efficient wealth transfer, as well as protecting assets from predators and creditors.

Create and Continue a Legacy. Legacy planning is part of the estate planning process. Many people donate money or assets on their death to causes they supported during their lifetime. These goals can be achieved by contributing to a donor advised fund, creating a family foundation or setting up a philanthropic trust.

Creating an estate plan is also a useful tool for having candid discussions with the family about the future, avoiding future conflicts and making your estate administration easier for loved ones.

Reference: The Aspen Times (Jan. 24, 2023) “Five benefits of estate planning”

Top Benefits of Estate Planning

Despite the hard lessons learned during the COVID pandemic, surveys repeatedly show most Americans still don’t have an estate plan in place. According to the article “Five benefits of estate planning” from The Aspen Times, a comprehensive estate plan ensures your assets are distributed according to your wishes when you die, minimizes taxes on your estate and protects your loved ones, especially those who depend on you financially. In addition, estate planning protects you while you are living and ensures that your wishes are followed, if you become incapacitated.

Protect Yourself and Your Assets During Your Lifetime. No one likes to consider themselves at risk of incapacity. However, this happens. If you become mentally or physically incapacitated during your lifetime, you might not be able to earn income, or make decisions for yourself. Part of an estate plan includes documents to address these risks to protect yourself, your family and your assets.

Designating a health care proxy and a power of attorney gives people you choose the ability to make decisions on your behalf. Otherwise, the responsibility for your medical, legal and financial decisions may go to someone you don’t even know.

Asset Distribution. Without a last will, your home state’s laws govern the distribution of your assets. Your intentions to care for certain individuals won’t be relevant, as the law itself decides who gets what. A last will is used to state exactly how you want assets to be distributed. Your last will should be updated as your financial situation and/or family dynamics change. You should also review designated beneficiaries on investment accounts and insurance policies regularly and especially after any major life changes.

Minimize Transfer Taxes. While there’s no way to predict what taxes will take effect in the future, it’s safe to assume there will be taxes on your estate. If you hope to leave wealth of any size to your family, proper estate planning is crucial. There are many different strategies to minimize taxes on inherited wealth, including life insurance, Roth IRA conversions, lifetime giving and trusts. Your estate planning attorney will be able to create a plan suited for your unique situation.

Protect Family Wealth. As people accumulate wealth, they often become the targets of frivolous lawsuits. For this reason, placing assets in certain types of trusts can ensure efficient wealth transfer, as well as protecting assets from predators and creditors.

Create and Continue a Legacy. Legacy planning is part of the estate planning process. Many people donate money or assets on their death to causes they supported during their lifetime. These goals can be achieved by contributing to a donor advised fund, creating a family foundation or setting up a philanthropic trust.

Creating an estate plan is also a useful tool for having candid discussions with the family about the future, avoiding future conflicts and making your estate administration easier for loved ones.

Reference: The Aspen Times (Jan. 24, 2023) “Five benefits of estate planning”

Do You Need a Revocable or an Irrevocable Trust?

 

It’s not always obvious which type of trust is the best for an individual, says a recent article titled “Which is Best for Me: A Revocable or Irrevocable Trust?” from Westchester & Fairfield County Business Journals.

In a revocable living trust (RLT), the creator of the trust, known as the “grantor,” benefits from the trust and can be the sole Trustee. While living, the grantor/trustee has full control of the real estate property, bank accounts or investments placed in the trust. The grantor can also amend, modify and revoke the trust.

The goal of a revocable trust is mainly to avoid probate at death. Probate is the process of admitting your last will and testament in the court in the county where you lived to have your last will deemed legally valid. This is also when the court appoints the executor named in your last will. The executor then has access to the estate’s assets to pay bills and distribute funds to beneficiaries as named in the last will.

Probate can take six months to several years to complete, depending upon the complexity of the estate and the jurisdiction. Once the estate is probated, your estate is part of the public record.

A revocable living trust and the transfer of assets into the trust can accomplish everything a last will can. However, distribution of assets at the time of death remains private and the court is not involved. Distribution of assets takes place according to the instructions in the trust.

By comparison, irrevocable trusts are not easily revoked or changed. Most irrevocable trusts are used as a planning tool to transfer assets for the benefit of another person without making an outright gift, or for purposes of Medicaid or estate tax planning. An Irrevocable Medicaid Asset Protection Trust is used to allow an individual to protect their life savings and home from the cost of long-term care, while allowing the trust’s creator to continue to live in their home and benefit from income generated by assets transferred into the irrevocable trust.

The transfer of assets to a Medicaid Asset Protection trust starts a five-year penalty period for Nursing Home Medicaid and a two-and-a-half-year penalty period for Home Care Medicaid for applications filed after March 1, 2024. After the penalty (or “look back”) periods expire, the funds held by the trust are protected and are not considered countable assets for Medicaid.

An irrevocable trust can also be used to transfer assets for the benefit of a loved one, friend, child, or grandchild. Assets are not controlled by the beneficiaries but can be used by the trustee for the beneficiary’s health, education, maintenance and support.

Trusts are used to reduce the size of the taxable estate, to plan for the well-being of loved ones, and to protect the individual and couple if long-term care is needed. Speak with an estate planning attorney about which trust is best for your unique situation.

Reference: Westchester & Fairfield County Business Journals (Jan. 26, 2023) “Which is Best for Me: A Revocable or Irrevocable Trust?”

Does Will Have an Expiration Date?

Nj.com’s recent article entitled “Do I need to change my will if it’s about 10 years old?” explains that there’s no expiration date on a will.

However, as your family and financial situations change, let alone as laws change, wills may need to be updated to reflect these changes and better reflect your intent.

If the changes are minor, they can be reflected in a codicil. That’s a separate document changing the will.

Codicils can be used to keep a will current and up to date. They’re separate documents from wills—and serve as an addendum to the will.

The use of a codicil dates back to ancient times when, for instance, an heir needed to be named.

The requirements for a codicil vary in each state, and like a will, most states require two witness signatures for codicils, while some states allow the document to be notarized.

In contrast, significant changes should be done by having a new will prepared and executed.

Sometimes, even minor changes may involve preparation of a new will.

For instance, in the original will you may have excluded a beneficiary who you now want to include.

However, don’t want the beneficiary to find out they were originally excluded.

If you sign a codicil, the previous exclusion will be obvious. However, with a new will, the old will and previous exclusion will remain undisclosed.

Don’t mark up or hand-edit an original will because that will make it hard or impossible to probate. It will probably require a court proceeding to have the will accepted for probate.

Finally, some financial institutions have problems with older wills, so you may want to inquire about their policies to make sure there won’t be trouble after you pass away.

Reference: nj.com (Oct. 22, 2022) “Do I need to change my will if it’s about 10 years old?”

What Is Included on a HIPAA Authorization Form?

HIPAA Journal’s recent article entitled “What is HIPAA Authorization?” explains that the authorization form must be written in plain language so it can be easily understood. In addition, and as a minimum, the authorization form must have these components:
Specific and meaningful information, including a description of the information that will be used or disclosed
The name of the individual authorized to make the requested use or disclosure
The name of the person or class of persons to whom information will be disclosed
A description of the purpose of the requested use or disclosure
A specific time frame for the authorization, including an expiration date; and
A date and signature from the individual giving the authorization.
Statements must also be included on the HIPAA authorization to notify the individual of the right to revoke the authorization in writing and either:
exceptions to the right to revoke and a description of how the right to revoke can be exercised; or
the extent to which the information is included in the organization’s notice of privacy practices.
In addition, the statement included on the HIPAA authorization to notify the individual of the ability or inability to condition treatment, payment, enrollment, or eligibility for benefits on the authorization by stating either:
that the covered entity may not condition treatment, payment, enrollment, or eligibility for benefits on whether the individual signs the authorization; or
the consequences of a refusal to sign the authorization when the covered entity is permitted to condition treatment, enrollment in the health plan, or eligibility for benefits on a failure to obtain authorization.
The person giving consent must be provided with a copy of the authorization form for their records.
Reference: HIPAA Journal (Oct. 9, 2021) “What is HIPAA Authorization?”

What Do I Need to Know If I’m Getting an Inheritance?

 

Kiplinger’s recent article entitled “Getting an Inheritance? Here Are 4 Things to Consider” says you can’t always know exactly what’s left in a will. However, if you’ve received or anticipate receiving some type of inheritance, there are a few things to consider that can help you prepare for the issues heirs face.
1. Expect the Process to Take Time. Settling an estate is a big task. When the decedent’s affairs aren’t in order, it’s an even greater task. The executor (the person appointed to administer the will) must notify beneficiaries and interested parties, pay outstanding debts, close accounts, take an inventory of assets and determine if any of the assets not part of the will must go through probate. They must file with the IRS to pay taxes. After this, the assets finally can be distributed to close the estate.
2. Create a Plan for the Money. This is an opportunity to put the money toward some practicalities, including ways to help protect your future. Think about building up your emergency fund, paying off high-interest debt and saving for long-term goals. After you address your financial priorities, it’s fine to begin thinking about spending the money on something fun.
3. Get Advice from an Experienced Estate Planning Attorney. The rules on inheriting assets can be complex, like when inheritors may have what’s called a step-up-in-basis provision for taxes. This lets the heirs set the valuation of their inherited property equal to its fair market value at the date of death – instead of the lower price at which it was purchased. This helps minimize capital gains taxes on inherited assets that have appreciated over time. There may also be state estate and inheritance taxes to consider.
4. Take Time to Review Your Own Estate Plan. Make your own estate administration as easy as possible after you are gone. This includes keeping clear records of all your accounts, along with any estate plan documents including trusts, wills, powers of attorney and advance health care directives. You should keep them all in a location accessible to those responsible for administering your estate.
Reference: Kiplinger (Jan. 9, 2023) “Getting an Inheritance? Here Are 4 Things to Consider”

Why Change the Executor of Your Will?

 

Yahoo Finance’s recent article entitled “How to Change the Executor of a Will” explains that you may need to choose a new executor in the following situations:

Your original executor dies or becomes seriously ill and can’t fulfill his or her duties;

You named your spouse as executor but you’ve divorced;

The individual you originally designated as executor decides he or she no longer wants the responsibility;

You’ve had a personal falling out with your executor; and

You think another person is better equipped to execute your will.

However, you don’t need to give a specific reason to change the executor of a will. When you’re ready to make a change, you can add a codicil to an existing will or draft a new will.

A codicil is a written amendment used to modify the terms of your will without drafting a new one. It can be used to change the executor of a will or revise any other terms as needed.

You must validate the codicil the same way you did your original will, signing and dating the codicil with the same legal formalities required for the original will.

If you’d like to change more than just the executor of your will, you might think about drafting a new will document. The new will would also need to be signed with the same legal formalities required for the original will.

You must also take the added step of destroying all copies of the original will. This is needed to avoid confusion and any possible challenges to the terms of the will after you die.

If you don’t name an executor in your will, the probate court can assign one. After you die, eligible persons can apply to become the executor of your estate. The individual the judge selects would then be able to carry out the terms of your will.

If you don’t have a will at all, then your assets would be distributed by default according to your state’s inheritance laws.

Reference: Yahoo Finance (Dec. 28, 2022) “How to Change the Executor of a Will”

 

What are Big Mistakes When Writing Financial Power of Attorney?

A financial power of attorney can be a powerful tool in your estate planning tool belt. However, if you don't take careful consideration when creating this document, you could face serious consequences. Read Kiplinger’s recent article entitled “5 Mistakes to Avoid When Writing a Financial Power of Attorney” to learn five of the biggest mistakes to avoid when writing your financial power of attorney.
1. Not Designating an Alternative Agent. The most protective plans consider contingencies — including if your primary agent is unable or unwilling to serve. Naming an alternative agent lets you say who will manage your affairs if your first choice dies, becomes incapacitated, resigns, or simply refuses to act. It can also help avoid having the court appoint a new agent, someone you wouldn’t have chosen.
2. Creating a “Springing” Agency. When an agency is conditioned on the incapacity of the principal, it’s sometimes called a “springing” agency,” because it “springs” into existence upon a triggering event. However, not all states recognize springing agencies.
3. Overbroad Gifting Powers. A powerful term that can be granted to an agent under a power of attorney is the authority to give away the principal’s property. Granting your agent this power gives them powerful control over your estate. Before granting this power, you should carefully consider the potential risks involved — including financial abuse or fraud. You can also limit your agent’s gift-making authority and specify to whom your agent is authorized to make gifts, including if the agent should be permitted to make a gift to themselves. You should also specify the total value of gifts your agent will be authorized to make in a given year.
4. Not Telling Current Agents of a Change. Most powers of attorney include an express statement that all old powers of attorney are revoked or canceled whenever the document is updated or replaced. Any agents acting under a previously authorized power that’s now void should be told (in writing) to avoid any confusion or potential issues.
5. Failing to Plan for Real Estate Powers. One of the most common powers principals grant their agents is the power to manage their real estate. This may include renting or selling real estate, paying for repairs or renovations or hiring a real estate agent to help carry out transactions. If you want to grant your agent this power, you may be required to file your POA with your local land records office.
Reference: Kiplinger (Dec. 27, 2022) “5 Mistakes to Avoid When Writing a Financial Power of Attorney”

Is Estate Planning and Writing Will the Same Thing?

 

An estate plan is a broader plan for your assets that may apply during your life as well as after your death. A will states where your assets will pass after you die, who will be the guardian of your minor children and other directions. A will is often part of an estate plan, but an estate plan covers much more.

Yahoo’s recent article entitled “How Is Estate Planning Different From Will Planning?” says that if you’re thinking about writing your will or creating an estate plan, it can be a good idea to speak with an experienced estate planning attorney.

A will is a legal document that describes the way you want your assets transferred after your death. It can also state your wishes when it comes to how your minor children will be cared after your death. Wills also nominate an executor who’s in charge of carrying out the actions in your will.

Without a will, your heirs may spend significant time, money and energy trying to determine how to divide up your assets through the probate court. When you die intestate, the succession laws where you reside determine how your property is divided.

Estate planning is much broader and more complex than writing a will. A will is a single tool, and an estate plan involves multiple tools, such as powers of attorney, advance directives and trusts.

Estate planning may include thinking through topics even beyond legal documents, like deciding who has the power to make healthcare decisions on your behalf while you’re alive, in addition to deciding how your assets will be distributed after your death.

Therefore, wills are part of an estate plan. However, an estate plan is more than just a will.

A will is just a first step when it comes to creating an estate plan. To leave your family in the best position after your death, create a comprehensive estate plan, so your assets can end up where you want them.

Reference: Yahoo (Oct. 20, 2022) “How Is Estate Planning Different From Will Planning?”

How to Help Create an Estate Plan

 

We all have assets that need to go to someone when we die. Without an estate plan, the decision as to who gets your assets is left to state law, explains Money Talks News’ recent article entitled “Why Everyone Needs an Estate Plan.”

You don’t have to delay until you’re gray to get an estate plan in place. Estate planning can benefit you at any age. No one can predict the future, and if the unexpected occurs and you pass at a young age, an estate plan can designate who will get guardianship of your minor children or the pets you leave behind.

Hiring an experienced estate planning attorney who can write up the necessary legal documents may be smart when you decide to put together an estate plan. You can also take these steps to put your estate plan in place.

Make an inventory of your assets — list your tangible and intangible assets and their estimated value. Tangible assets include your home or other real estate holdings, vehicles, fine jewelry and collectibles. Intangible assets are things such as your bank account, life insurance policies, retirement accounts, investments (stocks, bonds, and mutual funds) and businesses you own.

Review your beneficiaries — make certain your retirement account and life insurance policies have designated beneficiaries and the information is up to date.

Review the estate tax and inheritance tax laws in your state.

Review your estate plan regularly — things in your life may change, so you should reassess your estate plan when these changes happen. Life events, such as marriage, divorce, having a child, losing a loved one, or getting a new job, are all good times to take another scan of your estate plan.

Failing to have an estate plan can cause a lot of stress for your family. They can be torn apart in disputes over the division of assets after a loved one dies.

Life is full of unknowns, so whether you’re a young parent or a senior, having an estate plan in place to carry out your wishes after you die will lessen the burden on those you love and give them time to grieve.

Reference: Money Talks News (Oct. 21, 2022) “Why Everyone Needs an Estate Plan”

Why Do I Need an Estate Plan?

Money Talks News’ recent article entitled “Why Everyone Needs an Estate Plan” reminds us that estate plans aren’t just for the wealthy. People of all ages and income levels can benefit from drafting an estate plan. An estate plan provides instructions about how your assets will be distributed, as well as how you’ll pay for your debts, final arrangements and even your medical care if you become incapacitated.

With everything stated explicitly in an estate plan, your family can work through their grief after your death instead of battling each other about who gets what.

An estate plan describes your wishes regarding how assets such as your house, vehicle bank accounts, investments and valuables will be transferred to your beneficiaries after you die. Most of this is included in your will. You’ll also name the executor of your estate in your will, as well as a guardian for your minor children, and even someone to take care of your pets when you’re no longer here.

Many people will confuse an estate plan with a will. However, that’s just a part of a comprehensive estate plan. There is much more involved in an estate plan than just who gets what after you die. An estate plan can also include your wishes, if you’re medically unable to manage your own affairs. Your plan can designate your durable power of attorney (DPA), who can make medical and financial decisions in your stead, along with medical directives on what medical procedures you do or don’t want to prolong your life.

One of the most compelling reasons to have an estate plan is that it can help avoid probate and prevent your family from winding up in court to access the assets you’ve left behind for them. Another reason to have an estate plan is to help reduce any estate or inheritance taxes imposed on your estate when your assets are transferred to your beneficiaries.

Federal estate taxes typically only apply to the very wealthy. In 2022, the threshold, or estate tax exemption, is $12.06 million, for 2023 that number is $12.93 million.

Unless your assets are valued over the applicable exemption in the year of death, you’re exempt from federal estate taxes. However, while you may be exempt from federal-level estate taxes, the state you live in may impose its own estate taxes. Some states also levy inheritance taxes on beneficiaries who receive assets from your estate.

Check with an experienced estate planning attorney in your area.

Reference: Money Talks News (Oct. 21, 2022) “Why Everyone Needs an Estate Plan”

Giving to My Favorite Charity in Estate Plan

 

If you’d like to leave some or all of your money to a charity, Go Banking Rates’ recent article entitled “How To Leave Your Inheritance to an Organization” provides what you need to know about charitable giving as part of your estate plan.
1. Make Sure the Organization Accepts Donations. Unless you have a formal agreement with the charity stating they’ll accept the inheritance, the confirmation isn’t a binding commitment. As a result, you should ask the organization if there’s any form language that they may want you to add to your will or trust as part of a specific bequest. If the charity isn’t currently able to accept this kind of donation, look at what they will accept or if other charities with a similar mission will accept it.
2. Set the Amount You Want the Charity To Receive. Some people want to leave the estate tax exemption — the maximum amount that can pass without tax — to individuals and leave the rest to charity. Because the estate tax exemption is subject to change and the value of your assets will change, the amount the charity will get will probably change from when the planning is completed.
3. Have a Plan B in the Event that the Charity Doesn’t Exist After Your Death. Meet with your estate planning attorney and decide what happens to the bequest if the organization you’re donating to no longer exists. You may plan ahead to pass along the inheritance to another organization and make sure it receives the funds. You could also have the inheritance go back into the general distributions in your will.
4. State How You Want Your Gift to Be Used. If there is a certain way that you’d like the charity to use the inheritance, you can certainly inquire with the organization and learn more. Find out if the charity accepts this type of restriction, how long it may last and what happens if the charity no longer uses it for this purpose.
As you draft charitable planning provisions, make sure you do so alongside an experienced estate planning attorney.
The provisions in your will should be specific about your desires and provide enough flexibility to your personal representative, executor, or trustee to be modified based on the conditions at the time of your death.
Reference: Go Banking Rates (August 26, 2022) “How To Leave Your Inheritance to an Organization”

The Basics of Estate Planning

No matter how BIG or small your net worth is, estate planning is a process that ensures your assets are handed down the way you want after you die.

Forbes’ recent article entitled “Estate Planning Basics” explains that everybody has an estate.

An estate is nothing more or less than the sum total of your assets and possessions of value. This includes:

Your car
Your home
Financial accounts
Investments; and
Personal property.

Estate planning is the process of deciding which people or organizations are to get your possessions or assets after you’ve died.

It’s also how you leave directions for managing your care and assets if you are incapacitated and unable to make financial or medical decisions. That is done with powers of attorney, a healthcare directive and a living will.

Your estate plan details who gets your assets. It also designates who can make critical healthcare and financial decisions on your behalf should you become incapacitated. If you have minor children, your estate plan also lets you designate their legal guardians, in case you die before they reach 18. It also allows you to name adults to safeguard their financial interests.

Your estate plan directs assets to specific entities or people in a legally binding manner. If you want your daughter to have your coin collection or your favorite animal rescue organization to get $500, it’s all mapped out in your estate plan.

You can also create a trust to safeguard a minor child’s assets until they reach a certain age. You can also keep assets out of probate. That way, your beneficiaries can easily access things like your home or bank accounts.

All estate plans should include documents that cover three main areas: asset transfer, medical needs and financial decisions. Ask an experienced estate planning attorney to help you create your estate plan.

Reference: Forbes (Nov. 16, 2022) “Estate Planning Basics”

Blunders in Estate Planning May Lead to Breach of Family Harmony

 

The Financial Post’s recent article entitled “Avoid these five mistakes when estate planning to preserve family peace” provides us with some of the biggest mistakes:
1. Treating family members differently. People do this frequently. They may have valid reasons for doing so. However, it’s still not a great idea. Instead, comfortably tell your children in advance why you’re doing this. This will avoid anger and jealousy between the children when they discover this. Try to leave assets equally, even if you don’t think it is fair.
2. Pass the family vacation home to multiple children. It's best to either sell the home in your later years or, if you keep it, make sure it is openly discussed. You might set up life insurance to specifically pay taxes and perhaps one or two children, so the remaining children can afford to keep the cottage. Even so, a sale is the cleanest approach.
3. Don’t tell the children anything about your money. Not a good idea. This approach often eliminates any ability to understand what might be most meaningful to your children or beneficiaries. Maybe less so in terms of cash, but in terms of family heirlooms or property. Perhaps a favorite piece of furniture was really important to two children, but there was never any discussion about it. As a result, it’s now completely left to them to fight over. This may sound like a small issue. However, many families have split up forever over just this type of scenario.
4. Purposely or inadvertently leaving most or all assets to a new spouse. It can occur by accident due to poor planning around ownership titles, lack of pre-nuptial agreements or the unintended naming of beneficiaries on investment accounts or life insurance. However, sometimes, it’s meant to hurt the children. The hurt can certainly go both ways and is frequently a major issue when a spouse isn’t treated fairly. Ask an experienced estate planning attorney to walk through this with you.
5. Significant charitable giving. If your gifts to charity aren’t discussed with your so-called traditional beneficiaries, there can be conflicts with the charity that can be drawn out.
Communicate what you’re doing and why to your family.
Reference: Financial Post (Nov. 9, 2022) “Avoid these five mistakes when estate planning to preserve family peace”

Major Blunders in Estate Planning

Kiplinger’s recent article entitled “5 Common Estate Planning Mistakes to Avoid” warns that if you overlook an important step or make a misstep in your estate planning, everything could be undone. You could instead burden your family with a challenging and headache-inducing estate.

There are many ways to get things wrong. Let’s look at a few:

1. Not preparing for incapacity. The main reason to create a will is because we know that some day we’ll pass away. A will lets your family know how to distribute your property and other assets. A well-thought-out estate plan should identify the people authorized to make important decisions on your behalf regarding finances, health care and other critical matters. This is accomplished with powers of attorney. Once you are unconscious or afflicted with dementia, it will be too late. Make a list of decision-makers now, inform them of your wishes and create the necessary powers of attorney
2. Failing to include funeral and burial wishes. If you can purchase a burial plot and make funeral plans, put this in your estate planning documents. If you don’t, it may mean a lot of work for your family after your death. Name someone to be in charge of the funeral and burial arrangements and make sure that person understands your wishes. If you don’t detail your wishes prior to your death, it may become an issue for your loved ones.
3. Ignoring the tax implications of transferring property. As generous as it may seem to give property to your family during your lifetime, it is usually much smarter – and far more generous – to delay the transfer until you’re deceased. If you convey the deed to property to your next of kin before you die, they may see a hefty tax bill whenever they sell the same property. That’s because the basis for that property will be tagged to the date on which you made your purchase, not the date you made your gift. As a result, it could leave your heirs scrambling to pay an enormous sum that would have been averted, had they been granted the deed after your death.
4. Failing to designate backups for decision-makers. The best of plans can go south without a secondary beneficiary. This will address any unforeseen events. Name backups for your executor and other decision-makers. If they can’t fulfill their obligations, a court will name substitutes unless you’ve already planned for these contingencies.
5.  Not tracking beneficiary designations. In addition to stating the beneficiaries and their respective shares in your will, you must also communicate a directive to your bank that sets forth the interests in your account after your death. If you fail to do this, the bank’s rules will override anything you’re written in your will as to that account. That means your percentages will be different from those expressed in your will.
6. Take steps now to make certain there are no hidden issues that will haunt your family after you’ve passed.
7. Reference: Kiplinger (Oct. 17, 2022) “5 Common Estate Planning Mistakes to Avoid”

What is a Life Estate?

 

A life estate is a type of property ownership that divides the control and ownership of a property. The person who creates the life estate for their home and assets is known as the “life tenant.” While a tenant retains control of the property, he or she shares ownership during their lifetime with the remainderman (the estate's heir).

Quicken Loans’ recent article entitled “What Is A Life Estate And What Property Rights Does It Confer?” explains that while the life tenant lives, they’re in control of the property in all respects, except they can’t sell or encumber the property without the consent of the remaindermen. After the life tenant passes away, the remainderman inherits the property and avoids probate. This is a popular estate planning tool that automatically transfers ownership at the life tenant's death to their heirs.

The life estate deed shows the terms of the life estate. Upon the death of the life tenant, the heir must only provide the death certificate to the county clerk to assume total ownership of the property.
Medicaid can play an essential role in many older adults’ lives, giving them the financial support needed for nursing facilities, home health care and more. However, the government considers your assets when calculating Medicaid eligibility. As a result, owning a home – or selling it and keeping the proceeds – could impact those benefits. When determining your eligibility for Medicaid, most states will use a five-year look-back period. This means they will total up all the assets you’ve held, sold, or transferred over the last five years. If the value of these assets passes above a certain threshold, you’ll likely be ineligible for Medicaid assistance.

However, a life estate can help elderly property owners avoid selling their home to pay for nursing home expenses. If your life estate deed was established more than five years before you first apply for benefits, the homeownership transfer would not count against you for Medicaid eligibility purposes.

To ensure you’re correctly navigating qualifying for Medicaid, it’s smart to discuss your situation with an attorney specializing in Medicaid issues.

Reference: Quicken Loans (Aug. 9, 2022) “What Is A Life Estate And What Property Rights Does It Confer?”

Important Documents in Your Estate Plan

 

The Durable Power of Attorney (DPOA) and a Health Surrogacy or Advanced Health Directive are used for situations where you can’t make decisions for yourself, explains Parent Your Parents recent article entitled “What You Should Know about Durable Powers of Attorney and Health Surrogacies.”

A Durable Power of Attorney (DPOA). This is written authorization to represent or act on another’s behalf in private affairs, business, or legal matters. The person authorizing the other to act is the “principal” or “grantor.” The person given the power is called the “agent” or “attorney-in-fact.” There are two types of power of attorney: (1) a Springing Durable Power of Attorney, which “springs” into action when you become incapacitated; and (2) a General Durable Power of Attorney, which becomes effective as soon as it is signed and continues until you die.

If you live in a “Springing POA” state and move to a “Durable POA” state, the document is treated as a Durable Power of Attorney, and your agent can act without your consent. You should consider who you trust to be your agent.

It is typically a family member, a friend, or a professional agent. You should also have an alternate designated who can step in if something happens to your first choice and he or she is unable to serve.

Health Surrogacy or Advanced Directive. This document is called a variety of things: a Power of Attorney for Health, Designation of Health Surrogate, or a Living Will. No matter what it’s called, you’re appointing an adult to make healthcare decisions for you when you are unable to make them for yourself.

When you’re in an accident, unconscious, or injured and need a specific medical procedure, the designated agent steps in and makes important decisions in your stead.

If you’re in your 60s but still don’t have a legal document describing what you want to happen when you’re incapacitated, speak with an experienced estate planning attorney.

Your family, close friends, and healthcare professionals should know how you feel about end-of-life treatments and have your detailed directions as to various circumstances and how you would like them handled.

Reference: Parent Your Parents (Sep. 15, 2022) “What You Should Know about Durable Powers of Attorney and Health Surrogacies”

The Difference between Revocable and Irrevocable Trust

 

A living trust can be revocable or irrevocable, says Yahoo Finance’s recent article entitled “Revocable vs. Irrevocable Trusts: Which Is Better?” And not everyone needs a trust. For some, a will may be enough. However, if you have substantial assets you plan to pass on to family members or to charity, a trust can make this much easier.

There are many different types of trusts you can establish, and a revocable trust is a trust that can be changed or terminated at any time during the lifetime of the grantor (i.e., the person making the trust). This means you could:

Add or remove beneficiaries at any time

Transfer new assets into the trust or remove ones that are in it

Change the terms of the trust concerning how assets should be managed or distributed to beneficiaries; and

Terminate or end the trust completely.

When you die, a revocable trust automatically becomes irrevocable and no further changes can be made to its terms. An irrevocable trust is permanent. If you create an irrevocable trust during your lifetime, any assets you transfer to the trust must stay in the trust. You can’t add or remove beneficiaries or change the terms of the trust.

The big advantage of choosing a revocable trust is flexibility. A revocable trust allows you to make changes, and an irrevocable trust doesn’t. Revocable trusts can also allow your heirs to avoid probate when you die. However, a revocable trust doesn’t offer the same type of protection against creditors as an irrevocable trust. If you’re sued, creditors could still try to attach trust assets to satisfy a judgment. The assets in a revocable trust are part of your taxable estate and subject to federal estate taxes when you die.

In addition to protecting assets from creditors, irrevocable trusts can also help in managing estate tax obligations. The assets are owned by the trust (not you), so estate taxes are avoided. Holding assets in an irrevocable trust can also be useful if you’re trying to qualify for Medicaid to help pay for long-term care and want to avoid having to spend down assets.

But again, you can’t change this type of trust and you can’t act as your own trustee. Once the trust is set up and the assets are transferred, you no longer have control over them.

Speak with an experienced estate planning or probate attorney to see if a revocable or an irrevocable trust is best or whether you even need a trust at all.

Reference: Yahoo Finance (Sep. 10, 2022) “Revocable vs. Irrevocable Trusts: Which Is Better?”

 

Why Does Everyone Need an Estate Plan?

Twenty and thirty-year olds are busy building their lives, starting or growing careers, exploring personal goals, repaying student loans and maybe starting a family. They’re young and healthy and think nothing can happen to them—but that’s not true. A recent article from Kiplinger titled “You’re Not Too Young for an Estate Plan: 7 Essentials for Your 20s and 30s” explains why even a twenty-year old with student loans needs an estate plan.

Student loans. Federal student loans discharge upon death, so no further payments are needed, including any federal Parent PLUS loans parents may have taken out. However, for private student loans, the decision is up to the lender. If the private loan was taken out by the student, the institution may forgive the loan. However, if a parent or another adult co-signed the loan, they might be responsible for paying the entire loan. The exception: if the loan was made after November 20, 2018, the co-signer may be protected by the Economic Growth, Regulatory Relief and Consumer Protection Act. If you took out loans after getting married, the surviving spouse is likely to be required to pay the loan if they co-signed the loan or if you live in a community property state.

 

Health Care Directive and Health Care Power of Attorney. The Health Care Directive is used to tell your family what you would want if you were near death, whether by injury or illness. Healthcare providers are obligated to follow your directions if they are stated in this document. Without it, you could be kept on life support for many years, regardless of what your family wants.

 

A Health Care Power of Attorney is used to name someone you trust to act as your “agent,” if you become incapacitated. This document is focused on your care and medical treatments. It also lets your agent speak with your health insurance company, obtain access to medical records and discuss your care with healthcare providers.

 

Last Will and Testament. This document isn’t just for people with homes, families, and retirement accounts. Young people have property too—your car, your personal possessions, and whatever financial resources you may have accumulated. If you have a will, you can direct who you want to receive what you own. Without one, the court will decide who gets your possessions and your family won’t have any say about it. With a will, you can determine who receives your property, including your digital assets. You’ll also name an executor in the will—the person who is in charge of distributing your property. An estate planning attorney will create a document to comply with your state’s laws. It doesn’t have to be a complicated document, but it is a good way to ensure your loved ones know your wishes.

 

Retirement Accounts and Beneficiaries. These accounts may not be as robust as they will be later in your life. However, they are still yours. Make sure that you have named beneficiaries who you want to receive them if you die. Singles may name a sibling, parents, partner, or another family member to receive these assets.

 

Digital Assets. A digital life means you need a digital estate plan. Creating an inventory list of all of your digital accounts, usernames and passwords. If an account has two-factor authentication, indicate how another person might gain access to the account. Don’t include any of this information in your will, as it becomes a public document after being submitted to the court for probate. Tell a trusted family member where the inventory is located. If you own cryptocurrency, research how crypto assets are passed if the original owner dies.

 

Guardianship. Your will is used to name a guardian for minor children. Without it, the court will appoint a guardian, and it may not be the family member you wish it would be.

 

Don’t Forget Your Furry Friends. You can add a pet guardianship clause to a will to ensure that your pet stays with a trusted friend or family member who has agreed to care for your pet. You can also set up a pet trust to set aside funds for your pet’s care, including food, veterinary visits, toys, training and treats.

 

Reference: Kiplinger (Aug. 22, 2022) “You’re Not Too Young for an Estate Plan: 7 Essentials for Your 20s and 30s”

Estate Planning for Blended Families

Today, a blended family is more common than ever, with stepfamily members, half-siblings, former spouses, new spouses and every combination of parents, children and partners imaginable.

Traditional estate planning, including wills and non-probate tools like transfer on death (TOD) documents, as valuable as they are, may not be enough for the blended family, advises a recent article titled “Legal-Ease: Hers, his and ours—blended family estate planning” from limaohio.com.

Not too long ago, when most people didn’t take advantage of the power of trusts, couples often went for estate plans with “mirror” wills, even those with children from prior marriages. Their wills basically said each spouse would leave the other spouse everything. This will would be accompanied by a contract stating neither would change their will for the rest of their lives. If there was a subsequent marriage after one spouse passed, this led to problems for the new couple, since the surviving spouse was legally bound not to change their will.

As an illustration, Bob has three children from his first marriage and Sue has two kids from her first marriage. They marry and have two children of their own. Their wills stipulate they’ll leave each other everything when the first one dies. There may have been some specific language about what would happen to the children from the first marriages, but just as likely this would not have been addressed.

It sounds practical enough, but in this situation, the children from the first spouse to die were at risk of being disinherited, unless plans were made for them to inherit from their biological parent.

Todays’ blended family benefits from the use of trusts, which are designed to protect each spouse, their children and any child or children they have together. There are a number of different kinds of trusts for use by spouses only to protect children and surviving spouses.

Trust law requires the trustee—the person who is in charge of administering the trust—to give a copy of the trust to each beneficiary. The trustee is also required to provide updates to beneficiaries about the assets in the trust.

A surviving spouse will most likely serve as the trustee when the first spouse passes and will have a legal responsibility to honor the shared wishes of the first spouse to pass.

Your estate planning attorney will be able to explain the many different types of spousal trusts, and which is best for your situation.

Reference: limaohio.com (Aug. 20, 2022) “Legal-Ease: Hers, his and ours—blended family estate planning”

Who Is the Best Choice for Executor?

 

Parents do so much to make sure they are treating their children equally. This is all good when it comes to buying bicycles or sharing candy. However, when it comes to naming your executor, equal is not always best, says a recent article titled “3 Mistakes to Avoid When Choosing Your Personal Representative of Your Estate” from The Street.

The most common mistake parents make is naming all of their children, with the hope they’ll set aside any differences and rise to the occasion. Another is to make an age-based decision and name the oldest child as the executor. Maybe worse: tossing names into a hat and picking one.

The wrong decision can lead to more than fighting among siblings. Fighting often escalates to litigation and wounds that never heal.

The decision of who to name as a personal representative, agent or executor needs to have a business approach. Remove emotions from the equation and examine your children’s strengths and weaknesses.

Your executor, the agent named to carry out instructions in your will, has many responsibilities, including:

Obtain the last will and testament and file it with the court.

Obtain multiple original copies of a death certificate.

Inform heirs and relatives of your death and of the open contest period when they may challenge the validity of the will.

Use estate funds to settle outstanding debts.

Maintain any real property, until the estate is settled.

Notify banks, government agencies, insurance companies and creditors of your death.

File final personal income tax.

Create a complete inventory of the estate and, when the will is deemed valid by the court and creditors have been paid, distribute assets.

Make court appearances on behalf of the estate during probate.

File estate taxes.

The executor must be able to manage these and other matters, while keeping the peace in the family and standing up to any challenges. Not everyone is up to the task.

Naming more than one personal representative so no feelings get hurt.

If your children have a history of working well together and are all equally versed in personal finance, this might work. However, more often than not, it’s a recipe for disaster. By asking so much of them during a highly emotional time, even the best sibling relationships will be tested.

Picking the wrong child for the job.

Not only does the person need to be responsible, reliable, organized and trustworthy, but they need to live close enough or be able to travel if you live far away. If none of your children are good candidates, speak with an estate planning attorney to explore other options.

Not preparing the person ahead of time.

Someone who has never served as an executor before is not likely to fully understand what their role will be, what tasks need to be accomplished and how much time it will take out of their schedule. Talk with the person you chose as your executor and provide them with all the details. Tell them where personal property is located and where you are storing your last will and testament. Share the names of your estate planning attorney, financial advisor and CPA.

Good estate planning and clear communication is the best bet to avoid acrimony between siblings after parents die. Make sure that they understand your desire for the family to stay together and give them the tools to do so.

Reference: The Street (July 28, 2022) “3 Mistakes to Avoid When Choosing Your Personal Representative of Your Estate”

Some Key Documents Should Be Considered Before Sending Your Child Off to College

In the United States, as soon as a minor turns 18, they’re typically considered a legal adult.

As a result, parents no longer have any authority to make decisions for their child, including financial and health care decisions.

Yahoo’s recent article entitled “Don’t Let Your Child Leave for College Without Signing Three Critical Documents” asks what if your adult child becomes sick or is in an accident and ends up hospitalized?

Because of privacy laws, known as Health Insurance Portability and Accountability Act (HIPAA), you wouldn’t have any rights to get any information from the hospital regarding your child's condition.

Yes, we know you’re her mother. However, that’s the law!

You also wouldn’t have the ability to access his or her medical records or intercede on your child's behalf regarding medical treatment and care.

If your child’s unable to communicate with doctors, you’d also have to ask a judge to appoint you as your child’s guardian before being able to be told of his or her condition and to make any healthcare decisions for them.

While this is hard when your child is still living at home, it’s a huge headache if your child is attending college away from home.

However, there’s a relatively easy fix to address this issue:

Ask an experienced estate planning attorney about drafting three legal documents for your child to sign:

A Durable Power of Attorney (DPOA) for Health Care. This document designates the parent as your child's patient advocate.

A HIPAA Authorization gives you access to your child’s medical records and lets you to discuss his or her health condition with doctors.

A DPOA for Financial Matters, designates the parent as your child's agent, so that you can manage your child's financial affairs, including things like banking and bill paying, in case your child becomes sick or injured, or is unable to act for any reason.

Reference: Yahoo (Aug. 2, 2022) “Don’t Let Your Child Leave for College Without Signing Three Critical Documents”

Does the Way I Title My Assets Have an Impact on My Estate?

FedWeek’s recent article entitled “How Assets Are Titled Can Make a Big Difference” discusses the different ways property may be titled, and the significance of each one.

The way in which you take title to assets can affect your estate, taxes and perhaps the disposition of the asset if a couple divorces. Many couples want assets to be titled simply in the event something happens to one, so the other spouse can take possession immediately without taxes or complications. Joint ownership may be the simplest way to meet most of these objectives. However, this can get complicated if any number of things happen, such as divorce, second marriage, children from multiple marriages, adoption and blended families of all types.

It’s critical to be educated on the different types of ownership, so you know when a change may be needed. Here are the main options:

Holding Assets in Your Own Name is simple and inexpensive. However, if you become incompetent, those assets might be mismanaged. At your death, individually owned assets may have to go through probate.

Joint Tenants with Right of Survivorship is when one co-owner dies, all assets held this way automatically pass to the survivor. One joint owner can take over if the other is incapacitated, and jointly held assets don’t go through probate.

Tenants in Common means there’s a divided interest, although none of the owners may claim to own a specific part of the property. At the death of one of the joint owners, the share owned by the deceased must pass through their will to determine ownership. The surviving joint owner doesn’t automatically own the entirety of assets.

Tenancy by the Entirety is a type of joint ownership similar to rights of survivorship for married couples. It lets spouses own property together as a single legal entity. Ownership can’t be separated, which means creditors of an individual spouse may not attach and sell the property. Only creditors of the couple may make claims against the property.

With Entity Ownership, you might create a trust, a partnership (such as a family limited partnership), or a limited liability company (LLC) to hold assets. These entities may provide protection from creditors and tax benefits.

Community Property may only be used by married couples in community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin). Each person owns an undivided interest in the entire property. When a spouse dies, the survivor automatically receives the entire interest, so there’s no need for probate. Community property can’t be controlled by a person’s will or trust.

Ask an experienced estate planning attorney to review your estate plan and how assets are titled.
Reference: FedWeek (July 27, 2022) “How Assets Are Titled Can Make a Big Difference”

What are Big Mistakes to Avoid in Estate Planning?

Whether it’s a change in domicile, the death of a family member, new grandchildren, or a significant change in assets, it is important to make sure you adjust your estate plan accordingly, says Kiplinger’s recent article entitled “Updating Your Estate Plan? Don’t Make These Top Mistakes.”

1. Updating a will or trust but forgetting to update ancillary documents. When updating an estate plan, people tend to home in on updating their wills and trusts without also having their powers of attorney, health care directives, or guardians reviewed. This prevents them from completing a full update to their estate planning. While these ancillary documents are good forever, that doesn’t mean they shouldn’t be reviewed and updated.
2. Using flawed reasoning when selecting agents to act on your behalf. Some people choose their executors, trustees and other agents by trying to appoint all their children together or appointing agents by age or profession, instead of who is best suited to serve. The best person should live nearby and have the time to address issues you may need.
3. Forgetting to update an estate plan when moving to another state. Estate planning documents drafted out-of-state, provided they were drafted with the legal requirements of that state, will be effective in all states. However, practically speaking, having out-of-state documents can complicate trust or estate administration, or the ability to exercise powers of attorney or health care directives. You should always update your plan when they move to another state to make certain that the plan functions correctly.
4. Forgetting to create an asset cheat sheet or failing to keep that list updated. Most of us accumulate different assets and investments as we get older. It’s not uncommon for a person to have stocks, life insurance, annuities, securities, or other investments at many different institutions. When you update your estate plan, create a list of your accounts and assets and update that list as things change. Be sure to include the name and location of the account and the last four digits of the account number.

When making changes, if you avoid the above mistakes, it will ensure that your plan is properly updated and will not cause any unnecessary future complications.

Reference: Kiplinger (June 30, 2022) “Updating Your Estate Plan? Don’t Make These Top Mistakes”

Addressing Vacation Home in Another State in Estate Planning

Many families have an out-of-state cabin or vacation home that’s passed down by putting the property in a will. While that’s an option, this strategy might not make it as easy as you think for your family to inherit this home in the future.

Florida Today’s recent article entitled “Avoiding probate: What is the best option for my out-of-state vacation home?” explains the reason to look into a more comprehensive plan. While you could just leave an out-of-state vacation home in your will, you might consider protecting your loved ones from the often expensive, overwhelming and complicated process of dealing both an in-state probate and an out-of-state probate.

There are options to help avoid probate on an out-of-state vacation home that can save your family headaches in the future. Let’s take a look:

Revocable trust: This type of trust can be altered while you’re still living, especially as your assets or beneficiaries change. You can place all your assets into this trust, but at the very least, put the vacation home in the trust to avoid the property going through probate. Another benefit of a revocable trust is you could set aside money in the trust specifically for the management and upkeep of the property, and you can leave instructions on how the vacation home should be managed upon your death.

Irrevocable trust: similar to the revocable trust, assets can be put into an irrevocable trust, including your vacation home. You can leave instructions and money for the management of the vacation home. However, once an irrevocable trust is established, you can’t amend or terminate it.

Limited liability company (LLC): You can also create an LLC and list your home as an asset of the company to eliminate probate and save you or your family from the risk of losing any other assets outside of the vacation home, if sued. You can protect yourself if renting out a vacation home and the renter decides to sue. The most you could then lose is that property, rather than possibly losing any other assets. Having beneficiaries rent the home will help keep out-of-pocket expenses low for future beneficiaries. With the creation of an LLC, you’re also able to create a plan to help with the future management of the vacation home.

Transfer via a deed: When you have multiple children, issues may arise when making decisions surrounding the home. This is usually because your wishes for the management of the house are not explicitly detailed in writing.

Joint ownership: You can hold the title to the property with another that’s given the right of survivorship. However, like with the deed, this can lead to miscommunication as to how the house should be cared for and used.

Plan for the future to help make certain that the property continues to be a place where cherished memories can be made for years to come. Talk to a qualified estate planning attorney for expert legal advice for your specific situation.

Reference: Florida Today (July 2, 2022) “Avoiding probate: What is the best option for my out-of-state vacation home?”

What Does a Blended Family Need to Know about Finances?

Family finances can be a big issue in any circumstances. It’s even more significant with blended families, where two sets of often well-established financial histories and philosophies try to merge into one.

Kiplinger’s recent article entitled “Yours, Mine and Ours: A Checklist for Blended Family Finances” says that a blended family is one where people have remarried, either after a divorce or the death of a spouse. Sometimes it’s older couples already in retirement. In other cases, it’s a younger couple still trying to raise children.

However, regardless of the specifics of any individual situation, when families blend, so do their finances. That is when things can get problematic, if careful planning and communication don’t occur.

Here are a few things to consider:

Money habits. People are raised with different ideas about money. They’re influenced by their parents or by the circumstances of their formative years. Some people are exceptionally frugal and save every penny and seldom, if ever, splurge on something just for fun. Others spend with reckless abandon, unconcerned about the unexpected expenses that life can throw at them at any moment.
Many people are somewhere in between these extremes. If you are entering a serious relationship, you should speak to your new partner about how each of you approaches spending money.

Financial accounts and bills. Once you learn each other’s financial philosophy, you will have decisions to make. These include whether to blend your financial accounts or keep them separate. If the two of you are closely aligned with your finances and how you approach spending, you may want to simply combine everything. If you’re older, have adult children from prior relationships and are more financially established, you may decide to keep things separate.

For many, a hybrid approach may be best — keep some things separate, but have common savings, investments and household accounts to reach your blended goals.

Family. When there are children from a prior marriage — especially young children — additional financial situations will need to be addressed. Issues of child support and how it fits into the overall budget is one concern, as is the status of college funding for the children.

Talk to an experienced estate planning attorney to make sure you have the plans for your blended family set up the way you wish.

Reference: Kiplinger (June 27, 2022) “Yours, Mine and Ours: A Checklist for Blended Family Finances”

What’s Involved with Being a Trustee?

There’s an old saying that the two best days in a boat owner’s life are the day they buy their boat and the day they sell it.

Forbes’ recent article entitled “How To Be An Effective Trustee” says that a similar notion applies to being a trustee – it’s an honor to be named and then a huge relief when it’s over. That’s because being a trustee is difficult.

Remember that a trust is a fiduciary relationship in which one party (the trustor) gives another party (the trustee) the right to hold title to property or assets for the benefit of a third party (the beneficiary). Trusts are created to provide legal protection for the trustor’s assets, to make certain those assets are distributed according to the wishes of the trustor, and to save time, reduce paperwork and, in some cases, avoid or reduce inheritance or estate taxes.

Being a trustee requires knowledge about a wide range of topics, including:

The trustee’s fiduciary duties, which include loyalty, impartiality, duty of care, protection of trust property, enforcement of claims and the duty to inform and account to beneficiaries, among others (violation of these duties exposes the trustee to liability).

Understanding the details of the trust, like the specifics of the distribution instructions.
Investments and the ability to engage and monitor investment managers.

Administrative matters, such as record keeping and principal and income accounting.

Estate planning, trusts and the basics of the estate, gift and generation skipping taxes.

Income tax, including how trusts are taxed both by the federal government and the state.

A trustee must also be able to productively communicate and work with the beneficiaries on their financial wellness and distribution needs, which is an area that can be full of conflict.

It’s a daunting list. Talk with an experienced estate planning attorney to discussion your situation in detail.

Reference: Forbes (May 31, 2022) “How To Be An Effective Trustee”

When Should I Revise My Will?

 

Just as your life changes, so should your will. You may need to replace an executor, update accounts, or adjust heirs. If you have an estate plan with greater wealth or need more complex arrangements, such as trusts or guardianship provisions, may want to work with an experienced estate planning attorney, says US News’ March 2018 article entitled “4 Times It Makes Sense to Revise Your Will.” Let’s look at the four events:
1. You've experienced a significant life event. This may be a marriage, a divorce, the birth of a child, remarriage or the death of a loved one. These changes may require that new heirs be added to a will or others removed. These life events may also influence how assets are divided in the will. In addition, if you move to a new state, update your will to ensure it adheres to the laws there.
2. A person in your will has experienced a significant life event. Wills also include executors, trustees and guardians. These individuals may move, get married or become sick or disabled, all of which could change whether they are appropriate for the role listed in your will.
3. The tax laws have changed. A will may be written to minimize the effects of estate taxes. When laws change, the provisions of the will may need to be updated. For example, in 2017, $5.49 million of a person's estate was exempt from the 40% federal estate tax. Under the Tax Cuts and Jobs Act, $12.06 million of an estate is currently exempt from the tax in 2022. This could mean that some families no longer need to worry about paying an estate tax and could eliminate the need for some trusts or other provisions in a will.
4. If it's been three to five years. It's smart to review a will at least every three to five years and ensure that all provisions are still in line with your wishes.
While you're reviewing your will, don't forget to also review beneficiaries on bank accounts, retirement funds and life insurance. Remember that a named beneficiary trumps the will.
Make sure that all that hard work on your will does not go to waste, by reviewing and updating the document periodically to make sure it reflects the changing landscape of your life.
When you have the will updated, be sure to store it in a secure location, like a fire-proof safe, and let your executor know where to find it. If an attorney drew up your will, they’ll be happy to store at least a digital copy for you.
Reference: US News (March 30, 2018) “4 Times It Makes Sense to Revise Your Will”

Should I Update My Estate Plan?

An estate plan exists to accomplish three things.

Preserving your accumulated wealth

To specify who will inherit your assets after your death; and

To indicate who will make health care and financial decisions on your behalf if you’re unable.

Real Daily’s recent article entitled “4 Good Reasons to Update Your Estate Plan” says that as you age, you should consider updating your estate plan. Why? Well, your feelings may change over time or you may experience a significant life event that requires you to update things. These are events such as a marriage or divorce, a new child or grandchild, or a significant change in your health, wealth and outlook on life.

In addition to your will and trusts, you need to review your power of attorney, healthcare directive, living will and HIPAA waiver.

It's critical to recognize the life events that may necessitate updating your estate plan.
For example, if you are recently married or divorced, according to some state laws, existing wills are nullified when someone gets married or divorced.

It’s also possible that your wealth has increased significantly, which may affect the way you view how your assets should be distributed to your beneficiaries.

Another reason to update your plan, is if you want to give more (or less) to charity or to your heirs.

Your executor or trustees may change their minds about their roles, no longer live nearby, or they themselves have died. If an individual is no longer interested in assuming those responsibilities, no longer alive, or no longer in good health or of repute, then there is a need to revise the document.
Some other reasons to update your plan include if you’re in the process of retiring, moving to another state, or buying or selling real estate.

Each of these events calls for a comprehensive estate plan review.

Finally, your goals may evolve over the years as a result of changes to your lifestyle or circumstances, such as an inheritance, career change, marriage, house purchase, or a growing family.

Reference: Real Daily (June 13, 2022) “4 Good Reasons to Update Your Estate Plan”

Is a Trust a Good Idea?

If chosen wisely, with the help of an experienced estate planning attorney, a trust can be a great chance to minimize taxes on your estate.

Forbes’ recent article entitled “Estate Planning Opportunities: How Trusts Can Minimize Taxes On Your Legacy,” explains that trusts are legal arrangements that benefit causes or people you choose down the line. They vary in how they are activated and accessed, according to these basic types.

Revocable or irrevocable: In a revocable trust, a grantor can reclaim assets whenever they want during their lifetime. In an irrevocable trust, a grantor gives up the right to reclaim property once the trust is designated.

Testamentary or living: a testamentary trust, created under a last will, becomes effective when the grantor dies and then becomes irrevocable to administer the inheritance. A living trust, also called an “inter-vivos trust,” is a transitionary method that helps with incapacity planning, putting a trust into action before death, and avoiding potential problems in the probate process.

Grantor or non-grantor: In a grantor arrangement, income is generally taxed to the grantor rather than to the trust. In a non-grantor arrangement, income is generally taxed to the trust (unless it is being distributed that same year).

With the help of an experienced estate planning attorney, you can look at the best opportunities for you to protect your assets from unnecessary charges, leaving behind as much of your legacy as possible.

Reference: Forbes (May 23, 2022) “Estate Planning Opportunities: How Trusts Can Minimize Taxes On Your Legacy”

What Exactly Is a Prenup?

There are some important financial decisions that need to be made before you get hitched. One of them is whether you should get a prenuptial agreement (“prenup”). This isn’t the most romantic issue to discuss, especially because these agreements usually focus on what will happen in the event of the marriage ending. However, in many cases, having tough conversations about the practical side of marriage can actually bring you and your spouse closer together.

JP Morgan’s recent article entitled “What to know about prenups before getting married” explains that being prepared with a prenup that makes both people in a marriage feel comfortable can be a great foundation for building a financially healthy and emotionally healthy marriage.

A prenup is a contract that two people enter before getting married. The terms outlined in a prenup supersede default marital laws, which would otherwise determine what happens if a couple gets divorced or one person dies. Prenups can cover:

How property, retirement benefits and savings will be divided if a marriage ends;

If and how one person in the couple is allowed to seek alimony (financial support from a spouse); and

If one person in a couple goes bankrupt.

Prenups can be useful for people in many different income brackets. If you or your future spouse has a significant amount of debt or assets, it’s probably wise to have a prenup. They can also be useful if you (or your spouse) have a stake in a business, have children from another marriage, or have financial agreements with an ex-spouse.

First, have an open and honest conversation with your spouse-to-be. Next, talk to an attorney, and make sure he or she understands you and your fiancé’s unique goals for your prenup. You and your partner will then compile your financial information, your attorney will negotiate and draft your prenup, you’ll review it and sign it.

Remember that a prenup can be a useful resource for couples in many different circumstances.

It might feel overwhelming to discuss a prenup with your fiancé, but doing this in a non-emotional, organized way can save a lot of strife in the future and could help bring you closer together ahead of your big day.

Reference: JP Morgan (April 4, 2022) “What to know about prenups before getting married”

 

Has the Pandemic Made People More Aware of Estate Planning?

 

The COVID-19 pandemic has led many more Americans to pay attention to estate planning, but just a third of them have taken action, according to a recent report.

Financial Advisor IQ’s recent article entitled “More Americans Set Up Estate Plans Since Start of Pandemic” reports that more than 50% of Americans think estate planning is at least somewhat important, senior living referral service Caring.com found in a survey of more than 2,600 American adults. Caring.com didn't disclose when the survey was conducted.

The number of those aged 18 to 34 with estate planning documents has increased 50% since the beginning of the pandemic, according to the survey. Americans who’ve suffered through a serious COVID case are also 66% more likely to have a will than those who haven’t, Caring.com found.
Roughly 48% who have had a serious case have estate planning in place, as do 41% of those who have loved ones who had one. That’s compared to 29% who have no experience with a serious COVID -19 case, according to the survey.

Overall, two out of three American adults don’t have a will — the percentage has only inched up from 32.1% in 2020 to 32.9% in 2021 to 33.1% this year.

More than 60% of those without a will have done nothing toward getting a will or any estate planning document, according to the survey.

The most cited reason for not having a will is simply not getting around to it. That’s cited by 40% of all Americans without one.

That’s particularly prevalent among those earning $80,000 a year or more and without a will, 63% of whom say they haven’t had time to do so, as well as those with postgraduate education, two out of three of whom say they haven’t got around to it, according to the survey.

On the other hand, 48% of those earning $80,000 or more say they do have a will or another estate planning document.

That represents a 7% increase since 2020, Caring.com says.

However, a third (33%) of Americans overall say they don’t have an estate plan because they don’t have enough to leave behind, according to the survey.

Meanwhile, 12% say they don’t know how to get a will or living trust, and about 13% believe it’s too expensive to set up. Another 6% think it takes too long, and 9% say they don’t have anyone to leave their assets to, Caring.com found.

Reference: Financial Advisor IQ (April 25, 2022) “More Americans Set Up Estate Plans Since Start of Pandemic”

Why Do I Need a Will?

 

Without an estate plan, it can open the door to family disputes or significant court costs to settle an estate. Nonetheless, just a little more than half of Americans over 55 have a will, according to a 2019 survey by Merrill Lynch.

The Seattle Times’ recent article entitled “Do you have a will? Without an estate plan, families can struggle to sort it out” says it’s critical to put your wishes in writing, so health care and financial decisions are handled responsibly at the end of your life.

It’s the best thing you could do to help their family and eliminate any kind of discord down the road.

This can help with the most routine aspects of settling someone’s affairs or provide additional protection for more rare occurrences.

There are three significant steps to take when estate planning, though others may be necessary for someone’s specific financial, health or family situation.

It’s best to work with an experienced estate planning attorney.

Create a living trust. A living trust states specific plans for the person creating the trust, while they’re still alive and after death. This includes instructions for medical care and how to divide and distribute assets held in the trust, including property, businesses and investments.

Write a will. Writing a will can also instruct the way real property and other assets should be transferred. Note that a will that’s entirely in someone’s own handwriting — not anyone else’s — that’s signed and dated can be valid. However, it’s important to know that a hand-written will can be disputed in court, if there are questions about its authenticity and some states do not permit them at all. A will also can nominate the guardian for your minor children.

Designate health care and financial powers of attorney. This person or people will make decisions about your medical decisions and finances, if you’re incapacitated.

Reference: The Seattle Times (May 16, 2022) “Do you have a will? Without an estate plan, families can struggle to sort it out”

Can I Make Decisions for My 18-Year-Old ‘Kid’ If She Becomes Incapacitated?

 

The Press-Enterprise’s recent article entitled “Legal documents for young adults” describes some of the important legal and estate planning documents your “kid” (who’s now an adult) should have.

HIPAA Waiver. This form allows medical personnel to provide information to the parties you’ve named in the document. Without it, even mom would be prohibited from accessing her 19-year-old’s health information—even in an emergency. However, know that this form doesn’t authorize anyone to make decisions. For that, see Health Care Directives below.

Health Care Directive. Also known as a health care power of attorney, this authorizes someone else to make health care decisions for you and details the decisions you’d like made.

Durable Power of Attorney. Once your child turns 18, you’re no longer able to act on their behalf, make decisions for them, or enter into any kind of an agreement binding them. This can be a big concern, if your adult child becomes incapacitated. A springing durable power of attorney is a document that becomes effective only upon the incapacity of the principal (the person signing the document). It’s called a “springing” power because it springs into effect upon incapacity, rather than being effective immediately.

A durable power of attorney, whether springing or immediate, states who can make decisions for you upon your incapacity and what powers the agent has. The designated agent will typically be able to access bank accounts, pay bills, file insurance claims, engage attorneys or other professionals, and in general, act on behalf of the incapacitated person.

They’ll always be your babies, but once your child turns 18, he or she is legally an adult.

Be certain that you’ve got the legal documents in place to be there for them in case of an emergency.

Remember a spring break, when they’re home for summer after their 18th birthday, or a senior road trip are all opportunities when these documents may be needed.

Reference: The Press-Enterprise (April 2, 2022) “Legal documents for young adults”

What Should I Know about Estate Planning before ‘I Do’?

Romance is in the air. Spring is the time for marriages, and with America coming out of the pandemic, wedding calendars will be filled.

AZ Big Media’s recent article entitled “5 estate planning tips for newlyweds” gives those ready to walk down the aisle a few things to consider.

1. Prenuptial Agreement. Commonly referred to as a prenup, this is a written contract that you and your spouse enter into before getting legally married. It provides details on what happens to finances and assets during your marriage and, of course, in the event of divorce. A prenup is particularly important if one of the spouses already has significant assets and earnings and wishes to protect them in the event of divorce or death.

2. Review you restate plan. Even if you come into a marriage with an existing plan, it’s out of date as soon as you’re wed.

3. Update your beneficiary designations. Much of an individual’s estate plan takes place by beneficiary designations. Decide if you want your future spouse to be a beneficiary of life insurance, IRAs, or other pay on death accounts.

4. Consider real estate. A married couple frequently opts to live in the residence of one of the spouses. This should be covered in the prenup. However, in a greater picture, decide in the event of the death of the owner, if you’d want this real estate to pass to the survivor, or would you want the survivor simply to have the right to live in the property for a specified period of time.

5. Life insurance. You want to be sure that one spouse is taken care of in the event of your death. A married couple often relies on the incomes of both spouses, but death will wreck that plan. Think about life insurance as a substitute for a spouse’s earning capacity.

If you are soon-to-be-married or recently married and want to discuss it with an expert, make an appointment with a skilled estate planning attorney.

Reference: AZ Big Media (March 23, 2022) “5 estate planning tips for newlyweds”

When Should I Update My Will?

 

CNBC’s recent article entitled “When it comes to a will or estate plan, don’t just set it and forget it” says that your Will should be updated when your personal circumstances change, could happen at any time. Some frequent triggers include:

Changes in health, including that of executors and guardians

Changes in laws, which may impact tax and legal strategies; and

Changes in state residence, which can also impact planning.

Every state has different laws as to the administration of a Will. They will vary regarding the required residence of an executor, inheritance tax laws and whether a child can be disinherited by omission.

It’s wise to review your Will every few years with an estate planning attorney, who likely will say that documents should also be reviewed when these events happen:

A substantial change in your financial status

A change of parental status, like the birth of a child

A change of guardians

Changes in designations of fiduciaries, such as the executor of the will, successor trustee of a revocable trust, attorney-in-fact, or health-care agent; and

Changes in a family member’s situation, such as if a child develops special needs and will need appropriate planning.

The article says that an overlooked trigger to updating your will is consolidation in the banking industry. If you named a bank as the executor of your estate and the bank has been bought or sold recently, you may now have a new executor.

Make certain that you know who that person or institution is – and that you trust its judgment.
It’s also important to revisit your beneficiaries after marriage or divorce.

Reference: CNBC (March 1, 2022) “When it comes to a will or estate plan, don’t just set it and forget it”

Should I have Revocable Living Trust in Estate Plan?

Kiplinger’s recent article entitled “What Assets Should Be Included in Your Trust?” says that a revocable living trust is a document that’s created to protect your assets during your lifetime. It also creates a way to seamlessly pass your assets at your death. The biggest benefit of creating a trust is avoiding probate. Placing your important assets in a trust can give you peace of mind knowing assets will be passed onto the beneficiary you designate, under the conditions you choose and without first undergoing a drawn-out probate process.

Many people think that once they sign the trust documents at their attorney’s office, they’re good to go. Setting up a trust is just half of the job. For a revocable living trust to take effect, it should be funded by transferring assets into the trust. You can fund a living trust with real estate, financial accounts, life insurance, annuity certificates, personal property, business interests and other assets.

People often ask if it’s wise to place their house in a trust. Considering that your home is potentially one of your largest assets, living trusts can be especially beneficial. A trust can transfer real estate quickly. They also help avoid the hassle of separate probate proceedings for land, commercial properties and homes that are owned out of state or held in different counties. However, property with a mortgage must be retitled in the name of the trust. Some lenders may be reluctant to do this.

There are several types of financial assets that can be owned by a trust, here are some examples:
Bonds
Stock certificates
Shareholders’ stock from closely-held corporations
Non-retirement brokerage and mutual fund accounts
Money market accounts
Cash
Checking and savings accounts
Annuities
Certificates of deposit (CD); and
Safe deposit boxes.

While creating a trust can seem to be costly and complex, it can make the inheritance process much easier on your beneficiaries. To ensure your trust performs as it is intended, work with an experienced estate planning attorney.

Reference: Kiplinger (Jan. 16, 2022) “What Assets Should Be Included in Your Trust?”

What Is a Power of Attorney?

 

Nj.com’s recent article entitled “What does becoming someone’s ‘power of attorney’ mean?” explains that a power of attorney (POA) is a legal document through which a principal states that his or her trusted agent may act on his or her behalf and for their benefit.

A power of attorney is usually centered on addressing the principal’s financial matters, such as banking, paying taxes and selling or buying property.

There is also what is known as a medical power of attorney or living will. This is a legal document through which a principal authorizes an agent to make medical decisions for him or her, when they’re incapable of making the decisions for themselves.

In either event, the agent doesn’t become personally responsible for the financial expenses incurred by the principal, unless the agent agrees to take such responsibility in his/her individual capacity.

It is, therefore, important to execute documents as an agent and indicate you’re doing so as an agent.

For example, you, Jim Smith, would sign for principal Mary Smith as follows: “Mary Smith, by Jim Smith, attorney-in-fact,” or “Jim Smith, as agent for Mary Smith, under power of attorney.”

When signing a contract with respect to nursing home care, be wary of agreeing to individually be the “responsible party.” That term may be defined to assign additional obligations, meaning being responsible for the bill.

Remember to sign everything as agent under the power of attorney.

Reference: nj.com (April 12, 2022) “What does becoming someone’s ‘power of attorney’ mean?”

 

Why Is Communication Important in Estate Planning?

 

Successful transition of wealth from generation to generation is best accomplished when family members have a shared understanding of the overall use of the family wealth. While the initial wealth creators have final say about how their assets are distributed, awareness and agreement on the part of the receiving family members regarding how the wealth is used can help preserve assets as they move to the next generation.

Forbes’ recent article entitled “Communication Can Be The Key To Creating Harmony In Multi-Generational Estate Planning” says that coming to an agreement can sometimes be difficult, especially if family members bring their own perspectives and values to the estate planning process. However, good communication can help head off potential multi-generational conflicts before they happen.

One of the most significant challenges in achieving multi-generational wealth preservation is that each individual and generation has a different outlook on wealth. Today’s families could include four or even five generations. This big gap in ages could mean differing perspectives on many topics, including:

1) Personal values. Family members may have different belief systems and values, including how they view work, social and political systems, relationships, and other topics.

2) Investing priorities. Some generations may give greater importance to socially conscious investing than others. This could create a conflict when it comes to how and where to invest.

3) Shifting economic environments. Older generations who have lived through various economic scenarios may have very different perspectives than younger generations, particularly those just coming of age in a time of high inflation and a slowing economy.

4)  Communication. Not every generation or family member is comfortable talking openly about money, especially when it comes to sharing how much is involved and how to spend it.

5)  View of the role of a financial advisor. Some family members may see a financial advisor as a trusted partner, and others may be more skeptical.

 

While these differences can create challenges in the estate planning process, you can resolve them and reach an agreement about how to best manage the family’s wealth. Begin with a plan designed for the long-term, spanning current and future generations that’s flexible to meet the family’s changing needs and shifting economic environments.

Reference: Forbes (April 18, 2022) “Communication Can Be The Key To Creating Harmony In Multi-Generational Estate Planning”

What Do I Need to Know about Wills?

 

Some people mistakenly think that not having a will enables their assets to bypass the time and expense of probate.
That’s 100% not true–if you die without a will, your property still must go through probate when there is no surviving joint owner or designated beneficiary, says FedWeek’s recent article entitled “Expressing Your Will with a Will.”
You really should have a will.
If probate avoidance is a concern, you can create a trust. By using a revocable trust, you can retain control over the trust assets while you are alive.
The assets placed in trust during your lifetime can be distributed at your death, under the instructions of the trust, without going through probate.
After you draft a will, do not forget about it.
Significant life events, like births, deaths, marriages and divorces, all may raise the need to revisit your last wishes.
After each change, be certain that your current will is both safe and accessible.
One way to do this is to leave your will with your executor, especially if you name a financial institution rather than an individual.
If you decide to keep your will somewhere else, your executor and other loved ones should know where it is.
The estate planning attorney who prepared your will should have a copy, as well as a memo stating the location of the original.
Regardless of where you put your will, you should have another document for your funeral and burial instructions.
Wills are typically not read until days or weeks after death, so it will not help your family make decisions about a funeral or a memorial service.
As a result, a separate letter should be drafted to state your final wishes. Your executor should know where these instructions can be located.
Reference: FedWeek (Feb. 22, 2022) “Expressing Your Will with a Will”

How to Get Started on an Estate Plan

 

CNBC’s recent article entitled “67% of Americans have no estate plan, survey finds. Here’s how to get started on one” reports that just a third of Americans have put these plans in place, according to a new survey from senior living referral service Caring.com.
That means that 67% are leaving what happens to them and their assets in case of disability or death up to others, including the state.
What is the biggest reason why they don’t have an estate plan? They just have not gotten around to it, according to 40% of survey respondents.
Meanwhile, 33% say they do not have enough assets to pass on to their loved ones, 13% said the estate-planning process is too costly. A total of 12% said they do not know how to get a will.
Those who have had a serious case of COVID-19 are 66% more likely to engage in estate planning compared to those who have not, according to Caring.com. About 41% of those ages 18 to 34 now see greater need for a will or other estate-planning documents following the onset of the pandemic.
Of course, there’s room for improvement, said Jim Rosenthal, CEO of Caring.com, noting only 48% of people who had a severe case of Covid have an estate plan in place.
“Even with the big scare of potential impending death, people still don’t run out and take care of what’s not that challenging to take care of,” Rosenthal said.
You should know that you do not need to have a lot of assets to decide where you want the assets you do have to go when you die, or to stipulate your preferences for your end-of-life or other care should you become incapacitated.
The first step is to become as educated as you can and consider consulting an experienced estate planning attorney. Call today to schedule your free consultation and have your questions answered- (989) 790-1461
Reference: CNBC (April 11, 2022) “67% of Americans have no estate plan, survey finds.

Should an Estate Plan Include a Cabin on the Lake?

 

If you don’t plan appropriately and thoughtfully, problems may arise with respect to this property and your family when you are gone, says Kiplinger’s recent article entitled “Your Vacation Home Needs an Estate Plan!”
Speaking with your spouse and children is a good first step to help determine interest in retaining the property for the next generation and financial ability to maintain it. Let’s look at three ways you can plan for your vacation home.
Leave a Vacation Home to Children Outright During Life or at Death. An outright transfer of the home via a deed to children is the easiest way to transfer a vacation home.

However, if your children all own the property equally, they all have an equal say as to its use and management.
As a result, all decisions require unanimous agreement, which can prove challenging and be ripe for disagreement. Suggest that they create a Use and Maintenance Agreement to determine the terms and rules for the property usage. The contract would require all children to agree.
Form a Limited Liability Company (LLC). This is a tool often used by families, where each family member has a certain amount of membership interests in a home or to give away a home in a controlled manner. The operating agreement states the rules for governing the use and management of the property.
Put the Vacation Home in a Trust. A trust is another way to help with the ownership and transfer of vacation homes. Ask an experienced estate planning attorney about how this might work for your family.
Planning for your family’s vacation property is important to help avoid litigation and maintain family peace.
Addressing how the property will be paid for and setting aside money for it—as well as selecting the right structure for your family to use and enjoy the property—will help avoid issues in the future.
Reference: Kiplinger (Feb. 1, 2022) “Your Vacation Home Needs an Estate Plan!”

When Should I Think About Business Succession?

 

The pandemic has made many business owners rethink their business succession and retirement planning. Insurance News Net’s recent article entitled “Succession Planning For Business Owners: More Important Than Ever” reports that according to PwC’s 2021 US Family Business Survey, only a third of US family businesses have a robust, documented and communicated succession plan in place.
If you wait too long, you may not have the right people in place to run the business. It also restricts the tax planning options for the business and your personal estate. Either error can cause a business to fail, when it passes from one generation to the next.
An exit that is too sudden or without direction can leave a vacuum at the top and damage relationships with existing clients and customers. With clear objectives, a sense of urgency and an experienced estate planning attorney, you can help ensure that your business, and your future, are secure.
There are a number of areas of transition that should be addressed:
Founder Transition: Determine how long you plan to stay with the business, and what your retirement plans are;
Family Transition: If you plan to leave your business to your children, determine the way in which the roles and power relationships will change;
Business Transition: How will the company’s operations and customer relations be maintained through other transitions;
Management Transition: Decide who will make up the new management team, such as family, non-family, or both, and how new leadership will be evaluated. You should also map out the schedule for transferring control of day to day decisions;
Ownership Transition: Determine how ownership is to be transferred; and
Estate Transition: see how you will coordinate your estate plan to ensure that the other transitions above occur as planned.
Many of these transitions will be accomplished through formal documentation, such as an operating agreement, buy-sell agreements and trusts. Sit down with an attorney soon rather than later to sort this out.
Reference: Insurance News Net (December 30, 2021) “Succession Planning For Business Owners: More Important Than Ever”

Organize Your Important Papers and Get Personal and Financial Affairs in Order

 

Organizing your important papers and getting your personal and financial affairs in order is a wise move and wonderful gift to your family. The Daily Journal’s recent article entitled “How to get your affairs in order” says to collect your important personal, financial and legal information. Here is a list of areas on which to focus:
Contacts: Make a list of names and phone numbers of close friends, doctors, lawyers, accountants, brokers and insurance agents.
Medical information: Include a list of medications you take, along with any allergies and illnesses.
Personal documents: These are things like your birth certificate, Social Security card, marriage license, tax records and military discharge papers.
Digital assets: List your digital assets, including everything from social media accounts to online banking accounts to home utilities you manage online. It should include usernames and passwords.
Pets: If you have a pet, give instructions for their care.
End of life: Indicate your wishes for organ and tissue donation and state your funeral instructions. If you have made pre-arrangements with a funeral home, include a copy of the agreement, the contact information and if it is prepaid.
Will and trusts: Include the original copy of your will and other estate planning documents.
Advance health care directives: A living will and medical power of attorney state your wishes as to your end-of-life medical treatment, when you can no longer make decisions for yourself.
Financial accounts: List your bank accounts, brokerage and mutual fund accounts and any other financial assets.
Debts and liabilities: State any loans, leases or debts you have — mortgages owed, car loans, student loans, medical bills, credit card debts, along with a list of all credit and charge cards, including the card numbers and contact information.
Company benefits: List any retirement plans, pensions, or health benefits from your current or former employer, including the contact information of the benefits administrator.
Insurance: List the policies you own, such as life, long-term care, home, auto, Medicare, Medigap and prescription drugs. Add policy numbers, agents and contact info numbers.
Property: Note your real estate, vehicles and other properties you own, rent, or lease and include documents, such as deeds, titles and loan or lease agreements.
Gather all your organized information and files in a convenient location, like a fireproof filing cabinet or safe in your home. Review and update it every year, and do not forget to tell your loved ones where it is located.
Reference: Daily Journal (Jan. 6, 2022) “How to get your affairs in order”

How Do I Avoid Probate?

 

Probate can tie up the estate for months and be an added expense. Some states have a streamlined process for less valuable estates, but probate still has delays, extra expense and work for the estate administrator. A probated estate is also a public record anyone can review.
Forbes’ recent article entitled “7 Ways To Avoid Probate Without A Living Trust” says that avoiding probate often is a big estate planning goal. You can structure the estate so that all or most of it passes to your loved ones without this process.
A living trust is the most well-known way to avoid probate. However, retirement accounts, such as IRAs and 401(k)s, avoid probate. The beneficiary designation on file with the account administrator or trustee determines who inherits them. Likewise, life insurance benefits and annuities are distributed to the beneficiaries named in the contract.
Joint accounts and joint title are ways to avoid probate. Married couples can own real estate or financial accounts through joint tenancy with right of survivorship. The surviving spouse automatically takes full title after the other spouse passes away. Non-spouses also can establish joint title, like when a senior creates a joint account with an adult child at a financial institution. The child will automatically inherit the account when the parent passes away without probate. If the parent cannot manage his or her affairs at some point, the child can manage the finances without the need for a power of attorney.
Note that all joint owners have equal rights to the property. A joint owner can take withdrawals without the consent of the other. Once joint title is established you cannot sell, give or dispose of the property without the consent of the other joint owner.
A transfer on death provision (TOD) is another vehicle to avoid probate. You might come across the traditional term Totten trust, which is another name for a TOD or POD account (but there is no trust involved). After the original owner passes away, the TOD account is transferred to the beneficiary or changed to his or her name, once the financial institution gets the death certificate.
You can name multiple beneficiaries and specify the percentage of the account each will inherit. However, beneficiaries under a TOD have no rights in or access to the account while the owner is alive.
Reference: Forbes (March 28, 2022) “7 Ways To Avoid Probate Without A Living Trust”

What Should I Leave Out of My Will?

 

Let’s look at what shouldn’t be in a will, according to Best Life’s recent article titled “Never Include These 2 Things in Your Will, Experts Warn.”
1. Never include a conditional gift in your will. A conditional gift is when money or property is given only when and if a specific event takes place. For instance, grandpa might leave a conditional gift for his grandchild, if she graduates college or gets married. These provisions are often drafted in the hopes of encouraging or discouraging certain behaviors and have a tendency to get messy.
Even the seemingly basic condition of graduating from college can turn into a major issue, if the beneficiary decides to pursue the trades or accelerates in college and is offered an excellent job before earning her degree.
Similar obstacles—and, frequently, creative workarounds from beneficiaries who want to unlock their inheritance—will also be encountered with other conditional gifts. However, there are still ways to achieve the spirit of the conditional gift without it getting complicated. Instead, give the bequest outright without any conditions but include the encouragement that the beneficiary does something specific.
Another option is to hold the gift in a trust for a beneficiary. With a trust you can designate a trustee to be in control of the assets in the trusty after your death. The trustee will have discretion as to the timing and amount of distributions. You can also detail how narrow or broad that discretion should be.
2. Be careful with dollar amount bequests. The second thing you should never include in your will is a dollar amount bequest.
While this might seem common, it's not recommended. This also has the potential to create major conflict within a family.
A better option is to use percentages. In this way, your estate will self-correct for size and each beneficiary will get their proper share.
Every will is specific to the person who creates it. In order to ensure that yours is done properly, meet with an experienced estate planning attorney to create a will that benefits you and your loved ones—without any unexpected problems.
Reference: Best Life (March 20, 2022) “Never Include These 2 Things in Your Will, Experts Warn”

Can I Plan My Estate to Avoid Leaving Residual Assets?

 

When looking into your estate plan, you see the term “residuary estate.” This is any part of your estate that hasn’t been distributed to your heirs through a will. It’s also called estate residue or residual estate. However, it simply means assets that are left over once your will’s been read, the assets have been distributed to your heirs and any final expenses have been paid.
Proper estate planning can help you avoid leaving residual assets behind, says Yahoo Finance’s recent article entitled “Residuary Estate Definition and Example.” An experienced estate planning attorney can help you select a structure for your estate that accomplishes your objectives.
A will lets you state how you want your assets to be divided among your heirs when you pass away. However, it’s possible that not all of your assets will make it into your will for some reason. Any assets that aren’t included in your will or distributed through a trust automatically become part of your residuary estate when you pass away.
Residual estates can be created without advance planning. For example, your heirs may be left to deal with a residuary estate if:
⦁ You neglected to include certain assets in your will;
⦁ You acquired new assets after drafting your will and failed to amend the document for the distribution of these assets; or
⦁ Someone you named in your will dies before you or is unable to receive their inheritance for some other reason.
Assets that are designed to have a named beneficiary but don’t have one, can also be included in the residuary estate.
When a residuary estate exists, it can complicate the probate process for your family. Any unclaimed or otherwise overlooked assets would be distributed according to the state’s inheritance laws, after any estate taxes, outstanding debts or final expenses have been paid.
You should also know that it’s possible to have a residuary beneficiary of a living trust. This person would receive any property or assets transferred to the trust that were not designated for specific beneficiaries. If you create a trust properly, there should be a provision for each beneficiary you want to be included and which assets they should receive. However, you could still run into issues if a named beneficiary dies, and you haven’t named anyone as a residuary beneficiary.
A residuary estate is something you may need to plan for when creating a will or trust. Fortunately, it’s pretty easy to do so by including the proper wording in your will and trust documents. Ask an estate planning attorney to eliminate confusion and to plan your estate properly.
: Yahoo Finance (Dec. 30, 2021) “Residuary Estate Definition and Example”

Why Shouldn’t I Wait to Draft my Will?

 

There are countless reasons why people 50 and over fail to write a will, update a previous one, or make other estate planning decisions. Market Watch’s recent article entitled “We beat up 6 of your excuses for not writing a will (or updating an old one)” takes a closer look at those six reasons, and how to help overcome them.
Excuse No. 1: You have plenty of time. Sure, you know you need to do it. However, it’s an easy thing to move down on your priority list. We all believe we have time and that we’ll live to be 100. However, that’s not always the case. Set up an appointment with an experienced estate planning lawyer ASAP because what gets scheduled gets done.
Excuse No. 2: You don’t have a lot of money. Some think they have to have a certain amount of assets before estate planning matters. That isn’t true. Drafting these documents is much more than assigning your assets to your heirs: it also includes end-of-life decisions and deciding who would step in, if you were unable to make financial decisions yourself. It’s also wise to have up-to-date documents like a power of attorney and a living will in case you can’t make decisions for yourself.
Excuse No. 3: You don’t want to think about your death. This is a job that does require some time and energy. However, think about what could happen without an up-to-date estate plan. Older people have seen it personally, having had friends pass without a will and seeing the children fighting over their inheritance.
Excuse No. 4: It takes too much time. There’s a misconception about how time-consuming writing a will is. However, it really can be a fairly quick process. It can take as little as 2½ hours. First, plan on an hour to meet with the lawyer; an hour to review the draft; and a half-hour to sign and execute your documents. That is not a hard-and-fast time requirement. However, it is a fair estimate.
Excuse No. 5: You’d rather avoid making difficult decisions. People get concerned about how to divide their estate and aren’t sure to whom they should leave it. While making some decisions in your estate plan may seem final, you can always review your choices another time.
Excuse No. 6: You don’t want to pay an attorney. See this as investment in your loved ones’ futures. Working with an experienced estate planning attorney helps you uncover and address the issues you don’t even know you have. Maybe you don’t want your children to fight. However, there can be other issues. After all, you didn’t go to law school to learn the details of estate planning.
Reference: Market Watch (March 12, 2022) “We beat up 6 of your excuses for not writing a will (or updating an old one)”

What are Biggest Estate Planning Mistakes?

The Huffington Post’s recent article entitled “The Biggest Mistakes People Make In Their Wills, According To Estate Lawyers” explains that your last will and testament is one of the most important legal documents you’ll ever have. A will lets you state where you want your property, minor children and debts to go after you die. It also allows you to appoint an executor to carry out your wishes. The lack of a will is a common tragic mistake. Just about everyone over the age of 18 needs some estate planning. The following are some of the major estate planning mistakes:
1. Assigning co-executors. You should name only one executor, with alternate executors. Many testators want to make all their children responsible for administering the estate. However, that’s a really bad idea. If you have two executors, and they don’t agree, who gets the final say? However, if you’re set on naming more than one, make it an odd number so it’s majority-rule.
2. Thinking a will is all you need to avoid probate. Probate is the legal process of administering a person’s estate whether they die with a will or without one (i.e., “intestate”). Although a valid will can say where assets are allocated, it will likely not avoid the probate process if there are assets titled solely in your name. If you have a will in place, but a bank account doesn’t have a beneficiary designation, the assets likely have to go through the probate process before being distributed according to the terms of your will.
3. Being too vague about items with sentimental value. When people pass away, relationships change. Money can change people. Children who got along so well when you were alive may not get along as well when you’re gone and not there to mediate between them. If you’re too general, a term may be based on interpretation. If people interpret it differently, there’s a problem. If you know that someone wants a specific item, write it down.
4. Failing to update your will to reflect life changes. The biggest mistake people make when it comes to doing wills or estate plans is their failure to update those documents. There are a number of life events that require the documents to be updated, such as marriage, divorce and births of children. It is recommended that your estate plan be revisited every few years.
5. Failing to hire an experienced estate planning attorney. It’s important to get your estate planning documents correct. This is because when the documents are executed, the difference between a good set of documents and those drafted by a non-attorney (or one who doesn’t practice in this area of law) can mean considerably more time, money and stress.
Reference: Huffington Post (March 8, 2022) “The Biggest Mistakes People Make in Their Wills, According to Estate Lawyers”