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?”

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?”

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”

 

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?”

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”

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”

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?”

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?”

 

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”

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?”

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”

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”

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?”

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”

Is Estate Planning Affected by Property in Two States?

 

Cleveland Jewish News’ recent article titled “Use attorney when considering multi-state estate plan” says that if a person owns real estate or other tangible property (like a boat) in another state, they should think about creating a trust that can hold all their real estate. You don’t need one for each state. You can assign or deed their property to the trust, no matter where the property is located.
Some inherited assets require taxes be paid by the inheritors. Those taxes are determined by the laws of the state in which the asset is located.
A big mistake that people frequently make is not creating a trust. When a person fails to do this, their assets will go to probate. Some other common errors include improperly titling the property in their trust or failing to fund the trust. When those things occur, ancillary probate is required. This means a probate estate needs to be opened in the other state. As a result, there may be two probate estates going on in two different states, which can mean twice the work and expense, as well as twice the stress.
Having two estates going through probate simultaneously in two different states can delay the time it takes to close the probate estate.
There are some other options besides using a trust to avoid filing an ancillary estate. Most states let an estate holder file a “transfer on death affidavit,” also known as a “transfer on death deed” or “beneficiary deed” when the asset is real estate. This permits property to go directly to a beneficiary without needing to go through probate.
A real estate owner may also avoid probate by appointing a co-owner with survivorship rights on the deed. Do not attempt this without consulting an attorney.
If you have real estate, like a second home, in another state (and) you die owning that individually, you’re going to have to probate that in the state where it’s located. It is usually best to avoid probate in multiple jurisdictions, and also to avoid probate altogether.
A co-owner with survivorship is an option for avoiding probate. If there’s no surviving spouse, or after the first one dies, you could transfer the estate to their revocable trust.
Each state has different requirements. If you’re going to move to another state or have property in another state, you should consult with a local estate planning attorney.
Reference: Cleveland Jewish News (March 21, 2022) “Use attorney when considering multi-state estate plan”

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”

How Do I Talk to My Parents About Estate Planning?

 

Failing to draft an estate plan can mean a pair of obstacles when a parent dies. First, it can leave you scrambling to unravel their financial picture while trying to grieve. Second, it can be expensive.
MarketWatch’s recent article entitled “It’s easy to put it off, but here’s why you should talk to your parents about estate planning, and how to start the conversation” says that a wise way to avoid both scenarios is to begin talking with your parents about estate planning. While this can sound like a job just for the uber-rich, it is really an essential process that ensures clear directives exist for all sorts of situations that accompany the end of life.
An estate plan is a chance to set mindful intentions about life’s inevitabilities. It is, therefore, a great idea to ask your parents to take account of their assets and belongings. This is not just about the numbers and paperwork—it is a chance to gauge preparedness.
Start by asking your parent(s) the following:
Who do you want as your primary caregiver?
How will we pay for health care expenses?
What are your medical care preferences?
Which of us should make medical decisions on your behalf?
How should we handle your property when you die?
Do you have any valuable items that you want to be handled in a special way?
Where are your most important documents and do we have access to all of your digital records?
Inheritance often require probate. However, if the right legal documents are in place, it can be a relatively quick and painless process. When someone dies intestate (without a will), it can sticky and get tricky. Understand that the state has its own rules for dying without a will. Depending on the situation, you might need to hire a probate attorney because there will be legal proceedings. Therefore, make certain that your parents have a will and that beneficiaries are clearly stated in all policies and documents. It is a preventative measure that can pay dividends.
Remember that when wealth is transferred (or assets are passed from one person to another), taxes are often inevitable. Work with an experienced estate planning attorney to minimize liability.
Reference: MarketWatch (Dec. 29, 2021) “It’s easy to put it off, but here’s why you should talk to your parents about estate planning, and how to start the conversation”

What are My Responsibilities if I’m Named an Executor?

 

An executor is the person who helps finalize the finances and assets for a deceased person. As executor of an estate, you will need to get copies of the death certificate, notify authorities, such as Social Security, to stop benefits and may be involved in arranging the funeral.
You will also need to follow the instructions in the will to administer the estate.
You will organize the assets, pay off any debts, close accounts like utilities and cable or phone plans and distribute money and possessions to beneficiaries.
US News’ recent article entitled “How to Prepare to Be an Executor of an Estate” takes a look at the responsibilities of an executor.
If are asked and accept the position, start by finding the important documents, like the will. As executor, you are acting in a fiduciary capacity, and your efforts are directed toward the interests of the beneficiaries of the decedent’s the estate.
The time required to be an executor can be extensive. If you are asked to be the executor before the person passes away, ask to locate the original will. Read it and make certain that you understand it.
There are also requirements that must be met to be an executor of an estate. Anyone convicted of a felony is not allowed to be an executor, even if they are named in the decedent’s will. The exact rules vary, depending on the state, so ask an estate planning attorney.
After the death, it typically takes at least six months or more to carry out all the administrative work related to the estate. Therefore, if you do not have the time, do not agree to serve as executor.
Finally, executors may be compensated for their work. Some states have commission schedules listed in their statutes that the executor can collect, while other states require that you keep track of your time and the judge will authorize “reasonable” compensation for your actual efforts.
Ask for help if tasks seem overwhelming or you do not understand certain instructions on accounts or the will. An experienced estate planning attorney can assist.
Reference: US News (Dec. 22, 2021) “How to Prepare to Be an Executor of an Estate”

How Do I Give Assets to Minor Grandchildren in My Will?

 

If a married couple is creating its estate plan, then how does the couple leave the estate to non-adult grandchildren?
However, what if something were to happen to them before the grandchildren become adults? Can this couple make sure the minor grandchildren do not get control of any inheritance until they’re adults?
Can arrangements be made for any unborn grandchildren to be included?
Nj.com’s recent article entitled “How can I leave my money to my minor grandchildren when I die?” says that one way to solve these issues is to create a testamentary trust to provide for young beneficiaries whether they’re children, grandchildren, step-children, or unrelated beneficiaries. The terms of a testamentary trust are in your will. It is only established and funded after you pass away.
The terms of the trust generally provide instructions to the trustee about the ages at which distributions must be made, if any. These instructions also allow the trustee to make discretionary distributions of income and principal to the beneficiaries.
Beneficiaries do not need to be identified by name or need to be born at the time the will is written. However, they must be able to be identified upon your death. As a result, you can provide a bequest to all of your grandchildren, whether or not they are born yet.
It doesn’t matter where your grandchildren live as far as estate planning is concerned. However, if they live outside the United States and the bequest is considerable, the laws of their home country should be addressed. This is because a big gift may cause adverse tax implications to the recipient.
For children, some states’ laws allow you to add a term in your will that penalizes any interested person — like an heir or beneficiary — for contesting the will.
However, if there’s probable cause initiating a proceeding concerning the estate, then the clause will not be enforced.
When a person names another as primary beneficiary, they should also name one or more contingent beneficiaries, so that if the first person predeceases him or her, they will not have to revise the will.
If you do not designate a contingent beneficiary, and an heir predeceases, the assets pass according to the state’s intestacy statute rather than according to the will.
Reference: nj.com (Dec. 9, 2021) “How can I leave my money to my minor grandchildren when I die?”

What Can a Trust Do for Me and My Family?

 

A trust is defined as a legal contract that lets an individual or entity (the trustee) hold assets on behalf of another person (the beneficiary). The assets in the trust can be cash, investments, physical assets like real estate, business interests and digital assets. There is no minimum amount of money needed to establish a trust.
US News’ recent article entitled “Trusts Explained” explains that trusts can be structured in a number of ways to instruct the way in which the assets are handled both during and after your lifetime. Trusts can reduce estate taxes and provide many other benefits.
Placing assets in a trust lets you know that they will be managed through your instructions, even if you’re unable to manage them yourself. Trusts also bypass the probate process. This lets your heirs get the trust assets faster than if they were transferred through a will.
The two main types of trusts are revocable (known as “living trusts”) and irrevocable trusts. A revocable trust allows the grantor to change the terms of the trust or dissolve the trust at any time. Revocable trusts avoid probate, but the assets in them are generally still considered part of your estate. That is because you retain control over them during your lifetime.
To totally remove the assets from your estate, you need an irrevocable trust. An irrevocable trust cannot be altered by the grantor after it's been created. Therefore, if you’re the grantor, you can’t change the terms of the trust, such as the beneficiaries, or dissolve the trust after it has been established.
You also lose control over the assets you put into an irrevocable trust.
Trusts give you more say about your assets than a will does. With a trust, you can set more particular terms as to when your beneficiaries receive those assets. Another type of trust is created under a last will and testament and is known as a testamentary trust. Although the last will must be probated to create the testamentary trust, this trust can protect an inheritance from and for your heirs as you design.
Trusts are not a do-it-yourself proposition: ask for the expertise of an experienced estate planning attorney.
Reference: US News (Feb. 7, 2022) “Trusts Explained”

What are Biggest Blunders in Wealth Transfer?

 

When it comes time to transfer what we’ve work so hard to accumulate, the way in which we transfer our wealth can have a big impact on how much of our wealth is actually received by our heirs and how much is transferred to the federal government.
Forbes’ recent article entitled “Top 7 Tax Mistakes Made in Planning a Wealth Transfer” says that tax mistakes can mean losing a lot of hard earned money, if you’re not careful. Here are some of the biggest mistakes made in wealth transfer planning.
1. IRD Taxes. Most people are unaware of this tax. It stands for “Income in Respect of the Decedent.” It’s the income tax your heirs will pay on tax-deferred assets, such as traditional IRAs, 401k’s and annuities. In many cases, these taxes will push heirs into a higher marginal tax bracket. You should plan to reduce or eliminate the IRD Tax, if you have a 401k, IRA or annuities. For example, if you gift IRA and 401k assets to charity and non-IRD assets to your heirs, you can save them in IRD Taxes! The use of a Charitable Remainder Trust can provide a tax-efficient way to create a “charitable stretch IRA” for your children or grandchildren.
2. Charitable Giving Mistakes. Most people do charitable giving with after tax cash from their income. However, this isn’t the most efficient way to give. Gifting highly appreciated securities, real estate, or even business interests can give you a double tax benefit: it can eliminate capital gains taxes and still get the charitable tax deduction.
3. Dying without a Comprehensive Estate Plan. About three-quarters of Americans die without a will. A will, by itself, subjects your assets (and your heirs) to probate. A well-designed estate plan can help reduce or eliminate both probate and estate taxes. Ask an experienced estate planning attorney about creating a comprehensive estate plan for you or review the one you have.
4. No (or Improper) Beneficiary Designations. This can result in a loss of inheritance for your family. With retirement accounts like IRAs or 401(k)s, properly designating beneficiaries is essential to avoid the loss of further income tax deferral at death. If you don’t have primary and contingent beneficiaries named on all your accounts, these assets will have to go through probate and could cost unnecessary IRD taxes.
5. Improper Titling of Business Interests. A business is frequently titled only in the name of the business owning spouse. However, when that spouse dies, the business itself must go through the costly process of probate, which can create issues for the operation of the company.
6. Bad Choices for Ownership & Beneficiary Designations on Life Insurance. Life insurance can be a great financial planning tool and provide liquidity. It can also be a great wealth transfer tool in estate planning or business planning. However, if the ownership and beneficiaries are done incorrectly, the life insurance benefits can be subject to estate taxes. Ask an experienced estate planning attorney about an irrevocable life insurance trust (ILIT).
7. Giving the Wrong Assets to your Heirs. A common mistake that people make in wealth transfer planning, is to leave a percentage of their estate to their children, another to their grandchildren and another to their favorite charities (or Donor Advised Fund) in their will or via a trust. However, this isn’t the smartest way to distribute your assets from a tax perspective. Doing so could subject them to IRD taxes. Instead, use IRA (and other IRD assets such as 401k) for your gifts to charity and, give non-IRD assets (such as cash, real estate, life insurance, or a Roth IRA) to your children and grandchildren.
Reference: Forbes (Dec. 15, 2021) “Top 7 Tax Mistakes Made in Planning a Wealth Transfer”

Why Do I Need an Estate Planning Attorney?

 

Pennsylvania News Today’s recent article entitled “Top 7 Reasons You Need An Estate Lawyer says that when you think about hiring a real estate lawyer, it might seem a little unsettling. However, let’s look at these reasons and why you might require them.
Estate Planning. You might want to consider this, but everyone passes away. It’s important that your family is ready for this. An experienced estate planning attorney can help you through this process and make certain everything is prepared. You should have a will. This document says what should happen with your assets when you pass away.
Trusts. A trust helps manage assets before someone dies. If you only have one or two assets you want given to someone, a will is adequate. However, if you own extensive property, ask an experienced estate planning attorney about setting up a trust. This will help your family keep living in your home, even after you’re gone without worrying about it being sold out from under them.
Probate. The probate court oversees the distribution of a person’s estate according to the instructions in their will. Probate can be a lengthy and expensive process, depending on where you live and the complexity of your assets or family situation. An estate planning attorney can help you with strategies to avoid it. A probate attorney can help you, so your family doesn’t have to worry about dealing with that stress or spending a vast amount of money necessary to do this correctly.
Guardianship. Guardianships are used when parents pass away and leave minor children behind. You can designate a guardian for your minor children in your will.
Elder Law Services. Seniors frequently need help managing finances and health care decisions. An experienced estate planning attorney or elder law attorney can help your loved ones through these complicated matters.
Estate Investments. An experienced attorney can also advise you on how to make smart investments for your family and can make certain that the transaction goes smoothly, and that any moves work with your estate planning objectives.
Tax Issues. Taxes may be owed on estates worth more than five million dollars. This can make it hard for heirs who don’t have access to this much money upfront. An estate planning attorney can help you avoid taxes, so your family doesn’t have to deal with this problem.
Estate planning is a process that should be started as soon as possible. You’ll need an estate planning lawyer who is knowledgeable and experienced to help.
Reference: Pennsylvania News Today (Nov. 11, 2021) “Top 7 Reasons You Need An Estate Lawyer”

Should I Start Estate Planning Now?

The coronavirus has taken a toll on our finances, as well as our physical and mental health. As a result, it’s important to plan appropriately for your health care and financial needs in an estate plan to provide much-needed peace of mind, say Yahoo Finance’s recent article entitled “Estate Planning During a Pandemic – Quit Stalling.” The article lists the important components of a comprehensive estate plan:
Advance Health Care Directive. This is a written plan that states your wishes, in the event you can’t speak for yourself. Your wishes need to be in writing, and the document should be updated as your health changes. Review your advance health care directive with your doctor and the person you select as your health care proxy to be certain it’s completed correctly.
Health Care Power of Attorney. This legal document lets you name someone who can review your medical records and make decisions, such as how and where you should be treated. This would be applicable, if you were incapacitated and unable to make medical decisions for yourself.
Living Will. A living will is a type of advance health care directive that specifically states your end-of-life decisions in the event you are terminally ill or permanently unconscious. This covers specific medical treatments, like CPR, ventilation, pain management, tube feeding and organ and tissue donation.
Financial Power of Attorney. This document lets you name someone to help with your finances, if you become incapacitated and unable to do so. You can state how much control your power of attorney will have, like accessing accounts, selling stock and managing real estate.
Trusts. Ask an experienced estate planning attorney about creating a trust to protect your assets as you pass them down to your heirs. If your children or grandchildren aren’t old enough or mature enough to handle their inheritance, you can set up a trust that provides them with a small amount of money each year, increasing that amount as they get older. You can also direct that the money be specifically used for an adult child’s mortgage or student loans.
Beneficiaries. Many people forget to update their life insurance policies, bank, brokerage accounts and retirement plans. These all have beneficiary forms, which supersede a will. These should be updated, along with your estate plan, every few years and after every major life change. That’s something like a marriage, divorce, death, adoption, or birth.
Make certain that you are reviewing and updating your estate plan when you review your retirement plan each year or so.
Reference: Yahoo Finance (Oct. 31, 2021) “Estate Planning During a Pandemic – Quit Stalling”

Is Estate Planning Really That Important?

Over 50% of our adult population (120 million adults) neither have nor realize the significance of having an up-to-date estate plan to protect themselves and their family’s assets.
Mountain Times’ recent article entitled “Do you need an estate plan?” explains that estate and gift planning is a process that can protect you and your family. It is a very important component of your overall financial planning. This is the perfect time to put your estate planning in order. If you don’t have an up-to-date estate plan and you are seriously ill or injured and can’t manage your financial affairs, a judge will have to appoint someone to manage them for you. The person they appoint might not be the one you would want to perform those tasks.
Without an estate plan, when you pass, your affairs will be settled by the probate laws of the state. As a result, the handling of your affairs can be costly and frustrating for your family.
Your assets may also not pass to your desired beneficiaries. In addition, there’s no way for your assets to be donated to your favorite charities or causes, unless some advance arrangements are made.
Sit down with an experienced estate planning attorney to discuss your goals and objectives. Your attorney can then draft the appropriate legal documents, such as wills, trusts, buy-sell agreements for business owners, durable powers of attorney for financial management and an advance healthcare directive or health-care power of attorney. These documents will help your family at a very difficult and emotional time.
Regardless of the extent of your net worth, estate planning is important for everyone.
Complex strategies may be used by wealthy people to reduce death taxes and costs. However, everyone needs a will and/or trust to pass on property to their heirs and provide for minor children.
An estate plan is an essential part of your financial and gift planning.
The time to create or update your estate plan is now with the help of an experienced estate planning attorney.
Reference: Mountain Times (Oct. 6, 2021) “Do you need an estate plan?”

Why Should I Update My Estate Plan?

 

The majority of Americans don't have an updated estate plan in place. This can create a major headache for their families, in the event that anything happens to them.
Fox 43’s recent article entitled “Majority of Americans have outdated estate plans” explains that estate planning is making some decisions now for what you want to happen in the future, if you're unable to make decisions then.
It's important that every adult has an estate plan in place. Moreover, as you get older and you have a family, an estate plan becomes even more important.
These decisions can impact your family. It involves deciding who will care for your children. If you're a parent with children under the age of 18, your estate plan can name the guardians of those children.
This is accomplished by having a clause in your will that states which person(s) will have the responsibility of caring for your minor children, in the event that you and your spouse pass away unexpectantly.
In your will, you’ll also name an executor who will carry out your wishes after your death.
You may ask an experienced estate planning attorney about whether you should have a trust to protect some of your assets.
You also should have your attorney draft a power of attorney, healthcare directive, living will and HIPAA waiver.
Many people don't know where to get started. However, the good thing is ultimately it's your decisions about what you want to happen, if you are unable to care for your loved ones.
Talk to an experienced estate planning attorney and do this sooner rather than later.
Reference: Fox 43 (Oct. 27, 2021) “Majority of Americans have outdated estate plans”

Can My Power of Attorney Change My Will?

A power of attorney can’t change a properly written will. But note that an agent can make many changes to the assets in the estate, says Yahoo Finance’s recent article entitled “Can a Power of Attorney Change a Will?”
A power of attorney is a document that grants a person, known as the attorney in fact or agent, the authority to make legally binding decisions on your behalf. This can mean managing financial assets, making choices regarding medical care, signing contracts and other commitments.
Your attorney in fact can access confidential materials and their decisions are as binding as if you had made them yourself. In some instances, you may want your power of attorney to be broad and at other times you may want to limit the authority under your power of attorney by time, scope, or both.
Provided a will is valid, an attorney in fact under a power of attorney can’t modify or rewrite it. It’s not within their scope of authority, even if it specifically says otherwise in their power of attorney assignment.
A will written by a power of attorney is invalid on its face.
The authority of a power of attorney typically ends once the principal (the person granting authority) dies. At that point, the principal’s legal rights transfer to their estate. The executor of the estate takes over and manages all of the deceased’s affairs from that point forward.
Thus, an attorney in fact appointed under a power of attorney can’t change a will while the principal is alive because they don’t have the authority to do so. In addition, they can’t change an estate once the principal dies because their role as attorney in fact under the power of attorney ends with his or her death.
It’s important to understand that a person with a general power of attorney can still change the circumstances surrounding a will. He or she can make changes to your estate—essentially, before it becomes your estate. For example, an attorney in fact can make significant financial decisions on your behalf. As a result, they may be able to restructure your personal finances according to their own best judgment. The effect is that it may invalidate sections of your will if the power of attorney dissolves or changes assets that you had assigned to various heirs. This doesn’t always require bad faith and unfair dealing, but that can also occur.
If you include a general power of attorney as part of your elder care plan, you should discuss your estate wishes with your attorney in fact in advance. Remember that issues such as power of attorney and estate law are highly specific to each state. Talk to an experienced estate planning attorney about a power of attorney.
Reference: Yahoo Finance (Sep. 17, 2021) “Can a Power of Attorney Change a Will?”

What Is Probate?

WTOP’s recent article entitled “Everything You Need to Know About Probate” explains that probate is the court-supervised proceeding, in which the assets of the decedent are distributed to his or her heirs. This involves validating the decedent’s will, distributing assets and ensuring that the debts of the estate are paid.
Probate is how assets formally pass from one person who passed away to their heirs or beneficiaries. Probate can be long and complex or pretty efficient. Each state has its own probate code, and some have a small estate probate process for estates that are under a certain threshold. The administration of the estate involves the executor or personal representative, beneficiaries, creditors and a probate judge.
The probate process is required by state law to manage the decedent’s assets and property that aren’t transferred by contract law, state titling law, or trust law. As a result, any assets or property awarded in a last will or assets owned by an individual who dies without a will may require probate.
Property that passes through probate includes assets and property awarded to heirs through a will, such as household goods, automobiles and personal property owned at death but not awarded in the will and not otherwise transferred.
If a person dies intestate or without a valid will, the disposition of their probate property will be controlled by the laws of intestacy of the state where the decedent resided at death. Probate property is all property that was held individually and that does not have a beneficiary designation.
Each state has its own probate process. However, the first step in probate generally is to produce a will. A probate attorney can determine if all of the heirs will consent to have it probated. If there’s not going to be any objection, the attorney can prepare the probate documents and have the waivers signed by the distributees. Once they sign and notarize the consent, the attorney can take the will with the probate documents and have it filed.
After a will is deemed valid, the executor of the estate and the attorney will file certain documentation with the court. This might include the will, a certified copy of the death certificate, a list of names and addresses of the decedent’s heirs and any known creditors. Creditors will be paid first, then the remaining assets are distributed to the heirs. After any required tax returns are filed, the executor will ask the court to close the estate.
Reference: WTOP (Aug. 31, 20211) “Everything You Need to Know About Probate”

Should I Ask Mom and Pop about Their Finances?

 

Adult children should know about their parents’ finances in case of any emergency. They should also know critical information in case of death. NASDAQ’s recent article entitled “9 Questions to Ask Aging Parents About Their Finances” acknowledges that speaking to aging parents about their finances isn’t easy. However, to start this process, the article gives us nine important topics you may want to discuss with your parents:
Do You Have a Financial Plan (and is it enough)? See if your parents have a financial plan. Some parents will have a solid financial plan that will let them to live comfortably into their 80s or 90s. On the other hand, you may discover they’re living on a fixed budget and money is tight. If you see that you’ll need to help them financially now or in the future, start planning ASAP. Any decision to provide them with financial support will likely have an effect on your own financial plan.
Do You Have an Accessible List of All Your Accounts? Ask your parents to draft a list of their financial assets and those named as beneficiaries of those accounts and keep it in a safe place. They should also put together important contacts, such as clergy, CPA, estate planning attorney, physician, etc.
Where’s Your Will, and Who’s the Executor? See where your parents keep their wills and estate documents. Some estate planning attorneys retain an original copy. If your parents don’t have a will, encourage them to see an estate attorney. An item that’s not commonly listed in the will, that you may want to ask about, is if your parents have prepaid for a burial plot or memorial arrangements.
Do You Have Life Insurance Policies that I Should Know About? See if your parents have any active life insurance policies. Get the details of the policies and the policy numbers. If your parents are still working, they may also have life insurance through an employer.
Are There Any Special Bequests to Family and Friends? Family heirlooms and special personal property may be a part of your parents’ estate plan. A sibling may have claimed your dad’s coin collection. Knowing your parents’ intentions and wishes for their keepsakes will make things much easier when they pass. Moreover, having conversations about family heirlooms now can help prevent any hard feelings later. Some people make up a list for their personal bequests and reference it in their wills.
Who Have You Named as Your Financial Power of Attorney? This document lets your parents name a primary and secondary person to make financial decisions on their behalf, if they become incapacitated. If you’re the one named as the person to make financial decisions, find out where all of your parents’ financial assets are held. You should also get information about their Medicare policy, any pensions and their Social Security benefits. It even helps to know their utility companies in case you need to pay these bills and must prove power of attorney.

Do You Have a Living Will? They should each have an advance health care directive or living will and health care power of attorney. These documents designate who has authority to make medical decisions on their behalf, if they became incapacitated or terminally ill. This also includes your parents’ preferences for life-sustaining treatment, including a “Do Not Resuscitate” clause, as well as their preferences on organ donation.
Have You Had Trouble Balancing Your Checkbook Lately or Forgotten to Pay Bills? Have a discussion about key financial decisions with your parents while they are in good health. This will let you make a plan, if they show signs of memory loss. The signs of memory loss include forgetting appointments, making occasional errors while managing household finances, or getting confused about the day of the week.
Do You Have a Long-Term Care Policy? To claim benefits of long-term care insurance, a person typically needs to be unable to perform two out of six common “activities of daily living” (bathing, dressing, toileting, eating, transferring and continence) or have a severe cognitive disorder. If your parents have a policy, access it and review its core benefits, in case you need to help them file a claim.
Discussing your parents’ financial and estate plans isn’t fun, but it will help give both you and your parents some peace of mind to know that they will be provided for, and things will be taken care of in their absence.
Reference: NASDAQ (Aug. 27, 2021) “9 Questions to Ask Aging Parents About Their Finances”

Where Do You Score on Estate Planning Checklist?

 

Make sure that you review your estate plan at least once every few years to be certain that all the information is accurate and updated. It’s even more necessary if you experienced a significant change, such as marriage, divorce, children, a move, or a new child or grandchild. If laws have changed, or if your wishes have changed and you need to make substantial changes to the documents, you should visit an experienced estate planning attorney.
Kiplinger’s recent article “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?” gives us a few things to keep in mind when updating your estate plan:
Moving to Another State. Note that if you’ve recently moved to a new state, the estate laws vary in different states. Therefore, it’s wise to review your estate plan to make sure it complies with local laws and regulations.
Changes in Probate or Tax Laws. Review your estate plan with an experienced estate planning attorney to see if it’s been impacted by changes to any state or federal laws.
Powers of Attorney. A power of attorney is a document in which you authorize an agent to act on your behalf to make business, personal, legal, or financial decisions, if you become incapacitated. It must be accurate and up to date. You should also review and update your health care power of attorney. Make your wishes clear about do-not-resuscitate (DNR) provisions and tell your health care providers about your decisions. It is also important to affirm any clearly expressed wishes as to your end-of-life treatment options.
A Will. Review the details of your will, including your executor, the allocation of your estate and the potential estate tax burden. If you have minor children, you should also designate guardians for them.
Trusts. If you have a revocable living trust, look at the trustee and successor appointments. You should also check your estate and inheritance tax burden with an estate planning attorney. If you have an irrevocable trust, confirm that the trustee properly carries out the trustee duties like administration, management and annual tax returns.
Gifting Opportunities. The laws concerning gifts can change over time, so you should review any gifts and update them accordingly. You may also want to change specific gifts or recipients.
Regularly updating your estate plan can help you to avoid simple estate planning mistakes. You can also ensure that your estate plan is entirely up to date and in compliance with any state and federal laws.
Reference: Kiplinger (July 28, 2021) “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?”

What are Biggest Mistakes in Estate Planning?

 

Bankrate’s recent article entitled “Estate planning checklist: 3 key steps to making a successful plan” talks about five things to watch out for with an estate plan. Therefore, as you’re making your estate plan, carefully consider everything, and that means it may take some time to complete your plan. Let’s look at five things to watch out for in that process:
1. Plan your estate now. Of course, it’s not just the old and infirm who need an estate plan. Everyone needs a last will so that their last wishes are respected, knowing that the unexpected can happen at any time.
2. Say who will take care of your minor children. While last wills may typically focus on what happens to your financial assets, you’ll also want to specify what happens to any minor children on your passing, namely who takes care of them. If you have underage children, you must state who would be a guardian for that child and where that child will live. Without a last will, a judge will decide who will take care of your children. That could be a family member or a state-appointed guardian.
3. Ask executors if they’re willing and able to take on the task. An executor carries out the instructions in your last will. This may be a complicated and time-consuming task. It involves distributing money in accordance with the stipulations of the document and ensuring that the estate is moved properly through the legal system. Make sure you designate an executor who’s up to the task. That means you’ll need to speak with them and make certain that he or she is willing and able to act.
4. Consider if you want to leave it all to your children. Many young families simply give all their assets to their children when they die. However, if the parents pass away when the children are young, and they don’t establish a trust, they have access to all of the money when they reach the age of majority. This could be a great sum of money for a young adult to inherit with no rules on how to use it.
5. Keep your estate plan up to date. You should review your estate plan regularly, at least every five years to be sure that everything is still how you intend it and that tax laws haven’t changed in the interim. Your plan could be vastly out of date, depending on changes since you first drafted it.
Estate planning can be a process where you demonstrate to your friends and family how much you care about them and how you’ve remembered them with certain assets or property.
TI’s a way to ensure that your loved ones don’t have months of work trying to handle your estate.
Reference: Bankrate (July 23, 2021) “Estate planning checklist: 3 key steps to making a successful plan”

No Kids? What Happens to My Estate?

Just because you don’t have children or heirs doesn’t mean you should not write a will. If you decide to have children later on, a will can help protect their financial future. However, even if you die with no children, a will can help you ensure that your assets will go to the people, institutions, or organizations of your own choosing. As a result, estate planning is necessary for everyone.
Claremont Portside’s recent article entitled “What Happens to Your Estate If You Die With No Children” says that your estate will go to your spouse or common-law partner, unless stated otherwise in your will. If you don’t have any children or a spouse or common-law partner, your estate will go to your living parents. Typically, your estate will be divided equally between them. If you don’t have children, a spouse, or living parents, your estate will go to your siblings. If there are any deceased siblings, their share will go to their children.
The best way to make certain your estate goes to the right people, and that your loved ones can divide your assets as easily as possible, is to write a will. Ask an experienced estate planning attorney to help you. As part of this process, you must name an executor. This is a person you appoint who will have the responsibility of administering your estate after you die.
It’s not uncommon for people to appoint one of their children as the executor of their will. But if you don’t have children, you can appoint another family member or a friend. Select someone who’s trustworthy, responsible, impartial and has the mental and emotional resources to take on this responsibility while mourning your death.
You should also be sure to update your will after every major event in your life, like a marriage, the death of one of your intended beneficiaries and divorce. In addition, specifically designating beneficiaries and indicating what they will receive from your estate will help prevent any disputes or contests after your death. If you have no children, you might leave a part (or your entire) estate to friends, and you can also name charities and other organizations as beneficiaries.
It’s important to name who should receive items of sentimental value, such as family heirlooms, and it’s a good idea to discuss this with your loved ones, in case there are any disputes in the future.
Even without children, estate planning can be complicated, so plan your estate well in advance. That way, when something happens to you, your assets will pass to the right people and your last wishes will be carried out. Ask an experienced estate planning attorney for assistance in creating a comprehensive estate plan.
Reference: Claremont Portside “What Happens to Your Estate If You Die with No Children”

How Do I Avoid Estate Planning Mistakes with a Blended Family?

The Wealth Advisor’s recent article entitled “Remarried With Children? 5 Estate Planning Mistakes to Avoid” says that you can’t guarantee that everyone in the blended family will be happy with the arrangements you’ve made with a second marriage.
Mistake #1: Failing to change beneficiaries. With a beneficiary designation, the money passes directly to your intended beneficiary without probate. Look at all of your financial accounts to be certain that your spouse is designated the beneficiary if that's what you want. Plus, check your life insurance beneficiaries because these payouts also bypass probate.
Mistake #2: Failing to update your last will. Your last will determines much of who gets the assets you and your spouse accumulated during your lifetimes. You probably don't want your ex-spouse to get these. People on their second marriage frequently decide that the surviving spouse gets all the assets; upon the death of the second spouse, the remaining assets will be divided evenly among all of the children. There are ways to make that happen, but it takes very special legal planning.
Mistake #3: Treating all heirs equally. Most spouses aren't financial equals when they marry, and this is particularly so in second marriages. If your new spouse moves into your house, for example, you may want your children to get the proceeds when it’s sold, not your spouse or your spouse's children. There are many reasons why parents don't treat children equally, including when there’s a child who’s disabled or has special needs. A child may also suffer from an addiction and require a trust that provides stipends at regular intervals to the beneficiary and deters creditors from getting money in the trust.
Mistake #4: Failing to give while you’re still alive. If you're planning to leave money to your kids, you might think about giving it to them now. You can give up to $15,000 per person without having to pay the federal gift tax or deal with the IRS. Plus, your spouse may also give the same amount.
Mistake #5: Failing to work with an experienced estate planning attorney. If you're older and on your second marriage, your life is probably complex with ex-spouses and children and stepchildren. Blended families and comingled assets make things complicated, as does a child with special needs or an aging parent. An experienced estate planning attorney can work through all of your issues and make sure you have the best and most comprehensive plan for your circumstances.
Reference: The Wealth Advisor (July 12, 2021) “Remarried With Children? 5 Estate Planning Mistakes to Avoid”

What Exactly Is a Trust?

MSN Money’s recent article entitled “What is a trust?” explains that many people create trusts to minimize issues and costs for their families or to create a legacy of charitable giving. Trusts can be used in conjunction with a last will to instruct where your assets should go after you die. However, trusts offer several great estate planning benefits that you don’t get in a last will, like letting your heirs to see a relatively speedy conclusion to settling your estate.
Working with an experienced estate planning attorney, you can create a trust to minimize taxes, protect assets and spare your family from going through the lengthy probate process to divide up your assets after you pass away. A trust can also let you control to whom your assets will be disbursed, as well as how the money will be paid out. That’s a major point if the beneficiary is a child or a family member who doesn’t have the ability to handle money wisely. You can name a trustee to execute your wishes stated in the trust document. When you draft a trust, you can:
Say where your assets go and when your beneficiaries have access to them
Save your beneficiaries from paying estate taxes and court fees
Shield your assets from your beneficiaries’ creditors or from loss through divorce settlements
Instruct where your remaining assets should go if a beneficiary dies, which can be helpful in a family that includes second marriages and stepchildren; and
Avoid a long probate court process.
One of the most common trusts is called a living or revocable trust, which lets you put assets in a trust while you’re alive. The control of the trust is transferred after you die to beneficiaries that you named. You might want to ask an experienced estate planning attorney about creating a living trust for several reasons, such as:
If you’d like someone else to take on the management responsibilities for some or all of your property
If you have a business and want to be certain that it operates smoothly with no interruption of income flow, if you die or become disabled
If you want to shield assets from the incompetency or incapacity of yourself or your beneficiaries; or
If you want to decrease the chances that your will may be contested.
A living trust can be a smart move for those with even relatively modest estates. The downside is that while a revocable trust will usually keep your assets out of probate if you were to die, there still will be estate taxes if you hit the threshold.
By contrast, an irrevocable trust can’t be changed once it’s been created. You also relinquish control of the assets you put into the trust. However, an irrevocable trust has a key advantage in that it can protect beneficiaries from probate and estate taxes.
In addition, there are many types of specialty trusts you can create. Each is structured to accomplish different goals. Ask an experienced estate planning attorney about these.
Reference: MSN Money (July 9, 2021) “What is a trust?”

Do Singles Need Estate Planning?

 

Pauls Valley Democrat’s recent article entitled “Even 'singles' need estate plans” tells us what might happen if you die intestate (without a last will and testament). In that case, your any assets without a surviving joint owner or designated beneficiary or titled in a revocable living trust may be required to pass through the probate process. As a result, they’ll be distributed by the court, according to the state's intestate succession laws.
Even if you don’t have children, you may have nephews or nieces, or even children of cousins or friends, to whom you’d like to leave some of your assets. However, if everything you own goes through probate, there’s no guarantee that these people will get what you wanted them to have. Therefore, if you want to leave something to family members or close friends, state this in your last will and testament.
However, you may also want to provide support to some charities. You can just name these charities in your will. However, there may be options that could provide you with additional benefits. One such possibility is a charitable remainder trust. With this trust, you’d transfer appreciated assets, such as stocks, mutual funds or other securities, into an irrevocable trust. Your named trustee could then sell the assets at full market value, avoiding the capital gains taxes you’d have to pay if you sold them yourself, outside a trust.
Moreover, if you itemize, you may be able to claim a charitable deduction on your taxes. With the proceeds, the trust can purchase income-producing assets and provide you with an income stream for the rest of your life. At your death, the remaining trust assets will go to the charities that you’ve named.
A single person also should have as part of his or her estate planning, a durable power of attorney and a health care proxy. A durable power of attorney allows you to designate an individual to manage your finances, if you become incapacitated. This is really important, if you don’t have a spouse to step in.
If you become incapacitated, your health care proxy – also known as a health care surrogate or medical power of attorney – allows you to name another person to legally make health care decisions for you, if you are unable to do so yourself.
Estate planning can be complex, so work with an experienced estate planning attorney.
Reference: Pauls Valley Democrat (June 24, 2021) “Even 'singles' need estate plans”

What Is a Testamentary Trust?

 

Trusts are created to hold assets, and money in a trust is managed according to the instructions of the person who created it. A testamentary trust is a trust that’s created by a will after death, explains WTOP’s article entitled “What Is a Testamentary Trust and How Do I Create One?” Once the trust has been created, assets are placed into it and then distributed, as designated by its legal documentation.
There is also something called a revocable trust, which is a living trust created prior to a person’s death. A revocable trust is created outside of probate, which means that the heirs do not have to go through probate to receive assets from a living trust. Instead, a trustee can distribute funds directly to beneficiaries. Both testamentary trusts and living trusts are used for estate planning. However, a living trust allows for more flexibility and can have lower long-term costs. Living trusts are not only created outside probate but managed outside the court system as well. In contrast, testamentary trusts are administered through probate for as long as they are in effect.
A testamentary trust is frequently used to manage money for minor children, but it can protect assets in other situations too. The good thing is that there is a lot more court oversight. The bad part is court oversight is not cheap.
For example, a testamentary trust could be used to manage money for an 8-year-old beneficiary until age 25. But that means 17 years of probate. So, while testamentary trusts may be less expensive than living trusts to set up, they could cost more in the long run. These trusts are rare, and the one time a testamentary trust may have an advantage over a living trust is if someone involved in the estate is prone to taking legal action, in which case court management may be the better option.
You should ask an attorney to draft the documents. It should be an attorney who specializes in trusts and estates. Having an attorney draw up will and trust documents will make certain that they meet the state’s requirements and are written so that your assets are distributed according to your instructions.
When the creator of the trust dies, the testamentary trust will be created, and assets moved into it as stipulated in the deceased’s will. Distributions will then occur from the trust, as instructed in the trust documents.
Reference: WTOP (July 19, 2021) “What Is a Testamentary Trust and How Do I Create One?”

Should a Trust Be a Component of My Estate Planning?

 

Let’s say that there’s a young father with a wife and young son, who owns a home and a Roth IRA account, with a few stock investments. On the stock investments, he’s filled out the beneficiary designation forms passing all his assets to his wife and son, should anything happen to him.
This father owns his home is joint tenancy with right of survivorship with his wife.
Does he need to set up a separate trust, if most of his assets pass through beneficiary designations?
Nj.com’s recent article entitled “Do I need a trust in case something happens to me?” says that leaving assets outright to a minor is typically a bad move. The son’s guardian and/or the court would take custody of the assets, both of which require significant court oversight and involvement.
The minor would also receive the assets upon attaining the age of majority, which in most states is age 18.
No one can tell what a young child will be like at the age of 18, especially after suffering the loss of their parents. Even if there are no significant issues, such as drug addiction or special needs, parents should think about what they’d have done with that much money at that age.
The best option is to leave assets in trust for the benefit of the minor son.
The trustee can manage and use the assets for the benefit of the young boy with limited court involvement.
The terms of the trust can also delay the point at which the assets can be distributed and ultimately paid over to the beneficiary, if at all.
For example, it’s not uncommon for a trust to stipulate that the beneficiary gets a third of the assets at 25, half of the remaining assets at 30 and the rest at age 35. However, other trusts don’t provide for such mandatory distributions and can hold the assets for the beneficiary’s lifetime, which has its advantages.
In some instances, the terms of the trust are included in a will. This creates a trust account after death, which is also called a testamentary trust.
Talk to an experienced estate planning attorney, who can assess your specific situation and provide guidance in creating an estate plan. The attorney can also make certain that trust assets are correctly titled and that beneficiary designations of retirement accounts and life insurance are correctly prepared, so the trust under the will receives those assets and not the minor individually.
Reference: nj.com (June 14, 2021) “Do I need a trust in case something happens to me?”

Why Is Estate Planning So Important?

 

Big Easy Magazine’s recent article “Estate Planning Is Essential and Here’s Why” says that writing a last will isn’t limited to what happens to your house, car, company, or other assets after you die. It also states who will take care of your minor children, if they are orphaned.
Your instructions for burial and other smaller things can be included.
If you fail to provide specific instructions, the state intestacy laws will apply upon your death. Here is a glimpse of the consequences of not writing your last will:
Your burial preferences may not be honored.
Your properties may be managed by an individual you don’t necessarily trust. Without a named executor to your last will, some other family member may be asked to file taxes, make transfers and manage your estate.
Family members may not get an inheritance. Under intestacy laws, same-sex relationships and common-law marriages may not be recognized. So, your partner may not get a portion of your estate.
Your favorite charity may be left out. If you are committed to leaving a legacy, your charity, religious organization, or other organization of choice should be mentioned in the last will.
The government will name the guardians for your minor children.
With a last will, you can designate a guardian for your children and avoid additional taxes. Ask an experienced estate planning attorney about developing a comprehensive estate plan.
Aside from this, estate planning can also save your loved ones considerable angst and money.
A detailed last will with your instructions will avoid complications and provide comfort, while your loved ones recover emotionally from their loss.
Reference: Big Easy Magazine (May 17, 2021) “Estate Planning Is Essential and Here’s Why”

 

What Estate Planning Documents Should I Have when I Retire?

Research shows that most retirees (53%) have a last will and testament. However, they don’t have six other crucial legal documents.

Money Talks News’ recent article entitled “6 Legal Documents Retirees Need — but Don’t Have” says in fact, in this pandemic, 30% of retirees have none of these crucial documents — not even a will — according to the 20th annual Transamerica Retirement Survey of Retirees.

In addition, the Transamerica survey found the following among retirees:

• 32% have a power of attorney or medical proxy, which allows a designated agent to make medical decisions on their behalf
• 30% have an advance directive or living will, which states their end-of-life medical preferences to health care providers
• 28% have designated a power of attorney to make financial decisions in their stead
• 19% have written funeral and burial arrangements
• 18% have filled out a Health Insurance Portability and Accountability Act (HIPAA) waiver, which allows designated people to talk to their health care and insurance providers on their behalf; and
• 11% have created a trust.

The study shows there is a big gap that retirees need to fill, if they want to be properly prepared for the end of their lives.

The coronavirus pandemic has created an even more challenging situation. Retirees can and should be taking more actions to protect their health and financial well-being. However, they may find it hard while sheltering in place.

Now more than ever, seniors may need extra motivation and support from their families and friends.

The Transamerica results shouldn’t shock anyone. That is because we have a long history of disregarding death, and very important estate planning questions. No one really wants to ponder their ultimate demise, when they can be out enjoying themselves.

However, planning your estate now will give you peace of mind. More importantly, this planning can save your heirs and loved ones a lot of headaches and stress, when you pass away.

Talk to an experienced estate planning attorney today to get your plan going.

Reference: Money Talks News (Dec. 16, 2020) “6 Legal Documents Retirees Need — but Don’t Have”

Should I Add that to My Will?

In general, a last will and testament is an easy and straightforward way to state who gets what when you die and designate a guardian for your minor children, if you (and your spouse) die unexpectedly.

MSN’s recent article entitled “Things you should never put in your will” explains that you can be specific about who receives what. However, attaching strings or conditions may not work because there’s no one to legally enforce the terms. If you have specific details about how a person should use their inheritance, whether they are a spendthrift or someone with special needs, a trust may be a better option because you’ll have more control, even from beyond the grave.

Keeping some assets out of your will can actually benefit your future heirs because they’ll get their inheritance faster. When you pass on, your will must be “proven” and validated in a probate court prior to distribution of your property. This process takes some time and effort, if there are issues—including something in your will that doesn’t need to be there. For example, property in a trust and payable-on-death accounts are two types of assets that can be distributed to your beneficiaries without a will.

Don’t put anything in a will that you don’t own outright. If you jointly own assets with someone, they will likely become the new owner. For example, this applies to a property acquired by married couples in community property states.

Property in a revocable living trust. This is a separate entity that you can use to distribute your assets which avoids probate. When you title property into the trust, it is subject to the trust’s rules.  Because a trust operates independently, you must avoid inconsistencies and not include anything in your will that the trust addresses.

Assets with named beneficiaries. Some financial accounts are payable-on-death or transferable-on-death. They are distributed or paid out directly to the named beneficiaries. That makes putting them in a will unnecessary (and potentially troublesome, if you’re inconsistent). However, you can add information about these assets in your letter of instruction (see below). As far as bank accounts, brokerage or investment accounts, retirement accounts and pension plans and life insurance policies, assign a beneficiary rather than putting these assets in your will.

Jointly owned property. Property you jointly own with someone else will almost always directly pass to the co-owner when you die, so do not put it in your will. A common arrangement is joint tenancy with rights of survivorship.

Other things you may not want to put in a will. Businesses can be given away in a will, but it’s not the best plan. Wills must be probated in court and that can create a rough transition after you die. Instead, work with an experienced estate planning attorney on a succession plan for your business and discuss any estate tax issues you may have as a business owner.

Adding your funeral instructions in your will isn’t optimal. This is because the family may not be able to read the will before making arrangements. Instead, leave a letter of instruction with any personal wishes and desires.

Reference: MSN (Dec. 8, 2020) “Things you should never put in your will”

What Should I Know about a Living Trust?

 

A will and a living trust both can be very important in your estate plan. However, a living trust doesn’t require probate to transfer your assets.

KYT24’s recent article entitled “Fundamentals Of A Living Trust” explains that everyone who owns a home and/or other assets should have a will or a living trust. Proper estate planning can protect your family from unnecessary court costs and delay, if you become incapacitated, disabled, or die.

With a living trust, you can avoid all probate delays and related costs and make life much simpler for your family in a crisis. If you pass away, your spouse will be able to automatically and immediately continue without any delay or unnecessary expense.

When you and your spouse both die, your assets will also transfer directly to your beneficiaries.

Living trusts can save time, expense and stress for your loved ones. Speak with an experienced estate planning attorney about creating a living trust.

A trust agreement, being a legal document, must be written by an experienced estate planning attorney who has the knowledge and experience to prepare such a legal document to cover all of your needs and desires. If not properly and completely drafted, you run the risk of issues after you’re gone for your family.

After your attorney drafts your living trust, you must fund the trust, by titling or adding assets to it. If assets aren’t titled to or otherwise connected to your trust agreement, they won’t be legally part of the trust.

This totally defeats the purpose of drafting your living trust agreement in the first place.

It’s a common mistake to fail to fund a trust, which can happen as a result of poor follow through after signing the trust.

Work with an experienced estate planning attorney to complete a living trust and your entire estate plan. This includes a thorough review of your goals and objectives, as well as reviewing all estate assets to complete the funding of your trust, by transferring assets into the name of the living trust.

Reference: KYT24 (Nov. 14, 2020) “Fundamentals Of A Living Trust”

What are the Biggest Estate Planning Mistakes?

One of the largest wealth transfers our nation has ever seen is about to occur, since in the next 25 years, roughly $68 trillion of wealth will be passed to succeeding generations. This event has unique planning opportunities for those who are prepared, and also big challenges due to the ever-changing legal and tax world of estate planning.
Fox Business’ article “5 estate planning disasters you'll want to avoid,” discusses the biggest estate planning errors to avoid.
Failing to properly name beneficiaries. This common estate planning mistake is easily overlooked, when setting up a retirement plan for the first time or when switching investment companies. A big advantage of adding a beneficiary to your account, is that the account will avoid probate and pass directly to your beneficiaries.
Any account with a properly listed beneficiary designation will override what is written in your will or revocable living trust. Therefore, you should review your investment and bank accounts to make certain that your beneficiaries are accurate and match your intentions.
Naming a minor as a beneficiary. This can be a problem, if they are still minors when you die. A minor won’t have the legal authority to take control of inheritance or investment accounts until they reach the age of 18 or 21 (depending on state law). When a minor receives an asset as a beneficiary, a court-appointed guardianship will be created to supervise and manage the assets on behalf of the minor. To avoid this mistake, you can name a guardian for the minor child in your will.
Forgetting to fund a trust. Creating a trust is the first step, but many people don’t properly fund their trust after it’s established.
Making a tax mess for your heirs. A significant advantages of passing on real estate or other highly appreciated investments or property, is that your beneficiaries receive what is known as a “step-up” in basis, so that they aren’t responsible for any income taxes on the appreciated assets when they are received. The exception is when inheriting retirement accounts, such as 401k’s and traditional IRAs. Except for a surviving spouse, inheriting a traditional IRA or 401k means that you are now responsible for the taxes owed. With the recent passage of the SECURE Act, most non-spouse beneficiaries must totally withdraw a 401k or IRA within 10 years. It is deemed to be ordinary income for beneficiaries, which could result in a huge tax bill for your heirs. To avoid this, you can convert some or all of your retirement account assets to a Roth IRA during your lifetime, which lets you to pay the conversion taxes at your current income tax rate—a rate that may be much lower than your children or grandchildren’s tax rate. When you pass away, any money that is passed inside a Roth IRA goes tax-free to your heirs.
Failing to create a comprehensive estate plan. Properly establishing your estate plan now, will care for your loved ones financially, and can also save them a lot of emotional stress after you’re gone.
Talk to an experienced estate planning attorney about planning now. It can really affect your family for generations. It is one of the best gifts that you can leave your family.
Reference: Fox Business (Nov. 12, 2020) “5 estate planning disasters you'll want to avoid”