Michigan Estate Planning Blog

Is an ‘I Love You Will’ a Good Idea?

 

Many married couples plan to write their wills and go with simple “I Love You Wills.” This simple last will plan can work well for many couples, but the practical impact isn’t very loving for others.

Kiplinger’s recent article, “I Love You, But Your ‘I Love You Will’ Needs to Go,” says that these types of last wills generally refer to reciprocal last wills created by spouses. In their last wills, each spouse leaves their entire estate to the other spouse outright, and then, in most cases, upon the surviving spouse’s death, the remaining assets are slated to pass to their mutual children.

These types of last wills are frequently created by those creating last wills for the first time who have simple estates and are anxious to have something in place before a significant life event (such as marriage, a first child, or taking an extended family vacation). Others who create I Love You Wills may do so because they find the process of last will creation emotionally draining or overly depressing. They want easy and simple instead of something more thoughtful that may take the help of an experienced estate planning attorney.

Here are a few challenges to consider when deciding if an I Love You Will is right for you.

Control Upon the Survivor’s Death. A major issue with an I Love You Will is that the surviving spouse can change their will after the first spouse’s death. As a result, they can easily eliminate or reduce gifts to children of the marriage in favor of a new spouse, new or stepchildren, or other beneficiaries who aren’t part of the original couple’s plan design. But with a trust for the surviving spouse upon the first spouse’s death, the originally intended beneficiaries can be “locked in.” An appointed independent trustee or co-trustee can serve alongside the surviving spouse and assess distribution decisions. Plus, it makes it harder for assets acquired during the marriage to benefit new families or for the surviving spouse to disinherit mutual children.

No Option for a ‘Primary’ Charitable Bequest. Most spouses intend to benefit their surviving spouse with most of their assets. Still, many people want to also leave something directly on their passing to a church or charity. An I Love You Will doesn’t afford this opportunity to immediately create a lasting legacy and sustain an important cause for generations.

No Incapacity Protection. Think about if—at the time of your death—your surviving spouse was incapacitated and couldn’t manage their financial affairs, including any inheritance. Most folks would prefer to have their spouse’s inheritance managed by a trusted family member they named, not someone appointed by a court. This arrangement that leaves assets outright to the surviving spouse is less protective when a trust for the surviving spouse can help ensure that assets are managed sensibly for their benefit if they cannot manage their finances independently.

Reference: Kiplinger (May 2, 2023) “I Love You, But Your ‘I Love You Will’ Needs to Go”

 

Can a Minor Be Named as a Beneficiary?

The significant exception to the rule of not naming a minor as a beneficiary is trusts: you can name a legal minor as the beneficiary of a trust. That’s important because if you want to leave assets to a minor, a trust is the way to do it.

Yahoo Finance’s recent article entitled, “Can I Name a Minor as a Beneficiary?” points out that it’s important to know that property and estate laws are highly state specific. Therefore, consult a local attorney before making any decisions regarding your money and estate planning.

Several legal documents can name someone as the beneficiary of any underlying assets. A beneficiary is the third party who receives some benefit from the document, typically in the form of financial or other property assets.

Four primary types of documents can name a beneficiary when it comes to estate planning:

Wills: In a last will and testament, a beneficiary is the person the will names to receive assets from your estate.

Life Insurance: Here, a beneficiary is an individual who receives a payment from the life insurance policy after the policyholder's death.

Retirement Accounts: A beneficiary in a retirement account is someone who receives the assets in the account after the death of the account holder.

Trusts: In a trust, a beneficiary gets assets from the account based on the terms of the trust and the trustee’s management.

Under most circumstances, a minor can’t receive assets as a beneficiary. The major exception to this is also trusts. Minors can be named as beneficiaries of a trust because the beneficiaries of a trust don’t participate in contractual or financial transactions.

Because minors cannot participate in financial transactions or handle legal matters, they can’t get assets through contracts and legal documents. They can’t directly inherit through a will, nor can they receive assets through a contract, such as a life insurance policy or a retirement account.

Reference: Yahoo Finance (June 19, 2023) “Can I Name a Minor as a Beneficiary?”

What are the Basics of Trusts?

Trusts aren’t just for the uber-wealthy; using one in your estate plan can make sense no matter how much money you have. But work with an experienced estate planning attorney to see if a trust is right for your situation.

A survey by Wealth.com found that three-quarters (76%) of respondents created an estate plan to take care of their families.

A trust could help you achieve that goal with its combination of privacy, asset protection, and the ability to avoid the potentially drawn-out process of probate.

Fortunes’ recent article, “Understanding trusts: An important estate planning tool for everyday

Americans,” explains that at its core, a trust is a legal document that creates a triangle-like relationship between three different parties: the trust, its trustee, and its beneficiaries.

The trust is the legal entity that holds title to the assets;

The trustee is the trust’s decision-maker; and

The beneficiaries are those who receive assets from the trust.

A trust—created by the grantor—says how assets can be used during their lifetime and how they should pass to the grantor’s beneficiaries when they die. Trusts offer an added estate planning perk: avoiding probate.

And while the word “trust” might be intimidating, they’re just arrangements that most people already use in their day-to-day finances.

While there are different types of trusts, they all work the same way. The grantor establishes the trust and specifies how the assets in the trust should be managed and transferred to the beneficiaries at their death.

The grantor will put assets in the trust, which removes the assets from the grantor’s name and estate. In addition, the grantor names a trustee, the person charged with making the day-to-day decisions for the trust, its assets, and its beneficiaries. When the grantor dies, the trustee will direct the distributions of assets held in the trust according to the trust’s terms.

You can create a trust by contracting with an estate planning attorney.

Reference: Fortune (June 9, 2023) “Understanding trusts: An important estate planning tool for everyday Americans”

What Is a ‘Step-Up’ in Basis in Estate Planning?

Let’s say that you have a condominium in New York that’s currently being rented out, and you retired to Florida. You plan to sell the apartment within the next year or two, which is in your name, not your trust.

However, the question arises if you didn’t sell it and put it in trust, would the condo get the stepped-up basis if it were sold after we pass away, asks Market Watch’s recent article entitled, “Will our condo get a step-up in basis if we put it in trust?”

The answer is yes for revocable trusts and most irrevocable trusts.

Trusts can be beneficial for out-of-state property to avoid two probate processes upon the death of the owners, one in their state of residence and one where the out-of-state property is located. These are usually revocable trusts. Irrevocable trusts may be used for other purposes, such as asset protection.

The “step-up” in basis concerns the calculation of the capital gains on the sale of property. The capital gain is the difference between net proceeds on sale and the basis. The initial basis is the purchase price of the property. The cost of any improvements may be added to it.

So, for instance, if you paid $500,000 for your condominium and spent $100,000 replacing the kitchen, the basis would be $600,000. If you sold the apartment for $1 million, your capital gain would be $400,000.

The step-up in basis is another adjustment that occurs when an owner dies. At that time, the basis is adjusted to the date-of-death fair market value of the property. This is commonly called a “step-up” in basis because real-estate values typically increase over time, so the new basis is typically higher than the old one.

In the example, if the condo had a market value of $1 million upon the death of the owner, that would become the new basis. If the property were sold, any capital gain would be only an increase in value after death.

To receive a step-up in basis on a property upon the death of the owner, it must be in their taxable estate. All property in a revocable trust created by the decedent is in their taxable estate.

Whether an irrevocable trust is in the decedent’s taxable estate depends on how it’s drafted. Ask an experienced estate planning attorney to draft an irrevocable trust for estate inclusion and consequently a step-up in basis if that’s your goal.

Reference: Market Watch (April 7, 2023) “Will our condo get a step-up in basis if we put it in trust?”

 

When is a Trust a Good Idea?

If you prefer to place specific conditions on your assets after you pass away, you should have a trust in place, says Kiplinger’s recent article, “Why Do I Need a Trust?”

Trusts can be especially important with second marriages, where one spouse wants to leave their assets to their children but not their stepchildren. Here are some other benefits of a trust:

Creditor Protection. If your profession has a high probability of liability, having assets transferred via a trust (once the trust becomes irrevocable) may shelter funds from being attached in a lawsuit. This can be very specific concerning state law and the type of lawsuit, so discuss this with an experienced estate planning attorney before making any decisions.

Passing Funds Outside of the Estate. For large estates that are anticipated to grow, creating trusts during your lifetime and gifting assets can remove the growth from your estate and lower future estate taxes. If your estate is higher than the exemption, and you have more funds than you need to live on, funding an irrevocable trust now is beneficial. Also, remember, revocable (or living) trusts become irrevocable on your passing, so anything in the revocable trust will be out of the beneficiary’s estate.

Providing for Grandchildren. If you want to provide for grandchildren at your death or don’t trust the parents to set inheritance funds aside for their children, creating a trust for the grandchildren is an option. If you leave assets outright to their parents, there’s no guarantee that the funds will get to them.

Protect Against Fraud or Beneficiary Changes. Seniors can be duped into updating their beneficiaries when they’re in the hospital or under hospice care. If the individual can sign a form and their signature matches what is on file at the custodian—and they have no immediate family to catch the update—this can be a problem. If the elderly person is not of sound mind, the attorney will likely be able to notice something is wrong compared to submitting a beneficiary form to a custodian directly.

Special Needs Beneficiaries. If you have incapacitated beneficiaries who require special care due to mental or physical disability, setting up a special needs trust may be a good move. A Special Needs Trust will ensure that assets can be given to this person but not interfere with government benefits or disability payments.

Ask an experienced estate planning attorney if your situation and your intentions warrant a trust. They can help you protect your assets and your wishes.

Reference: Kiplinger (August 31, 2022) “Why Do I Need a Trust?”

Can I Keep Stepchildren Out of Estate Plan?

Parents in second marriages may want to leave assets to their children and try to make sure that their stepchildren don’t inherit. However, if stepchildren inherit, it can create resentment leading to legal disputes that can cost the estate significantly in delay and attorney fees.

AOL’s recent article, “How to Protect Assets From Stepchildren,” says that taking specific estate planning steps will let you effectively protect your assets from stepchildren.

If a stepchild inherits some of your assets, your children may feel cheated out of their rightful inheritance. Therefore, they may contest any awards to stepchildren to protect their interests.

Your children will be recognized as heirs to your estate even without a will naming them as beneficiaries. Stepchildren don’t have the same rights.

In most cases, they won’t inherit from a deceased stepparent’s estate unless specifically listed as beneficiaries in the will. However, stepchildren still may receive assets from your estate if your spouse dies after you and leaves assets to their children. Preventing stepchildren from ever getting assets from your estate can be done. However, it requires definite action to exclude them as beneficiaries.

If your spouse from a second or later marriage dies first, you usually don’t have to do anything to prevent stepchildren from receiving assets you control.

Even after an intestate death that happens without a valid will, stepchildren typically aren’t recognized as having any right to assets in the estate. However, some states grant stepchildren some rights of inheritance. Ask an experienced estate planning attorney about this.

In addition, a will can name specific people, including stepchildren, and exclude them from receiving benefits from the estate.

Using a trust, you can ALSO prevent stepchildren from getting assets from your estate after you die.

This can help avoid conflicts and potential litigation from children upset because stepchildren received assets from the estate.

Remember that if you fail to act, stepchildren can still benefit even at the expense of your children if, for example, you die before your spouse, who then names their children as beneficiaries of the estate.

Reference: AOL (April 26, 2023) “How to Protect Assets From Stepchildren”

What Is Probate?

Investopedia’s recent article, “What Is Probate Court?” explains that people want to avoid or shorten the probate process because of its length and expense. This can be accomplished by creating a living trust, assigning your assets to it and naming beneficiaries for those assets. A living trust is an estate planning tool that can help you avoid probate's usually lengthy, sometimes costly, and always public nature.

Some assets, including life insurance and retirement accounts, are not generally subject to probate. You instead designate beneficiaries for them in the account paperwork held by the life insurance company, retirement plan, brokerage, and bank. As a result, these funds will flow directly to the beneficiaries upon your death.

Another way to reduce probate is to give gifts during your lifetime. Anyone can provide individuals with tax-free money in the form of gifts, as defined by the IRS.

At a probate court hearing, the judge will list the responsibilities of the executor of the will, including contacting any beneficiaries and creditors, appraising the deceased's assets and paying any outstanding creditors and taxes.

At the second court hearing, the judge will ensure that all these tasks have been accomplished and close out the estate, so that the transfers of money and other assets in the estate may start.

Each state has specific probate laws to determine what's required. Unless someone has no assets or descendants when they die, probate may still be necessary to settle the deceased's remaining affairs, including debts, assets and paying their final bills and taxes.

While it can be hard to avoid probate court altogether, some ways to avoid probate include creating a living trust, naming beneficiaries clearly on all investment, bank and retirement accounts, and establishing joint ownership for certain assets.

The time for probate varies depending on the deceased person's assets, the complexity of their will and other factors. For instance, the executor may have to liquidate assets to pay creditors, and selling a home or other property for this purpose can take time. However, the average time it takes to complete is about nine months.

After someone dies, the grief over their loss can be all-consuming for their family and friends. Unfortunately, the probate process can add to this a financial and administrative burden. Yet, with or without a will, the probate process is essential to ensure that all of one's affairs are in order before death.

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

What Should Women Know About Estate Planning?

Life circumstances, such as the demise of their spouse or a loved one, incapacitation of the breadwinner of the family, divorce, or terminal illness usually forces a woman to look into financial matters. However, managing these affairs promptly safeguards your assets, wishes and choices.

Money Control’s recent article entitled “How women can make a solid estate plan” looks at the crucial aspects you should consider when creating your estate plan.

Last Will and Testament. Suppose you choose not to create a will. In that case, intestate succession laws will prevail, whereby your assets may be inherited by individuals and in a manner not necessarily aligned with your wishes. Therefore, getting a will in place should be one of the first steps to protect your wishes and those of your intended beneficiaries.
As a mother with minor children ― married, divorced, or widowed ― there is a greater responsibility to make sure that you appoint a guardian who would manage your children’s financial affairs until they’re 18. As a married woman, it may also be worthwhile to consider coordinating your estate plan with your spouse, so both of you can be on the same page regarding safeguarding each other’s interests and deciding on the subsequent manner of your inheritance. Then, again, by writing your will, you can determine whomsoever you wish to pass on your wealth to, such as confidantes, friends, staff members, or charitable institutions.

Power of Attorney. A power of attorney is a document that can ensure your financial affairs are taken care of during your lifetime, for instance, in case of incapacitation. If you can’t manage your financial affairs due to medical conditions, you may consider appointing a trustworthy individual to ensure that your finances are safe.

Private Family Trust. There may need to be more than a will for large families with a complex succession planning mechanism. A trust is a structure that can be created during your lifetime, so beneficiaries are defined, and the trust’s instructions are clearly stated. Men frequently set up the trust to benefit their spouse, children and lineal descendants.

Women shouldn’t overlook this critical aspect of their life and wait for a life-changing event to take charge of their financial affairs in which case it might be too late. 

Reference: Money Control (March 28, 2023) “How women can make a solid estate plan”

 

What are Five Keys to Estate Planning?

 

If your family has to sort out your affairs while also dealing with the emotional fallout from losing you, they will soon realize the importance of having an estate plan, whether you are wealthy or not. They’ll also feel the pain of your failing to create one for them.
CNBC’s recent article entitled “5 key things to know when you create a will and make other end-of-life plans” explains that your estate plan spells out whom you want to make decisions and who will inherit what you own. “Estate” refers to possessions and other assets. With that in mind, here are five key things to know if you start thinking about how you’d craft an estate plan.
1. A will may not cover all your bases. A will is a core component of an estate plan. A will states whom you want to have your assets and whom you want as a guardian for minor children. Without a will in place when you die, a judge will decide who gets what or who is appointed guardian.
2. Use care when naming an executor. When you create a will, you name an executor to carry out your wishes and handle your estate. This includes liquidating or closing accounts, ensuring your assets go to the proper beneficiaries and paying any liabilities. An estate plan should also include other end-of-life documents, like a living will that details the health care you want and don’t want if you become unable to communicate those desires yourself. You also can sign a power of attorney to an agent to make decisions on your behalf if you become incapacitated.
3. Some assets get a step-up in basis. If you have assets, such as the family home, and are thinking about giving them to your children while you’re alive, it might make more sense to wait. When these assets are sold, any increase from the so-called cost basis (the value when the asset was acquired), and the sale price is subject to capital gains taxes. However, at your death, your heirs who inherit receive a “step-up in basis.” This means that the market value of the asset at your death becomes the cost basis for the heir. As a result, any appreciation prior to that is untaxed. Therefore, when the heir sells the asset, any gains (or losses) are based on the new cost basis. In comparison, if you were to gift such appreciated assets to heirs before your death, they’d assume your original cost basis — which could translate into a large tax bill when the assets are sold.
4. You may want to consider a trust. If you want your children to receive money but don’t want to give a young adult or one with poor money management total access to a sudden windfall, consider creating a trust to be the beneficiary of a particular asset. A trust holds assets on behalf of your beneficiary. The assets are left to the trust instead of directly to your heirs. They can only receive money according to how (or when) you’ve stipulated in the trust documents. Ask an experienced estate planning attorney to help you with this.
5. You’ll need to review your estate plan. When you have a major life change, like the birth of a child or divorce, you need to review your estate plan. If you move to a new state, check to see if you need to update any part of your plan, so it follows that state’s laws.
Reference: CNBC (March 19, 2023) “5 key things to know when you create a will and make other end-of-life plans”

The Biggest Mistakes Made with Trusts

The Dallas Morning News’ recent article entitled “Owning your trust: Avoid these five common trust mistakes” explains these big mistakes frequently made with trusts.

Mistake 1: Failing to fund the trust. This involves transferring assets into the trust and managing assets with the trustee. It also makes the assets subject to the trust’s terms. A trust without assets is a worthless piece of paper.

Mistake 2: Placing your homestead into the trust. For example, a homestead designation in Texas carries several benefits, like creditor protection, tax exemptions and bankruptcy protection. Those are lost when you put your homestead into a trust, unless it is a “qualifying trust.” If your homestead has a mortgage, transferring it into a trust may cause a default. A mortgage company may also refuse to refinance an existing mortgage or extend new financing on a homestead that is in a trust.

Mistake 3: Funding the trust with a vacation home. This can be a headache for the trust’s beneficiaries. Most of us don’t leave enough money in the trust to maintain the home in perpetuity. Your children and their spouses will fight over holiday usage. It ends up being an expensive albatross. If you decide to keep the property in the family, ask an experienced estate planning attorney about a family limited partnership or an LLC. However, before you take this step, ask your children if they want to keep it.

Mistake 4: Failing to understand the trust document. While most trusts are long, boring and contain provisions that make absolutely no sense to anyone but the IRS, if you rely on a trust for your financial future and legacy, you must know what it says and does.

Mistake 5: Failing to review the trust annually. A lot can change in a year, like assets, financial conditions, births, deaths, divorces, marriages, etc. These may require changes to your trust.

Reference: Dallas Morning News (March 12, 2023) “Owning your trust: Avoid these five common trust mistakes”

Do I Need an Estate Planning Attorney?

Sound estate planning can help minimize taxes and expenses associated with transferring your assets and property after your death, says Urban Asia’s recent article entitled “Why Is It Important To Hire An Estate Planning Attorney.”

An experienced estate planning attorney can help you with your estate planning goals efficiently, avoiding legal processes that can be time-consuming and costly. Estate planning through an attorney can help you, and your loved ones avoid legal complications or unwanted delays.

What are the benefits of hiring an experienced estate planning attorney?

Legal expertise: They have specialized knowledge of the laws and regulations governing probate and estates. They can advise you on the best plan to suit the utilization of your assets and needs, and make sure that your estate planning complies with all applicable laws.

Tax implications: Estates can have tax implications. An experienced estate planning attorney can advise you on how to structure your estate plan to minimize taxes and maximize the benefits for your beneficiaries.

Customization: They can help customize your estate plan to suit your individual needs and goals.

Protection of beneficiaries: Estate planning attorneys can help protect your heirs’ interests by ensuring that your will and trust are administered correctly. They can help assure that all your assets are protected from creditors and other legal claims.

Charitable giving: An estate planning attorney can advise you on how to make philanthropic gifts, either during your lifetime or at death, through charitable trusts or other charitable giving vehicles.

Incapacity planning: They can help you plan for incapacity by creating a power of attorney or living will to let you specify how your assets and property should be managed, if you are unable to decide for yourself.

Finding the right attorney for estate planning can be a challenging task. Estate planning can be complex, and selecting an attorney with experience and expertise in this discipline is essential.

Therefore, look for an attorney with plenty of experience in estate planning.

Reference: Urban Asia (Jan. 22, 2023) “Why Is It Important To Hire An Estate Planning Attorney”

 

Is Estate Planning and Writing Will the Same Thing?

 

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

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

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

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

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

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

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

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

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

How to Help Create an Estate Plan

 

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

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

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

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

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

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

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

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

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

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

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”

Estate Planning for Blended Families

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

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

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

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

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

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

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

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

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

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

What’s Involved with Being a Trustee?

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

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

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

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

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

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

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

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

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

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

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

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

Should an Estate Plan Include a Cabin on the Lake?

 

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

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

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”

Can I Plan My Estate to Avoid Leaving Residual Assets?

 

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

Should I have a Charitable Trust in My Estate Plan?

 

Charitable trusts can be created to provide a reliable income stream to you and your beneficiaries for a set period of time, says Bankrate’s recent article entitled “What is a charitable trust?”
Establishing a charitable trust can be a critical component of your estate plan and a rewarding way to make an impact for a cause you care deeply about. There are a few kinds of charitable trusts to consider based on your situation and what you may be looking to accomplish.
Charitable lead trust. This is an irrevocable trust that is created to distribute an income stream to a designated charity or nonprofit organization for a set number of years. It can be established with a gift of cash or securities made to the trust. Depending on the structure, the donor can benefit from a stream of income during the life of the trust, deductions for gift and estate taxes, as well as current year income tax deductions when the assets are donated to the trust.
If the charitable lead trust is funded with a donation of cash, the donor can claim a deduction of up to 60% of their adjusted gross income (AGI), and any unused deductions can generally be carried over into subsequent tax years. The deduction limit for appreciated securities or other assets is limited to no more than 30% of AGI in the year of the donation.
At the expiration of the charitable lead trust, the assets that remain in the trust revert back to the donor, their heirs, or designated beneficiaries—not the charity.
Charitable remainder trust. This trust is different from a charitable lead trust. It’s an irrevocable trust that’s funded with cash or securities. A CRT gives the donor or other beneficiaries an income stream with the remaining assets in the trust reverting to the charity upon death or the expiration of the trust period. There are two types of CRTs:
A charitable remainder annuity trust or CRAT distributes a fixed amount as an annuity each year, and there are no additional contributions can be made to a CRAT.
A charitable remainder unitrust or CRUT distributes a fixed percentage of the value of the trust, which is recalculated every year. Additional contributions can be made to a CRUT.
Here are the steps when using a CRT:
Make a partially tax-deductible donation of cash, stocks, ETFs, mutual funds or non-publicly traded assets, such as real estate, to the trust. The amount of the tax deduction is a function of the type of CRT, the term of the trust, the projected annual payments (usually stated as a percentage) and the IRS interest rates that determine the projected growth in the asset that’s in effect at the time.
Receive an income stream for you or your beneficiaries based on how the trust is created. The minimum percentage is 5% based on current IRS rules. Payments can be made monthly, quarterly or annually.
After a designated time or after the death of the last remaining income beneficiary, the remaining assets in the CRT revert to the designated charity or charities.
There are a number of benefits of a charitable trust that make them attractive for estate planning and other purposes. It’s a tax-efficient way to donate to the charities or nonprofit organizations of your choosing. The charitable trust provides benefits to the charity and the donor. The trust also provides upfront income tax benefits to the donor, when the contribution to the trust is made.
Donating highly appreciated assets, such as stocks, ETFs, and mutual funds, to the charitable trust can help avoid paying capital gains taxes that would be due if these assets were sold outright. Donations to a charitable trust can also help to reduce the value of your estate and reduce estate taxes on larger estates.
However, charitable trusts do have some disadvantages. First, they’re irrevocable, so you can’t undo the trust if your situation changes, and you were to need the money or assets donated to the trust. When you establish and fund the trust, the money’s no longer under your control and the trust can’t be revoked.
A charitable trust may be a good option if you have a desire to create a legacy with some of your assets. Talk with an experienced estate planning attorney about your specific situation.
Reference: Bankrate (Dec. 14, 2021) “What is a charitable trust?”

Why Is Estate Planning Review Important?

Maybe your estate plan was created when you were single, and there have been some significant changes in your life. Perhaps you got married or divorced.
You also may now be on better terms with children with whom you were once estranged.
Tax and estate laws can also change over time, requiring further updates to your planning documents.
WMUR’s recent article entitled “The 'final' estate-planning step” reminds us that change is a constant thing. With that in mind, here are some key indicators that a review is in order.
The value of your estate has changed dramatically
You or your spouse changed jobs
Changes to your income level or income needs
You are retiring and no longer working
There is a divorce or marriage in your family
There is a new child or grandchild
There is a death in the family
You (or a close family member) have become ill or incapacitated
Your parents have become dependent on you
You have formed, purchased, or sold a business;
You make significant financial transactions, such as substantial gifts, borrowing or lending money, or purchasing, leasing, or selling assets or investments
You have moved
You have purchased a vacation home or other property in another state
A designated trustee, executor, or guardian dies or changes his or her mind about serving; and
You are making changes in your insurance coverage.
Reference: WMUR (Feb. 3, 2022) “The 'final' estate-planning step”

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?”

How to Protect Valuable Assets in Estate Planning

 

If you fail to take the necessary measures, you can lose your property, which might cause financial challenges when you will not be working in retirement.
Legal Reader’s recent article entitled “How to Legally Protect Your Assets” says there are different strategies you can use to protect your personal assets.
This will help you to prepare for any eventuality. Let’s look at some of them:
A Family Trust. This may be one of the best strategies to protect your personal assets. A trust will help protect your assets when you lose all your money. A family trust can also provide tax benefits to family members in lower tax brackets. However, talk to an experienced estate planning attorney before setting up the trust to make the right decisions.
Start a Company. This may be an alternative to setting up a family trust, since your property will be more secure than when operating a sole proprietorship or a partnership business. This gives you a more secure future, even when you face financial challenges. However, there are many legalities in starting a company, so talk to an attorney.
Register Your Most Valuable Assets in the Name of the Low-risk Spouse. This tactic will make it difficult for a trustee or liquidator to gain access to the property in case of bankruptcy. However, ask an attorney to help you to structure the purchase to make certain that the low-risk partner’s name appears on the legal documents. An experienced estate planning attorney can also help you access benefits, such as Social Security and Medicaid.
These laws keep changing. You might miss an opportunity of getting long-term care planning, if you keep postponing a review with an experienced estate planning attorney.
As you spend your hard-earned cash, take some time to learn how to protect what you buy. You should also use the legal strategies above to keep your property secure.
Reference: Legal Reader Jan. 26, 2022) “How to Legally Protect Your Assets”

What are Common Mistakes People Make with Living Trusts?

Yahoo Life’s recent article entitled “Why You Should Put Your House in a Living Trust” explains some of the biggest errors people make with trusts.
Remember that a trust is a fiduciary relationship in which one party (trustor) gives another party (trustee) the right to hold title to property or assets for the benefit of a third party (beneficiary).
Trusts are created for these reasons:
To provide legal protection for the trustor’s assets
To be certain that those assets are distributed according to the trustor’s wishes
To save time and reduce paperwork; and
In some instances, to avoid or reduce inheritance or estate taxes.
Also remember that although trusts are generally associated with the wealthy, they are highly versatile instruments that can be used for a variety of purposes to achieve specific goals.
Failing to retitle your home. If you don't retitle your home or transfer the deed into the name of the trust, you paid a lot of money for a piece of paper. The trust is empty because it hasn’t been transferred. Therefore, it is not covered.
Failing to notify tenants of the ownership change. If you're retitling a two- (or multi-) family home into the trust, and the property has rent-paying tenants, you need to inform must them of this change in landlord for rent payment purposes. You’ll also need to set up a bank account in the name of the trust for rent deposits.
Failing to tell the insurance company of ownership change. Be sure to tell your home insurance company about retitling to a trust. If not, the insurance company may deny your claim in an event because the actual property owner—your trust—wasn’t insured.
Failing to tell the bank holding the mortgage of the intended transfer. See if your mortgage has a "due on transfer" clause. That means you'd have to pay the mortgage balance, if you transfer the home from yourself to the trust.
Don’t make these mistakes. Work with an experienced estate planning attorney.
Reference: Yahoo Life (Jan. 10, 2022) “Why You Should Put Your House in a Living Trust”

Should I Use a Corporate Trustee?

When you work with an experienced estate planning attorney to create a revocable living trust, you will usually name yourself as trustee and manage your financial assets as you have previously. However, it’s necessary to name a successor trustee. This person or entity can act, if you’re incapacitated or pass away.
Selecting the right trustee is one of the most important decisions you’ll make.
The Quad Cities Times’ recent article entitled “Benefits of a corporate trustee” warns that care should be taken when selecting someone to serve in this role. Family members may not have the experience, ability and time required to perform the duties of a trustee. Those with personal relationships with beneficiaries may cause conflicts within the family. You can name almost any adult, including family members or friends, but think about a corporate or professional trustee as the possible answer.
Experience and Dedication. Corporate trustees can devote their full attention to the trust assets and possess experience, resources, access to tax, legal, and investment knowledge that may be hard for the average person to duplicate. A corporate trustee can be hired as the administrative trustee—letting them concentrate on the operation of the trust. You can also hire a registered investment advisor to manage the investment assets. A corporate trustee can also be engaged as both administrative trustee and investment manager.
Regulation and Protection. Corporate trustees provide safety and security of your assets and are regulated by both state and federal law. Corporate trustees and registered investment advisors are both held to the fiduciary standard of acting solely in the best interests of trust beneficiaries.
Successor Trustee. If you choose to name personal trustees, you may provide in your trust documents for a corporate trustee as a successor, in case none of the personal trustees is available, capable, or willing to serve. Corporate trustees are institutions that don’t become incapacitated or die. You should consider the type of assets you own including investment securities, farmland and commercial real estate and then choose the most qualified corporate trustee to manage them.
In sum, many estate owners can benefit from the advantages of a corporate trustee.
Ask an experienced estate planning attorney when creating or amending a revocable living trust, about naming the appropriate corporate trustee, and the advisability of including terms for your registered investment advisor to manage assets for your trust.
Reference: Quad Cities Times (Nov. 28, 2021) “Benefits of a corporate trustee”

Does My State Have an Inheritance Tax?

 

Real Simple’s recent article entitled “Here's Which States Collect Zero Estate or Inheritance Taxes” explains that inheritance taxes are levies paid by the living beneficiary who gets the inheritance. And both federal and state governments can apply estate taxes, which are levied against the assets that are bequeathed.
Just five states apply an inheritance tax: New Jersey, Nebraska, Iowa, Kentucky and Pennsylvania. There are 12 states that have an estate tax: Washington, Oregon, Minnesota, Illinois, New York, Maine, Vermont, Rhode Island, Massachusetts, Connecticut, Hawaii and the District of Columbia. Maryland collects both. As a result, there are 32 states that don’t collect death-related taxes: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Kansas, Louisiana, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin and Wyoming.
To better estimate and project the possible outcomes, you should consider an intergenerational planning meeting. There are some families that like the transparency of establishing a trust. This can minimize fighting and avoid probate. Trusts are also taxed differently than individuals. There’s more certainty about who will bear the costs.
There are families that gift assets, while an elderly or chronically ill person is still alive. These gifts can be subject to taxation, but there are exceptions for tuition and medical expenses. Gifts to children may also be excluded.
There’s no one-size-fits-all approach to transferring valuable or sentimental assets. You can list the most important people and causes in your life. If that list has people in other states, it will be even more important to prepare everyone for their role and responsibilities with the help of an experienced estate planning attorney.
If inheritance tax sounds intimidating, start small with updating the beneficiary forms on your bank accounts and employer-led retirement accounts. Organize documents, such as insurance information and house titles and deeds. Make them secure but accessible to those who might need them, if you're unavailable.
Even if you're socially distancing, many estate planning attorneys offer consultations via video conferencing. There's no reason to delay another year to clarify your inheritance and estate plans.
Reference: Real Simple (Nov. 24, 2021) “Here's Which States Collect Zero Estate or Inheritance Taxes”

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”

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”

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”

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”

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?”

What are Top ‘To-Dos’ in Estate Planning?

 

Spotlight News’ recent article entitled “Estate Planning To-Dos” says that with the potential for substantial changes to estate and gift tax rules under the Biden administration, this may be an opportune time to create or review our estate plan. If you are not sure where to begin, look at these to-dos for an estate plan.
See an experienced estate planning attorney to discuss your plans. The biggest estate planning mistake is having no plan whatsoever. The top triggers for estate planning conversations can be life-altering events, such as a car accident or health crisis. If you already have a plan in place, visit your estate planning attorney and keep it up to date with the changes in your life.
Draft financial and healthcare powers of attorney. Estate plans contain multiple pieces that may overlap, including long-term care plans and powers of attorney. These say who has decision-making power in the event of a medical emergency.
Draft a healthcare directive. Living wills and other advance directives are written to provide legal instructions describing your preferences for medical care, if you are unable to make decisions for yourself. Advance care planning is a process that includes quality of life decisions and palliative and hospice care.
Make a will. A will is one of the foundational aspects of estate planning, However, this is frequently the only thing people do when estate planning. A huge misconception about estate planning is that a will can oversee the distribution of all assets. A will is a necessity, but you should think about estate plans holistically—as more than just a will. For example, a modern aspect of financial planning that can be overlooked in wills and estate plans is digital assets. It is also recommended that you ask an experienced estate planning attorney about whether a trust fits into your circumstances, and to help you with the other parts of a complete estate plan.
Review beneficiary designations. Retirement plans, life insurance, pensions and annuities are independent of the will and require beneficiary designations. One of the biggest estate planning mistakes is having outdated beneficiary designations, which only supports the need to review estate plans and designated beneficiaries with an experienced estate planning attorney on a regular basis.
Reference: Spotlight News (May 19, 2021) “Estate Planning To-Dos”

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 Do I Need to Know about Creating a Will?

A simple or basic will allows you to specifically say the way in which you want your assets to be distributed among your beneficiaries after your death. This can be a good starting point for creating a comprehensive estate plan because you may need more than just a basic will.
KAKE’s recent article entitled “What Is a Simple Will and How Do You Make One?” explains that a last will and testament is a legal document that states what you want to happen to your property and “worldly goods” when you die. A simple will can be used to designate an executor for the will and a legal guardian for minor children and specify who (or which organizations) should inherit your assets when you die.
A will must be approved in the probate process when you pass away. After the probate court reviews the will to make sure it’s valid, your executor will take care of the collection and distribution of assets listed in the will. Your executor would also be responsible for paying any debts owed by your estate.
Whether you need a basic will or something more complex, usually depends on a few factors, including your age, the size of your estate and if you have children (and their ages).
Having a will in place can be a good starting point for estate planning. However, deciding if it should be simple or complex can depend on a number of factors, such as:
The size of your estate
The amount of estate tax you expect to owe
The type of assets and property you own
Whether you own a business
The number of beneficiaries you want to name
Whether the beneficiaries are individuals or organizations (like charities)
Any significant life changes you anticipate, like marriages, divorces, or having more children; and
Whether any of your children or beneficiaries have special needs.
With these situations, you may need a more detailed will to plan how you want your assets to be distributed. In any event, work with an experienced estate planning attorney. With life or financial changes, you may need to create a more complex will or consider a trust. It is smart to speak with an estate planning attorney, who can help you determine which components to include in your plan and help you keep it updated.
Reference: KAKE (Nov. 23, 2020) “What Is a Simple Will and How Do You Make One?”

What Key Estate Planning Terms Should I Know?

Estate planning can help you accomplish several objectives, including naming guardians for minor children, choosing healthcare agents to make decisions for you should you become ill, minimizing taxes so you can give more wealth to your heirs and saying how and to whom you would like to pass your estate at death.

Emmett Messenger Index’s recent article entitled “13 Estate Planning Terms You Need to Know” provides some important terms to understand as you consider your own estate plan.

Assets: This is anything a person owns. It can include a home and other real estate, bank accounts, life insurance, investments, furniture, jewelry, collectibles, art, and clothing.

Beneficiary: This is an individual or entity (like a charity) that gets a beneficial interest in an asset, such as an estate, trust, account, or insurance policy.

Distribution: A payment in cash or asset(s) to the beneficiary who’s designated to receive it.

Estate: All of the assets and debts left by a person at death.

Fiduciary: An individual with a legal obligation or duty to act primarily for another person’s benefit, such as a trustee or agent under a power of attorney.

Funding: The process of transferring or retitling assets to a trust. Note that a living trust will only avoid probate at the trustmaker’s death if it’s fully funded. A trustmaker also may be known as a grantor, settlor, or trustor.

Incapacitated or Incompetent: The situation when a person is unable to manage her own affairs, either temporarily or permanently, and often involves a lack of mental capacity.

Inheritance: These are assets received from someone who has died.

Probate: This is the orderly court-supervised process of distributing the assets of a person who has died.

Trust: This is a fiduciary relationship where a trustmaker gives a trustee the right to hold property or assets for the benefit of another party, known as the beneficiary. The trust is a written trust agreement that directs how the trust assets will be distributed to the beneficiary.

Will: A written document with directions for disposing of a person’s assets after their death. A will is enforced by a probate court. A will can provide for the nomination of a guardian for minor children.

Reference: Emmett Messenger Index (Oct. 28, 2020) “13 Estate Planning Terms You Need to Know”

What Trusts are Available for Estate Planning?

A trust is a legal agreement that has at least three parties. The same person(a) can be in more than one of these roles at the same time. The terms of the trust usually are embodied in a legal document called a trust agreement. Forbes’s recent article entitled “Here’s What You Need To Know About The Most-Popular Estate Planning Trusts” explains that the first party is the person who creates the trust, known as a trustor, grantor, settlor, or creator.
The trustee is the second party to the agreement. This person has legal title to the property in the trust and manages the property, according to the instructions in the trust and state law. The third party is the beneficiary who benefits from the trust. There can be multiple beneficiaries at the same time, and there also can be different beneficiaries over time.
The trustee is a fiduciary who must manage the trust property only for the interests of the beneficiaries and consistent with the trust agreement and the law. Although a trust is created when the trust agreement is signed and executed, it isn’t really operational until it’s funded by transferring property to it.
A living trust, also called an inter vivos trust, is a trust that’s created during the trustor’s lifetime. A testamentary trust is created in the trustor’s last will and testament. A trust can be revocable, which means that the trustor can revoke it or modify the terms at any time. An irrevocable trust can’t be changed or revoked.
Assets that are owned by a trust avoid the cost, delay and publicity of probate. However, there are no tax benefits to a revocable living trust. The settlors-trustees are taxed as though they still own the assets. The trust assets are also included in their estates under the federal estate tax.
An irrevocable trust typically is created to reduce income and/or estate taxes. This type of trust can also protect assets from creditors. When assets are transferred to an irrevocable trust, the income and gains are taxed to the trust when they are retained by the trust and taxed to the beneficiaries when distributed to them.
Under the federal estate tax and most state estate taxes, assets that are retitled to an irrevocable trust aren’t part of the grantor’s estate. Transfers to the trust are gifts to the beneficiaries. The grantor’s gift tax annual exclusion and lifetime exemption can be used to avoid gift taxes, until gifts exceed the exclusion and exemption limit.
A grantor trust is an income tax term that describes a trust where the grantor is taxed on the income. That’s because he or she retained rights to or benefits of the property. The revocable living trust is an example of a grantor trust.
A trust can be discretionary or nondiscretionary. A trustee of a discretionary trust has the power to make or withhold distributions to beneficiaries as the trustee deems appropriate or in their best interests. In a nondiscretionary trust, the trustee makes distributions according to the directions in the trust agreement.
Another type of trust is a spendthrift trust. This is an irrevocable trust that can be either living or testamentary. The key term restricts limits the beneficiary’s access to the trust principal, and the beneficiary and the beneficiary’s creditors can’t force distributions. The spendthrift provision is used when the settlor is worried that a beneficiary might waste the money or have trouble with creditors. Many states permit spendthrift trusts, but some limit the amount of principal that can be protected, and some do not recognize spendthrift provisions.
Finally, a special needs trust can be used to provide for a person who needs assistance for life. In many cases, it’s a child or sibling of the trust settlor. It can be either living or testamentary. Critical to a special needs trust is it has provisions that make certain the beneficiary can receive financial support from the trust, without being disqualified from federal and state support programs for those with special needs.
For more about trusts and how one may fit into your estate planning, contact an experienced estate planning attorney.
Reference: Forbes (Oct. 26, 2020) “Here’s What You Need To Know About The Most-Popular Estate Planning Trusts”

Learning From Disney Is Not Just for Kids

Walt Disney passed away in 1966, however problems with his estate plan continue to mount. At issue is a trust he left for his grandchildren. The trust itself is fairly standard in that trust principal was to be distributed to the grandchildren in stages. For one grandchild, everything went according to plan. However, for the other two, problems have arisen. Investing Daily, in an article entitled “Key Estate Planning Mistakes You Need to Avoid,” locates the problem with a clause in the trust that states the principal could be withheld if the grandchildren lacked the “maturity and financial ability to manage and utilize such funds in a prudent and responsible manner.” The article points out that this is a standard clause in many trusts. The problem is that disagreements have arisen between the trustees and the grandchildren. The trustees say the grandchildren have learning disabilities and are unable to manage money. In addition, the trustees contend that the grandchildren are overly influenced by a stepfather. However, the grandchildren believe the trustees just do not want to lose their income from managing the trust and that the grandchildren are being punished for refusing to keep any distributed money at one of the trustee's financial firms. From the outside, it is impossible to know whether the trustees or the grandchildren are in the right. What we can say is that it appears that Walt Disney chose the wrong trustees. It is extremely important to choose a trustee who will be able to cooperate with your trust's beneficiaries. Whenever litigation occurs between trustees and beneficiaries, that may indicate that wrong choice has been made.

Reference: Investing Daily (July 24, 2014) “Key Estate Planning Mistakes You Need to Avoid”

For more informaton, see www.jerryreiflawyer.com

Are You Afraid To Speak Of Estate Planning?

Remarkably, a recent New York Times article, titled "What’s Almost as Certain as Death? Not Talking About the Inheritance," noted that it is easier to have a will (83% do) than it is to discuss the will with your children (only half). It is even more difficult to give them details about those assets (34%). Regardless their levels of financial wealth, those surveyed were equally deficient when it comes to discussing estate plans with their children. Roughly 55% of people with more than $1 million talk to their children about an inheritance, and 53% of people with fewer than $1 million did. As you might expect, the majority of parents want the transfer of money to their children to go smoothly (84%) without creating bad feelings among siblings (66%). Why are there so many people failing to take time to let their kids know about this important subject? According to the original article, people usually do not want to discuss inheritance with their children for several reasons. • They do not want to talk about dying; • They do not want to discuss money with their children; • They do not want their children to know how much they are going to receive; and • They are concerned about their children's financial acumen. However, there is an even greater issue making the conversation about inheritance more troublesome than it was in prior generations. For example, the article describes how one 65-year-old disclosed everything to her executor, even though she was divorced without children or siblings. She learned from her experience with her mother's estate, which took the women almost two years to settle — despite the fact that it was a modest estate, and her mother had told her where everything was. Likewise, when her stepfather died many years earlier, he left everything to her mother. However, after he died, title to none of the assets had been updated. Consequently, she had to go to court three times to get it done, run an ad in the newspaper and take copies of the will to the bank to get the investments straightened out. This certainly was not what she expected. Let your children know what to expect regarding their inheritance and your other estate plans. Speak with your estate planning attorney to make sure everything is in order, and then get the family together and have that conversation.

Reference: The New York Times (August 1, 2014) "What’s Almost as Certain as Death? Not Talking About the Inheritance"

For more information, see www.jerryreiflawyer.com

 

Estate Planning for Singles and Those Without Children

The website dailycall.com recently posted an article, titled "Aging and estate planning for singles and couples without children," to help get you thinking about what you need to do to be well-prepared for the future. Here are some of the ideas suggested: • Choose your advocates wisely. Select individuals you can trust. This could be a friend, family member, or a trustee — just make sure everyone knows and will support your wishes. Select some younger people as alternates, if the people you ask are about your same age, in the event someone is not able to perform his or her responsibilities. • Determine your asset distribution. A will is an easy way to put your intentions for your assets in writing and into a binding legal document. Your estate planning attorney is well-equipped to help you draw up a will that states how and to whom you want your assets distributed. If you do not have a will, your estate may be probated according to the statutes of your state. This may or may not be what you intended for your assets. • Create a gifting plan. Another part of your estate plan can include strategies for giving monetary gifts before or after your passing. Currently, you can give up to $14,000 per person to an unlimited number of individuals without gift tax consequences. Another idea is to pay college tuition for others without gift tax liability and without using any of the annual or lifetime gift tax exclusions (provided payment is made directly to the institution). The original article includes additional helpful ideas, and your estate planning attorney can create a plan that works for you.

  For more information, see www.jerryreiflawyer.com

 

 

Does Everyone Need a Revocable Living Trust?

When many people first consult an estate planning attorney, they assume they already know what they need in their estate plans before the attorney even says a single word. As revocable living trusts continue in popularity, many of these first-time visitors think that is the solution to their estate planning needs. Usually a friend or family member who has a trust will suggest it, or they may have read articles online suggesting everyone needs to have a revocable living trust. The truth is that revocable living trusts are designed for particular estate planning situations. They are not necessary in every situation. A recent article in Financial Planning titled “Does Your Client Need a Revocable Trust?” considered common situations that might call for a revocable living trust. The list includes: • Probate Avoidance – If an estate might have issues in probate, a revocable living trust can be used to keep it out of probate. Not every estate will have issues with probate, however. • Privacy Concerns – Wills are often subject to public scrutiny through the probate process. Because a trust does not go through probate, the details of an estate plan can be kept private. • Second Marriages & Blended Families – Trusts can provide a way to ensure that assets go to a second wife first and that the remainder then goes to children of a first marriage, if that is the objective. • Incapacity Planning – Trusts can provide a way for someone to manage your assets in the event you become too sick to do so yourself. • Special Needs – If you have a relative with special needs, a trust can be used to provide for their care without jeopardizing their public assistance benefits. Again, these are the primary reasons why you might want to have a revocable living trust as part of your estate plan. However, the important thing to remember is to go to an estate planning attorney's office with an open mind. Let the attorney tell you what the best options for your estate plan are.

Reference: Financial Planning (July 14, 2014) “Does Your Client Need a Revocable Trust?”

For more information, see www.jerryreiflawyer.com

A Plan In Eight Steps

Your estate plan is, to put it briefly, the sum total of your plans for your loved ones, your end-of-life, your assets, and your charitable hopes, and all of it put to paper. Naturally, a properly planned and executed estate plan will have a few key elements and a number of important documents. So how many pieces is that? It should depend upon your own estate and estate plan of course. Regardless, it’s also helpful to break down a basic estate plan and build a basic list. There are a great number of little estate planning lists out there, and a dozen ways to list the documents you might need. That noted, MSN Money provided a helpful guide not too long ago with a helpful list of eight titled “Estate-Planning Documents You Need Right Now.” The eight? 1. Last will and testament 2. Revocable living trust 3. Beneficiary designations 4. Durable power of attorney 5. Health care power of attorney and living will 6. Provision for digital assets 7. Letter of intent 8. List of important documents Now you might not need all of these elements. In the context of your plans, one or another may be all the more important and so all the more robust. However, these are the basics to consider as you get started. The original article has more to say concerning each tool and some further resources besides. Do you have unique goals, unique assets, or a unique family? It’s very likely there is more to be done with these documents and a few useful tools besides. Whether your plan will be basic or advanced, it pays to ensure that your affairs are in order with the input and guidance of competent counsel.

Reference: MSN Money (April 18, 2014) “Estate-Planning Documents You Need Right Now”

For more information, see www.jerryreiflawyer.com

Filling in the (Estate Planning) Gaps with a Letter of Intent

Your estate and your plan for it are more than just a set of documents. Nevertheless, it is only through documents that you and your wishes truly get a voice. There are the legal documents that speak to the court, but that does not necessarily do all of the speaking you need it to. When you need to leave that much more instruction behind there is an important tool to be found in the Letter of Intent. A “Letter of Intent,” not unlike the business version used in and around business transactions, is not the document that does the legal heavy lifting but it can move things along. So, too, with letters of intent which are meant to supplement and complement a will or trust arrangement, but never to do the work standing alone. LifeHealthPro offered some important perspective on the Letter of Intent in a recent article with some special attention to planning for special needs children and it is worth your thoughts: “Letter of intent: a useful component of an estate plan.” If the will tells the probate court what you want to do with your assets, the Letter of Intent gives you the voice to say the same for all of the other topics, from your hopes and wishes to very practical instruction regarding this or that. If you have a child with special needs, then a Letter of Intent can give you the space to offer all manners of practical instruction that simply cannot fit within a will and may be inappropriate for a legal document in the first place. That is the rub, of course. The Letter of Intent is not the will and is not legally binding. For a bit more on the Letter of Intent as a tool and for a great deal more advice on how to use it, particularly with regard to children with special needs, check out the original article. Sometimes this little letter can mean all of the difference. In any event, it might help you and your loved ones organize your thoughts. In the end, however, if your objectives require that some essential legal concerns are addressed, then the heavy lifting needs to be done in properly drawn legal documents. So what are your needs and how will you put them to paper?

Reference: LifeHealthPro (June 3, 3014) “Letter of intent: a useful component of an estate plan”

Think Twice: Trusts as IRA Beneficiaries?

When it comes to planning for the estate and all of your various accounts and various beneficiary designations, it is important to ensure that you have updated your beneficiary designations and that you have elected the most efficient beneficiaries in the first place. It is not about which heir is best with economics; if you are electing a trust as a beneficiary to an IRA or other retirement account it is simply not the same as electing one of your heirs. It is an important difference to understand. The confusion between IRA beneficiaries, trust beneficiaries, and IRA trusts by way of IRA beneficiaries is a common confusion, but one that may end up costing your estate and heirs. The Slott Report took up the charge recently and offered a definitive answer worth consideration for those hoping to mix their trusts and IRA. The question (and article): “How Many Beneficiaries Are There With a Trust?” The Answer? Just one: the trust. Even if there are 20 beneficiaries to the trust there is just the one beneficiary to the IRA - and that is the trust. The difference comes out in the balance and the math at the end. Naming a trust as beneficiary can seem like or even be an easy way to spread an IRA amongst the heirs you have already chosen to be beneficiaries of the trust. It is not the same thing, however, and that may affect the usefulness of the IRA. After all, IRAs can make for uniquely useful bequests because they can be stretched out over the life of the inheritor, but when the trust is the beneficiary the math changes entirely. How? It is the eldest beneficiary that determines the age. How and when distributions happen is, further, at the discretion of the trustee rather than the would-be IRA owner. Sometimes this multi-tiered approach can work for a family, but more often than not it is not understood before the papers are signed and only dealt with after the fact. Always consult your attorney when considering the trust, its assets, and any time you might wish to elect the trust as a beneficiary to this account or the other.

Reference: The Slott Report (May 30, 2014) “How Many Beneficiaries Are There With a Trust?”

For more information, see www.jerryreiflawyer.com

 

The Keys to the Castle and the Control of the Trust

You can build the greatest and strongest castle in all the land. However, if you leave it to a guard who forgets to lock the gate, then those strong walls won’t do you much good. Trusts work pretty much the same way. Even the most carefully crafted trust is hobbled, counterproductive or even broken by leaving the wrong trustee in charge. How do you make sure you leave the trust in the right hands? Picking a trustee can be a very difficult task. It is not the same as crafting words to paper – ink is cheap in a certain sense – because picking a trustee means picking the right person. You have to read people well and know the right people (or financial institutions) to pick. Financial Planning recently offered a few principals well worth mulling over if you’re in the process of creating a trust in an article titled “Selecting a Trustee? 3 Factors to Consider.” Factors one and two are useful foils: “think twice before naming children” and “consider using a professional.” There are definite trade-offs to read into this because a family member turned trustee is certainly wedded to the project and the well-being of the family. On the other hand, a professional is detached. Of course, a professional is detached for good reason. Depending upon the complexity of the assets in a trust, correctly managing them can require a special skillset. Finally, and regardless who you put in charge, remember that the trust itself can always be built to include a power to remove a trustee. Depending upon whom you choose and who your beneficiaries are, this may be more and more important to strengthen, either to protect the trustee or to ensure that the trustee can be kicked out. Finding a trustee is always a bit of a balancing act, but it is a necessary one. The purpose of the trust itself is to ensure there is a legal device carrying out your wishes, to hold your assets and protect your beneficiaries as you would do so yourself. So when you build the castle, with whom will you leave the keys?

Reference: Financial Planning (May 29, 2014) “Selecting a Trustee? 3 Factors to Consider”

To Protect Your Heirs From Themselves: Inherited IRAs And Trustee Guidance Mid-Michigan

Sometimes all you want to do is just give away an asset to your heirs, let them do with it as they wish, and let life teach them the folly of shortsightedness if they are not good stewards. Then again, simply letting them fail in the "school for hard knocks" can be such an awful waste and not all heirs learn best by failure. This is especially true in the case of an inherited IRA. You may have many assets to leave behind for your heirs. However, an IRA is unique enough to be easily squandered in taxes, as MarketWatch noted in a recent article appropriately titled “Protect your heirs from an IRA tax trap.” IRAs are some of the most common high-value assets. That noted, because they are such unique accounts, there are some equally unique rules regarding inherited IRAs that are either amenable to diligent financial planning or a short-term high of a cash-out. When an IRA is inherited, the inheritor can elect to take regular distributions (much like the retiree who earned the funds in the first place) that will stretch over the life of the IRA. This can maximize the long-term value of the IRA and minimize the taxation. Alternatively, the inheritor can elect to immediately cash out the IRA and foot the tax bill on the whole sum. This will limit the value of the IRA now and maximize the taxation, limiting growth and the true benefit to the IRA in the first place. Either way, how do you make sure the inheritor will make the right decision? The original article has some options for you to consider. This is important if your IRA is going to be a large part of the inheritance you leave. Basically, to avoid a disaster that cannot be undone, make sure there is someone there to speak up when needed and to exercise authority over the decision. You can either name a trust as the beneficiary of the IRA, giving a trustee discretion, or you can actually structure the IRA to be a Trusteed IRA. Each option requires sound legal and financial planning advice, as the rules are some of the most complex in the entire tax code. How does IRA distribution planning fit into your overall estate plan? Is the IRA the only asset you worry about or is there more to protect? With careful legal structuring, an entire estate plan can work to protect your heirs from themselves.

Reference: MarketWatch (April 28, 2013) “Protect your heirs from an IRA tax trap”

For more information, see www.jerryreiflawyer.com

 

Planning for Your Special Needs Child

1. Caring for your child with special needs requires much more thought and planning. After all, you are responsible to ensure the well-being of your child in a world without you. How can you possibly ensure for the future of your children, especially when they have certain dependencies? CNBC recently touched on this topic offering up a solution - the special needs trust. If this topic touches you and someone you love, then take a moment to read the original article titled “Special needs trusts: Helping parents provide for kids' futures.” Trusts are powerful legal devices made to do what you program them to do, all under the watchful gaze of a responsible trustee. The needs of a child with special needs are especially amenable to special planning. You can’t leave your assets to them outright, as your child is likely unable to use them. In fact, just owning them might endanger their government assistance. Sure, money could be left to another child or other loved one with express instructions to care for the special needs child. However, without formalization, it’s never guaranteed that the money will be used for this purpose. Instead, that money would be open to the other individual’s liabilities, suits, divorces, and other legal pitfalls. The special needs trust solves all of this in a very tidy way and even ensures that there is always a financial guardian of sorts in the trustee. Why do you need to leave assets to your child with special needs in the first place? After all, they will be receiving government assistance, right? This depends greatly upon the nature of the care needed, of course. But as many parents can already attest, those government benefits can only take you so far and even sometimes force decisions. Your special needs trust can care for them without any benefits, if your have the means of course. In reality the express goal of a special needs trust is to bridge the gaps and protect all aspects of their life and longevity. Just what kind of a trust you can put together and what kind of needs you have to fulfill depends on your finances and your child. Regardless, the trust needs to be drafted by a steady hand and a careful mind. Competent counsel can knit together the plan, the ability and the needs in light of current (and even future) laws and regulations to provide for a loved one’s care. In the end, that’s not just peace of mind now, but the assurance of a happy life for your loved ones who cannot take care of themselves.

   Reference: CNBC (May 31, 2014) “Special needs trusts: Helping parents provide for kids' futures”

Planning for Your Special Needs Child

Caring for your child with special needs requires much more thought and planning. After all, you are responsible to ensure the well-being of your child in a world without you. How can you possibly ensure for the future of your children, especially when they have certain dependencies? CNBC recently touched on this topic offering up a solution - the special needs trust. If this topic touches you and someone you love, then take a moment to read the original article titled “Special needs trusts: Helping parents provide for kids' futures.” Trusts are powerful legal devices made to do what you program them to do, all under the watchful gaze of a responsible trustee. The needs of a child with special needs are especially amenable to special planning. You can’t leave your assets to them outright, as your child is likely unable to use them. In fact, just owning them might endanger their government assistance. Sure, money could be left to another child or other loved one with express instructions to care for the special needs child. However, without formalization, it’s never guaranteed that the money will be used for this purpose. Instead, that money would be open to the other individual’s liabilities, suits, divorces, and other legal pitfalls. The special needs trust solves all of this in a very tidy way and even ensures that there is always a financial guardian of sorts in the trustee. Why do you need to leave assets to your child with special needs in the first place? After all, they will be receiving government assistance, right? This depends greatly upon the nature of the care needed, of course. But as many parents can already attest, those government benefits can only take you so far and even sometimes force decisions. Your special needs trust can care for them without any benefits, if your have the means of course. In reality the express goal of a special needs trust is to bridge the gaps and protect all aspects of their life and longevity. Just what kind of a trust you can put together and what kind of needs you have to fulfill depends on your finances and your child. Regardless, the trust needs to be drafted by a steady hand and a careful mind. Competent counsel can knit together the plan, the ability and the needs in light of current (and even future) laws and regulations to provide for a loved one’s care. In the end, that’s not just peace of mind now, but the assurance of a happy life for your loved ones who cannot take care of themselves.

Reference: CNBC (May 31, 2014) “Special needs trusts: Helping parents provide for kids' futures”

To Protect Your Heirs From Themselves: Inherited IRAs And Trustee Guidance Saginaw, MI

Sometimes all you want to do is just give away an asset to your heirs, let them do with it as they wish, and let life teach them the folly of shortsightedness if they are not good stewards. Then again, simply letting them fail in the "school for hard knocks" can be such an awful waste and not all heirs learn best by failure. This is especially true in the case of an inherited IRA. You may have many assets to leave behind for your heirs. However, an IRA is unique enough to be easily squandered in taxes, as MarketWatch noted in a recent article appropriately titled “Protect your heirs from an IRA tax trap.” IRAs are some of the most common high-value assets. That noted, because they are such unique accounts, there are some equally unique rules regarding inherited IRAs that are either amenable to diligent financial planning or a short-term high of a cash-out. When an IRA is inherited, the inheritor can elect to take regular distributions (much like the retiree who earned the funds in the first place) that will stretch over the life of the IRA. This can maximize the long-term value of the IRA and minimize the taxation. Alternatively, the inheritor can elect to immediately cash out the IRA and foot the tax bill on the whole sum. This will limit the value of the IRA now and maximize the taxation, limiting growth and the true benefit to the IRA in the first place. Either way, how do you make sure the inheritor will make the right decision? The original article has some options for you to consider. This is important if your IRA is going to be a large part of the inheritance you leave. Basically, to avoid a disaster that cannot be undone, make sure there is someone there to speak up when needed and to exercise authority over the decision. You can either name a trust as the beneficiary of the IRA, giving a trustee discretion, or you can actually structure the IRA to be a Trusteed IRA. Each option requires sound legal and financial planning advice, as the rules are some of the most complex in the entire tax code. How does IRA distribution planning fit into your overall estate plan? Is the IRA the only asset you worry about or is there more to protect? With careful legal structuring, an entire estate plan can work to protect your heirs from themselves.

Reference: MarketWatch (April 28, 2013) “Protect your heirs from an IRA tax trap”

For more information, see www.jerryreiflawyer.com