Michigan Estate Planning Blog

Planning to Protect Your Children’s Inheritance: Asset Protection

 

No one likes to think about the possibility of losing a lifetime of earnings through unfortunate events like divorce, spendthrift heirs, or litigation. However, ignoring these risks won’t prevent them. A recent article from Kiplinger, “Want Your Kids to Inherit? You Need an Asset Protection Plan, ” explains several asset protection strategies used to protect wealth from disappearing in nefarious ways.

Prenuptial agreements aren’t the most welcoming topic when your adult child announces their engagement. Still, this should be discussed and encouraged no matter how much you love your prospective new family member. A prenuptial agreement or prenup is a contract between two adults agreeing on how they will distribute assets in case of divorce. This legally binding document addresses assets, debts, spousal support, alimony, gifts and inheritances. It’s also helpful as a supporting document if one of the spouses should die unexpectedly. However, the couple should have a will, power of attorney and other estate planning documents created as soon as they are married.

Depending on the state, there may be laws concerning when the prenup is signed for it to be valid. Signing a prenup under duress could make it invalid, so this needs to be addressed in a timely manner.

Another option is to create a postnuptial agreement (postnup). Spouses may contractually agree to terms outlining the distribution of assets in the event of a divorce after the wedding.

Asset protection includes determining and formalizing how assets will be passed on to heirs. Parents should consider creating trusts as part of their estate plan. Trusts allow grantors (the person creating the trust) a much higher degree of control over who receives the assets in the trust and takes them out of the probate estate.

For example, the trust may call for a beneficiary to receive a portion of their inheritance at ages 30 and 40 and the balance at age 50. An heir with a drug dependency might be required to complete a rehabilitation program or maintain employment over a steady period of time before the trustee can distribute some or all of the assets in the trust.

If assets are left through a will, a number of vulnerabilities are created. First, they are part of the probate estate and subject to federal and state taxes. Second, the will becomes a public document when it goes through probate, so creditors can learn if someone is receiving an inheritance. Creditors may include ex-spouses, credit card companies and financial institutions.

An experienced estate planning attorney is familiar with the tools used to protect assets and ensure that they pass to the next generation according to your wishes. Protecting a lifetime of hard work is a worthy endeavor, creating a legacy and providing security for those you love.

Reference: Kiplinger (Nov. 9, 2024) “Want Your Kids to Inherit? You Need an Asset Protection Plan”

Why an Updated Estate Plan Is Critical, Especially Now

 

Without a properly prepared and current estate plan, property is distributed following the intestacy law of the decedent’s state of residence. In most cases, the laws are centered around kinship, with spouses and children dividing percentages of the estate.

If you had something else in mind, it wouldn’t matter—the time to create and update an estate plan is while you’re living. We all know this. However, many just keep procrastinating. A recent article, “Make sure your estate plan is updated to reflect law changes,” from Los Altos Town Crier, explains precisely what pitfalls your loved ones will face if you put off creating an estate plan until it’s too late.

Probate can be minimized or avoided with a professionally prepared estate plan. The probate experience varies with the jurisdiction: in some courts, it’s a streamlined process, while in others, it is a series of delays, sometimes stretching out over months or even years. The time and costs of probate also depend upon the complexity of the estate. In some states, probate can cost 4—7% of the estate’s total value.

An estate planning attorney works with clients to create a means of passing assets to their intended beneficiaries without court involvement. This takes many different shapes depending on the family, the value of the assets, the structure of ownership, etc. Trusts, payable on death accounts, joint tenancy ownership and LLCs (Limited Liability Corporations) are just a few means of passing wealth without involving probate.

Estate planning attorneys help clients control how and when assets are passed to heirs. For instance, if someone had a child who is exceptionally mature and responsible, they may wish to provide the child with their inheritance upon their death. A trust can be created to address the concerns of a family with an adult child who, for whatever reason, cannot manage money. The trust can have a trustee who will be charged with distributing assets according to directions provided by the parents—after achieving certain milestones, at specific ages, or when the trustee deems funds should be distributed.

Incapacity is unpleasant to consider but is as much a part of estate planning as planning for asset distribution after death. Without having a plan for incapacity, the family may be forced to go to court and petition for a supervised conservatorship, a costly and stressful process.

Incapacity or death are the last things on the minds of new parents. However, when a new child joins the family, updating an estate plan to include naming a guardian becomes critical. If there is no will or the will has never been updated to reflect the addition of children, the court determines who will raise the children. Any interested party may petition the court to be appointed as a guardian. The court ultimately makes the decision. However, the decision by the parents, as expressed in an estate plan, will have more weight than an estranged sibling.

An estate plan protects the family by lessening the chances of family disputes and legal battles, which can lead to lifelong divisions. A meeting with an estate planning attorney will give you insight into the importance of having an estate plan and how it serves as a gift to loved ones.

Reference: Los Altos Town Crier (Oct. 29, 2024) “Make sure your estate plan is updated to reflect law changes”

How Does a Special Needs Trust Work?

 

The most straightforward description of a special needs trust is designed to hold assets for a disabled person without putting benefits received from the government at risk. It’s essential for those planning for a loved one’s future to understand how special needs trusts work, how they are funded and what they can and cannot accomplish. A recent article appearing in Success, “What Is a Special Needs Trust?” provides more insight.

Individuals with disabilities who qualify for financial support through Medicaid or Supplemental Security Income (SSI) must have limited assets and income. They become ineligible for benefits and resources if they exceed their state’s limits. A Special Needs Trust (SNT) keeps assets separate.

An estate planning attorney creates the SNT and names a trustee for the funds. The trust's assets are to be used for housing, transportation, education, health and other expenses not covered by government benefits.

In some cases, the SNT shouldn’t be funded until necessary. Once money or other assets are in the trust, its use is restricted. Parents are advised to ensure that well-meaning grandparents or other family members don’t bequeath assets directly to their disabled loved ones. They have the option of creating an SNT of their own or bequeathing assets to the SNT created by the parent.

There are different kinds of SNTs. A Third-Party Special Needs Trust is created by a parent or other involved person to benefit a disabled child. If any assets are in the trust when the beneficiary of the trust dies, the person who created the trust decides who receives them. They may choose to donate the assets to a charity or a family member.

If an adult becomes disabled later in life, a different type of trust is used: a First Party Special Needs Trust. These trusts are created to own the assets of the disabled individual. For instance, if someone becomes disabled due to a car accident and receives a legal settlement, the money would go into the trust. This allows the disabled person to continue to receive government benefits. When the person dies, the funds spent on their care are paid back to the government through the Medicaid Repayment Program.

Parents or loved ones need several other legal documents to protect themselves and their disabled family members. An estate planning attorney will draft a will to ensure that the parent’s assets pass into the Special Needs Trust. Everyone should have a Power of Attorney and Medical Power of Attorney to protect themselves in case of incapacity.

Checking beneficiary designations is especially important if a family member receives funding from a Special Needs Trust. The person named on the beneficiary designations receives assets upon the owner’s death, which could put their government benefits at risk. All assets must go into the Special Needs Trust to protect their Medicaid eligibility.

Planning for the future is essential for parents of disabled children and adults. It can’t fix everything, but it can relieve some of the worry, knowing that their loved one’s future is protected.

Reference: Success (Oct. 20, 2024) “What Is a Special Needs Trust?”

It’s Not Too Soon for Generation X to Start Estate Planning

 

Adults born between 1965 and 1980 are often called the “sandwich generation” as they sometimes support older children who are still figuring out who they want to be when they grow up and caring for aging parents. While retirement may feel far away, says a recent article from Kiplinger, “Come as You Are: Wealth Management for Gen X,” it’s on the horizon, and planning for the future should start now.

Some of the tools used for retirement planning include 401(k) plans, which are tax-deferred plans from an employer. If your employer offers matching funds, try to contribute enough to take advantage of the match. You can also use a personal IRA to make tax-free annual contributions.

With changes from the SECURE 2.0 Act, you can open and contribute to a 529 College Savings Account and then roll a portion of unused funds into a Roth IRA once the account has been opened for 15 years and the funds have been in the account for at least five years. There are rollover limits, but this might be a good fit for retirement savings. Commonly, 529 funds are used for various educational purposes, so even if your children are past college, your grandchildren might use them for private school, not just college.

The one constant in life is change, and estate planning documents created when your children were little need to be reviewed and possibly updated. If the last time you thought about your will was when your adult children were born, you should schedule a review with your estate planning attorney. Changes like marriage, divorce, death, financial ups and downs and changes in the tax law all call for updates to wills.

If you don’t have long-term care insurance, now is the time, while you’re still relatively young and healthy enough to be able to buy it. Insurance companies now offer hybrid policies combining life insurance with a long-term care insurance policy rider.

Digital assets are a relatively new asset class requiring estate planning. Speak with your estate planning attorney to be sure your estate plan documents reflect your digital life. If you are active on social media, investing in cryptocurrency, or own an online business, you have digital assets and need to protect them.

Be proactive about estate planning to protect yourself now and your loved ones after you’ve passed. Just as retirement is on the horizon, so are the inevitable events of aging. Make an appointment to see an estate planning attorney to learn your needs, now and in the future.

Reference: Kiplinger (Oct. 7, 2024) “Come as You Are: Wealth Management for Gen X”

Wealth Protection Through Estate Planning

 

Without a well-prepared estate plan, wealth can be lost to taxes, administrative costs, or disputes among heirs, both in and out of court. With an up-to-date estate plan, changes to tax laws are proactively addressed and wealth can be protected and passed across generations. A recent article appearing in Medical Economics, “Estate planning is your first line of defense against wealth loss—Here’s what you should know,” explains how an estate plan creates a framework to minimize taxes, avoid the costs and complications of probate and ensures that your wishes for your estate are followed.

Documenting assets is one task that is done when creating an estate plan. When records are not clear, transferring assets can become complicated. A comprehensive record-keeping system can store documents like deeds, life insurance policies, asset inventories, family videos and photographs online.

Many financial records are already online through client portals by major financial companies. The key to incorporating these records into an estate plan is remembering where all the information is stored and being willing to share access information with a trusted family member or friend. The person you name as an executor of your will or a trustee for a trust is the most likely candidate to be provided with this information.

There are many steps to having a solid estate plan. However, there are also many missteps. Here are some of the most common pitfalls to avoid:

Failing to update an estate plan. All the documents in your estate plan, including a Will, Power of Attorney, Healthcare Proxy, HIPAA Release Form, Trusts, Advanced Directives and more, must be updated to comply with changing laws and changes in your life.

Making a careless decision about the executor or trustee can be disastrous. The eldest child does not have to be the one to be in charge of your estate. Neither does the person you love if their life is a trainwreck. The person to be named executor and/or trustee needs to be someone you know to be extremely responsible, reliable, good with money management and a solid moral compass.

Digital assets are often ignored when it comes to estate planning. However, this new asset class needs to be included. If you have email, you have a digital asset. You have digital assets if you have email, cryptocurrency, websites, social media content, online subscriptions and photos stored in the cloud. Suppose no plan is made to create an inventory of accounts and name a digital executor. In that case, your estate becomes vulnerable to identity theft, valuable cryptocurrency could be lost forever and there may be nothing your loved ones can do.

Most family fights have to do with unequal asset distribution after the death of a parent. A clear estate plan is one way to preclude confusion about what you want to happen after death. Talking about your estate plan while you’re still able to have these uncomfortable discussions is one way to help establish your wishes. You may want to create a Letter of Intent or make a video to express your reasons for making certain decisions. This may not be legally enforceable. However, it will serve to document your wishes.

Estate planning is not just about distributing assets after death. By establishing an estate plan, the family is better prepared to deal with the loss of a loved one and can focus on healing together instead of battling over their inheritance.

Reference: Medical Economics (Oct. 17, 2024) “Estate planning is your first line of defense against wealth loss—Here’s what you should know”

How Can a Will Be Changed?

 

A last will and testament is a legal document that distributes assets, including investments, real estate and personal property after death. Once a will has been signed and executed, it becomes the foundation for an estate plan. However, what happens if you want to make changes? This is the topic addressed in a recent article from smartasset.com, “What is a Codicil to a Will?”

A codicil is a legal document that changes an already completed and valid will. Some prefer to use a codicil rather than revise their entire will, usually for reasons of economy. The codicil allows the will’s creator to update specific provisions. A codicil can be used to change beneficiaries, assign a different person to be the estate executor, or even change the size of gifts made to heirs.

Codicils are like wills: they need to be signed and witnessed according to the laws of the state to be valid. People like the ability to make changes to their wills quickly and easily. However, sometimes, a codicil is not the right way to change a will.

The codicil performs best when changes being made to the will are minor in nature. They should be used to make small changes when the testator’s wish is to maintain the overall intent of the will. For instance, the birth of a new child and the addition of an heir could be reflected through a codicil.

An experienced estate planning attorney must create the codicil. Making a note on an original will with initials and a date is not a codicil. It’s a separate document, requiring a formal signature and the presence and signatures of witnesses. Most states don’t require a codicil to be notarized. However, you should check with your estate planning attorney to find out if this applies to your state.

Making a lot of changes to a will with multiple codicils may result in estate problems in the future. There are numerous instances where multiple changes, especially repetitive ones, like taking the same person off and then adding them back, are perceived as changing the intent of the testator (the person who made the will). This leaves the entire estate vulnerable to challenges.

Some typical reasons for using a codicil:

Changing beneficiaries

Replacing an executor

Revising asset distribution

Divorce, marriage, birth, death.

Making new bequests

Correcting prior errors or omissions

Before having your estate planning attorney create a codicil, there are a few steps to take. First, discuss the reason for the change and whether the entire will should be revised. A new will may be better if the change is not simple and straightforward. If the codicil is being done to disinherit a beneficiary, your estate planning attorney may have other suggestions. If you have created trusts, the changes to the will don’t carry over to your trusts. They may need to be modified as well.

Reference: smartasset.com (Oct. 23, 2024) “What is a Codicil to a Will?”

What Is Needed for End-of-Life Planning?

 

Becoming incapacitated or dying without planning isn’t uncommon. Nevertheless, it is harmful to loved ones who are left to address the legal and financial aspects at the same time they are experiencing the grief of loss. What needs to happen is addressed in an article from Twin Cities Pioneer Press, “Your Money: A balanced approach to end-of-life planning.”

End-of-life care is expensive. Costs rise as the person moves through the different stages of illness or age. Medicare doesn’t cover long-term nursing care in a facility or at home, so resources without planned protection will rapidly be exhausted. An estate planning attorney can help the family prepare for these costs, but only when planning takes place in advance.

Once incapacitated, people cannot legally sign and execute legal documents. If the family hasn’t arranged for a Power of Attorney or Medical Proxy to be created while the person is still legally able, the family may be faced with the additional expense of going to court to petition for guardianship and/or conservatorship.

There are five basic estate planning documents to be prepared. While every adult should have these documents, they become more critical when someone is closer to passing.

Last Will and Testament. A will directs how you want your assets to be distributed upon your passing. It may include personal property, real estate, jewelry, family heirlooms and any other material goods. Note the will becomes a public document when the estate goes through probate, so don’t include any account numbers or information you don’t want to read by others.

Healthcare Directives. Privacy laws are strict, and healthcare providers are limited in what they can discuss with spouses and children if the right documents are not in place. A Medical Power of Attorney or Healthcare Proxy is needed for family members to be involved in medical decisions. A HIPAA Release Form should be created to access health care and health insurance records.

Many accounts, including bank and investment accounts, IRAs, SEPs and life insurance policies, have beneficiary designations, where a person or persons are named to receive the asset upon the original owner's death. Make sure these are up to date to reflect the owner’s wishes.

Trusts take assets out of an estate for tax and wealth transfer purposes. The person creating the trust dictates how and when the beneficiaries should receive assets. Distributions can occur over an extended period or when certain conditions are met.

Meet with an experienced estate planning attorney if you or a loved one is ill and may be approaching the end of life. Putting an estate plan in place ensures that wishes are fulfilled and spares the family from having to guess what a loved one would have wanted in their final days.

Reference: Twin Cities Pioneer Press (Oct. 12, 2024) “Your Money: A balanced approach to end-of-life planning”

Millennials Need Estate Planning

 

One family jokes about their mother’s large blue binder, affectionately calling it “Mom’s Book of Life.” She has assembled physical copies of estate planning documents, including medical directives for next of kin, account information, passwords and a list of assets. Her adult children thought they were too young to deal with such matters, reports a recent article, “I’m Way Too Young For Estate Planning. Or Am I?” from The Wall Street Journal. On reflection, they realized they, too, needed an estate plan.

Someone as young as 18 could benefit from having an estate plan, and someone in their 30s definitely needs one. Once a young person becomes a legal adult, their parents no longer have any say in financial or health matters without properly prepared estate planning documents.

Everyone over 18 should have an advanced healthcare directive, sometimes called a healthcare proxy or healthcare power of attorney. This allows people of your choosing the ability to make decisions about your healthcare if you become incapacitated: too sick or severely injured and unable to communicate your wishes.

Adults of all ages also need a power of attorney. This document gives another person the legal authority to access and manage your finances in case of incapacity.

A will, also known as a last will and testament, is needed to direct how you want your assets to be distributed after death. Even if you don’t own a home or car, chances are you have some personal property and may want specific people to receive certain items. Creating a will and getting used to the concept of planning for the future is a good habit.

If you have an extensive online life, digital assets will also require some planning. An inventory of your digital assets, including email accounts, apps, social media, cryptocurrency, photos, videos, etc., should be created, so a digital executor can manage the accounts. Some platforms permit naming a legacy contact, while others require specific directions on what should be done with your content.

Student loans, 401(k)s from employers and other financial accounts should be inventoried. However, this information doesn’t go into the will. The will becomes a public document once submitted to the court for probate, so any specific account information should be kept in an inventory of assets and debts.

Creating an estate plan can open a conversation with older relatives and parents about their plans for end-of-life care, a difficult but important dialogue. Talking about their wishes before something happens will allow you or other relatives to know beforehand, rather than spending the rest of your life worrying about a decision made in an emergency situation.

Estate plans need to be changed as you go through your life. New partners or spouses may need to be added, or a deceased parent may need to be removed as an executor. Getting used to addressing these life matters is part of being a responsible and loving adult.

Reference: The Wall Street Journal (Oct. 18, 2024) “I’m Way Too Young For Estate Planning. Or Am I?”

How to Create an Estate Plan with a Blended Family?

 

Blended families are not as unusual as they used to be. However, the financial and legal challenges of combining two families haven’t changed. If your future includes a combined family with stepchildren and stepparenting, the recent article from Kiplinger, “How to Navigate Finances as a Blended Family,” has useful information to consider.

Prenuptial Agreement. A prenup is used to clarify expectations regarding assets and debts. How assets are to be divided between children from past marriages or any future grandchildren can be addressed in a prenup and your will. If you come to the marriage already owning a home or a business, a prenup should be used to clarify your future spouse’s ownership interest. If your spouse-to-be has debts, a prenup covers how premarital debt will be handled.

Shared Expenses. Hoping financial matters will work out themselves is not a plan for a blended family. Will you set up joint checking accounts? Who will be responsible for biological or adopted children’s expenses from prior marriages? What expenses will be split? Single parents of college-age children need to know that if they marry, both spouses' incomes are used on applications for financial aid.

Estate Planning Updates. Everything related to estate planning, from your will, trusts, insurance policies and health care directives, must be updated when you marry again.

Your will must be updated to reflect your wishes for assets to go to children from a prior marriage and your spouse. It’s easy for children to be disinherited in a blended family, requiring special attention. If there is no will, the state’s laws will be applied. This may not be what you wanted.

Beneficiary designations need to be updated. The person named as a beneficiary on accounts like IRAs, SEPs, pensions and life insurance policies receives assets directly, regardless of what the will may state.

You may want to establish a Revocable Trust to take assets from your “probate estate” and provide for children. Your new spouse may be the trustee, or you may choose an adult sibling to administer the trust. You may want to update the trustee or beneficiaries if you have trusts.

Medical directives must be updated so your new spouse can be involved in your healthcare. Privacy laws are strict, and a new spouse might be shut out from making healthcare decisions without new documents. These include a Health Care Proxy, also known as a Medical Power of Attorney, HIPAA Release Forms and Living Will. Your estate planning attorney will know what documents are used in your state.

Estate planning is not as romantic as planning a wedding. It is still a sure signal to your intended and your family to prepare for a future based on responsibility and caring.

Reference: Kiplinger (Oct. 18, 2024) “How to Navigate Finances as a Blended Family”

What Is Legacy and Estate Planning?

 

Creating a last will and testament is part of planning for the future. Leaving a legacy is another. Both are part of an estate plan, which addresses planning for incapacity during your lifetime and the disposition of your property after you’ve passed. A comprehensive estate plan is a worthy endeavor, says a recent article from North Shore News, “How to secure your legacy with estate planning.”

The core components of an estate plan include a last will, power of attorney and advance directives for health care decisions, sometimes called health care power of attorney or health care proxy. Your family will face additional stress and expenses if you don’t have a last will. Your wishes for the disposition of property won’t be honored, unless you proactively have an estate plan created.

Will charitable giving be part of your legacy? This also requires advance planning. When you make donations to individual charities or use Donor Advised Funds, you create a legacy of giving and may also create tax benefits. An experienced estate planning attorney will help create a plan to maximize the tax advantages of charitable gifting.

Estate planning is especially important for women, who statistically live longer than men and tend to have lower earning power. Women need to consider who will be their caregivers if their partners predecease them or if they are solo agers.

Discussing family dynamics with an estate planning attorney can help ensure that the estate plan is created to address individual needs. Estate planning is never a one-size-fits-all plan.

Estate planning also requires regular reviews. One estate planning attorney advises her clients to revisit their estate plans every time there’s a presidential election. It’s an easy way to remember the passing of four years, which is a good time to review an estate plan.

A carefully crafted and regularly updated estate plan addresses changes to your life and the laws governing wills, trusts and retirement accounts. The SECURE Act made major changes to how assets in retirement accounts are distributed to heirs, for instance. The addition of Roth IRA and SEP accounts created huge changes in the passing of assets to the next generation.

Your estate planning attorney will give you and your family the peace of mind of knowing you’re prepared for the future, including the unexpected events, happy and sad, that life brings.

Reference: North Shore News (October, 2024) “How to secure your legacy with estate planning”

Do I Need a Will?

 

 

Even after living through the global COVID pandemic, many people still don’t understand why they need a will and estate planning documents. One survey revealed as many as 40% thought they didn’t need an estate plan because they don’t have enough assets, says a recent article from Pittsburgh Post-Gazette, “Elder Law Guys: Having a will can bring peace, for you and your loved ones.” Even more worrisome, many of these people have minor children, who will be left unprotected if there is no will naming a guardian for them if their parents should die.

We’ve all read the stories of estate battles following the death of rich and famous people. Regardless of their age, marital status, or notoriety, their personal lives and finances became public headlines without a will and estate planning.

Regular people don’t want their loved ones to go through the mess of an estate battle, even if their personal news won’t become hot news on the internet. Here’s what to do to protect yourself and your family.

Make an inventory of your property. Include everything: your home, bank and investment accounts, personal possessions, retirement funds, life insurance, cars, boats and shares in a family business. Listing out who gets what in your will can avoid some (but not all) fights among relatives and siblings.
Even if you rent a home, if you’re employed and have a 401(k) and a bank account, you’ll want to be sure the people you care about inherit your property.

If yours is a blended family, or if you and your partner aren’t married, estate planning is even more critical. Estate planning is how you ensure that your biological children inherit your assets. If you’re not married, you need to take extra care, so you and your partner protect each other in case of a health emergency as well as for property distribution after death.

For parents of young children, a will is essential. Your will is the document used to name who you want to raise your children—a guardian. Without it, the court will decide, and it may not be the person you would have wanted. Your estate plan is also how you determine how children’s living costs will be paid. Your life insurance policy might belong in a trust, with a trustee named to oversee how funds are distributed to the guardians.

Your will is also used to name an executor, the person who will administer your estate, distribute assets, pay final taxes and estate taxes and ensure that your wishes are followed. An executor needs to be organized, responsible and trustworthy.

An estate plan should include documents to protect you while you are living. These include a Power of Attorney for financial and legal decisions in case of incapacity. A Healthcare Proxy or Medical Power of Attorney is needed so another person can be involved in your medical care, if you’re unable to speak for yourself. An experienced estate planning attorney will also discuss the need for a Living Will and other documents you might want to have.

The peace of mind resulting from having an estate plan in place can’t be measured. Knowing that you’ve protected your loved ones and yourself in life and after you’ve passed is a worthwhile investment.

Reference: Pittsburgh Post-Gazette (Sept. 22, 2024) “Elder Law Guys: Having a will can bring peace, for you and your loved ones”

Estate Planning When You’re Single

 

For one woman, the wake-up call arrived when listening to a friend explain all the tasks she needed to perform for her 91-year-old mother, whose needs were increasing rapidly. Solo agers, people who are growing older without spouses, adult children, or other family members, are now a significant part of the older population, says the article “Going Solo: How to Plan for Retirement When You’re on Your Own” from The New York Times.

Seniors who are married or have adult children have many of the same retirement planning issues as their solo ager counterparts. However, figuring out the answers requires different solutions. Managing future healthcare issues, where to live and how to ensure that retirement savings lasts needs a different approach.

Options must be addressed sooner rather than later. Estate planning is a core part of the plan. While you can’t plan everything, you can anticipate and prepare for certain events.

Determining who you can count on in a healthcare crisis and to handle your financial and legal issues is key. This is challenging when no obvious answers exist. However, it should not be avoided. You’ll need an estate plan with advance directives to convey your wishes for medical treatment and end-of-life care.

An estate planning attorney will help draw up a Power of Attorney, so someone of your choice can step in to make legal and financial issues if you become incapacitated. You’ll also want a Healthcare Proxy to name a person who can make medical decisions on your behalf if you can’t communicate your wishes. While it’s comfortable to name a trusted friend, what would happen if they aren’t able to serve? A younger person you know and trust is a better choice for this role.

A Last Will and Testament is needed to establish your wishes for distributing property. Your will is also used to name an executor who administers the will. Think about people you trust who are a generation or two younger than you, like a niece or nephew or the adult child of someone you know well. You’ll need to talk with them about taking on this role; don’t spring it on them after you’ve passed. Just because someone is named an executor doesn’t mean they have to accept the role.

Where you age matters. From safety and socialization standpoints, aging alone in a single-family home may not be the best option. Having a strong network of friends is important for the solo ager. Moving to a planned community with various support systems may be better than aging in place. Explore other housing options while you are still able to live on your own, so you can make an informed choice if and when the time comes for community living.

A combination of professional help will make the solo aging journey better. An experienced estate planning attorney, financial advisor and health insurance source can help you navigate the legal and business side of your life. Check with your town’s senior center for available social services and activities resources.

Reference: The New York Times (Sept. 21, 2024) “Going Solo: How to Plan for Retirement When You’re on Your Own”

Why Does Young Family Need an Estate Plan?

 

If you thought estate planning was just for grandparents, think again. Families with young children should have an estate plan. In fact, they should start working on their estate plan as soon as they know they’ll be welcoming a new member into the family. A recent article from Chronogram, “Why Estate Planning Is Important for Young Families,” explains why this is critical to protecting children.

Without a will, the court will make all kinds of decisions about the children’s lives, from who will raise them to how their living expenses will be paid. The decisions may not be what the parents would have wanted. Family members will still need to undertake expensive and stressful litigation if they want to go against the court’s recommendations.

The Last Will and Testament is used to distribute assets after the owner dies, including the primary residence, bank and investment accounts and personal property. Without a will, the state law determines what happens to the property. Let’s say someone dies with a spouse and young children. In some states, the spouse automatically receives the first $50,000 in value. The rest is divided equally between the surviving spouse and all children.

What happens if the children aren’t old enough to inherit property? Minors are not legally permitted to receive property, including ownership interest in real estate. If there is no will, the court appoints a guardian for the child. This can lead to unnecessary costs and delays in managing the ownership of the home. Having a will where each spouse leaves their property to the surviving spouse prevents this situation.

Wills are also used to appoint guardians to take care of children in the event both parents pass away. Guardianship refers to the person who will raise the children, which is different than managing the financial assets for the children’s living expenses. Parents are often advised to name a person other than the guardian to handle support for the children. Proceeds from life insurance policies, investment accounts, etc., may be better managed by a second person. A trust may need to be created and funded for these assets.

The role of the executor is especially important where minor children are involved. An executor overseeing the management of an estate when small children are involved needs a different mindset than someone distributing assets after the death of elderly parents. Another reason parents of young children must have a will and name a responsible executor is to protect the children’s futures by making sure that resources needed for the children’s support aren’t squandered because of family fights over the estate.

An experienced estate planning attorney can craft an estate plan to fit the family’s needs and protect the surviving spouse and children. There’s no need to leave the decisions up to a court when having a will and related estate planning documents can be prepared to protect the family.

Reference: Chronogram (Sep. 10, 2024) “Why Estate Planning Is Important for Young Families”

Can I Bequeath the Family Home to My Children?

 

You may believe giving your home to your adult children is a generous move leading to happy memories. However, this isn’t always true. One story recounted in a recent article, “Inheriting a Home With Your Siblings? Here’s All That Can Go Wrong,” from Realtor.com, is an example of how badly this could go.

Three siblings were left their parent’s house when the second parent died. One sibling wanted to keep the house, while a second brother and a sister wanted to sell it and split the money. They had the property appraised, and the sibling who wanted the house bought out his sibling’s shares, paying them both a third of the house's current value. One brother blew his inheritance on a sports car, exotic vacations and an expensive nightlife. The sister bought a boat.

Fast-forward a few years, and real estate values skyrocketed. The brother who bought the house decided to sell it before moving away to be closer to his wife’s family. The house had tripled in value. His siblings now think he should share the profits he made, even though his siblings didn’t want the house. The rest of the family sides with the siblings, making matters harder for the brother.

Estate planning attorneys were asked for their opinions on the matter, and all agreed. He made the decision to buy the property when they didn’t want it, so he owned it free and clear. They aren’t entitled to share the profits. They certainly wouldn’t have shared the losses if the property value had gone down!

Other families fight about the contents of the house. This is why everyone needs an estate plan with a last will and testament clearly detailing how they want their estate, including personal possessions, to be distributed. Hoping the children “work things out” doesn’t end well for most families.

Some families like to have an estate sale company come in and sell the contents of the house and split the profits, while others flip a coin to see who gets what.

Another issue about personal possessions is items disappearing. Sometimes, aging parents decide to declutter without telling anyone. In other cases, a child or family member decides to take something without telling anyone.

How can you prevent your children from fighting over the house or its contents? Have a will made and discuss how to handle your unique situation with an estate planning attorney. Make sure the will includes clear directions as to whether or not the house should be sold or how the shares should be distributed. You could also add a provision stating that if one child buys the shares at fair market value, the transaction is final and the other siblings may not pursue any future gains after the sale.

Parents should never leave property to one child and expect the child to share the proceeds with any other siblings or family members. If property is left to one sibling, they have no legal requirement to share any portion of their inheritance. This happens more often than you’d think despite it being an easy situation to avoid.

As the example above illustrates, even buying out siblings’ shares can lead to problems. If the sibling buying out others' shares is also the executor or the trustee, the siblings and parents would be wise to meet with the estate planning attorney to clarify how this asset will be distributed and what their role will be. Executors who are also beneficiaries can find themselves at the centers of estate battles.

Families may think they don’t need to put things in writing. After all, they’re family. However, when it comes to inheritances, having everything in writing, property prepared by an experienced estate planning attorney and clearly understood by all, is the best you can do to prevent any estate battles among your loved ones.

Reference: Realtor.com (Sep. 14, 2024) “Inheriting a Home With Your Siblings? Here’s All That Can Go Wrong”

Curated a Collection? You Need an Estate Plan for It

 

If you’re wondering if you need an estate plan, the simple answer is yes. The reasons are many, but among them is the answer to this question posed in an article from Morningstar, “A dilemma of the ultrawealthy: Who inherits the wine and art collections?”

The number of zeroes appearing after your estate value doesn’t matter to the courts who will decide what happens to your assets after you die if you don’t have a will. If you don’t have a last will and testament, your family will have to go through months or even years of sorting through your affairs. The entire estate will go through probate, which is costly and takes time. Without an estate plan, your heirs will see any inheritance shrink after state and federal estate taxes.

A better way is to have an estate plan created. You need a Power of Attorney and Healthcare Proxy to allow a trusted person to make legal and medical decisions on your behalf if you become incapacitated. You need a will to name an executor, a person of your choosing, to manage your estate after your death. If you have young children, you want to name the person who will take care of them and not hope the court doesn’t pick a family member whose lifestyle and values don’t match your own.

What about the collection you’ve spent a lifetime diligently assembling, thinking it will have greater value for heirs than a traditional financial investment plan? Whether you have a coin or stamp collection, own a small fleet of midcentury cars, or enjoyed curating a wine cellar, your collection has limited appeal for your heirs. Younger generations aren’t as interested as you think in these items, either as a means of amassing wealth or something to fight with their siblings over when you’ve passed.

When faced with shrugs over who wants what from the collection, most people put their heads in the sand and expect the children to figure it out after they’re gone. For one sports memorabilia collector, the eye-opening moment came when he sat down with his adult children to discuss their role in continuing his collection. No one was interested.

His response was proactive. He created a spreadsheet of the assets meticulously documenting their provenance, value and where they could best be sold. He also included information tracking the life-cycle of the collectibles, documenting the family’s lack of interest in the collection and insurance protection.

Another example of the importance of documentation came from the experience of a woman whose uncle had a massive coin collection. Twenty boxes of coins were set out in the family’s den, and she spent evenings creating an equally massive spreadsheet. The spreadsheet was submitted to a reputable antiques company, which sent a representative to review and purchase the collection only because the documentation was thorough and the coins had some value. It must be said—the coin collection was valued at far less than expected.

Depending on the collection, your estate planning attorney may also suggest making a charitable donation to a local, regional, or major cultural center. If you have a collection of movie posters, for instance, a local independent cinema might be able to auction them off at a fundraiser.

Addressing collections of any kind and planning for their eventual sale or distribution should be part of your estate plan. An experienced estate planning attorney can help create an estate plan to protect your assets, even those your heirs don’t value the way you do.

Reference: Morningstar (September 3, 2024) “A dilemma of the ultrawealthy: Who inherits the wine and art collections?”

When Should I Start Doing Estate and Tax Planning?

 

Estate planning creates a legal framework to manage assets in the event of incapacity or upon death and should include tax planning to protect income and inheritances. A recent article from The Street, “Don’t Be a Grasshopper: The Importance of Proactive Tax and Estate Planning,” references Aesop’s fable of the Ant and the Grasshopper. The ants are always hard at work, preparing for winter, while the grasshoppers play all summer and starve when winter comes.

Fundamentals for estate plans include having an experienced attorney create a last will and testament to convey your wishes for asset distribution. This is also done through the creation (and funding) of trusts, which take assets out of your personal ownership and place them in a separate legal entity. One of the many benefits of trusts is that assets are distributed directly to beneficiaries, without needing to go through probate.

Other estate planning documents include a Power of Attorney, which designates another person of your choice to handle financial and legal decisions on your behalf if you are incapacitated. The Power of Attorney ends upon your death, so it is only used while you are living. Similarly, a Medical Power of Attorney, sometimes known as a Healthcare Proxy, is used to give another person, also of your choosing, the power to be involved with your medical care, speak with your health insurance provider and be part of your health care decision making.

Which estate and tax planning strategies you need will depend in large part upon the size of your estate. If you own a home, a car and investment accounts, a will is needed to distribute your assets and different types of trusts may be needed. If the family includes a disabled family member, you should speak with an estate planning attorney about Special Needs Trusts. If long term care is a concern, a Medicaid Asset Protection Trust may be helpful to protect the well spouse and family.

Proactive planning can be a little more complex for those with significant wealth. Strategies like a Dynasty Trust or Irrevocable Trust may be needed for those whose estates reach estate tax exemption thresholds, which are likely to shrink considerably in the future.

When possible, communicate your wishes with the family so there are no surprises after your passing. Decide how transparent you can be with your children and grandchildren. In some families, this is accomplished with a series of family meetings. For others, holding a meeting in the estate planning attorney’s office with the attorney present to answer questions can be more productive.

Regardless of your estate size and family dynamic, taking the time to create or update an estate plan is a kindness to your loved ones. They’ll know you made an effort to prepare so they can celebrate your life and hold their memories close without the distraction of family fights or protracted court proceedings.

Reference: The Street (September 3, 2024) “Don’t Be a Grasshopper: The Importance of Proactive Tax and Estate Planning”

Do You Need a Will and an Estate Plan?

 

Dying without a will can cause your family to go through at least a year, maybe longer, of probate, fights over property distribution, and, in many cases, litigation against each other. This is probably not the legacy you have in mind, which is why this aptly-titled article, “You need a will and here’s why,” from Lincoln County Leader, is a good read.

Dying intestate, the legal term for dying without a will, means the local jurisdiction will be in charge of how your estate is handled. Each state has its own laws for distribution. In most states, distribution is based on kinship or bloodlines, so if you have relatives, they may be first in line for your inheritance.

In some states, when there is no will, the surviving spouse receives 50% of all assets, and the remaining assets are divided equally among the children. In other states, the spouse gets 30%, with the children receiving the balance. You must have a will if you want your spouse to receive 100% of your assets. If you have children but no spouse, they will usually inherit everything in equal shares.

If you have no children and no spouse, property distribution can become more complicated unless you have a will. The court may give your parents your estate if they are living. If your parents have passed, your siblings are the next likely heirs. The court will seek to identify your closest relatives by kinship, and they may inherit all of your worldly goods.

If there are family heirlooms, you want to give to a particular child, or if you want to have a portion of your estate go to a charity, it won’t happen without a will.

Today’s family often is a bit more complicated than in the past. Blended families need to have estate planning so biological children aren’t disinherited. Estranged relatives could end up with your precious heirlooms unless a will is in place.

What if your children are minors? A will is used to name a guardian for children, so they are brought up by the people you trust. The court will decide who will raise your children if you don’t name a guardian in your will. Also, minor children cannot inherit property, so if you die, your spouse will get their share as per your state’s laws, and the children’s inheritance will be overseen either by the court or by a person named by the court.

Having a last will and testament allows you to direct who is to inherit your assets, from personal items to financial assets. But you need to do more to protect yourself and your family, and this is part of the estate planning process.

When you sit down with an estate planning attorney, they will also review matters, including beneficiary designations (i.e., the people named to receive assets upon your death on life insurance, retirement accounts, and certain financial accounts). They’ll also advise you on documents like a Power of Attorney and Medical Power of Attorney, which allow you to name someone to take care of your financial and healthcare matters if you become incapacitated.

Taken all together, an estate plan provides security for your family, protects you while you’re living, and creates a legacy of caring about the ones you love.

Reference: Lincoln County Leader (Aug. 4, 2024) “You need a will and here’s why”

What are the Essentials of Estate Planning?

 

Once you’re familiar with the basics, estate planning isn’t quite as daunting as it may seem at first, says a recent article from The Atlanta Journal-Constitution, “Estate planning 101: A guide to management.” Estate planning includes the necessary planning to protect you while living and distributing assets after you have passed.

Your estate plan depends on many factors, including the size of your family, whether you’re married, widowed, or single and the amount of your assets, including your home, investment accounts, real estate, retirement accounts and digital assets.

One important thing to know: estate planning is not just for wealthy people. If you think you don’t have enough assets for an estate plan, you’re wrong: any adult needs an estate plan to protect themselves and their loved ones.

Consider your last will and testament as a gift to your loved ones. A will is a legal document containing instructions for distributing your property to heirs upon death. What constitutes a valid will varies from state to state, so you’ll want to work with a local estate planning attorney to create a will.

If you die without a will, your estate is considered “intestate,” and your property will be distributed according to the laws of your state and the probate court. Your family won’t have any say in whoreceives assets. They could go to a distant relative you’ve never even met. With a will, you get to decide (within the bounds of law, of course) what you want to happen with your assets.

Trusts are used to have further control over assets in an estate. Wills become part of the public record once filed in probate court. However, the contents of a trust remain private. The trust can be used to hold assets while you are living, and certain types of trust only become effective upon your death. Another benefit of a trust is that it can allow a trustee to manage assets in the trust if you become incapacitated.

Special Needs Trusts are created for people with developmental disabilities to provide support in addition to government benefits. Medicaid Asset Protection Trusts take assets out of a person’s estate, often as part of planning for long-term care costs. An estate planning attorney can recommend the type of trust best for your unique situation.

A power of attorney is a document used while you are living to give another person the ability to manage your affairs in case of incapacity. Everyone should have a POA for their financial and legal affairs and a Medical or Health Care Power of Attorney, so a trusted person can help with medical decisions and be involved in decision-making for medical care.

An executor is a person you name in your will who is in charge of your estate and estate management after you have died. You can name one or two people to be executors of your estate. However, be sure that they work well together to avoid any stalemates.

An experienced estate planning attorney can make this a relatively straightforward process, giving you the peace of mind of knowing you have taken the necessary steps to protect yourself and your loved ones.

Reference: The Atlanta Journal-Constitution (Aug. 1, 2024) “Estate planning 101: A guide to management”

Should All of My Assets Be in a Trust?

 

By now, you may have heard about the “great wealth transfer,” which refers to Americans inheriting as much as $72 trillion over the next twenty years. Do you have a plan in place for your family? A recent article, “Is a Living Trust Really the Best Way to Pass an Inheritance to Your Family?” from The Motley Fool, explains how this estate planning tool works.

How does wealth pass to heirs? One way is a Last Will and Testament. However, a Living Trust may be better. The Living Trust is the creation of a legal entity, the trust, which allows the person creating it—the grantor—to control the trust and the assets in it during their lifetime. When the grantor passes, the secondary trustee takes over, managing assets in the trust and distributing them according to the language in the trust.

A living trust isn’t for everyone. There are definite advantages. However, there are also some disadvantages you’ll want to understand before deciding if this is for you.

Living Trusts allow the grantor to maintain control of the trust and the assets within the trust. The grantor can change their mind about any aspect of the trust at any time. They can change beneficiaries, remove assets or even close the trust.

The Living Trust takes assets out of your probate estate, meaning the assets in the trust are distributed to beneficiaries with no court involvement. Probate is a lengthy, expensive and public process. It can take months or years to complete, and the will becomes part of the public record. Anyone who wants to, from nosy relatives to scammers, can read the will.

Those with significant wealth use trusts to keep their private business private. People with estranged family members use trusts to maintain privacy and prevent feuds.

However, there are some downsides to consider. There is some work and costs associated with trusts. Placing assets into a trust requires retitling those assets, such as real estate or investment accounts.

You should speak with an estate planning attorney, especially if your goal in creating a trust is to qualify for Medicaid. This is a different type of trust requiring the help of an experienced estate planning attorney.

A trust isn’t an instant tax shelter. An estate planning attorney should be consulted to create the proper legal entities if your main goal is to take assets out of your estate to avoid federal, state, or inheritance taxes.

Trusts aren’t do-it-yourself projects. To do this right, you’ll want the help of an experienced estate planning attorney. They’ll help you define your goals and then create a plan to achieve them.

Reference: The Motley Fool (July 5, 2024) “Is a Living Trust Really the Best Way to Pass an Inheritance to Your Family?”

Can You Get Around Probate?

 

As any estate planning attorney will tell you, probate takes time, costs money and adds stress to settling a loved one’s estate. A reporter shares her personal experience in a recent article appearing in Market Watch, “Inheritance isn’t automatic: The probate process can take almost two years and cost thousands of dollars.”

Most people have a vague notion of what probate is. They understand it to be a process where the family must file the will with the country court and wait for it to be approved before distributing assets. If there’s no will, they may think probate is the process of settling the estate.

Others think inheritance happens automatically, with heirs receiving 35% of an estate. This is not true. One of the easiest ways for assets to go to heirs outside of probate is to make the most of beneficiary designations. Certain financial accounts offer the option to assign someone as a beneficiary, usually investment, retirement and bank accounts. After the account owner dies, the heirs apply for their inheritance with a death certificate and proof of their identity.

A recent study showed that only 2% of people understood that the average period of time to probate an estate is 20 months. While there are some jurisdictions where probate happens more efficiently, most estates take a long time to go through the process.

How can you avoid probate or simplify your estate so fewer assets go through probate? Your estate planning attorney will be able to explain how using trusts takes assets out of the estate. Another is simplifying your life. If you have assets with multiple investment companies, for instance, consolidating them into one account with one financial institution could streamline the process for your heirs.

While you’re consolidating your accounts, check on your beneficiary designations. If you opened an investment account twenty years ago, you may have named someone who isn’t in your life anymore. They may be happy to receive a surprise inheritance from you. However, your family won’t be able to get the assets, even if your will says otherwise.

For an excellent example of how to manage an estate, consider the actor Matthew Perry. Most of his estate was transferred to heirs through trusts, which avoided large assets going through probate and kept his personal business private. One bank account had no named beneficiaries, so his family went to probate court to file his “pour-over will.” This is a will where assets not already in trust are directed to be added to the trust after death. Because the will was filed in court, reporters were able to obtain information about this one account. The rest was private.

Consult with your estate planning attorney to determine how to structure your estate best to avoid or minimize probate for your loved ones.

Reference: Market Watch (July 17, 2024) “Inheritance isn’t automatic: The probate process can take almost two years and cost thousands of dollars”

Do Single Parents Need an Estate Plan?

 

Raising a child or children by yourself is challenging on many levels. Single parents have very little spare time or resources, making planning for the future even more important than if another parent was involved. This includes estate planning, as discussed in a recent article from The News-Enterprise, “Single parents must be deliberate in estate planning.”

Two key decisions to be made with minor children are who to name in a will as their guardian, the person who will raise them if the parent dies or is incapacitated, and who will be in charge of their finances. If another biological parent is involved in their care, things can get complicated.

Whether or not the other parent will be named as a guardian who will take custody of the child(ren) depends on whether or not they have any legal custody of the children. If the parents were married at one time but the marriage ended after the child was born, there is likely to be a separation agreement addressing custody.

If both parents share custody, the surviving parent would take custody of the child. This is standard practice, regardless of who has primary custody.

But if the parents never married and no one pursued an order of paternity or entered a custody order recognizing the legal rights of the noncustodial parent, or if a parent has lost any legal rights to the child, the parent needs to name a guardian and an alternate guardian.

Even if there is a surviving parent, you’ll want to name at least one guardian and one contingent guardian. There are instances when the noncustodial parent prefers not to become the custodial parent, even if the child’s other parent has died. There are also cases where the noncustodial parent is not fit to raise a child, so having other potential guardians named is a better idea.

Separate from the guardianship issue is the decision of who should manage the assets left for the child. You have a right to name the person of your choice to oversee these funds, regardless of whether or not the other parent is living. In most cases, there are two general options:

Conservator: This is a court-appointed person who is responsible for any assets left outside of a trust or any income received by the child. The conservator can be the same person as the guardian, but it does not have to be the same.

Trustee: A best practice in estate planning for a child is to leave the property in trust to be distributed for specific purposes, like education, health care, and general support. Assets can be left in trust through a last will and testament or through a trust set up while the parent is living to benefit the child.

An estate planning attorney should be consulted to determine how best to structure planning when there is only one parent. This protects the child and gives the parent peace of mind.

Reference: The News-Enterprise (July 5, 2024) “Single parents must be deliberate in estate planning”

What are Risks of a DIY Estate Plan?

 

The number of online tools purporting to create estate plans easily and cheaply makes it tempting to forgo working with an estate planning attorney, but the long-term consequences of a DIY estate plan could be disastrous. A recent article from mondaq, “Risks of DIY Estate Planning” takes a close look at what can go wrong.

Estate and tax laws are both complicated and nuanced. Without an experienced estate planning attorney overseeing the creation of an estate plan, a homegrown plan isn’t likely to achieve the desired results. In addition, chances are good it won’t follow state law. If a last will and testament is found to be invalid during probate, it’s as if there was no will at all.

Estate planning needs to be created for each person’s unique situation. Do family members get along, or should the estate plan be designed to be litigation-proof? Are there large assets held in trust or corporations with complex tax consequences? If there are family members with special needs, have the proper trusts been established to protect them over their lifetimes?

Tax planning is often a significant part of an estate plan. Depending on your state and where you own property or businesses, your estate must consider many different types of taxes. Transfer tax, capital gains taxes, income taxes, and estate taxes are just a few of the taxes to be addressed. If the estate plan doesn’t dovetail with tax liabilities, beneficiaries could find themselves with a far smaller inheritance than anticipated.

Today’s modern family is not as straightforward as in the past. Families come in many different variations, all of which have their own special challenges. Blended families are fairly common, and a traditional “I love you” will, where one spouse leaves the other everything and vice versa, may result in some children being disinherited. Same-sex married couples with children need to be sure their children, biological and adopted, are protected with an estate plan designed to protect all members of the family.

Comprehensive estate plans should address asset distribution issues, guardianship for minor children, and name an executor and heirs. A Power of Attorney is needed so spouses may be involved in each other’s healthcare. Living Wills are required to clarify wishes for end-of-life care, as are Advanced Medical Directives. There are a host of documents to be created and decisions to be made, all of which require the knowledge and experience of an established estate planning attorney.

Reference: mondaq (July 1, 2024) “Risks of DIY Estate Planning”

Do Single Childless People Need an Estate Plan?

A single person without children can focus on their personal goals, including philanthropy. However, it takes planning to ensure that their assets are distributed according to their wishes. A recent article, “I’m an Estate Planner: 8 Ways Single and Childfree People Can Manage Their Assets” from AOL, provides tips for singles with no children and notes that they need an estate plan.

One of the challenges facing singles is the need to have an estate plan in place earlier in their lives than marrieds or parents. If the state is unable to identify a next of kin, the state will take the assets as unclaimed. This is probably not what anyone has in mind for their property.

Consider the people and organizations that have meaning for you. Have an estate plan prepared by an experienced estate planning attorney, who will help you clarify who might be a suitable heir. It may be a close friend, charitable organization, niece, or nephew. Remember to update your will as life changes occur.

For some singles, the preferred option is to “die with zero.” The concept is not to leave any generational wealth behind but to live their lives to the fullest, including philanthropy and gifting while they are living. This lets them see the good work done by charities and the benefits to those they choose to give assets to.

A challenge for some singles is identifying a person to serve as their executor, who will administer their estate, including distributing assets, after their death. If no executor is named in a will or there is no will, a court will name an administrator, and assets will be distributed according to the state's laws.

Do single people need to establish trusts? Trusts are extremely useful in the event of incapacity, which no one wants to think about but needs to be addressed. If you become incapacitated, the trustee can use the funds in a trust to keep your bills paid and your household running. There are also trusts used in charitable giving to meet your philanthropic goals or trusts to protect assets if you need long-term care.

Designating people to serve as your Power of Attorney and Healthcare Proxy is especially important for singles with no children. This way, people of your choosing can oversee your day-to-day financial and legal matters and be involved in your medical decisions.

Finally, don’t leave any of this to chance. Have conversations with people you’ve chosen to fulfill various roles, including executor, power of attorney, healthcare proxy and trustee. Make sure that they understand what you are asking them to do, and be sure they are willing to take on the tasks.

A consultation with an estate planning attorney is the first step to implementing a plan.

Reference: AOL (June 7, 2024) “I’m an Estate Planner: 8 Ways Single and Childfree People Can Manage Their Assets”

Top Estate Planning Mistakes Can Easily Be Avoided

The music icon Prince was far from the only celebrity failing to have a will, the most significant estate planning mistake of all. Tobacco heiress Dorothy Duke named her butler the executor of a $1.3 billion estate, and her family spent millions on legal costs before the estate was settled. You don’t have to be wealthy to make an expensive estate blunder, says a recent article from Microsoft Start Money, “Seven Estate Planning Mistakes You Can’t Afford To Make.” Regular people also make costly mistakes. However, they can easily be avoided by following these steps.

Procrastinating until the “right” time. Making decisions when you’re under a time constraint because of an unexpected event is a bad time to do estate planning. Leaving a mess for your children to figure out will almost always end badly. Fighting among family members, assets lost to cost battles and unnecessary stress are just a few of the headaches. It’s not how you want to be remembered.

Not updating your estate plan. Wills are like pets—they require ongoing care. If a new child is born and your will isn’t updated, you’ve effectively disinherited the child. If you remarry and don’t update your estate plan or beneficiary designations, your new spouse will have little recourse to what you might have left them. The same goes for major changes in your financial life, up or down.

Putting your head in the sand about taxes. In the last 15 years, there have been many tax changes. Failing to address tax changes with estate planning in mind can lead to financial disasters. Remember, you may not be near the federal estate tax threshold. However, if your state levies estate taxes, you’ll need to plan for them.

If the lifetime estate and gift tax exemption reverts to pre-2017 tax law levels, “average” wealthy people with estates worth around $6.46 million will pay federal estate taxes. If this is your situation, start talking with your estate planning attorney now to address this change.

Ignoring incapacity. We’re not sure which is harder to consider, incapacity or death. Neither is pleasant to consider; one is likely, and another is certain. Having the right plan in place means having the power of attorney, health care directives, HIPAA release forms, do not resuscitate, living wills and other documents specific to your state are all part of estate planning.

Forgetting to plan for non-cash assets. If you own a home, what do you want to have happen to the home upon your death? If you become incapacitated, who will take care of your home, your pets and any property requiring upkeep? Classic cars, antiques and art collections must be disposed of in a planned manner.

Neglecting digital assets. More and more of our lives are now conducted online. Bank accounts, social media, photos, online businesses and cryptocurrencies are not included in household assets by your will. You’ll need to provide a tech-savvy person with information on your accounts, create an inventory and direct the person to serve as your digital executor.

Trying to do it yourself. Creating an estate plan without the help of an experienced estate planning attorney is asking for trouble. Here’s just one example: a family thought it was a good idea to retitle the house to Joint Tenancy with Right of Survivorship for the parent and an adult child. They didn’t know about the child’s serious debt situation. The child now had an asset, and creditors moved swiftly to put a lien on the house. The family eventually lost the house to the creditors.

Reference: Microsoft Start Money (June 23, 2024) “Seven Estate Planning Mistakes You Can’t Afford To Make”

How Younger Adults Take Charge of Estate Planning

However, recent anecdotal trends show a new, positive shift among millennials or Gen-Z individuals. According to a recent article from Forbes, “Why Gen-Z Is Suddenly Creating Wills And Trusts—And You Should Too,” within recent months, more and more millennials and Gen-Zers who are being told to create an estate plan are actually going ahead and doing so.

The article says Gen-Zers and millennials have become the “quiet leaders” of estate planning. Several things are driving this shift:

Digital Assets. Younger people, even those of modest means, have significant digital assets, including cryptocurrencies, online businesses and many social media accounts.

COVID. Living through a global pandemic and experiencing the unexpected loss of family members raised awareness relatively early in their adult years of the repercussions of not having an estate plan.

Changing Family Structures. “Modern Family” is more than entertainment. Today’s family is more likely to be different than the traditional family structure of the past, and clear directives are needed to prepare for asset distribution.

Valuing Philanthropy. Younger adults are more aware of the role nonprofits play, whether in their immediate communities or globally. They are also more likely to give a portion of their estate to nonprofit organizations.

Financial Savvy. Younger adults are more candid than past generations with their peers about money and how to protect it through estate planning as part of money management and investment strategies.

Having an estate plan can protect a legacy for family and children, while not having one could mean giving half of your estate to the government in taxes. An estate planning attorney can help to avoid or minimize probate, a court process requiring your will to become a public document. Probate can delay the distribution of property and can be costly.

Another reason to have a will is to minimize family conflict. Your family won’t be left guessing how you want your assets to be distributed. It is also less likely that there will be family fights or misunderstandings after you’ve passed.

Estate plans are not just for wealthy people but anyone who cares enough about their family to protect them. Younger adults embracing estate planning is a good sign for the future.

Reference: Forbes (April 17, 2024) “Why Gen-Z Is Suddenly Creating Wills And Trusts—And You Should Too”

Would Your Family Benefit from a Living Trust?

 

Estate planning is rarely on top of anyone’s bucket list. However, taking charge of your legacy is a gift to your family and should be done sooner rather than later. A recent article from The Motley Fool explains why a living trust should be part of your estate plan. The title says it all: “3 Reasons to Seriously Consider Using a Living Trust to Pass Inheritance to Your Family.”

At its essence, a trust is a way for one person to own and manage another person’s property or even to manage their own property. The IRS definition of a trust is as follows: “In general, a trust is a relationship in which one person holds title to property, subject to an obligation to keep or use the property for the benefit of another.”

A living trust requires you (the grantor) to transfer assets into it. If you manage the trust yourself, you are also the trustee. This lets you make all decisions for the trust while leaving instructions in very specific language for its distribution by a successor trustee (or two successor trustees) after you pass away.

Having the correct language is essential for the trust to achieve your goals, which is best prepared by an experienced estate planning attorney. They will know how the laws of your jurisdiction treat trusts and what language must be included for the trust to be valid.
Property can also be distributed through a last will and testament. However, there are several advantages to using a living trust.

Trusts avoid the time and costs of probate. During probate, the court supervises the distribution of assets. It takes time—months or, depending on the complexity of the estate, years. During this time, heirs don’t have access to assets, which they may have been counting on to pay for final expenses or maintain a home.

Trusts keep your life and death private. Once a will is filed with the court, it becomes a public document. Anyone who wants to can review its contents. Creditors, ex-spouses, estranged family members and salespeople can all review the will. This is why phone calls and mailings from realtors and financial advisors after a death in the family often besiege loved ones. Trusts remain private and are only reviewed by the trustee and, in some cases, beneficiaries.

Revocable trusts are flexible. While a revocable trust doesn’t provide the same level of tax protection as an irrevocable trust, it allows you, as the grantor, to make changes. You can add or delete beneficiaries, move assets in or out of the trust and change your appointed successor trustees.

A trust of any kind is not a do-it-yourself project. Consult an experienced estate planning attorney to define your goals and determine the best trust for your situation.

Reference: The Motley Fool (Feb. 12, 2024) “3 Reasons to Seriously Consider Using a Living Trust to Pass Inheritance to Your Family”

How Does a Revocable Trust Work?

 

A revocable or living trust is a document created by you while you are living, creating a separate legal entity to hold title to property or receive property by being the designated beneficiary of financial assets. Real estate is moved into the trust by recording a deed for the real estate into your trust, according to the article “What are the pros and cons to putting my home in our trust” from Coastal Point.

There are many benefits to having property in a revocable trust, including probate avoidance, especially when you use one trust to hold property in more than one state, thereby avoiding having the estate go through probate in more than one state. Trusts are also used to make the administration of an estate easier and maintain property in further trust for beneficiaries within the initial trust. Trusts are also used to maintain privacy, since a revocable trust is never a public record in most states, unlike a last will and testament.

The revocable trust can be more expensive and time-consuming to set up initially. Nevertheless, they save the beneficiaries time and money after the death of the grantor (the person creating the trust). They can be a little more difficult for people to understand than the traditional last will and testament. However, the overall pros usually outweigh the negatives.

Probate is the process by which the court approves the validity of the will and the plan to distribute assets to beneficiaries. When someone dies, and their real estate and assets are not in a trust, the estate is probated, meaning an estate is opened at the Register of Wills in each state where the person owned real estate. The assets of the decedent are tied up for at least eight months, so any creditors of the decedent can submit claims against the estate. After the period of time required by each state, check with your estate planning attorney to find out about your state’s process. The estate can be closed, and assets can be distributed.

The main benefit of placing real estate in trust is to avoid probate. This not only saves time and expense but allows the property to pass immediately to the beneficiaries, be sold to a third party, or otherwise be disposed of following the instructions in the trust. Holding assets in trust also provides privacy and lets you be very specific about what you want to happen to those estates.

If the trust is revocable (as opposed to irrevocable), you also have a lot of flexibility. Changes can be made to the terms, contents and distributions as wished by the grantor. The trust can even be revoked entirely, if wished. A revocable trust remains private and is not part of the public record.

Be sure to fund the trust once it is created, either by retitling deeds or other asset ownerships. Knowing exactly how to title the property deed or make proper changes to account names is something your estate planning attorney can help with.

Reference: Coastal Point (Feb. 15, 2024) “What are the pros and cons to putting my home in our trust”

How to Protect Your Spouse when Diagnosis Is Dementia

 

Few illnesses are as terrifying as dementia, for which there is no cure. If estate planning is in place, it may need to be adjusted to address new, more imminent issues. Reviewing the family situation from a legal and financial aspect is critical, and there is no time for delay, explains a recent article from Morningstar, “’I don’t want my wife to lose everything’: I’ve been diagnosed with dementia –I suddenly could not spell or write legibly.”

There are a number of steps to be taken to smooth the path ahead. First is to update your will and create a financial power of attorney. Don’t try to do this without the help of an experienced estate planning attorney.

This may also be the time to reassess your investment portfolio based on your new financial plan and risk tolerance.

An Advanced Healthcare Directive will inform doctors what actions you want them to take when you cannot make those decisions for yourself. You may want to list your wife as your healthcare proxy to carry out these decisions, but be mindful of the pressures put on a marriage when serious healthcare issues occur. Your spouse will need emotional support as well, and you’ll want to have a successor to your spouse for both the healthcare and POA documents.

Share your situation with trusted family and friends to create a team–a community of people who can provide support, part of which will be updating beneficiaries. Now would also be the time to record instructions for access to devices, documents, and even daily habits.

Long-term care insurance will help with expenses and should serve as an example for anyone reading this article. Policies should be purchased early in life when they are relatively affordable to help alleviate the financial burden of nursing home costs.

An estate planning attorney and financial advisor will help you take an accounting for assets, expenses, and projected long-term care costs. You’ll want a team approach to provide as much guidance as possible.

When to put your long-term care policies into payout status is a difficult decision. You’ll need to time this with a Medicaid plan, which your elder law estate planning attorney will be able to help with.

Now may also be the time to create a trust and divest assets to make it through the five-year Medicaid look-back, using your long-term care policy in the next five years.

There are exceptions to the five-year look-back rule for Medicaid eligibility. They include paying off debts, buying medical devices, or making home improvements to improve accessibility. However, eligibility depends upon income and other assets.

Some states, including Florida and New York, have rules exempting homes from assets calculated by Medicaid under certain circumstances. California eliminated an asset limit this year, making a person’s home automatically safe from Medicaid while they are living, but this does not mean it’s exempt from the Medicaid Estate Recovery Program.

Working with a team of professionals, including an estate planning attorney, and having the support of family and trusted friends will be important as time goes by and the disease progresses.

Reference: Morningstar (Feb. 25, 2024) “’I don’t want my wife to lose everything’: I’ve been diagnosed with dementia –I suddenly could not spell or write legibly”

How Does an Estate Plan Address Young Beneficiaries?

 

Certain beneficiaries require more intentional estate planning than others. While the law sets the age of adulthood at 18, specific testamentary instruments can redefine at what age a beneficiary is considered an adult. A recent article from The News-Enterprise, “When planning for young beneficiaries, consider all options,” explains how this works.

Young beneficiaries, especially 18-year-olds still in high school, are still immature, and their brains are still developing. Add a strong dose of grief to a teenager’s life, and even a bright, stable adolescent may not make good decisions.

Young adult beneficiaries are categorized in two ways: primary and contingent.

A primary beneficiary is one who the testator or grantor expects to be a young beneficiary at the time of distribution of assets or who is young when the estate planning documents are executed. This is typically the parents of young children or grandparents who intend to leave property to young grandchildren.

Contingent beneficiaries are those who are not anticipated to receive property as young beneficiaries. However, they could inherit if a primary beneficiary dies, such as when a grandchild receives an inheritance following their parent's death.

Even for contingent beneficiaries, some level of planning needs to be done to define the age of majority and provide options for distribution. This is done through an immediate split of assets, with assets going into a general needs trust or a common pot trust.

Assets are most commonly left to young beneficiaries through an immediate split of assets upon estate distribution. Assets are held in a separate trust for each beneficiary, with a trustee appointed for each trust. Assets within the trust are typically available for the child's health, education, maintenance, or support until the child reaches the predetermined age.

Upon reaching the age defined by the trust, the child may receive the assets either outright or incrementally over a period of time.

Another option is to use a common pot trust. This is used for parents with multiple minor children. This type of trust allows the assets to remain in one trust to be used for the needs of all children until a triggering event, such as the youngest child reaching age 18. At that time, the remaining trust assets are split into as many shares as there are beneficiaries, and the shares are distributed according to the remaining instructions. Each separate share is usually left in an ongoing general needs trust until a certain age.

Leaving property in trust for young beneficiaries doesn’t cut off their ability to use the money property. The trustee can continue to use the assets for the beneficiary's care. However, whatever is left is distributed to the beneficiary upon reaching the distribution age.

Your estate planning attorney can help you determine the best way to structure trusts for your children or grandchildren based on your wishes and their ages. By redefining the age of majority and outlining specific directions for distributions, young beneficiaries can receive the most value from their inheritance.

Reference: The News-Enterprise (Feb. 10, 2024) “When planning for young beneficiaries, consider all options”

What are the Important Steps in the Estate Planning Process?

 

Estate planning is about taking charge of your legacy and your life. Despite all good intentions, only one in three Americans has an estate plan, according to a recent article from Kiplinger, “10 Things You Should Know About Estate Planning.”

An estate plan does not prevent death or illness. However, it does protect the family from stress and grief. By creating an estate plan, you provide your loved ones with clarity about what you want to happen to your property upon your death.

Equally importantly, the estate plan explains your wishes if you have a serious medical condition and can’t make decisions or communicate yourself. A financial Power of attorney (POA) names someone to oversee your finances and do tasks like paying bills if you are alive but incapacitated. A healthcare POA names someone to make healthcare decisions on your behalf. A healthcare directive explains your wishes for medical treatment in different situations.

What happens if you don’t have an estate plan? Each state has its own laws for what to do when someone dies or if they become incapacitated. Having an estate plan means you are making those decisions yourself. The court may assign someone to make healthcare and/or financial decisions for you. However, they may not be the person you would have selected or make the decisions you would have chosen.

Beneficiary designations supersede your will. Any account with beneficiary designations will go to the person named on the document, regardless of what your will may say.

Trust funds provide control of assets during life and after death. A trust is a legal entity holding property for someone else’s benefit. The trust can be set up to control exactly how you want your money and property distributed after death.

When you die, the court reviews your will to ensure that it’s been properly prepared and gives your executor the power to perform their tasks. This is called probate and can take time. A good estate plan can take much or all your assets out of your probate estate, speeding up the process of distributing assets faster.

Estate planning includes tax planning. In 2024, the federal exemption is $13.61 million, but 17 states and the District of Columbia levy a state estate tax. Some states also have inheritance taxes. Your estate planning attorney will help you incorporate tax planning into your estate plan.

Don’t neglect your pets. You can express your wishes in an estate plan. However, a pet trust is better. It is enforceable and provides specific information about how you want the pet to be cared for and who you want to care for it.

Digital assets need to be addressed to protect assets and prevent theft. Create an inventory of your accounts, usernames, passwords and name a person who will be your digital executor.

Review your plan every three to five years with an experienced estate planning attorney.

Reference: Kiplinger (Feb. 1, 2024) “10 Things You Should Know About Estate Planning”

What Does Your Estate Plan Include Besides a Will?

 

A last will and testament is a part of your estate plan, one of several essential documents to explain your wishes. However, a will is only the first step, and having an estate plan becomes more important as conditions and your life change says the article “Planning Ahead: Your estate plan does not end with a will” from The Times Herald.

Assets Need to Be Divided into Those Titled in Your Name Alone, Jointly Titled and Beneficiary Designations

There are different rules for how your assets are distributed upon your death. Looking at your assets and how they are owned will clarify what will happen when you pass. The review could be a surprise, especially if you haven’t updated designated beneficiaries in a while. You might be spared any shocks if you’re married and have traditionally titled assets.

If assets like your home, bank and investment accounts are titled jointly with your spouse (known as Tenants by the Entireties), those assets will pass directly to your spouse upon your death. If you have IRAs, 401(k)s, 403(b)s, or similar retirement accounts or life insurance policies, you likely named your spouse as the beneficiary. If you’ve remarried, make sure those beneficiaries are updated.

There are exceptions. You may have kept certain assets in your name only, especially if you have been married more than once. These generally will pass by will, unless they pass by beneficiary designation.

Consider how assets will pass if you become a widow or widower or are single or divorced. In most cases, your assets are mainly in your own name. You may not have named “secondary beneficiaries,” which you could have done when the original documents were drafted. It’s not too late to do this now.

Ask yourself if you want your adult children to inherit directly or if you want assets to go to grandchildren. Note that minors cannot inherit property, so talk with your estate planning attorney about creating a trust if you wish assets to go to grandchildren. When creating a trust, you can decide if you want the funds to be given to the beneficiaries in small sums over many years, when they reach certain milestones, or to be used solely for their education.

Consider the Entire Picture—Beneficiary Designations

Many people hold assets in the equity of their home or tax-deferred funds, like IRAs. Updating these beneficiary designations is a critical step for your estate plan. A difficulty might arise if you are single, divorced or widowed and don’t specify how you want these funds to be distributed.

Keep the Paperwork in a Safe Place

Once your paperwork for your will, life insurance and tax-deferred funds are completed, keep them in a safe place and tell your beneficiaries where they are located. Online access can be tricky or impossible. So many financial institutions have been bought and sold that we can’t count on their having documents properly archived.

Reference: The Times Herald (Jan. 14, 2024) “Planning Ahead: Your estate plan does not end with a will”

What Is the Biggest Mistake People Make on Their Wills?

 

Making mistakes in your estate planning can torpedo every effort made to protect your family after you die, warns a recent article from Kiplinger, “Common Estate Planning Mistakes.” Everyone benefits from a professionally-made comprehensive estate plan, a process for preparing your legal and financial affairs so assets and possessions are passed on after your death to the people or charities you want.

Not having an estate plan can create a world of trouble for those you love. The biggest estate planning mistake of all is not having an estate plan. After that, there are several others.

Procrastination. Suppose you unexpectedly become incapacitated and don’t have an estate plan. In that case, your family will be left guessing what you would want your medical care to be, in addition to needing to go to court to apply for guardianship so they can pay your bills and keep your household running. Everyone should have documents like Health Care Power of Attorney, Power of Attorney, HIPAA Release Form and Living Will in place.

Trying to make an estate plan on your own. Unless you’re an experienced estate planning attorney, there’s a lot you could leave out if you attempt a DIY estate plan. If there are errors, a court could declare your will invalid and it’s as if you never had a will in the first place. The laws of your state will be used to distribute your assets. It may not be what you had in mind.

Keeping estate planning documents in a safe or safe deposit box. Documents need to be where someone can get them in an emergency or after your passing. Safety deposit boxes are often sealed on the death of the owner. Give copies of your estate plan to your appointed executor or trustee, a trusted family member and your estate planning attorney.

Missing key documents. If your estate plan lacks key documents, your heirs might find themselves battling over the estate. Make sure your estate plan includes these documents:

Last will and testament—This document outlines all final wishes and instructions for distributing your assets and how you want your affairs managed after you die. It also is used to name a guardian for minor children and an executor to oversee the instructions in the will.

Beneficiary designations—Any account allowing for beneficiaries, including IRAs, pension plans, investment accounts and insurance policies, will pass directly to named beneficiaries. Be sure that these are up to date.

Durable power of attorney for medical care—Allows another person to make medical decisions for you if you become incapacitated. Depending on your jurisdiction, it may include an advanced healthcare directive, which gives your instructions on whether or not to use life support.

Funeral instructions—Do you want a traditional burial? Cremation? Tell your family your wishes for a funeral or memorial service.

Proof of identity—Your Social Security card, birth certificate, marriage and/or divorce certificate and any prenuptial agreements will be needed for administering the estate.

Deeds or loan documents for large assets—Collect paperwork for homes, boats and other big assets.

Digital assets. These include websites, cloud storage, social media accounts and cryptocurrency, to name a few. By assigning a digital fiduciary and sharing key information, you help heirs avoid identity theft and lost assets.

Failing to update your plan. Your estate plan needs to reflect the changes in your life. If your estate plan is outdated, you may unintentionally disinherit beneficiaries.

Appointing the wrong person as executor or trustee. If your eldest child is a disaster with money management, don’t name them your executor. Consider a trusted person who is unbiased and able to manage money and family dynamics and talk with them about taking on this role before appointing them to this critical role.

Reference: Kiplinger (Dec. 30, 2023) “Common Estate Planning Mistakes”

What Questions Should You Ask an Estate Planning Attorney?

 

To protect assets and health during life and facilitate a smooth transition of assets to loved ones after your death, an estate plan needs to address many different issues. This includes the laws of asset distribution in your state of residence, potential transfer taxes and costs and strategies required to expedite and simplify succession issues. A recent article from mondaq, “Four Questions To Ask Your Estate Planning Attorney,” explains key points to cover with your estate planning attorney.

How do assets pass after death? Some assets pass through the will, but not all. It depends upon where you live, where your assets are situated, what kind of assets they are and how they are titled. State law governs how assets are conveyed after death, so consulting with an estate planning attorney in your estate is critical to creating a successful plan.

If you live in a community property state, your property will pass to the surviving spouse, who is deemed to own one-half of the community property. In these states, one cannot leave more than half of their property through a will, as you only own half.

There may be rules in your area restricting asset transfers. Some states have forced heirship rules, which require a certain percentage of assets to be distributed to a spouse or children, while others have “elective share” rights for surviving spouses. This allows the spouse to elect to take a sizable portion of their deceased spouse’s assets.

What legal documents make up an estate plan? There are two categories of estate planning documents: those used during your lifetime and those used after you die. During your lifetime, you’ll need a healthcare proxy to permit another person to make medical decisions for you. A Power of Attorney allows an agent to make financial and legal decisions on your behalf. Without these documents, your family may need to apply to the court for guardianship, which is an arduous process.

Everyone needs a will and/or trust to transfer assets after death. Lacking a legally enforceable document directing the disposition of assets, they will pass according to the laws of your jurisdiction, which may not follow your wishes. Using a trust to distribute assets combined with a “pour over will” is another approach to minimize court involvement. A pour-over will provides direction for any assets not already in a living trust to be placed into the trust when you die, thus removing assets from your probate estate and allowing them to be distributed according to the terms of the will.

What tax planning needs to be done? Federal, state, inheritance and income taxes vary by state and are subject to change. Consult with an estate planning attorney about what the tax rules are for you and how to accomplish goals in a tax-minded manner. For instance, right now (for 2024), the federal exemption for estate and gift taxes is $13.610 million per person, but this will be cut in half on January 1, 2026, so it may be wise for you to make gifts now. Some states have their own estate taxes, and a few have inheritance taxes, which apply to heirs regardless of where they live.

Have there been any recent changes to the law impacting my estate plan? Changes occur frequently on federal and state levels, making regular updates to estate plans critical to their effectiveness. Your estate plan may not reflect recent tax changes if it is over three to five years old. In addition to tax laws, other laws may significantly impact an estate plan. Regular meetings to review your estate plan with an experienced estate planning attorney could also prevent your will from being declared invalid by the court, when your estate will be treated as if there was no will and the state’s laws will determine how your assets are distributed.

Reference: mondaq (Dec. 18, 2023) “Four Questions To Ask Your Estate Planning Attorney”

 

How Does Estate Planning Protect Young Children?

 

Once you have a child, you’ve got a bundle of joy—and a lifelong commitment to caring for the child, sometimes even after they reach adulthood. What would happen if something happened to you and your partner? To be sure your child or children are taken care of, you’ll need to take these estate planning steps, as explained in a recent article from Kiplinger, “To Protect Your Kids, Consider These Estate Planning Steps.”

Appointing a guardian. Planning for the absence of parents from a physical and financial perspective needs to be done. Parents need to establish a guardian and have the person named in their will. It may be a good idea to name a secondary guardian if something happens and the primary guardian is unwilling or unable to serve in this role.

Create a trust. Parents should consider creating a trust for their children to ensure that there is money to provide for their care if both parents die. A child under the age of 18 is a minor and, as such, may not legally hold title to property. A trust is used to hold assets for the child’s benefit. The language of the trust would have instructions to provide for the children’s education, health and support.

There are two basic trusts to consider. A revocable trust is created during a person’s lifetime and can be changed anytime by the trustmaker. A testamentary trust is created as part of a will. Neither trust needs to be funded until the person passes away, at which time the property of the decedent is placed in a trust if the will contains the correct instructions. An estate planning attorney will be able to structure this plan.

Assign a trustee. This person manages the trust assets for the children's benefit. They need to be financially responsible people who can manage the funds for the children. The trustee can be a family member but should not be the same person chosen as the guardian. Keeping these roles separate ensures that the guardian will not misuse funds. Another option is to hire a professional to serve as the trustee. Professional trustees, including banks or financial advisors, usually charge a percentage of assets. In some cases, estate planning attorneys serve as trustees for minor children.

Establish terms of distribution. It’s up to the parents to decide how their children should receive trust assets. They can mandate principal distributions at certain ages, like a certain percentage at age 20, another at 30 and the balance at 40. While the parent dictates the terms of distribution while the children are minors, the trustee will be the one to decide on distributions for food, health, education, or extracurricular activities.

How do you be sure there will be money for your children? Parents should purchase life insurance, since most young parents don’t have a lot of liquidity. Term policies are the least expensive and can be for ten, twenty, or thirty years, during which the policy is guaranteed if the premium is paid. Whole life insurance is another option. However, it is more expensive.

Start a 529 college savings fund. These accounts can be funded through automatic withdrawals from a checking account, or family members can be encouraged to make gifts to these accounts. In some states, there are state income tax benefits for residents. The growth is tax-free if the funds are used for qualifying educational expenses.

When the child becomes a legal adult. Once a child celebrates their 18th birthday, they are legal adults, and parents lose their rights. New adults should have a healthcare proxy so someone can make medical decisions for them in case of incapacity. They should also execute a HIPAA disclosure form so healthcare professionals can discuss their medical care with parents.

If a child has special needs. An estate planning attorney will create a Special Needs Trust to hold assets and name a trustee to manage the funds. This trust allows a child with special needs who may be eligible for government benefits to continue to receive benefits in addition to distributions from the trust.

Reference: Kiplinger (Nov. 19, 2023) “To Protect Your Kids, Consider These Estate Planning Steps”

Can I Prevent Children from Fighting over my Estate?

Even the best of sibling relationships can become strained after the death of a parent. This is especially true if the estate includes real estate, like a family or vacation home. More than one adult child often wishes to inherit the asset for sentimental and financial reasons, according to the recent article “Estate Planning: Reducing risk of family in-fighting” from Lake County News.

Sometimes, a family discussion between parents and children about the planned property division can reach an agreement, becoming part of the parent’s estate plan. However, there are times when this isn’t possible.

When the family is a late-in-life blended family, gaining consensus among the siblings may be more difficult, especially if the two sets of children were never close or never got along.

Some children may expect their biological parents to leave the assets brought into the second marriage to their biological children. Stepparents need to take steps to ensure that their separate property goes to their own children. Their stepchildren don’t have to approve of the gift. However, it is crucial for proper estate planning to be done in advance.

If the parent wishes to give each child an equal share of their inheritance and the inheritance includes real property, it may be best to use cash gifts to equalize their shares. The monetary gifts might be funded through life insurance proceeds or by having the successor trustee borrow against the real estate.

This may mean the child who inherits the real property will take it subject to the loan, which they will pay off, or refinance the debt upon distribution.

Families who own businesses require special consideration because some children may be actively involved while others are not. Succession planning will need to be done, including placing the business in a partnership or a corporation. The children involved in the business may be made general partners or executive officers in the corporation. In contrast, the children not involved in the business could be made passive partners or given ownership interests without an active participation role.

Suppose the estate includes valuable heirlooms or items with great sentimental value. Conversations about the individual items should occur while parents live. In that case, the wishes should be incorporated into the will.

If it seems as if the family can anticipate disputes over possessions or assets, an experienced estate planning attorney can prepare an estate plan designed to withstand challenges. This type of protection varies depending on the circumstances and the anticipated nature of the challenges.

One common scenario is a disgruntled child pressuring the parents to change their will to favor the child. If a no-contest clause is used, where anyone who disputes the will and loses the lawsuit will also lose what they would have otherwise inherited from the estate, other siblings may lose out entirely. Preparing a will for challenges requires a lot of strategy and planning .

In some states, it is possible to petition the court to confirm the terms of the trust while the grantor is living. This forces any contest to occur while the parent is still living and can testify to their intentions. In some high-value estates, this is a pre-emptive strategy to be considered.

Reference: Lake County News (Dec. 9, 2023) “Estate Planning: Reducing risk of family in-fighting”

 

How Does a Pour-Over Will Work?

 

A Revocable Living Trust allows a married couple or a single person to direct what they wish to happen to their possessions after death. It also indicates who will be in charge of carrying out their instructions without the involvement of a probate court, explains a recent article from Coeur d’Alene/Post Falls Press, “If you have a living trust, you also need a pour-over will.”

It should be noted that the Revocable Living Trust instructions only apply to assets placed into the Trust, referred to as “funding the trust.” This crucial step must occur as soon as the trust is created. Your estate planning attorney can help you get your assets into the trust. However, if you acquire any new assets over time, they, too, must be placed into the trust.

If you don’t remember to put them into the trust, they become part of your probate estate unless you take steps to prevent this from happening.

If you don’t have a will and assets are not included in your Revocable Living Trust, your assets will be distributed according to your state’s laws. This is probably not what you thought when you created the Revocable Living Trust.

However, this is a problem with a solution. Your estate planning attorney needs to create what is referred to as a “Pour-Over Will.” This type of will differs from a traditional one because it includes specific instructions to place any assets not already in your trust into your trust as soon as possible.

This type of will must go through the probate process. However, probate will only apply to assets left out of the trust. Having most of your assets inside the Revocable Living Trust will help probate to be less arduous for all concerned.

The goal of using a Revocable Living Trust is to avoid probate altogether. Therefore, combining the Revocable Living Trust with a Pour-Over Will adds another layer of protection all trust users should have in place.

If you are a parent with minor children, you should have had a will created by an experienced estate planning attorney as soon as your children were born. The will is used to name the person or people who you want to serve as guardians for your minor child or children if both of the child’s parents are deceased or unavailable to act as parents.

Without this provision in your will, a court will determine who will raise your child. Will it be the person you would have chosen? There’s no way to know unless you put this information into your will.

These details in estate planning go a long way in protecting your family and ensuring that your wishes are carried out.

Reference: Coeur d’Alene/Post Falls Press (Nov. 29, 2023) “If you have a living trust, you also need a pour-over will”

Estate Planning for Millennials and Gen Zers

 

Estate planning is increasingly on the mind of younger adults, far from the stereotype of being only of interest to older, affluent couples nearing retirement or dealing with health concerns. These younger generations have unique attributes, including pragmatic financial views and humanitarian concerns, according to a recent article, “Six Estate Planning Tips for Younger Generations,” from Kiplinger. Here are tips to make this process easier for any generation.

Start with a basic will, which guides how assets and possessions are distributed after one’s passing. Prepared by an experienced estate planning attorney, the will should minimize potential disputes, include a clear delineation of assets and beneficiaries and name an executor to manage the estate and guardianship for any surviving dependents.

Appoint a power of attorney and draft medical directives. Power of Attorney and Medical Directives are basic documents that state your preferences during incapacity. A POA grants a named individual the legal authority to act on your behalf for legal and financial matters, if you cannot do so. Medical directives establish your wishes regarding medical treatment and end-of-life care. While taking care of these matters, you may also want to consider becoming an organ donor.

Determine who you want to be your children’s guardian. Naming a guardian of your minor children isn’t pleasant. However, it ensures that you and your partner make this decision, not the court.

Consider a living trust. Living trusts offer a strategic means of managing assets and helping to ensure that your surviving loved ones maintain control of your assets after you have passed. The trust, established with the help of an estate planning attorney, grants ownership of certain assets or properties into the trust, which becomes their owner. A trustee is named to manage and distribute these assets in accordance with your wishes. In some instances, it makes sense to hire a professional trustee, especially if the trust will need to be managed for decades.

By taking assets out of your estate and placing them into a trust, these assets won’t go through the probate process. Probate involves your executor filing your will with a court after you die. The court reviews the will to validate it and grants the named executor the power to execute your final instructions. Probate can be lengthy, expensive and emotionally charged for the family. Your will is entered into the public record, so anyone who wants to can see your will and know your final wishes.

Don’t forget your digital assets. Younger generations are more aware of the value and footprint of their digital assets. They often name a specific digital executor in their estate plans to ensure that their many accounts and digital assets are managed after their passing.

Seek professional advice and update documents. Despite a plethora of online sites and apps, estate planning documents require the skillful handling of an experienced estate planning attorney. Estate laws are state-specific, so wills and trust documents must be created with local laws in mind. Your estate plan documents, from wills to insurance policies, should be reviewed every three to five years. Every time there’s a significant change in your life, like getting married, buying a home, having a child, or getting divorced, this should also be done.

Reference: Kiplinger (Dec. 3, 2023) “Six Estate Planning Tips for Younger Generations”

Don’t Make These Estate Planning Mistakes

 

Everything from life savings to digital assets to pets must be considered when creating an estate plan, according to the article “Seven Big Mistakes People Make When It Comes to Estate Planning” from Kiplinger. No matter how good your intentions are, some mistakes are commonly made. Use the tips below to avoid them.

Implementing the estate plan. Creating an estate plan with an experienced estate planning attorney is step one. However, there are further tasks to be done. For example, if trusts are created, they must be funded. This may mean retitling accounts or moving assets. If trusts are not funded, they won’t perform as planned. In addition, your trusted loved ones should be told about the existence of an estate plan and where documents can be found when needed.

Don’t ignore your own mortality. People often wait until it’s too late to start planning, thinking they have a world of time. None of us knows when we will become incapacitated or die. Don’t delay.

Neglecting to create a trust. Having a trust created by an estate planning attorney can help avoid the costs and delays of probate. A trust can also ensure opportunities to provide specific assets to beneficiaries and could be a better way to distribute assets to children, especially if they are not financially responsible.

Failing to create a deadline-driven checklist for your estate plan. Most people simply do better when they have a checklist with deadlines. The tasks are clearly identified, and the date keeps most people focused. This is essential to have a secure estate plan and avoid missing crucial steps.

Leaving room for misinterpretation. Vague wording can sink your estate plan. Use complete, legal names when designating beneficiaries. If there are a number of people in the family with the same name, include their date of birth to avoid any confusion.

Forgetting to distribute personal property. Create a home inventory, and if any items are of high value, have them valued by a qualified professional appraiser. Family members often fight just as much over personal possessions as financial assets—don’t underestimate the emotional impact of sentimental value.

Getting it done! Most people don’t have a will, power of attorney, named guardians for minor children, health care power of attorney, living will and more because they fail to finish what they’ve started. Even smart people procrastinate over estate plans. The result is loved ones having to deal with taxes, legal fees, inaccessible assets and even family litigation. Contact an estate planning attorney and get this done sooner rather than later.

Reference: Kiplinger( Nov. 21, 2023) “Seven Big Mistakes People Make When It Comes to Estate Planning”

Are You Neglecting Your Estate Planning?

 

Estate planning is about more than ensuring that assets are distributed according to your own wishes after you die. It’s also about what you’d like to have happen to your assets and who you want to be in charge of your health care decisions if you become incapacitated. A recent article from Go Banking Rates, “8 Key Signs You’re Neglecting Essential Estate Planning,” outlines the top signs showing that you need to take care of this critical task.

You don’t have a will? This is the biggest red flag of estate planning mistakes. A will, or last will and testament, is a critical legal document specifying how you want your assets to be distributed after you die. If you don’t have a will, the laws of your state will determine how everything in your estate will be given to heirs. If you have estranged family members, they may end up owning everything. There won’t be anything your beloved family members can do about it. All state’s laws are different, so speak with a local estate planning attorney to address this critical document.

How outdated are your beneficiary designations? Many people open accounts as young adults and forget to update them as the decades pass. If you’ve been married, divorced, had children, experienced loss, or if your beneficiaries are no longer part of your life, you will want to update your beneficiary designations. Your assets could very easily go to people like an ex-spouse or a former friend. Beneficiary information should be updated every few years to be sure that your current wishes are followed.

Do you have a Power of Attorney? Everyone of legal age should have a Power of Attorney. A Power of Attorney is a legal document giving a person of your choice the legal power to make decisions on your behalf if you cannot do so because of illness or an injury. Without a POA, your family will need to go to court to apply for guardianship to take care of various duties, like paying bills, managing investments, or maintaining your home.

Do you have an inventory of digital assets? If you pay bills online, are active on social media accounts, or own any digital assets like cryptocurrency, you need a plan for digital assets. Start by making a complete inventory of your accounts—you’ll be surprised at how much of your life is lived online. Some platforms have an option for naming a “legacy” contact—someone who can access your data and manage it after you pass. Your digital executor will also need usernames and passwords. Otherwise, they won’t be able to access your accounts.

Have you planned for taxes? Estate planning includes understanding the tax implications of assets. There may be estate taxes or state estate taxes due from your estate, and failing to plan could leave heirs with a smaller or no inheritance.

Do you need a trust? Trusts are valuable tools for addressing specific needs, from caring for a disabled family member to managing minor children's assets. Without trusts, these individuals could face unexpected complications that could otherwise be avoided.

If you own a business, do you have a succession plan? Business owners need a succession plan to protect their work and family. Planning for a smooth transition includes naming key employees, creating partnership or shareholder agreements and determining if the business can continue to operate and provide income to family members, including the retiring owner.

What about end-of-life care plans? Estate planning includes end-of-life care, including a living will or healthcare directives. Your family will be less stressed if you have documented your wishes for what kind of health care you want or don’t want if you become incapacitated.

Reference: Go Banking Rates (Nov. 25, 2023) “8 Key Signs You’re Neglecting Essential Estate Planning”

What Is the Difference Between a Living Will and a Last Will and Testament?

 

A Last Will and Testament is completely different from a Living Will, no matter where you live. Despite its title, “Do you understand the difference between a Living Will and a Last Will in Idaho?” this recent Coeur d’Alene/Post Falls Press article applies to all states.

A last will is the document most people think of when considering estate planning. Often called simply a “will,” this is the estate planning document used to give instructions about what should happen to your assets and possessions when you die and who you want to carry out your wishes in the document.

The will is only effective after you have died.

The person managing your estate after you pass is known as a “Personal Representative” or executor or executrix. Some states only use the phrase personal representative. However, the tasks are the same. Your executor (or your estate planning attorney) files your last will with the county probate court for review, ensuring that the will complies with your state’s laws and getting approval to serve as the executor. This is called “probating the will.”

There are ways to avoid having your entire estate go through probate. An experienced estate planning attorney may recommend trusts and other strategies.

The last will is also used to name a guardian for minor children, which is why every young family needs a last will, even if they don’t have a large estate. Doing so guides the court system and the family about your wishes for your children.

How is the last will different from a living will? It’s a completely different document, serving an entirely different purpose.

A living will is used while you are still alive and serves a very narrow set of circumstances. A living will is used to state what medical treatments you do or don’t want to be administered if you are terminally ill and death is imminent or if you are in what is called a “persistent vegetative state.” This means your body is alive, but your brain is no longer functioning.

In the living will, you can state whether or not you will receive CPR, artificial or natural hydration and nutrition, mechanical respiration and any other means used to keep your body alive. The Living Will is often used with another document, known as a Physician’s Order for Scope of Treatment, or POST, regarding options for medical treatments.

An estate planning attorney can prepare a living will and other documents, including a Power of Attorney and a Health Care Power of Attorney, all of which are needed to protect you while you are living and a last will.

Reference: Coeur d’Alene/Post Falls Press (Nov. 19, 2023) “Do you understand the difference between a Living Will and a Last Will in Idaho?”

How Does a Living Trust Protect Your Legacy

 

Want to leave assets of any kind to loved ones? You’ll need to plan ahead. There are a number of options used to pass wealth to the next generation, including a last will and testament. This is a legal document designating someone to be in charge of your estate after you die and telling them how you want your assets to be divided.

Another means of passing assets along is explained in the recent article from The Motley Fool, “3 Reasons to Seriously Consider Using a Living Trust to Pass Inheritance to Your Family.” A living trust is a legal entity created while you are living to hold assets and designates someone to manage and disburse them based on specific directions in the trust document. You don’t have to be wealthy to have a trust.

While these two instruments sound similar, they have unique elements, making one better than another in certain situations. For many people, a living trust can benefit the individual making the trust (the grantor) and their families. Here are a few to consider.

Maintaining privacy. Wills must go through probate, a court-supervised process to review the decedent’s assets, approve their executor and rule on the will's validity. Because the will is under the court's review, it becomes public information. In most jurisdictions, anyone who wants to see your will can. They can also see who received what assets.

f you have concerns about maintaining your privacy or the privacy of your heirs, it may be worthwhile to create a trust. This will keep your assets and your heir’s receipt of assets private. The only people who know what’s in a trust are the grantor, the trustee who manages the trust and the beneficiaries.

Avoiding long delays. Since a trust doesn’t go through probate, it may be possible for the trustee to make distributions of assets much faster. The executor typically needs to file the will for probate and wait for the process to be concluded. Only then can they carry out the directions of a will.

When assets are in a trust, the trustee can implement the terms of the trust more quickly. This can significantly help loved ones, especially if they have paid for long-term care, hospital bills, funeral expenses, etc. If they were relying on an inheritance to cover these costs, the faster the trust can reimburse them, the better.

Managing assets if you become incapacitated. One of the biggest advantages of having a trust over a will is its value during your lifetime. A will doesn’t take effect until you die. On the other hand, a living trust with a successor trustee allows the successor to manage the trust if you become incapacitated and cannot serve as the primary trustee.

Whether you have a trust or not, you will want to name a Power of Attorney who will manage your financial and legal affairs if you cannot do so. However, financial institutions can be challenging when dealing with a POA.

Changing the trustee does not impact the trust’s status as a separate legal entity. The successor trustee steps in, and financial institutions will generally be on notice as long as the initial trust documents specify who the successor trustee will be.

Talk with your estate planning attorney about using a living trust as part of your estate plan. It may be wise to use a combination of a will and a trust to achieve your desired outcome. Do remember estate planning is not just for what happens after you die but for preparing to care for yourself and your family while you are living. A living trust could serve you and your family well, during life and after death.

Reference: The Motley Fool (Oct. 31, 2023) “3 Reasons to Seriously Consider Using a Living Trust to Pass Inheritance to Your Family”

When Should You Update Your Estate Plan?

 

We know we need to see our doctor for annual checkups and see the dentist every six months, not to mention getting a good night’s sleep, brushing and flossing our teeth. In the same way, your estate plan needs regular maintenance, according to an article from The Street, which asks, “When Is It Time to Update Your Estate Plan?”

Far too often, estate plans are created with the best intentions and then lie dormant, in many cases, for decades. Provisions no longer make sense, or people in key roles, like executors, either move away or die.

Failing to update an estate plan can lead to a beloved child being disinherited or an animal companion ending up in a shelter.

This is an easy problem to solve. However, it requires taking action. Scanning your estate plan once a year won’t take long. However, when certain events occur, it’s time to bring all your estate planning documents to an estate planning attorney’s office.

Here are a few trigger events when you may want to make changes:

Welcoming a new child into the family. Wills and trusts often contemplate future children. However, when the children arrive, you’ll need to update wills, trusts and beneficiary designations. Life insurance policies, investment accounts and retirement accounts allow you to name a beneficiary, and the proceeds from these accounts go directly to the beneficiaries, bypassing probate.
If no beneficiary is named or cannot be located, the asset usually goes back into the estate, meaning it goes through probate and there may be tax liabilities.

Charitable giving goals often change over time. An organization with great personal meaning in your twenties may be less important or may have closed. If you’ve become involved with a charitable mission and want to leave assets to the organization, you’ll want to create a charitable bequest in your will or trust. Those changes need to be reflected in your estate plan.

People’s ability to serve in fiduciary roles may have changed. If the people you assigned certain roles to—like trustees, executors, agents, or the guardian named for minor children—may no longer be suitable for the role. The person you selected to serve as a guardian for minor children may not be available or willing to manage adolescents. If your trustees are over 70, you may want to name an adult child to serve in this role.

Reviewing insurance policies needs to be done regularly. In some cases, the value of life insurance proceeds may be subject to estate tax. Proper planning should be able to avoid this by making certain the policy is not included in your taxable estate.

If you are considering taking out a new life insurance policy, revisit your existing plans with your estate planning attorney. It may make sense for you to create an insurance trust, which allows you to exempt certain assets from your taxable estate.

Are pets an important part of your life? If so, you may want to make plans for who should take care of your pet if you pass away. In many cases, a pet trust works to name a trustee to manage funds for the pet’s care and formally outlines how you want your pet to be cared for.

Reviewing your estate plan every three to five years with your estate planning attorney or whenever a significant life event occurs will ensure that your wishes are followed.

Reference: The Street (Oct. 30, 2023) “When Is It Time to Update Your Estate Plan?”

The Team Behind a Successful Estate Plan

 

 

Most advisors stick with their areas of knowledge. The estate planning attorney drafts the necessary documents, your CPA files tax returns and the investment advisor fine tunes assets. However, coordinating these professional silos is critical to ensuring your estate plan works, says a recent article from Forbes, “Your Estate Plan Must Be Coordinated To Work.”

Communication needs to extend past advisors to key loved ones and people you name in roles, such as agents, trustees and executors. Many people find these discussions awkward. However, preparing heirs and fiduciaries for their roles and setting expectations is a crucial step to avoid issues during transition periods. Some of the most significant estate planning problems arise when the baton is passed, such as if you fall and become incapacitated. You need to be sure your agents know what is expected of them and when they will be called upon to perform their respective tasks.

Coordinating advisor actions will save time and expense in the long run. Your estate planning attorney, CPA, trust officer, wealth advisor and insurance broker should know what each other is doing on your behalf. Many people shy away from doing this because of concerns about cost. However, not doing it can lead to much larger expenses.

You want to foster coordination and collaboration, in a controlled and cost-effective manner. One way to do this is to have advisors prepare a summary of key points, facts and decisions following your meetings, so you can circulate it to other advisors. This way they all know what is being done and can share their knowledge and experience if they think something is wrong or won’t work as planned.

One example of what can happen when advisors are not coordinated is paying bills from incorrect accounts. For instance, if you incur legal fees for the estate plan but pay them from a trust account or business entity, a creditor could argue this is a personal benefit from a trust you are not a beneficiary of, or you’ve violated the business purpose of an entity, which could expose all trust or entity assets.

Your estate planning attorney should know how your assets are titled, which are owned jointly, or other designations used to avoid the terms of your will and/or any trusts. Beneficiary designations, wills and titles must be planned and coordinated to avoid derailing your estate plan.

If you die and an asset is owned in your name only, the asset will go through probate and be distributed according to the terms of your will. If you are incapacitated, your agent, under your financial Power of Attorney, must act concerning the asset to help pay bills.

Many people opt to have assets held in a joint name so that on death, the asset will pass to the named joint owner without going through the will and probate. If the person named as the joint owner is not the same as the POA, you may have created a logistical nightmare. How will the POA pay bills if the joint owner does not cooperate?

Coordinating professional advisers is as important as coordinating family members. There are many different agents and positions to be appointed. People often sign a financial POA with their estate planning attorney, and no one looks closely at any conflicting appointments.

The same kind of issues occur with health care agents. There are several different health care documents, and you’ll want to coordinate them to eliminate the possibility of conflicting appointments. The key to achieving this is diligence, communication and follow-up.

Reference: Forbes (Oct. 31, 2023) “Your Estate Plan Must Be Coordinated To Work”

 

Can You Amend a Will or a Trust?

It’s the rare person who puts their estate plan together once and never needs to change some part of it. What is important is to understand how to make changes effectively and legally to a will or a trust so these changes are enforceable and your wishes are followed. A recent article from Coeur d’Alene/Post Falls Press, “Amendments to your estate planning documents require certain steps,” explains how an estate planning attorney ensures that your requested changes are made properly.

All too often, people come to their estate planning attorney’s office with handwritten edits and changes to the original language, thinking their notes and a signature or their initials will make the changes legitimate. This is never a good idea.

People also arrive at their attorney’s offices with handwritten addendums written on the front or back of a will or trust document, attached by a staple or paper clip after the original document has been signed. This doesn’t work either.

These approaches create problems because they don’t meet state requirements for a legally valid amendment to a will or trust.

There are two ways to make legally enforceable changes to a will. One is replacing the prior document with an entirely new will document. This new will must explicitly state in the document that all prior wills are revoked and replaced.

The second is to add a document known as a codicil to the old will to clarify exactly which part of the old document is being changed. It typically reaffirms the unchanged other terms of the old will document.

Legally enforceable changes to trusts are similarly done in one of two ways. The first is to replace the prior trust document with an entirely new trust document, although the name and creation date of the trust must remain the same and must state explicitly this is not a revocation of the trust. This is referred to as a trust restatement.

The second way to change a trust is using a trust amendment, which is similar to a codicil of a will. A trust amendment is a new document added to the existing trust document. It states which parts of the original trust document are being changed.

It’s important to speak with a local estate planning attorney about making changes to wills or trusts because each state has its own technical requirements for a will codicil or trust amendment/restatement, which must be followed so the changes will be legally effective.

Just writing on the existing pages of a will or trust never meets the requirements but certainly ensures that there will be major post-death disputes among family members and interested parties.

An estate planning attorney can help with any modifications, whether they are large or small, to your will or trust.

Reference: Coeur d’Alene/Post Falls Press (Oct. 25, 2023) “Amendments to your estate planning documents require certain steps”

Where Should I Store My Will?

 

When you fail to plan for your demise, your heirs may end up fighting. With Aretha Franklin, three of her sons were battling in court over handwritten wills. The Queen of Soul, who died in 2018, had a few wills: one was dated and signed in 2010, which was found in a locked cabinet. Another, signed in 2014, was discovered in a spiral notebook under the cushions of a couch in her suburban Detroit home.

The Herald-Ledger’s recent article, “Aretha Franklin's will was in her couch. Here's where to keep yours,” says that a jury recently decided the couch-kept will is valid. However, Aretha didn’t clarify her final wishes. Her handwritten wills had notations that were hard to decipher, and she didn’t properly store the will she may have wanted to be executed upon her death.

The Herald-Ledger’s article gives some options for storing your will. First, don’t store your will in the couch.

You should keep your will where it is secure but easily located. Here are some options:

Safe-deposit box: The downside is that the box might be initially inaccessible when you die. If your will is in the box, that’s an issue. The executor may need a copy of the will to access the box. If so, and a court order is required, it could take some time before the executor can get the will from the safe deposit box. If you do this, include your executor or the person designated to handle your estate on the safe deposit box contract.

At home: Keep a copy of your will in a fireproof and waterproof safe, but make sure there’s a duplicate key, or you give the combination code to your executor or some other trusted person.
With an attorney: You could have a spare set of original documents and leave one with your attorney. But be sure your family knows the attorney's name with the will.

Local court: Check with the local probate court about storing your will and tell someone that you’ve placed your will in the care of the court. For instance, in Maryland, you can keep your original last will and testament with an office called the Register of Wills. The will can then be released only to you or to a person you authorize in writing to retrieve it.

Electronic storage: You could store it online to keep your will safe. However, most states don’t yet recognize electronic wills. As a result, you’ll need to have the originally signed copy of your will even if you store a digital copy.

All options to store your will have pros and cons. Whatever you do, tell the person designated to handle your estate where to find your will.

Reference: The Herald-Ledger (July 19, 2023) “Aretha Franklin's will was in her couch. Here's where to keep yours.”

Why Do I Need a Will?

Every state has different rules for who inherits your assets if you pass away without a will (known as “intestacy”). However, most states follow rules similar to this:

If your spouse survives you and you have no children, he or she inherits everything;

If you're survived by your spouse and at least one child, your spouse gets a portion of your assets, and your child(ren) gets the rest;

If your children are minors, their assets are held for them until they turn a particular age (usually 18 or 21), then they control their inheritance, no matter how large; and

If you're survived by children but no spouse, your children inherit everything equally.

Your will is the only document a probate court will recognize in which you can name guardians for your minor children. If you die without a will, your family must decide who will care for your children, or a court will decide.

J.P Morgan Wealth Management’s article, “Estate planning: Why everyone should have a will,” says that if you have a will, you will have designed an executor or personal representative. This is the person in charge of carrying out your instructions. If you die without a will, your heirs can go to court to be put in charge of your estate. In either event, unless you've structured your assets so they don't go through probate, your heirs will have to go to court; the court will oversee the process.

You may be able to minimize or avoid probate by, for example, owning everything jointly with rights of survivorship, having beneficiaries designated to receive your assets, or putting everything in a revocable trust.

You should ask an experienced estate planning attorney about your state's probate process to understand how important it might be for you to avoid court — and the only way to avoid court is to have an estate plan.

Unfortunately, any of us can die at any moment, young or old, in good or bad health.

Reference: J.P Morgan Wealth Management (Jan. 27, 2023) “Estate planning: Why everyone should have a will”

What’s a ‘No Contest’ Clause?

One way to defend a claim is to let your personal representative or trustee defend your choices. A second way is to include a no-contest clause that disinherits all claimants if they lose their challenge or for even filing the challenge in the first place, explains Kiplinger’s recent article entitled, “What Do No-Contest Clauses Have to Do With Undue Influence?”

A no-contest clause can be a powerful deterrent for a beneficiary who believes they are entitled to more than the share provided, if they know that simply filing the challenge will forfeit even that share. However, it isn’t a deterrent for a relative omitted from the estate plan. Ask an experienced estate planning attorney drafting your estate plan to add these typical terms to your document:

To omit all heirs at law not specifically mentioned in the document.

To revoke the share provided for any person seeking:

To claim a share of your estate, to increase their share, or to claim certain assets in your estate;

To invalidate your document or any provision in your document or

To take any part of your estate in a manner not specifically described in the document.

Many no-contest clauses will treat a challenger as having predeceased you (or having predeceased you, leaving no issue), thereby passing their share according to other terms in the document. However, note that some states include a specific direction as to what happens to their forfeited share.

Not all states treat a no-contest clause the same. Some states refuse to enforce them as a matter of public policy, and some strictly construe the no-contest clause because they disfavor any forfeitures. In these states, an overly broad or vague provision may be voided.

Other considerations may weigh against enforcing a no-contest clause, and you should consider these if you want to tailor your no-contest clause or exclude it from your documents:

Allowing a court to determine the fairness of a challenge that may protect your intentions.

Revealing any undue influence that depleted your estate or impacted your decisions if you were wrongly isolated from family or subjected to financial or personal abuse by a caregiver or relative.

Avoid punishing a proper challenge brought in good faith by excluding any petition or suit brought by a person:

Only seeking more information about your estate;

Seeking documentation of expenditures by a caregiver or relative in charge of your finances before you died;

Seeking the court’s interpretation of your last will or trust instruments;

Seeking to deny the probate of a last will drafted and executed under questionable circumstances or

Filing an appearance to question the appointment of the personal representative or the purported state of residence.

Reference: Kiplinger (Sep. 1, 2023) “What Do No-Contest Clauses Have to Do With Undue Influence?”

Are CDs Good for My Estate Plan?

 

Certificates of deposit (CDs) are a low-risk way of saving funds for the short term and earning a modest return on it. When you take out a standard CD, your bank or credit union guarantees that they will pay you a set return on your money. In exchange, you agree to leave your money untouched in the account.

Investopedia’s recent article, “Can You Bypass Probate With CDs?” says that because CDs are a low-risk, time-constrained investment, they’re popular among seniors and often form part of inheritance settlements. When the owner of a CD passes away, it can be inherited in one of three ways. Therefore, it’s a way to pass on money without the CD going through probate.

CDs are treated like any other account as far as inheritance. While probate is frequently used to decide who will inherit particular assets after someone dies, other ways of passing on accounts can be much simpler and less expensive than probate.

There are three common ways to inherit property; only one involves probate. First, some property is jointly owned, passing directly to the co-owner without probate. This applies to joint accounts (including joint CDs) and real estate owned jointly.

The second category is contract property, like life insurance, retirement accounts and non-retirement accounts with beneficiaries designated upon death. These designations override instructions in the will and pass outside of probate directly to the named beneficiary. These accounts are often designated as payable on death (POD) or transfer on death (TOD). It is possible to add this designation to your CD account.

The third category is everything else. All property not covered above will generally have to go through probate.

If you want to avoid probate for the money you hold in your CD, there are two options available to you—you can either add a payable-on-death (POD) beneficiary to your account or hold it as a joint account. CDs can be held as joint accounts. However, the rules vary by state. In some states, if one joint account owner passes away, the other owner is automatically given full ownership of the account. If you inherit a CD in this way, it will typically continue to run in the way it was before. Once it reaches maturity, you can close it and withdraw the funds. In other states, if the joint owner of a bank account dies, the funds are divided between the surviving owner and the estate of the deceased.

Some CD accounts allow the owner to name a payable-on-death (POD) beneficiary. If the account owner dies, this person will automatically inherit the funds in a CD. These banks may terminate a CD when the account owner dies and allow the POD beneficiary immediate access to these funds. Other institutions will make them wait until the CD reaches maturity. In either case, the CD won’t have to go through probate.

Reference: Investopedia (August 23, 2022) “Can You Bypass Probate With CDs?”

 

How to Find Out If a Person has a Will

The American Reporter’s recent article entitled “How to Find Out if Someone Has a Will” explains that if a will has been made a public record, anyone can view it. However, when the existence of a will is unknown, only immediate family members or the executor or personal representative of the estate may attempt to locate and access it.

Contact Family and Close Friends. If you want to find out if someone has a will, you can ask immediate family members and close friends. This allows you to gather crucial information and determine if a will exists.

Ask the Person’s Attorney. See if there’s any contact information, such as business cards or documents, among the person’s belongings. Explain your situation and request their assistance in locating the will. They might have kept a copy or records indicating the document's existence.

Look for Relevant Documents. While searching for a will, looking for related documents that might give you some idea of its location is essential. Start by examining the person’s files, safes, and safety deposit boxes. You can also review financial records, like bank statements and insurance policies, which might reference a will or the person’s attorney. You should also look at digital files, such as email accounts and cloud storage, for electronic copies.

Ask the Probate Court. If you’ve exhausted all other options, you may contact the probate court and explain your situation to the court clerk. However, if a will exists, it may only be available for public access after the individual’s death.

Discovering whether a person has a will is an important step in estate planning.

By contacting family members, reaching out to attorneys, searching for relevant documents and checking with the probate court, you can collect the necessary information to navigate the estate settlement process efficiently and respect the wishes of the decedent.

It’s important to know if you’re legally allowed to do this search and abide by any rules associated with the process.

Reference: The American Reporter (June 16, 2023) “How to Find Out if Someone Has a Will”

 

How to Speak With Mom and Dad About Estate Planning

 

The estate planning process typically includes making a list of your assets and debts, determining the beneficiaries of your property, and establishing a power of attorney (a person who can act on your behalf to handle your finances, healthcare, or other needs, if you become incapacitated).

The Milwaukee Journal-Sentinel’s recent article, “Five tips for having a conversation with your loved one about estate planning,” gives us some ideas to make the conversation easier.

Learn the laws. Know your state's probate laws when you talk to family members about estate planning. Some states’ laws say that if a family member dies intestate (without a will), their assets — if they have any — go directly to their children. However, this can present issues if there are no children or multiple children and no one, such as a trustee or executor, to carry out the dead loved one's wishes.

Start early. The earlier these discussions happen, the better. In many cases, people wait until they’re already sick and having problems before they even begin to think about estate planning. Involve loved ones early, so they feel invested in seeing it through and that planning will help ensure that their death does not burden the ones they love.

Keep discussions empathetic and brief. Family visits or holiday gatherings are good times to discuss estate planning. It's important to remind relatives that planning protects their wishes. Ask open-ended questions, such as, "Let’s talk about your legacy or how you would like to give back to your family or your community."

Remind your loved one they're in control — and estate planning helps them stay that way. Leaving your loved one out of the planning process can result in their wishes being misinterpreted or not represented.

Note that the person creating the will should consult an experienced estate planning attorney.

Reference: Milwaukee Journal-Sentinel (April 25, 2023) “Five tips for having a conversation with your loved one about estate planning”