“If you care about what happens to your money, home and other property after you die, you need to do some estate planning.”
An estate planning lawyer has many different tools to achieve clients’ estate planning goals. However, at the heart of any plan is the will, also known as the “last will and testament.” Even people who are young or who have modest levels of assets should have a will—one that is legally valid and up to date. For parents of young children, this is especially important, says the article “Wills: The Cornerstone of Your Estate Plan” from the Sparta Independent. Why? Because in most states, a will is the only way that parents can name guardians for their children.
Having a will means that your estate will avoid being “intestate,” that is, having your assets distributed according to the laws of your state. With a will, you get to determine who is to receive your property. That includes your home, car, bank and investment accounts and any other assets, including those with sentimental value.
Without a will, your property will be distributed to your closest blood relatives, depending upon how closely related they are to you. Few individuals want to have the state making these decisions for their property. Most people would rather make these decisions for themselves.
Property can be left to anyone you choose—including a spouse, children, charities, a trust, other relatives, a college or university, or anyone you want. There are some limits imposed by law that you should know about: a spouse has certain rights to your property, and they cannot be reversed based on your will.
For parents of young children, the will is used to name a legal guardian for children. A personal guardian, who takes personal custody of the children, can be named, as well as a property guardian, who is in charge of the children’s assets. This can be the same person, but is often two different people. You may also want to ask your estate planning attorney about using trusts to fund children’s college educations.
The will is also a means of naming an executor. This is the person who acts as your legal representative after your death. This person will be in charge of carrying out all of your estate settlement tasks, so they need to be someone you trust, who is skilled with managing property and the many tasks that go into settling an estate. The executor must be approved by the probate court, before they can start taking action for you.
There are also taxes and expenses that need to be managed. Unless the will provides directions, these are determined by state law. To be sure that gifts you wanted to give to family and loved ones are not consumed by taxes, the will needs to indicate that taxes and expenses are to be paid from the residuary estate.
A will can be used to create a “testamentary trust,” which comes into existence when your will is probated. It has a trustee, beneficiaries and directions on how distributions should be made. The use of trusts is especially important, if you have young children who are not able to manage assets or property.
Note that any assets distributed through a will are subject to probate, the court-supervised process of administering and proving a will. Probate can be costly and time-consuming, and the records are available to the public, which means anyone can see them. Many people chose to distribute their assets through trusts to avoid having large assets pass through probate.
Talk with an experienced estate planning attorney about creating a will and the many different functions that the will plays in settling your estate. You’ll also want to explore planning for incapacity, which includes having a Power of Attorney, Health Care Proxy, and Medical Directives. Estate planning attorneys also work on tax issues to minimize the taxes paid by the estate.
Reference: Sparta Independent (Dec. 19, 2019) “Wills: The Cornerstone of Your Estate Plan”
“Years ago he signed a power of attorney document naming me as his agent, so I could help him with these types of things. Not ever having done this before, what do I need to know about fiduciary duty?”
There are any number of pitfalls that may occur when administering an estate, a trust or another person’s finances under a Power of Attorney (POA). Fiduciary duties are the highest under the law, and the fiduciary is legally required to put the interests of the person they are representing above their own. The most common problem for a fiduciary is not taking their responsibilities seriously enough, says the article “What does it mean to serve as a fiduciary? from the New Hampshire Union Leader.
You can avoid some common pitfalls, if you keep the following in mind:
Know the governing instrument. A fiduciary must abide by the terms of the governing instrument, which might be a Power of Attorney (POA), trust, or another legal document. The powers you hold are limited to those granted in the document. There are times when even though you have a power or the ability to do something, it’s not in the best interest of the grantor. Let’s say the trust gives you as a trustee the power to make distributions to a beneficiary. If the beneficiary has sufficient independent resources, doing so might be a breach of your duties. In the same way, the ability to make gifts that is given by a POA, doesn’t mean you should automatically start making gifts.
Maintain extremely detailed records. Do this for two reasons. You have a duty to do so, and you need good records in case anyone claims that you did something wrong. Make sure that your records have enough details so that any expense or expenditure can be documented and explained.
Transparency is the best approach. Every situation is different, and family dynamics differs, but if you can, speak with family members before making any transactions. If they object, you can decide whether or not to proceed, or to petition the probate court to give the court’s blessing in advance. In this case, it is better to ask permission in advance, than ask for forgiveness after the fact.
Never mix your personal or business funds with that of the estate. This is one of the biggest problems for people who have never been a fiduciary before. If you are a fiduciary for more than one estate, then you’ll need to have funds and property completely separate from each other.
Fiduciary duties need to be treated with great care to avoid any liability and litigation. If you are not prepared to be a fiduciary, you could decide to decline the role. Speak with an estate planning attorney, if you have any reservations about taking on this responsibility.
Reference: New Hampshire Union Leader (December 7, 2019) “What does it mean to serve as a fiduciary?
“The disadvantages of do-it-yourself elder law estate planning are costly errors, omissions and neglecting protections.”
What usually happens when people do their own estate planning or work on elder law issues, without a lawyer who has years of practice? They may not incur the costs on the front end, but the costs, in financial and emotional terms, often arrive just when the individual or their family is most vulnerable. That message comes through loud and clear in the article “Do-it-yourself elder law estate planning can be risky” from a recent article in the Times Herald-Record.
Let’s clarify the two different areas:
Two of the most important documents in an elder law estate plan are the Powers of Attorney (POA) and health care proxies. If these forms are not prepared correctly, problems will ensue. In some states, like New York, the POA form is long and complicated. Banks and financial institutions will refuse to recognize the form, if they are not completed correctly.
A POA needs to include the “Statutory Gifts Rider,” which allows broad giving powers to the elder law attorney to save assets, even on the eve of the person being admitted to a nursing home. Someone who is not an elder law attorney is not likely to know what this is, or how to prepare it.
There will be similar issues to a do-it-yourself health care proxy. Here’s just one example of the many things that can go wrong: an agent may not make decisions about withholding certain extreme life support measures, even if they are in possession of a valid health care proxy. There needs to be a living will from the individual that explicitly states their wishes regarding withholding heroic means and/or artificial measures. Without the proper document, the person could remain on life support for months or years, even if this was not their wish.
A do-it-yourself approach leaves much to chance. As a result, the potential for problems is enormous. A far better solution that spares spouses and loved ones, is to work with an experienced estate planning lawyer. Can you put a price on peace of mind?
Reference: Times Herald-Record (Nov. 23, 2019) “Do-it-yourself elder law estate planning can be risky”
“A task without a deadline is just wishful thinking. Sometimes, you can get away with procrastinating. If you never get around to alphabetizing your spices, no one’s life will change.”
There are some tasks that, left undone, can have an enormous impact on those you love. The end of the year is a good time to set some deadlines for yourself. Give yourself a December 31 deadline, and you’ll stay focused says The Daily Journal’s article “5 financial tasks you should tackle by year-end.”
Here’s the list to get you started:
Check Your Beneficiaries on All Accounts. A sad story comes from Washington state, where a man died two months after his divorce was finalized. He had not changed his beneficiaries, so all of his life insurance proceeds, and his pension plan went to his ex-wife, and not to his children from a prior marriage. The case went through the court system all the way up to the U.S. Supreme Court, which ruled in 2001 that the beneficiary designations had to be honored.
Start by making a list of your accounts, then check to see who your beneficiaries are. You may need to contact the custodian of the accounts, or you might be able to do it online. Ask for a confirmation in all cases, so you and your heirs will have it in writing.
Look at Any Pay-On-Death Designations. In some accounts, there is a pay-on-death designation, in place of a beneficiary designation. This also may have been an option that you chose when you first opened the account. Without a designation or Pay-On-Death name, the account must go through probate, the legal procedure to distribute property in your estate.
Depending on the state, you might have had this option on property or even vehicles. A local estate planning attorney will know if this is an option in your state. To add or change a beneficiary, you’ll need to apply for a certificate of car ownership with the beneficiary form. If you want to change your deed to a Transfer-on-Death deed, you will need to submit a new deed to the appropriate county recorder. Here again, an estate planning attorney will be able to help. The lawyer will also help evaluate whether this is a good way to transfer property in your situation.
Update Insurance Policies. The insurance company is not going to send a beneficiary a check, without someone filing a claim. The family often does not know what insurance policies exist. A 2013 investigation from Consumer Reports found nearly $1 billion in unclaimed life insurance proceeds. You want to update your contact information with the insurer every now and then, making sure that your beneficiaries are correct and that bills are being sent to the right address. In some cases, the insurance company allows people to notify another person, if payment is overdue and they are not able to reach you. You should also keep that contact information updated, in case your back-up person moves.
What’s In Your Safe Deposit Box? If it’s been a while since you’ve visited your safe deposit box, schedule a time to go and have a look. If you neglect to pay your annual fee, after a number of years the bank is legally permitted to open the box and turn its contents over to the state. Visit once a year to make sure payments and contact details are current. Leave clear instructions with your executor and heirs about where to find the box and its keys. Consider giving another family member official access to the box.
Revise Powers of Attorney. And if you don’t have power of attorney documents in place, make an appointment with your estate planning lawyer to have them created. If you can’t locate your original POA documents, or if the people you chose many years ago have died or moved away, it’s time for a new set. Spare your family the stress, lost time and unnecessary expenses, by having these updated and name a backup agent (or two).
Yes, there’s still enough time to get all these tasks done and enjoy the holiday season.
Reference: The Daily Journal (Nov. 18, 2019) “5 financial tasks you should tackle by year-end”
“Going straight from a busy work life to ‘retired’ can be difficult, if you haven’t mapped out your path. Preparing yourself effectively involves both financial and lifestyle choices.”
If you’re a successful person, maybe a real estate developer or a physician, you’re too busy to think about retirement. However, just like you had to prepare for your current position, you need to prepare for your life after you stop working, advises the article “Retirement planning for the busy professional” from the New Haven Register. What busy people often don’t realize, is that before they know it, retirement is around the corner.
Making the transition to a successful, fulfilling retirement is not just about saving money, although that is an important factor. Here are a few tips to help you plan a great retirement:
Use your imagination. What would you want your life to look like during retirement? How will you spend your days? Write down goals and be specific. If volunteering is something you don’t have time for now, would you want to become active in your community during retirement? What would that be—running a small organization or pitching in as part of a team? Do you plan on spending more time with your family? If so, what does that look like? Being very detailed will help you set goals and allow you to estimate your retirement expenses.
Run the numbers. There are different scenarios that you can work through. For instance, if your idea of retirement is a schedule of non-stop travel, you can figure out what kind of trips you want to take—Elder Hostels or travelling first class—and what they’ll cost. If you already own a second home and plan to retire there, you have a good idea of what it costs to live in your second community. Consider investment returns, health care costs, taxes and life expectancy.
Review your financial and legal plans. It is never too early to plan for the legal and financial aspects of your retirement. Anyone over age 18 should have an estate plan, both to protect you and your family in the case of death and incapacity. You should have a will, a power of attorney, health care proxy and possibly a trust. A financial plan will give you a roadmap. Are you saving enough? Are there opportunities you are missing? Do you have the correct insurance in place?
Cut expenses and minimize debt. The less debt you have going into retirement, the better. Cutting expenses now will get you used to living within a tighter budget and controlling expenses. Write down your expenses to find out where the money is going. You will likely find some big surprises.
Are your advisors right for you now, and will they be right for you in the future? If you’ve put up with an advisor who never returns your phone calls for a few years, is that the person you want to depend on when hard decisions need to be made about investments and retirement? Your team needs to include an estate planning attorney, a CPA and a financial advisor. Each of them should have a good working relationship with the other, and they should all be making you and your family a top priority.
Reference: New Haven Register (Oct. 13, 2019) “Retirement planning for the busy professional”
“How many of us are reading this and know the importance of having ‘our affairs in order,’ yet haven’t done so ourselves? Having your medical and legal wishes known are important for any of us, regardless of our age.”
When children are born, many people make sure to have their wills prepared, so they can name a guardian in the event both parents die. Usually those documents are not reviewed, says the article “Preparations for the Future” from the Montevideo American-News, and this can lead to problems.
Legal and medical experts encourage people to review their estate planning documents from time to time, to be sure that their wishes have not changed.
When people are diagnosed with a serious illness, they are also encouraged to examine their legal and healthcare documents. It’s also important to have plans in place for people diagnosed with dementia as soon as possible, as long as that person is still deemed mentally competent to make these decisions for themselves.
According to the National Institute on Aging, advance planning should take place immediately after a diagnosis of early-stage Alzheimer’s, while the person can participate in discussions.
People with early stage disease can often understand many aspects and consequences of legal decision making. However, as the disease progresses, the ability to make decisions becomes difficult and the validity of the document may come into question.
Advance directives for healthcare documents that communicate healthcare wishes are just part of the legal documents that need to be created. Other documents include a Living Will, which records a person’s wishes for medical treatment, a durable Power of Attorney for Healthcare, which designates a person to make healthcare decisions on your behalf and a Do Not Resuscitate (DNR) order.
Estate planning also needs to be done. An estate planning attorney can help the individual and the family create their plan for the future. There will need to be a Last Will and Testament created, as well as a Power of Attorney for finances, so someone can handle the financial aspect of their life.
A Living Trust may need to be created, to provide instructions about the person’s estate and appoint someone to hold title and property for the beneficiaries. It may be necessary for trusts to be created and funded to protect the family’s assets.
Having an estate planning attorney who has worked with patients suffering from Alzheimer’s and other forms of dementia, will allow the family to focus on caregiving.
Reference: Montevideo American-News (September 25, 2019) “Preparations for the Future”
“If elderly parents aren’t good at record-keeping, a family member will need to identify this information and keep it in a place where it can be referenced when needed.”
As parent’s age, it becomes more important for their children or another trusted adult to start helping them with their finances and their legal documents, especially an estate plan. In “Six tips for managing an elderly parent’s finances,” ABC7 On Your Side presents the important tasks that need to be done.
Make sure the family knows where important personal and financial documents are in an emergency. Start with a list that includes:
They’ll need a list of all accounts, safe deposit boxes, financial institutions and contact information for their estate planning attorney, CPA and financial advisors. Even if they don’t want to share this information until an emergency occurs, make sure it is somewhere a family member can find it easily.
Set up direct deposit for any incoming funds. Automating the deposit of pension and benefit checks is far more secure and convenient for everyone. This prevents a delay in funds being deposited and checks can’t be stolen in the mail or lost at home.
Set up automatic bill payment or at least online bill payment. Making these payments automatic will save a lot of time and energy for all concerned. If your parents are not comfortable with an automatic payment, and many are not, try setting up the accounts so they can be paid online. Work with your parents, so they are comfortable with doing this. They will appreciate how much easier it is and saving themselves a trip to the post office.
Have a “Durable Power of Attorney” prepared. This is a legal document prepared by an estate planning attorney that gives one or more people the legal authority to handle finances or other matters, if they become mentally or physically incapacitated.
Have a “Living Will” and a “Healthcare Power of Attorney” prepared. The Healthcare Power of Attorney allows a person to make health care decisions for another person, if they are mentally or physically incapacitated. The Living Will allows a person to express their wishes about end-of-life care, if they are terminally ill and unable to express their wishes.
Take precautions to guard against fraud. Seniors are the chief targets of many scams, for two reasons. If they have any kind of cognitive decline, no matter how slight, they are more likely to comply with a person posing as an authority figure. They have a lifetime of assets and are a “rich” target.
An estate planning attorney can work with your parents to assist in preparing an estate plan and advising the family on how to help their parents as they age. Most estate planning attorneys have access to a large network of related service providers.
Reference: ABC7 On Your Side (Sep. 5, 2019) “Six tips for managing an elderly parent’s finances,”
“There are milestones in every life. For many, graduations, marriage, children, opening a business and retiring are among these milestones.”
As we go through the many milestones of life, it’s important to plan for what’s coming, and also plan for the unexpected. An estate planning attorney works with individuals, families and businesses to plan for what lies ahead, says the Cincinnati Business Courier in the article “Estate planning considerations for every stage of life.” For younger families, having an estate plan is like having life insurance: it is hoped that the insurance is never needed, but having it in place is comforting.
For others, in different stages of life, an estate plan is needed to ensure a smooth transition for a business owner heading to retirement, protecting a spouse or children from creditors or minimizing tax liability for a family.
Here are some milestones in life when an estate plan is needed:
Becoming an adult. It is true, for most 18-year-olds, estate planning is the last thing on their minds. However, at 18 most states consider them legal adults, and their parents no longer control many things in their lives. If parents want or need to be involved with medical or financial matters, certain estate planning documents are needed. All new adults need a general power of attorney and health care directives to allow someone else to step in, if something occurs.
That can be as minimal as a parent talking with a doctor during an office appointment or making medical decisions during a crisis. A HIPAA release should also be prepared. A simple will should be considered, especially if assets are to pass directly to siblings or a significant person in their life, to whom they are not married.
Getting married. Marriage unites individuals and their assets. For newly married couples, estate planning documents should be updated for each spouse, so their estate plans may be merged, and the new spouse can become a joint owner, primary beneficiary and fiduciary. In addition to the wills, power of attorney, healthcare directive and beneficiary designations also need to be updated to name the new spouse or a trust. This is also a time to start keeping a list of assets, in case someone needs to access accounts.
When children join the family. Whether born or adopted, the entrance of children into the family makes an estate plan especially important. Choosing guardians who will raise the children in the absence of their parents is the hardest thing to think about, but it is critical for the children’s well-being. A revocable trust may be a means of allowing the seamless transfer and ongoing administration of the family’s assets to benefit the children and other family members.
Part of business planning. Estate planning should be part of every business owner’s plan. If the unexpected occurs, the business and the owner’s family will also be better off, regardless of whether they are involved in the business. At the very least, business interests should be directed to transfer out of probate, allowing for an efficient transition of the business to the right people without the burden of probate estate administration.
If a divorce occurs. Divorce is a sad reality for more than half of today’s married couples. The post-divorce period is the time to review the estate plan to remove the ex-spouse, change any beneficiary designations, and plan for new fiduciaries. It’s important to review all accounts to ensure that any controlling-on-death accounts are updated. A careful review by an estate planning attorney is worth the time to make sure no assets are overlooked.
Upon retirement. Just before or after retirement is an important time to review an estate plan. Children may be grown and take on roles of fiduciaries or be in a position to help with medical or financial affairs. This is the time to plan for wealth transfer, minimizing estate taxes and planning for incapacity.
Reference: Cincinnati Business Courier (Sep. 4, 2019) “Estate planning considerations for every stage of life.”