How Do I Deed My Home into a Trust?

Say that a husband used his inheritance to purchase the family home outright. The wife signed a quitclaim deed to him to put the property into his living trust with the condition that if he died before his wife, she could live in the home until her death.

However, a common issue is that the husband or the creator of the trust never signed the living trust. So what would happen to the property if the husband were to die before the wife?

This can be complicated if the couple lives out-of-state and it’s a second marriage for each of the spouses. They both also have adult children from prior marriages.

The Herald Tribune’s recent article, “Home ownership complications need guidance from estate planning attorney,” says that in this situation it’s important to know if the deed was to the husband, individually or to his living trust. If the wife deeded the home to her husband, individually, he then owns her share of the home. However, if the wife deeded the home to his living trust, and the trust was never created, the wife may still own the husband’s interest in the home. You need to contact an experienced estate planning attorney if this is the case.

First, the wife should see if the deed was even filed or recorded. If it wasn’t recorded or filed, she could simply destroy the document and keep the status of the title as it was. However, if the document was recorded and she transferred ownership to her husband, he would be the sole owner of the home, subject to her marital rights under state law.

If the trust doesn’t exist, her deed transfer to an entity that doesn’t exist would create a situation, where she could claim that she still owned her interest in the home. However, the home may now be owned by the spouses, as tenants in common, rather than joint tenants with rights of survivorship.

To complicate things further, if the husband now owns the home and the wife has marital rights in the home, upon his death, she may still be entitled to a share of the home under her husband’s will, if he has one, or by the laws of intestacy. However, the husband’s children would also own a share of his share of the home. At that point, the wife would co-own the home with his children.

You can see how crazy this can get. It’s best to seek the advice of a qualified estate planning attorney to guide you through the process and make sure that the proper documents get signed and filed or recorded.

Reference: The (Sarasota, FL) Herald Tribune (September 8, 2019) “Home ownership complications need guidance from estate planning attorney”

 

What Are The Essential Estate Planning Documents?

Forbes’ recent article, “Retirement, Estate Planning: Documents You Should Have,” says that in this time of life, while emotions are running high, it’s critical to be make sure your financial and legal matters are in order.

Putting together a well thought out financial plan and creating an estate plan lets you be certain that personal, financial, and health wishes will be carried out the way you want. Managing your estate, regardless of the size, starts with working with an experienced estate planning attorney who will help give you greater control, privacy and security of your legacy. Here are the documents you need to get started:

Will. This is a legal document that is used to detail your wishes regarding the distribution of your assets and property, as well as the care of any minor children, by naming a guardian in the event your pass away while they’re still young.

Durable Power of Attorney. This is a written authorization that gives a trusted family or friend the authority to act on your behalf in business, legal, and financial matters, if you’re unable to act for yourself due to a mental or physical disability. The requirements are different in each state, so ask your attorney about the right form and language to include.

Health Care Proxy. This is also known as a living will. It is another legal document that states your health care preferences in case you become incapacitated or unable to speak for yourself. It also allows you to say how you’d like your end-of-life care to be handled.

Information Document. Another important part of your estate plan is a document that contains bank account information, passwords, insurance policies, contact information for attorneys, financial planners and any other significant data regarding your personal estate and final wishes. It provides important information to family in the event of an emergency.

Plan for the future, by making certain that your loved ones know and are able to carry out your final wishes.

Reference: Forbes (August 28, 2019) “Retirement, Estate Planning: Documents You Should Have”

 

More Reasons to Review Your Estate Plan

Every estate planning attorney will tell you that they meet with people every day who sheepishly admit that they’ve been meaning to review their estate plan but just haven’t gotten to it. Let the guilt go.

Attorneys know that no one wants to talk about death, taxes or illness, says Wicked Local in the article “Five Reasons to Review Your Estate Plan.” However, there are five times when even an appearance before the Queen of England has to come second to reviewing your estate plan.

You have minor children. An estate plan for a couple with young children must do two very important things: address the care and custody of minor children should both parents die and address the management and distribution of the assets that the children will inherit. The will is the estate planning document used to name a guardian for minor children. The guardian is the person who will determine where your children will live and go to school, what kind of health care they receive and make all daily decisions about their care and upbringing.

If you don’t have a will, the court will name a guardian. You may not like the court’s decision. Your children might not like it at all. Having a will takes care of this important decision.

Your estate is worth more than $1 million. While the federal estate plan exemptions currently are at levels that remove federal tax from most people’s estate planning concerns, there are still state estate taxes. Some states have inheritance taxes. Whether you are married or single, if your assets are significant, you need an estate plan that maps out how assets will be left to your heirs and to plan for taxes.

Your last estate plan was created before 2012. There have been numerous changes in state estate tax laws regarding wills, probate and trusts in Massachusetts. This is not the only state that has seen major changes. There have been big changes in federal estate taxes. Strategies that were perfect in the past, may no longer be necessary or as productive because of these changes. While you’re making these changes, don’t forget to deal with digital assets. That includes email accounts, social media, online banking, etc. This will protect your fiduciaries from breaking federal hacking laws that are meant to protect online accounts, even when the person has your username and password.

You have robust retirement plans. Your will and trust do not control all the assets you own at the time of death. The first and foremost controlling element in your asset distribution is the beneficiary designation. Life insurance policies, annuities, and retirement accounts will be paid to the beneficiary named on the account, regardless of what your will says. Part of a comprehensive will review is to review beneficiary designations on each account.

You are worried about long-term care costs. Estate planning does not take place in a vacuum. Your estate plan needs to address issues like your plan, if you or your spouse need care. Do you intend to stay in your home? Are you going to move to live closer to your children, or to a Continuing Care Retirement Community? Do you have long-term insurance in place? Do you want to plan for Medicaid eligibility?

All of these issues need to be considered when reviewing and updating your estate plan. If you’ve never had an estate plan created, this is the time. Put your mind at ease, by getting this off your “to do” list and contact an experienced estate planning attorney.

Reference: Wicked Local (Aug. 29, 2019) “Five Reasons to Review Your Estate Plan”

 

What Are My Estate Planning “Must Have’s”?

Many people think that having an estate plan just means drafting a will or a trust. However, there’s much more to include in your estate planning to be sure all of your assets are transferred directly to your heirs at your death. A successful estate plan also includes provisions allowing your family members to access or control your assets, if you become incapacitated.

Investopedia’s recent article, “6 Estate Planning Must-Haves,” provides us with a list of items every estate plan should include:

  • A will and/or a trust;
  • Powers of attorney;
  • Beneficiary designations;
  • A letter of intent – specific wishes; and
  • Guardianship designations.

In addition to these documents and designations, a thorough estate plan also should consider the purchase of insurance, like long-term care insurance (if available), a lifetime annuity to generate some level of income until death and life insurance to pass money to beneficiaries without probate.

Let’s look at each item on this checklist to make sure you haven’t left any decisions to chance.

Wills and Trusts. A will or trust should be one of the primary parts of your estate plan even if you don’t have a lot of assets. Wills make certain that your assets are distributed according to your instructions. Some trusts also help limit estate taxes or legal challenges. Talk to an experienced estate planning attorney about wills and trusts.

Power Of Attorney. A durable power of attorney (POA) allows an agent or a person you assign to act on your behalf if you are unable to do so yourself. A healthcare proxy (HCP) designates another person to make critical healthcare decisions on your behalf in the event of incapacity.

Beneficiary Designations. Some of your assets will pass to your heirs without being mentioned in your will such as 401(k) plan assets. Therefore, maintain a beneficiary and a contingent beneficiary on these types of accounts. Likewise, insurance plans should have a beneficiary and a contingent beneficiary because they also pass outside of a will. Your beneficiaries should be over 21 and mentally competent.

Letter of Intent. This is simply a document for your executor or a beneficiary to define what you want done with a particular asset after your death or incapacitation. Some letters of intent also contain funeral details and other special requests. A letter of intent isn’t legally binding.

Guardians. If you have minor children or are considering having kids, naming a guardian is very important. Be sure the person(s) shares your views, is financially sound and willing to raise your children. You should also name a backup or contingent guardian.

Without these designations, a court could order your children to live with a family member you wouldn’t have selected, or in some instances, the court could instruct that your children become wards of the state.

A will is a great place to start, but it’s only the starting point.

It is very important that you contact an experienced estate planning attorney to assist you in the preparation of these important documents.

Reference: Investopedia (July 16, 2019) “6 Estate Planning Must-Haves”

 

So, You Have to Manage Someone Else’s Money – Now What?

This sounds like a disaster in the making. A durable power of attorney document must follow the statutory requirements, must delegate proper authority, must consider the timing of when the agent may act and a host of other issues that must be addressed, warns My San Antonio in the article “Guide to managing someone else’s money.” A durable power of attorney document can be so far reaching that a form downloaded from the Internet is asking for major trouble.

Start by speaking with an experienced estate planning attorney to provide proper advice and draft a legally valid document that is appropriate for your situation.

Once a proper durable power of attorney has been drafted, talk with the agent you have selected and with the successor agents you want to name, about their roles and responsibilities. For instance:

When will the agent’s power commence? It may start immediately, or it may not become active, until the person becomes incapacitated.

If the power is postponed, how will the agent prove that the person has become incapacitated? Will he or she need to go to court?

What is the extent of the agent’s authority? This is very important. Do you want the agent to be able to talk with the IRS about your taxes?, with your investment advisor? will the agent have the power to make gifts on your behalf, and to what extent? May the agent set up a trust for your benefit?, can the agent change beneficiary designations and what about caring for your pets? Can they talk with your lawyer or accountant?

When does the agent’s authority end? Unless the document sets an earlier date, it ends when you revoke it, when you die, when a court appoints a guardian for you, or if your agent is your spouse, when you divorce.

What does the agent need to report to you? What are your expectations for the agent’s role? Do you want immediate assistance from the agent or will you continue to sign documents for yourself?

Does the agent know how to avoid personal exposure? If the agent signs a contract for you by signing his or her own name that contract may be performed by the agent. Legally, that means that the cost of the services provided could be taken out of the agent’s wallet. Does the agent understand how to sign a contract to avoid liability?

All of these questions need to be addressed long before any durable power of attorney papers are signed. Both you and the agent need to understand the role of a power of attorney. An experienced estate planning attorney will be able to explore all the issues inherent in a durable power of attorney and make sure that it is the correct document.

Reference: My San Antonio Life (Aug. 26, 2019) “Guide to managing someone else’s money”

 

Don’t Forget to Update Your Estate Plan

There are some people who sign their will once in their life and never change it. They may have executed their estate plan late in life, or after they were diagnosed with a serious disease. However, even if your family life and finances are pretty basic there are still changes in the law that you may need to incorporate into your estate plan.  You should contact your estate planning attorney to discuss any changes that have occurred since you created your plan. Some of the people that you named in your will could also have died or moved away.

Forbes’ recent article, “Why You Should Change Your Will Now,” warns us that if you’ve taken the “one and done” approach to your estate plan, think again. In addition to the reasons already mentioned, your assets may have changed dramatically since you signed your will. The plan you put in place years ago, may not have considered new federal and state estate taxes. Now that you’ve accumulated significant wealth that will be passed on to your children, you might need to review your plans for that wealth for your children. You may want to include grandchildren to help pay for their college education.

It is also not uncommon for parents to want to protect their children from themselves. This can be because of addiction issues or a lack of financial literacy. If that’s an issue, some parents elect to hold monies in trust for adult children, as a way to ensure that the funds will be there throughout the child’s lifetime.

A person’s estate plan should grow with them over time. An estate plan for a twenty-something may be very basic, but a newly-married couple will want to include provisions for their spouse. Parents need to think about providing for and protecting their children. Adult children have another set of concerns and you need prepare for the possibility of divorcing spouses, poor life choices, addiction issues and just poor money management. There are many stages in life when you may need to readjust the provisions for your children in your estate planning documents.

If you haven’t looked at your will in a while, do it now and contact an experienced estate planning attorney.

Reference: Forbes (August 27, 2019) “Why You Should Change Your Will Now”

 

How Do I Plan My Estate With a Disabled Child?

Yahoo News’ recent article, “4 Tips for Estate Planning When Your Child Has a Disability” gives us four simple steps to take, if you have children with disabilities.

  1. Draft a letter of intent. This is a letter of instruction that includes instructions that your family and friends will need, if you die or for any reason become incapacitated. This letter should list the passwords to your online financial accounts and personal information someone would need to efficiently step into your life, your home and care for child with a disability. It can include medications, daily routine, strategies you use for calming, therapists’ contact info and other daily living items someone not living in your home may not know about your life.
  2. See an experienced estate planning lawyer. Ask an attorney to help you build a vision for what you want your child’s future to look like. Have the attorney create a will and a special needs trust. A special needs trust lets you to distribute funds and property in a way that doesn’t interfere with government program benefits.
  3. Create a power of attorney or guardianship or conservatorship. A power of attorney for financial and medical issues may be a viable solution. Supported decision-making is an alternative that empowers those with intellectual disabilities to make choices with support and while preserving their rights. If guardianship/conservatorship is your objective, talk to an experienced estate planning attorney before your child reaches age 17. At age 18, the child is no longer considered a juvenile and it is much more difficult to obtain these.
  4. Create a new account. This account can hold funds to ensure your child’s regular account never has more than $2000, which would jeopardize government program benefits, like Medicaid.

This may seem like a gigantic task, so take it one step at a time. Do one thing at a time. Begin the process with the letter of intent and think about the vision you have for your child. Then speak with an experienced estate planning attorney who is experienced in helping special needs families.

Reference: Yahoo News (August 26, 2019) “4 Tips for Estate Planning When Your Child Has a Disability”

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How Should I Title My Property in My Estate Plan?

Pauls Valley Democrat’s recent article, “Considerations in how to title your property,” says that there are several types of “automatic” transfer of property methods that don’t require probate.

The first is Joint Tenancy with Right of Survivorship. This form of ownership passes title to the survivor immediately upon death and avoids probate. The transfer to the survivor happens automatically at the death of one of the joint owners.

To complete the transfer, one must confirm the death in the county records and effectively give notice that one joint tenant has died, and that the ownership is now in the survivor(s) name. This is usually accomplished, by having the survivor complete an Affidavit of Surviving Joint Tenant. The affidavit affirms the death of one party (in many cases a spouse), and the survivorship to title of the other party. This affidavit and a certified copy of the death certificate are filed with the county.

The survivor now owns the property as an individual. He or she can now sell or deed the property to others, including children, without a probate action to clear the title.

Next is Tenancy in Common. Ownership as a tenant in common gives an undivided interest in the whole property (like a third), which stands on its own and can be bought and sold. Tenancy in Common is used when two or more people want to keep their title separate from the other at death. Therefore, an undivided one-half owner has the right to use the entire property including the right to benefit from one-half of the rent, lease or crop share. However, if several people own an undivided interest, control, usage and management can become complicated.

If, for some reason, a husband and wife own their property as tenants in common, and one spouse dies, his undivided interest remains as a part of his estate. In that case, his estate must be probated to provide a clear transfer of title to the surviving spouse or to other heirs.

It’s an added expense for the survivor that can be avoided if another form of ownership is used.

Thinking through these factors is a critical component of successful estate planning. Plan in advance with the help of a seasoned estate planning attorney. Don’t create bigger problems for yourself or your heirs, by trying to avoid upfront costs.

Reference: Pauls Valley (OK) Democrat (August 21, 2019) “Considerations in how to title your property”

 

Why Wills Need to be Updated

Lives change and laws change. People come and go in our lives, through birth, death, marriage and divorce. Change is a constant factor in everyone’s lives. If your estate plan doesn’t keep up to date, says Next Avenue in the article “8 Reasons You May Need to Update Your Will,” you could create real problems for those you love. Here are eight reasons why people need to review their wills to ensure that your estate plan reflects your current life.

Moving to a new home. If you’ve moved to a new state since the last time your will was written, your will needs a review. Remember, wills are administered under the laws of the state where you live so the new state’s laws apply. An out-of-state will could present issues. If the number of witnesses required to make a will valid in your old state of residence was one but the new state requires two witnesses your will could be deemed invalid.

Selling one home and buying another. If your will does not reflect your current address, it’s going to be very difficult for your executor to properly transfer ownership or manage the sale of the house. Most wills incorporate specific language about homes that includes the address.

You’ve done a good job of downsizing. Kudos to you for cleaning out and getting rid of unwanted items. If you no longer own things that are itemized in a will, they’ll be skipped over. However, do you want to give heirs something else? Without specific instructions, they won’t know who gets what.

Did you already give away possessions? Avoid family conflicts by being clear about who gets what. If you already gave your oldest daughter an antique dining room set but your will says it goes to the youngest son, things could become awkward. Similarly, if you gave one child something with a higher market or sentimental value than what you gave to another, it could create tension in the family. Updating your will is an opportunity to adjust these gifts.

Charity relationships change. The same organization that mattered greatly to you ten years ago may not have as much meaning—or may have changed its focus. Update your will to reflect the charitable contributions that matter to you now.

Finances change. If a will spells out exact amounts and the money is gone, or if your accounts have increased, those numbers may no longer be accurate or reflect your wishes. The dollar amounts may create a challenge for your executor. What if you designated a gift of stock to someone that wasn’t worth much at the time, but is worth a small fortune now? Amending a will can ensure that your gifts are of the value that you want them to be.

One child is now your primary caregiver. If one child has dedicated the last five years to taking care of you, you may want to update the document to show your gratitude and compensate them for lost earnings or expenses. If you do, explain your reasons for this kind of change to other children, so that there’s no misunderstanding when the will is read.

A beneficiary has passed away. If you are a surviving spouse, that alone may not be reason to update your will, if—and this is a big if—your will included alternate recipients as a plan for this situation. If there were no alternate recipients, then you will need to revise your will after the death of a spouse. If you listed leaving items to a beneficiary who has died, instructions on how to distribute these items or assets to someone else can be done with an amended will.

Your estate planning attorney will be able to review your will and your estate plan with you to determine what items need to be updated. Your documents may need only a tune-up, and not a complete overhaul, but it is advisable to review estate plans every three or four years.

Reference: Next Avenue (August 22, 2019) “8 Reasons You May Need to Update Your Will”

 

Will My Family Have to Pay Off My Credit Cards When I Die?

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Credit card debt won’t vanish when you pass away. Your estate will settle your debts using your assets, says Yahoo Finance’s recent article, “What Happens to Credit Card Debt When You Die?”

The executor of your estate will use your assets to pay off your credit cards. However, if your debts wipe out all your assets, your heirs may be left with little or no inheritance.

If you’re worried about your family being stuck with your debts after you die, know your rights and work with an estate planning attorney to help protect your assets.

When a family member dies, relatives typically won’t have to pay off his or her credit card debts. However, there are some exceptions. A spouse or other family member might have to pay debts, if he or she:

  • Co-signed for a loan or credit card;
  • Jointly owned property or a business;
  • Lives in a community property state (California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin); or
  • Is required by state law to pay a debt, like health care expenses or to resolve the estate.

An authorized credit card user doesn’t have to pay off the deceased’s debts unless one of the conditions listed above is applicable. If it’s a joint account, the surviving cardholder must keep making on-time payments to avoid late fees and negative credit reporting. If sorting out debts is causing stress, a family can check the deceased’s credit reports.

Unless you have a living trust or make other arrangements, a probate court will determine your financial affairs after you die. In most states, the executor named in the will is responsible for handling the final details of your estate.  When the deceased has credit card debt and assets the big question is if the assets are available to the creditor. If the deceased had a life insurance policy proceeds go to beneficiaries before any of the debts are repaid. If the deceased had assets, credit card debts and other debts, the executor must know that the beneficiaries can’t get money before the bills are paid.

The first debt the estate has to pay is secured debt, like a mortgage or car loan. The estate then usually pays administrative and legal fees followed by unsecured debt, like credit cards. Creditors are required to submit their claims against the estate by a deadline determined by state law. If that claim meets the deadline, and the estate has sufficient assets, it must be paid. The rules vary by state, and arrangements made prior to death will impact the amount of debt that must be paid.

Ask an experienced estate planning attorney about a living trust so that assets held in a trust won’t be subject to probate. The trust will own the assets and they’ll be distributed according to the trust. These laws vary by state, so speak with an estate planning attorney licensed to practice in your state.

Reference: Yahoo Finance (August 19, 2019) “What Happens to Credit Card Debt When You Die?”