Have Estate Planning Conversations with Aging Parents

Let’s start with this idea: maybe your parents are going to leave you a generous bequest as part of their estate plan. Do you know this for a fact, or is it wishful thinking? The only way to know, advises a recent article from Yahoo! Finance titled “How To Talk to Your Parents About Their Estate (Without Making It Awkward),” is to have a conversation, or a series of conversations. It’s not the first awkward conversation you’ll have with your parents, but it may be a bit stickier than you expect.

No matter how you approach it, this is a sensitive issue. How do you avoid appearing greedy or selfish? There is actually a lot more to know beyond the inheritance issue. You need to know how to ensure that your parents’ wishes are carried out, while they are living as well as after their deaths.

It will be helpful to be aware that the prospective inheritance amount may change over the course of your parents’ remaining lives. You also don’t want your parents thinking that you consider yourself entitled in any way to the assets they have built over the course of their lives. Instead, start the conversation by talking about their estate plan. Explain that you want to be able to follow their instructions. You might reference an article or blog post that you have read about the importance of estate planning. You can also talk about your own estate plan, explaining that you have created an estate plan to protect your children and family members and to be sure that your instructions are followed.

Don’t be afraid to acknowledge how difficult this conversation is for you. Reassure them that you are not looking forward to their demise, but you have concerns about how things will work out when the time does come. Depending upon your family dynamics, holidays may be a good time to address estate planning. This provides an opportunity for all family members to be included and for concerns and plans to be shared among involved siblings.

This does not mean discussing inheritances at the dinner table. Focus on what your parents’ wishes are and include a conversation about what values they would like to pass on to the next generation. If there are family histories or stories to share, this is also part of your inheritance.

Regardless of when or how you approach the topic, you do want to be sure your parents have a plan in place, so there is a path for whoever will be taking care of them and their assets. Ask if they have these key legal documents:

  • A Last Will, also known as a Last Will and Testament
  • A Power of Attorney to designate someone to make financial and legal decisions, if they are not able to do so for themselves.
  • A Living Will or health care directive that will designate someone who can make healthcare decisions and address end of life care for them.

Ask where your parents keep these documents, and how you can find them when the time comes. Are they in your father’s night table, or in a lockbox in the attic? If they have a financial advisor or estate planning attorney, who is that person? You’ll need to be able to access the documents and speak with their estate planning attorney.

A few awkward moments now will help all of you as your parents, and you, move through the coming stages of life.

Reference: Yahoo! Finance (March 25, 2021) “How To Talk to Your Parents About Their Estate (Without Making It Awkward)”

 

Why Do I Need a Will?

Estate planning attorneys aren’t the only professionals to advise anyone who is a legal adult and of sound mind to have a will. Financial advisors, CPAs and other professional advisors recognize that without a will, a person places themselves and their family in an unnecessarily difficult position. A recent article titled “One document everyone should have” from the Aiken Standard explains why this document is so important and what else is needed for an estate plan. A will is a “testamentary” document, meaning it becomes operative, only when the person who makes the will (the “testator”) dies.

The process of probate can only begin upon death. Each county or jurisdiction has a probate court, where the estate assets of deceased individuals are administrated. On the date a person dies, those assets must be identified. Some assets must be used to pay debts, if there are any, and the balance is distributed either according to the directions in the will or, if there is no will or the will has been deemed to be invalid, according to the laws of the state.

All this assumes, by the way, that the decedent did not arrange for his or her assets to pass without probate, by various non-probate transfer methods. For example, there is no probate required, if there is a surviving joint owner or designated beneficiary.

When there is no will and assets are subject to probate, then such assets are passed by intestacy, which usually means they are distributed along the lines of kinship. This may not always be the desired outcome, but with no will, the law controls asset distribution.

Why is a will important?

  • It allows you to leave specific property to specific loved ones, friends, or charities.
  • It may be used to provide funeral and burial instructions, although they can also be provided in a different document, so they are available to family or friends immediately.
  • A will can direct how you want assets to be used to pay debts, any taxes and payment of estate administration expenses, which include the cost of probate, legal fees and executor fees.
  • A will can be used to minimize estate taxes, which may be levied not just by the federal government but also by the state.
  • The will names the estate’s executor and the extent of his or her powers.
  • If there are minor children, the will is used to name a guardian to raise the children.
  • If you would like to disinherit any relative, the will provides the means to doing so.

Everyone needs a will, regardless of how large or small their personal assets may be. Every adult should also have an estate plan that includes other important documents, like a Power of Attorney to name another individual to act on your behalf, if you are unable to do so because of an injury or illness. A Healthcare Proxy and a Living Will are also important, so those who love you can follow your end of life care wishes. Contact an experienced estate planning attorney to assist you.

Reference: Aiken Standard (March 13,2021) “One document everyone should have”

 

Is the Pandemic Making Young People Think About Estate Planning?

A 2021 study from caring.com shows the coronavirus pandemic’s impact on estate planning and the change in viewpoints among specific groups. The survey generated responses from 2,500 Americans and is a continuing effort to create greater awareness and understanding about the estate planning process.

Insurance News Net’s recent article entitled “Study: Young Adults More Likely To Do Estate Planning Due To COVID-19” reports that, based on results from last year, the number of young adults with a will increased by 63%.

For the first time, adults under 35 are more likely to have a will than those ages 35-54. About 50% of all younger adults surveyed also said that COVID-19 prompted their interest in estate planning. Despite the growing interest among younger adults, most Americans still do not have a will. They fail to take any action, except for speaking to loved ones about estate planning. About ⅔ or 67% overall still don’t have a will.

Most of those who responded to the survey said that procrastination was the main reason for not having a will. However, the number of Americans who expressed a lack of understanding increased by 90% since 2017.

The survey also shows a significant increase among Hispanic and Black Americans with a will. The number of Hispanics with a will increased by 12% and by 6.2% among Blacks, since the 2020 report.

“In comparison to previous years, the 2021 study indicates that Americans see a greater need for estate planning due to the pandemic,” says caring.com CEO, Jim Rosenthal. “Unfortunately, many people haven’t begun the estate planning process – even with the increased availability of remote and online services.”

Income level is also a significant factor among people who do in estate planning. The survey’s respondents making under $40,000 a year were less likely to have a will.

The percentage of Americans with a will and annual income of $40,000 to $80,000 increased 6% to 39% in one year.

Caring.com has conducted its Wills and Estate Planning Study since 2015 to raise awareness of the importance of estate planning, especially among people who may not feel they have the money or know-how needed to create a will or living trust.

Contact an experienced estate planning attorney to discuss your needs.

Reference: Insurance News Net (Feb. 23, 2021) “Study: Young Adults More Likely To Do Estate Planning Due To COVID-19”

 

What Is a Guardianship?

We would like to think that all of our very responsible parents and relatives have their legal documents in order. However, that is not always the case. Florida Today’s recent article entitled “One Senior Place: What is guardianship and should I seek it?” explains that we need to have a serious discussion with our loved ones and determine if, in fact, “their affairs are in order.” If not, a guardianship may be in their futures.  That is because a guardianship is really a last step.

Guardianship is a legal process that is used to protect a senior who is no longer able to care for his or herself due to incapacity or disability. A court will appoint a legal guardian to care for a senior, who’s called a ward. A legal guardian has the legal authority to make decisions for the ward and represent his or her personal and financial interests. A court-appointed guardian can also be authorized to make healthcare decisions. In a guardianship, the senior relinquishes all rights to self-determination, so you can see how this is the choice of last resort.  If a suitable guardian isn’t found, the court can appoint a publicly financed agency that serves this role.

A doctor will examine a senior and determine if he or she is incompetent to make his or her own decisions. The judge will review the senior’s medical reports and listen to testimony to determine the extent of the alleged incapacity and whether the person seeking guardianship is qualified and responsible.

A guardian can be any competent adult, such as the ward’s spouse, another family member, a friend, or a neighbor. There are even professional guardians. The guardian will usually consider the known wishes of the person under guardianship.

Guardianship can be very costly and can involve a profound loss of freedom and dignity. As a result, speaking with an experienced elder law attorney is essential.

However, there are things that any competent adult can do to decrease the chances of ever needing guardianship. This includes:

  • Drafting a power of attorney for finances; and
  • Drafting an advance healthcare directive, which names a surrogate decision maker for your healthcare decisions, including the right to refuse or terminate life-sustaining medical care based on your wishes.

Moreover, talk about your wishes and all your estate planning documents with your family. That way they’ll know how to put your plan into action, if required in the future. Contact an experienced estate planning attorney or an elder law attorney to assist you.

Reference: Florida Today (March 23, 2021) “One Senior Place: What is guardianship and should I seek it?”

 

Can I Revoke a Power of Attorney?

Spouses and partners chosen by adult children often lead to estate planning challenges. In one case, a parent worries that a second husband may be a poor influence and wants to revoke the power of attorney originally granted to a daughter. How to do that legally and without any hurt feelings is examined in the article Estate Planning: Revoking a power of attorney” from nwi.com.

A Power of Attorney is a document that allows another person to act on your behalf. The person designated is referred to as the “Attorney in Fact” or the “Agent.”

The problem this family faces, is that any revocation of a POA must be in writing, must identify the person who is to be revoked as the POA and must be signed by the person who is revoking the POA. Here’s where the hurt feelings come in: the revocation is not legal, until and unless the agent has actual knowledge of the revocation. You can’t slip off to your estate planning lawyer’s office, revoke the POA and hope the family member will never know.

Another way to revoke a POA is to execute a new one. In most states, most durable POAs include a provision that the new POA revokes any prior POAs. By executing a new POA that revokes the prior ones, you have a valid revocation that is in writing and signed by the principal.  However, a daughter who is duly appointed must be notified. If she is currently acting under the POA and has a copy of it, there’s no way to avoid her learning of the parent’s decision.  If, however, the daughter has never seen a copy of the POA and she is not currently acting on it, then you may be able to make a new POA without notifying her. However, it may create a sticky situation in the future. Notification may be your only option.

If the POA has been recorded for any reason, the revocation must reference the book, page and instrument number assigned by the recorder’s office and be recorded. If the POA has been provided to any individuals or financial institutions, such as banks, life insurance companies, financial advisors, etc., they will need to be properly notified that it has been revoked or replaced.

Two cautions: not telling the daughter and having her find out after the parent has passed or is incapacitated might be a painful blow, with no resolution. Telling the daughter while the parent can discuss the change may be challenging but reaching an understanding will at least be possible. A diplomatic approach is best: the parent wishes to adjust her estate plan and the attorney made some recommendations, this revocation among them, should suffice.

Not revoking the power of attorney correctly could also lead to an estate planning disaster, with the daughter challenging whoever was named as the POA without her knowledge.

Talk with your estate planning lawyer to ensure that the POA is changed properly and that all POAs have been updated.

Reference: nwi.com (March 7, 2021) “Estate Planning: Revoking a power of attorney”

 

Can an Attorney Help with Estate Planning?

Creating an estate plan is a big job. Many of these decisions must be made to make certain that assets transfer to beneficiaries properly. That is why finding the right estate planning attorney in this process is critical.

Cleveland Jewish News’ recent article entitled “Attorney can help with estate planning process,” recommends always having a lawyer because an estate plan also prepares someone for their eventual passing.

If you use an online program to create a will or power of attorney, you may not be doing it correctly—and the laws vary from state to state. Thus, to make certain that your will is accepted by the court and everything would be handled as you intended, using the services of an experienced estate planning attorney is highly recommended.

A big problem that happens when a person doesn’t use a lawyer, is they may not fill out the will clearly, or specifically state their beneficiaries. If this occurs, the will must go through an extended probate process. That’s a judge-supervised distribution of a deceased person’s assets, which can take weeks even months.

When seeking an attorney, it is important to find one who best suits your needs, circumstances, and expectations.

In some states, a person can opt for board-certified estate planning attorney. That’s a sign that they’re working with one of the best possible estate planning attorneys.

These lawyers are extremely qualified, specialists in estate planning.

To become a specialist, a lawyer must satisfy several bar requirements. They must practice in the area of estate planning and have a substantial amount of experience.

These lawyers must take annual continuing education courses. They must also pass a test and have periodic recommendations from peers.

You want to be sure your estate planning attorney has the experience to prepare your documents, so your wishes are clearly stated and to avoid any problems after you are gone.

Due to the stressful and emotional aspect of filing an estate plan, it’s important to feel understood by an experienced estate planning attorney.

Reference: Cleveland Jewish News (March 17, 2021) “Attorney can help with estate planning process”

 

What Paperwork Is Needed after Someone Dies?

Tax return issues, family matters, business associates, partners, trustees, bankers, investment advisors and tax collectors from the IRS to state and local taxing authorities all require attention after someone has died. There is a lot of work, and often a grieving family member finds it helpful to enlist the aid of a professional to lighten the load. A recent article, “Checklist for Working With a Decedent’s Estate” from Accounting Web, contains a list of the tasks to be completed.

General administration and legal tasks. At the very earliest, the executor should create a timetable with the known tasks. If you’ve never done this before, there’s no shame in enlisting help from a qualified professional. Be realistic about your familiarity with tax and legal issues and your organizational skills.

Determine with your estate planning attorney whether probate is necessary. Is the estate small enough for your state’s laws to allow you to expedite the process? Some jurisdictions can do this, others do not.

If an estate plan was created and executed properly, many assets may not need to go through probate. Assets like IRAs, joint tenancies, accounts that are POD, or Payable on Death and any assets with named beneficiaries do not require probate.

Gather information about family owners or others who may have a claim to the estate and who may have useful information about the assets. You’ll need to locate and notify heirs of the decedent’s passing.

Others who need to be notified, include charities named in the will. You’ll need to identify prior transfers to charities that were partial transfers, such as Charitable Remainder Trusts. If there is a charitable remainder trust with a retained lifetime income interest, it will need to be in the estate tax return, albeit with an offsetting estate tax charitable deduction.

Locate the important documents, including the will, any correspondence relating to the will, any letters explaining the decedent’s wishes, deeds, trusts, bank and brokerage statements, partnership agreements, prior tax returns, federal and state tax forms and any gift tax returns.

An estate planning attorney will be able to help determine ownership issues, including identifying assets and liabilities. This includes deeds, vehicle titles, club memberships, personal possessions and business assets, including copyrights and patents.

Social Security will need to be notified, as will Medicare, pension administrators, Department of Veteran Affairs, the post office, trustees, and any service providers.

Filing taxes for the last year of the person’s life and their estate tax filing needs to happen on a timely basis. Even if an estate tax return may not be required, it is useful to file to establish date of death values for assets. It is important to resolve income tax statute of limitation issues and any IRS or state examination issues.

Estate administration is a big job, especially if you’ve never done it before. Having the help of an experienced estate lawyer can alleviate much of the worry that comes with settling an estate.

Reference: Accounting Web (March 19, 2021) “Checklist for Working With a Decedent’s Estate”

 

Should a Trust Be Part of My Estate Plan?

A revocable trust can be a wise choice for managing your assets, says nj.com’s recent article entitled “What are the advantages of putting assets into a trust?”

A revocable trust is a type of trust that can be changed once it is executed by the creator of the trust, known as the grantor. During the life of the trust, income earned is distributed to the grantor. After his or her death, the trust assets transfer to the beneficiaries of the trust.  A revocable trust can be advantageous because it has flexibility and provides this income stream and full access to the trust principal by the living grantor (also known as the trustor).

If you are the grantor, you can act as trustee, by yourself or with another as co-trustee.  When you no longer want to manage, or when you’re unable to manage your affairs, the co-trustee or a successor trustee can take over all of the duties.

If you didn’t put your assets in a revocable trust, you’d need to appoint an agent under a durable power of attorney to handle your financial affairs, if you become incapacitated.  However, some financial institutions would rather do business with a trustee instead of an agent under a power of attorney.

At your death, if all of your assets are in trust, your family can avoid the probate process. The trustee continues to manage the trust assets pursuant to the terms of the trust document. Those instructions do not need to be recorded any court in most jurisdictions.

Unlike a will, which is recorded with the government once it is probated, a trust is not a public document in most jurisdictions. Therefore, privacy is another advantage of a trust.

Finally, in states where an inheritance tax return is required, a revocable trust also avoids the need to obtain tax waivers, which are issued by the state to release any tax liens, upon death.  However, there are some downsides to putting assets into a trust.

First, the expense of creating a trust will be more than a simple will and you would still need a will in the event you did not place everything in the trust during your lifetime or upon your death by a beneficiary designation.

Sometimes, having all of your assets in trust can also be more costly or cumbersome. For instance, insurance may be more expensive when an asset is in the trust.

Contact an experienced estate planning attorney to prepare a trust and estate planning documents for you.

Reference: nj.com (March 17, 2021) “What are the advantages of putting assets into a trust?”

 

Trusts can Work for ‘Regular’ People

A trust fund is an estate planning tool that can be used by anyone who wishes to pass their property to individuals, family members or nonprofits. They are used by wealthy people because they solve a number of wealth transfer problems and are equally applicable to people who aren’t mega-rich, explains this recent article from Forbes titled “Trust Funds: They’re Not Just For The Wealthy.”

A trust is a legal entity in the same way that a corporation is a legal entity. A trust is used in estate planning to own assets, as instructed by the terms of the trust. Terms commonly used in discussing trusts include:

  • Grantor—the person who creates the trust and places assets into the trust.
  • Beneficiary—the person or organization who will receive the assets, as directed by the trust documents.
  • Trustee—the person who ensures that the assets in the trust are properly managed and distributed to beneficiaries.

Trusts may contain a variety of property, from real estate to personal property, stocks, bonds and even entire businesses.

Certain assets should not be placed in a trust, and an estate planning attorney will know how and why to make these decisions. Retirement accounts and other accounts with named beneficiaries don’t need to be placed inside a trust, since the asset will go to the named beneficiaries upon death. They do not pass through probate, which is the process of the court validating the will and how assets are passed as directed by the will. However, there may be reasons to designate such accounts to pass to the trust and your estate planning attorney will advise you accordingly.

Assets are transferred into trusts in two main ways: the grantor transfers assets into the trust while living, often by retitling the asset, or by using their estate plan to stipulate that a trust will be created and retain certain assets upon their death.

Trusts are used extensively because they work. Some benefits of using a trust as part of an estate plan include:

Avoiding probate. Assets placed in a trust pass to beneficiaries outside of the probate process.

Protecting beneficiaries from themselves. Young adults may be legally able to inherit but that doesn’t mean they are capable of handling large amounts of money or property. Trusts can be structured to pass along assets at certain ages or when they reach particular milestones in life.

Protecting assets. Trusts can be created to protect inheritances for beneficiaries from creditors and divorces. A trust can be created to ensure a former spouse has no legal claim to the assets in the trust.

Tax liabilities. Transferring assets into an irrevocable trust means they are owned and controlled by the trust. For example, with a non-grantor irrevocable trust, the former owner of the assets does not pay taxes on assets in the trust during his or her life, and they are not part of the taxable estate upon death.

Caring for a Special Needs beneficiary. Disabled individuals who receive government benefits may lose those benefits, if they inherit directly. If you want to provide income to someone with special needs when you have passed, a Special Needs Trust (sometimes known as a Supplemental Needs trust) can be created. An experienced estate planning attorney will know how to do this properly.

Reference: Forbes (March 15, 2021) “Trust Funds: They’re Not Just For The Wealthy”

 

Why Would I Need a Living Trust?

EIN Presswire’s recent article “Advantages of a Living Trust” explains that, if you have not prepared a will, your state of residence dictates the distribution of your estate by default.

A living trust is a legal document that is created during a person’s lifetime where a named person (the trustee) is given responsibility for managing the trustmaker’s assets for the benefit of the beneficiary. A living trust is designed to provide an easy transfer of the trustmaker’s assets, while bypassing the probate process.

If you fail to plan for your estate, it can result in the government—not your heirs—inheriting the majority of your assets. That is because the top estate tax rate is an 40%.  Moreover, probate costs can take from 5% to 25% of the gross value of your estate, and the probate process can take a year or longer. It can be a very difficult and frustrating experience for your surviving family.

You can’t just think you’re doing effective estate planning by putting everything you own into joint title or having a will leaving everything to your spouse. You need to review your circumstances with an experienced estate planning attorney. Let’s see what you can do with a living trust:

  1. Avoid probate delays and expenses.
  2. Reduce the emotional stress on your family.
  3. Eliminate or reduce taxes.
  4. Enjoy total flexibility, since a living trust can be changed or canceled at any time.
  5. Keep control of your assets, even in the event of your incompetency and after your death.
  6. Avoid a conservatorship at physical or mental incapacity.
  7. Keep your privacy, as a trust is completely confidential.
  8. Allow for a fast distribution of assets to beneficiaries; and
  9. Save time, money, and future headaches for your family.

Ask an experienced estate planning attorney if a living trust fits into your comprehensive estate plan.

Reference: EIN Presswire (March 12, 2021) “Advantages of a Living Trust”