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Have a Plan for Life

How Do I Make the Right Estate Planning Moves When I Divorce?

The Journal Enterprise explains in its recent article, “5 Estate Planning Moves If You Are Getting Divorced,” that the following tips will help you get your plans in order, so your final wishes will be carried out later.

Medical Power of Attorney. This is also called a healthcare proxy. This person is named to make decisions on your medical care, if you’re ill or injured and can’t state your medical care decisions. Unless you make the change, your ex-spouse will have this right.

Financial Power of Attorney. Like a healthcare proxy, this is someone you select to take charge, if you become incapacitated. This person has authority over your financial decisions, and it means they have the authority to pay your bills, access your bank and investment accounts, collect and cash your paychecks and make financial decisions for you. You want to be certain that your assets are protected, and your financial obligations are met, while you’re unable to act on your own behalf. Most people name a spouse, but if you get divorced and don’t switch this designation, your spouse will still be your financial power of attorney and will retain access to your finances.

Create a List of Things to Change After Your Divorce. A divorce can freeze some assets and accounts, which remains in effect until it’s finalized. Therefore, you won’t be able to change the beneficiary on life insurance policies, pensions and other types of accounts. Ask your estate planning attorney to find out exactly what accounts will be affected. Once you know which ones are frozen, you should make a list to ensure you won’t neglect to change them, when the divorce is finalized.

Modify Your Will. In some states, you may not be permitted to create a new will, but your attorney should still be able to help you make the necessary changes. You’ll want to review your heirs. If you do have minor children and you have sole custody, you may want to designate another person as their guardian. If you named your spouse as executor of your will, you may want to consider changing that.

Modify Your Trust. You may have a revocable living trust, in addition to a will. One of the advantages of a revocable trust is that it doesn’t go through probate, so your heirs get a bigger inheritance more quickly. If you have a revocable trust, talk to your estate planning attorney about changing it after your divorce.

If you don’t make these changes at the time of your divorce, your assets may not go to the right beneficiaries, or your ex-spouse may end up with rights you didn’t intend.

Reference: Journal Enterprise (March 20, 2019) “5 Estate Planning Moves If You Are Getting Divorced”

Suggested Key Terms: Estate Planning Lawyer, Wills, Capacity, Guardianship, Executor, Probate Court, Inheritance, Power of Attorney, Healthcare Directive, IRA, 401(k), Beneficiary Designations, Life Insurance,

Wills v. Trusts: What’s Right for You?

It’s a good idea to take the time and make the effort to create an estate plan to take care of your estate — no matter if it’s a condo apartment and a housecat or a big house and lots of money in the bank — just in case something unexpected occurs tomorrow. That’s the advice from AZ Big Media in the article “The pros and cons of wills vs. trusts.”

Estate planning is the area of the law that focuses on the disposition of assets and expenses, when a person dies. The goal is to take care of the “business side” of life while you are living, so your family and loved ones don’t have to pick up the pieces after you are gone. It’s much more expensive, time-consuming and stressful for the survivors to do this after death, than it is if you plan in advance.

You have likely heard the words “trust” and “will” as part of estate planning. What are the differences between the two, and how do you know which one you need?

A will is the most commonly used legal document for leaving instructions about your property after you die. It is also used to name an executor — the person who will be in charge of your assets, their distribution, paying taxes and any estate expenses after you die. The will is very important, if you have minor children. This is how you will name guardians to raise your children, if something unexpected occurs to you and your partner, spouse or co-parent. The will is also the document you use to name the person who you would like to care for your pets, if you have any.

Burial instructions are not included in wills, since the will is not usually read for weeks or sometimes months after a person passes. It’s also not the right way to distribute funds that have been taken care of through the use of beneficiary designations or joint ownership on accounts or assets.

Another document used in estate planning is a trust. There are many different types of trusts, from revocable trusts, which you control as long as you are alive, and irrevocable trusts, which are controlled by trustees. There are too many to name in one article, but if there is something that needs to be accomplished in an estate plan, there’s a good chance there is a special trust designed to do it. An estate planning attorney will be able to tell you if you need a trust, and what purpose it will serve.

Trusts can be used by anyone with assets or property.

A will can be a very simple document. It requires proper formats and formalities to ensure that it is valid. If you try to do this on your own, your heirs will be the ones to find out if you have done it properly.  If it is not done correctly, the court will deem it invalid and your estate will be “intestate,” that is, without a will.

Many people believe that they should put all their assets into a trust to avoid probate. In some cases, this may be useful. However, there are many states where probate is not an onerous process, and this is not the reason for setting up trusts.

A trust won’t eliminate taxes completely, nor will it eliminate the need for any estate administration. However, it may make passing certain assets to another person or another generation easier. Your estate planning attorney will be able to guide you through this process.

Whether you use a will or a trust, or as is most common, a combination of the two, you need an estate plan that includes other documents, including power of attorney and health care power of attorney. These two particular documents are used while you are living, so that someone you name can make financial decisions (power of attorney) and medical health decisions (health care power of attorney) if you should become incapacitated, through illness or injury.

Speak with an estate planning attorney. Every person’s situation is a little different, and an estate planning attorney will create an estate plan that works for you and protects your family.

Reference: AZ Big Media (March 21, 2019) “The pros and cons of wills vs. trusts”

Suggested Key Terms: Estate Plan, Will, Trusts, Power of Attorney, Health Care, Incapacitated, Executor,

Surviving Spouse Needs An Estate Plan

When one spouse dies after meticulously titling assets to pass through joint tenancy to the surviving spouse, estate planning attorneys flinch. There are occasions when everything works smoothly, but they are the exception. As this article from the Santa Cruz Sentinel warns “After husband’s death, wife needs to create revocable trust.” Actually, she needs more than a revocable trust: she needs an estate plan.

Most of the assets in the plan created by her husband, in this case, did pass to the wife outside of probate. However, there are a number of details that remain. She needs to obtain date-of-death values for any non-IRA securities the couple owned, and she should also have their home’s value determined, so that a new cost basis for the house will be established. She also needs an appointment with an estate planning attorney to create a will and an estate plan.

If she dies without a will, her children will inherit the estate in equal shares by intestate succession. However, if any of her children pass before she does, the estate could be distributed to her grandchildren. If they are of legal age, there is no control over how the assets will be managed.  Making matters worse, if a child or grandchild is disabled and receiving government benefits, an inheritance could make them ineligible for Social Security and Medicaid benefits, unless the inheritance is held within a Special Needs Trust.

Another reason for an estate plan: a will details exactly how assets are distributed, from the set of pearls that great aunt Sarah has kept in the family for decades to the family home. A durable power of attorney is also part of an estate plan, which lets a named family member or trusted friend make financial decisions on your behalf, if you become incapacitated. An estate plan also includes an advance health care directive, so a loved one can make medical decisions on your behalf if you are not able.

These are the basics of an estate plan. They protect loved ones from having to go to court to obtain the power to make decisions on your behalf, as well as protect your family from outsiders making claims on your estate.

A revocable trust is one way to avoid probate. An estate planning attorney will be able to evaluate your own unique situation and determine what the best type of trust would be for your situation, or if you even need a trust.

You may be thinking of putting your home, most families’ biggest asset, into joint tenancy with your children. What if one or more of your children have a divorce, lawsuit or bankruptcy? This will jeopardize your control of your home. A revocable trust will allow your assets to remain in your control.

The last piece in this estate is the IRA. If you are the surviving spouse, you’ll want to roll over your spouse’s IRA into your own. Make sure to update the beneficiary designation. If you neglect this step and the IRA pays into your estate when you pass, then the IRA has to be cashed in within five years of your death. Your children will lose the opportunity to stretch IRA distributions over their lifetimes.

An estate planning attorney can help guide you through this entire process, working through all the details. If your goal is to avoid probate, they can make that happen, while protecting you and your loved ones at the same time.

Reference: Santa Cruz Sentinel (March 24, 2019) “After husband’s death, wife needs to create revocable trust”

 

Virginia Passes New Law to Thwart Elder Abuse

“Elder abuse is a growing epidemic in our Commonwealth, yet these cases are under-reported and remain very difficult to prosecute for various reasons,” says Chuck Slemp III, commonwealth’s attorney for Wise County and the City of Norton.

The Southwest Times’ recent article, “Law boosts tools to fight elder abuse,” reports that Slemp requested the new legislation. This law goes into effect July 1 and will help protect adults age 60 and older and physically or mentally incapacitated adults age 18 and older. The legislation provides a framework for local departments of social service and commonwealth attorneys to create one or separate multidisciplinary teams to review cases at all stages of investigation and prosecution. The teams would be made up of professionals from diverse disciplines. The team goals would be as follows:

  • To help identify abused, neglected and exploited individuals;
  • To coordinate medical, social and legal services for these people and their families;
  • To develop programs to detect and prevent abuse, neglect and exploitation; and
  • To promote community awareness of the problem, and educate them on ways to prevent it.

Slemp said that he was thrilled that the bill will become law to give the state additional tools in the effort to fight elder crimes and to establish a framework for a team-approach to review these situations. The Commonwealth’s attorney for Wise County and the City of Norton added that he was grateful to Senator Chafin and 4th District Delegate Todd Pillion (R-Abingdon), who introduced the House version of the legislation.

“Every day the elderly are taken advantage of financially and abused. It is our responsibility in the General Assembly to help protect the most vulnerable of our citizens. Commonwealth Attorneys and law enforcement need all of the tools available to effectively prosecute elder abuse and financial exploitation,” said Chafin. “Multidisciplinary response teams will aid in the prosecution of these crimes and will bring these criminals to justice.”

Pillion added, “With an aging population, particularly in rural areas, it’s critical we form the systems and processes needed to help safeguard people who may find themselves in abusive situations.” You may also seek help from a local attorney.

Slemp believes that the new bill will help localities to concentrate additional resources on the “epidemic” of elder abuse.

Reference: The Southwest Times (March 13, 2018) “Law boosts tools to fight elder abuse”

 

What Are the Common Myths of Powers of Attorney?

The Lubbock Avalanche-Journal’s recent article entitled “Five common myths about powers of attorney” explains away some misconceptions about powers of attorney.

  1. There’s just one uniform power of attorney document. No, there are many types. However, they can vary by state. Talk to an experienced estate planning attorney to draft a document to meet your specific needs.
  2. It’s OK to sign a power of attorney, even if I lack mental capacity. No, to be valid, the person granting the rights (the principal) must have mental capacity to execute the document. A power of attorney can be valid for an individual with mental incapacity, provided the document was signed before the occurrence. That’s a key reason to have a durable power of attorney in place.
  3. A durable power of attorney and healthcare power of attorney are the same thing. No, a durable power of attorney grants rights to an agent to act on your behalf, regarding your assets. These rights can be general to all assets for an unlimited time, or the POA can be limited as to the time frame and assets included. A medical power of attorney grants an agent the authority to make medical decisions on your behalf.
  4. Senior citizens are the ones who need a power of attorney. Not true, because accidents and unforeseen illness can strike at any age. You need to have a plan in place to ease the burden of one aspect of an already stressful and complicated situation. Don’t assume your spouse has automatic power to make decisions on your behalf. It can be much more difficult, unless you have given them the power of attorney.
  5. A power of attorney can be used to handle my relative’s estate at death. Again, not true. Although there are other ways to structure an estate to avoid probate, a power of attorney isn’t one of them. A power of attorney lets the agent to stand in the place of the principal to make decisions. It doesn’t continue beyond the death of the principal.

If you avoid these common misconceptions, a power of attorney prepared by an experienced estate planning attorney can be a very useful tool to meet your needs.

Reference: Lubbock Avalanche-Journal (March 15, 2019) “Five common myths about powers of attorney”

 

What is an Advance Directive and Do I Need One?

These are difficult questions to think about. However, they are very important, as every estate planning attorney knows. Should you ever become unable to speak for yourself, reports the Enid News & Eagle in the article “Veteran Connection: What you should know about advance directives” . An Advance Directive is a way to make a plan, so your wishes are known to another person and legally conveying them in advance, making sure you have a say, even when you don’t have a voice. Yes, you do need an Advance Directive.

The advance directive helps family members and your doctors understand your wishes about medical care. The wishes you express through these two documents described below, require reflection on values, beliefs, views on medical treatments, quality of life during intense medical care and may even touch on spiritual beliefs.

The goal is to prepare so your wishes are followed, when you are no longer able to express them. This can include situations like end-of-life care, the use of a respirator to breathe for you, or who you want to be in the room with you, when you are near death.

It should be noted that an advance directive also includes a mental health component, that extends to making decisions on your behalf when there are mental health issues, not just physical issues.

There are two types of documents: a durable power of attorney for health care and a living will.

The durable power of attorney for health care lets you name a person you trust to make health care decisions when you cannot make them for yourself. This person is called your health care agent and will have the legal right to make these decisions. If you don’t have this in place, your doctor will decide who should speak for you. They may rely on order of relationships: a legal guardian, spouse, adult child, parent, sibling, grandparent, grandchild or a close friend.

A living will is the document that communicates what kind of health care you want, if you become ill and cannot make decisions for yourself. This helps your named person and your doctor make decisions about your care that align with your own wishes.

Another very important part of this issue: the conversation with the people who you want to be on hand when these decisions have to be made. Are they willing to serve in this capacity? Can they make the hard decisions, especially if it’s what you wanted and not what they would want? Do you want a spouse to make these decisions on your behalf? Many people do that, but you may have a trusted family member or friend you would prefer, if you feel that your spouse will be too overwhelmed to follow your wishes.

An experienced estate planning attorney can prepare these important documents for you.

Reference: Enid News & Eagle (March 13, 2019) “Veteran Connection: What you should know about advance directives”

 

There’s A Reason Why There are Laws about Wills and Estates

There are laws about Wills and Estates and if this sounds like a question from a lawyer’s bar exam, that would be about right. It sounds like the first will should be in control, since his intentions were made clear in the first will, even if it was not executed correctly. This was explained by nwi.com in the article “Estate Planning: Will formalities are important.” However, there are many different factors that go into determining which of these three wills should be the one that the court accepts. This is a good illustration of why a will should be prepared with the help of an estate planning attorney.

First, is the third will valid? If there were no witnesses, it seems very clear that it is not. Except for very unusual circumstances, a will is only valid if it is in writing, signed by the person who is its “creator,” which is the “testator,” and witnessed by not one but two witnesses.

The next question is, how about that second will? Is it valid? Was the second will revoked, when the third was created, even though it was not properly executed?

There are two basic ways to revoke a will: physical destruction or written instrument. If the will was not destroyed, then the revocation of the second is considered to have occurred by the creation of the third will. Most wills contain a recital revoking all previous wills and codicils, which serves as a written revocation.

However, there’s a problem. Because the third will is most likely void, then it could not have revoked the second will. Will revocations also need to be witnessed, and since the third will was not witnessed, the recital contained in the third will revoking the prior wills is also void.

It, therefore, seems that the second will is valid in this situation. We say it seems, because there may be other factors that might also make the second will invalid: we don’t have all the facts.

The lesson from this article is that when it comes to wills, trusts and estate plans, the formalities really do matter. Procedures and formalities are considered more important than intent.

Another story that illustrates that point comes from an attorney who was involved in an estate matter where the person who made the will tried to take out several beneficiaries, by taking a razor blade to the document and physically removing their names from the will. The estate battle began after he died. The intention was clear—to remove the beneficiaries from the will. However, because the proper formalities were not followed, the beneficiaries were not properly removed from the will and they received their bequests after all.

If you have a will and estate plan and you wish to make changes to it, sit down with an estate planning attorney to discuss the changes you want to make, and have the documents properly revised, following all the required steps. Don’t try to do this yourself: your wishes may not be followed otherwise.

Reference: nwi.com (March 10, 2019) “Estate Planning: Will formalities are important”

 

Where There’s A Will, There’s a Better Future for Family

There’s a better future for family if you had a will. The plain truth is, everyone needs a will. The value of someone’s personal property has very little to do with the need for a will or estate plan. Without one, the process of settling an estate and having heirs receive their inheritance could be delayed for many months, or even years, says the article “Where there’s a will, there is a plan in place” from The Advertiser. For wills to be legally acceptable, there are certain things that need to be included:

Identification of the person making the will, also known as the testator. The will must contain the person’s name, address, state their intention to create a distribution process for assets and the statement that this will is intended to be their last will and testament and all other wills are revoked. The will must also be dated to be sure to know hold old it is, with regard to other wills.

Outstanding debt payment. The will needs to explain how any outstanding bills will be paid, including funeral costs, medical costs, taxes owed, and any other expenses that a person may have at the time of their death. This may vary by state, so speak with a local estate planning attorney to find out what your state’s laws are.

Name any heirs and what they are being given. You may give your property to whomever you want, or to a charity. The bequest needs to be carefully written, so it is very specific and there are no misunderstandings. Since it may be hard to know what will be left after final expenses are paid, it may be wise to give percentages of assets, rather than specific figures. An estate planning attorney will know how to best handle this aspect of a will.

Chose an executor and name them in the will. The executor is responsible for carrying out the wishes of the testator and is in charge of paying debts, taxes, distributing assets and any tasks assigned in the will. Choosing the right person for this task is very important. They need to be able to handle the responsibility and be able to execute your wishes, without being bullied by family members or friends. Always name a secondary executor, in case the first predeceases you, or if the person is unable or unwilling to serve.

Name a guardian for minor children. This is why parents of young children must have a will. If there is no will, the court will determine who should raise the children, following the laws of kinship of your state. You may not agree with the court’s decision. Select a person (or couple) you believe will raise the children, as close as possible to how you would raise the children.

Plan for your funeral. This is a kindness to your loved ones. If you don’t plan in advance, your loved ones may spend more than you would wish on an elaborate funeral. The opposite may also happen. A simple paragraph may do the job, or you could visit the local funeral home and prepay, selecting everything so that it will be done according to your own wishes.

In addition to a will, you’ll want a power of attorney and health care power of attorney in place to protect you, in case of incapacity. This way, someone will be able to take care of your finances and someone else will be able to make health care decisions, if you can’t.

An estate planning attorney can work with you to make sure that all these documents are properly prepared according to your state’s laws.  They have worked with many others, know what kind of issues crop up and how to prepare for them. This is especially important with blended families or families where there are complicated histories. Think of the estate plan as a gift to your heirs, a chance to express your wishes and a way to create a legacy for your loved ones.

Reference: The Advertiser (March 10, 2019) “Where there’s a will, there is a plan in place”

 

What is a Life Estate?

The question of a life estate may arise, when adult children are discussing the possibility of moving a parent into an assisted-living facility and selling the family home.

The Spokesman-Review’s recent article asks: “Does a life estate have cash value?”

The article explains that a life estate is a form of co-ownership. A person’s interest in property is limited to his life, with the property passing to other recipients at his death. The person who holds the life estate is called a life tenant, and those who receive the property at the death of the life tenant are called remaindermen.

The life tenant and the remaindermen both have real interests in the property, but unlike other partnerships or other forms of co-ownership, the life tenant and remaindermen don’t have rights in the property at the same time. Only the life tenant has a current right to possession. The remaindermen’s interest doesn’t become activated, until the death of the life tenant.

A life estate is an actual form of ownership, rather than a right to use. The life tenant—in many cases the parent—“owns” the house until her death. The parent will need to pay the taxes and keep the property in reasonable condition. The life tenant could sell the property, but the buyer would only have rights until she dies. There would be few people who would ever buy the property. No lender would loan mom money against the property because their interest would go away when the life tenant died.

But there is a value to a life estate, and upon sale, the life tenant must be compensated for the sale of their interest. Life estates are valued using the age of the life tenant and the present fair market value of the property.

Although life estates typically end when the life tenant (or another specified person) dies, some specify conditions that can trigger termination. These would cause the life estate to be terminated, even though the life tenant is still alive and well. For example, a life estate may terminate, if the life tenant leaves the home for more than six months. The actual life estate document details any conditional limits that define when the life estate terminates.

Talk with an experienced estate planning attorney about whether a life estate makes sense for your situation, or if there are alternative strategies that would be better suited.

Reference: The Spokesman-Review (March 17, 2019) “Does a life estate have cash value?”

 

What Are the Biggest Threats to Estate Planning?

A recent survey conducted by TD Wealth at the 53rd Annual Heckerling Institute on Estate Planning found that nearly half (46%) of respondents said that family conflict was the biggest threat to estate planning in 2019, followed by market volatility (24%) and tax reform (14%).

Insurance News Net’s recent article, “Family Conflict Reigns As Greatest Threat To Estate Planning, Survey Finds,” reported that the survey also looked at the various causes of family conflict, when engaging in estate planning. They said that the designation of beneficiaries (30%) was the most common cause of conflict. Other leading factors included not communicating the plan with family members (25%) and working with blended families (21%).

Family dynamics have always played a crucial part in estate planning. With an increase in blended families, many experts think that these conversations will become even more frequent and challenging. Estate planning comes with the responsibility of motivating families to communicate through difficult times. This requires regular conversations and total transparency. To minimize risk, families should include everyone at the table to participate in an open and honest conversation about their shared goals and objectives.

Market volatility was also a big concern of the respondents for 2019. Almost 25% said that identifying volatile markets was the biggest threat to estate planning this year, up from 12% in 2018.

Market fluctuations are worth watching and can cause worry for potential gift givers. It’s best to maintain a long-term view when investing, and know that short-term market movements are no match for a robust estate plan and a well-balanced portfolio.

The Tax Cuts and Jobs Act continues to have a large-scale effect on estate planning. After the increase in the federal gift and estate tax exemption, there are some new strategies to allow people to take advantage of the exemption. About one third of respondents (31%) propose that their clients consider creating trusts to protect assets. About 26% say their clients plan to minimize future capital gains tax consequences and 21% agree to gift now, while the exemption is high.

Experts are stressing the importance of creating trusts for the benefit of family, so assets can be protected from future claims.

A total of 40% of estate planners think their clients will continue to give the same amount to charities as they did in 2018, with 21% expecting them to donate more.

Reference: Insurance News Net (March 13, 2019) “Family Conflict Reigns As Greatest Threat To Estate Planning, Survey Finds”