Blog

Law Office of Michael D. DellaMonaca

Have a Plan for Life

Does Your Estate Plan Need a Will or a Trust—Or Both?

When you pass, having a structure in place that clearly directs who is in charge and who gets what assets, gives most people a sense of relief about their estate plan. Does your estate plan need a will or a trust or both. It’s important to understand how a will works, how a trust works and when to use each of these planning tools, reports the article “Revocable trust vs. will: A guide to estate planning in the age of coronavirus” from Bankrate. In many cases, using both achieves the ultimate goal of protecting the family assets and their privacy.

The will process is more complex than its typical portrayal in film or fiction. The will directs who is to receive the property of the deceased. Without a will, property may be distributed by the courts following the “intestate succession” law of the state. That’s usually the next of kin—not always who you want to inherit your estate.

If property is owned jointly, then it passes to the surviving owner. Accounts and assets with a named beneficiary go directly to that beneficiary. Any assets held in a trust are subject to the directions in the trust. That is one reason to check all accounts you own and make sure they have two named beneficiaries—primary and contingent. That applies to retirement and investment accounts, as well as life insurance policies.

The probate court appoints an executor— who should be chosen by the decedent and nominated in the will—to carry out the directions in the will, pay any outstanding debts, take care of taxes and oversee the distribution of assets. The process of administering the will can be lengthy, depending upon the size and the complexity of the estate. During probate, the will becomes a public document. Predatory creditors are able to see the will, including the amount of assets and their distribution. In many jurisdictions, there are court fees associated with probate that can take a bite (or a nibble) out of the estate.

Trusts are used to circumvent some of the issues created when assets are passed via a will. Trusts are legal structures that provide protection for assets. The assets in a trust do not belong to the individual, they belong to the trust.  Therefore, they are not subject to probate. When the trust is created, a trustee is named whose job it is to manage the affairs of the trust. A successor trustee is named to manage the trust, if the trustee cannot or will not serve.

The revocable trust is used to take assets out of the estate while allowing the asset owner to maintain control. Assets can be moved in or out of the trust, or the trust can be dissolved, and the assets taken back. However, there are no tax benefits since the trust owner is the trust maker, the trustee, and the beneficiary, as long as the owner is alive. On the owner’s passing, the designated successor trustee takes over.

With an irrevocable trust, there are significant tax benefits. However, there is also a loss of control of the assets. Trusts do cost more to establish than wills but they offer a number of advantages. The use of a trust means that less or none of your assets will go through probate, speeding up the distribution process. Trusts also protect the family’s privacy, since the details in the trusts do not become part of the public record. There is less involvement by the court in distributing assets, so fees may be lower.

Speak with an estate planning attorney about how trusts may play a useful part in your estate plan and for passing wealth down to multiple generations.

Reference: Bankrate (April 17, 2020) “Revocable trust vs. will: A guide to estate planning in the age of coronavirus”

 

What Should I Know about Guardianship?

In a perfect world, a child would be raised by its parents. However, this isn’t always possible, and legally enforceable decisions must sometimes be made to name the person who is best positioned to look after a child. Guardianship rules are very specific.  Guardianship is generally only needed when a person is incapable—whether legally or practically—of looking after their own affairs, says VENTS Magazine in the article “Legal Guardianship 101: What You Need to Know.”

Courts have the power to appoint guardians for adults and children. This is usually a person who is unable to make decisions for themselves.  It may be a disabled person, and guardians are appointed for children when parents consent to it, when their parental rights are removed by a court, or when both parents are dead or permanently incapacitated.

Guardians have duties as to both the protected person and their estate. The duties to the person include providing necessities, education and appropriate medical treatment, where necessary. As far as the estate of the protected person, the duties are to manage any funds properly and to spend them pursuant to the protected person’s needs. Guardians must prepare an inventory of assets within 60 days of their appointment to the role.

Custody is only granted for children. When appointed, a custodian is given parental rights over the child. Guardianship does not bestow these rights.  A guardian is appointed to take care of a protected person and to safeguard their estate. Biological parents, if alive, keep their parental rights over the child.

To become a guardian you must file a petition with the court. The documents need to be prepared correctly and a medical certificate must also be submitted. There will be a hearing on your application and must present proof (from a doctor, for example) that guardianship is necessary under the circumstances.

Guardianship litigation can be stressful,  so engage an experienced estate planning attorney to help you.

Reference: VENTS Magazine (April 13, 2020) “Legal Guardianship 101: What You Need to Know”

 

Helping Your Elderly Parents during the Pandemic

Considerable’s recent article entitled “4 things you can do for your aging parents during the coronavirus pandemic” reports that 8 out of 10 deaths reported in the U.S. related to COVID-19 have been in adults 65 years old and older, according to the Centers for Disease Control and Prevention (CDC). If your parents are in one of the vulnerable categories, here are four things you can do right now to help them.

  1. Shop or help them place orders online. With many cities experiencing a shopping frenzy in response to the coronavirus, personal care and household items have quickly disappeared from stores. You can help your parents by allowing them to stay home and going to the store for them and dropping off groceries on their door. You can also place online orders that can be delivered to their home.
  2. Contact them regularly. The CDC says the coronavirus is believed to spread primarily from person-to-person contact, particularly between people who are closer than six feet from each other. Therefore, you have likely already been separating yourself from your family members, including your parents. To avoid possibly exposing your parents, use Skype, FaceTime, or call them on the phone. Stay in close communication to keep their spirits up and check on how they’re feeling. This can help you to verify their mental and physical health, as the days of social distancing add up. You can set up a schedule with specific times you’ll call, so they have something to look forward to throughout the day.
  3. Watch for scams. We’re already hearing about the con artists coming out of the woodwork to prey on the elderly—and all of us in this medical and financial crisis. Speak to your parents about these scams, so they can protect themselves. The Federal Trade Commission has issued guidelines for avoiding scams, including the following:
  • Hang up on robocalls and don’t press any numbers.
  • Verify your sellers because many online sellers may say they have in-demand products in stock, when they actually don’t.
  • Don’t click on links from sources you don’t know.
  • Research before making donations, and if asked for donations by cash, gift card, or wiring money, pass!
  1. Keep ‘em busy. Seniors have unique challenges when they stay at home. The inactivity that can be linked to being confined in the home can cause declines in physical health and in physical abilities. The elderly are also at greater risk of developing depression in social isolation, and their elevated risk for bad outcomes from this virus can cause higher levels of anxiety and lead to sleep difficulties and other health issues. Encourage your parents to read, play a board game, do a puzzle, or take a walk, provided that they’re keeping distance from others. Many religious groups have also transitioned their services online, and there are plenty of movies and TV shows on-demand for home viewing.

Most significantly, make certain that your parents are taking the pandemic seriously and emphasize the importance of social distancing.

Remember, too this would be a great time to review your parent’s estate planning to make sure that everything is in place. Reach out to the estate planning attorney who prepared the documents and have the documents reviewed.

Considerable (April 8, 2020) “4 things you can do for your aging parents during the coronavirus pandemic”

 

Am I Making One of the Five Common Estate Planning Mistakes?

You don’t have to be super-wealthy to see the benefits from a well-prepared estate plan. However, you must make sure the plan is updated regularly so these kinds of mistakes don’t occur and hurt the people you love most, reports Kiplinger in its article entitled “Is Anything Wrong with Your Estate Plan? Here are 5 Common Mistakes.”

An estate plan contains legal documents that will provide clarity about how you’d like your wishes executed both during your life and after you die. There are three key documents:

  • A will
  • A durable power of attorney for financial matters
  • A health care power of attorney or similar document

In the last two of these documents, you appoint someone you trust to help make decisions involving your finances or health, in case you can’t while you’re still living. Let’s look at five common mistakes in estate planning:

# 1: No Estate Plan Whatsoever. A will has specific information about who will receive your money, property and other property. It’s important for people, even with minimal assets. If you don’t have a will, state law will determine who will receive your assets. Dying without a will (or “intestate”) entails your family going through a time-consuming and expensive process that can be avoided by simply having a will.  A will can also include several other important pieces of information that can have a significant impact on your heirs, such as naming a guardian for your minor children and an executor to carry out the business of closing your estate and distributing your assets. Without a will, these decisions will be made by a probate court.

# 2: Forgetting to Name or Naming the Wrong Beneficiaries. Some of your assets, like retirement accounts and life insurance policies, aren’t normally controlled by your will. They pass directly without probate to the beneficiaries you designate. To ensure that the intended person inherits these assets, a specific person or trust must be designated as the beneficiary for each account.

# 3: Wrong Joint Title. Married couples can own assets jointly, but they may not know that there are different types of joint ownership, such as the following:

  • Joint Tenants with Rights of Survivorship (JTWROS) means that, if one joint owner passes away, then the surviving joint owners (their spouse or partner) automatically inherits the deceased owner’s part of the asset. This transfer of ownership bypasses a will entirely.
  • Tenancy in Common (TIC) means that each joint owner has a separately transferrable share of the asset. Each owner’s will says who gets the share at their death.

# 4: Not Funding a Revocable Living Trust. A living trust lets you put assets in a trust with the ability to freely move assets in and out of it, while you’re alive. At death, assets continue to be held in trust or are distributed to beneficiaries, which is set by the terms of the trust. The most common error made with a revocable living trust is failure to retitle or transfer ownership of assets to the trust. This is where you need the direction of an experienced estate planning attorney as this critical task is often overlooked after the effort of drafting the trust document is done. A trust is of no use if it doesn’t own any assets.

# 5: The Right Time to Name a Trust as a Beneficiary of an IRA. The new SECURE Act, which went into effect on January 1, 2020 gets rid of what’s known as the stretch IRA. This allowed non-spouses who inherited retirement accounts to stretch out disbursements over their lifetimes. It let assets in retirement accounts continue their tax-deferred growth over many years. However, the new Act requires a full payout from the inherited IRA within 10 years of the death of the original account holder, in most cases, when a non-spouse individual is the beneficiary. Therefore, it may not be a good idea to name a trust as the beneficiary of a retirement account. It’s possible that either distributions from the IRA may not be allowed when a beneficiary would like to take one, or distributions will be forced to take place at a bad time and the beneficiary will be hit with unnecessary taxes.

Talk to an experienced estate planning attorney and review your estate plans to make certain that the new SECURE Act provisions don’t create unintended consequences.

Reference: Kiplinger (Feb. 20, 2020) “Is Anything Wrong with Your Estate Plan? Here are 5 Common Mistakes”

 

Guardian Proceedings and Legal Representation

In many states, if a person is deemed unable to conduct their own affairs, a court appoints a guardian who makes decisions for the person and manages their financial affairs. Guardian proceedings and legal representation are different in many states.  In some states, Pennsylvania among them, the person has no legal right to have an attorney represent them during this process, explains a recent article from the Pittsburgh Post-Gazette, “Guardianship gap: Give people a right to counsel for proceedings.”  The article maintains that people who face losing control of the right to manage their lives would benefit from having the advice of an elder law attorney, especially if they wish to fight against a claim that they are incompetent.

About 18,400 adults in Pennsylvania are now under guardianship, and most are over 60 years old. There are problems with the guardianship process in the Keystone State. As a result, the state’s Supreme Court took action with the creation of an Elder Law Task Force. The task force issued a report calling for reforms six years ago—in 2014. Some reforms have been put into place. However, a recommendation to require appointed counsel was never implemented.  What is strange, the article reports, is that the goal of legal counsel is somehow marked as having been accomplished. Several members of the task force have expressed dismay that a right to legal counsel has not been completed. A number of judges do appoint counsel in guardianship cases because they believe it is the right thing to do. But not all of them do.

Guardian oversight and abuse is the concern. An improvement was made in 2018, when new software was made available, so that guardians could submit annual reports. The software identifies possible problems in the guardian’s handling of financial affairs. This has not solved the problem, as some jurisdictions are receiving alerts, but lack the staffing to follow up.  Guardians are also not required to submit bank statements, receipts and other documentation to verify their reports.

When you have an estate plan and if you are if you are deemed incompetent, you are in control of who will take care of financial and legal affairs including a power of attorney for financial affairs, power of attorney for healthcare decisions and a last will and testament.  When these documents are not in place, there is a very real risk that your life will end up being managed by a court-appointed guardian, who does not know you or your family.

Speak with an estate planning attorney to ensure that your wishes are properly documented and  that someone you select is able to represent your best interests, if necessary.

Reference: Pittsburgh Post-Gazette (April 9, 2020) “Guardianship gap: Give people a right to counsel for proceedings”

 

What are the Alzheimer’s Signs?

Considerable’s recent article entitled “These are the 10 Alzheimer’s signs to watch out for, provides a list of symptoms but cautions that it’s important to note that every one of these 10 symptoms can be applied to other problems.  The Alzheimer’s Association explains that there are 10 warning signs and symptoms of Alzheimer’s disease of which older adults should be aware. However, it’s also important to remember that for every one of these 10 symptoms of Alzheimer’s, there is also a typical age-related change that is not indicative of Alzheimer’s disease.

If you see any of these warning signs, don’t ignore them, especially if they’re impacting your life dramatically. See your doctor.

  1. Memory loss that upsets daily life. If you’re experiencing significant memory loss that’s interrupting your daily life it could indicate Alzheimer’s disease. However, the typical age-related change is that sometimes you forget names or appointments, but you remember them later on.
  2. Trouble planning or solving problems. You have changes in your ability to develop and follow a plan or work with numbers but it’s not a sign if you make a few errors when managing finances or household bills.
  3. Difficulty finishing regular tasks. Those with Alzheimer’s can begin having issues completing familiar tasks like driving to church, recalling the rules of a favorite game, or organizing a grocery list. However, it’s a typical age-related change to occasionally require assistance using a microwave or figuring out how to record a TV show.
  4. Confusion with time or location. If you’re always losing track of dates, seasons, and the passage of time, you should see your physician and have an Alzheimer’s test. You can, however, get confused about the day of the week and later recall.
  5. Trouble understanding visual images and spatial relationships. Some people will have visual issues that indicate Alzheimer’s, which is different than the typical age-related change of your sight related to cataracts.
  6. Recent issues with words in speaking or writing. If you stop in the middle of a conversation and have no clue how to continue, it can be a sign of Alzheimer’s. The same is true if you have trouble remembering the name of a common object and frequently repeat yourself. However, it’s a typical age-related change to occasionally have difficulty finding the right word.
  7. Misplacing things and losing the ability to retrace steps. If you put things in unusual places and can’t retrace your steps to find them, or if you accuse people of stealing from you, this may indicate Alzheimer’s disease. It is, however, a typical age-related change to misplace things from time to time and retrace your steps to find them.
  8. A lack of sound judgment. If you’re often experiencing difficulty with decision making and using poor judgment, see your doctor to be tested for Alzheimer’s. However, making an occasional bad decision or mistake is normal.
  9. No interest in work or social activities. Those with Alzheimer’s might feel unable to hold or follow a conversation and as a result withdraw from work or social activities.
  10. Change in mood and personality. If you think your mood and personality are shifting, it may be a sign of Alzheimer’s. This could include confusion, suspicion, depression, fear/anxiety and becoming easily upset.

Before this disease stops you, you should seek the advice of an experienced estate planning attorney to get your affairs in order.

 

Reference:  Considerable (March 4, 2020) “These are the 10 Alzheimer’s signs to watch out for”

 

What’s the Difference Between an Inter Vivos Trust and a Testamentary Trust?

Trusts can be part of your estate planning to transfer assets to your heirs. A trust created while an individual is still alive is an inter vivos trust, while one established upon the death of the individual is a testamentary trust.

Investopedia’s recent article entitled “Inter Vivos Trust vs. Testamentary Trust: What’s the Difference?” explains that an inter vivos or living trust is drafted as either a revocable or irrevocable living trust and allows the individual for whom the document was established to access assets like money, investments and real estate property named in the title of the trust. Living trusts that are revocable have more flexibility than those that are irrevocable. However, assets titled in or made payable to both types of living trusts bypass the probate process once the trust owner dies.

With an inter vivos trust, the assets are titled in the name of the trust by the owner and are used or spent down by him or her, while they’re alive. When the trust owner passes away, the remainder beneficiaries are granted access to the assets which are then managed by a successor trustee.

A testamentary trust (or will trust) is created when a person dies and the trust is set out in their last will and testament. Because the creation of a testamentary trust doesn’t occur until death, it’s irrevocable. The trust is a created by provisions in the will that instruct the executor of the estate to create the trust. After death, the will must go through probate to determine its authenticity before the testamentary trust can be created. After the trust is created, the executor follows the directions in the will to transfer property into the trust.

This type of trust does not protect a person’s assets from the probate process. As a result, distribution of cash, investments, real estate, or other property may not conform to the trust owner’s specific desires. A testamentary trust is designed to accomplish specific planning goals like the following:

  • Preserving property for children from a previous marriage
  • Protecting a spouse’s financial future by giving them lifetime income
  • Leaving funds for a special needs beneficiary
  • Keeping minors from inheriting property outright at age 18 or 21
  • Skipping your surviving spouse as a beneficiary and
  • Making gifts to charities.

Through trust planning, married couples may use of their opportunity for estate tax reduction through the Unified Federal Estate and Gift Tax Exemption. That’s the maximum amount of assets the IRS allows you to transfer tax-free during life or at death. It can be a substantial part of the estate (all of your assets), making this a very good choice for financial planning. Seek out an experienced estate planning attorney to explore and discuss these types of trusts.

Reference: Investopedia (Aug. 30, 2019) “Inter Vivos Trust vs. Testamentary Trust: What’s the Difference?”

 

A Good Move to Make during the Pandemic

While most of those infected with COVID-19 will recover, about 20% need hospitalization and in the absence of widely approved treatment those who are placed in the ICU can be in grave danger.  Thousands of deaths from the coronavirus is making many of us look at death more seriously than we would otherwise. With our major health crisis, it’s not really the time to delay creating a will if you don’t have one already. Many Americans are looking to create a will and making a will is a good move to make during the Pandemic. If you don’t have this important document in place, it’s critical that you create one immediately — just in case.

Motley Fool’s recent article entitled “The 1 Move You Must Make During the COVID-19 Crisis” says that about 37% of Americans have a will. Without one, you’ll risk having little to no say over what happens to your assets in the event of your passing.

It’s not uncommon for people to say things like, “I’m not rich and have very little money to my name, so who cares who gets it after I pass?” This is not so. Even if you only have a modest amount of assets, it’s wise to make out a will, so your wishes are carried out.  If you have minor children, you need to designate a guardian to care for them, if you should die and they don’t have another living parent. This isn’t a question you want to leave unanswered and you don’t want to leave your family members to fight over who will take on the assume the responsibility of taking in your children.

Create a will with the help of an estate planning attorney. If you create one online, you risk missing nuances that may be important in the event of your passing. If your estate is somewhat complex, it’s worth the money to use a legal expert.  Another estate-planning document to create includes a financial power of attorney which designates someone to make financial decisions on your behalf, if you can’t.

A healthcare proxy is a person who can make medical decisions on your behalf. Ask your estate planning attorney to help you determine which documents will benefit you. This document could give you and your loved ones peace of mind, when comfort goes a long way.

Reference: Motley Fool (April 6, 2020) “The 1 Move You Must Make During the COVID-19 Crisis”

 

Requests for Estate Plans Reflect Fears about Coronavirus

Estate planning lawyers have always known that estate planning is not about “if,” but about “when.” The current health pandemic has given many people a wake-up call and estate plans  reflect fears about Coronavirus. They realize there’s no time to procrastinate, reports the article “Surge on wills: Fearing death by coronavirus, people ask lawyers to write their last wishes” from InsuranceNews.net. Legal professionals urge everyone and not just the elderly or the wealthy to put their end-of-life plans in writing. The last time estate planning attorneys saw this type of surge was in 2012 when wealthy people were worried that Congress was about to lower the threshold of the estate tax. Today, everyone is worried.

Top priorities are creating a living will stating your wishes if you become incapacitated, designating a surrogate or a proxy to make medical decisions on your behalf, granting power of attorney to someone who can make legal and financial decisions and preparing advance directives, such as “Do Not Resuscitate” orders.

An estate plan including a last will and testament (and often trusts) that detail what you want to happen to assets and who will be guardian to minor children upon your death, spares your family the fights, legal costs and hours in court that can result when there is no estate plan.

The coronavirus has created a new problem for families. In the past, a health care surrogate would be in the hospital with you, talking to healthcare providers and making decisions on your behalf. However, now there are no visitors allowed in hospitals and patients are completely isolated. Estate planning attorneys are recommending that specific language be added to any end of life documents that authorize a surrogate to give instructions by phone, email or during an online conference.  Any prior documents that may have prohibited intubation need to be revised, since intubation is part of treatment for COVID-19 and not necessarily just an end-of-life stage.

Attorneys are finding ways to ensure that documents are properly witnessed and signed. In some states, remote signings are being permitted, while other states, Florida in particular, still require two in-person witnesses, when a will or other estate planning documents are being signed. There are many stories of people who have put off having their wills prepared, figuring out succession plans that usually take years to plan and people coming to terms with what they want to happen to their assets.

Equally concerning are seniors in nursing homes who have not reviewed their wills in many years and are not able to make changes now. Older adults and relatives are struggling with awkward and urgent circumstances, when they are confined to nursing homes or senior communities with no visitors.

Reference: InsuranceNews.net (April 3, 2020) “Surge on wills: Fearing death by coronavirus, people ask lawyers to write their last wishes”

 

Do You Have an Estate Planning Blueprint?

An estate planning attorney is necessary to ensure that an estate planning “Blueprint” for your assets is completed. this applies to people of all ages. Your assets can go to one of four spots:

  • Your family
  • Your friends
  • Charitable organizations or
  • The government.

Therefore, you need to avoid the last choice to confirm that your assets go to who you want them to.

Forbes recent article entitled “How To Create An Estate Planning Blueprint” reminds you to make sure your plan is optimized, so your beneficiaries can avoid probate and make the most of the gifts you plan to leave them.

Here are some ideas on how to make sure your estate is as planned as possible.

Set Regular Check-Ins. Estate planning isn’t a “set it and forget it’ task.” It needs regular reviews. Your estate is constantly evolving because of life events, changing laws and your financial circumstances. You need to talk to your attorney to make certain that all your assets, as well as circumstances, such as the birth or adoption of a grandchild, are recognized in your will. These meetings should be held every few years—but may be more frequent due to occurrences, such as a births, deaths, or divorces.

Think of the Future. Forecasting into the future can give you peace of mind now and make things easier for your beneficiaries. Failing to plan can create future problems for your heirs.

Look at Your Options. If you decide to create a trust, know your options and discuss different setups—and their tax implications—with an experienced estate planning attorney. Working through the pros and cons of options, can help you to determine the best options for you and your situation.

Tell Your Beneficiaries about Your Wishes. Let your beneficiaries know what you’re planning, so there are no surprises or hurt feelings. There’s no need to detail all of the financial details. Just give a summary of what you anticipate, as well as details about who will be the trustees and executors of your estate.

When it comes to your estate, paying for the professional services of a qualified estate planning attorney now, can help you and your family avoid issues in the future.

Reference: Forbes (April 1, 2020) “How To Create An Estate Planning Blueprint”