Tell Me again Why Estate Planning Is So Important

The Legal Reader’s recent article entitled “The Importance of Estate Planning” explains that estate planning is not just for the rich.

If you don’t have a comprehensive estate plan, it could mean headaches for your family left to manage things after you die, and it can be expensive and have long-lasting impact.

Here are four reasons why estate planning is critical, and you need the help of an experienced estate planning attorney.

Estate plan beneficiaries. Middle-class families must plan in the event something happens to the bread earner. You might be only leaving behind one second home, but if you don’t decide who is to receive it, things might become complicated. The main purpose of estate planning is to allocate heirs to the assets. If you have no estate plan when you die, the court decides who gets the assets.

Protection for minor children. If you have small children, you must prepare for the worst. To be certain that your children receive proper care if they are orphaned, you must name their guardians in your last will. If you don’t, the court will do it!

It can save on taxes. Estate planning can protect your loved ones from the IRS. A critical aspect of estate planning is the process of transferring assets to the heirs to generate the smallest tax burden for them. Estate planning can minimize estate taxes and state inheritance taxes.

Avoid fighting and headaches in the family. No one wants fighting when a loved one dies. There might be siblings who might think they deserve much more than the other children. The other siblings might also believe that they should be given the charge for financial matters, despite the fact that they aren’t good with debts and finances. These types of disagreements can get ugly and lead to court. Estate planning will help in creating individualized plans.

Work with an experienced estate planning attorney and see how estate planning can help your specific situation.

Reference: The Legal Reader (May 10, 2021) “The Importance of Estate Planning”

 

What Do I Need to Know about Estate Planning?

Your idea of planning for the future may include vacations and visits to family and friends—estate planning, not so much. However, it should, advises Real Simple in the article “Everything You Need to Know About Estate Planning—and Why You Should Start Now.” Estate planning concerns decisions about distributing your property when you die, and while that’s not as much fun as planning a trip to an adventure park, it’s become increasing important for adults of all ages.

A survey by caring.com found that the number of young adults with a last will (ages 18-34) increased by 63 percent since 2020. Many tough lessons were learned through the pandemic, and the importance of having an estate plan was one of them.

An estate plan is more than documents for when you die. There are also documents for what should happen, if you become disabled. The last will is one piece of the larger estate plan. An estate plan is also an opportunity to plan for wealth accumulation and building generational wealth, at any level.

Estate planning is for everyone, regardless of their net worth. People with lower incomes actually need estate planning more than the wealthy. There’s less room for error. Estate planning is everything from where you want your money to go, to who will be in charge of it and who will be in charge of your minor children, if you have a young family.

It may be rare for both parents to die at the same time, but it does happen. Your last will is also used to name a guardian to raise your minor children. With no last will, the court will decide who raises them.

If you’ve filled out 401(k) and life insurance paperwork at work, you’ve started estate planning already. Any document that asks you to name a beneficiary in case of your death is part of your estate plan. Be certain to update these documents. Young adults often name their parents and then neglect to change the beneficiaries, when they get married or have children.

For single people, estate planning is more important. If you have no estate plan and no children, everything you own will go to your parents. What if you have a partner or best friend and want them to receive your assets? Without an estate plan, they have no legal rights. An estate planning attorney will know how to plan, so your wishes are followed.

Estate planning includes planning for disability, also known as “incapacity.” If you become too sick to manage your affairs, bills still need to be paid. Who can do that for you? Without an estate plan, a family member will need to go to court to be assigned that role—or someone you don’t even know may be assigned that role. Your last will names an executor to manage your affairs after you die.

Work with an experienced estate planning attorney to have your last will, Power of Attorney, Medical Power of Attorney and other parts of your estate plan created. The court system and processes are complex, and the laws are different in every state. Trying to do it yourself or using a template that you download, could leave you with an invalid last will, which will cause more problems than it solves.

Reference: Real Simple (May 12, 2021) “Everything You Need to Know About Estate Planning—and Why You Should Start Now”

 

Your Will and Estate Planning Checklist

Dying without a last will creates additional costs and eliminates any chance your wishes for loved ones will be followed after your death. Typically, people think about last wills when they marry or have children, and then do not think about last wills or estate plans until they retire. While a last will is important, there are other estate planning documents that are just as important, says the recent article “10 Steps to Writing a Will” from U.S. News & World Report.

Most assets, including retirement accounts and insurance policy proceeds, can be transferred to heirs outside of a will, if they have designated beneficiaries. However, the outcome of an estate may be more impacted by Power of Attorney for financial matters and Medical Power of Attorney documents.

Here are ten specific tasks that need to be completed for your last will to be effective. Remember, if the will does not comply with your state’s estate law, it can be declared invalid.

  1. Find an estate planning attorney who is experienced with the laws of your state.
  2. Select beneficiaries for your last will.
  3. Check beneficiaries on non-probate assets to make sure they are current.
  4. Decide who will be the executor of your last will.
  5. Name a guardian for minor children, if yours are still young.
  6. Make a letter describing possessions and who you want to receive them. Be very specific.

There are also tasks for your own care while you are living, in case of incapacity:

  1. Name a person for the Power of Attorney role. They will be your representative for legal and financial matters, but only while you are living.
  2. Name a person for the Medical Power of Attorney to make decisions on your behalf, if you cannot.
  3. Create an Advance Directive, also known as a Living Will, to explain your wishes for medical care, particularly concerning end-of-life care.
  4. Discuss these roles and their responsibilities with the people you have chosen, and make sure they are willing to serve.

Be realistic about the people you are naming to receive your property. If you have a child who is not good with managing money, a trust can be set up to distribute assets according to your wishes: by age or accomplishments, like finishing college, going to rehab, or maintaining a steady work history.

Do not forget to tell family members where they can find your last will and other estate documents. You should also talk with them about your digital assets. If accounts are protected by passwords or facial recognition, find out if the digital platform has a process for your executor to legally obtain access to your digital assets.

Finally, do not neglect updating your last will every three to four years or anytime you have a major life event. An estate plan is like a house: it needs regular maintenance. Old last wills can disinherit family members or lead to the wrong person being in charge of your estate. An experienced estate planning attorney will make the process easier and straightforward for you and your loved ones.

Reference: U.S. News & World Report (May 13, 2021) “10 Steps to Writing a Will”

 

Do You Have to Do Probate when Someone Dies?

Probate is a Latin term meaning “to prove.” Legally, a deceased person may not own property, so the moment a person dies, the property they owned while living is in a legal state of limbo. The rightful owners must prove their ownership in court, explains the article “Wills and Probate” from Southlake Style. Probate refers to the legal process that recognizes a person’s death, proves whether or not a valid last will exists and who is entitled to assets the decedent owned while they were living.

The probate court oversees the payment of the decedent’s debts, as well as the distribution of their assets. The court’s role is to facilitate this process and protect the interests of all creditors and beneficiaries of the estate. The process is known as “probate administration.”

Having a last will does not automatically transfer property. The last will must be properly probated first. If there is a last will, the estate is described as “testate.” The last will must contain certain language and have been properly executed by the testator (the decedent) and the witnesses. Every state has its own estate laws. Therefore, to be valid, the last will must follow the rules of the person’s state. A last will that is valid in one state may be invalid in another.

The court must give its approval that the last will is valid and confirm the executor is suited to perform their duties. Texas is one of a few states that allow for independent administration, where the court appoints an administrator who submits an inventory of assets and liabilities. The administration goes on with no need for probate judge’s approval, as long as the last will contains the specific language to qualify.

If there was no last will, the estate is considered to be “intestate” and the laws of the state determine who inherits what assets. The laws rely on the relationship between the decedent and the genetic or bloodline family members. An estranged relative could end up with everything. The estate distribution is more likely to be challenged if there is no last will, causing additional family grief, stress and expenses.

The last will should name an executor or administrator to carry out the terms of the last will. The executor can be a family member or a trusted friend, as long as they are known to be honest and able to manage financial and legal transactions. Administering an estate takes time, depending upon the complexity of the estate and how the person managed the business side of their lives. The executor pays bills, may need to sell a home and also deals with any creditors.

The smart estate plan includes assets that are not transferrable by the last will. These are known as “non-probate” assets and go directly to the heirs, if the beneficiary designation is properly done. They can include life insurance proceeds, pensions, 401(k)s, bank accounts and any asset with a beneficiary designation. If all of the assets in an estate are non-probate assets, assets of the estate are easily and usually quickly distributed. Many people accomplish this through the use of a Living Trust.

Every person’s life is different, and so is their estate plan. Family dynamics, the amount of assets owned and how they are owned will impact how the estate is distributed. Start by meeting with an experienced estate planning or elder law attorney to prepare for the future.

Reference: Southlake Style (May 17, 2021) “Wills and Probate”

 

Why Is Estate Planning So Important?

Big Easy Magazine’s recent article “Estate Planning Is Essential and Here’s Why” says that writing a last will isn’t limited to what happens to your house, car, company, or other assets after you die. It also states who will take care of your minor children, if they are orphaned.

Your instructions for burial and other smaller things can be included.

If you fail to provide specific instructions, the state intestacy laws will apply upon your death. Here is a glimpse of the consequences of not writing your last will:

  • Your burial preferences may not be honored.
  • Your properties may be managed by an individual you don’t necessarily trust. Without a named executor to your last will, some other family member may be asked to file taxes, make transfers and manage your estate.
  • Family members may not get an inheritance. Under intestacy laws, same-sex relationships and common-law marriages may not be recognized. So, your partner may not get a portion of your estate.
  • Your favorite charity may be left out. If you are committed to leaving a legacy, your charity, religious organization, or other organization of choice should be mentioned in the last will.
  • The government will name the guardians for your minor children.

With a last will, you can designate a guardian for your children and avoid additional taxes. Ask an experienced estate planning attorney about developing a comprehensive estate plan.

Aside from this, estate planning can also save your loved ones considerable angst and money.

A detailed last will with your instructions will avoid complications and provide comfort, while your loved ones recover emotionally from their loss.

Reference: Big Easy Magazine (May 17, 2021) “Estate Planning Is Essential and Here’s Why”

 

How to Simplify Estate Planning

For most people, estate planning and preparation doesn’t rank very high on their “to do” list. There are a number of reasons, but frequently it comes down these three: (i) cost; (ii) they believe it’s just for the rich; and (iii) it’s too complicated.

Fort Worth’s recent article entitled “3 Tips to Help Simplify Estate Planning,” explains that an estate plan really is not about you. It’s about taking care of your loved ones and charities.

Without an estate plan or last will, state intestacy law determines who gets your assets. You lose control of how your wealth will be distributed.

Let’s look at three tips to make it easier and to help you prepare for the future:

  1. Work with an experienced estate planning attorney. Estate planning is not something you ask your buddy to do. “Hey, Jimmy, help me write my will.” No way. Partner with an experienced estate planning attorney, so you are confident your documents comply with state law and that the plan’s language clearly details how your wealth should be managed.
  2. Review your estate planning documents regularly. We all have planned and unexpected events in our lives, like new grandchildren, illnesses, or significant increases or decreases in your net worth that could impact wealth and how it should be distributed. Meet regularly with your estate planning attorney and review your plan to make sure it still meets your needs and intentions.
  3. Organize important documents. Make certain important documents have been created and can be located quickly, if something happens to you. Here is a list of documents you should have on file that can be accessed by your spouse or family members in case of an emergency:
  • Wills, trusts, and other important estate planning documents
  • A list of tangible and intangible property
  • A list of financial accounts and insurance policies; and
  • Email accounts, logins, or other log-in information to your PC and phone.

Estate planning is not a DIY project. You need the expertise of an experienced estate planning attorney to make certain that your wishes are carried out and that your estate plan can withstand any legal challenge.

Reference: Fort Worth (May 6, 2021) “3 Tips To Help Simplify Estate Planning”

 

When Should Children Receive an Inheritance?

Should an inheritance remain an inheritance, given to children only after their parents die, or should parents use some of the money to help their kids out while they are still living? That’s a question that many families grapple with, reports a recent article “When to Give Inheritance Money to Your Kids,” from The Wall Street Journal.

Not every family can afford to give their children an advance on their inheritance, but for those who can, there are some things to consider:

Some financial advisors believe that “gifting with warm hands” is a better way to go. Parents can enjoy seeing their children and grandchildren benefit from having the help, based on when it is needed. Decoupling an inheritance from parental death is a happier scenario than the alternative.

Others believe that current financial needs, taxes and the tax situations of the parents and children ought to be the deciding factor. First, is there enough money for the parents to live comfortably in retirement? That includes being prepared for the cost of an unexpected health crisis that might lead them to need short- and long-term care. Follow that by understanding the tax situation of both parents and heirs. Once those answers are fully formed, then a discussion about gifting can move forward.

Another school of thought is to stop saving every penny and enjoy life to its fullest right here, right now. Some people are more concerned with maxing out their 401(k) plans than enjoying their lives. A healthy balance between protecting assets for later years, creating wealth for the next generation and having some fun too is the goal for many families.

Regardless of how you see your situation, one thing is sure: if you have any concerns about how your children will handle an inheritance, make a gift while you are living. You’ll get to see how they handle it, responsibility or recklessly. This may inform your planning for the future, including the use of spendthrift trusts.

The pandemic has forced many people to confront their own mortality and consider how they really want to spend the rest of their lives, as well as their assets. Many parents are preparing to make changes in their estate and gifting plans to accommodate needs that have arisen as a result of COVID’s economic impact.

Talk with your children about finances—yours and theirs. Discuss their needs, especially if they have been unemployed for an extended period of time. If they need money for something critical, like paying for health insurance or catching up on student loans, the gift should be made with a clear understanding of its intended purpose.

Your estate planning attorney can help create a plan that works while you are living and after you have passed. Trusts may be a strategic plan for sharing assets while you are alive, with some tax advantages.

Reference: The Wall Street Journal (April 30, 2021) “When to Give Inheritance Money to Your Kids”

 

How to Avoid Basic Estate Planning Miscues

WMUR’s recent article entitled “Common estate planning mistakes” gives us a few of the most common and potentially costly mistakes, along with help on how to avoid them.

Failing to plan. You delay and you delay. Most Americans don’t have a will and no estate plan. If you die without a will, your assets will be divided according to the intestacy laws of your state. There is no guarantee this would be consistent with your wishes. Whether an estate plan involves a basic will or perhaps a trust, having a plan can help reduce estate taxes, save on estate administrative costs, preserve privacy and speed up disbursement to beneficiaries. An estate plan can help direct how your assets are to be distributed. You can also designate a guardian for your minor children in your will.

Failing to maximize your marital estate exemption. Portability is an estate planning provision that can help with potential estates. Each person gets an $11.7 million federal estate tax exemption in 2021. If one spouse dies without using up his or her $11.7 million, the unused portion may be transferred to the other spouse for use at the survivor’s death. However, portability doesn’t address the appreciation of assets from the first spouse’s estate. It also doesn’t offer creditor protection. There are other documents in a comprehensive estate plan that can address these goals. Discuss the issues with an experienced estate planning attorney.

Failing to consider state estate taxes. You may live in one of the states that has state estate taxes. Twelve states and DC impose estate taxes. These include Hawaii, Washington, Massachusetts, Oregon, New York, Minnesota, Illinois, Vermont, Maine, Rhode Island, Connecticut and Maryland. Keep this in mind when reviewing your strategy and make certain to discuss how portability is elected with your estate planning attorney.

Taking advice from family or friends. Make sure the person you discuss your estate plans with is knowledgeable about the process. Look for an experienced estate planning attorney who knows estate tax law, trust and probate issues. You may also ask this attorney, if they practice in elder law.  You should have your estate documents in place to give you peace of mind that things are going to happen as you wished upon your death.

Reference: WMUR (May 6, 2021) “Common estate planning mistakes”

 

Can My Family Fight the Gift of My Estate to Caregiver?

Family fights over an estate after someone dies is not uncommon, says nj.com’s recent article entitled “I’m leaving my estate to my caregiver. Can my family fight it?”

A family member could contest a power of attorney, a will, or a living will on the grounds that the principal (the person who appointed an attorney-in-fact or agent) was mentally incapacitated when the document was signed. A family member could also contest a power of attorney on the grounds that the agent abused his or her authority. Lastly, a will, a power of attorney and living will can be challenged on the grounds that the documents were not executed properly.

A power of attorney gives one or more persons the authority to act on your behalf as your agent or agent in fact or attorney in fact. The power may be limited to a particular activity, like closing the sale of your home. It may also be general in its application.  The principle may give temporary or permanent authority to act on your behalf.

All 50 states allow you to express your wishes as to medical treatment in terminal illness or injury situations, and to designate an individual to communicate for you, if you cannot communicate for yourself.

Depending on the state, these documents are known as “living wills,” “medical directives,” “health care proxies,” or “advance health care directives.”

Reasons for contesting an estate planning document include the fact that the document may not have been witnessed by the number of witnesses required by state law or notarized, if state law requires notarization.

You should work with an experienced estate planning attorney to try to limit the success of any challenges.  Estate planning is a process involving legal counsel familiar with your goals and concerns, your assets and how they are owned, along with your family structure. Estate planning covers the transfer of property at death, as well as a variety of other personal matters and may involve planning for taxes, business succession and legacy planning.

Reference:  nj.com (May 7, 2021) “I’m leaving my estate to my caregiver. Can my family fight it?”

 

Do Stepchildren Inherit?

When an individual passes away without a will, the state laws of intestacy instruct how the person’s probate estate will be distributed.  Only assets that would have passed through a person’s will are impacted by intestate succession laws. This typically includes only assets owned alone in his or her name.

For instance, in Nebraska, under intestate succession, who inherits depends on whether the deceased had living children, parents, or other close relatives, when he or she died.  In Nebraska, if the decedent was married and died without a will, what the decedent’s spouse will receive depends on whether the decedent had any living parents or descendants, such as children, grandchildren, or great-grandchildren. If the decedent did not, then his or her spouse inherits all of the intestate property.

Under New Jersey’s intestacy statute, when a decedent is survived by a spouse and children who are not children of the surviving spouse (stepchildren), the surviving spouse is entitled to the first 25% of the intestate estate, but not less than $50,000 nor more than $200,000– plus one-half of the remainder of the intestate estate.

However, nj.com’s recent article entitled “Who gets this house after spouse dies with no will?” explains that the laws of intestacy don’t control the distribution of assets that were jointly owned with a right of survivorship (like a house) or that have a beneficiary designation (like life insurance).

If the house was jointly owned as husband and wife in joint tenancy with the right of survivorship, the surviving spouse solely owns the entire house by operation of law, upon the death of the first spouse. The stepchildren do not have any right to the proceeds of the sale of the house.  However, if the decedent spouse owned the house only in his or her own name or the house was titled by the spouses as “tenants in common,” then the laws of intestacy would apply.

Tenancy in common is an arrangement where two or more people have ownership interests in a property.  The big difference between joint tenants and tenants in common is that joint tenants have the right of survivorship (which gives them ownership of the property when one owner dies), tenants in common do not.  With a tenancy in common, the tenants can own different percentages of the property. Tenants in common can also gift their share of the property to anyone upon their death.

Contact an experienced estate planning attorney in your area if you have questions.

Reference: nj.com (May 5, 2021) “Who gets this house after spouse dies with no will?”