Dissolving the Mystery of Probate

Probate can be avoided with proper estate planning.

The Street’s recent article on this subject asks “What Is Probate and How Can You Avoid It?” The article looks at the probate process and tries to put it in real-life terms.

Probate is an estate planning process that works within a probate court with a probate judge presiding over the proceedings. Usually, surviving families and other interested parties (with the help of an experienced estate planning attorney) initiate a probate process, to address issues relating to the deceased individual’s estate settlement. These include:

  • The handling of the deceased’s valid will;
  • Properly citing and categorizing the deceased’s assets;
  • Appraising the deceased’s estate and property;
  • Paying off any of the deceased’s existing debts; and
  • Distributing the deceased’s property to those directed by the will (or, if there’s no will, the probate court will direct the distribution of estate assets,according to the laws of intestacy).

The executor handling the deceased’s estate will typically start the process. Here are the basic steps:

File a Petition. The estate’s executor will file a request for probate where the deceased resided.  The court will then assign a date to confirm the executor and, once that is done, the probate judge will officially open the probate case.

Notice. The executor must send a notice that the deceased’s estate is officially in probate to all applicable beneficiaries, heirs, debtors and creditors.

Inventory Assets. The executor will then collect, list and present a value for all of the deceased’s assets and supply this to the probate court.

Pay the Bills. The executor will need to pay all outstanding debts owed by the estate.

Complete Any Tax Returns. The estate may also have existing tax returns that need to be filed. An accountant can be hired by the estate to work on this, or the executor may choose to file the taxes on his or her own.

Pay the Heirs. The executor can now distribute the remainder of the estate to any heirs, according to the will’s instructions.

Close the Estate. Finally, the executor will file paperwork with the court and file to close the estate.

An experienced estate planning attorney licensed to practice in your state will be able to explain what strategies are used to avoid probate, how to remove certain assets from the process, or whether it needs to be avoided at all. In some regions, probate is swift, while in others it is long and tiresome. A local estate planning attorney is your best resource.

Reference: The Street (July 29, 2019) “What Is Probate and How Can You Avoid It?”

 

Why Do I Need an Attorney to Help Me with Estate Planning?

Your estate plan can be simple or complicated. The New Hampshire Union Leader’s recent article, “Estate planning is important and may require help from a professional,” says that some strategies are definitely easier to implement—like having a will, for example. Others are more complex, like creating a trust. Whatever your needs, most strategies will probably necessitate that you hire a qualified estate planning attorney. Here are some situations that may require special planning attention:

  • Your estate is valued at more than the federal gift and/or estate tax applicable exclusion amount ($11.4 million per person in 2019);
  • You have minor children;
  • You have loved ones with special needs who depend on you;
  • You own a business;
  • You have property in more than one state;
  • You want to donate to charities;
  • You own valuable artwork or collectibles;
  • You have specific thoughts concerning health care; or
  • You desire privacy and want to avoid the probate process.

First, you need to understand your situation, and that includes factors like your age, health and wealth. Your thoughts about benefitting family members and taxes also need to be considered. You’ll want to have plans in place should you become incapacitated.

Next, think about your goals and objectives. Some common goals are:

  • Providing financial security for your family;
  • Preserving property for your heirs;
  • Avoiding disputes among family members or business partners;
  • Giving to a charity;
  • Managing your affairs, if you are disabled;
  • Having sufficient liquidity to pay the expenses of your estate; and
  • Transferring ownership of your property or business interests.

Ask your attorney about a will. If you have minor children, you must have a will to address guardianship, unless your state provides an alternative legal means to do so. Some people many need a trust to properly address their planning concerns. Some of your assets will also have their own beneficiary designations. Once you have you a plan, review it every few years or when there’s a birth, adoption, death, or divorce in the family.

Reference: New Hampshire Union Leader (July 27, 2019) “Estate planning is important and may require help from a professional”

Suggested Key Terms: Estate Planning Lawyer, Wills, Capacity, Guardianship, Trusts, Asset Protection, Probate Court, Inheritance, Power of Attorney, Healthcare Directive, Tax Planning, Estate Tax

Estate Planning Smooths Life’s Bumpy Road

It’s too bad that this happened to the Franklin family but it happens often. A family member dies unexpectedly or becomes incapacitated at a young age and they never did the right planning.  Sometimes worse, they did the right planning but the documents are decades old and out of step with current laws and the power of attorney is so old  that no financial institution will recognize it.

The problems that these scenarios create for loved ones are stressful and expensive and take a fair amount of everyone’s time. Solutions are offered in the article “Planning for the unexpected–4 Steps to get your affairs in order” from the Post Independent.

These four steps will help make the unexpected events of life a little less challenging.

Have a will and other estate planning documents prepared.

A will is a list of instructions to the court that details how you want your possessions to be distributed after you die. It should be drafted by an estate planning attorney who is licensed to practice law in your home state. The will goes through the probate process, which takes care of your legal and financial matters. In some states, the probate process is a simple process. In others, it can be problematic. Your estate planning attorney will be able to advise you about the probate process in your area.

A revocable living trust is a useful estate planning document that is used to establish more control over your assets, while you are alive. It should also be created by an experienced estate planning attorney. At your death, assets held in your trust then pass to heirs and avoid the probate process.

Make sure you title your assets properly.

Once you have a will and any trusts in place, any assets you wish to have placed in the trust need to be titled correctly. If you own a property with someone else and want to be sure your share of that property goes to the other owner, you’ll need to title it jointly.

Don’t forget to review the beneficiary designations that are usually a part of your bank and investment accounts, retirement accounts and insurance policies. Any beneficiary designation will override the will. If you haven’t reviewed beneficiary designations in a long time, now is the time to do so. There is no way to undo a beneficiary designation, once you have died.

Have power of attorney agreements created.

These documents give another person, the “agent,” the power to act on your business, financial and legal affairs, if you are incapacitated. The laws vary from state to state, which is another reason to work with an estate planning attorney licensed in your state. You’ll need these documents:

  • A Durable Power of Attorney
  • A Health Care Proxy
  • A Living Will
  • Prepare a letter of instruction-This is not a legally binding document, but it can provide loved ones with a great deal of clarity when you have passed.
  • Consider including this information:
  • A list of financial accounts and account numbers and any online usernames and passwords.
  • A list of important documents and where they can be found.
  • The names and contact information for the legal and financial professionals with whom you work.
  • Your final burial and/or funeral wishes.

Once you’re done, review the documents every few years and when there are major events in your life, including births, marriages, divorces, deaths and other “trigger” events. Remember that the laws change, so don’t let too much time go by without a thorough review of your estate plan.

Reference: Post Independent (July 22, 2019) “Planning for the unexpected–4 Steps to get your affairs in order”

 

Can a Transaction Occur if One Spouse is Incapacitated?

An elderly married couple wished to sell their home, but they had a big problem. The notary public refused to notarize the wife’s signature, because she clearly did not understand the document she was being asked to sign. Because there was no power of attorney in place that could have authorized her husband to represent her, the transaction came to a halt.

This situation, as described in Lake Country News’ article “When one spouse becomes incapacitated,” is not an uncommon occurrence. The couple needed to petition the court for an order authorizing the transaction. When community property is concerned and one spouse is competent while the second is not, the competent spouse may ask the court for permission to conduct the transaction.

The request in California requires the following:

The incapacitated spouse must have an examination by a physician and a capacity evaluation form must be filed with the court. This is the same as a conservator proceeding.

The court must appoint a “guardian ad litem” to represent the incapacitated spouse’s interests. The person might be an adult child, or an attorney. That person must then file a written report with their recommendation to the court.

Next, the transaction must involve the couple’s community property. The order may affect additional separate property interests in the same transaction. If there is no community property, it is permissible for the well spouse to change some of the well spouse’s private property into community property to meet the requirements for community property.

The transactions must also be for one of several allowed purposes, including the best interests of the spouses or their estates, or for the care or support of either spouse.

In the example that starts this article, the purpose was to authorize the sale of their home, so they could move out of state to live with their children. Another example could be to transfer property, so an incapacitated spouse may become eligible for government benefits.

Finally, the notice of hearing and a copy of the petition must be served on all the incapacitated spouse’s children and grandchildren. Any of these individuals are permitted to object and could set the proceedings back months or even years.

In Massachusetts, there is no community property however, it is very important that you contact an experienced estate planning attorney if this situation arises.

How much easier would it be to simply meet with an estate planning attorney long before there are any health or mental capacity issues and have a power of attorney document created for each of the spouses?

Speak with an experienced estate planning attorney to have your estate plan, which includes a power of attorney document, and have all these important documents created before you need them.

Reference: Lake Country News (July 27, 2019) “When one spouse becomes incapacitated”

 

How Should Couples Begin the Estate Planning Process?

About 17% of adults don’t think they need a will, believing that estate planning is only for the very wealthy. However, no matter how few assets it seems someone owns, completing a few documents can make a huge difference in the future.

valuewalk.com’s recent article, “Couples: Here’s How To Start The Estate Planning Process” notes that although estate planning can seem overwhelming, taking inventory of assets is a terrific place to start.

Make a list of all your belongings of $100 or more in value, both inside and outside of the home. After that, think about how these assets should be divided among family, friends, churches or charities.

Drafting a will may be the most critical step in the estate planning process. A will serves as the directions for how assets are to be distributed, which can avoid unpleasant disputes.

A will can simplify the distribution of assets at your death, and it also provides instructions to your family and heirs.

A will can also set out directions for childcare, pet care, or any additional instructions or specifications.

Without a will in place, your assets will be distributed according to state law, rather than according to your wishes. Creating a will keeps the state from making decisions about how your estate is divvied up—decisions you may not have intended.

Once you have your assets and beneficiaries set, see an experienced estate planning attorney and have your will, durable power of attorney and health care proxy drafted immediately. Hey, life is unpredictable.

Another important part of the process is to have a discussion with everyone involved to prevent any legal or familial disputes regarding the estate.

Failure to start the estate planning process can lead to family fighting, misappropriated assets, court litigation and unneeded expenses. Get going!

Reference: valuewalk.com (July 22, 2019) “Couples: Here’s How To Start The Estate Planning Process”

 

Estate Planning a Necessity for Small Business Owners

Just as the small business owner must plan for their own personal estate to be passed onto the next generation, they must also plan for the future of their business. This is why you need a comprehensive estate plan that addresses both you personal life and the business, says grbj.com’s recent article “Estate planning for small businesses.” Here are the basic strategies you’ll need as a small business owner:

A will. A last will and testament allows you to name someone who will receive your assets, including your business, when you die. If you don’t have a will, you leave your heirs a series of problems, expenses and stress. In the absence of a will, everything you’ve worked to attain will be distributed depending on the laws of the state. That includes your assets and your business. It’s far better to have a will so you make these decisions.

A Living Trust. A living trust is similar to a will in that it allows you to name who will receive your assets when you die. However, there are certain advantages to having a trust. For one thing, a trust is a private document and assets controlled by the trust can bypass probate. Assets controlled by a will must first go through probate which is a public proceeding. If you’ve ever had a family member die and wonder why all those companies seemed to know that your loved one had passed it’s because they get the information that is available to the public.

If your business is owned by a trust, the transition of ownership to your intended beneficiaries can be a much smoother process.

A financial durable power of attorney. This document lets you appoint an agent to act on your behalf,if you are incapacitated by illness or injury. This is a powerful legal document so take the time to consider who you want to give this power to. Your agent can manage your finances, pay your bills and manage the day-to-day operations of your business.

A succession plan. Here is where many small business owners fall short in their planning. It takes a long time to create a succession plan for a business. Sometimes a buy-out agreement is part of a succession plan or a partner in the business or key employee wishes to become the new owner. If a family member wishes to take over the business, will they inherit your entire ownership interest or will there be a payment required? Will more than one family member take over the business? If a non-family member is going to take over the business, you’ll need an agreement documenting the obligation to purchase the business and the terms of the purchase.

If you would prefer to have the business sold upon your death, you’ll need to plan for that in advance so that family members will be able to receive the best possible price.

A buy-sell agreement. If you are not the sole owner, it’s important that you have a buy-sell agreement with your partners. This agreement requires your ownership interest to be purchased by the business or other owners, if and when a triggering event occurs, like death or disability. This document must set forth how the value of ownership interest is to be determined and how it is to be paid to your family. Without this kind of document, your ownership interest in the business will pass to your spouse or other family members. If that is not your intention, you’ll need to do prior planning.

The right type of life insurance. This is an important part of planning for the future for the small business owner. The death benefit may be needed to provide income to the family, until a business is sold, if that is the ultimate goal. If a family member takes over the business, proceeds from the life insurance policy may be needed to cover payroll or other expenses until the business gets going under new leadership. Life insurance proceeds may also be used to buy out the other partners in the business.

Failing to plan through the use of basic estate planning and succession planning can create significant costs and stress. An experienced estate planning attorney can review the strategies and documents that are appropriate for your situation. You’ll want to ensure a smooth transition for your business and your family, as that too will be part of your legacy.

Reference: grbj.com (Grand Rapids Business Journal) (July 19, 2019) “Estate planning for small businesses”

 

Elder Law Estate Planning for the Future

Seniors who are parents of adult children can make their children’s lives easier, by making the effort to button down major goals in elder law estate planning, advises Times Herald-Record in the article “Three ways for seniors to make things easier for their kids.” Those tasks are planning for disability, protecting assets from long-term care or nursing home costs and minimizing costs and stress in passing assets to the next generation. Here’s what you need to do, and how to do it.

Disability planning includes signing advance directives. These are legal documents that are created while you still have all of your mental faculties. Naming people who will make decisions on your behalf, if and when you become incapacitated, gives those you love the ability to take care of you without having to apply for guardianship or other legal proceedings. Advance directives include powers of attorney, health care proxies, durable powers of attorney and living wills.

Your power of attorney will make all and any legal and financial decisions on your behalf.  With a health care proxy, a person is named who can make medical decisions. In a living will, you have the ability to convey your wishes for end-of-life care, including resuscitation and artificial feeding.

When advance directives are in place, you spare your family the need to have a judge appoint a legal guardian to manage your affairs. That saves time, money and keeps the judiciary out of your life. Your children can act on your behalf when they need to, during what will already be a very difficult time.

Goal number two is protecting assets from the cost of long-term care. Losing the family home and retirement savings to unexpected nursing costs is devasting and may be avoided with the right planning. The first and best option is to purchase long-term care insurance. If you don’t have or can’t obtain a policy, the next best is the Medicaid Asset Protection Trust (MAPT) that is used to protect assets in the trust from nursing home costs after the assets have been in the trust for five years.

The third thing that will make your adult children’s lives easier is to have a will. This lets you leave assets to the family as you want, with the least amount of court costs, legal fees, taxes and family battles over inheritances. Work with an experienced estate planning attorney to have a will created.  If your attorney advises it, you can also consider having trusts created so your assets can be placed into the trusts and avoid probate (which is a public process). A trust can be easier for children because estates settle more quickly.

Think of estate planning as part of your legacy of taking care of your family ensuring that your hard-earned assets are passed to the next generation. You can’t avoid your own death, or that of your spouse, but you can prepare so those you love are helped by thoughtful and proper planning.

Reference: Times Herald-Record (July 13, 2019) “Three ways for seniors to make things easier for their kids”

 

What Do I Need to Know About Long-Term Care Insurance?

Only 7.2 million Americans have long-term care insurance. This covers many of the costs of a nursing home, assisted living or in-home care that aren’t covered by Medicare. AARP’s article “5 Things You SHOULD Know About Long-Term Care Insurance” gives you a great look at what you need to know about LTC insurance today.

  1. Traditional policies are used less. For years, long-term care insurance meant paying an annual premium for financial assistance, if you require help with day-to-day activities. However, typical terms now include a daily benefit of $160 for nursing home coverage, a waiting period of about three months before insurance starts and a limit of three years’ worth of coverage.
  2. Even if you don’t need insurance, you need a plan. Premiums for LTC policies average about $2,700 a year, which puts the coverage out of reach for many Americans. Plan for this possible expense, by looking at other ways to pay for it.
  3. A new kind of insurance. As traditional LTC insurance is used less, another policy is growing in stature: it’s whole life insurance that allows you to draw from the death benefit for long-term care. Unlike the older types of LTC insurance, these “hybrid” policies will return money to your heirs, even if you don’t end up needing long-term care. There’s no risk of a rate hike, because you lock in your premium upfront. If you’re older or have health problems, you may be more likely to qualify.
  4. Basic policies are less expensive. If all you want is cost-effective coverage, traditional LTC insurance has the advantage because hybrid policies are usually two to three times more expensive than traditional insurance, for the same long-term care benefits.
  5. Get going on this. Begin looking in your 50s or early 60s—before premiums rise dramatically, or your health disqualifies you from coverage.

Speak with your Estate Planning Attorney about Long-Term Care Insurance.

Reference: AARP (March 1, 2018) “5 Things You SHOULD Know About Long-Term Care Insurance”

Six Steps to Get Your Loved One’s Financial Records Under Control

For many people, organizing their paperwork is way down on their to-do list. It is somewhere after getting their teeth cleaned every six months and having comprehensive annual physicals. Some things get put off. If you serve as the caregiver or money manager for a relative, you might find you spend twice as long looking for a document you need, than it takes to perform the required task itself.

If your loved one’s organizational style consists of dropping off paperwork somewhere in the spare room, instead of creating a financial document file, you might feel overwhelmed. Here are six steps to get your loved one’s financial records under control.

  1. Ask Questions

Before you can organize your loved one’s financial life, you need to know about all bank and investment accounts your relative owns and all debt he has. You need to be able to log on to his computer and the accounts, so you will need user names and passwords. If you will be in charge of paying his bills at some point, you need to know about all the regular payments he makes.

Make a list of all of his property, including land, houses, condominiums, timeshares, cars, trucks, boats and other vehicles or property. Get the details about all bank loans, personal loans and credit cards. Find out the names and contact information of his accountant, broker, life insurance agent and lawyer.

Gather his will, trust, power of attorney and all other estate planning documents and confirm that these are current documents. He would need to contact his estate planning attorney to do this for you. Get a copy of the last three years of his tax returns. Find out about any pre-paid funeral plans or burial plots and get copies of these documents for the file.

  1. Look for Essential Documents

Try to find or get replacement copies of these papers:

  • Bank statements
  • Loan documents
  • Titles, deeds, and registration
  • Insurance policies
  • Military records
  • Marriage license
  • Divorce Decree
  • Death certificate, if his spouse predeceased him
  • Stock certificate and bonds

It will be time-consuming and a lot of work to put these documents together. However, if you wait until he has a medical crisis or dies to gather these papers, you will have to deal with the urgent situation and grief on top of all of these tasks.

  1. Organize the Papers into Binders

Grab a three-hole punch and a bunch of binders and labels. Make a stack for each category of paperwork, then place each group into its own binder. For example, legal documents like a will or trust should be separate from bills, taxes and bank statements. Legal documents should NOT be placed in a safe deposit box as access to it is only given to certain individuals on the account.

  1. Dedicate a Space for Financial Paperwork

If you do not designate a work area for the financial files, your brilliant organizational system will unravel quickly, and all of your time and work will be wasted. Get a large enough fireproof safe to hold the essential binders. Get a box or file cabinet for the rest of the papers. Do not share that space with other things, like memorabilia, crafts or storage of other items.

  1. Simplify Next Year’s Taxes

Every year, get a large manila envelope and stuff everything into it you will need for the next year’s taxes. Label the envelope for that tax year. These items can include receipts for tax-deductible purchases, medical bill payments and annual dividend and interest statements.

  1. Gather Information and Documents About Funeral and Burial Plans

People spend millions of dollars buying pre-paid funeral plans and burial plots that go unused, because the person’s loved one did not know about the purchases or did not have the necessary paperwork to claim the benefit. Make a binder that contains everything you will need at the time your loved one passes, including her last wishes and details about what type of service she would like and whether she prefers cremation or burial.

References:

AARP. “Organize Your Loved One’s Financial Records.” (accessed July 11, 2019) https://www.aarp.org/caregiving/financial-legal/info-2018/organize-financial-records.html

 

What Kind of Money Do I Need to Put into a Special Needs Trust for my Child?

One of the toughest things about planning for a child with special needs, is trying to calculate the amount of money it’s going to take to provide both while the parents are alive and after the parents pass away.

Kiplinger’s recent article asks “How Much Should Go into Your Special Needs Trust?” The article explains that it’s not uncommon for people to have done some estate planning but not necessarily special needs estate planning. They haven’t thought about how much money they should earmark to fund that trust someday and which assets would be the best to use.

Special needs estate planning involves creating a special needs trust that allows a person with a disability continue to receive certain public benefits. Typically, ownership of assets more than $2,000 would make the individual ineligible for certain public benefits. Assets held in a special needs trust don’t count toward this amount.

A child with special needs can generate multiple expenses. The precise amount will be based on the needs and lifestyle of the family and the child’s capabilities.

When the parents die, this budget must be increased, because the things the parents did must be monetized.

A special needs trust usually isn’t funded until the parents’ death. The trust would then need to file a tax return each year and pay taxes.

There are also legal and trust administration expenses to think about. Public program benefits can, in many cases, offset many of the above-mentioned costs.

It’s vital to conduct a complete analysis of the future costs to provide for a child with special needs so that parents can start saving and making adjustments in their planning.

Speak with an elder law or estate planning attorney about special needs trusts.

Reference: Kiplinger (June 10, 2019) “How Much Should Go into Your Special Needs Trust?”