Avoiding Probate with a Trust

Privacy is just one of the benefits of having a trust created as part of an estate plan. That’s because assets that are placed in a trust are no longer in the person’s name, and as a result do not need to go through probate when the person dies. An article from The Daily Sentinel asks, “When is a trust worth the cost and effort?” The article explains why a trust can be so advantageous even when the assets are not necessarily large.

Let’s say a person owns a piece of property. They can put the property in a trust by signing a deed that will transfer the title to the trust. That property is now owned by the trust and can only be transferred when the trustee signs a deed. Because the trust is the owner of the property, there’s no need to involve probate or the court when the original owner dies.

Establishing a trust is even more useful for those who own property in more than one state. If you own property in a state, the property must go through probate to be distributed from your estate to another person’s ownership. Therefore, if you own property in three states, your executor will need to manage three probate processes.

Privacy is often a problem when estates pass from one generation to the next. In most states, heirs and family members must be notified that you have died and that your estate is being probated. The probate process often requires the executor, or personal representative, to create a list of assets that are shared with certain family members. When the will is probated, that information is available to the public through the courts.  Family members who were not included in the will but were close enough kin to be notified of your death and your assets, may not respond well to being left out. This can create problems for the executor and heirs.

Having greater control over how and when assets are distributed is another benefit of using a trust rather than a will. Not all young adults are prepared or capable of managing large inheritances. With a trust, the inheritance can be distributed in portions: a third at age 28, a third at age 38, and a fourth at age 45, for instance. This kind of control is not always necessary, but when it is, a trust can provide the comfort of knowing that your children are less likely to be irresponsible about an inheritance.

There are other circumstances when a trust is necessary. If the family includes a member who has special needs and is receiving government benefits, an inheritance could make them ineligible for those benefits. In this circumstance, a special needs trust is created to serve their needs.

Another type of trust growing in popularity is the pet trust. Check with a local estate planning lawyer to learn if your state allows this type of trust. A pet trust allows you to set aside a certain amount of money that is only to be used for your pet’s care by a person you name to be their caretaker. In many instances, any money left in the trust after the pet passes can be donated to a charitable organization, usually one that cares for animals.

Finally, trusts can be drafted that are permanent, or “irrevocable,” or that can be changed by the person who wants to create it, a “revocable” trust. Once an irrevocable trust is created, it cannot be changed. Trusts should be created with the help of an experienced trusts and estate planning attorney, who will know how to create the trust and what type of trust will best suit your needs.

Reference: The Daily Sentinel (Jan. 23, 2020) “When is a trust worth the cost and effort?”

 

Do You Want to Decide or Do You Want the State to Decide?

A will allows you to direct your assets to the people you want to receive them, rather than the alternative, which is relying on the laws of your state to direct who receives your assets, says the article “Will you plan now or pay later?” from the Chron.com.

A will is also the document used to name an independent executor with successors, in the unlikely chance that the first executor fails, refuses or becomes unable to serve. Your estate planning attorney will discuss the use of special trusts to provide for family members who are disabled, trusts for minors or special needs family members or even adult children.

There are three big considerations you may not have even considered that would require you to have an estate plan created in recent years to be reviewed or revised. Years ago, the federal tax exemption, which allows a person to leave a certain amount of money to beneficiaries, was much smaller than it is now.

This was a “use it or lose it” exemption. Here’s an example of how things have changed. In 1987, when the exemption was $600,000 per taxpayer, a couple would use a by-pass trust to shelter the first $600,000 upon the first to die to take advantage of the exemption. In 2020, the exemption is $11.58 million. The “use it or lose it” law is different. Therefore, if your will still has a by-pass trust for this reason, it may be best to discuss it with your estate planning attorney. It is likely that you don’t need it anymore.

You also want a will to have some control over what happens to your assets when you die. Let’s say Betty and Bob have three children. Bob dies, leaving his assets to Betty, then Betty dies and leaves all of her assets to her three children. One of the children, Bea, dies shortly after Betty dies. Bea’s will leaves all of her assets to her husband Bruce.

Bruce remarries. When Bruce dies, the share of the family’s assets that Bruce inherited from his wife Bea may be left to Bruce’s second wife or the couple may spend them all during their marriage. If Bruce divorces his second wife, she may win those assets in a divorce settlement. Would Betty and Bob have wanted their assets to go to their grandchildren, instead of their son-in-law’s second wife and children?  An estate plan can be created to protect those assets, so they remain within the family, going to grandchildren or to the children of Betty and Bob.

While most people think of an estate plan as a plan for death, it’s also a plan for illness and incapacity. A perfectly healthy person is injured in a car accident or suffers a stroke. Without having documents like a power of attorney, power of attorney for health care, living will and medical privacy documents, the family will spend a great deal of time and money trying to establish legal control over the estate.

Speak with an experienced estate planning attorney today to update your current will or create a will and the necessary documents to protect yourself and your family.

Reference: Chron.com (January 16, 2020) “Will you plan now or pay later?”

 

Why Is a Power of Attorney Important?

A son who is preparing to help his mother with her legal and financial affairs asks what legal documents he needs to obtain in the article “Tips for becoming a power of attorney” in Hometown Life. He is concerned about a sibling who is estranged from the family and could cause problems in the future. Can he protect his mother and himself?

The first thing he needs to do is obtain a medical power of attorney for the mother, and a durable power of attorney. These are two separate powers of attorney that will give the son the legal right to handle both her financial affairs and her medical care.

With the documents, he will be able to speak directly to her healthcare providers, including her doctors, and to make end-of-life decisions on her behalf. An unhappy family member could indeed cause problems, especially when it comes to major decisions.

The durable power of attorney is geared for legal or financial issues, including handling the mother’s day-to-day money tasks and making decisions about her investments and assets, including the family home.

Having both of these documents, gives the son the ability to do what is necessary for his mother, while also protecting him from an uncooperative family member. However, there are more tasks to be done.

First, he needs to find out if she has an estate plan, including a will, a trust or even any other powers of attorney. He should find out if they are current, and if they still reflect her wishes.

If she has an estate plan, he’ll need to find out when it was last updated and see if it needs to be revised. If she does not, she needs to meet with an experienced estate planning attorney to create a plan to distribute assets according to her wishes and create any needed trusts.

He should also collect her medical information, so he knows who her doctors are and what medications she is taking. He also needs to understand her medical insurance coverage and see if she has the protection that she needs from health care costs.

For her financial affairs, the son needs to gather up information about her accounts, including passwords and login information. The mother should add the son as a signatory to her bank accounts and brokerage houses.

He should also get the names and contact information of any financial professionals she works with. That includes financial advisors, insurance agents and CPAs. It would be wise to get the last two years of her tax returns. This could be invaluable in helping to understand her assets.

Reference: Hometown Life (Dec. 6, 2019) “Tips for becoming a power of attorney”

Have an Estate Plan, for Your Heir’s Sake

Few people want to leave their heirs with a paperwork disaster but that’s what happens when there’s no estate plan. According to the article “The importance of creating an estate road map for your heirs” from Grand Rapids Business Journal, an estate plan usually involves a will, a durable power of attorney for financial decisions, a health care power of attorney (sometimes known as a health care proxy) for medical decisions, and often, a trust.

An estate plan also involves making sure assets are titled correctly and beneficiary designations for assets are coordinated with these documents so assets pass to the people of your choosing in an efficient manner.  It’s always better if this information is gathered together and put in a location that is known to trusted family members.

Another step to consider is leaving a personalized letter of instructions to your spouse or other family members. The letter can be used to explain why you distributed your assets the way you did or guide them on what you’d like them to do with your estate regarding the assets. This is not a legally enforceable document but it may provide your family members with a level of understanding not otherwise explained in your will.

For most people, retirement accounts, real estate, bank and investment accounts, cars and maybe pensions are the total sum of their estate. If your estate is larger or more complex, i.e., you own a business or a large real estate portfolio, your estate plan may be more complex.

Step-by-step instructions regarding each asset may be helpful for your heirs, including contact information for each asset. They will also find it helpful to have a list of your professional team: your estate planning attorney, financial advisor and accountant.

For certain accounts, instructions may need to be very specific. For a retirement plan, if your spouse survives you, they’ll need to know about rolling the funds into an inherited spousal IRA and naming beneficiaries. Your estate planning attorney can help your surviving spouse avoid any expensive mistakes.

If you own a business, there will be need for more guidance. A succession plan should be set up long in advance of your retirement so that family members who are active in the business will be able to see it continue, if that is your goal. If the family does not want to run the business, they’ll need to know who to contact to ensure that it maintains its value after your passing, so it can be sold for a healthy profit.

Attorneys and accountants will definitely be able to help your family after your passing but if you own a business, you know it better than anyone else. Just as you have a business plan for various contingencies, you need to have a plan in the event of your untimely passing. This is lacking for many family-owned businesses, and it often does not end well for the family or the business.

The more detailed the directions you can leave for your family, the better off everyone will be. Having a good estate plan is an act of great kindness to those you love.

Reference: Grand Rapids Business Journal (October 31, 2019) “The importance of creating an estate road map for your heirs”

 

Not Having a Will Should Scare You and Your Family

For families of people who don’t have a will dealing with their estate is an expensive, stressful and time-consuming experience. A will isn’t anything to be afraid of says the Herald Journal in the article “It’s Halloween, do you have a will?” Here’s a list of things not to do that should be useful for anyone who doesn’t have a will yet.

Don’t procrastinate. You can keep on waiting until there’s a better time but life has a way of happening while we’re waiting. Now is the time to do your will. For your sake and your family’s sake don’t put it off any longer.

This is not a do-it-yourself project. No matter how simple you think your estate is it isn’t. A form that you download from a website may not be legal in your state. Nothing can replace the sense of security that sitting down with an experienced estate planning attorney can give to you and your family. You’ll know that your will is legally valid in your state if you follow all the right steps and it was created for your unique situation by an estate planning attorney.

An estate plan requires more than a will. There are many other documents and strategies to consider. Chances are that you already have more than a few other accounts to consider, like an insurance policy, investment accounts and jointly owned accounts. For an estate plan to protect you and your family, you’ll need a power of attorney, health care power of attorney, a living will and possibly a trust. A qualified estate planning attorney will help you coordinate all of your assets and make sure everything is properly prepared.

Don’t set it and forget it. Your life changes and so should your estate plan. There have been some large changes to the tax law in recent years, and a number of bills are now pending in Congress that may bring even bigger changes in 2020. Your family may have celebrated a marriage, welcomed a new child or experienced a loss. All of these issues require updates to your estate plan.

Don’t hide your will and estate planning documents. Having all of these documents prepared properly is step one. The next step is to make sure that your family members know where the documents have been stored and how to access them. They should not be in a safe deposit box, as those are usually sealed upon the death of the owner. If you don’t own a waterproof, fireproof safe consider purchasing one. Then tell a trusted family member where it is.

If charitable giving is part of your life, make it part of your legacy. Making a charitable gift as part of your estate plan can be helpful in reducing your estate taxes. It also sends a positive message about philanthropy to your family.

Make an appointment with an estate planning attorney to create your will, establish protection for yourself and your spouse in case of incapacity and create a legacy.

Reference: Herald Journal (October 26, 2019) “It’s Halloween, do you have a will?”

 

It’s Like Going to the Dentist: You Need to Get Your Estate Plan Ready

This is one of those things that you know you should do but you keep finding reasons not to. After all, says the article Estate planning: How to quit stalling and write your willfrom The Orange County Register, none of us likes to think about dying or what might occur that would require someone else to raise our children.

What do you need to get motivated and stop procrastinating?

Remember who you are creating a will for. Think of it as a love letter to those you leave behind. You want to provide specific instructions for the people you love about what you want to happen to your minor children, beloved pets and possessions. You are saving them the worries of trying to guess what you would have wanted and the cost of having to pay attorneys to clean up a mess after you have died.

Legal visualization. Think about what will happen in the absence of a will. Without an estate plan, a court will decide who will raise your children. State law determines who inherits your possessions and maybe the laws won’t follow your wishes. Every estate planning attorney has stories of people who die without planning. A spendthrift heir can easily spend a lifetime’s work in less than two years. A trust can be used to control how and when money is distributed.

Simple works. Don’t let the term “estate plan” throw you. A basic estate plan is not as complicated or as expensive as you might think. An experienced estate planning attorney will guide you through the process. You should also think about the short-term: what do you want to happen, if you die sometime in the next five years? You can always update the plan, if things change.

Give yourself a realistic timeline. Setting specific dates for tasks to be done and breaking the project out into smaller parts, can make this easier to address. Start by getting an appointment with an attorney on your calendar. Then set a date to have a conversation with your family members about guardians, charities and other intentions for your legacy. That might take place around Thanksgiving, when families have extended time together. By December 1, clarify and confirm that you want your documents drafted by an experienced estate planning attorney and set hte ball in motion to get the documents prepared and signed. You should also make sure to retitle any assets that are being moved into trusts.

If you were to start today, you could be done by New Year’s Day, 2020. Wouldn’t that feel great?

Reference: The Orange County Register (October 1, 2019) Estate planning: How to quit stalling and write your will

 

Why You—and Everyone—Needs an Estate Plan

At its essence, estate planning is any decision you make concerning your property if you die or if you become incapacitated. There are a number of things to keep in mind when creating an estate plan, says KTUU in the article “Estate planning dos and don’ts.”

The first task is not what most people think. It’s very basic: making a list of all of your assets and how they are titled. Remember, the estate plan is dealing with the distribution of your assets—so you have to first know what those assets are. If you are old enough to have lived through the sale of several different financial institutions, do you know where your accounts are? Not everyone does!

Next, you need to be clear on how the assets are titled. If they are joint with a spouse, Payable on Death (POD) or Transfer on Death (TOD), jointly with a child or owned by a trust, they may be treated differently in your estate plan than if you owned them outright.

Roughly fifty percent of all adults don’t make a plan for their estate. That becomes a huge headache for their loved ones. If you don’t have an estate plan, your property will be distributed according to the laws of your state. What you do or don’t want to have happen to your property won’t matter, and in some instances, your family may be passed over for a long-lost sibling. It’s a risk.

In addition, if you don’t have an estate plan, chances are you haven’t done any tax planning. Some states have inheritance taxes, others have estate taxes, and some have both. Even if your estate’s value doesn’t come anywhere close to the very high federal estate tax level ($11.4 million per person for 2019), your heirs could inherit far less if state and inheritance taxes take a bite out of the assets.

For a blended family, there are a number of rules in different states that divide your assets. In Alaska, for instance, if some of the children of one spouse are not the children of the other spouse, there is a statutory formula that depends on how many children there are and which of them are living. Different percentages of money are awarded to the children which becomes complicated.

Another reason to have an estate plan has to do with incapacity. This is perhaps harder to discuss than death for some families. Estate planning includes preparing for what the individual would want to happen if they were injured or too sick to convey their wishes to others. Decisions about health care treatments and end-of-life care are documented with a Living Will (sometimes called an Advanced Care Directive), so your loved ones are not left wondering what you would have wanted and hoping that they got it right.

One last point about an estate plan: be sure to check beneficiary designations while you are doing your estate plan. If you own retirement accounts, life insurance policies, or other assets with named beneficiaries, the assets will pass directly to the named beneficiary regardless of the instructions in your will. If you opened an IRA when you had one child and have had other children since then, make sure to include all of those children and the proportion of their shares. There may be tax implications if only one child receives the assets and there may also be family fights if assets are not distributed equally.

If you have not created an estate plan for yourself, you need to contact an experienced estate planning attorney to help you.

Reference: KTUU (August 14, 2019) “Estate planning dos and don’ts”

 

What Goes into an Estate Plan?

The very idea of creating an estate plan can be intimidating, but this article from Brainerd Dispatch, “Navigating your estate plan,” wisely advises breaking down the process into smaller pieces making it more manageable. By taking it step by step, it’s more likely that you’ll be comfortable getting started with the process.

Start with Beneficiaries. This may be the easiest way to start. If you have retirement accounts, like IRAs, 401(k)s, 403(b)s or other retirement accounts, chances are you have already written down the name of the person who you want to receive your assets if you die. The same goes for life insurance policies. The beneficiary designation tells who receives the assets on your death. You should also note that there are tax ramifications if you do not have a beneficiary. Your assets could become taxable five years after you die without a named beneficiary.

Be aware that no matter what your will says, the name on your beneficiary designations on these accounts determines who gets the assets. You need to check on these to be sure the people you have named are still the people who you want to receive your accounts. You should review the designations every time you review your estate plan with your estate planning attorney which should be every three or four years.

Where There’s a Will, There’s a Way Forward. The will is a key document in your estate plan. It can be used to minimize taxes on your estate, ensure that your family has the management assistance they need, and if you have minor children, establish who their guardians should be. Don’t neglect updating your will whenever there is a big change to the law or changes in your life. Not having a will leaves your family in a terrible position where they will have to endure unnecessary expenses and added stress. Your assets will be distributed according to the laws of the Commonwealth of Massachusetts, and not according to your own wishes.

Directives for Difficult Times Health care proxies give your loved ones direction when a terrible situation occurs. If you become incapacitated, through an accident or serious illness, the health care proxy tells your family members what kind of care you want—or do not want. That  person can make medical decisions on your behalf. An estate planning attorney who is licensed will know what forms are accepted.

In addition, you’ll need a Durable Power of Attorney. This allows you to designate someone to step in and manage your finances in the case of incapacity. This is especially important if you are single because otherwise a court may name someone to be your financial guardian.

What About Trusts? If you own a lot of assets, own several piece of real estate or business entities or if your estate is complicated, a trust may be helpful. Trusts are legal entities that hold assets on behalf of a beneficiary or beneficiaries. There are many different types of trusts that are used to serve different purposes, from Special Needs Trusts that are designed to help families plan for an individual with special needs; revocable trusts are used to avoid probate and testamentary trusts are created only when you die. An experienced estate planning attorney will know which trusts are appropriate for your individual situation.

Reference: Brainerd Dispatch (Aug. 11, 2019) “Navigating your estate plan”

 

Why an Attorney Should Help with a Medicaid Application

Elder law attorneys can be very helpful when planning for Medicaid coverage, and they can save money in the long run, ensuring that you (or a loved one) get the best care. Instead of waiting to see how wrong the process can get, says The Middletown Press, it’s best to “Use a lawyer for Medicaid planning” right from the start. Here’s why.

Everyone wants the Medicaid application to be successful, but let’s be realistic. It’s in the nursing home’s best interest that the resident pays privately for as long as possible, before going on Medicaid. It’s in the resident or family member’s best interest to protect the family’s assets for care for the resident’s spouse or family.

An attorney has a duty of loyalty only to their client. The attorney also has an ethical and professional responsibility to put their client’s needs ahead of their own.

Saving money is possible. Nursing homes in some areas cost as much as $15,000 a month. While every market and every law practice is different, it would be unusual for legal fees to cost more than a month in the facility. With an experienced medicaid attorney’s help, you might save more than her fee in long-term care and probate cost. Most attorneys will consult with new clients at little or no cost to determine what they need and what they want to achieve before paying a larger fee.

The benefit of experience. It’s all well and good to read through pages of online information, but nothing beats the years of experience that an attorney who practices in this area can bring to the table. Any professional in any field develops knowledge of the ins and outs of an area and applying for Medicaid is no different. Without experience, it’s hard to know how it all works.

Peace of mind from a reliable, reputable source. Today we hear a lot about “FOMO,” or fear of missing out. Consulting with an experienced attorney about a Medicaid application will help you avoid years of wondering, if there was more you could have done to help yourself or your loved one.

There are multiple opportunities for nursing home residents to preserve assets for themselves and spouses, children and grandchildren, particularly when a family member has special needs. However, here’s a key fact: if you wait for the last minute, there will be far less options than if you begin planning long before there’s a need to apply for Medicaid.

Reference: The Middletown Press (July 29, 2019) “Use a lawyer for Medicaid planning”

 

A Will, Power of Attorney and Health Care Power of Attorney: Three Documents Everyone Should Have

These three documents combined allow you to designate who you want to be responsible for your well- being, if you are unable to communicate to others on your own behalf and name who you want to receive your property. Having a will, power of attorney and health care power of attorney are the foundation of an estate plan and peace of mind, says the article “Simple steps to peace of mind” from the Traverse City Record Eagle.

If you die without a will, your state has a plan in place for you. However, you, or more correctly, your family, probably won’t like it. Your assets will be distributed according to the laws of inheritance, and people who you may not know or haven’t spoken to in years may end up inheriting your estate.

If your fate is to become incapacitated and you don’t have an estate plan, your family faces an entirely new set of challenges. Here’s what happened to one family:

A son contacted the financial advisor who had worked with the family for many years. He asked if the advisor had a power of attorney for his father. His mother had passed away two years ago, and his father had Alzheimer’s and wasn’t able to communicate or make decisions on his own behalf.

Five years ago, the financial advisor had recommended an estate planning attorney to the couple. The son called the attorney’s office and learned that his parents did make an appointment and met with the attorney about having these three documents created. However, they never moved forward with an estate plan.

The son had tried to talk with his parents over the years, but his father refused to discuss anything.

The son now had to hire that very same attorney to represent him in front of the probate court to be appointed as his father’s guardian and conservator. The son was appointed, but the court could just have easily appointed a complete stranger to these roles.

The son now has the power to help his father, but he will also have to report to the probate court every year to prove that his father’s well-being and finances are being handled properly. Having a will, power of attorney and medical power of attorney would have made this situation much easier for the family.

Guardianship is concerned with the person and his or her well-being. Conservatorship means a person has control over an individual’s financial matters and can make all decisions about property and assets.

There is a key difference between powers of attorney and conservatorship and guardianship. The person gets to name who they wish to have power of attorney. It’s someone who knows them, who they trust and they make the decision. With conservator and guardianship, it’s possible that someone you don’t know and who doesn’t know your family, holds all your legal rights.

A far better alternative is simply to meet with an experienced estate planning attorney and have him create these three documents and whatever planning tools your situation calls for. Start by giving some thought to who you would want to be in charge of your life and your money, if you should become unable to manage your life by yourself. Then consider who you would want to have your various assets when you die. Take your notes with you to a meeting with an estate planning attorney, who will know what documents you need. Make sure to complete the process: signing all the completed documents, funding any trusts, retitling any accounts and finally, making sure your family knows where your documents are. This is a road to peace of mind, for you and your family.

Reference: Traverse City Record Eagle (June 23, 2019) “Simple steps to peace of mind”