Zappos CEO had No Will and That Is a Mistake

Former Zappos CEO Tony Hsieh, who built the giant online retailer Zappos based on “delivering happiness,” died at age 46 from complications of smoke inhalation from a house fire. He left an estate worth an estimated $840 million and no will, according to the article “Former Zappos CEO Tony Hsieh died without a will, reports say. Here’s why you should plan for your own death” from CNBC.

Without a will or an estate plan, his family will never know exactly how he wanted his estate to be distributed. The family has asked a judge to name Hsieh’s father and brother as special administrators of his estate.

How can someone with so much wealth not have an estate plan? Hsieh probably thought he had plenty of time to “get around to it.” However, we never know when we are going to die, and unexpected accidents and illnesses happen all the time.

Why would someone who is not wealthy need to have an estate plan? It is even more important when there are fewer assets to be distributed. When a person dies with no will, the family may be faced with unexpected and overwhelming expenses.

Putting an estate plan in place, including a will, power of attorney and health care proxy, makes it far easier for a family that might otherwise become ensnared in fights about what their loved one might have wanted. Reaching out to an estate planning attorney should have been done.

An estate plan is about making things easier for your loved ones, as much as it is about distributing your assets.

What Does a Will Do? A will is the document that explains who you want to receive your assets when you die. It can be extremely specific, detailing what items you wish to leave to an individual, or more general, saying that your surviving spouse should get everything.

If you have no will, a state court may decide who receives your assets, and if you have minor children, the court will decide who will raise your children.

Some assets pass outside the will, including accounts with beneficiary designations. That can include tax deferred retirement accounts, life insurance policies and property owned jointly. The person named as the beneficiary will receive the assets in the accounts, regardless of what your will says. The law requires your current spouse to receive the assets in your 401(k) account, unless your spouse has signed a document that agrees otherwise.

If there are no beneficiaries listed on these non-will items, or if the beneficiary is deceased and there is no contingent beneficiary, then those assets automatically go into probate. The process can take months or a year or more under state law, depending on how complicated your estate is.

Naming an Executor. Part of making a will includes selecting a person who will carry out your instructions—the executor. This can be a big responsibility, depending upon the size and complexity of the estate. They are in charge of making sure assets go to beneficiaries, paying outstanding debts, paying taxes for you and your estate and even selling your home. Select someone who is trustworthy, reliable and good with finances.

Your estate plan also includes a power of attorney for someone to handle financial and legal affairs, if you become incapacitated. An advance health-care directive, or living will, is used to explain your wishes, if you are being kept alive by life support. Otherwise, your loved ones will not know if you want to be kept alive or if you would prefer to be allowed to die.

Having an estate plan is a kindness to your family. Don’t wait until it’s too late to take care of it. Contact an experienced estate planning attorney.

Reference: CNBC (Dec. 3, 2020) “Former Zappos CEO Tony Hsieh died without a will, reports say. Here’s why you should plan for your own death”

 

Estate Planning Basics You Need to Know

The key reason for estate planning is to create a plan directing where your assets will go after you die. The ultimate goal is for wealth and real property to be given to the people or organizations you wish, while minimizing taxes, so beneficiaries can keep more of your wealth. However, good estate planning also reduces family arguments, protects minor children and provides a roadmap for end-of-life decisions, says the article “What is estate planning?” from Bankrate.

Whenever you’ve opened a checking and savings account, retirement account or purchased life insurance, you’ve been asked to provide the name of a beneficiary for the account. This person (or persons) will receive these assets directly upon your passing. You can have multiple beneficiaries, but you should always have contingent beneficiaries, in case something happens to your primary beneficiaries. Named beneficiaries always supersede any declarations in your will, so you want to make sure any account that permits a beneficiary has at least one and update them as you go through the inevitable changes of life.

A last will and testament is a key document in your estate plan. It directs the distribution of assets that are not distributed through otherwise designated beneficiaries. Property you own jointly, typically but not always with a spouse, passes to the surviving owner(s). An executor you name in your will is appointed by the court to take care of carrying out your instructions in the will. Choose the executor carefully—he or she will have a lot to take care of, including the probate of your will.

Probate is the process of having a court review your estate plan and approve it. It can be challenging and depending upon where you live and how complicated your estate is, could take six months to two years to complete. It can also be expensive, with court fees determined by the size of the estate.

Many people use trusts to minimize how much of their estate goes through probate and to minimize estate taxes. Assets that are distributed through trusts are also private, unlike probate documents, which become public documents and can be seen by anyone from nosy relatives to salespeople to thieves and scammers.

Trusts can be complex, but they don’t have to be. Trusts can also offer a much greater level of control over how assets are distributed. For instance, a spendthrift trust is used when an heir is not good with handling money. A trustee distributes assets, and a timeframe or specific requirements can be set before any funds are distributed.

Living wills are also part of an estate plan. These are documents used to give another person the ability to make decisions on your behalf, if you become incapacitated or if decisions need to be made concerning end-of-life care.

An estate plan can help prevent family fights over who gets what. Arguments over sentimental items, or someone wanting to make a grab for cash can create fractures that last for generations. A properly prepared estate plan makes your wishes clear, lessening the reasons for squabbles during a difficult period. Speak with your estate planning attorney if you have any questions.

Protecting minor children and heirs is another important reason to have a well thought out estate plan. Your last will and testament is used to nominate a guardian for minor children and can also be used to direct who will be in charge of any assets left for the children’s care.

Reference: Bankrate (Aug. 3, 2020) “What is estate planning?”

That Last Step: Trust Funding

Neglecting to fund trusts is a surprisingly common mistake and one that can undo the best estate and tax plans. Many people put it on the back burner, then forget about it, says the article “Don’t Overlook Your Trust Funding” from Forbes.

Done properly, trust funding helps avoid probate, provides for you and your family in the event of incapacity and helps save on estate taxes.

Creating a revocable trust gives you control. With a revocable trust, you can make changes to the trust while you are living including funding. Think of a trust like an empty box—you can put assets in it now, or after you pass. If you transfer assets to the trust now, however, your executor won’t have to do it when you die.

Note that if you don’t put assets in the trust while you are living, those assets will go through the probate process. While the executor will have the authority to transfer assets, they’ll have to get court approval. That takes time and costs money. It is best to do it while you are living.

A trust helps if you become incapacitated. You may be managing the trust while you are living, but what happens if you die or become too sick to manage your own affairs? If the trust is funded and a successor trustee has been named, the successor trustee will be able to manage your assets and take care of you and your family. If the successor trustee has control of an empty, unfunded trust, a conservatorship may need to be appointed by the court to oversee assets.

There’s a tax benefit to trusts. For married people, trusts are often created that contain provisions for estate tax savings that defer estate taxes until the death of the second spouse. Income is provided to the surviving spouse and access to the principal during their lifetime. The children are usually the ultimate beneficiaries. However, the trust won’t work if it’s empty.

Depending on where you live, a trust may benefit you with regard to state estate taxes. Putting money in the trust takes it out of your taxable estate. You’ll need to work with an experienced estate planning attorney to ensure that the assets are properly structured. For instance, if your assets are owned jointly with your spouse, they will not pass into a trust at your death and won’t be outside of your taxable estate.

Move the right assets to the right trust. It’s very important that any assets you transfer to the trust are aligned with your estate plan. Taxable brokerage accounts, bank accounts and real estate are usually transferred into a trust. Some tangible assets may be transferred into the trust, as well as any stocks from a family business or interests in a limited liability company. Your estate planning attorney, financial advisor and insurance broker should be consulted to avoid making expensive mistakes.

You’ve worked hard to accumulate assets and protecting them with a trust is a good idea. Just don’t forget the final step of funding the trust.

Reference: Forbes (July 13, 2020) “Don’t Overlook Your Trust Funding”

 

Alzheimer’s, Dementia and other Brain Diseases Require Special Estate Planning Steps

There are certain steps that can be taken by individuals, loved ones and family members to make this challenging time safer and smarter, advises an article “Financial And Estate Planning Steps To Take Now: Special Considerations For Those With Brain Disease” from Forbes. Anyone living with a neurologic condition needs to be sure their planning reflects not only their condition but their personal experience of the condition. Alzeheimer’s, Dementia and other diseases required special estate planning steps. The variability of each person’s experience of a brain disease, from symptoms and severity to the progression rate and future prognosis to the possibility of any recovery, affects how they need to plan.

For an Alzheimer’s patient, in early stages there may be no problems in signing legal documents and putting legal safeguards in place to protect finances. Most people are not aware that the degree of competency to sign legal documents varies, depending upon the complexity of the documents to be signed and the circumstances. A relatively low level of competency is required to sign a will. This is known as “testamentary capacity.” A higher level of competency is required to sign something like a revocable trust, investment policy statement, etc. Therefore, a person who may be legally able to sign a will may not have the legal capacity to sign other documents. Alzheimer’s patients need to get their entire estate plan in order, as soon as a diagnosis is received. Safeguards are extremely important, including having an independent person, like a CPA, an experienced estate planning attorney or trusted family member receive copies of all monthly bank and brokerage statements in case abilities decline faster than anticipated.

Patients living with peripheral neuropathy may experience issues with balance, burning sensations, dizziness, hypersensitive skin and pain that make wearing socks or shoes impossible. If the condition becomes so severe that the person becomes homebound, they need to make changes: set up accounts, so bills can be paid online, have income streams set to automatic deposit and simplify and consolidate accounts. It is important to have a Power of Attorney (POA) that is effective immediately or a revocable living trust with a co-trustee. In this way, you do not have to leave home to conduct your business.

Parkinson’s disease may not be well understood by professional advisors. You’ll need to explain that your facial expression—Parkinsonian masked face—does not mean that you are not responding to a conversation. They need to know that your handwriting may change, becoming small and cramped. This can result in a bank or other financial institution refusing to accept your signature on documents. Your estate planning attorney can prepare a document that confirms you are living with Parkinson’s disease and that micrographia is one of your symptoms. The document should include three or four different signatures to reflect the variations. Have each signature witnessed and notarized.

People living with MS (multiple sclerosis) face the possibility of an exacerbation that could leave them incapacitated at any time. A revocable trust to coordinate financial management with trusted individuals as co-trustees should be in place.

For people with these and other brain illnesses, an emergency financial and legal road map needs to be prepared. It should include monthly recurring bills, non-recurring bills like life insurance, property taxes, etc. Contact information for key advisors, your estate planning attorney, CPA, financial advisor, banker, insurance agent, etc., needs to be shared. Your estate plan should be updated, if you haven’t reviewed it in three or four years. If you don’t have an estate plan in place, now is the time to have one created.

Reference: Forbes (May 17, 2020) “Financial And Estate Planning Steps To Take Now: Special Considerations For Those With Brain Disease”

 

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”

 

Be Prepared: Death Happens when We’re Not Looking

There are hard topics like sickness and death, that estate planning prepares for. Then there’s the unexpected, says Wicked Local Dedham in the article “Five Things to consider before getting hit by the bus.” Without an estate plan in place families have to cope with the pain of a sudden loss in addition to managing a funeral and estate minus any advance planning. It makes a bad situation worse.

The solution is relatively simple: have an estate plan and a “just in case” plan ready.

Access to money for expenses. If your family needed to get funds to pay bills and funeral expenses, how would they do that? If you don’t have close family nearby who you can count on, who will take care of these things for you? Note that today, when most banking statements and billing payments are done online, you’ll also need to have a list of online accounts and either name someone to manage your digital property or list your passwords. Plan for how someone you trust, will access this information.

Life insurance and other assets with beneficiaries. If you have one or more life insurance policies, does anyone but you know about them? Do your beneficiaries know that they are your beneficiaries? If your employer or former employer offers life insurance, disability insurance or any other benefits, make sure that someone else besides you knows about them. If you receive a pension, does your pension get transferred to your spouse, or do the payments stop when you die? Do you know what your Social Security benefits would be to a surviving spouse, or family members?

End-of-life medical decisions. If you don’t have an Advance Directive in place, it’s time to speak with an estate planning attorney and add this to your estate plan. If you don’t have a will, Health Care Power of Attorney or other documents prepared, now would be the time to get these plans in place.

You should have a named Health Care Agent, named in your Health Care Power of Attorney, who understands your wishes for end-of-life care, if you should suffer a stroke, be critically injured in an accident or experience an illness that leaves you incapacitated. These conversations are not just for you but for your loved ones. It will give them peace of mind to know that they are following your wishes, if a hard decision like removing you from life support needs to be made.

Final arrangements. Does anyone know your wishes for burial or cremation? Do you want a traditional funeral or a memorial service? Who should be notified of your passing? Making this information available for those who will be in charge, is a kindness to them. If they need to get names and emails from your computer, make sure they know how to log into your system. You could also print out a list and tell them where you are placing it.

Last will and testament. The first question is, do you have a will? The second is, does your family know where it is located? Tell your family and the person you have selected as the executor about the existence of your will, where it can be found and where other important documents are located. If you haven’t had your will created or haven’t reviewed your will in three or four years, it’s time. You should contact an experienced estate planning attorney and have this document prepared.

Death does not come without a lot of paperwork. For some people, a bad health diagnosis serves as a wake-up call and that’s when they decide to put their affairs in order. For others, the death of a close family member or friend is the trigger. Whatever motivates you, speak with an experienced estate planning attorney to have an estate plan created.

Reference: Wicked Local Dedham (Oct. 10, 2019) “Five Things to consider before getting hit by the bus.”

 

So, You Have to Manage Someone Else’s Money – Now What?

This sounds like a disaster in the making. A durable power of attorney document must follow the statutory requirements, must delegate proper authority, must consider the timing of when the agent may act and a host of other issues that must be addressed, warns My San Antonio in the article “Guide to managing someone else’s money.” A durable power of attorney document can be so far reaching that a form downloaded from the Internet is asking for major trouble.

Start by speaking with an experienced estate planning attorney to provide proper advice and draft a legally valid document that is appropriate for your situation.

Once a proper durable power of attorney has been drafted, talk with the agent you have selected and with the successor agents you want to name, about their roles and responsibilities. For instance:

When will the agent’s power commence? It may start immediately, or it may not become active, until the person becomes incapacitated.

If the power is postponed, how will the agent prove that the person has become incapacitated? Will he or she need to go to court?

What is the extent of the agent’s authority? This is very important. Do you want the agent to be able to talk with the IRS about your taxes?, with your investment advisor? will the agent have the power to make gifts on your behalf, and to what extent? May the agent set up a trust for your benefit?, can the agent change beneficiary designations and what about caring for your pets? Can they talk with your lawyer or accountant?

When does the agent’s authority end? Unless the document sets an earlier date, it ends when you revoke it, when you die, when a court appoints a guardian for you, or if your agent is your spouse, when you divorce.

What does the agent need to report to you? What are your expectations for the agent’s role? Do you want immediate assistance from the agent or will you continue to sign documents for yourself?

Does the agent know how to avoid personal exposure? If the agent signs a contract for you by signing his or her own name that contract may be performed by the agent. Legally, that means that the cost of the services provided could be taken out of the agent’s wallet. Does the agent understand how to sign a contract to avoid liability?

All of these questions need to be addressed long before any durable power of attorney papers are signed. Both you and the agent need to understand the role of a power of attorney. An experienced estate planning attorney will be able to explore all the issues inherent in a durable power of attorney and make sure that it is the correct document.

Reference: My San Antonio Life (Aug. 26, 2019) “Guide to managing someone else’s money”

 

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”

 

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”

 

Power of Attorney: Why You’re Never Too Young

When that time comes, having a power of attorney is a critical document to have. The power of attorney is among a handful of estate planning documents that help with decision making, when a person is too ill, injured or lacks the mental capacity to make their own decisions. The article, “Why you’re never too young for a power of attorney” from Lancaster Online, explains what these documents are, and what purpose they serve.

There are three basic power of attorney documents: financial, limited and health care.

You’re never too young or too old to have a power of attorney. If you don’t, a guardian must be appointed in a court proceeding, and they will make decisions for you. If the guardian who is appointed does not know you or your family, they may make decisions that you would not have wanted. Anyone over the age of 18 should have a power of attorney.

It’s never too early, but it could be too late. If you become incapacitated, you cannot sign a POA. Then your family is faced with needing to pursue a guardianship and will not have the ability to make decisions on your behalf, until that’s in place.

You’ll want to name someone you trust implicitly and who is also going to be available to make decisions when time is an issue.

For a medical or healthcare power of attorney, it is a great help if the person lives nearby and knows you well. For a financial power of attorney, the person may not need to live nearby, but they must be trustworthy and financially competent.

Always have back-up agents, so if your primary agent is unavailable or declines to serve, you have someone who can step in on your behalf.

You should also work with an estate planning attorney to create the power of attorney you need. You may want to assign select powers to a POA, like managing certain bank accounts but not the sale of your home, for instance. An estate planning attorney will be able to tailor the POA to your exact needs. They will also make sure to create a document that gives proper powers to the people you select. You want to ensure that you don’t create a POA that gives someone the ability to exploit you.

Any of the POAs you have created should be updated on a fairly regular basis. Over time, laws change, or your personal situation may change. Review the documents at least annually to be sure that the people you have selected are still the people you want taking care of matters for you.

Most important of all, don’t wait to have a POA created. It’s an essential part of your estate plan, along with your last will and testament. Contact an experienced estate planning attorney to ensure that you have the correct power of attorney in place.

Reference: Lancaster Online (May 15, 2019) “Why you’re never too young for a power of attorney”