Estate Planning for Unmarried Couples

For some couples, getting married just doesn’t feel necessary. However, they don’t enjoy the automatic legal rights and protections that legally wed spouses do especially when it comes to death. There are many spousal rights that come with a marriage certificate, reports CNBC in the article “Here’s what happens to your partner if you’re not married and you die.” Without the benefit of marriage extra planning is necessary to protect each other.

Taxes are a non-starter. There’s no federal or state income tax form that will permit a non-married couple to file jointly. If one of the couple’s employers is the source of health insurance for both, the amount that the company contributes is taxable to the employee. A spouse doesn’t have to pay taxes on health insurance.

More important, however, is what happens when one of the partners dies or becomes incapacitated. A number of documents need to be created so should one become incapacitated the other is able to act on their behalf. Preparations also need to be made so the surviving partner is protected and can manage the deceased’s estate.

In order to be prepared, an estate plan is necessary. Creating a plan for what happens to you and your estate is critical for unmarried couples who want their commitment to each other to be protected at death. The general default for a married couple is that everything goes to the surviving spouse. However, for unmarried couples the default may be a sibling, children, parents or other relatives. It won’t be the unmarried partner.

This is especially true if a person dies with no will. The courts in the state of residence will decide who gets what depending upon the law of that state. If there are multiple heirs who have conflicting interests, it could become nasty—and expensive.

However, a will isn’t all that is needed. Most tax-advantaged accounts—Roth IRAs, traditional IRAs, 401(k) plans, etc.—have beneficiaries named. That person receives the assets upon death of the owner. The same is true for investment accounts, annuities, life insurance and any financial product that has a beneficiary named. The beneficiary receives the asset regardless of what is in the will. Therefore, checking beneficiaries need to be part of the estate plan. Checking, savings and investment accounts that are in both partner’s names will become the property of the surviving person, but accounts with only one person’s name on them will not.

Unmarried couples who own a home together need to check how the deed is titled, regardless who is on the mortgage. The legal owner is the person whose name is on the deed. If the house is only in one person’s name, it won’t become part of the estate. Change the deed so both names are on the deed with rights of survivorship, so both are entitled to assume full ownership upon the death of the other.

To prepare for incapacity, an estate planning attorney can help create a durable power of attorney for health care, so partners will be able to make medical decisions on each other’s behalf. A living will should also be created for both people which states wishes for end of life decisions. For financial matters, a durable power of attorney will allow each partner to have control over each other’s financial affairs. It takes a little extra planning for unmarried couples, but the peace of mind that comes from knowing that you have prepared to care for each other, until death do you part, is priceless.

Reference: CNBC (Dec. 16, 2019) “Here’s what happens to your partner if you’re not married and you die”

 

What’s Better, A Living Trust or a Will?

Everyone knows what a Last Will and Testament is however, a Will is not always the best way to distribute your assets, explains the Times Herald-Record in the article “Living trusts are better choice than wills.” Most people think that by having a will alone, they will make it clear who they want to receive their assets when they die. However, wills are used by the court in a proceeding called “probate” if the only estate plan you have is a will. The court proceeding is to establish that the will is valid. Depending upon where you live, probate can take a year before assets are distributed to beneficiaries.

Certain family members must receive notifications when a will is submitted to probate. Some people will receive notices even if they are not mentioned in the will. This can lead to all kinds of awkward situations especially from estranged or unknown relatives. The person who is the Executor of the will is required to locate these relatives and until they are found and notified, the probate process comes to a standstill.

There are instances where a judge will allow a legal notice to be published in a local newspaper after valid attempts to find relatives aren’t successful. If there is a disabled beneficiary, a minor beneficiary, a relative or beneficiary who can’t be located or a relative who has been incarcerated, the judge often appoints lawyers to represent these parties’ interests and the estate pays for the attorney’s fees.

Depending on the situation, the Executor may be required to furnish a family tree, or a friend of the decedent must sign an affidavit attesting that the person never had any children.

Thinking of disinheriting a child? Anyone who is disinherited in a will, receives a notice about that and is legally permitted to contest the will. That can lead to years of expensive litigation, including discovery demands, depositions, motions and possibly a trial. Like most litigation, will contests usually end in a settlement. The disinherited relative often gets a share of the inheritance even when the decedent didn’t want them to get anything.

For many families, a living trust is a better alternative. They also serve as disability planning naming people who will manage the assets of the trust in case of incapacity. They are private documents so their information does not become public knowledge like the details of a will.

A qualified estate planning attorney will help you determine what estate planning tools will work best to achieve your goals while maintaining your privacy and ensuring that assets pass to heirs in a discrete manner.

Reference: Times Herald-Record (Oct. 26, 2019) “Living trusts are better choice than wills”

 

Everyone Should Have a Power of Attorney and Healthcare Power of Attorney

Before snowbirds begin their seasonal journey to warmer climates it’s time to be sure that they have the important legal documents in place, advises LimaOhio.com in a recent article “Different seasons and documents, same peace of mind.” The two documents are a healthcare power of attorney and a financial power of attorney and they should be prepared and be ready to be used at any time.

These documents name another person to make healthcare and financial decisions, in case you are not able to make those decisions for yourself. We never think that anything will really happen to us until it does. Having these documents properly prepared and easily accessible helps our loved ones. They are the ones who will need the powers given by the documents, without them they cannot act in a timely manner.

If traveling between a home state and a winter home, it is wise to have a set of documents that align with the laws of both states. It may be necessary to have a separate set of documents for each state, if the laws differ.

Financial powers of attorney typically need updating more often than healthcare powers of attorney. The law has changed in recent years, and there are a number of specific powers that need to be stated precisely, so that the document can grant those powers. This includes the power to gift assets and make a person eligible for nursing home and other healthcare assistance, like Medicaid.

If these documents are not in place and are needed, the only way that someone else can make decisions for the person, is to become a guardian of that person. That includes spouses. Many people think that the fact that two people are married gives them every right, but that is not the case. Guardianship takes considerably more time and costs more than these two documents. It should be noted that once guardianship is established, the person who is the guardian will need to report to the court on a regular basis.

Another document that needs to be in place is a living will or advance directive. This is a document prepared to instruct others as to your wishes for end-of-life care. The document is created when a person is mentally competent and expresses their wishes for what they want to happen, if they are being kept alive by artificial means. For loved ones, this document is a blessing, as it lets them know very clearly what their family members wishes are.

Peace of mind is a wonderful thing to take with you as you prepare for a warm winter in a different climate. Talk with an estate planning attorney to be sure that your estate planning documents will be acceptable in your winter home.

Reference: LimaOhio.com (Oct. 26, 2019) “Different seasons and documents, same peace of mind”

 

Estate Planning, Simplified

Estate planning attorneys hear it all the time: “My children will have to figure it out,” “Everything will go to my spouse, right?” and “It’s just not a priority right now.” But then we read about famous people who don’t plan, and the family court battles that go on for years. Regular families also have this happen. We just don’t read about it.

A useful article from The Mercury titled “Estate planning basics and an estate attorney meeting preparation” reviews the basics of estate planning and explains how following the advice of an experienced estate planning attorney can protect families from the financial and emotional pain of an estate battle.

Estate planning is not just concerned with passing property and assets along to heirs. Estate planning also concerns itself with planning for incapacity, or the inability to act or speak on one’s own behalf. This is what happens when someone becomes too ill or is injured, although we usually think of incapacity as having to do with Alzheimer’s disease or another form of dementia.

Lacking an estate plan, all the assets you have worked to accumulate are subject to being distributed by a court-ordered executor, who likely doesn’t know you or your family. Having an estate plan in place protects you and your family.

Living Will or Advanced Directive. A living will provides directions from a patient to their doctor, concerning their wishes regarding life support. This alleviates the family from having to make a painful and permanent decision. They will know what their loved one wanted.

Springing Durable Power of Attorney. This document will allow someone you choose to make financial and legal decisions on your behalf if you are not able to. Some attorneys prefer to use the Durable Power of Attorney, rather than the Springing POA, since the Springing event may need a physician to state that the individual has become incapacitated, and it may require the court becoming involved. Powers of attorney can be drafted to be very limited in nature (i.e., to let one single task be accomplished), or very broad, allowing the POA to handle everything on your behalf.

Durable Power of Attorney for Health Care. This lets a person you name make health care decisions for you, if you are not able to do so. The decision-making power is limited to health care only.

Should Your Health Care POA and Your Financial/Legal POA be the Same Person? Deciding who to give these powers to can be difficult. Is the person you are considering equally skilled with health care as they are with finances? Someone who is very emotional may not be able to make health care decisions although they may be good with money. Think carefully about your decision. Just remember it’s better that you make this decision rather than leaving it for the court to decide.

Last Will and Testament: This is the document people think of when they think about estate planning. It is a document that allows the person to transfer specific property after they die in the way they want. It also allows the person to name a guardian for any minor children and an executor who will be in charge of administering the estate. It is far better that you name a guardian and an executor than having the court select someone to take on these roles.

The estate planning process will be smoother if you spend some time speaking with your spouse and family members to discuss some of the key decisions discussed above. Talk with your loved ones about your thoughts on death and what you’d like to have happen. Think about what kind of legacy you want to leave and then contact an experienced estate planning attorney to put your plan into action.

Estate battles often leave families estranged during a time when they need each other most. Spend the time and resources creating an estate plan with a qualified estate planning attorney. Leaving your family intact and loving may be the best legacy of all.

Reference: The Mercury (Oct. 27, 2019) “Estate planning basics and an estate attorney meeting preparation”

 

Do It Yourself Estate Planning Leads to Bad Outcomes

While the attraction of simplicity and low cost is appealing, the results are all too often disastrous, affirms Insurance News in the article “Mind Your Mouse Clicks: DIY Estate Planning War Stories.” The increasing number of glitches that estate planning attorneys are seeing after the fact has increased as much as the number of people using online estate planning forms. For estate planning attorneys who are concerned about their clients and their families, the disasters are troubling.

A few clumsy mouse clicks can derail an estate plan and adversely affect the family. Here are five real life examples.

Details matter. One of the biggest and most routinely made mistakes in DIY estate planning goes hand-in-hand with simple wills, where both spouses want to leave everything to each other. Except this typical couple neglected something. See if you can figure out what they did wrong:

John’s will: I leave everything to my wife Phyllis. Phyllis’ will: I leave everything to my wife Phyllis.

Unless John dies and Phyllis marries someone named Phyllis, this will is not going to work. It seems like a simple enough error but the courts are not forgiving of errors.

Life insurance mistakes. Jeff owns a life insurance policy and has been using its cash value as a “rainy day” fund. He had intended to swap the life insurance into his irrevocable grantor trust in exchange for low-basis stock held in the trust. The swap would remove the life insurance from Jeff’s estate without exposure to the estate tax three-year rule and the stock would receive a stepped-up basis at death leading to tax savings on both sides of the swap.

However, Jeff had a stroke recently and he’s incapacitated. He planned ahead though or so he thought. He downloaded a free durable power of attorney form from a nonprofit that helps the elderly. The POA specifically included the power to change ownership of his life insurance. Jeff put his name in the space designated for the POA. As a result, the insurance company won’t accept the form and the swap isn’t going to happen.

Incomplete documents. Ellen created an online will leaving her entire probate estate to her husband. It was fast, cheap and she was delighted. However, she forgot to click on the space where the executor is named. The website address for the website company is the default information in the form, which is what was created when she completed the will. The court is not going to appoint the website as her executor. Her heirs are stuck, unless she corrects this. Hope has a terrible estate plan which will not work when she passes.

Letting the form define the estate plan. Single parent Joan has a 6-year-old son. Her will includes a standard trust for minors providing income and principal for her son until he turns 21, at which point he inherits everything. Joan met with a life insurance advisor and applied for a $1 million convertible 20–year term life insurance policy. It will be payable to the trust. However, her son has autism and receives government benefits. There are no special needs provisions in her will so her son will most likely risk losing any benefits, if and when he inherits the policy proceeds.

Don’t set it and forget it. One couple created online wills when the estate tax exclusion was $2 million. They created a credit shelter, or bypass trust to reduce their estate taxes by allowing each of them to use their estate tax exclusion amount. However, the federal estate tax exclusion today is $11.4 million per person. With $4 million in separate assets and a $2 million life insurance policy payable to children from a previous marriage, the husband’s separate assets will go into the bypass trust. None of it will go to his wife.

An experienced estate planning attorney who is licensed to practice in your state is the best source for creating and updating estate plans, preparing for incapacity and ensuring that tax planning is done efficiently.

Reference: Insurance News Net (Sep. 9, 2019) “Mind Your Mouse Clicks: DIY Estate Planning War Stories”

 

When are You Done with Estate Planning?

A family has set up their estate plan. Two sons are already in the farming business and are thriving. Their daughter will receive the proceeds from a second-to-die life insurance policy and their considerable savings. The amounts are not equal in amount, but they are an equitable inheritance, and it seems like the couple has done its homework.

However, asks an article in The Courier, “The will is done, you’re sitting pretty—but are you?”

Estate planning is a lot like putting together a jigsaw puzzle. Like farming, it gets put together over time, piece by piece. Each piece represents something that needs to be done. For instance, a key part of the puzzle is having a Last Will and Testament. That functions like building the outside frame of the puzzle for those who start their puzzles by building the perimeter first. It frames the rest of your estate plan.

Other pieces are included within the will like naming a personal representative or executor. This is the person who is in charge of distributing your assets and making sure that the directions in your will are followed when you pass away.

Do you have a plan for what happens when you die? For instance, if a husband dies, is there a plan for the wife to maintain the farm, or will she sell machinery and other transitory assets?

For the couple mentioned above who has the will, a transition spelled out in the will and a second-to-die policy in place to supplement the daughter’s inheritance, congratulations: they have many pieces of the puzzle in place. However, that’s not everything.

The other parts of the puzzle have to do with issues while the couple is still living. What happens if one or both are injured, or become ill? Who should take over the farming in the short or long term? Who will care for the spouse or spouses? Will they depend on each other for caretaking or their daughter?

The number one worry for seniors is whether they have enough money to last until they die. However, by taking a portion of their savings and investing in a long-term care insurance policy, they can rest assured that they or their spouse will get the care they need—in a nursing home or at home—without burning through the family’s savings.

This piece of the estate planning puzzle—preparing for illness or disability—is often missing, and it can turn the rest of the estate plan into a pile of unattached pieces.

Speak with an experienced estate planning attorney today to make sure your estate plan does not have any missing pieces. If you have not recently reviewed your estate plan in the last three or four years, schedule a review. Changes in the law and changes in your own life may make your old estate plan out of date and may no longer achieve the goals you had in mind.

Reference: The Courier (Sep. 4, 2019) “The will is done, you’re sitting pretty—but are you?”

 

Why We All Need to Have an Estate Plan

Putting off estate planning is never a good idea. Life happens, and before you know it, “someday” arrives. Having an estate plan is advisable for everyone, says the South Florida Reporter in the article “Why Estate Planning is so Important.” It doesn’t matter if you are rich or poor—you need an estate plan. People with families who depend upon them, as well as singles who don’t, need an estate plan.

What exactly does estate planning mean? Estate planning is planning for the disposition of your assets, when you have died. It’s also done to protect you and your family, in the event you become incapacitated and cannot convey your wishes to others. It protects your family from complications, unnecessary costs and delays about distributing your estate.

Having an estate plan means that you have taken the time to plan out what you want to happen to your property and how you want to take care of your family when you are gone. For those who have young children, your last will and testament is the document used to name the person who will raise your children. It also lets you appoint a separate person (although it can be the same person) who will look after your finances, with regard to your children.

Without a will, a court will decide what should happen to your children and your property. The court must follow the laws of your state, which may not be what you had in mind. Let’s say you have a brother who lives far away and from whom you are estranged. If you don’t have a will and he is your legal next-of-kin, in some states he will inherit everything you own. It’s far better to have a will.

Estate planning also includes tax planning. Having an estate plan that is created by an experienced estate planning attorney with knowledge of tax planning will allow you to minimize your tax liability and make sure more of your assets are passed to the next generation, than are passed to the government.

Having an estate plans gives you the opportunity to take a long look at your life and your legacy. How do you want to be remembered? Do you want to leave behind part of your estate to a charity, a school or a healthcare facility that has been important to you or another family member? Planning for charitable giving is also part of an estate plan. Some people give because they are seeking tax benefits, but many are generous because they are creating a legacy.

Your estate plan can include a letter to your heirs explaining why you have made the decisions you have about your possessions and assets. This kind of letter is not a legally enforceable document. However, if there is a dispute about your will, it can be used to support your intentions.

Note that even the best estate plan needs to be updated every few years. Tax laws have changed with the new federal tax laws that were adopted in 2017. If your estate plan has not been reviewed by your estate planning attorney since 2017, it’s time for a review.

Reference: South Florida Reporter (June 12, 2019) “Why Estate Planning is so Important.”

 

What Does ‘Getting Your Affairs in Order’ Really Mean?
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What Does ‘Getting Your Affairs in Order’ Really Mean?

That “something” that happens that no one wants to come out and say is that you are either incapacitated by a serious illness or injury or the ultimate ‘something,’ which is death. There are steps you can take that will help your family and loved ones, so they have the information they need and can help you, says Catching Health’s article “Getting your affairs in order.”

Start with the concept of incapacity, which is an important part of estate planning. Who would you want to speak on your behalf? Would that person be the same one you would want to make important financial decisions, pay bills and handle your personal affairs? Does your family know what your wishes are, or do you know what your parent’s wishes are?

Financial Power of Attorney. Someone needs to be able to pay your bills and handle financial matters. That person is named in a Financial Power of Attorney, and they become your agent. Without an agent, your family will have to go to court and get a conservatorship. This takes time and money. It also brings in court involvement into your life and adds another layer of stress and expense.

It’s important to name someone who you trust implicitly and whose financial savvy you trust. Talk with the person you have in mind first and make sure they are comfortable taking on this responsibility. There may be other family members who will not agree with your decisions, or your agent’s decisions. They’ll have to be able to stick to the course in the face of disagreements.

Health Care Directive, Health Care Proxy or Living Will. The name of these documents and what they serve to accomplish does vary from state to state, so speak with an estate planning attorney in your state to determine exactly what it is that you need.

Health Care Proxy. This is the health care agent who makes medical decisions on your behalf, when you can no longer do so. In Maine, that’s a health care advance directive. The document should be given to the named person for easy access. It should also be given to doctors and medical providers.

DNR, or Do Not Resuscitate Order. This is a document that says that if your heart has stopped working or if you stop breathing, not to bring you back to life. When an ambulance arrives and the EMT asked for this document, it’s because they need to know what your wishes are. Some folks put them on the fridge or in a folder where an aide or family member can find them easily. If you are in cardiac arrest and the DNR is with a family member who is driving from another state to get to you, the EMT is bound by law to revive you. You need to have that on hand, if that is your wish.

How Much Should You Tell Your Kids? While it’s really up to you as to how much you want to share with your kids, the more they know, the more they can help in an emergency. Some seniors bring their kids with them to the estate planning attorney’s office, but some prefer to keep everything under wraps. At the very least, the children need to know where the important documents are, and have contact information for the estate planning attorney, the accountant and the financial advisor. Many people create a binder with all of their important documents, so there are no delays caused in healthcare decisions.

Reference: Catching Health (May 28, 2019) “Getting your affairs in order.”

 

An Estate Plan Directs Assets According to Your Wishes

Anyone who has any assets they want distributed should have an estate plan, regardless of the size of their estate. Having a will and an estate plan created by an experienced estate planning attorney is the easiest place to start, says the Observer-Reporter in the article “Set up an estate plan so your assets go where you want.” Without a will, the state will decide what happens to your assets, and it may not be what you wanted.

If your will was done more than four years ago and was never updated, it may lead to some unwanted results. If people you named as beneficiaries or executors have died, or if there were divorces in your family, these are examples of changes that should be addressed in the estate plan.

Many people don’t know that insurance policies, annuities, 401(k), or IRA accounts that have a designated beneficiary are going to the designated beneficiary, regardless of what is in the will. If the will says everything in the estate should be divided equally between children, but one child was named the beneficiary on the life insurance policy, then only the named child will inherit the insurance policy.

Another part of an estate plan that is needed to ensure that your wishes are followed, is a financial power of attorney and a health care power of attorney. The financial power of attorney gives the person you name the legal ability to make financial decisions for you, if you are incapacitated. The health care power of attorney, similarly, gives the person you name the power to make health care decisions for you, if you cannot do so for yourself. A living will is another part of planning for incapacity that is a part of a comprehensive estate plan. The living will lets your wishes for end of life care be known to others.

Assets that pass to heirs through beneficiary designations do not go through the probate process. However, assets distributed through your will do so. Probate administration of an estate takes some time to complete, depending upon where you live. In some states, probate is more involved and time consuming than in others.

Another reason why people like to avoid probate is that documents, including your will, are filed with the court and become part of the public record. That’s why many people who lose a family member find themselves receiving direct mail and phone calls about buying insurance policy or selling their home.

There are ways to minimize the number of assets that pass through probate, which your estate planning attorney will be able to explain. Trusts are used for this purpose. There are a variety of trusts that can be used, depending upon your circumstances. Some are used to protect inheritances, if a person has an opiate addiction or cannot manage her own affairs. Others are used, so individuals with special needs do not receive inheritances that would make them ineligible for government benefits.

An experienced estate planning attorney can advise you in creating an estate plan that fits your unique circumstances.

Reference: Observer-Reporter (April 19, 2019) “Set up an estate plan so your assets go where you want”