Will the Girlfriend Get the Life Insurance or the Wife?

Nj.com’s recent article entitled “Who will get my boyfriend’s property if he dies? Me or his wife?” says that a couple that’s lived together for some time where one is still married to another can create some issues. If the boyfriend has a life insurance policy and 401(k) with the girlfriend as beneficiary, they should draft a will to make certain that the estranged wife does not get that money.

Despite the fact that the girlfriend is the named beneficiary of the life insurance and the 401(k), there is more you need to think about.

Without a will, probate assets (the assets held by individuals in their own name without a beneficiary designation or assets held in joint names as tenants in common) will be transferred by the laws of intestacy.

The laws of intestacy provide first to a spouse and/or children of the deceased, without regard to whether the couple are living together.  If the deceased had no spouse or children, state intestacy laws say that property passes to parents then siblings.

As far as the life insurance policy and 401(k), absent a valid waiver, the boyfriend’s spouse will certainly have a legal right to the 401(k) and may have a contractual claim on the life insurance either through a premarital agreement or a property settlement agreement.

Therefore, even if the assets are paid out to the girlfriend, the contractual claim may provide the spouse with a successful action against her.

A spouse may also have rights to the policy or part of the 401(k) as a result of the marriage in a future divorce proceeding.

Contact an experienced estate planning attorney to prepare your estate planning documents.

Reference: nj.com (June 21, 2021) “Who will get my boyfriend’s property if he dies? Me or his wife?”

 

Should a Trust Be a Component of My Estate Planning?

Let’s say that there’s a young father with a wife and young son, who owns a home and a Roth IRA account, with a few stock investments. On the stock investments, he’s filled out the beneficiary designation forms passing all his assets to his wife and son, should anything happen to him.  This father owns his home is joint tenancy with right of survivorship with his wife.  Does he need to set up a separate trust, if most of his assets pass through beneficiary designations?

Nj.com’s recent article entitled “Do I need a trust in case something happens to me?” says that leaving assets outright to a minor is typically a bad move. The son’s guardian and/or the court would take custody of the assets, both of which require significant court oversight and involvement.

The minor would also receive the assets upon attaining the age of majority, which in most states is age 18.

No one can tell what a young child will be like at the age of 18, especially after suffering the loss of their parents. Even if there are no significant issues, such as drug addiction or special needs, parents should think about what they’d have done with that much money at that age.

The best option is to leave assets in trust for the benefit of the minor son.

The trustee can manage and use the assets for the benefit of the young boy with limited court involvement.

The terms of the trust can also delay the point at which the assets can be distributed and ultimately paid over to the beneficiary, if at all.

For example, it’s not uncommon for a trust to stipulate that the beneficiary gets a third of the assets at 25, half of the remaining assets at 30 and the rest at age 35. However, other trusts don’t provide for such mandatory distributions and can hold the assets for the beneficiary’s lifetime, which has its advantages.

In some instances, the terms of the trust are included in a will. This creates a trust account after death, which is also called a testamentary trust.

Talk to an experienced estate planning attorney, who can assess your specific situation and provide guidance in creating an estate plan. The attorney can also make certain that trust assets are correctly titled and that beneficiary designations of retirement accounts and life insurance are correctly prepared, so the trust under the will receives those assets and not the minor individually.

Reference: nj.com (June 14, 2021) “Do I need a trust in case something happens to me?”

 

How to Avoid Probate

Avoiding probate and minimizing estate taxes are sound estate planning goals, but they shouldn’t be the only focus of an estate plan.

Nj.com’s recent article entitled “How can we avoid probate and avoid taxes for our children?” says that proper estate planning is a much broader discussion you should have with a qualified estate attorney. However, the article offers some topics to discuss with an attorney, who can review all the specifics of your situation.

Probate is the legal process for settling the debts, taxes and last expenses of a deceased person and distributing the remaining assets to his or her heirs. The costs and time needed to settle an estate can be burdensome in some states. However, steps can be taken to significantly limit probate.

Without any special planning, there are a few types of assets that can be transferred outside of probate. Items owned jointly with rights of survivorship (JTWROS) automatically become the sole property of the survivor at the first joint owner’s death. This property doesn’t go through probate.   Accounts with beneficiary designations, like retirement accounts, annuities, and life insurance policies also pass outside probate. There is a payable on death (POD) feature that provides for a beneficiary designation on non-retirement accounts (like a bank account), so POD accounts can also be transferred outside of probate.

You can also create a living trust and transfer assets into the trust during your lifetime to avoid probate. Since the trust document dictates the way in which assets are distributed upon the death of the grantor rather than the will, probate is not needed here either.  In addition, ancillary probate is a second, simultaneous process that is needed when real estate is owned in a state outside the decedent’s state of residence.

Placing out-of-state real estate in a living trust is a useful way to avoid ancillary probate. You can also place the out-of-state real estate in a Limited Liability Company (LLC), so the estate owns an interest in an LLC rather than real property. That way, the entire probate process can be handled in the decedent’s state of residence. However, talk to an experienced estate planning attorney to review which of these options — or perhaps another option — would be best for your unique situation and goals.

Other types of trusts, whether created during your lifetime or at your death, can provide creditor protection and ensure that an inheritance stays in the family, as well as help minimize estate taxes.

Under current law, federal estate tax is only due if your estate is worth more than $11.7 million (double that if you are married). A few states also have an estate tax. Other states also have an inheritance tax, but in many instances it does not apply to amounts left to the decedent’s closest relatives, including their children.

Speak with an estate planning attorney if you need assistance.

Reference: nj.com (March 24, 2021) “How can we avoid probate and avoid taxes for our children?”

 

How Does Home Ownership Transfer after a Parent Dies?

The first thing you’ll need to know about selling a home after the death of a parent, is how your parents held title, or owned, the home, begins the recent article “Home ownership after the death of a spouse” from nwi.com. In most cases, the home is owned by a couple as “joint tenants with rights of survivorship” or as “tenants by the entirety.” The latter is less common.

Tenancy by the entirety is a form of ownership available only to married people in a limited number of states and offers several advantages to the owners. It creates an ownership interest where the spouses own property jointly and not as individuals. It also creates the rights of survivorship, so that the surviving spouse owns the property by law when the first spouse dies.

Joint tenancy with rights of survivorship is similar to tenants by the entirety, in that they both convey rights of survivorship. However, joint tenancy does not treat the owners as a single unit. If you own entireties property with a spouse, you may not transfer your interest without your spouse’s permission because you own it as a unit.

In joint tenants, if one of the tenants want to transfer their interest in the property, he or she may do so at any time—and do not need the permission of the other tenant. This has led to some sticky situations, which is why tenants by the entirety is preferred in many situations.

If your parents own their home as tenants by the entireties or as joint tenants with rights of survivorship, the surviving spouse owns the home as a matter of law, and legally, ownership begins at the moment that first spouse dies.

Different states record this change of ownership differently, so you’ll need to speak with an estate planning attorney in your community (or the state where your parents lived, if it was different than where you live).

To notify the recorder’s office of the death, some state laws require the submission of a surviving spouse affidavit, which puts the recorder and the community on notice that one of the owners has died and the survivor now owns the home individually. Here again, an estate planning attorney will know the laws that apply in your situation.

There was a time when people recorded a death certificate, but this does not occur often. The affidavit makes a number of recitals that are important, and the recorded document proves the change of title.  In most cases, there is no need for a new deed, since the surviving spouse owns the property at the time of death, and the affidavit itself demonstrates proof of the transfer of title in lieu of a deed.

Reference: nwi.com (March 14, 2021) “Home ownership after the death of a spouse”

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Am I Named in a Will? How Would I Know?

Imagine a scenario where three brothers’ biological father passed away a decade ago. The father wasn’t married to the brothers’ mother, plus, he had another family with three children, grandchildren, and great grandchildren. The father never publicly acknowledged that the three boys were his children. They’ve now heard rumors that he left them something in his will—which may or may not exist. The father’s wife has also passed away.

Nj.com’s recent article entitled “How can we find out if our father left us something in his will?” explains that a parent isn’t required to leave his or her adult children an inheritance.

If a person doesn’t leave a will when they die, the intestacy laws of the state in which he or she dies will dictate how the decedent’s property is divided.

For example, if you die without a will in Kansas, your assets will go to your closest relatives. If there were children but no spouse, the children inherit everything. If there is a spouse and descendants, the spouse inherits one-half of your intestate property, and your descendants inherit the other one-half of your intestate property.

In Illinois, if you’re married and you pass away without a will, the portion given to your spouse is based upon whether you have living descendants, such as children and grandchildren.

In New Jersey, if the decedent is survived by a spouse and children—this includes any children who are not children of the surviving spouse—the surviving spouse gets the first 25% of the intestate estate, but not less than $50,000 nor more than $200,000, plus one-half of the balance of the intestate estate. In that state, the descendants of the decedent would receive the remainder.

Note that an intestate estate doesn’t include property that’s in the joint name of the decedent and another person with rights of survivorship or payable upon death to another beneficiary. In our problem above, the issue would be whether the three boys would’ve been entitled to a percentage of the property permitted under the state intestacy statute, or under a will if you could prove there was one.

However, the time for the three boys to make a claim against their father’s estate would have been at his death. A 10-year delay is a problem. It may prevent a recovery because there are time limitations for bringing legal actions. However, they may have other claims, and there may be reasons you are not too late.

Litigation is very fact-specific, and the rules are state-specific. The boys should talk to an estate litigation attorney, if they think there are enough assets to make at it worth their while. Also, you should contact an experienced estate planning attorney to create an estate planning package.

Reference: nj.com (Dec. 29, 2020) “How can we find out if our father left us something in his will?”

 

Should I Add that to My Will?

In general, a last will and testament is an easy and straightforward way to state who gets what when you die and designate a guardian for your minor children, if you (and your spouse) die unexpectedly.

MSN’s recent article entitled “Things you should never put in your will” explains that you can be specific about who receives what. However, attaching strings or conditions may not work because there’s no one to legally enforce the terms. If you have specific details about how a person should use their inheritance, whether they are a spendthrift or someone with special needs, a trust may be a better option because you’ll have more control, even from beyond the grave.

Keeping some assets out of your will can actually benefit your future heirs because they’ll get their inheritance faster. When you pass on, your will must be “proven” and validated in a probate court prior to distribution of your property. This process takes some time and effort, if there are issues—including something in your will that doesn’t need to be there. For example, property in a trust and payable-on-death accounts are two types of assets that can be distributed to your beneficiaries without a will.

Don’t put anything in a will that you don’t own outright. If you jointly own assets with someone, they will likely become the new owner. For example, this applies to a property acquired by married couples in community property states.

Property in a revocable living trust. This is a separate entity that you can use to distribute your assets which avoids probate. When you title property into the trust, it is subject to the trust’s rules.  Because a trust operates independently, you must avoid inconsistencies and not include anything in your will that the trust addresses. Contact an experienced estate planning attorney to discuss.

Assets with named beneficiaries. Some financial accounts are payable-on-death or transferable-on-death. They are distributed or paid out directly to the named beneficiaries. That makes putting them in a will unnecessary (and potentially troublesome, if you’re inconsistent). However, you can add information about these assets in your letter of instruction (see below). As far as bank accounts, brokerage or investment accounts, retirement accounts and pension plans and life insurance policies, assign a beneficiary rather than putting these assets in your will.

Jointly owned property. Property you jointly own with someone else will almost always directly pass to the co-owner when you die, so do not put it in your will. A common arrangement is joint tenancy with rights of survivorship.

Other things you may not want to put in a will. Businesses can be given away in a will, but it’s not the best plan. Wills must be probated in court and that can create a rough transition after you die. Instead, work with an experienced estate planning attorney on a succession plan for your business and discuss any estate tax issues you may have as a business owner.

Adding your funeral instructions in your will isn’t optimal. This is because the family may not be able to read the will before making arrangements. Instead, leave a letter of instruction with any personal wishes and desires.

Reference: MSN (Dec. 8, 2020) “Things you should never put in your will”

 

Does My Estate Plan Need an Audit?

You should have an estate plan because every state has statutes that describe how your assets are managed, and who benefits if you don’t have a will. Most people want to have more say about who and how their assets are managed, so they draft estate planning documents that match their objectives.

Forbes’ recent article entitled “Auditing Your Estate Plan” says the first question is what are your estate planning objectives? Almost everyone wants to have financial security and the satisfaction of knowing how their assets will be properly managed. Therefore, these are often the most common objectives. However, some people also want to also promote the financial and personal growth of their families, provide for social and cultural objectives by giving to charity and other goals. To help you with deciding on your objectives and priorities, here are some of the most common objectives:

  • Making sure a surviving spouse or family is financially OK
  • Providing for others
  • Providing now for your children and later
  • Saving now on income taxes
  • Saving on estate and gift taxes in the future
  • Donating to charity
  • Having a trusted agency manage my assets, if I am incapacitated
  • Having money for my children’s education
  • Having retirement income; and
  • Shielding my assets from creditors.

Speak with an experienced estate planning attorney about the way in which you should handle your assets. If your plan doesn’t meet your objectives, your estate plan should be revised. This will include a review of your will, trusts, powers of attorney, healthcare proxies, beneficiary designation forms and real property titles.

Note that joint accounts, pay on death (POD) accounts, retirement accounts, life insurance policies, annuities and other assets will transfer to your heirs by the way you designate your beneficiaries on those accounts. Any assets in a trust won’t go through probate. “Irrevocable” trusts may protect assets from the claims of creditors and possibly long-term care costs, if properly drafted and funded.

Another question is what happens in the event you become mentally or physically incapacitated and who will see to your financial and medical affairs. Use a power of attorney to name a person to act as your agent in these situations.

If, after your audit, you find that your plans need to be revised, follow these steps:

  1. Work with an experienced estate planning attorney to create a plan based on your objectives
  2. Draft and execute a will and other estate planning documents customized to your plan
  3. Correctly title your assets and complete your beneficiary designations
  4. Create and fund trusts
  5. Draft and sign powers of attorney, in the event of your incapacity
  6. Draft and sign documents for ownership interest in businesses, intellectual property, artwork and real estate
  7. Discuss the consequences of implementing your plan with an experienced estate planning attorney; and
  8. Review your plan regularly.

Reference: Forbes (Sep. 23, 2020) “Auditing Your Estate Plan”

 

What Is Estate Planning and Is It for Everyone?

A key objective of estate planning is to make certain that your assets go to those you want rather than distant family. It also can minimize taxes, so your beneficiaries can keep more of your wealth. Finally, sound estate planning can decrease family fighting and provide clear end-of-life directives, if you become incapacitated before you die.

Bankrate’s recent article entitled “What is estate planning?” gives us a look at estate planning and why you absolutely need it, regardless of how much wealth you have. Here are a few of the most common elements of an estate plan and what you should consider.

Beneficiary designations. When you open a financial account, checking, savings, brokerage, or insurance account, you’ll be asked to name a beneficiary for the account. This person will get any funds from the account at your death. You can have multiple beneficiaries and should also name contingent beneficiaries in case the primary beneficiaries are not living when you pass away. Naming a beneficiary supersedes any other declaration in your estate.

Will. This is another key document in the estate plan. When you die, it instructs where your assets will go. Property that’s owned jointly, such as with a spouse, passes directly to the surviving owner(s). An executor will be appointed to carry out the will and manage the distribution of assets.

Trusts. This is a legal vehicle that allows a third party (the trust) to hold assets for a beneficiary. They give you several estate planning options, including avoiding probate and privacy. Trusts also let you direct how your assets are distributed after your death. You can also name the trustee(s) to manage and direct the trust on your passing. Ask your experienced estate planning attorney to help you with your trust questions and to create one, if it is a good idea.

Living wills. In the event you become incapacitated, you should have a clear statement of your wishes. A living will states how you want to be treated during your end-of-life care, such as specific treatments to take or refrain from taking. A living will is often combined with a durable power of attorney which can allow a surrogate to make decisions on behalf of the incapacitated individual.

Estate planning can help avoid many issues from arising, even if you don’t have a lot of money. By determining how you want to handle your estate before you die, you’ll save your loved ones a lot of effort, expense and stress concerning how your estate is distributed. Contact an estate planning attorney to schedule an appointment.

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

 

Do I Need More Than a Will?

If you die without a will (i.e., intestate), a court will determine who inherits your assets and who would care for any surviving children as a guardian.  CNBC’s recent article entitled “A will doesn’t cover all your bases when it comes to end-of-life decisions. Here’s what else you need” explains that some assets pass outside of the will including retirement accounts and life insurance.

Start your estate planning with a will which is just one piece of an “estate plan.” Creating a plan for your assets helps make certain that your wishes will be carried out upon your death and that family grumbling doesn’t escalate into destroyed relationships. Here are some additional things about estate planning you should know.

What passes via your will. A will is a document that allows you to say who gets what when you die. However, there are some assets that pass outside of the will, such as retirement accounts like 401(k) plans and individual retirement accounts (IRAs), and life insurance policies. As a result, the person named as a beneficiary on those accounts will get the money, no matter what your will says. Regular bank accounts also can have beneficiaries listed on a payable-on-death form, also known as a POD. If you own a home, check how it’s titled to ensure it ends up passing as you wish upon your death.

Executor. As part of the will-making process, you’ll need to name an executor of your will (sometimes called a personal representative). This entails making sure that assets are liquidated, the assets go to the proper beneficiaries, paying any debts not discharged and selling your home.

To prepare a will, you can hire an estate planning attorney in your local area, who knows state law. If use an online option, note that not all of the web-based alternatives will necessarily reflect the specifics of your state’s law. Online forms or software may not be compliant with your local law.

Living Will. An estate plan will typically include a few other legal documents, such as an advance health-care directive, also known as a living will. This document states your wishes, if you become incapacitated due to illness or injury, like whether you want to be kept on life support if there’s no hope of recovery.

Powers of Attorney. If you become incapacitated, your designated attorney-at-fact or agent will handle your medical and financial affairs. Similar to selecting an executor, be certain that he or she is trustworthy and smart, with the ability, skill set, time and desire to make such decisions and do these tasks.

Make a list of critical documents. Create an organized list of information your executor will need to settle your estate and include passwords, so your online accounts can be accessed.

Look at a trust. If you want your children or loved ones to receive money but don’t want to give a young adult or someone with poor money management free access to a lot of cash, you can create a trust for your beneficiaries. A trust holds assets on behalf of your beneficiaries, so they can only receive money according to how (or when) you’ve stated in the trust documents.

Again, it is important that you contact an experienced estate planning attorney to help you.

Reference: CNBC (July 27, 2020) “A will doesn’t cover all your bases when it comes to end-of-life decisions. Here’s what else you need”

 

What If Grandma Didn’t Have a Will and Died from COVID-19?

The latest report shows about 1.87 million reported cases and at least 108,000 COVID-19-related deaths were reported in the U.S., according to data released by Johns Hopkins University and Medicine.

Here’s a question that is being asked a lot these days: What happens if someone dies “intestate,” or without having established a will or estate plans?

If you die without a will in California and many other states, your assets will go to your closest relatives under state “intestate succession” statutes.

Yahoo Finance’s recent article entitled “My loved one died without a will – now what?” explains that there are laws in each state that will dictate what happens, if you die without a will.

In Pennsylvania, the laws list the order of who receives upon your death, if you die without a will: your spouse, your children, and then your parents (if still alive), your siblings, and then on down the line to cousins, aunts and uncles, and the like. Typically, first on every state’s list is the spouse and the children.

You may also have some valuable assets that will not pass via your will and aren’t affected by your state’s intestate succession laws. Here are some of the common ones:

  • Any property that you’ve transferred to a living trust
  • Your life insurance proceeds
  • Funds in an IRA, 401(k), or other retirement accounts
  • Any securities held in a transfer-on-death account
  • A payable-on-death bank account
  • Your vehicles held by transfer-on-death registration; or
  • Property you own with someone else in joint tenancy or as community property with the right of survivorship.

These types of assets will pass to the surviving co-owner or to the beneficiary you named, whether or not you have a will.

It’s quite unusual for the government to claim a deceased person’s estate. While it might be allowed in some states, it’s considered a last resort. Typically, we all have some relatives.

If you have a loved one who has died without a will, speak with an experienced estate planning attorney about your next steps.

Reference: Yahoo Finance (June 1, 2020) “My loved one died without a will – now what?”