Your Will and Estate Planning Checklist

Dying without a last will creates additional costs and eliminates any chance your wishes for loved ones will be followed after your death. Typically, people think about last wills when they marry or have children, and then do not think about last wills or estate plans until they retire. While a last will is important, there are other estate planning documents that are just as important, says the recent article “10 Steps to Writing a Will” from U.S. News & World Report.

Most assets, including retirement accounts and insurance policy proceeds, can be transferred to heirs outside of a will, if they have designated beneficiaries. However, the outcome of an estate may be more impacted by Power of Attorney for financial matters and Medical Power of Attorney documents.

Here are ten specific tasks that need to be completed for your last will to be effective. Remember, if the will does not comply with your state’s estate law, it can be declared invalid.

  1. Find an estate planning attorney who is experienced with the laws of your state.
  2. Select beneficiaries for your last will.
  3. Check beneficiaries on non-probate assets to make sure they are current.
  4. Decide who will be the executor of your last will.
  5. Name a guardian for minor children, if yours are still young.
  6. Make a letter describing possessions and who you want to receive them. Be very specific.

There are also tasks for your own care while you are living, in case of incapacity:

  1. Name a person for the Power of Attorney role. They will be your representative for legal and financial matters, but only while you are living.
  2. Name a person for the Medical Power of Attorney to make decisions on your behalf, if you cannot.
  3. Create an Advance Directive, also known as a Living Will, to explain your wishes for medical care, particularly concerning end-of-life care.
  4. Discuss these roles and their responsibilities with the people you have chosen, and make sure they are willing to serve.

Be realistic about the people you are naming to receive your property. If you have a child who is not good with managing money, a trust can be set up to distribute assets according to your wishes: by age or accomplishments, like finishing college, going to rehab, or maintaining a steady work history.

Do not forget to tell family members where they can find your last will and other estate documents. You should also talk with them about your digital assets. If accounts are protected by passwords or facial recognition, find out if the digital platform has a process for your executor to legally obtain access to your digital assets.

Finally, do not neglect updating your last will every three to four years or anytime you have a major life event. An estate plan is like a house: it needs regular maintenance. Old last wills can disinherit family members or lead to the wrong person being in charge of your estate. An experienced estate planning attorney will make the process easier and straightforward for you and your loved ones.

Reference: U.S. News & World Report (May 13, 2021) “10 Steps to Writing a Will”

 

Should I Create a Trust?

Most people know that a will instructs your executor regarding where to transfer your assets when you die. You may also want to consider a trust.

Nbcnew25.com’s recent article entitled “Elder law and estate planning: What you need to know” explains that a trust can give you peace of mind that your wishes will be carried out when you pass away. Your property won’t need to go through the probate process, if it’s in a trust. Your family can focus on the grieving process without having any problems with wrapping up your estate.

In addition, financial and health care powers of attorney should also be part of your estate plan. Ask an experienced estate planning or elder law attorney to help you draft these documents to save your loved ones the worry, if you must be moved into a nursing home and are unable to make decisions for yourself.

Having the correct documents in place before you or a loved one goes into a nursing home is extremely important. With a financial power of attorney, an elder law attorney could design a Medicaid plan for someone entering a nursing home to help protect their assets.

If the correct documents aren’t in place when a loved one enters a nursing home, it could create issues—one of which is the inability to protect their assets. In that case, you may also be required to appear in front of a judge to get permission for an elder law attorney to assist in protecting assets. That request could even be denied by the judge.

For a married couple, 100% of cash assets, plus the home, can be protected, and Medicaid would cover most of the nursing home cost. This is big because the cost of nursing homes can exceed be tens of thousands of dollars every month.

For married couples, in many instances, the income of the spouse who is entering the nursing home may be able to be transferred to the spouse who still lives at home. That’s important because the spouse at home may depend on the other spouse’s income to help make ends meet.

For singles, at least 60% to 70% of cash assets, plus the home, can be protected, so that Medicaid would cover most of the nursing home cost.

Moving a loved one into a nursing home can be stressful enough, without having to worry about the cost. Help yourself and your family, by preparing the proper documents ahead of time to eliminate some of the stress. Working with an elder law attorney who specializes in Medicaid planning is a wise move. Don’t wait until it is too late.

Have things in order, so you or a loved one can avoid any unnecessary stress and keep the assets that you’ve acquired during your lifetime. Contact an experienced estate planning attorney.

Reference: nbcnew25.com (April 30, 2021) “Elder law and estate planning: What you need to know”

 

What Is the Purpose of an Estate Plan?

No one wants to think about becoming seriously ill or dying, but scrambling to get an estate plan and healthcare documents done while in the hospital or nursing home is a bad alternative, says a recent article titled “The Essentials You Need for an Estate Plan” from Kiplinger. Not having an estate plan in place can create enormous costs for the estate, including taxes, and delay the transfer of assets to heirs.

If you would like to avoid the cost, stress and possibility of your spouse or children having to go to court to get all of this done while you are incapacitated, it is time to have an estate plan created. Here are the basics:

A Will, a Living Will, Power of Attorney and a Beneficiary Check-Up. People think of a will when they think of an estate plan, but that’s only part of the plan. The will gives instructions for what you want to happen to assets, who will be in charge of your estate—the executor—and who will be in charge of any minor children—the guardian. No will? This is known as dying intestate, and probate courts will make all of these decisions for you, based on state law.

However, a will is not enough. Beneficiary designations determine who receives assets from certain types of property. This includes life insurance policies, qualified retirement accounts, annuities, and any account that provides the opportunity to name a beneficiary. These instructions supersede the will, so make sure that they are up to date. If you fail to name a beneficiary, then the asset is considered part of your estate. If you fail to update your beneficiaries, then the person you may have wanted to receive the assets forty years ago will receive it.

Some banks and brokerage accounts may have an option of a Transfer on Death (TOD) agreement. This allows you to plan out asset distribution outside of the will, speeding the distribution of assets.

A Living Will or Advance Directive is used to communicate in advance what you would want to happen if you are alive but unable to make decisions for yourself. It names an agent to make serious medical decisions on your behalf, like being kept on life support or having surgery. Not having the right to make medical decisions for a loved one requires petitioning the court.

Financial Power of Attorney names an attorney in fact to manage finances, paying bills and overseeing investments. Without a POA, your family can’t take action on your financial matters, like paying bills, overseeing the maintenance of your home, etc. If the court appoints a non-family member to manage this task, the family may see the estate evaporate.

Creating a trust is part of most people’s estate plan. A trust is a means of leaving assets for a minor child, or someone who cannot be trusted to manage money. The trust is a legal entity that inherits money when you pass, and a trustee, who you name in the trust documents, manages everything, according to the terms of the trust.

Today’s estate plan needs to include digital assets. You need to give someone legal authority to manage social media accounts, websites, email and any other digital property you own.  The time to create an estate plan, or review and update an existing estate plan, is now. COVID has awakened many people to the inevitability of severe illness and death. Planning for the future today protects the ones you love tomorrow.

Speak with an experienced estate planning attorney to assist you in preparing your documents.

Reference: Kiplinger (April 21, 2021) “The Essentials You Need for an Estate Plan”

 

A Trust can Protect Inheritance from Relatives

It’s always exciting to watch adult children build their lives and select spouses. However, even if we adore the person they love, it’s wise to prepare to protect our children, says a recent article titled “Worried about Your Child’s Inheritance If They Divorce? A Trust Can Be Your Answer” from Kiplinger.

After all, why would you want the assets and money that you accumulated over a lifetime to pass to any ex-spouse, if a divorce happens? With the current federal estate tax exemptions still historically high (although that may change in the near future), setting up a trust to protect wealth from federal estate taxes isn’t the driving force in many estate plans. The bigger concern is how well your children will do, if and when they receive their inheritance.

Some people recognize that their children are simply not up to the task. They worry about potential divorces, or a spendthrift spouse. The answer is estate planning in general, and more specifically, a well-designed trust. By establishing a trust as part of an estate plan, these assets can be protected.  If an adult child receives an inheritance and commingles it with assets owned jointly with their spouse—like a joint bank account—depending upon the state where they live, the inheritance may become a marital asset and subject to marital property division, if the couple divorces.

If the inheritance remains in a trust account, or if the trust funds are used to pay for assets that are only owned in the child’s name, the inherited wealth can be protected. This permits the child to have assets as a financial cushion, if a divorce should happen.  Placing an inheritance in a trust is often done after a first divorce, when the family learns the hard way how combined assets are treated. Wiser still is to have a trust created when the child marries. In that way, there’s less of a learning curve (not to mention more assets to preserve).

Here are three typical situations:

Minor children. Children who are 18 or younger cannot inherit assets. However, when they reach the age of majority, they can. A sudden and large inheritance is best placed in the hands of a trustee, who can guide them to make smart decisions and has the ability to deny requests that may seem entirely reasonable to an 18-year-old, but ridiculous to a more mature adult.

Newlyweds. Most couples are divinely happy in the early years of a marriage. However, when life becomes more complicated, as it inevitably does, the marriage may be tested and might not work out. Setting up a trust after the couple has been together for five or ten years is an option.

Marriage moves into the middle years. After five or ten years, it’s likely you’ll have a clearer understanding of your child’s spouse and how their marriage is faring. If you have any doubts, talk with an estate planning attorney, and set up a trust for your child.

Estate plans should be reviewed every four or five years, as circumstances, relationships and tax laws change. A periodic review with your estate planning attorney allows you to ensure that your estate plan reflects your wishes.

Reference: Kiplinger (April 16, 2021) “Worried about Your Child’s Inheritance If They Divorce? A Trust Can Be Your Answer”

 

What can a Power of Attorney Do—or Not Do?

Power of attorney is an important tool in estate planning. The recent article “Top Ten Facts About Powers of Attorney” from My Prime Time News, explains how a POA works, what it can and cannot do and how it helps families with loved ones who are incapacitated.

The agent’s authority to powers of attorney (POA) is only effective while the person is living. It ends upon the death of the principal. At that point in time, the executor named in the last will or an administrator named by a court are the only persons legally permitted to act on behalf of the decent.

An incapacitated person may not sign a POA. Powers of Attorney can be broad or narrow. A person may be granted POA to manage a single transaction, for example, the sale of a home. They may also be named POA to handle all of a person’s financial and legal affairs. In some states, such as Colorado, general language in a POA may not be enough to authorize certain transactions. A POA should be created with an estate planning attorney as part of a strategic plan to manage the principal’s assets. A generic POA could create more problems than it solves.

You can have more than one agent to serve under your POA. If you prefer that two people serve as POA, the POA documents will need to state that requirement.

Banks and financial institutions have not always been compliant with POAs. In some cases, they insist that only their POA forms may be used. This has created problems for many families over the years, when POAs were not created in a timely fashion. In 2010, Colorado law set penalties for third parties (banks, etc.) that refused to honor current POAs without reasonable cause. A similar law was passed in New York State in 2009. Rules and requirements are different from state to state, so speak with a local estate planning attorney to ensure that your POA is valid.

Your POA is effective immediately once it is executed. A Springing POA becomes effective when the conditions specified in the POA are met. This often includes having a treating physician sign a document attesting to your being incapacitated. An estate planning attorney will be able to create a POA that best suits your situation. If you anticipate needing a trust in the future, you may grant your agent the ability to create a trust in your POA. The language must align with your state’s laws to achieve this.

Your agent is charged with reporting any financial abuse and taking appropriate action to safeguard your best interests. If your agent fails to notify you of abuse or take actions to stop the abuser, they may be liable for reasonably foreseeable damages that could have been avoided.

The agent must never use your property to benefit himself, unless given authority to do so. This gets sticky, if you own property together. You may need additional documents to ensure that the proper authority is granted, if your POA and you are in business together, for example.

Every situation is different, and every state’s laws and requirements are different. It will be worthwhile to meet with an estate planning attorney to ensure that the documents created will be valid and to perform as desired.

Reference: My Prime-Time News (April 10, 2021) “Top Ten Facts About Powers of Attorney”

 

Just What Does an Executor Do?

Spending the least amount of time possible contemplating your death is what most people try to do. However, one part of the estate planning process needs time and reflection: deciding who should serve in important roles, including executor. Whatever the size of your estate, the people you name have jobs that will impact your life and your family’s future, says a recent article “How to get it right when naming an executor and filling other key roles in your estate plan” from CNBC. A quick decision now might have a bad outcome later.

First, let’s look at the executor. They are responsible for everything from filing your last will with the court to paying off debts, closing accounts and making sure that assets in your probate estate are distributed according to the directions in your last will. They need to be trustworthy, organized and able to manage financial decisions. They also need to be available to handle your estate, in addition to their other responsibilities.  Note that some of your assets, including retirement tax deferred accounts, life insurance proceeds and any other assets with a named beneficiary, will pass outside of your probate estate. These assets need to be identified and the custodian needs to be notified so the heir can receive the asset.

Settling an estate takes an average of 16 months, with smaller estates being settled more quickly. Larger estates, worth more than $5 million and up, can take as long as four years to settle.

Some people prefer to name co-executors as a means of spreading out the responsibilities. That ix fine, unless the two people have a history of not getting along, as is the case with many siblings. Sharing the duties sounds like a good idea, but it can lead to delays if the two don’t agree or can’t coordinate their estate tasks. Many estate planning attorneys recommend naming one person as the executor and a second as the contingency executor, in case the first cannot serve or decides he or she does not want to take on the responsibilities. The same applies to any trustees, if your estate plan includes a trust.

Make sure the people you are considering as executor, contingent executor, trustee or success or trustee are willing to take on these roles. If there is no one in your life who can take on these tasks, an option is to name an estate planning attorney, accountant, or trust company.

Another important role in your estate plan is the Power of Attorney. You’ll want one for financial decisions and another for healthcare decisions. They can be the same person or different people. Understand that the financial Power of Attorney will have complete control over your assets, including accounts, real estate, and personal property, if you are too incapacitated to make decisions or to communicate your wishes.

The healthcare Power of Attorney will be making medical decisions on your behalf. You will want to name a person you trust to carry out your wishes—even if they are not the same ones they would want, or if your family opposes your wishes. It’s not an easy task, so be sure to create a Living Will to express your wishes, if you are placed on life support or suffer from a terminal condition. This will help your healthcare Power of Attorney follow your wishes.

Finally, revisit your estate plan every three to five years. Life changes, laws change and your estate plan should continue to reflect your wishes. The lives of the people in key roles change, so the same person who was ready to serve as your executor today may not be five years from now. Confirm their willingness to serve every time you review your last will, just to be sure.

Reference: CNBC (March 5, 2021) “How to get it right when naming an executor and filling other key roles in your estate plan”

 

What Should I Do with My Valuable Beanie Baby Collection?

The Wealth Advisor’s recent article entitled “Estate Planning for Your Collections May Be a Smart Decision to Make” explains that the legacy we leave isn’t always a lot of money or real estate. Artifacts and collections have a value that goes beyond dollars and cents. The importance of hobbies and collections in a person’s estate plan should be noted.

Learning a foreign language, making wine and crafting are popular stay-at-home activities, there’s a new trend: childhood collections of baseball cards, comic books, video games, sneakers, model trains, and Barbie dolls are being uncovered and re-examined.

A collector should catalog their collection because an heir might have no idea what he’s holding. Is it a three-buck toy from the local department store or is it a Devi Kroell Barbie from 2010 that sells now for at least $1,100?  One way to start a catalog is to take photos on a smart phone and save them in a shared file called “My Collectible Barbies.”

Next, get an idea what your collection is worth. You can get some idea by looking at prices for similar items on eBay prices. You also should be aware of the “grade” of your pieces. Is your Devi Kroell Barbie still in its original packaging in pristine condition, or has your niece chewed on it for a few years as a baby? Of course, the condition makes a huge difference in the price.

You can gift a collection to a trust through a gift memorandum and specifically listed it on a trust’s Schedule A. If the collectible has its own title, like your 1954 Chevrolet Corvette Convertible, the title can be transferred to the trust. When it’s part of a trust, a collectible can be distributed or maintained the way other trust assets are governed.  Trusts avoid probate and let a collector have more flexibility to control how her collection is handled, appreciated and sold. Contact an estate planning attorney to discuss preparing a trust.

Without a specific bequest in a last will, something like a Beanie Baby collection worth thousands of dollars may only be mentioned as “personal property” in a catch-all category for non-financial accounts or real estate belonging to the decedent. As a result, it’s lumped in with clothing, furniture and household items. An executor who is unfamiliar with Beanie Babies or Barbies may not know enough to maximize the collection’s value.

Some collectors dispose of an unwanted collection while they’re still alive. That is because the owner is the one who understands the market for the collectibles. Obtaining the best prices and letting your heirs  use the windfall for their individual plans may be a win-win.

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

Reference: The Wealth Advisor (Feb. 2, 2021) “Estate Planning for Your Collections May Be a Smart Decision to Make”

 

Preparing for an Estate Planning Meeting

Preparing to meet with an estate planning attorney for the first time is an opportunity to get organized and think about your wishes for the future. If you meet with your accountant every year to prepare tax returns, this may be a familiar process. It’s a chance to step away from day-to-day activities and focus on your life, as described in a recent article “Preparing for an Estate Planning Consultation: 10 Items to Consider Before Meeting Your Attorney” from The National Law Journal.

Minor Children Need Guardians and Conservators. In most states, families with minor children need a last will to designate one or more guardians to raise the children in the event both parents die. A successor should be named in case the first named guardian is unable or unwilling to serve. Discuss your decision with the people you are naming; don’t leave this as a surprise. Choosing these people is a hard decision. However, don’t let it be a reason to delay creating your estate plan. It’s better that you name a guardian, rather than let the court make that decision.

Agents, Trustees, and Power of Attorney. With a Durable Power of Attorney, your assets can be managed by a named agent, if you become incapacitated. The person who manages your estate after death is the executor. They are named in your last will. If you have trusts, the documents that create the trust also name the trustees. It is possible for one person to act as a fiduciary for all of these roles, although the tasks can be divided.

Living Will and Patient Advocate Designation. If you are incapacitated, a Patient Advocate can make medical decisions on your behalf, including following the instructions of your Living Will.

Personal Property. Any items of personal property, whether their value is sentimental or monetary, should be specified in the will. A list of items and who you want to receive what, may spare your heirs from squabbles over your personal effects, large or small. If you own a business or real estate, they also need to be addressed in your will.

Charitable Donations. If you are charitably minded, your will is one way to make bequests and build a lasting legacy. Charitable donations can also be made to gain tax benefits for heirs.

Beneficiary Distributions. The beneficiary designation is the unsung hero of the estate plan. By managing beneficiary designations while you are living—updating beneficiary designations, assigning beneficiary designations to all accounts possible—you take assets out of your probate estate and smooth the asset distribution process. However, there are some wrinkles to consider.

Minor children may not receive assets until they become of age—18 in most cases. Do you want your children (or nieces or grandchildren) to receive an inheritance, while they are still in their teens? Proper estate planning includes trusts created, so a responsible adult can manage the trust on their behalf. Your trust can also be structured so the money may only be used for college expenses, or when the children reach certain ages.

Surviving Pets. You can plan for your pet’s care, if you pass away or become incapacitated before they die. Most states permit the creation of a pet trust, an enforceable means of providing assets to be used for the care and well-being of your pet.

Your estate planning attorney will be able to provide you with a list of the documents she will need to get started on your estate plan, but these are the major issues that you will be discussing at your first meeting.

Reference: The National Law Journal (Feb. 23, 2021) “Preparing for an Estate Planning Consultation: 10 Items to Consider Before Meeting Your Attorney”

 

Is it Better to Have a Living Will or a Living Trust?

A living will and a living trust are part of an estate plan that achieves the goals of protecting you while you are living and your loved ones when you have passed. You may need both, but before you make any decision, first know what they are, says the article “Living Will vs. Living Trust” from Yahoo! Finance.

A living will is a legal document used in healthcare decision making. It offers a way for you to provide in exact terms what kind of medical care and treatment you want to receive in end-of-life situations. They are not fun to contemplate, but the alternative is leaving your spouse or children guessing what you would want and living with the consequences. By having a living will prepared properly with your estate planning attorney (to ensure that it is valid), you tell your loved ones what you want. They will not be left guessing or fighting among each other. The treating physicians will also know what you want.

This is different from an advance healthcare directive, which also deals with medical situation but from a different angle. The advance healthcare directive is used to name an agent who will act on your behalf to make medical decisions. It is used in situations other than end-of-life care. Let’s say you are incapacitated by an illness. That person is authorized to make medical care decisions on your behalf.

A trust is a legal entity that lets you transfer assets to the ownership of a trustee and has little to do with your healthcare. The trustee is a person named to be in charge of the trust. He is considered a fiduciary, a legal standard requiring him to put the interest of the trust above his own. A living trust is one of many different kinds of trusts.

Living trusts are also known as “inter vivos” trusts and take effect while you are alive. You (the grantor) are permitted to serve as your own trustee. You should name one or more successor trustees, who can take over just in case something happens to you. You can also name someone else to be the trustee. That is usually a trusted person or a financial institution.

Living trusts may be revocable or irrevocable. When they are revocable, assets transferred to the trust can be moved in and out of the trust as you like, as long as you are alive. You can add assets, remove assets, change the named beneficiaries, or even change the terms of how the assets are managed.

An irrevocable trust is just as it sounds—once it’s created and funded, those assets are permanently inside the trust. There are some states that permit “decanting” of a trust, that is, moving the assets inside a trust to another trust. Your estate planning attorney will know if that is an option for you.

So, do you need a living will or a living trust? You probably need both. The living will deals with your healthcare, while the living trust is all about your assets. Do you need a trust? Most estates will benefit from some kind of a trust. Depending on the type of trust, it may let you protect assets against creditors, give you control postmortem of how and when (or if!) your beneficiaries receive their inheritance, and removes the assets from your taxable estate. Both are important tools in a comprehensive estate plan and should be prepared by an experienced estate planning attorney or an elder law attorney.

Reference: Yahoo! Finance (Feb. 18, 2021) “Living Will vs. Living Trust”

 

Does a Trust Have to Be Funded to Be Valid?

Thinking you have divided assets equally between children by creating a trust that names all as equal heirs, while placing only one child’s name on other assets is not an equally divided estate plan. Instead, as described in the article “Estate Planning: Fund the trust” from nwi.com, this arrangement is likely to lead to an estate battle.

One father did just that. He set up a trust with explicit instructions to divide everything equally among his heirs. However, only one brother was made a joint owner on his savings and checking accounts and the title of the family home.  Upon his death, ownership of the savings and checking accounts and the home would go directly to the brother. Assets in the trust, if there are any, will be divided equally between the children. That’s probably not what the father had in mind, but legally the other siblings will have no right to the non-trust assets.

This is an example of why creating a trust is only one part of an estate plan. If it is not funded, that is if assets are not retitled, it will not work.

Many estate plans include what is called a “pour-over will” usually executed just after the trust is executed. It is a safety net that “catches” any assets not funded into the trust and transfers them into it. However, this transfer requires probate, and since probate avoidance is a goal of having a trust, it is not the best solution.

The situation as described above is confusing. Why would one brother be a joint owner of assets, if the father means for all of the children to share equally in the inheritance? When the father passes, the brother will own the assets. If the matter went to court, the court would very likely decide that the father’s intention was for the brother to inherit them. Whatever language is in the trust will be immaterial.

If the father’s intention is for the siblings to share the estate equally, the changes need to be made while he is living. The brother’s name needs to come off the accounts and the title to the home and they all need to be re-titled in the name of the trust. The brother will need to sign off on removing his name. If he does not wish to do so, it’s going to be a legal challenge.

The family needs to address the situation as soon as possible with an experienced estate planning attorney. Even if the brother won’t sign off on changing the names of the assets, as long as the father is living there are options. Once he has passed, the family’s options will be limited. Estate battles can consume a fair amount of the estate’s value and destroy the family’s relationships. It would be wise to reach out to your estate planning attorney to review your estate plan. If you have not prepared estate planning documents, contact an experienced estate planning attorney to prepare them for you.

Reference: nwi.com (Jan. 17, 2021) “Estate Planning: Fund the trust”