Estate Planning Blog

If you haven’t dealt with losing a loved one, the days and weeks after a death can be overwhelming. Pain and grief are paired with important tasks that must be done, or unnecessary stress will result, explains a recent article, “11 Financial Steps to Follow After the Loss of a Loved One,” from U.S. News & World Report.

An official declaration of death. If the death occurs in a hospital, the hospital will issue it. If the death occurred at home, a medical professional or first responder would make the declaration.

Obtain a death certificate. This usually comes from the funeral home. You’ll want to get five to ten original certificates, which will be used for various legal and financial matters.

Gather financial documents. This includes estate planning documents, a will, a trust, bank and investment account information, utilities and bills, insurance policies and tax returns.

Reach out to advisors. This includes the estate planning attorney, financial advisor, CPA and other professionals working with the deceased. They will be able to offer guidance as you go through the process of managing the estate.

Contact any government agencies. If your loved one was receiving benefits from Social Security, the Veterans Administration, Medicare, Medicaid, or any other government agency, you must notify them of the death. The funeral home may have already sent the SSA a notification. You may still want to confirm if it has been sent, as the ultimate responsibility for notification is the surviving spouse or adult child.

Contact financial institutions. The financial institutions, including commercial banks, brokerage accounts and insurance companies, will all need to receive an original death certificate. If there is a POD (Payment on Death) order, the balance on accounts will be transferred to the designated beneficiary. If there are life insurance policies, you’ll need to find the policy and identify the designated beneficiary.

Avoid identity theft. Contact credit agencies, including Experian, Equifax and TransUnion, to notify them of the death. You may need to contact one for the others to become aware. You should also close the social media accounts of the deceased. Depending on the platform, you may only be able to memorialize the account instead of deleting it.

Other important institutions to contact. The post office will need to be notified, although you may first want to have the person’s mail sent to your home directly. The motor vehicle department needs a notification of death to stop renewing licenses. Unions and professional, service, or fraternal organizations should be notified. There may be survivor’s benefits.

Voter registration. You’ll want to notify the deceased’s voter registration agency, so they can remove their name from voting rolls.

Prepare the final tax return. There are two tax returns to be aware of—the final income tax returns and the estate tax returns. Your estate planning attorney will know the deadlines for both.

Filing the will with the probate court. Once the will goes through probate and is approved by the court, the executor will be able to distribute the deceased’s assets in accordance with the will. If there is no will, the distribution will be overseen by the court and follow the state’s intestacy laws.

Settle any remaining debts. In most cases, the remaining liability on a mortgage or car loan will be payable by the person inheriting them. All other forms of debt, like student loans, credit cards and medical loans, will be charged against the decedent’s estate.

Carrying out these tasks during a difficult time is not easy. An experienced estate planning attorney can help make the process easier for all concerned.

Reference: U.S. News & World Report (Sep. 1, 2023) “11 Financial Steps to Follow After the Loss of a Loved One”

If you’ve been married or in a longstanding relationship, it’s almost certain your initial beneficiary will be your spouse or partner. If you have children, it’s likely an easy decision to make them contingent or successor beneficiaries to your estate. More often than not, children inherit equally, explains the article “PLANNING AHEAD: The problems we have naming contingent beneficiaries” from The Mercury.

To avoid conflict, parents often decide to name children equally, even if they’d prefer a greater share to go to one child over another, usually because of a greater need. This is, of course, a matter of individual preference.

However, as you move down the line in naming a successor or contingent beneficiaries, you may encounter some unexpected stumbling blocks.

If there is a beneficiary who is disabled, whether a child, grandchild or more distant relative, or even a spouse, you have to determine if naming them is a good idea. If the disabled individual is receiving Medicaid or other government assistance, an inheritance could cause this person to become ineligible for local, state, or federal government benefits. An estate planning attorney with knowledge of special needs planning will help you understand how to help your loved one without risking their benefits.

A Supplemental Needs Trust may be in order, or a Special Needs Trust. If the person’s only benefit is Social Security Disability—different from Supplemental Security Income or some others—they may be free to inherit without a trust and will not impact benefits. Social Security Disability recipients cannot work in “substantial gainful employment.”

Another issue in naming successor and contingent beneficiaries is the choice of a trustee or manager to handle funds if a beneficiary cannot receive benefits directly. A grandparent will sometimes be reluctant to name a son-in-law or a daughter-in-law as trustees for minors if their daughter or son predeceases and the inheritance is intended for a minor or disabled grandchildren. The grandparents may be concerned about how the funds will be used or how well or poorly the person has handled financial matters in the past.

The same concern may be at issue for a child. A trust can be structured with specific parameters for a grandchild regarding the use of funds. If a supplemental needs trust is established, the trustee must understand clearly what they can and cannot do.

What happens if you’ve run out of beneficiaries? For those with small families or who live into their 90s, many family members and friends have passed before them. These seniors may be more vulnerable to scams or new “friends” whose genuine interest is in their assets. In these cases, an estate plan prepared by an experienced estate planning attorney will need to consider this when mapping out the distribution of their estate, however large or small, to follow their wishes.

Reference: The Mercury (Aug. 28, 2023) “PLANNING AHEAD: The problems we have naming contingent beneficiaries”

Unmarried couples must engage in estate planning because, without proper planning, their partner may be left with nothing when the first partner dies. Details of protecting partners are explained in a recent article, “BUSINESS: Unmarried Couples and Estate Planning,” from The Item.

For married couples, the spouse is usually the first to inherit, followed by children, parents, siblings, and other relatives, depending on who is still living. However, if you’re unmarried and no plans have been made, your partner receives nothing. In fact, in many states, the law doesn’t recognize unmarried couples at all.

Life insurance policies and retirement accounts could go to your estate if no designated beneficiary is named. This could lead to probate, a complicated and costly legal process where the court decides how assets should be distributed.

To avoid these and many other problems, having an estate plan to take care of your partner is best. This includes making a Will, naming beneficiaries for life insurance and retirement accounts and clearly stating your intentions in legally enforceable documents. This protects your partner’s rights and ensures your assets are distributed according to your wishes.

Married partners have the advantage of gifts, as they can give each other unlimited amounts of money or property without worrying about gift tax. However, there are limits to how much unmarried partners may give without facing gift tax exclusions, also known as the annual exclusion.

If you gift your partner more than the annual exclusion amount in a year, you must file a federal gift tax return and report the excess amount. The rules for federal estate tax are quite similar to the gift tax rules.

When married people die, they may leave an unlimited amount of money and property to each other without worrying about federal estate tax. However, any money or property left to an unmarried partner will count towards your lifetime exclusion amount.

Once this exclusion amount is exceeded, an estate tax will be due when the giver passes away. In 2023, the lifetime gift and estate tax exemption is $12.92 million, and the annual exclusion is $17,000. This amount will change over time because of inflation.

There are also personal matters to think about. You’ll want to designate someone to handle financial and legal transactions and make medical decisions on your behalf if you cannot do so. If you don’t choose a trusted person for these roles and have the appropriate documents created, your partner may not be included in these decisions. If you don’t have a good relationship with your family, this could create a situation where your partner is shunted aside.

What can you do? Meet with an experienced estate planning attorney and create a Will to protect your wishes after you pass. Have a Power of Attorney and Medical Power of Attorney created, so your partner can make decisions on your behalf if you become incapacitated. Doublecheck your beneficiary designations to be sure the person who will receive proceeds from your life insurance and retirement accounts is the person you want. If you own a home together, talk with your estate planning attorney to plan for what will happen if one of you needs long-term care or predeceases the other.

Reference: The Item (Aug. 26, 2023) “BUSINESS: Unmarried Couples and Estate Planning”

According to ITR Economics, out of the 77 million Baby Boomers in the U.S., an estimated 12 million are privately held business owners.

As ownership of businesses for those born between 1946-1964 is transferred to the next generation, an estimated $10 trillion worth of business assets is expected to be transferred in the coming years.

AZ Big Media’s recent article, “Passing the torch: Considerations for a successful generational business transfer,” explains the best way to have a successful business transfer.

Develop a Strategic Plan.  A successful generational business transfer takes time and planning. You should begin the planning process way in advance of the change in leadership. This can give a family time to define what the future of the company looks like. Determine what technology, human resources, and capital requirements the company needs to be successful in the short and long term. Ensure that the current and future owner’s visions are communicated. If both visions aren’t in alignment, discuss what the future for the business may look like. Balancing long-standing business practices with new changes can mean a sustainable and successful business. Begin integrating the future leader into day-to-day business operations before transitioning. Establishing a clear transfer of duties and mapping out a timeline can help with a smooth transfer process.

Get Finances in Order. Preparing business finances in advance of a generational transfer is critical. The current business owner may consider setting up a grantor-retained annuity trust for their successor. An experienced estate planning attorney can help to create this trust, which earns annual income for the beneficiary receiving the funds with minimal or no gift tax liability upon expiration. Family members may also consider transferring their business to the successor through an installment sale, which is a sale of property where at least one payment is received after the tax year in which the sale occurs. Note that an installment sale could mean a tax benefit for the seller because the overall tax liability is spread out over time rather than all at once during the business transfer. Once you decide on the preferred financial path to conduct the transfer, look at the company’s cash flow and other financial projections. List the projected expenses, liabilities and potential taxes owed, and then identify sources of liquidity to pay them.

Work With Financial Partners. If not already in place, look to assemble a team of trusted advisors, including a CPA, attorney, banker, and wealth advisor. This team can work through the financial aspects of any generational business transfer.

Transferring a business is a major family event involving potentially tough conversations and decisions. This can be a complex process. However, with proper planning, it also has the potential to be an opportunity to achieve new growth and elevate long-standing family business goals.

Reference: AZ Big Media (June 8, 2023) “Passing the torch: Considerations for a successful generational business transfer”

Your last will and testament is the document used to spell out exactly how you want your assets distributed after your death. Keeping it up to date and aligned with your state’s laws can prevent estate battles among family members. A recent article from The Motley Fool, “Where There’s A Will, There’s a Way. How You Can Avoid Conflict When Divvying Up Your Estate,” provides the details.

The article advises hiring an experienced estate planning attorney to create an up-to-date and legally valid will. You’ll want someone familiar with your state’s legal nuances and who knows how the local probate courts work.

Your will is also used to name the executor of your estate, who will administer your wishes. If you have minor children, the will is used to designate a guardian for your children.

Communication with your loved ones about your intentions will give them time to process your wishes and could reduce the risk of any will contests. Share your plans with immediate family members and key beneficiaries. The same goes for any changes to the estate plan during your lifetime.

Transparency includes ensuring everyone knows who has possession of the signed, legal, and final version of this vital estate planning document. Your executor or estate planning attorney may possess the will, but others should know where it is being kept.

Typically, a will must be filed with the county probate court within ten to thirty days of death.

Your estate plan also includes beneficiary designations on any bank accounts, investment accounts, and insurance policies. They could be mentioned in your will, but the beneficiary designation directs who receives these assets.

Assets with beneficiary designations don’t go through probate; instead, they go directly to the beneficiary. Review them annually and update them after any significant life events like birth, marriage, divorce, etc.

Estate planning is a highly personal and ongoing process. It is essential to seek guidance from experienced estate planning attorneys to ensure your estate plan reflects your wishes and confirms your state’s law concerning inheritance. Leave a legacy of love, not conflict.

Reference: The Motley Fool (Aug. 6, 2023) “Where There’s A Will, There’s a Way. How You Can Avoid Conflict When Divvying Up Your Estate”

Have the conversation about dementia, says The Tribune-Democrat’s recent article entitled, “Dealing with dementia | Planning ahead: ‘Have the conversation.’” Next, get the legal documents and define the future care. Note that the documents’ provisions are ineffective, until the person cannot make their own decisions.

Having the documents in place can help prevent the person from being placed in guardianship by the court. If they have no advance healthcare directives, the family or caregivers must apply to the court for guardianship if incapacity can be proven. When granted, the court appoints a decision-maker, taking away the individual’s ability to make decisions – either in whole or in part. This court oversight continues throughout the individual’s life.

Advanced directives, like a living will, health care power of attorney and financial power of attorney, allow those facing dementia to make their own decisions while they still have the capacity. Family members and potential caregivers should encourage their loved ones to act and get these important documents in place.

An advanced health care directive can include both a living will, which makes known what end-of-life care the individual wants, and a health care power of attorney, which assigns an agent to carry out the individual’s wishes when making health care decisions. The document states goals and values on which to base the decisions. It doesn’t take away the individual’s rights to make those decisions and can cover a broad range of medical decisions, or it can be narrow and limit the types of decisions.

The documents can be revoked anytime but don’t expire until the individual dies. The agents also don’t become personally responsible for the individuals’ debts. Careful consideration should be used in choosing the agent, which can be a family member or other trusted person. The agent should be capable and have a good relationship with the person.

A financial power of attorney is similar. It names an agent and doesn’t take away the individual’s decision-making ability. It ends with death and can be revised anytime. It can include handling money, checks, deposits, property sales and pursuing legal action. However, changing beneficiaries of insurance or making gifts requires specific instructions.

The agent selected should be a person who understands the individual’s feelings and point-of-view and is trusted to respect the individual’s wishes. They should be adept at handling their finances, as financial management becomes very important regarding where you will stay.

Reference: The Tribune-Democrat (July 29, 2023) “Dealing with dementia | Planning ahead: ‘Have the conversation’”

Family feuds are more likely over Aunt Josephine’s jewelry than the family home. Putting sticky notes on personal items before you die or expecting heirs to figure things out after you’ve passed often leads to ugly and expensive disputes, says a recent article from The Wall Street Journal, “Pass On Your Heirlooms, Not Family Drama.”

Boomers handling parents’ estates and assessing their personal property are having more conversations around inheritance and heirlooms. However, there are better ways to plan and distribute property to avoid family fights over cars, jewelry, furniture and household items.

The person you name to handle your estate, the executor, typically distributes personal property. Therefore, pick that person with care and clarify how much power they will have. An example of this comes from a police officer in Illinois who has been settling his father’s estate for nearly two years. His father owned more than twelve vehicles, a water-well drill rig and two semitrailers of car parts and guns dating back to the Civil War. He also listed 19 heirs, including stepchildren and friends. He told his son he knew he could handle everyone and the stress of people who “aren’t going to be happy.”

If you want a particular item to go to a specific person, make it clear in your will or trust. Describe the item in great detail and include the name of the person who should get it. A sticky note is easily removed, and just telling someone verbally that you want them to have something isn’t legally binding.

Without clear directions, one family with five siblings used a deck of cards and played high card wins for items more than one sibling wanted. Only some families have the temperament for this method.

In one estate, two sisters wanted the same ring. However, there were no directions from their late parents. An estate settlement officer at their bank had a creative solution: a duplicate ring was made, mixed up with materials from the original ring, and each daughter got one ring.

Ask your estate planning attorney how to address personal heirlooms best. In some states, you can draft a memo listing what you want to give and to whom. It is legally binding, if the memo is incorporated into a will or trust. If not, the personal representative can consider your wishes. Make sure to sign and date any documents you create.

Get heirlooms appraised to decide how to divide items equitably, which to sell and what to donate. If heirs don’t want personal property, they can donate it and use the appraisal to substantiate a tax deduction. Appraisals will also be needed for estate tax and capital gains tax purposes.

Reference: The Wall Street Journal (July 30, 2023) “Pass On Your Heirlooms, Not Family Drama”

The estate planning process typically includes making a list of your assets and debts, determining the beneficiaries of your property, and establishing a power of attorney (a person who can act on your behalf to handle your finances, healthcare, or other needs, if you become incapacitated).

The Milwaukee Journal-Sentinel’s recent article, “Five tips for having a conversation with your loved one about estate planning,” gives us some ideas to make the conversation easier.

1. Learn the laws. Know your state’s probate laws when you talk to family members about estate planning. Some states’ laws say that if a family member dies intestate (without a will), their assets — if they have any — go directly to their children. However, this can present issues if there are no children or multiple children and no one, such as a trustee or executor, to carry out the dead loved one’s wishes.
2. Start early. The earlier these discussions happen, the better. In many cases, people wait until they’re already sick and having problems before they even begin to think about estate planning. Involve loved ones early, so they feel invested in seeing it through and that planning will help ensure that their death does not burden the ones they love.
3. Keep discussions empathetic and brief. Family visits or holiday gatherings are good times to discuss estate planning. It’s important to remind relatives that planning protects their wishes. Ask open-ended questions, such as, “Let’s talk about your legacy or how you would like to give back to your family or your community.”
4. Remind your loved one they’re in control — and estate planning helps them stay that way. Leaving your loved one out of the planning process can result in their wishes being misinterpreted or not represented.

Note that the person creating the will should consult an experienced estate planning attorney.

Reference: Milwaukee Journal-Sentinel (April 25, 2023) “Five tips for having a conversation with your loved one about estate planning”