Think Strategically when Creating Estate Plan

Think Strategically when Creating Estate Plan

Mindful estate planning can create tax and investment efficiencies and help ensure that your wishes are fulfilled, says a recent article titled “Estate planning basics: Tips for strategic preparation” from Atlanta Business Chronicle. Before creating a plan, it may be helpful to understand the components of a comprehensive plan, how assets can be transferred and how to get started.

Thoughtful estate planning starts with key documents. Your last will and testament provides details on wishes about property distribution and assets after death. The will creator names an executor, who oversees and manages the estate until its final distribution, including payment of any outstanding debts or taxes.

The will has no impact on insurance proceeds, retirement assets, or transfer-on-death investment accounts. A will can be amended during the creator’s lifetime and should be reviewed every three years or so to ensure that it still aligns with the testator’s wishes.

Trusts are legal entities allowing a third party—the trustee—to manage assets on behalf of beneficiaries. There are many different kinds of trusts, depending on the family’s needs. The grantor, who is the person creating the trust, can define how and when assets pass to beneficiaries. They can be revocable, meaning the grantor can amend the trust as long as they are living, or irrevocable, meaning the grantor cannot amend the trust after its creation.

A letter of intent can accompany a will and is published to the executor, trustees and beneficiaries. This provides detail from the decedent on their wishes but is not legally enforceable.

Power of Attorney is used when the person creating it is physically or mentally disabled due to illness or injury. It allows an agent to manage financial and legal affairs, can be temporary or permanent and is revoked upon the death of the principal.

Advance directives for health care provide detailed guidance to caretakers and medical professionals regarding wishes for healthcare when the person is unable to communicate their own wishes.

Transferring assets to beneficiaries occurs in several different ways, including designations, jointly held accounts and property, probate, or trusts. Beneficiary designations are typically used with life insurance policies, annuity contracts, retirement accounts and investment accounts.

Some assets are owned through Joint Tenancy With Rights Of Survivorship (JTWROS). They pass by title or registration to a surviving co-owner. This type of ownership is usually used with bank and investment accounts, real estate property, vehicles, or boats. The asset automatically transfers to the surviving owner. Be sure to avoid conflicting instructions in wills or trusts when assets are owned with JTWROS.

Probate is the method through which the estate is approved by the court and assets are distributed using the will as guidance. The court also authorizes the executor to manage the estate.

Assets held in trust are maintained by trustees who hold the assets on behalf of beneficiaries. They are passed on based on the trust agreement and don’t go through probate.

Once you have created an inventory of all assets and properties, meet with an experienced estate planning attorney to draft the documents needed to carry out the plan. The attorney will help refine goals and clarify key issues. Assets may need to be retitled and trusts may need to be funded. Executors, trustees and beneficiaries should be notified, so they understand their role in your estate plan.

Reference: Atlanta Business Chronicle (March 1, 2023) “Estate planning basics: Tips for strategic preparation”

Do Family Secrets Hurt Estate Planning?

Do Family Secrets Hurt Estate Planning?

A study by the financial services research firm reveals just how big a problem family secrets can be, as reported in Financial Advisor’s recent article “Family Wealth Transfers Undermined by Secrecy.” Most asset holders plan to share their wishes and intentions with family members before they die. However, the research reveals only about half actually do so.

The survey looked at two demographics: affluent investors with more than $250,000 in investable assets and near affluent, investors under age 45 with earnings more than $125,000. Responses were weighted to reflect the distribution of households within these segments, which are wealthier and older than the average U.S. population.

Estate planning attorneys understand the complexity of multi-generational families and are experienced with nuances in family dynamics and the hesitancy of families to share their financial details. After a lifetime of not discussing wealth, it can be difficult to know where to begin.

When asked how well informed heirs are about their parent’s desires and plans for bequests, only 26% said their heirs were very well informed. The greater the wealth, the more likely conversations had taken place. About a third of respondents with more than $1 million in investable assets said heirs knew of their plans.

Those with less than $250,000 to pass on were not sure if heirs knew their wishes or, worse, admitted their heirs had absolutely no idea.

Although skipping generations offers tax advantages, most heirs receive inheritances directly from a parent upon their death. Having an estate plan in order, including wills and trusts agreements, ensures an orderly transfer of wealth.

A key component of successful wealth transfer is communication. However, this survey found a full 25% of respondents never intend to share information about their assets while they are living. This prevents comprehensive planning from taking place, since a number of aspects of wealth planning require active planning and other people to be involved during the parent’s lifetime.

Planning for incapacity requires the involvement of siblings, spouses, and heirs. Advanced directives, power of attorney, health care power of attorney and related documents need to be shared with family members, so they can act on the parent’s behalf. Lacking these documents creates emotional and financial burdens on loved ones.

Because healthcare costs later in life can quickly erode assets, talk with your estate planning attorney about health care and Medicaid planning for long term care to help manage expenses and preserve as much wealth as possible.

Reference: Financial Advisor (Feb. 22, 2023) “Family Wealth Transfers Undermined by Secrecy”

Steps to Take for End-of-Life Planning

Steps to Take for End-of-Life Planning

Most people don’t consider anything about planning for incapacity or death to be joyful. However, if you consider estate planning documents as a way to share your wishes and make your departure easier for those you love, as well as a means to express your thoughts and feelings, it could make these tasks a little cheerier. A recent article from The Washington Post, “6 joyful steps for end-of-life planning,” could help reframe how you think of estate planning.

From a practical standpoint, death and incapacity are complicated for loved ones. They will appreciate your preparing an advance health directive, which should be created when a person is healthy, and not when they are in a hospital bed. The same goes for funeral arrangements, which are costly. There are so many choices and decisions to make—do your loved ones even know what you want? Leaving instructions and paying in advance will remove the burden for adult children trying to know what you wanted and dealing with the expense of paying for a funeral.

Digging through a loved one’s credit card bills, cellphone accounts, bank accounts and internet passwords is a big challenge in today’s digital world. It was far easier when there were stacks of paper for every account. Today’s executors need to have all of this information to avoid lost assets, avoid identity theft and prevent roadblocks to wrapping up your estate.

Here’s a checklist to help get your estate plan moving forward.

1 Create a crisis notebook. One binder with all estate planning documents will make it easier for loved ones. You should make additional copies but keep originals in one place—and tell your executor where the binder can be found. Create a worksheet of your many documents, so loved ones will know what they are looking for.

2 Have an advance directive created while you are having your estate plan made. This tells your loved ones what you want in case of incapacity and end-of-life decisions.

3 Have a will created with an experienced estate planning attorney. Without a will, the laws of your state determine how your property is distributed and who raises your minor children. Wills are state-specific, so a local estate planning attorney is your best resource. Be wary of online documents—if they are deemed invalid, it will be as if you didn’t have a will.

4 Make a digital estate plan. No doubt you have more than one email account, shopping accounts with more than a few retailers, credit cards, car leases or loans, home mortgage payments, social media, cloud storage, gaming accounts and more. Without a complete and comprehensive list of all accounts, your executor won’t know what needs to be closed, where your personal documents or photos live or how to retrieve them.

5 Plan your funeral. Yes, it is a little morbid, but do you want your loved ones to have to incur the cost and the emotional burden of planning, when you can do it for them? You’ll feel better knowing your wishes will be followed, whether it’s for a “green” funeral or a cremation, with a long period of mourning following your faith’s tradition or a short memorial service.

6 Write a letter of intent and any final farewells. This is an opportunity to share your thoughts with those you love, with healthcare providers and anyone else who matters to you, about healthcare decisions at end of life, or to convey your values, hopes and dreams for those you love.

When your wills, advance care directives, power of attorney, digital estate plan and funeral plans are all completed, you’ll be surprised at the sense of relief you feel.

Reference: The Washington Post (Jan. 5, 2023) “6 joyful steps for end-of-life planning”

How Does Guardianship Work?

How Does Guardianship Work?

For family members of the estimated 6.5 million dementia patients in the U.S., it is crucial to understand whether guardianship may be an option for their loved one. A recent article from Next Avenue titled “Thinking of Becoming a Guardian?” explains how the guardianship process works and what factors go into the decision-making process.

Guardianship is the position of being responsible for someone else. State courts usually appoint a guardian to make decisions for a person, if the court finds that person to be incapacitated or unable to make safe and reasonable decisions for themselves. People who are placed under guardianship, known as “wards,” often lose their independence in making financial, legal and health care decisions.

If full guardianship is awarded, the person cannot make decisions about whether they may vote, marry, where they live, or make their own end-of-life decisions.

Two tasks that are evaluated when considering guardianship are a person’s ability to manage personal finances and to take medications as prescribed.

The court may call on a geriatrician or psychiatrist to evaluate the person’s functional behavior, cognitive function, disabling conditions and ability to meet their essential needs.

There are benefits to guardianship for someone who is not able to care for themselves. It ideally creates a safety net for a person who cannot make informed decisions for themselves.

this, of course, assumes that the guardian is honest and accountable, which is not always the case. The inconsistencies plaguing the guardianship system include minimum standards for guardians, lack of regular independent reviews of the need for guardianship and lack of educational requirements for guardians.

Once guardianship is assigned, there is a tendency for the person to become lost when no follow-up is done. The very same person who lacks capacity to care for themselves is not going to be able to advocate for themselves, contact an attorney or access funds for court proceedings.

There is also a tendency to assign full guardianship for a person, rather than less restrictive alternatives.

There are alternatives, but they require planning and discussion. More than 40% of Americans have not discussed their wishes for end-of-life care with their loved ones, according to an article in the Journal of the American Geriatrics Society. Families should have a conversation at the first sign of memory loss or when preparing for retirement regarding wishes for end-of-life care and write them down as part of an Advanced Directive—also known as a Living Will and Health Care Power of Attorney—when preparing their estate plan.

Another important document, although not legally binding, is a “Value History,” where you share your values and beliefs as they may impact care choices.

Designate a Power of Attorney and list two or even three back-up candidates. This person will be responsible for financial, legal and personal matters, avoiding the need for guardianship.

Appointing a family member or friend as a guardian is the ideal solution. However, there are instances when the best person to be a guardian is not a family member, but a court-appointed outsider. This relieves the family of being the ones who need to inform a person suffering from dementia with the news of having to move into a nursing home facility or sifting through financial records to learn that the family home is in foreclosure. The family can focus on being supportive and loving, while the guardian deals with the sometimes harsh realities of the person’s life.

Speak with your estate planning attorney to learn about how guardianship works, and whether it may be the right move for your family.

Reference: Next Avenue (Dec. 23, 2022) “Thinking of Becoming a Guardian?”

How Can an Elder Law Attorney Help Me?

How Can an Elder Law Attorney Help Me?

Seasons’ recent article entitled “Finding an elder care lawyer” discusses ways in which an experienced elder law attorney can help you.

Social Security. Did you know that you’re statistically more likely to achieve a positive outcome when you get help from a lawyer when approaching the Social Security Administration?

Elder attorneys know the steps they can take to get the Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) your senior deserves. Both of these programs can provide your senior with considerable financial assistance as they age.

Medicare and Medicaid planning. An elder attorney can accurately assess your eligibility and determine if it’s worth applying for Medicaid. If your application is denied, your attorney can also help you to appeal this decision.

An experienced Medicare lawyer can also help you to understand the various options available to you, letting you move forward and pursue the best possible health care assistance for your elder loved one. You may be paying more than necessary in premiums or out-of-pocket expenses, and a lawyer can guide you toward more suitable choices.

Probate. You may need to engage an elder law lawyer after your senior loved one has died. They can guide the entire family through this difficult time, assisting executors and ensuring that beneficiaries receive their inheritances.

While the probate process can be avoided entirely if your senior works with a qualified estate planning attorney prior to their death, there are several estate planning tools that can make inheriting assets much easier, including trusts.

With help from an experienced estate planning attorney, your senior can identify the most effective types of legal documents for their needs. Estate planning attorneys can also help with wills, advance directives, powers of attorney and more.

Reference: Seasons (Aug. 30, 2022) “Finding an elder care lawyer”

Is a Living Will the Same as an Advance Directive?

Is a Living Will the Same as an Advance Directive?

A comprehensive estate plan contains far more than a last will and testament. It also contains a number of documents to communicate wishes for decisions to be made during life. These include a living will, an advance directive and a healthcare power of attorney, as explained in the article “What Is a Living Will and Do I Need One?” from healthline.

What is a living will? A living will is a document providing instructions for medical care, or in some circumstances, for the termination of medical support. They indicate wishes for the use or discontinuation of life-sustaining medical treatments. The living will is used if the individual becomes incapacitated and cannot communicate normally. Incapacitation is determined and certified by a medical professional. Living wills address such treatments as resuscitation, hydration, a feeding tube and pain management.

Each state has its own rules for creating a legally valid living will. The information required in most states is:

  • Legal name and any aliases or nicknames.
  • The current day, month and year.
  • A statement attesting to being of sound mind and body.
  • Healthcare instructions for events with no reasonable expectation for recovery or quality of life, which may include CPR, DNR (do not resuscitate) and do not intubate (DNI).
  • The name of your healthcare proxy, the person who you want to communicate and state your wishes and the name of an alternate healthcare proxy, if you have one.
  • Witness statements indicating you willingly and rationally signed this document (the number of witnesses varies by state).
  • Your legal signature.

An advance directive is not the same thing but can include a living will. The advance directive has two parts: the living will and the healthcare power of attorney. These documents don’t address finances, property distribution, guardianship of children or any non-medical matters. For those, you need a last will and testament.

The healthcare power of attorney is a document identifying the person named to make healthcare decisions for you. It’s sometimes called a durable medical power of attorney. The person you name to make decisions is called your healthcare proxy, healthcare agent, or healthcare surrogate. This document does not address end-of-life care, but instead grants legal permission to the person to make decisions for you.

The living will, advance directive and healthcare power of attorney work together to allow someone else to represent you during a medical crisis. These documents should be created by an experienced estate planning attorney and shared with the people you choose, so they may act on your behalf. Unfortunately, we never know when a medical crisis or accident will occur, so these documents are needed at any age and stage of life.

Reference: healthline (Sep. 1, 2022) “What Is a Living Will and Do I Need One?”

What Does a Living Will Do for Me?

What Does a Living Will Do for Me?

During a medical crisis, families frequently must make decisions quickly regarding whether to withhold or provide life-sustaining treatments. A living will is a part of advance care planning. It’s a legal document that provides specific instructions on how to carry out your wishes to receive or decline such treatments when you otherwise can’t communicate those wishes yourself, explains, Forbes’ recent article entitled “How Does A Living Will Work?”

Your estate plan may already include a durable power of attorney for health care, which is a legal document that lets your designated agent or proxy make medical decisions for you if you become incapacitated. However, unlike that document, the instructions in a living will can be used only when the person named in the living will has no hope of recovery or cure.

A living will provides limited authority to an agent on behalf of the principal who’s no longer able to communicate their preferences to withhold or withdraw artificial means of life support or life-sustaining treatments. A living will should have your wishes noted for receiving or going without treatment when your condition isn’t expected to improve and treatment would extend your life for only a limited time.

A living will is designed to apply only in very limited situations when the principal who signed the document has an incurable or irreversible medical condition or conditions that will most likely result in the principal’s death within a short period of time—typically six months or fewer.

Life-sustaining treatments addressed in a living will may include:

  • Ventilators
  • Heart-lung machines
  • Nutrition via a feeding tube
  • Hydration via feeding tube or IV
  • Cardio-pulmonary resuscitation (CPR) or other extraordinary measures; and
  • Dialysis.

Living wills can also address issues, like pain management and palliative care. You may even include provisions such as “I would prefer to die at home” in a living will.

Provide as much information as you can to make certain that your proxy isn’t making the decision for you, but rather your wishes and words are moving through your proxy. The more information you can provide in your living will to your proxy to illustrate for them the type of care that you’d want to receive or decline, the better.

Reference: Forbes (Aug. 18, 2022) “How Does A Living Will Work?”

How Can I Choose an Estate Planning Lawyer?

How Can I Choose an Estate Planning Lawyer?

Only about a third of Americans have an estate plan, according to the article “Choosing an estate planning lawyer” from Senior Matters. The number of people with wills is decreasing, rather than increasing, despite the events of recent years. Estate planning is worth doing, for the peace of mind, the personal and financial protection it provides, not to mention leaving a legacy of caring about the future for the next generation.

Estate planning involves making end-of-life decisions, with an emphasis on both finances and health. Most people think of it as “who gets what,” which is accomplished largely through wills and trusts. For people who have amassed significant assets, this can be complex. An estate planning attorney makes it streamlined and will explain the implications of all aspects of the plan.

Estate planning includes gifting, generation skipping transfers, taxes, advance directives, power of attorney, health care proxies, living wills, naming an executor, organ donations, burial preferences, Do Not Resuscitate (DNR) orders and final wishes.

It is a highly personal process. This is why it’s important to find an attorney who is compassionate, as well as technically proficient. Estate planning attorneys tend to be caring individuals who chose this field of law because they sincerely wish to help others. They also know what happens when the planning is not done, because they also help children when their parents fail to do so.

Some people are reluctant to embark on estate planning, in part because they don’t wish to be reminded of their own mortality. Others are concerned about relatives with designs on their estate. However, not having a plan makes it more likely that relatives or others could challenge the estate and end up owning assets and provides protection.

When a person dies without an estate plan and assets subject to probate, their estate is considered to be “intestate.” Only the court will have any control over how the probate assets are distributed. The probate court will simply follow the laws of your state, which frequently are based on kinship. The exact details vary from state to state, and this is known as “intestate succession.”

The intestate laws may result in outcomes completely different than what you wished. An estranged spouse could end up owning everything, or a child with substance issues could inherit a substantial sum which will be gone in months. In most states, minor children may not receive inheritances, so trusts or custodial accounts are needed.

Estate planning is just as important for people of modest means as it is for wealthy people. If a senior owns their own home, the increase in property values could mean their estate is much bigger than they even realize.

Choosing an Attorney isn’t difficult. Ask friends and family for referrals, visit websites and find an estate planning attorney who shares your values, understands your family and feels like a good fit. Once your estate plan is in place, you’ll gain peace of mind.

Reference: Senior Matters (Aug. 17, 2022) “Choosing an estate planning lawyer”

Senior Second Marriages and Estate Planning

Senior Second Marriages and Estate Planning

For seniors enjoying the romance and vitality of an unexpected late-in-life engagement, congratulations! Love is a wonderful thing, at any age. However, anyone remarrying for the second, or even third time, needs to address their estate planning as well as financial plans for the future. Pre-wedding planning can make a huge difference later in life, advises a recent article from Seniors Matter titled “Your senior parent is getting remarried—just don’t ignore key areas.”

A careful review of your will, powers of attorney, healthcare proxy, living will and any other advance directives should be made. If you have new dependents, your estate planning attorney will help you figure out how your children from a prior marriage can be protected, while caring for new members of the family. Failing to adjust your estate plan could easily result in disinheriting your own offspring.

Deciding how to address finances is best done before you say, “I do.” If one partner has more assets than the other, or if one has more debts, there will be many issues to resolve. Will the partner with more assets want to help resolve the debts, or should the debts be cleared up before the wedding? How will bills be paid? If both partners own homes, where will the newlyweds live?

Do you need a prenuptial agreement? This document is especially important when there are significant assets owned by one or both partners. One function of a prenup is to prevent one partner from challenging the other person’s will and trusts. There are a number of trusts designed to protect loved ones including the new spouse, among them the Qualified Terminable Interest Property Trust, known as a QTIP. This trust provides support for the new spouse. When the spouse dies, the entire trust is transferred to the persons named in the trust, usually children from a first marriage.

Most estate planning attorneys recommend two separate wills for people who wed later in life. This makes distribution of assets easier. Don’t neglect updating Powers of Attorney and any health care documents.

Before walking down the aisle, make an inventory, if you don’t already have one, of all accounts with designated beneficiaries. This should include life insurance policies, pensions, IRAs, 401(k)s, investment accounts and any other property with a beneficiary designation. Make sure that the accounts reflect your current circumstances.

Sooner or later, one or both spouses may need long-term care. Do either of you have long-term care insurance? If one of you needed to go into a nursing home or have skilled care at home, how would you pay for it? An estate planning attorney can help you create a plan for the future, which is necessary regardless of how healthy you may be right now.

Once you are married, Social Security needs to be updated with your new marital status and any name change. If a parent marries after full retirement age and their new spouse’s benefit is higher than their own, they may be able to increase their benefits to 50% of the new spouse’s benefits. If they were receiving divorced spousal benefits, those will end. The same goes for survivor benefits, if the person marries before age 60. If they’re disabled, they may still receive those benefits after age 60.

Setting up an appointment with an estate planning attorney a few months before a senior wedding is a good idea for all concerned. It provides an opportunity to review important legal and financial matters, while giving both spouses time to focus on the “business” side of love.

Reference: Seniors Matter (April 29, 2022) “Your senior parent is getting remarried—just don’t ignore key areas”

The Most Common Estate Planning Mistakes

The Most Common Estate Planning Mistakes

Estate administration is the process of managing the estate when a loved one has passed. For the inexperienced executor, there are pitfalls to be avoided, warns the article “Top 5 Probate and Estate Administration Mistakes” from Long Island Press.

The biggest mistake is creating an estate plan from generic documents on the internet. Wills must meet many technical legal requirements to be valid. All wills are admitted to probate and the court scrutinizes wills carefully to be certain the wishes of the person who died (the testator) have been followed. A will created without the guidance of a skilled estate planning attorney is more likely to be found invalid and more easily challenged.

Neglecting to deal with Medicaid liens before distributing an inheritance can create huge financial problems for family members. Medicaid is required by law to attempt to clawback assets to recover the cost of care. Some states are more aggressive than others. Medicaid may attach a lien to any real estate owned by the Medicaid recipient and collect it at the time of their death.

The value of asset protection planning, including the use of a Medicaid Asset Protection Trust (MAPT), in a timely manner, cannot be understated.

Leaving heirs and beneficiaries in the dark about the estate plan and distribution wishes often creates a sense of something bad being planned. Surprise revelations about the estate are only good in movies. In real life, this can lead to litigation and family fights. Litigation can take the form of a will contest, a trust contest, a contested accounting, or an action to remove the executor.

Talk with the family about your plans, so there is less tension created over the future of your estate.

Taxes can undermine your wishes, if your estate plan does not include tax planning. There are numerous methods used to minimize tax liabilities. However, they must be put into place in advance.

The executor has to file a final income tax return on behalf of the decedent for the year of death and also file an estate tax return. The executor is also responsible to obtain an estate tax identification number (EIN) from the IRS and open an estate bank account used to pay taxes and debts.

Will your executor, spouse or heirs be able to locate your critical information? If your legal, financial and online information is not organized, your executor may spend a long time digging through old paperwork, most of which is likely to be out of date and irrelevant. Spare your executor the time and emotional impact of wasted hours reviewing old records. No one needs your checking accounts from the 1970s!

Information on everything from assets, tax returns, funeral and burial arrangements, life insurance policies, Social Security and Medicaid or Medicare cards, deed for home and title for your cars, should all be organized to help your family find the information they need.

While you are alive, your family will need access to documents like your Power of Attorney, Health Care Power of Attorney, and Advance Health Care Directives.

By planning and making an effort in advance to manage your affairs, you enhance your legacy. Leaving a mess behind will be remembered, perhaps more so than organized documents.

Reference: Long Island Press (May 4, 2022) “Top 5 Probate and Estate Administration Mistakes”