How Do I Avoid Probate?

Probate can tie up the estate for months and be an added expense. Some states have a streamlined process for less valuable estates, but probate still has delays, extra expense and work for the estate administrator. A probated estate is also a public record anyone can review.

Forbes’ recent article entitled “7 Ways To Avoid Probate Without A Living Trust” says that avoiding probate often is a big estate planning goal. You can structure the estate so that all or most of it passes to your loved ones without this process.

A living trust is the most well-known way to avoid probate. However, retirement accounts, such as IRAs and 401(k)s, avoid probate. The beneficiary designation on file with the account administrator or trustee determines who inherits them. Likewise, life insurance benefits and annuities are distributed to the beneficiaries named in the contract.

Joint accounts and joint title are ways to avoid probate. Married couples can own real estate or financial accounts through joint tenancy with right of survivorship. The surviving spouse automatically takes full title after the other spouse passes away. Non-spouses also can establish joint title, like when a senior creates a joint account with an adult child at a financial institution. The child will automatically inherit the account when the parent passes away without probate. If the parent cannot manage his or her affairs at some point, the child can manage the finances without the need for a power of attorney.

Note that all joint owners have equal rights to the property. A joint owner can take withdrawals without the consent of the other. Once joint title is established you cannot sell, give or dispose of the property without the consent of the other joint owner.

A transfer on death provision (TOD) is another vehicle to avoid probate. You might come across the traditional term Totten trust, which is another name for a TOD or POD account (but there is no trust involved). After the original owner passes away, the TOD account is transferred to the beneficiary or changed to his or her name, once the financial institution gets the death certificate.

You can name multiple beneficiaries and specify the percentage of the account each will inherit. However, beneficiaries under a TOD have no rights in or access to the account while the owner is alive.

Reference: Forbes (March 28, 2022) “7 Ways To Avoid Probate Without A Living Trust”

Is Estate Planning Affected by Property in Two States?

Cleveland Jewish News’ recent article titled “Use attorney when considering multi-state estate plan says that if a person owns real estate or other tangible property (like a boat) in another state, they should think about creating a trust that can hold all their real estate. You don’t need one for each state. You can assign or deed their property to the trust, no matter where the property is located.

Some inherited assets require taxes be paid by the inheritors. Those taxes are determined by the laws of the state in which the asset is located.

A big mistake that people frequently make is not creating a trust. When a person fails to do this, their assets will go to probate. Some other common errors include improperly titling the property in their trust or failing to fund the trust. When those things occur, ancillary probate is required.  This means a probate estate needs to be opened in the other state. As a result, there may be two probate estates going on in two different states, which can mean twice the work and expense, as well as twice the stress.

Having two estates going through probate simultaneously in two different states can delay the time it takes to close the probate estate.

There are some other options besides using a trust to avoid filing an ancillary estate. Most states let an estate holder file a “transfer on death affidavit,” also known as a “transfer on death deed” or “beneficiary deed” when the asset is real estate. This permits property to go directly to a beneficiary without needing to go through probate.

A real estate owner may also avoid probate by appointing a co-owner with survivorship rights on the deed. Do not attempt this without consulting an attorney.

If you have real estate, like a second home, in another state (and) you die owning that individually, you’re going to have to probate that in the state where it’s located. It is usually best to avoid probate in multiple jurisdictions, and also to avoid probate altogether.

A co-owner with survivorship is an option for avoiding probate. If there’s no surviving spouse, or after the first one dies, you could transfer the estate to their revocable trust.

Each state has different requirements. If you’re going to move to another state or have property in another state, you should consult with a local estate planning attorney.

Reference: Cleveland Jewish News (March 21, 2022) “Use attorney when considering multi-state estate plan”

Why Shouldn’t I Wait to Draft my Will?

There are countless reasons why people 50 and over fail to write a will, update a previous one, or make other estate planning decisions. Market Watch’s recent article entitled “We beat up 6 of your excuses for not writing a will (or updating an old one)” takes a closer look at those six reasons, and how to help overcome them.

Excuse No. 1: You have plenty of time. Sure, you know you need to do it. However, it’s an easy thing to move down on your priority list. We all believe we have time and that we’ll live to be 100. However, that’s not always the case. Set up an appointment with an experienced estate planning lawyer ASAP because what gets scheduled gets done.

Excuse No. 2: You don’t have a lot of money. Some think they have to have a certain amount of assets before estate planning matters. That isn’t true. Drafting these documents is much more than assigning your assets to your heirs: it also includes end-of-life decisions and deciding who would step in, if you were unable to make financial decisions yourself. It’s also wise to have up-to-date documents like a power of attorney and a living will in case you can’t make decisions for yourself.

Excuse No. 3: You don’t want to think about your death. This is a job that does require some time and energy. However, think about what could happen without an up-to-date estate plan. Older people have seen it personally, having had friends pass without a will and seeing the children fighting over their inheritance.

Excuse No. 4: It takes too much time. There’s a misconception about how time-consuming writing a will is. However, it really can be a fairly quick process. It can take as little as 2½ hours. First, plan on an hour to meet with the lawyer; an hour to review the draft; and a half-hour to sign and execute your documents. That is not a hard-and-fast time requirement. However, it is a fair estimate.

Excuse No. 5: You’d rather avoid making difficult decisions. People get concerned about how to divide their estate and aren’t sure to whom they should leave it. While making some decisions in your estate plan may seem final, you can always review your choices another time.

Excuse No. 6: You don’t want to pay an attorney. See this as investment in your loved ones’ futures. Working with an experienced estate planning attorney helps you uncover and address the issues you don’t even know you have. Maybe you don’t want your children to fight. However, there can be other issues. After all, you didn’t go to law school to learn the details of estate planning.

Reference: Market Watch (March 12, 2022) “We beat up 6 of your excuses for not writing a will (or updating an old one)”

What are Biggest Estate Planning Mistakes?

The Huffington Post’s recent article entitled “The Biggest Mistakes People Make In Their Wills, According To Estate Lawyers” explains that your last will and testament is one of the most important legal documents you’ll ever have. A will lets you state where you want your property, minor children and debts to go after you die. It also allows you to appoint an executor to carry out your wishes. The lack of a will is a common tragic mistake. Just about everyone over the age of 18 needs some estate planning. The following are some of the major estate planning mistakes:

  1. Assigning co-executors. You should name only one executor, with alternate executors. Many testators want to make all their children responsible for administering the estate. However, that’s a really bad idea. If you have two executors, and they don’t agree, who gets the final say? However, if you’re set on naming more than one, make it an odd number so it’s majority-rule.
  2. Thinking a will is all you need to avoid probate. Probate is the legal process of administering a person’s estate whether they die with a will or without one (i.e., “intestate”). Although a valid will can say where assets are allocated, it will likely not avoid the probate process if there are assets titled solely in your name. If you have a will in place, but a bank account doesn’t have a beneficiary designation, the assets likely have to go through the probate process before being distributed according to the terms of your will.
  3. Being too vague about items with sentimental value. When people pass away, relationships change. Money can change people. Children who got along so well when you were alive may not get along as well when you’re gone and not there to mediate between them. If you’re too general, a term may be based on interpretation. If people interpret it differently, there’s a problem. If you know that someone wants a specific item, write it down.
  4. Failing to update your will to reflect life changes. The biggest mistake people make when it comes to doing wills or estate plans is their failure to update those documents. There are a number of life events that require the documents to be updated, such as marriage, divorce and births of children. It is recommended that your estate plan be revisited every few years.
  5. Failing to hire an experienced estate planning attorney. It’s important to get your estate planning documents correct. This is because when the documents are executed, the difference between a good set of documents and those drafted by a non-attorney (or one who doesn’t practice in this area of law) can mean considerably more time, money and stress.

Reference: Huffington Post (March 8, 2022) “The Biggest Mistakes People Make in Their Wills, According to Estate Lawyers”

What are My Responsibilities if I’m Named an Executor?

An executor is the person who helps finalize the finances and assets for a deceased person. As executor of an estate, you will need to get copies of the death certificate, notify authorities, such as Social Security, to stop benefits and may be involved in arranging the funeral.

You will also need to follow the instructions in the will to administer the estate.

You will organize the assets, pay off any debts, close accounts like utilities and cable or phone plans and distribute money and possessions to beneficiaries.

US News’ recent article entitled “How to Prepare to Be an Executor of an Estate” takes a look at the responsibilities.

If you are asked and accept the position, start by finding the important documents, like the will. As executor, you are acting in a fiduciary capacity, and your efforts are directed toward the interests of the beneficiaries of the decedent’s the estate.

The time required to be an executor can be extensive. If you are asked to be the executor before the person passes away, ask to locate the original will. Read it and make certain that you understand it.

There are also requirements that must be met to be an executor of an estate. Anyone convicted of a felony is not allowed to be an executor, even if they are named in the decedent’s will. The exact rules vary, depending on the state, so ask an estate planning attorney.

After the death, it typically takes at least six months or more to carry out all the administrative work related to the estate. Therefore, if you do not have the time, do not agree to serve as executor.

Finally, executors may be compensated for their work. Some states have commission schedules listed in their statutes that the executor can collect, while other states require that you keep track of your time and the judge will authorize “reasonable” compensation for your actual efforts.

Ask for help if tasks seem overwhelming or you do not understand certain instructions on accounts or the will. An experienced estate planning attorney can assist.

Reference: US News (Dec. 22, 2021) “How to Prepare to Be an Executor of an Estate”

How Do I Talk to My Parents About Estate Planning?

Failing to draft an estate plan can mean a pair of obstacles after a parent’s death. First, it can leave you scrambling to unravel their financial picture while trying to grieve. Second, it can be expensive.

MarketWatch’s recent article entitled “It’s easy to put it off, but here’s why you should talk to your parents about estate planning, and how to start the conversation” says that a wise way to avoid both scenarios is to begin talking with your parents about estate planning. While this can sound like a job just for the uber-rich, it is really an essential process that ensures clear directives exist for all sorts of situations that accompany the end of life.

An estate plan is a chance to set mindful intentions about life’s inevitabilities.  It is, therefore, a great idea to ask your parents to take account of their assets and belongings. This is not just about the numbers and paperwork—it is a chance to gauge preparedness.

Start by asking your parent(s) the following:

  • Who do you want as your primary caregiver?
  • How will we pay for health care expenses?
  • What are your medical care preferences?
  • Which of us should make medical decisions on your behalf?
  • How should we handle your property when you die?
  • Do you have any valuable items that you want to be handled in a special way?
  • Where are your most important documents and do we have access to all of your digital records?

Inheritance often require probate. However, if the right legal documents are in place, it can be a relatively quick and painless process. When someone dies intestate (without a will), it can sticky and get tricky. Understand that the state has its own rules for dying without a will. Depending on the situation, you might need to hire a probate attorney because there will be legal proceedings. Therefore, make certain that your parents have a will and that beneficiaries are clearly stated in all policies and documents. It is a preventative measure that can pay dividends.

Remember that when wealth is transferred (or assets are passed from one person to another), taxes are often inevitable. Work with an experienced estate planning attorney to minimize liability.

Reference: MarketWatch (Dec. 29, 2021) “It’s easy to put it off, but here’s why you should talk to your parents about estate planning, and how to start the conversation”

Do You Need a Revocable or an Irrevocable Trust?

Many seniors planning for the future may want to place their home in a trust for their children.

This is especially true if the house is paid off, and free and clear of a mortgage.

However, what would happen if the home were placed in a trust and the senior then decides to sell it?

Nj.com’s recent article entitled “Can I sell my house after I put it in a trust?” explains that there are two primary types of trusts: revocable and irrevocable. In this situation, placing the home in a revocable trust may be a wise option.

The assets in a revocable trust avoid probate but stay in the grantor’s control. That is because you can always change the terms of the trust or terminate the trust. With a revocable trust, the terms can be altered or canceled dependent on the grantor (also known as the trustmaker, settlor, or trustor) of the trust.

During the life of the trust, income earned is given to the grantor, and only after death does property transfer to the beneficiaries.

A grantor can be the trustee. In that way, the grantor is still able to live in the home and sell it and dispose of it as they want upon death.

Assets in a revocable trust are available to creditors and are subject to estate taxes upon death.

In contrast, an irrevocable trust cannot be changed or altered once it is established. In fact, the trust itself becomes a legal entity that owns the assets placed in it.

Because the grantor no longer controls those assets, there are certain tax advantages and creditor protections.

An irrevocable trust is best used for transferring high-value assets that could cause gift or estate tax issues in the future.

Trust are very complicated, so in any situation consult with an experienced estate planning attorney about whether to use a trust and to make certain that you create the best trust for your specific situation.

Reference: nj.com (Feb. 25, 2022) “Can I sell my house after I put it in a trust?”

Are Millennials Estate Planning?

According to new research, 72% of U.S. millennials (ages 25 to 40) with wills created them or updated them in the past year.

MSN’s recent article entitled “Here’s why millennials are so into end-of-life planning reports that more than two-thirds of millennials don’t have a will. While the pandemic brought greater attention to end-of-life planning among millennials, they’re still largely unprepared. According to the 1Password findings, 68% of millennials don’t have a will.

As a result, respondents say that descendants would lose access to an average of $22,500. Only 38% have clarity over who should handle their digital assets after they die. Among those who do have a will, here’s what sparked it:

  • COVID-19 crisis (55%);
  • Having a child (36%);
  • Death of a celebrity or public figure (22%); and
  • Buying a house (17%).

With a digital transfer, the primary concern for respondents is giving their executor login credentials to banking and financial accounts (67%).

About 57% of millennial respondents say granting access to social media accounts is more important than giving access to email, subscription and e-commerce accounts.

The pandemic also provided a wake-up call for millennials and their end-of-life planning. However, there are some areas of estate planning that are uncertain. The survey finds 51% of millennials will be responsible for the execution of their parents’ wills. However, only 36% have access to their parents’ online account passwords.

While about a third (34%) of respondents said they’ve talked with their parents about their digital assets in the past year, about half (52%) have never discussed it with their parents or can’t recall the conversation.

Among those who have handled the execution of wills, 63% say it was more challenging than they anticipated to access accounts after a death.

Reference: MSN (Dec. 13, 2021) “Here’s why millennials are so into end-of-life planning”

What Can a Trust Do for Me and My Family?

A trust is defined as a legal contract that lets an individual or entity (the trustee) hold assets on behalf of another person (the beneficiary). The assets in the trust can be cash, investments, physical assets like real estate, business interests and digital assets. There is no minimum amount of money needed to establish a trust.

US News’ recent article entitled “Trusts Explained” explains that trusts can be structured in a number of ways to instruct the way in which the assets are handled both during and after your lifetime. Trusts can reduce estate taxes and provide many other benefits.

Placing assets in a trust lets you know that they will be managed through your instructions, even if you’re unable to manage them yourself. Trusts also bypass the probate process. This lets your heirs get the trust assets faster than if they were transferred through a will.

The two main types of trusts are revocable (known as “living trusts”) and irrevocable trusts. A revocable trust allows the grantor to change the terms of the trust or dissolve the trust at any time. Revocable trusts avoid probate, but the assets in them are generally still considered part of your estate. That is because you retain control over them during your lifetime.

To totally remove the assets from your estate, you need an irrevocable trust. An irrevocable trust cannot be altered by the grantor after it’s been created. Therefore, if you’re the grantor, you can’t change the terms of the trust, such as the beneficiaries, or dissolve the trust after it has been established.

You also lose control over the assets you put into an irrevocable trust.

Trusts give you more say about your assets than a will does. With a trust, you can set more particular terms as to when your beneficiaries receive those assets. Another type of trust is created under a last will and testament and is known as a testamentary trust. Although the last will must be probated to create the testamentary trust, this trust can protect an inheritance from and for your heirs as you design.

Trusts are not a do-it-yourself proposition: ask for the expertise of an experienced estate planning attorney.

Reference: US News (Feb. 7, 2022) “Trusts Explained”

How Do I Give Assets to Minor Grandchildren in My Will?

If a married couple is creating its estate plan, then how does the couple leave the estate to non-adult grandchildren?

However, what if something were to happen to them before the grandchildren become adults? Can this couple make sure the minor grandchildren do not get control of any inheritance until they’re adults?

Can arrangements be made for any unborn grandchildren to be included?

Nj.com’s recent article entitled “How can I leave my money to my minor grandchildren when I die?” says that one way to solve these issues is to create a testamentary trust to provide for young beneficiaries whether they’re children, grandchildren, step-children, or unrelated beneficiaries. The terms of a testamentary trust are in your will. It is only established and funded after you pass away.

The terms of the trust generally provide instructions to the trustee about the ages at which distributions must be made, if any. These instructions also allow the trustee to make discretionary distributions of income and principal to the beneficiaries.

Beneficiaries do not need to be identified by name or need to be born at the time the will is written.  However, they must be able to be identified upon your death. As a result, you can provide a bequest to all of your grandchildren, whether or not they are born yet.

It doesn’t matter where your grandchildren live as far as estate planning is concerned. However, if they live outside the United States and the bequest is considerable, the laws of their home country should be addressed. This is because a big gift may cause adverse tax implications to the recipient.

For children, some states’ laws allow you to add a term in your will that penalizes any interested person — like an heir or beneficiary — for contesting the will.

However, if there’s probable cause initiating a proceeding concerning the estate, then the clause will not be enforced.

When a person names another as primary beneficiary, they should also name one or more contingent beneficiaries, so that if the first person predeceases him or her, they will not have to revise the will.

If you do not designate a contingent beneficiary, and an heir predeceases, the assets pass according to the state’s intestacy statute rather than according to the will.

Reference: nj.com (Dec. 9, 2021) “How can I leave my money to my minor grandchildren when I die?”