Should a Trust Be Part of My Estate Plan?

A revocable trust can be a wise choice for managing your assets, says nj.com’s recent article entitled “What are the advantages of putting assets into a trust?”

A revocable trust is a type of trust that can be changed once it is executed by the creator of the trust, known as the grantor. During the life of the trust, income earned is distributed to the grantor. After his or her death, the trust assets transfer to the beneficiaries of the trust.

A revocable trust can be advantageous because it has flexibility and provides this income stream and full access to the trust principal by the living grantor (also known as the trustor).

If you are the grantor, you can act as trustee, by yourself or with another as co-trustee.

When you no longer want to manage, or when you’re unable to manage your affairs, the co-trustee or a successor trustee can take over all of the duties.

If you didn’t put your assets in a revocable trust, you’d need to appoint an agent under a durable power of attorney to handle your financial affairs, if you become incapacitated.

However, some financial institutions would rather do business with a trustee instead of an agent under a power of attorney.

At your death, if all of your assets are in trust, your family can avoid the probate process. The trustee continues to manage the trust assets pursuant to the terms of the trust document. Those instructions do not need to be recorded any court in most jurisdictions.

Unlike a will, which is recorded with the government once it is probated, a trust is not a public document in most jurisdictions. Therefore, privacy is another advantage of a trust.

Finally, in states where an inheritance tax return is required, a revocable trust also avoids the need to obtain tax waivers, which are issued by the state to release any tax liens, upon death.

However, there are some downsides to putting assets into a trust.

First, the expense of creating a trust will be more than a simple will, and you would still need a will in the event you did not place everything in the trust during your lifetime or upon your death by a beneficiary designation.

Sometimes, having all of your assets in trust can also be more costly or cumbersome. For instance, insurance may be more expensive when an asset is in the trust.

Reference: nj.com (March 17, 2021) “What are the advantages of putting assets into a trust?”

Who Can Witness Wills?

For a will to be binding, there are a number of requirements that must be met. While state laws on wills vary, most require you to be of legal adult age to make a will and have testamentary capacity (i.e., that you be “of sound mind”).

Yahoo Finance’s recent article entitled “Who Can and Cannot Witness a Will?” explains that you usually must have your will witnessed.

Witnesses to your will are significant in the event that someone disputes its validity later or if there is a will contest. If one of your heirs challenges the terms of your will, a witness may be asked by the probate court to attest that they watched you sign the will and that you appeared to be of sound mind when you did so. Witnesses provide you with another layer of validity to a will, and it makes it more difficult for someone to dispute its legality.

When drafting a will, it’s important to understand several requirements, including who can serve as a witness. Generally, but depending on applicable state law, anyone can witness a will, as long as they meet two requirements: (i) they are of legal adult age; and (ii) they do not have a direct interest in the will. Therefore, the types of people who could witness a will for you include your friends who aren’t to receive anything from your estate, a neighbor, co-workers and any of your relatives who aren’t included in your will.

If you’ve hired an experienced estate planning attorney to help you draft your will, he or she can also act as a witness, provided they’re not named as a beneficiary. An attorney who’s also acting as the executor of the will (the person who oversees the process of distributing your assets and paying off any outstanding debts owed by your estate) can also witness a will.

Most states don’t allow you to select individuals who will benefit from your will as witnesses. If you are drafting a will that leaves assets to your spouse, children, siblings, or parents, then none of those individuals can serve as witnesses to the will’s signing because they all have an interest in the will’s terms. The same is true for relatives or spouses of any of the beneficiaries.

The witnesses to your will do not need to review the entire will document in order to sign it. They only need to be able to verify that the document exists, that you have signed it in their presence and that they have signed it in front of you.

When you sign the will, get both witnesses together at the same time. You’ll need to sign, initial and date the will in ink, then have your witnesses do the same. Some states require you to attach a self-proving affidavit or have the will notarized in front of the witnesses.

Reference: Yahoo Finance (Dec. 28, 2020) “Who Can and Cannot Witness a Will?”

What Estate Planning Documents Should I Have when I Retire?

Research shows that most retirees (53%) have a last will and testament. However, they don’t have six other crucial legal documents.

Money Talks News’ recent article entitled “6 Legal Documents Retirees Need — but Don’t Have” says in fact, in this pandemic, 30% of retirees have none of these crucial documents — not even a will — according to the 20th annual Transamerica Retirement Survey of Retirees.

In addition, the Transamerica survey found the following among retirees:

  • 32% have a power of attorney or medical proxy, which allows a designated agent to make medical decisions on their behalf
  • 30% have an advance directive or living will, which states their end-of-life medical preferences to health care providers
  • 28% have designated a power of attorney to make financial decisions in their stead
  • 19% have written funeral and burial arrangements
  • 18% have filled out a Health Insurance Portability and Accountability Act (HIPAA) waiver, which allows designated people to talk to their health care and insurance providers on their behalf; and
  • 11% have created a trust.

The study shows there is a big gap that retirees need to fill, if they want to be properly prepared for the end of their lives.

The coronavirus pandemic has created an even more challenging situation. Retirees can and should be taking more actions to protect their health and financial well-being. However, they may find it hard while sheltering in place.

Now more than ever, seniors may need extra motivation and support from their families and friends.

The Transamerica results shouldn’t shock anyone. That is because we have a long history of disregarding death, and very important estate planning questions. No one really wants to ponder their ultimate demise, when they can be out enjoying themselves.

However, planning your estate now will give you peace of mind. More importantly, this planning can save your heirs and loved ones a lot of headaches and stress, when you pass away.

Talk to an experienced estate planning attorney today to get your plan going.

Reference: Money Talks News (Dec. 16, 2020) “6 Legal Documents Retirees Need — but Don’t Have”

What are Options for Powers of Attorney?

Power of attorney (POA) documents are an important component of an estate plan. There are four types. You should review each carefully to see which one will work best for you in your situation. What is required for a power of attorney, depends upon what power you want to authorize, says Carmel’s Hamlet Hub in a recent article titled “4 Types of Power of Attorney.”

Limited Power of Attorney. If you need someone to act on your behalf for a limited purpose, use a limited power of attorney. This will specify the date/time after which the power no longer is in effect.

General Power of Attorney. This is an all-encompassing power of attorney, in which you assign every power and right you possess as an individual to a certain party. It’s typically used where the principal is incapacitated. It is also used with those who don’t have the time, skills, knowledge, or energy to handle all of their financial matters. The power you assign is in effect for your lifetime, or until you are incapacitated (unless it is also “durable”). However, you can elect to rescind it before then.

Durable Power of Attorney. The key distinction with a durable power of attorney is that it stays in effect, even after you’ve become incapacitated. Therefore, you want to sign a durable power of attorney if: (i) you want to give the designated agent authority ONLY if you’re unable to act for yourself; or (ii) you want to give the agent immediate authority that continues after you’re unable to act for yourself.

Note that a limited or general power of attorney ends when you become incapacitated. At that point, a court will appoint a guardian or conservator to handle your matters. You can rescind a durable power of attorney at any time prior to becoming incapacitated.

Springing Power of Attorney. This document serves the same purpose as a durable power of attorney, but it’s effective only upon your becoming incapacitated. When drafting this, your experienced estate planning attorney will help you make clear your definition of “incapacitated.”

Remember that you’ll need to state in your power of attorney document which powers and duties you are assigning to the attorney-in-fact.

Regardless of the type of power of attorney you implement, the attorney-in-fact has the power to do only what your POA indicates.

Reference: Carmel’s Hamlet Hub (Dec. 16, 2020) “4 Types of Power of Attorney”

Does My Business Need a Power of Attorney?

Some business owners may need a power of attorney (POA). However, what type would be of benefit the most is the question. This article looks at the types of power of attorney and in what circumstances a business owner may need each of them.

Entrepreneur’s recent article entitled “Does Your Business Need a Power Of Attorney?” reports that the Consumer Financial Protection Bureau (CFPB) defines power of attorney as a legal document that permits a trusted agent the authority to act on your behalf. Accordingly, signing a power of attorney allows the business owner to authorize another person to conduct business in his stead. The person designated in the document is called the “agent” or sometimes the “attorney-in-fact.” There are three main types of power of attorney:

Financial Power of Attorney. This document allows the agent to deal with the financial responsibilities and functions of the “principal” (the person who signs the document), if the principal is unable to do so themselves. Some functions for the agent of a financial power of attorney include the following:

  • Delegation of the operation of your business
  • Hiring an attorney and making decisions in lawsuits
  • Filing and paying taxes
  • Conducting transactions with banks and other financial institutions
  • Making decisions on your investments and retirement plan
  • Entering into a contract
  • Purchasing of selling real estate or different types of property; and
  • Using your assets to pay for your living expenses.

Special Power of Attorney (or Limited Power of Attorney). A business owner may need to accomplish a task for the company, but she’s unable to be there because of other responsibilities. This document permits a particular agent to conduct business on her behalf, concerning a specific and clearly outlined event, like opening a bank account, settling a lawsuit, or signing a contract.

Healthcare Power of Attorney. An individual who is incapacitated and can’t communicate, can use this to permit an agent to make medical decisions on his behalf. Note that a healthcare power of attorney isn’t the same as a living will. A living will focuses on a person’s preferences for healthcare treatment, such as do-not-resuscitate and other religious or philosophical beliefs that they want to be respected. A healthcare power of attorney is more flexible and leaves the decisions regarding healthcare to the agent. A living will concerns end-of-life decisions only, where healthcare power of attorney applies in all medical situations.

Durable Power of Attorney. A POA usually becomes effective when a person is incapacitated and stops once they’re able to make their own decisions. However, a durable power of attorney or enduring power of attorney may be applied to any of the types mentioned above. As a result, the agent can make decisions on behalf of a business owner when they aren’t incapacitated.

A POA provides considerable protections that will help a business deal with regular operations, while the owner is unable to lead the company. If the business is an LLC or corporation, a power of attorney for the company may not be needed. However, it’s wise to have one for your own estate planning. Ask an experienced estate planning attorney about the types of power of attorney and how they might help your business.

Reference: Entrepreneur (Nov. 3, 2020) “Does Your Business Need a Power Of Attorney?”

What Key Estate Planning Terms Should I Know?

Estate planning can help you accomplish several objectives, including naming guardians for minor children, choosing healthcare agents to make decisions for you should you become ill, minimizing taxes so you can give more wealth to your heirs and saying how and to whom you would like to pass your estate at death.

Emmett Messenger Index’s recent article entitled “13 Estate Planning Terms You Need to Know” provides some important terms to understand as you consider your own estate plan.

Assets: This is anything a person owns. It can include a home and other real estate, bank accounts, life insurance, investments, furniture, jewelry, collectibles, art, and clothing.

Beneficiary: This is an individual or entity (like a charity) that gets a beneficial interest in an asset, such as an estate, trust, account, or insurance policy.

Distribution: A payment in cash or asset(s) to the beneficiary who’s designated to receive it.

Estate: All of the assets and debts left by a person at death.

Fiduciary: An individual with a legal obligation or duty to act primarily for another person’s benefit, such as a trustee or agent under a power of attorney.

Funding: The process of transferring or retitling assets to a trust. Note that a living trust will only avoid probate at the trustmaker’s death if it’s fully funded. A trustmaker also may be known as a grantor, settlor, or trustor.

Incapacitated or Incompetent: The situation when a person is unable to manage her own affairs, either temporarily or permanently, and often involves a lack of mental capacity.

Inheritance: These are assets received from someone who has died.

Probate: This is the orderly court-supervised process of distributing the assets of a person who has died.

Trust: This is a fiduciary relationship where a trustmaker gives a trustee the right to hold property or assets for the benefit of another party, known as the beneficiary. The trust is a written trust agreement that directs how the trust assets will be distributed to the beneficiary.

Will: A written document with directions for disposing of a person’s assets after their death. A will is enforced by a probate court. A will can provide for the nomination of a guardian for minor children.

Reference: Emmett Messenger Index (Oct. 28, 2020) “13 Estate Planning Terms You Need to Know”

Is My Estate Plan Set with a Power of Attorney?

A June 2020 Transamerica Center for Retirement Studies survey showed that a mere 28% of retirees have a financial power of attorney (POA)—and many people don’t understand that there are two types of these advance directives that serve different purposes.

MarketWatch recently published an article “Does your estate plan use the right type of Power of Attorney for you?” that says knowing how both types work is crucial in the pandemic, especially in the event that you get sick with coronavirus.

A Durable Power of Attorney for Finance can be either “springing” or “immediate.” “Durable” refers to the fact that this Power of Attorney will endure after you have lost mental or physical capacities, whether temporary or permanent. It lists when the powers would be granted to the person of your choosing and the powers end at your death.

An “immediate” Durable Power of Attorney for Finance is effective, as soon as you sign the document. In contrast, a “springing” POA for Finance means two physicians must first examine you and confirm in writing that you can no longer manage independently.

Therefore, to begin paying your bills, your agent must have those two physicians’ letters, and he or she doesn’t automatically have the authority to ask for them.

When issues, such as doctors’ letters, are required before the agent you chose can serve you, ask your estate planning attorney for guidance.

An obstacle for a Durable Power of Attorney for Finance can come upon you very fast and possibly include you and your spouse at the same time. For example, you both might get COVID-19.

The powers granted by a typical POA for Finance are often broad and permit selling and buying assets; managing your debt, car and Social Security payments; filing your tax returns; and caring for any assets not named in a trust you may have, such as your IRA.

If you recover your capacity, your agent must turn everything back over to you when you ask.

Remember that your advance directive documents are only as good as the people who implement them. You should also make certain anyone named knows that they’ll have the job, if needed. They must know where to find your POA and all other important information.

Reference: MarketWatch (Oct. 9, 2020) “Does your estate plan use the right type of Power of Attorney for you?”

How Do You Ask Parents about Estate Planning?
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How Do You Ask Parents about Estate Planning?

How do you ask your parents about their estate planning? No matter how you slice it, it’s a touchy subject to bring up.

You don’t want to come off as greedy when asking your parents about their estate planning.  However, you need answers to certain questions to ensure that their financial wishes are carried out and there is a smooth transition of wealth and assets.

Yahoo Finance’s recent article entitled “How To Talk to Your Parents About Their Estate Plan (Without Making It Awkward)” shows us how to approach this touchy subject and get the info that you need.

Begin by asking your parents about whether they have an estate plan. You can tell them that they don’t need to share the numbers and that you just want to be able to follow their instructions. A good way to start this conversation, is to acknowledge how awkward and difficult this conversation is for you. You should emphasize that you don’t want to think about their deaths but are just trying to sort things out.

Experts say that you’ll likely get a better reception from your parents, if you let the conversation happen organically and not schedule a time to talk. No matter how you approach the topic of an inheritance from your parents, the objective of the discussion is to make certain they have a plan in place, so there will be a clear path for whomever is left behind to go forward. You can start by asking if they have these key legal documents:

  • A will
  • A power of attorney; and
  • A living will or health care directive.

Ask where your parents keep these documents and how you can access them, if necessary.

You should also ask if your parents have written funeral or burial instructions. You also need to ask them to give you other important information, so you can handle their finances if they are unable to or when they die. This includes account numbers and passwords, insurance policies, information on their retirement plan or pension administrator, as well as the contact information for their accountant, attorney, financial planner, or other financial professional.

Reference: Yahoo Finance (Oct. 7, 2020) “How To Talk to Your Parents About Their Estate Plan (Without Making It Awkward)”

What Does an Estate Planning Attorney Actually Do?

It’s critical to understand what will happen to your estate after your death. That’s where the help of an experienced estate planning attorney comes in, says VENTS Magazine’s recent article entitled “What Does an Estate Lawyer Do Exactly?”

An experienced estate planning attorney is a legal professional, upon whom you can rely to help protect your estate after your death or in the event that you become incapacitated.

He or she will make certain that your assets and property are handled correctly.

In addition to assisting you with your estate, an estate planning attorney can help handle any family members trying to get involved in your legal affairs.

It may be difficult to please everyone when creating your will. Having an estate planning attorney will help you make the best decisions, when it comes to distributing your wealth.

Estate planning is critical—especially if you’re older, experiencing chronic illness, or just want to be smart about protecting your assets.

As we grow older, we can accumulate a long list of stressful issues and responsibilities. You may worry that your estate will be gobbled up by creditors once you pass away, or that your children will fail to distribute your assets as you intended.

Much of this stress is eliminated with the guidance and counsel of an experienced estate planning attorney. Having an estate plan allows you to enjoy a better quality of life, once you’re older. You won’t have to live every day with worry or stress about the future after you’re gone.

An experienced estate planning attorney is a valuable resource for your family, in the event someone tries to contest the will after your death.

Estate planning attorneys also aid in distributing the wealth, protecting your property from creditors and lowering estate taxes.

Reference: VENTS Magazine (Sep. 28, 2020) “What Does an Estate Lawyer Do Exactly?”

How Important Is Estate Planning in the Pandemic?

Waiting to create a will leaves nothing but headaches for your heirs and relatives. With nearly 200,000 deaths due to Covid-19 in the U.S. alone, we are reminded of how fast our lives can change.

The Street’s recent article entitled “Life Changes Fast: The Importance of Estate Planning and Health Care Directives” also notes that this reminds us how important it is to make sure we have current estate planning decisions and end-of-life decisions in place.

Here is a basic overview of some important areas of estate and health care planning you should consider:

Your Assets and Belongings

An experienced estate planning attorney can help you determine if a will or a trust would best take care of your objectives and needs. Don’t make this decision on your own because there are major differences between these two types of documents.

Some people use a living trust instead of a will because it avoids the publicity and expense that comes with the probate process. Ask your attorney what is best for your family and situation.

You’ll need to name an executor, who will be in charge of making sure your requests are carried out, including the division of assets. In addition to your will or trust, be sure the beneficiaries on your life insurance and accounts, such as your bank and retirement accounts are current. You should also see how the title is held on any real estate property you own.

Health Care and Your Body

Make certain that it’s super clear and in writing as to what your final wishes are for your medical treatment and final arrangements. Your documents need to address what type of medical treatment you want, if you are not able to make those decisions for yourself. It should also be clear as to any specific life-preserving measures you would want taken.

A power of attorney for healthcare lets you name an agent to make health-related decisions for you, if you’re unable to do so. Some states combine both the power of attorney for health care and a living will into one document, which is called an advance directive. If you want to be an organ donor, make sure this is recorded and your wishes are known (some states have directories or it’s on a person’s driver’s license). Be sure that your hospital and doctor are aware of your wishes and they have copies of any necessary documents.

Guidance and Financial Help. Always consult with an experienced estate planning attorney to be certain that your wishes and objectives are properly spelled out and legally binding.

Reference:  The Street (Aug. 28, 2020) “Life Changes Fast: The Importance of Estate Planning and Health Care Directives”