Estate Planning Needs for Every Stage

Many people decide they need an estate plan when they reach a certain age, but when an estate plan is needed is less about age than it is about stages in life, explains a recent article “Life stages dictate estate planning needs” from The News-Enterprise. Life’s stages can be broken into four groups, young with limited assets, young parents, getting close to retirement and post-retirement life.

Every adult should have an estate plan. Without one, we can’t determine who will take care of our financial and legal matters, if we are incapacitated or die unexpectedly. We also don’t have a voice in how any property we own will be distributed after death.

The first stage—a young individual with limited assets—includes college students, people in the early years of their careers and young couples, married or not. They may not own real estate or substantial assets, but they need a fiduciary and beneficiary. Distribution of assets is less of a priority than provisions for life emergencies.

Once a person becomes a parent, he or she needs to protect minor children or special needs dependents. Lifetime planning is still a concern, but protecting dependents is the priority. Estate planning is used in this stage to name guardians, set up trusts for children and name a trustee to oversee the child’s inheritance, regardless of size.

Many people use revocable living trusts as a means of protecting assets for minor dependents. The revocable trust directs property to pass to the minor beneficiary in whatever way the parents deem appropriate. This is typically done so the child can receive ongoing care, until the age when parents decide the child should receive his or her inheritance. The revocable trust also maintains privacy for the family, since the trust and its contents are not part of the probated estate.

The third stage of life includes people whose children are adults, who have no children or who are near retirement age and addresses different concerns, such as passing along assets to beneficiaries as smoothly as possible while minimizing taxes. The best planning strategy for this stage is often dictated by the primary type of asset.

For people with special situations, such as a beneficiary with substance abuse problems, or a person who owns multiple properties in multiple states or someone who is concerned about the public nature of probate, trusts are a critical part of protecting assets and privacy.

For people who own a primary residence and retirement assets, an estate plan that includes a will, a power of attorney and medical power of attorney may suffice. An estate planning attorney guides each family to make recommendations that will best suit their needs.

Reference: The News-Enterprise (Aug. 25, 2020) “Life stages dictate estate planning needs”

Estate Planning Different for Business Owners and Top-Level Executives

Do you need an estate plan? If you have children, ownership shares in a business, or even in more than one business, a desire to protect your family and business if you became disabled, or charitable giving goals, then you need an estate plan. The recent article “Estate planning for business owners and executives” from The Wealth Advisor explains why business owners, parents and executives need estate plans.

An estate plan is more than a way to distribute wealth. It can also:

  • Establish a Power of Attorney, if you can’t make decisions due to an illness or injury.
  • Identify a guardianship plan for minor children, naming a caregiver of your choice.
  • Ensure that assets are controlled through beneficiary designations rather than simply through a will and pass privately when owned through trusts. This includes retirement plans, life insurance, annuities and some jointly owned property.
  • Create trusts for beneficiaries who are younger, disabled, or others you feel need some kind of protection.
  • Identify professional management for assets in those trusts.
  • Minimize taxes and maximize privacy through the use of planning techniques.
  • Create a structure for your philanthropic goals.

An estate plan ensures that fiduciaries are identified to oversee and distribute assets as you want. Business owners, in particular, need estate plans to manage ownership assets, which requires more sophisticated planning. Ideally, you have a management and ownership succession plan for your business, and both should be well-documented and integrated with your overall estate plan.

Some business owners choose to separate their Power of Attorney documents, so one person or more who know their business well, as well as the POA holder or co-POA, are able to make decisions about the business, while family members are appointed POA for non-business decisions.

Depending on how your business is structured, the post-death transfer of the business may need to be a part of your estate plan. A current buy-sell agreement may be needed, especially if there are more than two owners of the business.

An estate plan, like a succession plan, is not a set-it-and-forget it document. Regular reviews will ensure that any changes are documented, from the size of your overall estate to the people you choose to make key decisions.

Reference: The Wealth Advisor (July 28, 2020) “Estate planning for business owners and executives”

Why Everyone Needs an Estate Plan

Financial planners know that most people need to have estate plans, no matter how much or even how little money they have, as explained in this recent article “I’m a financial planner, and there are 3 reasons everyone needs an estate plan no matter how much money you have” from Business Insider. An estate plan includes healthcare directives and identifies guardians for minor children in the event you and your spouse die unexpectedly. It also can be created to avoid your family from having to go through probate court.

Skipping this part of your overall financial and legal life could put you, your assets and your family members at risk. Estate planning is done to protect you and your loved ones. That’s just one reason why everyone needs an estate plan. Having an estate plan protects you while you are living.

An estate plan is more than just a will or a trust. The two most common tools in an estate plan are a will and trust, but that’s just the beginning. A will, or last will and testament, is the document that provides the instructions for your heirs and beneficiaries to follow after you die. Trusts are used to protect assets and enforce your wishes, after you’re gone. However, a good estate plan should also include these documents:

  • An advance healthcare directive or healthcare proxy. These documents stipulate how you want to be treated, if you are alive but so sick or injured that you can’t provide directions. You may want to have a Do Not Resuscitate Order (DNR).
  • Powers of attorney. This legal document outlines who can represent you in legal, medical or financial matters, if you are not able to do so.

The right documents help avoid probate court. If you don’t have a will, any property or possessions must go through the probate system. Your documents and information about your assets become part of the public record and can be seen by anyone. Going through probate opens the door to litigation and disputes, which can further delay settling your estate. Having a will and the proper trusts gives clarity to heirs about what you want.

An estate plan protects your children. If you don’t have a will, a court names the guardian who will raise your children. Instead, decide who you would want. Make sure the person you want to care for your children will accept this responsibility. Trusts are a way to preserve assets for your children. The trust is managed by a trustee after you die and can stipulate specific rules and uses for the assets. For instance, you can provide a certain amount of money for the children, until they reach age 18. At that point, your trust could instruct the trustee to use the money for college expenses. You can be as specific as you wish.

Meet with an estate planning attorney familiar with the laws of your state. An estate planning attorney will know the estate and tax laws that apply to you and your family.

Reference: Business Insider (June 12, 2020) “I’m a financial planner, and there are 3 reasons everyone needs an estate plan no matter how much money you have”

Estate Planning Is a Gift and a Legacy for Loved Ones

Without an end of life plan, a doctor you’ve never even met might decide how you spend your last moments, and your loved ones may live with the burden of not knowing what you would have wished. These are just a few reasons why “End-Of-Life Planning is a ‘Lifetime Gift’ To Your Loved Ones,” as discussed in a recent article from npr.org.

It’s important to recognize that planning for the end of your life is actually not all about you. It’s about the ones you love: your parents, spouse or your children. They are the ones who will benefit from the decisions you make to prepare for the end of your life, and life after you are gone. It is a gift to those you love.

So, what should you do?

Start by preparing to have an estate plan created. If you have an estate plan but haven’t reviewed it in the last three or four years, find it and review it. If you can’t find it, then you definitely need a new one. An estate planning attorney can help you create an estate plan, including a will and other documents.

In the will, you name an executor, someone who you trust completely to carry out your directions. Some people choose a spouse or adult child to be their executor. It’s a lot of work, so pick someone who is smart, organized and trustworthy. They’ll be in charge of all of your financial assets and communicating how the estate is distributed to everyone in your will.

Create an inventory. This includes things that are of financial and sentimental value. People fight over sentimental things, so giving your family specific directions may avoid squabbles.

If you have children under age 18, name a guardian for them. This should be a person who knows your children and will raise them with same values as you would.

Pets are often overlooked in estate planning. If you want to protect your pet, in many states you can create a pet trust. It includes funds that are to be used specifically for care for your pet, and a trustee who will be responsible for ensuring that the funds are used as you intended.

Digital accounts are also part of your property, including social media, online photos, everything in your online cloud storage, credit card rewards, email, frequent flyer miles and digital assets.

Make sure your will is executed and in compliance with the laws of your state. If your will is found to be invalid, then it is as if you never made a will, and all your planning will be undone.

You also need an advance directive, a legal document that covers health care and protects your wishes at the end of life. One part of an advance directive gives a person medical power of attorney, so they can make decisions for you if you cannot. The other part is a living will, where you share how you want to be cared for and what interventions you do or don’t want if you are near death.

Reference: npr.org (June 30, 2020) “End-Of-Life Planning is a ‘Lifetime Gift’ To Your Loved Ones”

Still Procrastinating about Your Estate Plan?

The continuing escalation of the COVID-19 pandemic has forced many people to finalize estate planning documents, even as their estate planning attorneys are working from home. People are coming to terms with the stark reality: they could be struck by the disease and need to have a plan in place, reports the article “Estate Planning In The Age Of Covid” from Financial Advisor.

Everyone should review their estate planning documents, including their wills, trusts and gifting techniques, to ensure that they are in line with their goals and the numerous tax law changes that have occurred in the last six months. The review of these estate planning documents is especially critical during these unpredictable times.

Here are the documents that may need to be updated:

Power of Attorney—This legal document gives a person you name the authority to handle financial affairs and protect property by acting on your behalf, if you become incapacitated.  Some of the typical tasks of your “agent” are paying bills, writing checks, selling or purchasing assets or signing tax returns.

You may name any competent adult you like. However, be certain to choose someone trusted who will put your interests above theirs. This person should possess common sense, ethics and financial acumen. Someone who lives near you, will be able to handle matters more expeditiously. Someone who is far away, may not be as effective. You should also name a back-up or secondary agent.

With no power of attorney, no one will be authorized to act on your behalf and your family will need to have the court appoint a conservator, which will take time and money.

Health-Care Proxy—This legal document gives an agent authority to make health-care decisions on your behalf, if you are unable to do so. Without one, the family of anyone over the age of 18 will need to go to court and have a guardian appointed.

Last Will and Testament—Your last will is the legal document that gives directions to how you want your property to be distributed after you die. It is used to appoint an executor to oversee the distribution of your assets. For parents of minor children, this is the document used to name a guardian to raise your children. If you don’t have a last will, the court will choose who will raise your child, who will distribute your assets and who will oversee your estate. It is much better to handle this in advance, so you are in control of these important decisions.

Living Trust—A revocable trust is a legal contract that creates an entity to hold title to your assets. As the grantor or creator of the trust, you can change it at any time. You can also set it to outlive you. If you become incapacitated, a successor trustee then steps in and manages your affairs without any court intervention. A trust also gives you privacy, since it avoids the probate process.

There are many estate planning tools that may be used to pass wealth to the next generation, minimize taxe, and ensure that your legacy continues, even during these unprecedented times.

Reference: Financial Advisor (June 16, 2020) “Estate Planning In The Age Of Covid”

Update Will at These 12 Times in Your Life

Estate planning lawyers hear it all the time—people meaning to update their will, but somehow never getting around to actually getting it done. The only group larger than the ones who mean to “someday,” are the ones who don’t think they ever need to update their documents, says the article “12 Different Times When You Should Update Your Will” from Kiplinger. The problems become abundantly clear when people die, and survivors learn that their will is so out-of-date that it creates a world of problems for a grieving family.

There are some wills that do stand the test of time, but they are far and few between. Families undergo all kinds of changes, and those changes should be reflected in the will. Here are one dozen times in life when wills need to be reviewed:

Welcoming a child to the family. The focus is on naming a guardian and a trustee to oversee their finances. The will should be flexible to accommodate additional children in the future.

Divorce is a possibility. Don’t wait until the divorce is underway to make changes. Do it beforehand. If you die before the divorce is finalized, your spouse will have marital rights to your property. Once you file for divorce, in many states you are not permitted to change your will, until the divorce is finalized. Make no moves here, however, without the advice of your attorney.

Your divorce has been finalized. If you didn’t do it before, update your will now. Don’t neglect updating beneficiaries on life insurance and any other accounts that may have named your ex as a beneficiary.

When your child(ren) marry. You may be able to mitigate the lack of a prenuptial agreement, by creating trusts in your will, so anything you leave your child won’t be considered a marital asset, if his or her marriage goes south.

Your beneficiary has problems with drugs or money. Money left directly to a beneficiary is at risk of being attached by creditors or dissolving into a drug habit. Updating your will to includes trusts that allow a trustee to only distribute funds under optimal circumstances protects your beneficiary and their inheritance.

Named executor or beneficiary dies. Your old will may have a contingency plan for what should happen if a beneficiary or executor dies, but you should probably revisit the plan. If a named executor dies and you don’t update the will, then what happens if the second executor dies?

A young family member grows up. Most people name a parent as their executor, then a spouse or trusted sibling. Two or three decades go by. An adult child may now be ready to take on the task of handling your estate.

New laws go into effect. In recent months, there have been many big changes to the law that impact estate planning, from the SECURE Act to the CARES act. Ask your estate planning attorney every few years, if there have been new laws that are relevant to your estate plan.

An inheritance or a windfall. If you come into a significant amount of money, your tax liability changes. You’ll want to update your will, so you can do efficient tax planning as part of your estate plan.

Can’t find your will? If you can’t find the original will, then you need a new will. Your estate planning attorney will make sure that your new will has language that states revokes all prior wills.

Buying property in another country or moving to another country. Some countries have reciprocity with America. However, transferring property to an heir in one country may be delayed, if the will needs to be probated in another country. Ask your estate planning attorney, if you need wills for each country in which you own property.

Family and friends are enemies. Friends have no rights when it comes to your estate plan. Therefore, if families and friends are fighting, the family member will win. If you suspect that your family may push back to any bequests to friends, consider adding a “No Contest” clause to disinherit family members who try to elbow your friends out of the estate.

Reference: Kiplinger (May 26, 2020) “12 Different Times When You Should Update Your Will”

Estate Planning Is For Everyone

Estate planning is something anyone who is 18 years old or older needs to think about, advises the article “Estate planning for every stage of life from the Independent Record. Estate planning includes much more than a person’s last will and testament. It protects you from incapacity, provides the legal right to allow others to talk to your doctors if you can’t and takes care of your minor children, if an unexpected tragedy occurs. Let’s look at all the ages and stages where estate planning is needed.

Parents of young adults should discuss estate planning with their children. While parents devote decades to helping their children become independent adults, sometimes life doesn’t go the way you expect. A college freshman is more concerned with acing a class, joining a club and the most recent trend on social media. However, a parent needs to think about what happens when the child is over 18 and has a medical emergency. Parents have no legal rights to medical information, medical decision making or finances, once a child becomes a legal adult. Hospitals may not release private information and doctors can’t talk with parents, even in an extreme situation. Young adults need to have a HIPAA release, a durable power of medical attorney and a power of attorney for their finances created.

New parents also need estate planning. While it may be hard to consider while adjusting to having a new baby in the house, what would happen to that baby if something unexpected were to affect both parents? The estate planning attorney will create a last will and testament, which is used to name a guardian for any minor children, in case both parents pass. This also includes decisions that need to be made about the child’s education, medical treatment and even their social life. You’ll need to name someone to be the child’s guardian, and to be sure that they will raise your child the same way that you would.

An estate plan includes naming a conservator, who is a person with control over a minor child’s finances. You’ll want to name a responsible person who is trustworthy and good with handling money. It is possible to name the same person as guardian and conservator. However, it may be wise to separate the responsibilities.

An estate plan also ensures that your children receive their inheritance, when you think they will be responsible enough to handle it. If a minor child’s parents die and there is no estate plan, the parent’s assets will be held by the court for the benefit of the child. Once the child turns 18, he or she will receive the entire amount in one lump sum. Few who are 18-years old are able to manage large sums of money. Estate planning helps you control how the money is distributed. This is also something to consider, when your children are the beneficiaries of any life insurance policies. An estate planning attorney can help you set up trusts, so the monies are distributed at the right time.

When people enter their ‘golden’ years—that is, they are almost retired—it is the time for estate plans to be reviewed. You may wish to name your children as power of attorney and medical power of attorney, rather than a sibling. It’s best to have people who will be younger than you for these roles as you age. This may also be the time to change how your wealth is distributed. Are your children old enough to be responsible with an inheritance? Do you want to create a legacy plan that includes charitable giving?

Lastly, update your estate plan any time there are changes in the family structure. Divorce, death, marriage or individuals with special needs all require a different approach to the basic estate plan. It’s a good idea to revisit an estate plan anytime there have been major changes in your relationships, to the law, or changes to your financial status.

Reference: Independent Record (March 1, 2020) “Estate planning for every stage of life

An Estate Plan Is Necessary for the Unthinkable

The death of basketball legend Kobe Bryant, his daughter and seven others reminded us that we never know what fate has in store for us. A recent article from The Press Enterprise titled Yes, you must go there: Think about the unthinkable, plan for the worst” explains the steps.

Put an appointment in your schedule. Make an appointment with a qualified estate planning attorney. If you make the call and have an actual appointment, you have a deadline and that’s a start. The attorney may have a planning worksheet or organizer that he or she can send to you to guide you.

Start getting organized. If this seems overwhelming, break it out into separate parts. Begin with the easy part: a list of names, addresses, phone numbers, and email addresses for family members. Include any other people who you intend to include in your estate plan.

Next, list your assets and an estimated value of each. It doesn’t have to be to the penny. Include the account numbers, name of the institution, phone number and, if you have a personal contact, a name. Include bank accounts, real estate holdings, timeshares, stocks, bonds, personal property, vehicles, RVs, any collectibles of value (attach appraisals if you have them), life insurance and retirement accounts.

List the professionals who you rely on—your estate planning lawyer, CPA, financial advisor, etc.

If you own a firearm, include your license and make sure that both your spouse and your estate planning attorney are aware of the information. In certain states, having possession of a firearm without being the licensed owner is against the law. Speak with your estate planning attorney about the law in your state and how to prepare for a situation if the firearm needs to be safely and properly dealt with.

Name an executor or personal representative. Estate planning is not just for death. It is also for incapacity. Who will act on your behalf, if you are not able to do so? Many people name their spouse, a long-time trusted friend or a family member. Be certain that person will be willing to act on your behalf. Have a second person also named, in case something occurs, and your first choice cannot serve.

If you have minor children, your estate plan will include a guardian, who will be responsible for raising them. Talk about that with your spouse and that person to make sure they are willing to serve. You can also name a second person to be in charge of finances for the children. Your estate planning lawyer will talk with you about the role of trusts to provide for the children.

Think about your overall goals. How do you see your legacy? Do you want to leave some funds for a charity that has meaning to you and your family? Do you want your children to receive equal shares of your entire estate? Does one child require special needs planning, or are you concerned that one of your children may not be able to manage an inheritance? These are all topics to discuss with your estate planning attorney. Their experience will help clarify your goals and create a plan.

Reference: The Press Enterprise (Feb. 2, 2020) Yes, you must go there: Think about the unthinkable, plan for the worst”

Retirement and Estate Planning Work Better Together

So, you’ve been married for a while, and you’re both comfortable with which bank accounts, credit cards and investment accounts are shared and which other accounts are kept separate. However, where the big picture is concerned—like coordinating retirement plans, health coverage and tax planning—you both need to take an active role in planning and making good decisions. In fact, says the article “Couples and Money: When Together is Better” from Kiplinger, the decisions that work well for you as individuals may not be so hot, when they are looked at from a couple’s perspective.

Here’s an example. A man is working at a firm that doesn’t offer a match for his 401(k) contributions, but his wife’s employer does. Instead of contributing to his 401(k) plan, he uses the money to pay off a HELOC (Home Equity Line of Credit) that the couple had taken together to do some upgrades on their home. She contributes enough to her own 401(k) to get her company’s match every year. The goal is to cut their debt and save as much as possible. This worked at that time in the couple’s life.

Ten years later, they are both maxing out their 401(k) savings and working to build short-term savings to send kids to college through the use of 529 College Savings Accounts.

Retirement accounts can never be jointly owned. However, some couples fall into a trap of saving for themselves without considering the overall household. Dual earning couples often run into trouble, when one has a workplace plan and the other does not. The spouse with the workplace plan isn’t thinking that he or she needs to save enough for two people to retire. With two incomes, you might think that both are making retirement a savings priority, but without a 401(k) plan, it’s possible that only one person is saving and only saving enough for themselves.

A general recommendation is that both members of a couple save between 10-15% of their household earnings, rather than their personal earnings, in retirement accounts. Couples should review their respective retirement plans together and plan together. If one has a more generous match, access to a Roth option, or better investment opportunities, they should consider how much the person with the better plan should save.

Couples also need to examine other financial aspects of their lives. Coordinating retirement benefits, reviewing life insurance policies, planning a coordinated strategy for taking Social Security and making informed choices about health care coverage can make a big difference in the family’s financial well-being.

Equally important: making sure that an estate plan is in place. That includes a will that names a guardian for any minor children, a health care proxy and a financial power of attorney. Depending upon the family’s circumstances, that may include trusts or other wealth transfer strategies.

Reference: Kiplinger (Dec. 23, 2019) “Couples and Money: When Together is Better”

Tips for Choosing a Fiduciary

One of the important tasks in creating a complete estate plan is selecting people (or financial institutions) to represent you, in case of incapacity or death. Most people think of naming an executor, but there are many more roles, advises the article “What to consider when appointing a fiduciary?” from The Ledger.

Here are the most common roles that an estate planning attorney will ask you to select:

  • Executor or personal representative, who is named in your will and appointed by the court to administer your estate.
  • Agent-in-fact (under a durable power of attorney) who manages your financial affairs while you are living, if you are unable to do so.
  • Health care surrogate who makes health care decisions on your behalf while you are living, if you are incapacitated.
  • Trustee of a trust document; administers the trust that you have created.
  • Guardian: a person who makes health care and financial decisions on your behalf, if the court determines that other roles, like health care surrogate or agent-in-fact, are not sufficient.
  • Guardian for minor children: person(s) who make decisions for your children, if you are not able to because of death or a loss of capacity before the children reach adulthood.

The individuals or financial institutions who take on financial roles are considered fiduciaries; that is, they have a legal duty to put your well-being first. Their responsibilities may include applying for government benefits, managing and invest your assets and income, deciding where you will live and working with your attorneys, financial advisors and accountants.

Many people name their spouse or eldest child to take on these roles. However, that’s not the only option. A few questions to consider before making this important decision include:

  • Does this person have the experience, skill and maturity to manage my financial affairs?
  • Does this person have the time to serve as a fiduciary?
  • Would this person make the same health care decisions that I would make?
  • Can this person make a difficult decision for my health care?
  • Does this person live near enough to arrive quickly, if necessary?
  • How old is this person, and will they be living when I may need them?
  • What kind of response will my family have to this person being named?
  • Are my assets substantial enough to require a financial institution or accountant to manage?

These are just a few of the questions to consider when choosing fiduciaries or health care agents in your estate plan. Speak with your estate planning attorney to help determine the best decision for you and your family.

Reference: The Ledger (Oct. 16, 2019) “What to consider when appointing a fiduciary?”