Don’t Ask Heirs to Guess What You Wanted—Have an Estate Plan
Table with wooden houses, calculator, magnifying glass with the word Estate planning. Property insurance. Mortgage. Investing. Living trust. Write a will. Woman sits at the table and writes plans

Don’t Ask Heirs to Guess What You Wanted—Have an Estate Plan

With an estate plan, you can distribute your assets according to your own wishes. Without one, your heirs may spend years and a good deal of money trying to settle your estate, reports U.S. News & World Report in the article “5 Reasons to Make an Estate Plan.”

If there is no estate plan in place, including a will, living trust, advance directives and other documents, people you love will be put in a position of guessing what you wanted for any number of things, from what your final wishes would be in a medical crisis, to what kind of a funeral would like to have. That guessing can cause strife between family members and worry, for a lifetime, that they didn’t do what you wanted.

Think of your estate plan as a love letter, showing that you care enough about those you love to do right by them.

What is estate planning? Estate planning is the process of legally documenting what you want to happen when you die. It also includes planning for your wishes in case of incapacity, that is, when you are not legally competent to make decisions for yourself because of illness or an injury. This is done through the use of wills, trusts, advance directives and beneficiary designations on accounts and life insurance policies.

Let’s face it, people don’t like to think about their passing, so they postpone making an appointment with an estate planning attorney. There’s also the fear of the unknown: will they have to share a lot of information with the attorney? Will it become complicated? Will they have to make decisions that they are not sure they can make?

Estate planning attorneys are experienced with the issues that come with planning for incapacity and death, and they are able to guide clients through the process.

The power of putting wishes down on paper can provide a great deal of relief to the people who are making the plan and to their family members. Here are five reasons why everyone should have an estate plan:

Avoid Probate. Without a will, the probate court decides how to distribute your estate. In some states, it can take at least seven months to allow creditors to put through claims. The estate is also public, with your information available to the public. Probate can also be expensive.

Minimize Taxes. There are a number of strategies that can be used to minimize taxes being imposed on your heirs. While the federal estate tax exemption is $11.4 million per individual, states have estate taxes and some states impose an inheritance taxes. An estate planning attorney can help you minimize the tax impact of your estate.

Care for Minor Children. Families with minor children need a plan for care, if both parents should pass away. Without a will that names a guardian for young children, the court will appoint a guardian to raise a child. With a will, you can prevent the scenario of relatives squabbling over who should get custody of minor children.

Distributing Assets. If you have a will, you can say who you want to get what assets. If you don’t, the laws of your state will determine who gets what. You can also use trusts to control how and when assets are distributed, in case there are heirs who are unable to manage money.

Plan for Pets. In many states, you can create a Pet Trust and name a trustee to manage the money, while naming someone in your will who will be in charge of caring for your pet. Seniors are often reluctant to get a pet, because they are concerned that they will die before the pet. However, with an estate plan that includes a pet trust, you can protect your pet.

Reference: U.S. News & World Report (October 18, 2019) “5 Reasons to Make an Estate Plan”

You Can Protect Pets after You’re Gone

Many of us consider our pets members of the family, but the law does not. In Arizona, pets are considered property, reports the East Valley Tribune in the article “Trusts can help provide for a pet’s future.” That means you can’t leave them your house, or open a bank account in their name.

However, you can take measures to protect your pets from what could happen to them after you pass away.

The simple thing to do is to make arrangements with a trusted family member or friend to take care of your pet and leave some money for their care. The problem is, there’s no way to enforce this, and it’s all based on trust. What happens if something unexpected happens to your trusted family member or friend, and they can’t care for your pet?

You’ve also given them funds that they are not legally required to spend on your pet.

Another choice is to leave your pet to a no-kill animal shelter. However, shelters, even no-kill shelters, can be stressful for animals who are used to a family home. There’s also no way to know when your pet will be adopted, since most people come to shelters to adopt puppies and kittens. There is also the issue of the shelter. Will it continue to operate after you are gone?

The best way that many people care for their pets, is by having a pet trust created. An estate planning attorney in your state will know if your state is among the many that allow a pet trust to be created to benefit your pet.

Start by naming a guardian for your pets, including instructions on whether your pets should be kept together. If you are not sure about a guardian, name additional guardians, in case one does not wish to serve. Then determine how much money you need to leave for the pet’s care. This will depend upon the animal’s age, health and life expectancy. There will need to be adequate funding for any medical issues. The trust can specify whether you want your pet to undergo expensive surgeries or whether they should be kept comfortable at any cost.

You’ll want to make sure to name a guardian who you are confident will care for your pet or pets in the same manner as you would.

A pet trust will require you to name a trustee, who will be in charge of disbursing the funds as they are needed and can also check on the pet to be sure they are well, and your instructions are being followed. The money in the trust must only be used by person for the care of the pets.

A pet trust will give you the peace of mind of knowing that your beloved companion animals are being cared for, even when you are not here to care for them. Speak with an estate planning attorney to learn how to make a pet trust part of your overall estate plan.

Reference: East Valley Tribune (Oct. 14, 2019) “Trusts can help provide for a pet’s future”

Ignoring Beneficiary Designations Is a Risky Business

Ignore beneficiary forms at your and your heirs’ own peril, especially when there are minor children, is the message from TAPintoChatham.com’s recent article “Are You Read to Deal with Your Beneficiary Forms?” The knee-jerk reaction is to name the spouse as a primary beneficiary and then name the minor children as contingent beneficiaries. However, this is not always the best way to deal with retirement assets.

Remember that retirement assets are different from taxable accounts. When distributions are made from retirement accounts, they are treated as Ordinary Income (OI) and are subject to the OI tax rate. Retirement plans have beneficiary forms, which overrule whatever your will documents may state. Because they have beneficiary forms, these accounts pass outside of your estate and are governed by their own rules and regulations.

Here are a few options for beneficiary designations when there are minors:

Name your spouse as the primary beneficiary and minor children as the contingent beneficiaries. This is the usual response (see above), but there is a problem. If the minor children inherit a retirement asset, they will need a guardian for that asset. The guardian named for their care and well-being in the will does not apply, because this asset passes outside of the estate. Therefore, the court may appoint a Guardian Ad Litem to represent the child’s interest for this asset. That could be a paid stranger appointed by the court, until the child reaches the age of majority, usually 18 in most states.

Elect a guardian in the retirement plan beneficiary form. Some custodians have a section of their beneficiary form to choose a guardian for minor. Most forms, unfortunately, do not provide this option.

Make your estate the contingent beneficiary of the retirement account. While this would solve the problem of not having a guardian for the minor children, because it would kick the retirement plan into the estate, it may lead to adverse tax consequences. An estate does not have a measuring life, so the retirement asset would need to be fully distributed in five years.

Leave the assets to the minor children in a trust. This is the most effective means of leaving retirement assets to minor children without terrible tax consequences or needing to have the court appoint a stranger to oversee the child’s funds. Your attorney would either create a separate trust for the minor child or build a conduit trust under your will or a revocable trust to hold this specific asset. You would then change your beneficiary form to make said trust or sub-trusts for each minor child the contingent beneficiary of your retirement plan. This way you control who the guardian is for this asset for your minor child and are tax efficient.

Whichever way you decide to go, speak with an experienced estate planning attorney to determine which is the best plan for your family.

Reference: TAPintoChatham.com (Sep. 8, 2109) “Are You Read to Deal with Your Beneficiary Forms?”

Estate Planning Is for Everyone, at Every Age

As we go through the many milestones of life, it’s important to plan for what’s coming, and also plan for the unexpected. An estate planning attorney works with individuals, families and businesses to plan for what lies ahead, says the Cincinnati Business Courier in the article “Estate planning considerations for every stage of life.” For younger families, having an estate plan is like having life insurance: it is hoped that the insurance is never needed, but having it in place is comforting.

For others, in different stages of life, an estate plan is needed to ensure a smooth transition for a business owner heading to retirement, protecting a spouse or children from creditors or minimizing tax liability for a family.

Here are some milestones in life when an estate plan is needed:

Becoming an adult. It is true, for most 18-year-olds, estate planning is the last thing on their minds. However, at 18 most states consider them legal adults, and their parents no longer control many things in their lives. If parents want or need to be involved with medical or financial matters, certain estate planning documents are needed. All new adults need a general power of attorney and health care directives to allow someone else to step in, if something occurs.

That can be as minimal as a parent talking with a doctor during an office appointment or making medical decisions during a crisis. A HIPAA release should also be prepared. A simple will should be considered, especially if assets are to pass directly to siblings or a significant person in their life, to whom they are not married.

Getting married. Marriage unites individuals and their assets. For newly married couples, estate planning documents should be updated for each spouse, so their estate plans may be merged, and the new spouse can become a joint owner, primary beneficiary and fiduciary. In addition to the wills, power of attorney, healthcare directive and beneficiary designations also need to be updated to name the new spouse or a trust. This is also a time to start keeping a list of assets, in case someone needs to access accounts.

When children join the family. Whether born or adopted, the entrance of children into the family makes an estate plan especially important. Choosing guardians who will raise the children in the absence of their parents is the hardest thing to think about, but it is critical for the children’s well-being. A revocable trust may be a means of allowing the seamless transfer and ongoing administration of the family’s assets to benefit the children and other family members.

Part of business planning. Estate planning should be part of every business owner’s plan. If the unexpected occurs, the business and the owner’s family will also be better off, regardless of whether they are involved in the business. At the very least, business interests should be directed to transfer out of probate, allowing for an efficient transition of the business to the right people without the burden of probate estate administration.

If a divorce occurs. Divorce is a sad reality for more than half of today’s married couples. The post-divorce period is the time to review the estate plan to remove the ex-spouse, change any beneficiary designations, and plan for new fiduciaries. It’s important to review all accounts to ensure that any controlling-on-death accounts are updated. A careful review by an estate planning attorney is worth the time to make sure no assets are overlooked.

Upon retirement. Just before or after retirement is an important time to review an estate plan. Children may be grown and take on roles of fiduciaries or be in a position to help with medical or financial affairs. This is the time to plan for wealth transfer, minimizing estate taxes and planning for incapacity.

Reference: Cincinnati Business Courier (Sep. 4, 2019) “Estate planning considerations for every stage of life.”

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