Top Benefits of Estate Planning

Top Benefits of Estate Planning

Despite the hard lessons learned during the COVID pandemic, surveys repeatedly show most Americans still don’t have an estate plan in place. According to the article “Five benefits of estate planning” from The Aspen Times, a comprehensive estate plan ensures your assets are distributed according to your wishes when you die, minimizes taxes on your estate and protects your loved ones, especially those who depend on you financially. In addition, estate planning protects you while you are living and ensures that your wishes are followed, if you become incapacitated.

Protect Yourself and Your Assets During Your Lifetime. No one likes to consider themselves at risk of incapacity. However, this happens. If you become mentally or physically incapacitated during your lifetime, you might not be able to earn income, or make decisions for yourself. Part of an estate plan includes documents to address these risks to protect yourself, your family and your assets.

Designating a health care proxy and a power of attorney gives people you choose the ability to make decisions on your behalf. Otherwise, the responsibility for your medical, legal and financial decisions may go to someone you don’t even know.

Asset Distribution. Without a last will, your home state’s laws govern the distribution of your assets. Your intentions to care for certain individuals won’t be relevant, as the law itself decides who gets what. A last will is used to state exactly how you want assets to be distributed. Your last will should be updated as your financial situation and/or family dynamics change. You should also review designated beneficiaries on investment accounts and insurance policies regularly and especially after any major life changes.

Minimize Transfer Taxes. While there’s no way to predict what taxes will take effect in the future, it’s safe to assume there will be taxes on your estate. If you hope to leave wealth of any size to your family, proper estate planning is crucial. There are many different strategies to minimize taxes on inherited wealth, including life insurance, Roth IRA conversions, lifetime giving and trusts. Your estate planning attorney will be able to create a plan suited for your unique situation.

Protect Family Wealth. As people accumulate wealth, they often become the targets of frivolous lawsuits. For this reason, placing assets in certain types of trusts can ensure efficient wealth transfer, as well as protecting assets from predators and creditors.

Create and Continue a Legacy. Legacy planning is part of the estate planning process. Many people donate money or assets on their death to causes they supported during their lifetime. These goals can be achieved by contributing to a donor advised fund, creating a family foundation or setting up a philanthropic trust.

Creating an estate plan is also a useful tool for having candid discussions with the family about the future, avoiding future conflicts and making your estate administration easier for loved ones.

Reference: The Aspen Times (Jan. 24, 2023) “Five benefits of estate planning”

Busting Some Estate Planning Myths

Busting Some Estate Planning Myths

An estate plan consists of four basic documents: a last will, a living trust, a financial power of attorney and a medical power of attorney and advance directive, according to the article titled “Common Estate Planning Myths” from The Street.

These documents need to be well-integrated, funded and aligned with your financial plan. There are many common misconceptions about how these documents work together to create a roadmap for your legacy. Let’s explore them.

A last will is a legal document outlining how you want your assets to be collected and distributed after death. The last will is also used to name an executor, who is responsible for managing assets, paying debts and distributing what is left to beneficiaries you specify. A last will also designates a guardian to care for minor children upon your death.

Myth: “If you have a trust, you don’t need a will.” Fact: Even if you have a trust, you still need a will.

For a trust to be effective, it must be funded, which means transferring assets from individual ownership to the trust ownership. People often forget to transfer assets or something unexpected occurs. For example, if a person creates a trust but becomes incapacitated before assets are transferred, the last will controls the distribution of assets.

Myth: “Trusts are only for ultra-high net worth people.” Fact: Everyone can benefit from a trust.

Trusts are used to retain privacy, control assets, plan for incapacity and avoid probate. Trusts can also be useful when family dynamics are challenging, or if you want to assert control over assets even after death. Consider a married couple with a net worth of $1 million who die prematurely with two children in their 20s. Each child inherits $500,000. Twenty-somethings may not be ready to handle large sums of money. A trust would allow the heirs to receive smaller amounts over the course of years and not all at once.

Myth: “I have a trust, so I don’t need a power of attorney.” Fact: You need a power of attorney.

Some assets cannot be owned by a trust, including IRAs, which must be owned by an individual. If you became incapacitated and do not have a power of attorney, there will be no one able to oversee investment management, Required Minimum Distributions or pay bills. Your spouse or other family member will have to petition the court to appoint a conservator to manage financial affairs.

Myth: “My loved one is in the hospital. However, I’m their spouse/daughter/sibling, so of course the hospital will tell me about their medical status and let me make decisions for them.” Fact: Protecting patient confidentiality is the law and healthcare facilities are very mindful of adhering to all state and federal guidelines.

An 18 year old who suffers an illness or injury is legally an adult, and parents have no legal right to medical information or decision-making without a medical power of attorney and a HIPAA release form. They cannot speak with the insurance company, doctors or make decisions about their loved one’s care.

A comprehensive estate plan, including a last will, financial power of attorney and health care proxy is something every adult should have. Speak with an experienced estate planning attorney to protect those you love and prepare for the future.

Reference: The Street (Jan. 6, 2023) “Common Estate Planning Myths”

Read more about the article What Happens When There Is No Will?

What Happens When There Is No Will?

A will ensures that your personal and financial assets are given to the people and organizations you want. It also allows you to choose the person you want to settle your affairs, known as your executor. The time to have a will prepared is typically the same time people have a power of attorney and healthcare proxy forms prepared, according to the article “What Happens if You Die Without a Will?” from The Street.

Your estate plan is the term used to describe having all of these and other tools prepared to work together. It has nothing to do with the size of your estate, which could be modest or major. Regardless of the financial size or complexity of your life, you need a will.

What happens without a will?

A married person with children who dies without a will does the family a great disservice. All property, including real estate, investments and accounts that are jointly owned with the spouse go to the co-owner without needing to go through probate. However, separately owned property and accounts are distributed by the state in the absence of a will. Depending on the state, one-third may be awarded to the surviving spouse, and the remainder may be divided among the children. If the children are minors, the funds will be held in an account only accessible with court approval. The family may find itself without sufficient funds to maintain its lifestyle.

A person who is married but has no children or grandchildren and dies without a will may have their entire estate given to the surviving spouse. However, some states have a cap of $100,000. Other states give a third of to one-half of assets to the surviving spouse and the rest to the deceased’s parents, if they are living, or to the siblings. Jointly owned property, accounts and community property go to the surviving spouse.

What about a single person with children? With no will, the state law gives the decedent’s assets to surviving children in equal shares. If an adult child is deceased, their share is split among their own children (the decedent’s grandchildren). However, if the children are minors, the money is subject to court control and supervision.

If someone who is single and has no children dies, the state usually gives their assets to surviving parents. If the parents are not living, the assets will be distributed to the decedent’s siblings, or nephews and nieces, if the siblings have also passed. The state will reference a consanguinity chart—a chart used to help identify relationships of people showing degrees of family relationships by blood or marriage. Assets may pass to distant cousins who have never met or even known of the existence of the decedent.

If there are no living family members, the estate typically goes to the state itself.

When a member of an unmarried couple dies without a will, the surviving partner has no legal rights at all. Only spouses and relatives are recognized by state law. The partner will not inherit anything; assets will pass as if the person was single.

Domestic partners are treated differently in different states. In some states, they have inheritance rights, but this is state-dependent.

An experienced estate planning attorney can create a will and related documents to ensure your wishes are carried out upon your death. Otherwise, your estate will be distributed according to the laws of your state. You can protect yourself and your loved ones with a will.

Reference: The Street (Jan. 2, 2023) “What Happens if You Die Without a Will?”

Why Is It Important to have an Estate Plan?

Why Is It Important to have an Estate Plan?

Right now, the federal estate tax exemption is so high as to be a non-issue for most taxpayers, but this will not always be the case, and there are also state estate taxes to consider. Regardless of taxes, there are other reasons why everyone needs to have an estate plan, affirms a recent article from mondaq titled “Do I Really Need an Estate Plan?” The short answer is yes, you definitely do.

The first thing a will does is distribute your assets according to your directions. If you have grandchildren, there are ways for you to gift them assets and minimize taxes, but you’ll need to plan for generation skipping taxes.

If you own a business, you will need a succession plan to align with your estate plan. Will family members become owners, or will the business be sold?

Does the family include a disabled or individual with special needs? A special needs trust can add an extra layer of resources. Guardianship planning needs to be done for the parents and guardians be named for when the parents are no longer able to care for the person.

The will is also used to name an executor, the person to handle all the decisions you express in the will and carry them out.

Gifting is another part of your estate plan. If you have any charitable organizations or individuals outside of your family who you’d like to make a gift to, this can be done through your will or through a number of gifting strategies.

The current federal estate tax exemption is set to end in 2025 and revert back to 2017 levels. Tax planning should be done well in advance to protect your estate and heirs.

A review of life insurance should be part of your estate plan. Do you know who your named beneficiary is on your life insurance policies? If your estate is the beneficiary, your estate’s value may exceed the federal or state estate tax limits.

Many people today create an ethical will. This is not a legally binding document; instead, it is used to express your values and your wishes for heir’s futures. It may also be used to give them insight into how your will was structured and why. If there is controversy in the family, an ethical will or statement of intentions may help bolster your will if there are any legal challenges.

Your retirement benefits and any workplace benefits have beneficiaries named in the event of your death. Do you know who they are, and do you still wish for those named to be your beneficiaries?

Estate planning includes addressing incapacity and illness. You’ll want a Power of Attorney for someone to act on your behalf if you are sick or injured and cannot handle your personal finances. You’ll also need a Health Care Proxy for someone who will be empowered to speak with healthcare personnel and make care decisions for you if you cannot.

Without a comprehensive estate plan, the difficulties facing your loved ones upon your illness and upon your death will be magnified. Yes, you need an estate plan. The sooner, the better. Speak with an estate planning attorney to get the process started.

Reference: mondaq (Aug. 24, 2022) “Do I Really Need an Estate Plan?”

How Can I Choose an Estate Planning Lawyer?

How Can I Choose an Estate Planning Lawyer?

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

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

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

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

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

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

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

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

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

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

Read more about the article How to Know If a Last Will Is Invalid

How to Know If a Last Will Is Invalid

One of the many reasons an experienced estate planning attorney is the best resource for creating an estate plan, including a Last Will and Testament, Power of Attorney and Health Care Proxy, is the confidence of knowing your estate plan has been properly prepared. People who believe they know better than an experienced lawyer, often send their families into a legal, financial, and emotional black hole after they die. The article “Red Flags Indicating a Potentially Invalid Will” from The National Law Journal provides a closer look at why it pays to work with a professional.

When a decedent executes a new Last Will near the end of their life and makes a dramatic change to previous estate plans, there may be trouble ahead. When this is the case, several issues need to be examined to ensure that the document is valid. Strong consideration must be given to whether the person had sufficient capacity to execute the document.

When a person is suffering from an illness or near death, they may be susceptible to the improper influence of people who may cause them to make uncharacteristic changes to their estate plan. Any Last Will drafted within the last few months of a person’s life requires careful review.

If, shortly after a person has handed the reins of their financial life to another, using a Power of Attorney in any of its forms (Durable POA, Springing POA) and a new Last Will is created, a red flag should be raised, especially if the Last Will has been changed to benefit this person.

What if a person’s capacity was hovering near the borderline of capacity and incapacity? If a decedent’s mental capacity was questionable at the time the Last Will was executed, the Last Will may not be valid. A person with legal mental capacity must understand the assets they own and clearly understand to whom they are bequeathing assets. The standard for this issue is low, but if the decedent was suffering from a degenerative mental condition or a sudden onset of incapacity due to an illness or accident, the Last Will may be challenged.

If a layperson creates a Last Will or uses an online service to create it and the Last Will does not comply with the state’s estate laws, the Last Will may have technical issues rendering it invalid. When this occurs, it is as if there were no Last Will at all and the estate is distributed according to the laws of the state.

The biggest red flag is the presence of any large changes from the next to Last Will to the final Last Will, with no known reason for the change having been made. This may be a result of changes to mental capacity or undue influence of a third party. An experienced estate planning attorney is the best resource to create a Last Will. They will be among the first to ask why significant changes from a prior Last Will are being requested.

Reference: The National Law Journal (March 30, 2022) “Red Flags Indicating a Potentially Invalid Will”

What Is a Digital Estate Plan?

What Is a Digital Estate Plan?

Traditional estate planning is step one, from creating a will to setting up a durable power of attorney and health care proxies. However, when you and your estate planning attorney create a comprehensive estate plan, you’ll now need to include digital estate planning. A recent article titled “Digital Estate Planning: 5 Things to Do Now to Make Things Easier in a Crisis” from Consumer Reports provides a step-by-step process.

First, get your important information organized. Create a document and either store it in a fireproof, waterproof safe in your home or share it with a secure digital password manager. Include complete contact information for doctors, estate planning attorneys, business partners, financial advisors, family members and important friends. Include land line and cell phones numbers and email addresses. Next, list your medical information, health conditions, prescriptions and pharmacies. Add information for your workplace, schools, houses of worship and community organizations. Anyone you interact with on a regular basis should be included.

Provide information for personal documents, including your birth certificate, Social Security card, estate planning documents, passport and Medicare or other health insurance information.

Your estate planning documents include your advance care directives, including a living will, durable power of attorney and healthcare proxy.

Financial information including bank accounts, account numbers, investments, credit cards, mortgages and car loans or leases should be listed. Make a note about all recurring bills when they are due and how you pay them.

Password sharing with trusted family members. Someone will need access to your online accounts. Ideally, share this information with two people—one who lives with you and one who does not—just in case one cannot help. Phone and computer passwords should be written down or write down a hint you know will easily be understood by someone who knows you well. You can also use a password manager. However, be careful to select one with extremely good security.

Create a legacy contact for major online accounts. A handful of major online platforms now provide an option to name a person who can access your accounts, if you designate a “legacy contact.” Apple, Facebook and Google are among those who offer this important feature. In the future, other platforms may follow.

Add digital assets to your will. Major platforms without a legacy contact feature have strict access requirements. Microsoft says it must be served with a valid subpoena or court order to provide access. LinkedIn and Instagram can memorialize accounts but require legal documentation or proof of death for an executor to gain access to the accounts. Go through all platforms and find out what your executor will need to do to obtain your digital assets. Make sure that they are added to your will. However, don’t include account numbers or passwords, as the will becomes part of the public record during probate.

Digital assets are still tricky. The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which has been adopted by most but not all states, allows people you designate in your will to access digital property. However, it is not a complete solution. RUFADAA doesn’t allow for access to the content of emails and other digital communications because of privacy laws. Your will needs to have language clearly stating your wish for your fiduciary to be able to access and read your emails.

Call a planning meeting with your family. Talk about your wishes, the planning you’ve done and your expectations for who will handle your affairs. It’s not the easiest conversation, and some family members may be more comfortable than others, but when the inevitable occurs, they’ll be ready.

Reference: Consumer Reports (May 4, 2022) “Digital Estate Planning: 5 Things to Do Now to Make Things Easier in a Crisis”

Senior Second Marriages and Estate Planning

Senior Second Marriages and Estate Planning

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

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

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

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

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

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

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

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

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

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

How Do I Plan for Taxes after Death?

How Do I Plan for Taxes after Death?

Let’s get this out of the way: preparing for death doesn’t mean it will come sooner. Quite the opposite is true. Most people find preparing and completing their estate plan leads to a sense of relief. They know if and when any of life’s unexpected events occur, like incapacity or death, they have done what was necessary to prepare, for themselves and their loved ones.

It’s a worthwhile task, says the recent article titled “Preparing for the certainties in life: death and taxes” from Cleveland Jewish News and doesn’t need to be overwhelming. Some attorneys use questionnaires to gather information to be brought into the office for the first meeting, while others use secure online portals to gather information. Then, the estate planning attorney and you will have a friendly, candid discussion of your wishes and what decisions need to be made.

Several roles need to be filled. The executor carries out the instructions in the will. A guardian is in charge of minor children, in the event both parents die. A person named as your attorney in fact (or agent) in your Power of Attorney (POA) will be in charge of the business side of your life. A POA can be as broad or limited as you wish, from managing one bank account to pay household expenses to handling everything. A Health Care Proxy is used to appoint your health care agent to have access to your medical information and speak with your health care providers, if you are unable to.

Your estate plan can be designed to minimize probate. Probate is the process where the court reviews your will to ensure its validity, approves the person you appoint to be executor and allows the administration of your estate to go forward.

Depending on your jurisdiction, probate can be a long, costly and stressful process. In Ohio, the law requires probate to be open for at least six months after the date of death, even if your estate dots every “i” and crosses every “t.”

Part of the estate planning process is reviewing assets to see how and if they might be taken out of your probate estate. This may involve creating trusts, legal entities to own property and allow for easier distribution to heirs. Charitable donations might become part of your plan, using other types of trusts to make donations, while preserving assets or creating an income stream for loved ones.

Minimizing taxes should be a part of your estate plan. While the federal estate tax exemption right now is historically high $12.06 million per person, on January 1, 2025, it drops to $5.49 million adjusted for inflation. While 2025 may seem like a long way off, if your estate plan is being done now, you might not see it again for three or five years. Planning for this lowered number makes sense.

Reviewing an estate plan should take place every three to five years to keep up with changes in the law, including the lowered estate tax. Large events in your family also need to prompt a review—trigger events like marriage, death, birth, divorce and the sale of a business or a home.

Reference: Cleveland Jewish News (May 13, 2022) “Preparing for the certainties in life: death and taxes”

What If You Don’t have a Will?

What If You Don’t have a Will?

A will is a written document stating wishes and directions for dealing with the property you own after your death, also known as your “estate,” explains a recent article “Placing the puzzle pieces of long-term care and planning a will” from Pittsburgh Post-Gazette. The COVID pandemic has reinforced the importance of having an estate plan in place. With almost one million deaths attributed to COVID to date, many families have learned this lesson in the hardest possible way.

When someone dies without a will, property is distributed according to their state’s intestacy laws. If your next of kin is someone you loathe, or even just dislike, they may become an heir, whether you or the rest of your family likes it or not. If you are part of an unmarried couple, your partner has no legal rights, unless you’ve created a will and an estate plan to provide for them.

In general, intestacy laws distribute property to a surviving spouse or certain descendants. A much better solution: speak with an experienced estate planning attorney to have a will and other estate planning documents prepared to protect yourself and those you love.

Start by determining your goals and speaking with family members. You may be surprised to learn an adult child doesn’t need or want what you want to leave them. If you have a vacation home you want to leave to the next generation, ask to see if they want it.

A family meeting, attended by an objective person, like an estate planning attorney, may be helpful in clarifying your intentions and setting expectations for heirs. It may reveal new information about your family and change how you distribute your estate. A grandchild who has already picked out a Ferrari, for instance, might make you consider setting up a trust with distributions over time, so they can’t blow their inheritance in one purchase.

Determining who will be your executor is another important decision for your will. The executor is like the business manager of your estate after you have passed. They are a fiduciary, with a legal obligation to put the estate’s interest above their own. They need to be able to manage money, make sound decisions and equally important, stick to your wishes, even when your surviving loved ones have other opinions about “what you would have wanted.”

You’ll need to speak with this person to make sure they are willing to take on the task. If there is no one suitable or willing, your estate planning attorney will have some suggestions. Depending on the size of the estate, a bank or trust company may be able to serve as executor.

The will is just the first step. An estate plan includes planning for incapacity. With a Will, a Power of Attorney, Health Care Proxy, and Living Will (also known as an Advance Directive), you and your loved ones will be better positioned to address the inevitable events of life.

Reference: Pittsburgh Post-Gazette (April 24, 2022) “Placing the puzzle pieces of long-term care and planning a will”