What Happens when Mom Refuses to Create an Estate Plan?

This is a tough scenario. It happens more often than you’d think. Someone owns a home, investment accounts and an inheritance, but doesn’t want to have an estate plan. They know they need to do something, but keep putting it off—until they die, and the family is left with an expensive and stressful mess. A recent article titled “How to Get a Loved One to Visit an Estate Planning Attorney Before It’s Too Late” from Kiplinger, explains how to help make things right.

Most people put off seeing an estate planning attorney, because they are afraid of death. They may also be overwhelmed by the thought of how much work is involved. They are also worried about what it all might cost. owever, if there is no estate plan, the costs will be far higher for the family.

How do you get the person to understand that they need to move forward?

Talk with the financial professionals the person already uses and trusts, like a CPA or financial advisor. Ask them for a referral to an estate planning attorney they think would be a good fit with the person who doesn’t have an estate plan. It may be easier to hear this message from a CPA, than from an adult child.

Work with that professional to promote the person, usually an older family member, to get comfortable with the idea to talk about their wishes and values with the estate planning attorney. Offer to attend the meeting, or to facilitate the video conference, to make the person feel more comfortable.

An experienced estate planning attorney will have worked with reluctant people before. They’ll know how to put the older person at ease and explore their concerns. When the conversation is pleasant and productive, the person may understand that the process will not be as challenging and that there will be a lot of help along the way.

If there is no trusted team of professionals, then offer to be a part of any conversations with the estate planning attorney to make the introductory discussion easier. Share your own experience in estate planning, and tread lightly.

Trying to force a person to engage in estate planning with a heavy hand, almost always ends up in a stubborn refusal. A gentle approach will always be more successful. Explain how part of the estate plan includes planning for medical decisions while the person is living and is not just about distributing their assets. You should be firm, consistent and kind.

Explaining what their family members will need to go through if there is no will, may or may not have an impact. Some people don’t care, and may simply shrug and say, “It’ll be their problem, not mine.” Consider what or who matters to the person. What if they could leave assets for a favorite grandchild to go to college? That might be more motivating.

One other thing to consider: if the person has an estate plan and it is out of date, that may be just as bad as not having an estate plan at all, especially when the person has been divorced and remarried. Just as many people refuse to have an estate plan, many people fail to update important documents, when they remarry. More than a few spouses come to estate planning attorney’s offices, when a loved one’s life insurance policy is going to their prior spouse. It’s too late to make any changes. A health care directive could also name a former brother-in-law to make important medical decisions. During a time of great duress, it is a bad time to learn that the formerly close in-law, who is now a sworn enemy, is the only one who can speak with doctors. Don’t procrastinate, if any of these issues are present.

Reference: Kiplinger (May 11, 2020) “How to Get a Loved One to Visit an Estate Planning Attorney Before It’s Too Late”

What Is an Advance Directive, and Why You Need This Document?

The coronavirus pandemic has had an impact on the entire world. No wonder—it’s a frightening disease that experts are just beginning to understand. Many of us are asking ourselves: Am I ready for a worst-case scenario? Anyone who does not have the health care portion of their estate plan in order, needs to address it now, says the timely article “COVID-19 crisis highlights the importance of completing advance directives” from Cincinnati.com.

The topic of an advance directive used to be introduced with a question about what would happen if a person were in a car accident, rushed to the hospital and unable to convey their wishes for care.  The question has now become, what if a sudden onset of COVID-19 occurred, and you were unable to speak on your own behalf? Would your loved ones know what you would want, or would they have to guess?

All adults—that is, anyone over the age of 18—should have an advance directive. The process of creating this and other health care-related estate planning documents will provide the answers to your loved ones, while helping you work through your wishes. Here’s how to start:

What matters to you? Give this considerable thought. What is important to you, who best knows and understands you and who would you trust to make critical decisions on your behalf, in the event of a medical emergency? What medical treatment would you want—or not want—and who can you count on to carry out your wishes?

Get documents in order, so your wishes are carried out. Your estate planning attorney can help you draft and execute the documents you need, so you can be confident that they will be treated as legitimate by health care providers. The estate planning lawyer will know how to execute the documents, so they are in compliance with your state’s laws. Here’s what you’ll want:

  • A living will, which records your wishes for medical treatment, if you cannot speak on your own behalf.
  • Medical power of attorney, to designate a person to make health care decisions, when you are not able to do so. The person is referred to as an agent, surrogate or proxy.
  • A HIPAA release form, so the person you designate may speak with your medical care providers.

Note that none of these documents concerns distribution of your personal property and assets. For that, you’ll want a will or revocable living trust, which your estate planning attorney can prepare for you.

Talk to loved ones now. Consider this conversation a gift to them. This alleviates them from a lifetime of wondering if they did the right thing for you. Have a forthright conversation with them, let them know about the documents you have had prepared and what your wishes are.

Reference: Cincinnati.com (April 27, 2020) “COVID-19 crisis highlights the importance of completing advance directives”

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

Alternatives for Stretch IRA Strategies

The majority of many people’s wealth is in their IRAs, that is saved from a lifetime of work. Their goal is to leave their IRAs to their children, says a recent article from Think Advisor titled “Three Replacements for Stretch IRAs.” The ability to distribute IRA wealth over years, and even decades, was eliminated with the passage of the SECURE Act.

The purpose of the law was to add an estimated $428 million to the federal budget over the next 10 years. Of the $16.2 billion in revenue provisions, some $15.7 billion is accounted for by eliminating the stretch IRA.

Existing beneficiaries of stretch IRAs will not be affected by the change in the law. But going forward, most IRA heirs—with a few exceptions, including spousal heirs—will have to take their withdrawals within a ten year period of time.

The estate planning legal and financial community is currently scrutinizing the law and looking for strategies will protect these large accounts from taxes. Here are three estate planning approaches that are emerging as front runners.

Roth conversions. Traditional IRA owners who wished to leave their retirement assets to children may be passing on big tax burdens now that the stretch is gone, especially if beneficiaries themselves are high earners. An alternative is to convert regular IRAs to Roth IRAs and take the tax hit at the time of the conversion.

There is no guarantee that the Roth IRA will never be taxed, but tax rates right now are relatively low. If tax rates go up, it might make converting the Roth IRAs too expensive.

This needs to be balanced with state inheritance taxes. Converting to a Roth could reduce the size of the estate and thereby reduce tax exposure for the state as well.

Life insurance. This is being widely touted as the answer to the loss of the stretch, but like all other methods, it needs to be viewed as part of the entire estate plan. Using distributions from an IRA to pay for a life insurance policy is not a new strategy.

Charitable Remainder Trusts (CRT). The IRA could be used to fund a charitable remainder trust. This allows the benefactor to establish an income stream for heirs with part of the IRA assets, with the remainder going to a named charity. The trust can grow assets tax free. There are two different ways to do this: a charitable remainder annuity trust, which distributes a fixed annual annuity and does not allow continued contributions, or a charitable remainder unitrust, which distributes a fixed percentage of the initial assets and does allow continued contributions.

Speak with your estate planning lawyer about what options may work best in your unique situation.

Reference: Think Advisor (Jan. 24, 2020) “Three Replacements for Stretch IRAs”