Does Divorce Have an Impact on Estate Planning?

Does Divorce Have an Impact on Estate Planning?

Even the most amicable divorce requires a review and update of your estate plan, as explained in a recent article from yahoo! finance, “I’m Divorcing. Will That Impact My Estate Planning?” This includes your will, power of attorney and other documents. Not getting this part of divorce right can have long-term repercussions, even after your death.

Last will and testament. If you don’t have a will, you should get this started. Why? If anything unexpected occurs, like dying while your divorce is in process, the people you want to receive your worldly goods will actually receive them, and the people you don’t want to receive your property won’t. If you do have a will and an estate plan and if your will leaves all of your property to your soon-to-be ex-spouse, then you may want to change it. Just a suggestion.

State laws handle assets in a will differently. Therefore, talk with your estate planning attorney and be sure your will is updated to reflect your new status, even before your divorce is finalized.

Trusts. The first change is to remove your someday-to-be ex-spouse as a trustee, if this is how you set up the trust. If you don’t have a trust and have children or others you would want to inherit assets, now might be the time to create a trust.

A Domestic Asset Protection Trust (DAPT) could be used to transfer assets to a trustee on behalf of minor children. The assets would not be considered marital property, so your spouse would not be entitled to them. However, a DAPT is an irrevocable trust, so once it’s created and funded, you would not be able to access these assets.

Review insurance policies. You’ll want to remove your spouse from insurance policies, especially life insurance. If you have young children with your spouse and you are sharing custody, you may want to keep your ex as a beneficiary, especially if that was ordered by the court. If you received your health insurance through your spouse’s plan, you’ll need to look into getting your own coverage after the divorce.

Power of Attorney. If your spouse is listed as your financial power of attorney and your healthcare power of attorney, there are steps you’ll need to take to make this change. First, you have to notify the person in writing to tell them a change is being made. This is especially urgent if you are reducing or eliminating their authority over your financial and legal affairs. You may only change or revoke a power of attorney in writing. Most states have specific language required to do this, and a local estate planning attorney can help do this properly.

You also have to notify all interested parties. This includes anyone who might regularly work with your power of attorney, or who should know this change is being made.

Divide Retirement Accounts. How these assets are divided depends on what kind of accounts they are and when the earnings were received. The court must issue a Qualified Domestic Relations Order (QDRO) before defined contribution plans can be split. The judge must sign this document, which allows plan administrators to enforce it. This applies to 401(k) plans, 403(b) plans and any plans governed under ERISA (Employment Retirement Income Security Act of 1974).

Divorce is stressful enough, and it may feel overwhelming to add estate planning into the mix. However, doing so will prevent many future problems and unwanted surprises.

Reference: yahoo! finance (Feb. 3, 2023) “I’m Divorcing. Will That Impact My Estate Planning?”

Why Everyone Needs an Estate Plan

Why Everyone Needs an Estate Plan

Estate planning means making plans to manage and distribute assets and caring for loved ones in the event of a person’s death or incapacity. It also involves the creation of legally binding documents to outline a person’s wishes for health care and financial matters. Estate planning ensures your wishes are carried out and is also used as a means to minimizes taxes, as explained in the article “Why Estate Planning Is Important Even If You Don’t Have Assets” from The LA Progressive.

Even if you don’t have significant assets, you still need to make decisions about your health care, which is done as part of an estate plan. Here are the fundamentals to get you started.

Will. This is a legal document with specific instructions regarding how your assets are to be distributed after death and who should be named as a guardian to care for minor children. The will is also used to name a person to serve as executor of your estate to carry out your wishes and manage distribution of assets.

Trust. A trust is a legal entity holding property or other assets on behalf of another person, known as the beneficiary. There are many different types of trusts, including revocable, irrevocable and charitable trusts.

The revocable trust allows you to maintain control over assets in the trust during your lifetime. After death, the assets in the trust are distributed according to the terms in the trust. An irrevocable trust can’t be changed or amended once it’s established. Charitable trusts are used to provide for a nonprofit organization.

Trusts are used to manage and distribute assets during a person’s lifetime and after their death. They are also used to remove assets from the taxable estate and can also be used to manage expenses associated with the distribution of one’s estate.

Healthcare Power of Attorney. This document allows you to name someone to make medical decisions on your behalf if you are incapacitated and can’t make decisions for yourself. These should be created with your personal situation in mind; a standard form may not permit the nuances you want to convey to another person. With a customized healthcare POA, you can specify the type of decisions your healthcare agent may make and describe any limitations you want over their authority.

Financial Power of Attorney. The financial POA allows you to name a person, called your “agent” or “attorney in fact,” to manage finances if you are too sick or injured to do so. This should also be a customized document, as you may want to limit your agent’s authority to pay bills or allow them to do everything from paying bills to managing investment accounts. The POA expires upon your death and the agent can’t perform any tasks once you have passed away.

Without an estate plan, the care of minor children and distribution of assets takes place according to state laws, which isn’t how most people want their decisions made. The solution is actually quite easy: talk with a local estate planning attorney and get started on creating your estate plan.

Reference: LA Progressive (Jan. 11, 2023) “Why Estate Planning Is Important Even If You Don’t Have Assets”

The Most Important Part of Estate Plan Is Planning for Living

The Most Important Part of Estate Plan Is Planning for Living

Most people think of estate planning as planning for death. However, a well-titled article “Planning for death probably isn’t the most important part of your estate plan” from Coeur d’Alene/Post Falls Press presents another reason for estate planning in clear terms. Estate planning is planning for the unexpected eventualities of life.

Estate planning documents address how things will work while you are still living but if you have become incapable of making your own decisions. In many cases, this is more important than distributing your worldly possessions.

Yes, you should have a will (last will and testament). But you should also have Power of Attorney documents—one for health care purposes and another for financial purposes.

The Power of Attorney document states who will be your substitute decision maker, or agent, if you are incapacitated or unable to make your own decisions while still living. This should be a personalized document prepared by an estate planning attorney to include the scope of tasks and the limits, if any, you want to set for your agent. The financial POA is an important one, as it gives your chosen agent the legal authority to make financial decisions on your behalf.

The health care power of attorney gives your agent the authority to make health care decisions on your behalf.

With both of these documents properly prepared and available, someone you name will be empowered to serve as your decision maker if necessary.

The will is used to state what happens to your possessions and assets when you die. It is also the legal document used to name your executor—the person who will be in charge of carrying out your instructions. The will tells the probate court how you want your estate to be administered after death.

Why do you need these and other documents? Your will only becomes effective after death. Your POA documents are effective if you become incapacitated. They are both part of your estate plan, which is a collection of legal documents and has nothing to do with whether you reside in a palatial estate.

Here’s how it might work. If you become seriously ill and cannot speak on your own behalf, but you have a Power of Attorney naming your daughter Carol to serve as your POA for healthcare and financial decisions, Carol will be able to pay bills, including paying the mortgage, keeping your car lease up to date, and taking care of all of the financial aspects of your life. If she is also named as your Health Care POA, she will be able to speak with your medical team, be involved in decisions about your course of care and follow the wishes you’ve expressed in your POA.

If you die, and Carol has also been named your executor, she will be able to transition into this new role by representing you through the probate process. She will be able to work with your estate planning attorney to have your will filed with the court and follow your directions for distribution of your assets.

Having only a last will and testament would not protect you while you are living. Having only a Power of Attorney would not protect your wishes after you have died. All of these documents—and there are others not mentioned here—work together to protect you during life and after you’ve passed.

Reference: Coeur d’Alene/Post Falls Press (Aug. 29, 2022) “Planning for death probably isn’t the most important part of your estate plan”

Why Do I Need a Will?

Why Do I Need a Will?

Perhaps getting hit by a cement truck is too blunt for some, but unexpected things happen all the time. An estate plan, including a will and other important documents, is good preparation, especially for caregivers of people with special needs. A recent article from Forbes titled “Where There is a Will, There is a Way” explains the steps everyone, especially caregivers, need to follow.

Creating a last will and testament

This is the foundation of an estate plan. Without a will, the court will distribute assets to children equally. If a disabled person receiving government benefits receives an inheritance, they will become ineligible and lose access to services. The court will also assign guardianship to minors or disabled individuals, if there is no will. A will, in tandem with proper estate planning, ensures protection for an individual with special needs, including naming a guardian of your choice.

Having a General Durable Power of Attorney for Finances

A POA allows you to name a person you trust to manage finances, real estate property, investments, or any aspect of your life, if you become incapacitated. A POA should be created for your needs, so you may decide in advance what you do and do not want your agent to be able to do for you.

Creating a Durable Power of Attorney for Healthcare

This important legal document, paired with a HIPAA release form, allows someone of your choice to take charge of your healthcare, talk with healthcare providers and make decisions based on your expressed wishes. You may name more than one person for this role but doing so could make it harder if the two people don’t agree on your care.

Naming a Guardian

This is a critical step if you are a caretaker for a person who will likely be unable to manage their own affairs, even after attaining legal age. By naming a guardian in your will, you can select the people who will be in charge of your special needs family member or minor children. Without a guardian named in your will, the courts will make this decision.

Drafting a “Letter of Intent”

A letter of intent is a guide with important information only you know. It is especially important for caretakers. Explaining in detail your disabled individual’s preferences can make a huge difference in the quality of their lives when you are no longer available. What are their likes and likes, what people do they enjoy spending time with and what foods do they prefer, etc. If your children are minors, this letter is an opportunity to describe your preferences for how they should be raised, including religious preferences, vocational choices and even nighttime rituals.

Providing Financial Security

If your family includes a loved one with Special Needs, you can protect their ability to have funds for things not covered by government benefits through a Special Needs Trust. Your estate planning attorney will create an SNT with a trustee and a secondary trustee to oversee the funds and ensure that they are used for qualified expenses.

Reference: Forbes (July 6, 2022) “Where There is a Will, There is a Way,”

What Is Power of Attorney and Is It Important?

What Is Power of Attorney and Is It Important?

Most people realize the importance of the last will and testament. However, they remain unaware of the importance of a durable power of attorney. This document authorizes another person to act on your behalf while you are alive and expires upon death, as explained in a recent article titled “Power of attorney likely to be first vital estate document” from The News-Enterprise.

The power of attorney is used to give authorization regarding legal and financial matters. It can be tailored to be as broad or as narrow as one wishes. A healthcare proxy, also known as a healthcare power of attorney, is used to give authorization for medical decisions.

The general Power of Attorney is used when a person is unable to act for themselves due to illness or injury. It is also needed when a person is unable to act on their own behalf because of mental incapacity. The POA is also used for when someone prefers to have another person manage their financial affairs.

Spouses use POAs to handle day-to-day financial tasks, from dealing with insurance companies to managing bank accounts, loans, or other financial matters. If one spouse cannot attend a real estate closing, for instance, the other will need a POA so they may represent their spouse.

Some people think just adding another person to an account will work the same way as a POA. However, this is not accurate. A co-owner might be able to pay bills. However, their ability to do anything else will be limited. They won’t be able to amend the account, unless both parties are present, for instance.

POAs are state-specific documents, so any Power of Attorney, whether for healthcare or finances, should be created by an estate planning attorney in the state where you live and any state where you own property.

Some powers, including the ability to make gifts of the principal’s property or to change beneficiaries for retirement accounts or life insurance policies, may sound as if they are far beyond what’s needed when these documents are first drafted. However, unexpected things happen at all stages of life, and situations arise where these powers are needed. Seemingly simple tasks become far more complicated, if the POA doesn’t permit these types of additional powers.

If there is concern about broad powers, the document can include limited language. For instance, a POA can include a limit on gifting the principal’s property pursuant to any previously documented wishes. This will allow gifting to be completed, but only to the terms already indicated. However, be careful about broad limiting language, like limiting gifts to annual gift exclusions. Prohibiting an agent from acting in ways to protect the principal’s property and best interest could be counterproductive.

Drafted by an experienced estate planning attorney to suit the specific needs of the individual, a power of attorney can make it possible for a trusted individual to conduct your wishes and protect your best interests. Make sure that you have one and update it whenever you update your overall estate plan.

Reference: The News Enterprise (June 25, 2022) “Power of attorney likely to be first vital estate document”

Is It Important for Physicians to Have an Estate Plan?

Is It Important for Physicians to Have an Estate Plan?

When the newly minted physician completes their residency and begins practicing, the last thing on their minds is getting their estate plan in order. Instead, they should make it a priority, according to a recent article titled “Physicians, get your estate in order or the court will do it instead” from Medical Economics. Physicians accumulate wealth to a greater degree and faster than most people. They are also in a profession with a higher likelihood of being sued than most. They need an estate plan.

Estate planning does more than distribute assets after death. It is also asset protection. An estate planning attorney helps physicians, dentists and other medical professionals protect their assets and their legacies.

Basic estate planning documents include a last will and testament, financial power of attorney and a medical power of attorney. However, the physician’s estate is complex and requires an attorney with experience in asset protection and business succession.

During the process of creating an estate plan, the physician will need to determine who they would want to serve as a guardian, if there are minor children and what they would want to occur if all of their beneficiaries were to predecease them. A list should be drafted with all assets, debts, including medical school loans, life insurance documents and retirement or pension accounts, including the names of beneficiaries.

The will is the center of the estate plan. It will require naming a person, typically a spouse, to be the executor: the person in charge of administering the estate. If the physician is not married, a trusted relative or friend can be named. There should also be a second person named, in case the first is unable to serve.

If the physician owns their practice, the estate plan should be augmented with a business succession plan. The will’s executor may need to oversee decisions regarding the sale of the practice. A trusted friend with no business acumen or knowledge of how a medical practice works may not be the best executor. These are all important considerations. Special considerations apply when the “business” is a professional practice, so do not make any moves without expert estate planning assistance.

The will only controls assets in the individual’s name. Assets owned jointly, or those with a beneficiary designation, are not governed by the will.

Without a will, the entire estate may need to go through probate, which is a lengthy and expensive process. For one family, their father’s lack of a will and secrecy took 18 months and cost $30,000 in legal fees for the estate to be settled.

Trusts are an option for protecting assets. By placing assets in trust, they are protected from creditors and provide control in complex family situations. The goal is to create a trust and fund it before any legal actions occur. Transferring assets after a lawsuit has begun or after a creditor has attached an asset could lead to a physician being charged with fraudulent conveyance—where assets are transferred for the sole purpose of avoiding paying creditors.

Estate planning is never a one-and-done event. If a doctor starts a family limited partnership to transfer wealth to the next generation but neglects to properly maintain the partnership, some or all of the funds may be vulnerable.

An estate plan needs to be reviewed every few years and certainly every time a major life event occurs, including marriage, divorce, birth, death, relocation, or a significant change in wealth.

When consulting with an experienced estate planning attorney, a doctor should ask about the potential benefits of revocable living trust planning to avoid probate, maintain privacy and streamline the administration of the estate upon incapacity or at death.

Reference: Medical Economics (Feb. 22, 2022) “Physicians, get your estate in order or the court will do it instead”

Who Is the Best Choice for Power of Attorney?

Who Is the Best Choice for Power of Attorney?

Picking a person to serve as your Power of Attorney is an extremely important part of your estate plan, although it is often treated like an afterthought once the will and trust documents are completed. Naming a POA needs to be given the same serious consideration as creating a will, as discussed in this recent article “Avoid powers of attorney mistakes” from Medical Economics.

Choosing the wrong person to act on your behalf as your Power of Attorney (POA) could lead to a host of unintended consequences, leading to financial disaster. If the same person has been named your POA for healthcare, you and your family could be looking at a double-disaster. What’s more, if the same person is also a beneficiary, the potential for conflict and self-dealing gets even worse.

The Power of Attorney is a fiduciary, meaning they are required to put your interests and the interest of the estate ahead of their own. To select a POA to manage your financial life, it should be someone who you trust will always put your interests first, is good at managing money and has a track record of being responsible. Spouses are typically chosen for POAs, but if your spouse is poor at money management, or if your marriage is new or on shaky ground, it may be better to consider an alternate person.

If the wrong person is named a POA, a self-dealing agent could change beneficiaries, redirect portfolio income to themselves, or completely undo your investment portfolio.

The person you name as a healthcare POA could protect the quality of your life and ensure that your remaining years are spent with good care and in comfort. However, the opposite could also occur. Your healthcare POA is responsible for arranging for your healthcare. If the healthcare POA is a beneficiary, could they hasten your demise by choosing a substandard nursing facility or failing to take you to medical appointments to get their inheritance? It has happened.

Most POAs, both healthcare and financial, are not evil characters like we see in the movies, but often incompetence alone can lead to a negative outcome.

How can you protect yourself? First, know what you are empowering your POAs to do. A boilerplate POA limits your ability to make decisions about who may do what tasks on your behalf. Work with your estate planning attorney to create a POA for your needs. Do you want one person to manage your day-to-day personal finances, while another is in charge of your investment portfolio? Perhaps you want a third person to be in charge of selling your home and distributing your personal possessions, if you have to move into a nursing home.

If someone, a family member, or a spouse, simply presents you with POA documents and demands you sign them, be suspicious. Your POA should be created by you and your estate planning attorney to achieve your wishes for care in case of incapacity.

Different grown children might do better with different tasks. If your trusted, beloved daughter is a nurse, she may be in a better position to manage your healthcare than another sibling. If you have two adult children who work together well and are respected and trusted, you might want to make them co-agents to take care of you.

Your estate planning attorney has seen all kinds of family situations concerning POAs for finances and healthcare. Ask their advice and don’t hesitate to share your concerns. They will be able to help you come up with a solution to protect you, your estate and your family.

Reference: Medical Economics (Feb. 3, 2022) “Avoid powers of attorney mistakes”

How Important Is an Estate Plan?

How Important Is an Estate Plan?

Estate planning is preparing for two things: incapacity and death. It includes making sure you’ve conveyed your wishes about medical care in the case of a serious or terminal illness, who you want to receive your possessions when you pass and a series of documents to tell your loved ones your wishes. A recent article from The Street, “Everyone Needs an Estate Plan,” explains how to make this happen.

The foundation of the estate plan is your will, aka Last Will and Testament. It’s used to name several individuals for key roles. One is a guardian for minor children—if you don’t have a will or fail to name a guardian, a court will decide who should raise your children. Another is the executor, the person who will be in charge of overseeing your estate and your instructions. If you have animal companions, you may name a person to be their caretaker. However, you may want to go a step further and create a pet trust to provide funds for their maintenance.

You’ll also want a Living Will. This is a document conveying your wishes, if you are no longer able to make healthcare decisions for yourself. It focuses on end of life care. Do you want to be kept alive with artificial means, and if so, which ones are acceptable? How would you want pain management to be handled? Do you want to donate your organs? Yes, it’s a little scary, but imagine your loved ones in a highly emotional state having to guess what you would have wanted. It’s better for you and your family to know what you would want.

A personalized Power of Attorney. Naming a person as a Power of Attorney lets them handle your financial affairs and act as your agent or representative. However, here’s a pitfall: using a standardized form can lead to trouble. You may want your POA to be able to manage your day-to-day finances, but there may be some things you’d prefer them not to do. A customized POA can be as broad or as narrow as you wish.

Healthcare Power of Attorney and HIPAA Authorization. Information and decision making about healthcare today is complicated today. Your representatives will need to have these documents to speak with your medical care providers, to make decisions and to gain access to your medical records. Without a HIPAA form, you won’t be able to see their medical records, even if you are a sibling or spouse. It’s best to have these documents in place long before they are needed.

The laws about these and other estate planning documents vary from state to state. Therefore, you’ll need to work with an experienced estate planning attorney in your area to make sure that all of your documents are valid. If you own a business or have a complex financial situation, there are many legal methods to protect your assets and convey them to your heirs.

Reference: The Street (Nov. 22, 2021) “Everyone Needs an Estate Plan”

Power of Attorney: Why You’re Never Too Young

When that time comes, having a power of attorney is a critical document to have. The power of attorney is among a handful of estate planning documents that help with decision making, when a person is too ill, injured or lacks the mental capacity to make their own decisions. The article, “Why you’re never too young for a power of attorney” from Lancaster Online, explains what these documents are, and what purpose they serve.

There are three basic power of attorney documents: financial, limited and health care.

You’re never too young or too old to have a power of attorney. If you don’t, a guardian must be appointed in a court proceeding, and they will make decisions for you. If the guardian who is appointed does not know you or your family, they may make decisions that you would not have wanted. Anyone over the age of 18 should have a power of attorney.

It’s never too early, but it could be too late. If you become incapacitated, you cannot sign a POA. Then your family is faced with needing to pursue a guardianship and will not have the ability to make decisions on your behalf, until that’s in place.Meet Our Team CTA Image

You’ll want to name someone you trust implicitly and who is also going to be available to make decisions when time is an issue.

For a medical or healthcare power of attorney, it is a great help if the person lives nearby and knows you well. For a financial power of attorney, the person may not need to live nearby, but they must be trustworthy and financially competent.

Always have back-up agents, so if your primary agent is unavailable or declines to serve, you have someone who can step in on your behalf.

You should also work with an estate planning attorney to create the power of attorney you need. You may want to assign select powers to a POA, like managing certain bank accounts but not the sale of your home, for instance. An estate planning attorney will be able to tailor the POA to your exact needs. They will also make sure to create a document that gives proper powers to the people you select. You want to ensure that you don’t create a POA that gives someone the ability to exploit you.

Any of the POAs you have created should be updated on a fairly regular basis. Over time, laws change, or your personal situation may change. Review the documents at least annually to be sure that the people you have selected are still the people you want taking care of matters for you.

Most important of all, don’t wait to have a POA created. It’s an essential part of your estate plan, along with your last will and testament.

Reference: Lancaster Online (May 15, 2019) “Why you’re never too young for a power of attorney”