Do I Need a Will If I’m Leaving Insurance Policy to a Beneficiary?

Do I Need a Will If I’m Leaving Insurance Policy to a Beneficiary?

If you aren’t thorough with your estate planning, you could create conflict, even with the best of intentions, says a recent article from yahoo! Entertainment titled “Life Insurance Beneficiary vs. Will: Do I Need Both?”

Your life insurance beneficiary designation supersedes your will, so you’ll need to have your life insurance policy and your will aligned to save heirs from stress, confusion, and possible litigation. You can use both life insurance beneficiaries and wills to bequeath assets to others when you die. However, they can work together or against each other, so meticulous planning is key.

Here’s how they work, and which takes precedence.

A life insurance beneficiary is the person or entity, like a charity, named to receive proceeds from your life insurance policy when you die. Your beneficiary will receive payment from the life insurance policy according to the terms of the policy. Who you designate as a beneficiary doesn’t have anything to do with who receives other assets from your estate, such as property or financial accounts.

A will is a legal document declaring who should receive your possessions after death. The will does not define the destination of one specific asset, like a life insurance beneficiary. Instead, it contains a list of the beneficiaries who you wish to receive your assets.

If you have minor children, a will is also used to assign legal guardians, the people who you wish to raise your children in your absence.

Your will needs to go through probate court before beneficiaries receive anything. The probate process confirms your will’s authenticity, interprets the language in the will and authorizes the named executor to carry out your intentions. Your life insurance policy goes directly to your beneficiary without probate review.

Does a life insurance policy override a will? If you designate one person to receive your life insurance policy proceeds and then name a different person in the will to receive the proceeds, the person named in the life insurance policy will win. Any intentions in the will don’t influence or have any legal power over what’s in the will.

Your beneficiary designation in the policy is the sole determining factor, with one exception. If the beneficiary passes away before you and there is no contingent beneficiary named, the life insurance proceeds will go to your estate. Your executor will then disburse assets from the estate according to the beneficiaries named in your will.

Do you need a will? While a will has no influence over your life insurance, it’s a critical part of your estate plan. Probate court uses the will to determine who receives assets and name an executor. Just be sure that your will, any trusts and named beneficiaries on life insurance and other accounts are aligned to avoid creating friction between loved ones. It’s best to have a will to bring cohesion to your estate plan, instead of relying on separate beneficiary designations.

Reference: yahoo! entertainment (Feb. 6, 2023) “Life Insurance Beneficiary vs. Will: Do I Need Both?”

What Should I Ask a Prospective Estate Planning Attorney?

What Should I Ask a Prospective Estate Planning Attorney?

Estate planning has many important advantages like providing for your immediate family, making certain your assets are distributed the way you want, supporting charitable causes, and more.

The Baltimore Post-Examiner’s recent article entitled “5 Questions to Ask an Estate Planning Attorney” provides some questions to help you find the right person to help you with this essential task.

  1. Do You Practice Only in Estate Planning? Specialization is critical, so find a lawyer whose practice focuses on estate planning. This person will be up to date on any law or regulation changes that impact estate planning.
  2. How Long Have You Been an Estate Planning Lawyer? It’s essential to find a lawyer specializing in estate planning. However, it’s also important to work with an experienced attorney who’s been doing this for some time. A lawyer who has practiced in the field for many years will have experience dealing with challenges to estate planning, such as will contests and disinheriting relatives.
  3. Do You Provide Periodic Reviews? Make sure you can come in and have periodic reviews to make possible changes when there are changes in your life.
  4. Are You Able to Help Me Create a Comprehensive Estate Plan? Make sure that you find an attorney who can help you develop an estate plan that include trusts, wills, powers of attorney and life insurance policies. An experienced estate planning attorney will be in the best position to assist you.
  5. What Do You Charge? Understand the pricing. Some attorneys charge a flat fee, some charge by the hour and others charge flat fees for some tasks and by the hour for other tasks. Look for an estate planning attorney who’s upfront and transparent with pricing.

Find a reputable estate planning attorney who can explain the process, help you make the right plans and then walk you through regular reviews.

Reference: Baltimore Post-Examiner (Jan. 24, 2023) “5 Questions to Ask an Estate Planning Attorney”

Do Family Secrets Hurt Estate Planning?

Do Family Secrets Hurt Estate Planning?

A study by the financial services research firm reveals just how big a problem family secrets can be, as reported in Financial Advisor’s recent article “Family Wealth Transfers Undermined by Secrecy.” Most asset holders plan to share their wishes and intentions with family members before they die. However, the research reveals only about half actually do so.

The survey looked at two demographics: affluent investors with more than $250,000 in investable assets and near affluent, investors under age 45 with earnings more than $125,000. Responses were weighted to reflect the distribution of households within these segments, which are wealthier and older than the average U.S. population.

Estate planning attorneys understand the complexity of multi-generational families and are experienced with nuances in family dynamics and the hesitancy of families to share their financial details. After a lifetime of not discussing wealth, it can be difficult to know where to begin.

When asked how well informed heirs are about their parent’s desires and plans for bequests, only 26% said their heirs were very well informed. The greater the wealth, the more likely conversations had taken place. About a third of respondents with more than $1 million in investable assets said heirs knew of their plans.

Those with less than $250,000 to pass on were not sure if heirs knew their wishes or, worse, admitted their heirs had absolutely no idea.

Although skipping generations offers tax advantages, most heirs receive inheritances directly from a parent upon their death. Having an estate plan in order, including wills and trusts agreements, ensures an orderly transfer of wealth.

A key component of successful wealth transfer is communication. However, this survey found a full 25% of respondents never intend to share information about their assets while they are living. This prevents comprehensive planning from taking place, since a number of aspects of wealth planning require active planning and other people to be involved during the parent’s lifetime.

Planning for incapacity requires the involvement of siblings, spouses, and heirs. Advanced directives, power of attorney, health care power of attorney and related documents need to be shared with family members, so they can act on the parent’s behalf. Lacking these documents creates emotional and financial burdens on loved ones.

Because healthcare costs later in life can quickly erode assets, talk with your estate planning attorney about health care and Medicaid planning for long term care to help manage expenses and preserve as much wealth as possible.

Reference: Financial Advisor (Feb. 22, 2023) “Family Wealth Transfers Undermined by Secrecy”

Read more about the article What are Some Best Practices for a Trustee?

What are Some Best Practices for a Trustee?

Forbes’ recent article entitled “How To Be An Effective Trustee” provides some great best practices for those asked to be a trustee.

  1. Make a team. No one person can have all the necessary skills and experience to be an effective trustee. Work with an experienced estate planning attorney, an investment advisor and a tax accountant knowledgeable about the taxation of trusts. It’s a good practice for the trustee to have regular meetings with the team of advisors, both as a team and individually.
  2. Understand the key trust terms. Understand what the trust document says and what the key terms mean. When you are named as trustee, a best practice is to read the entire trust document and go through the document with an attorney and have them explain the key terms. Some of these key terms may involve the following:
  • Distribution standards
  • Special provisions for investing, particularly direction to sell or not to sell certain assets
  • Provisions the trustee should act upon, like the power to appoint a successor; and
  • Knowing whether the beneficiary’s age will trigger distributions or any other actions.
  1. Work productively with beneficiaries. Dealing with beneficiaries is frequently the most challenging part of being a trustee. There can be differences of opinion over distribution amounts, investment strategy, or other matters relating to the management of the trust which can lead to disagreement. To avoid potential issues with beneficiaries and facilitate a productive relationship, trustees should try to practice following:
  • Communication
  • Transparency
  • Education
  • Clear Distributions; and
  • Providing Required Information.
  1. Documentation is Crucial. Although trustees can’t guarantee perfect results, they must act with care, skill and impartiality. They must have rational reasons for their decisions and documenting them is critical because it substantiates the trustee’s decision-making. Some examples of decisions that should be thoroughly documented include:
  • Distribution Decisions
  • Decisions That Set Investment Policy
  • Initiation or Termination of Investments and Hiring and Firing Investment Managers/Funds
  • Principal and Income Allocations;
  • Verbal Communications with Beneficiaries; And
  • Decisions to Hire Experts or Agents, like an attorney or an accountant.

Reference: Forbes (May 31, 2022) “How To Be An Effective Trustee”

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”

Can a Revocable Trust Protect Assets from Creditors?

Can a Revocable Trust Protect Assets from Creditors?

Revocable trusts, sometimes referred to as “living trusts”, do not protect assets from creditors. They are subject to collections actions and lawsuits, and can be included when third parties evaluate personal assets, as explained in a recent article titled “Will Revocable Trusts Protect My Assets From Creditors” from yahoo!

There are many different types of trusts. However, the overwhelming majority fall into one of two categories: revocable or living trusts and irrevocable trusts. With a revocable trust, the grantor has full access to the trust’s terms, beneficiaries and assets at all times. They can change how the trust operates, who benefits from it and even dissolve the trust as they wish. They can also take assets out of the trust.

Contrast this with an irrevocable trust, where the grantor can’t take any of these actions. A revocable trust is considered a legal entity existing as an extension of a person’s financial and estate plan, while an irrevocable trust is an entirely independent legal entity. Once it has been created, the grantor can’t easily change the terms of the trust or access its assets.

What then is the purpose of a revocable trust? As a legal entity, the revocable trust survives the grantor’s death. Assets can then be distributed to heirs without having to go through probate. A revocable trust is also useful in case the grantor becomes incapacitated or is otherwise unable to make decisions about the assets in the trust.

Creditors can access a revocable trust. While the revocable trust is extremely useful as a planning tool, the level of access means the grantor is the legal owner of the trust and its assets. Courts and creditors alike can fully access the contents because its assets are indistinguishable from that of the grantor. If the grantor owes money, any assets in a revocable trust are considered part of their net worth.

A court can order a grantor to pay debts based on what’s in the trust. They are considered part of the grantor’s total assets during a bankruptcy proceeding.

Some irrevocable trusts can be used protect assets. An irrevocable trust is an entirely separate legal entity from its creator. Therefore, the grantor loses control of any assets placed into it, subject to the terms of the trust. However, those assets are then legally considered no longer owned by the grantor.

This depends upon the jurisdiction and the nature of the trust, as state laws vary. Some trusts don’t work for protecting assets, especially not if the grantor has been named as a beneficiary. Some jurisdictions don’t recognize this at all, but it is a viable option under the right circumstances. But if a court determines the grantor moved assets around to keep them away from creditors, it would be considered fraud.

If you’re considering using trusts in your estate plan, speak with an estate planning attorney who can determine which type of trust is best suited to your needs.

Reference: yahoo! (Jan. 27, 2023) “Will Revocable Trusts Protect My Assets From Creditors”

What Is Inheritance Theft?

What Is Inheritance Theft?

Inheritance theft is sometimes a very real issue for those who inherit money, property, or other assets. Inheritance theft laws exist to protect heirs and beneficiaries. If you’re going to receive an inheritance or have received one that was stolen from you, it’s important to know your legal rights and how to get those assets back.

Yahoo’s recent article entitled “Someone Stole My Inheritance. What Are My Options?” says inheritance theft can take different forms, and some are more obvious than others. Some common examples of inheritance theft or inheritance hijacking include:

  • An executor of a will who steals or attempts to conceal assets from the estate inventory
  • A trustee who diverts assets from a trust for their own use or benefit
  • Executors who charge excessive fees for their services
  • Abuse of power of attorney status
  • Use of coercion or undue influence to force a will-maker or trust grantor to change the terms of their will or trust; and
  • Fraud or forgery related to the will or trust document or the destruction of the documents.

Inheritance theft can also occur on a more personal level. Perhaps your sister and you share caregiving duties for your aging mother. Your sister has access to your mother’s bank accounts and—without your knowledge—takes out a large sum while your mother is still living. Your mother then names you as the executor of her will. When she dies, you create an inventory of her assets, as required. While doing so, you discover the missing funds from her bank accounts. If you and your sister were supposed to have inherited those assets jointly, this could be a violation of state inheritance theft laws.

People who commit inheritance theft may be subject to both criminal and civil penalties. A caregiver who steals money from someone’s bank accounts or coerces them into signing over other assets could also be charged with a felony or misdemeanor crime.

The injured heirs or beneficiaries may also opt to pursue a civil claim against someone they believe has stolen their inheritance.

Reference: Yahoo (Jan. 18, 2023) “Someone Stole My Inheritance. What Are My Options?”

Who Gets Graceland after Lisa Marie Presley‘s Death?

Who Gets Graceland after Lisa Marie Presley‘s Death?

The daughter of Elvis and Priscilla Presley, died on January 12 at 54 after suffering a cardiac arrest at her home in Calabasas, California. She will be buried near her late father and son (Ben Keogh) at Graceland, reports NME’s recent article entitled “Lisa Marie Presley’s children to inherit Graceland estate.”

According to People, Lisa Marie’s three daughters – actor Riley Keough, 33, and twins Harper and Finley Lockwood, 14 – will inherit Graceland in Memphis, Tennessee.

She was the sole heir to her father’s estate, which she assumed in 1980 after the Presley’s death in 1977. She owned Elvis’ former home, including his Graceland mansion and its surrounding 13 acres.

The estate was passed to Lisa Marie in trust when she was just nine. That trust officially dissolved on her 25th birthday in 1993, giving her full ownership of Graceland.

Graceland was turned into a public museum in tribute to Elvis in 1982. About 650,000 people visit the estate every year. The property is estimated to be worth $500 million.

Lisa Marie vowed to keep Graceland in the family.

“Graceland was given to me and will always be mine,” she said in a 2013 interview. “And then passed to my children. It will never be sold.”

The family has requested that fans donate to The Elvis Presley Charitable Foundation, instead of giving flowers.

With the news of Lisa Marie’s passing, tributes poured in from the likes of her ex-husband Nicolas Cage, John Travolta, Elvis star Austin Butler and the Michael Jackson estate.

Lisa Marie Presley opened up about bereavement in a 2022 essay for People, writing that “grief does not stop or go away in any sense, a year, or years after the loss.” She lost her son Ben to suicide in 2020.

She added: “Grief is something you will have to carry with you for the rest of your life, in spite of what certain people or our culture wants us to believe.”

Reference: NME (Jan. 17, 2023) “Lisa Marie Presley’s children to inherit Graceland estate”

Why You Need a Secondary Beneficiary

Why You Need a Secondary Beneficiary

A secondary beneficiary, sometimes called a contingent beneficiary, is a person or entity entitled to receive assets from an estate or trust after the estate owner’s death, if the primary beneficiary is unable or unwilling to accept the assets. Secondary beneficiaries can be relatives or other people, but they can also be trusts, charities or other organizations, as explained in the recent article titled “What You Need to Know About Secondary or Contingent Beneficiaries” from yahoo! life.

An estate planning lawyer can help you decide whether you need a secondary beneficiary for your estate plan or for any trusts you create. Chances are, you do.

Beneficiaries are commonly named in wills and trust documents. They are also used in life insurance policies and in retirement accounts. After the account owner dies, the assets are distributed to beneficiaries as described in the legal documents.

The primary beneficiary is a person or entity with the first claim to assets. However, there are times when the primary beneficiary does not accept the assets, can’t be located, or has predeceased the estate owner.

A secondary beneficiary will receive the assets in this situation. They are also referred to as the “remainderman.”

In many cases, more than one contingent beneficiary is named. Multiple secondary beneficiaries might be entitled to receive a certain percentage of the value of the entire estate. More than one secondary beneficiary may also be directed to receive a portion of an individual asset, such as a family home.

Estate planning attorneys may even name an additional set of beneficiaries, usually referred to as tertiary beneficiaries. They receive assets if the secondary beneficiaries are not available or unwilling to accept the assets. In some cases, estate planning attorneys name a remote contingent beneficiary who will only become involved if all of the primary, secondary and other beneficiaries can’t or won’t accept assets.

For example, a person may specify their spouse as the primary beneficiary and children as secondary beneficiaries. A more remote relative, like a cousin, might be named as a tertiary beneficiary, while a charity could be named as a remote contingent beneficiary.

Almost any asset can be bequeathed by naming beneficiaries. This includes assets like real estate (in some states), IRAs and other retirement accounts, life insurance proceeds, annuities, securities, cash and other assets. Secondary and other types of beneficiaries can also be designated to receive personal property including vehicles, jewelry and family heirlooms.

Naming a secondary beneficiary ensures that your wishes as expressed in your will are going to be carried out even if the primary beneficiary cannot or does not wish to accept the inheritance. Lacking a secondary beneficiary, the estate assets will have to go through the probate process. Depending on the state’s laws, having a secondary beneficiary avoids having the estate distribution governed by intestate succession. Assets could go to someone who you don’t want to inherit them!

Talk with your estate planning attorney about naming secondary, tertiary and remote beneficiaries.

Reference: yahoo! life (Jan. 4, 2023) “What You Need to Know About Secondary or Contingent Beneficiaries”

How Does a Trust Work?

How Does a Trust Work?

You’ve worked hard to accumulate financial assets. You’ll need them to support your retirement. However, what if you also want to pass them on to loved ones? Trusts are used to pass assets to the next generation and have many benefits, says a recent article titled “Passing assets through a trust—What to know” from the Daily Bulldog.

“Funded” trusts don’t go through probate, which can be time-consuming, costly, and public. Your last will and testament becomes a public document when it is filed in the courthouse. Anyone can see it, from people wanting to sell your home to thieves looking for victims. Trust documents are not public, so no one outside of the grantor and the trustee knows what is in the trust and when distributions will be made. A trust also gives you the ability to be very specific about who will inherit assets in the trust, and when.

An estate planning attorney will help establish trusts, ensuring they are compliant with state law. There are three key questions to address during the trust creation process.

Who will serve as a trustee? There are several key roles in trusts. The person who creates the trust is the grantor of the trust. They name the trustee—the person or company charged with managing the trust’s assets and carrying out the instructions in the trust. You might choose a loved one. However, if they don’t have the knowledge or experience to manage the responsibilities, you could also name a corporate fiduciary, such as a bank or trust company. These entities charge for their services and usually require a minimum.

When will distributions be made? As the grantor, you get to decide when assets will be distributed and the amount of the distribution. You might want to keep the assets in the trust until the beneficiary reaches legal age. You could also structure the trust to make distributions at specific ages, i.e., at 30, 35 and 40. The trust could even hold the assets for the lifetime of the beneficiary and only distribute earned income. A large part of this decision has to do with how responsible you feel the beneficiaries will be with their inheritance.

What is the purpose of the trust? The grantor also gets to decide how trust assets should be used. The trust could designate broad categories, such as health, education, maintenance and support. The trust can be structured so the beneficiary needs to ask the trustee for a certain amount of assets. Other options are to structure the trust to provide mandatory income, once or twice a year, or tie distributions to incentives, such as finishing a college degree or purchasing a first home.

An estate planning attorney will explain the different types of trusts and which one is best for your unique situation. There are many different types of trusts. You’ll want to be sure to choose the right one to protect yourself and your loved ones.

Reference: Daily Bulldog (Dec. 24, 202) “Passing assets through a trust—What to know”