What Happens when Both Spouses Die at the Same Time?

There are any number of ways a person can inherit assets from another person. They may inherit assets from a trust, through a will or as a designated beneficiary of an insurance policy or retirement account. However, in each case, says Lake Country News in the article “Simultaneous and close together deaths,” the person inheriting the asset is living, while the person they inherited from has died.

What happens if spouses die either at the same exact time, or at a time that is very close to each other? The answer, as with so many estate planning questions, is that it depends.

The first question is, did both decedents have estate planning documents in place. If so, what directions do the wills give? Are there trusts, and if so, who are the trustees? If they served as trustees for each other’s trusts, did they name a secondary trustee?

If assets were owned as joint tenancy with right of survivorship, the estate of each deceased tenant receives an equal share of the asset, unless it can be proven that a joint tenant survived the other.

Here’s an example: if a parent dies without a will, is survived by two children, but one of the two children dies only four days after the parent’s death, i.e., fewer than 120 hours, in California, the law presumes that the deceased child did not survive the mother. The sole surviving child’s estate receives the entire parent’s intestate estate.

A beneficiary who survives long enough to inherit, however, might die before receiving complete distribution of his or her inheritance.

A trust may provide for distributions to alternative beneficiaries. This is another reason why it is wise to have primary and secondary beneficiaries on all accounts that permit secondary beneficiaries. Not all accounts permit this.

Similarly, a trust may provide for distribution to alternative beneficiaries. Otherwise, unless there has been advance planning, the undistributed inheritance becomes part of the deceased beneficiary’s estate, where it will be distributed either according to the beneficiary’s will, or according to the laws of intestacy of the decedent’s state of residence.

All of these instances are further reasons why it is so important for everyone to have a will and other estate planning documents prepared.

A probate of the beneficiary’s estate may be required, as a result of an undistributed inheritance.

The legal and factual analysis associated with the distribution of a couple who die at the same time or in close proximity to each other varies from case to case. Speak with an experienced estate planning attorney to have an estate plan prepared to avoid your family having to unravel the knotty mess that is created when there is no will, and no estate planning has been done.

Reference: Lake Country News (Aug. 10, 2019) “Simultaneous and close together deaths”

What Goes into an Estate Plan?

The very idea of creating an estate plan can be intimidating, but this article from Brainerd Dispatch, “Navigating your estate plan,” wisely advises breaking down the process into smaller pieces, making it more manageable. By taking it step by step, it’s more likely that you’ll be comfortable getting started with the process.

Start with Beneficiaries. This may be the easiest way to start. If you have retirement accounts, like IRAs, 401(k)s, 403(b)s or other retirement accounts, chances are you have already written down the name of the person who you want to receive your assets, if you die. The same goes for life insurance policies. The beneficiary designation tells who receives the assets on your death. You should also note that there are tax ramifications, if you do not have a beneficiary. Your assets could become taxable five years after you die, without a named beneficiary.

Be aware that no matter what your will says, the name on your beneficiary designations on these accounts determines who gets the assets. You need to check on these to be sure the people you have named are still the people who you want to receive your accounts. You should review the designations every time you review your estate plan, which should be every three or four years.

Where There’s a Will, There’s a Way Forward. The will is a key document in your estate plan. It can be used to minimize taxes on your estate, ensure that your family has the management assistance they need, and, if you have minor children, establish who their guardians should be. Don’t neglect updating your will, whenever there is a big change to the law or changes in your life. Not having a will leaves your family in a terrible position, where they will have to endure unnecessary expenses and added stress. Your assets will be distributed according to the laws of your state, and not according to your own wishes.

Directives for Difficult Times Health care directives give your loved ones direction when a terrible situation occurs. If you become incapacitated, through an accident or serious illness, the health care directive tells your family members what kind of care you want—or do not want. You should also have a health care proxy, so that a person can make medical decisions on your behalf. An estate planning attorney who is licensed in your state will know what forms are accepted.

In addition, you’ll need a financial power of attorney. This allows you to designate someone to step in and manage your finances in the case of incapacity. This is especially important if you are single, because otherwise a court may name someone to be your financial guardian.

What About Trusts? If you own a lot of assets or if your estate is complicated, a trust may be helpful. Trusts are legal entities that hold assets on behalf of a beneficiary or beneficiaries. There are many different types of trusts that are used to serve different purposes, from Special Needs Trusts that are designed to help families plan for an individual with special needs, revocable trusts used to avoid probate and testamentary trusts, which are created only when you die. An estate planning attorney will know which trusts are appropriate for your individual situation.

Reference: Brainerd Dispatch (Aug. 11, 2019) “Navigating your estate plan”

Who Looks Out for the Solo Senior?

She was a bit surprised, when she couldn’t find any. She then realized that it’s the adult children who push their aging parents into long-term care facilities. That’s who usually gets mom or dad to move, asks Market Watch in the article “Who watches out for childless retirees? How ‘solo agers’ can stay happy and safe.”

The adult children are the ones who badger their aging parents to leave their single family home and take up residence in a long-term care or senior living community. Those who don’t have children, or whose children are not a part of their lives, are more likely to encounter serious risks like isolation, financial elder abuse, malnutrition and other dangers.

It is the children who usually instruct mom or dad to hand over the keys to the car, who notice a decline in physical or mental abilities and identify sources for help, oversee their finances and supervise caretakers. A solo person who can no longer care for themselves, isn’t likely to have the ability to conduct a thorough study of possible living situations.

This is a tough but necessary scenario that single seniors need to be aware of. How can you stay safe and happy, while preparing for care you may need in the future?

Start by building a community. Without an extended social network, seniors can find themselves isolated and lonely as friends die or move in or near their grandchildren. By strengthening ties with the remaining relatives and cultivating new friends, especially those who are younger, it’s possible to build a new network. The same thing applies to making friends with neighbors, the people you see in the coffee shop every day and other acquaintances. You don’t need to be best friends with everyone. However, a big network of what are called “weak tie relationships” can be powerful.

Be smart about where you live. A walk-up in a five-story building may be great when you are in your thirties, forties or even fifties. However, at some point, that’s just not a good idea. If you live in the suburbs, what will happen when you can’t drive anymore? Not everyone wants or can afford to live in a planned community. There are some cities that have organized villages for aging in place, where there are services available for seniors, including local transportation to and from the local senior centers. Co-housing is another option, where people build clusters of homes around shared spaces. In some communities, there are “naturally occurring” retirement communities where residents socialize and look out for each other. They might crop up in any kind of living situation, from apartment buildings, condos, townhouses, etc. Don’t overlook the “Golden Girls” lifestyle—sharing a home with other seniors.

Either enlist or if need be, hire future guardians. Estate planning attorneys recommend that all adults have documents in place that permit someone else to make decisions, in case of incapacity at any age. However, for solo seniors, it is especially important to have powers of attorney for finances and health care. Without these documents, someone else who may not even know you will be given control over your finances and health care. Becoming a ward of the court is not an ideal situation for anyone, especially a vulnerable senior.

Choosing someone to take on these roles is not always easy. It may be a younger friend or a trusted relative (preferably younger) may be willing. In California and Arizona, it is possible to hire a licensed fiduciary for this role. Your estate planning attorney may be able to put you in touch with an appropriate professional.

Reference: Market Watch (Aug. 9, 2019) “Who watches out for childless retirees? How ‘solo agers’ can stay happy and safe”

Why Do I Need an Attorney to Help Me with Estate Planning?

Your estate plan can be simple or complicated. The New Hampshire Union Leader’s recent article, “Estate planning is important and may require help from a professional,” says that some strategies are definitely easier to implement—like having a will, for example. Others are more complex, like creating a trust. Whatever your needs, most strategies will probably necessitate that you hire a qualified estate planning attorney. Here are some situations that may require special planning attention:

  • Your estate is valued at more than the federal gift and/or estate tax applicable exclusion amount ($11.4 million per person in 2019);
  • You have minor children;
  • You have loved ones with special needs who depend on you;
  • You own a business;
  • You have property in more than one state;
  • You want to donate to charities;
  • You own valuable artwork or collectibles;
  • You have specific thoughts concerning health care; or
  • You desire privacy and want to avoid the probate process.

First, you need to understand your situation, and that includes factors like your age, health and wealth. Your thoughts about benefitting family members and taxes also need to be considered. You’ll want to have plans in place should you become incapacitated.

Next, think about your goals and objectives. Some common goals are:

  • Providing financial security for your family;
  • Preserving property for your heirs;
  • Avoiding disputes among family members or business partners;
  • Giving to a charity;
  • Managing your affairs, if you are disabled;
  • Having sufficient liquidity to pay the expenses of your estate; and
  • Transferring ownership of your property or business interests.

Ask your attorney about a will. If you have minor children, you must have a will to address guardianship, unless your state provides an alternative legal means to do so. Some people many need a trust to properly address their planning concerns. Some of your assets will also have their own beneficiary designations. Once you have you a plan, review it every few years or when there’s a birth, adoption, death, or divorce in the family.

Reference: New Hampshire Union Leader (July 27, 2019) “Estate planning is important and may require help from a professional”

Your Estate Plan Decides or the State Decides

It’s something that everyone needs, but often gets overlooked. Estate planning makes some people downright uncomfortable. There’s no law that says you must have an estate plan—just laws that will impact how your property is distributed and who will raise your children, if you don’t have a will. Planning is important, says WMUR 9 in a recent article “Money Matters: Estate planning,” if you want to be the one making those decisions.

An estate plan can be simple, if you only own a few assets, or complicated if you have significant assets, more than one home and multiple investments. Some strategies are easier to implement, like a last will and testament. Others can be simple or complex, like trusts. Whatever your needs, an estate planning attorney will be able to give you the guidance that your unique situation requires. Your estate planning attorney may work with your financial advisor and accountant to be sure that your financial and legal plans work together to benefit you and your family.

There are circumstances that require special estate planning:

  • If your estate is valued at more than the federal gift and/or estate tax exclusion, which is $11.4 million per person in 2019
  • You have minor children
  • There are family members with special needs who rely on your support
  • You own a business
  • You own property in more than one state
  • You want to leave a charitable legacy
  • Your property includes artwork or other valuable collectables
  • You have opinions about end-of-life healthcare
  • You want privacy for your family

The first step for any estate plan is a thorough review of the family finances, dynamics and assets. Who are your family members? How do you want to help them? What do they need? What is your tax picture like? How old are you, and how good is your health? These are just a few of the things an estate planning attorney will discuss with you. Once you are clear on your situation, you’ll discuss overall goals and objectives. The attorney will be able to outline your options, whether you are concerned with passing wealth to the next generation, avoiding family disputes, preparing for a disability or transferring ownership of a business.

A last will and testament will provide clear, legal direction as to how your assets should be distributed and who will care for any minor children.

A trust is used to address more complex planning concerns. A trust is a legal entity that holds assets to be used for the benefit of one or more individuals. It is overseen by a trustee or trustees, who can be individuals you name or professionals.

If you create trusts, it is important that assets be retitled so the trust owns the assets and not you personally. If the assets are not retitled, the trust will not achieve your goals.

Some property typically has its own beneficiary designations, like IRAs, retirement accounts and life insurance. These assets pass directly to heirs according to the designation, but only if you make the designations on the appropriate forms.

Once you’re done with your estate plan, make a note on your calendar. Estate plans and beneficiary designations need to be reviewed every three or four years. Lives change, laws change and your estate plan needs to keep pace.

Reference: WMUR 9 (Aug. 1, 2019) “Money Matters: Estate planning”

How Do Trusts Work in Your Estate Plan?

A trust can be a useful tool for passing on assets, allowing them to be held by a responsible trustee for beneficiaries. However, determining which type of trust is best for each family’s situation and setting them up so they work with an estate plan, can be complex. You’ll do better with the help of an estate planning attorney, says The Street in the article “How to Set Up a Trust Fund: What You Need to Know.”

Depending upon the assets, a trust can help avoid estate taxes that might make the transfer financially difficult for those receiving the assets. The amount of control that is available with a trust, is another reason why they are a popular estate planning tool.

First, make sure that you have enough assets to make using a trust productive. There are some tax complexities that arise with the use of trusts. Unless there is a fair amount of money involved, it may not be worth the expense. Once you’ve made that decision, it’s time to consider what type of trust is needed.

Revocable Trusts are trusts that can be changed. If you believe that you will live for a long time, you may want to use a revocable trust, so you can make changes to it, if necessary. Because of its flexibility, you can change beneficiaries, terminate the trust, or leave it as is. You have options. Once you die, the revocable trust becomes irrevocable and distributions and assets shift to the beneficiaries.

A revocable trust avoids probate for the trust, but will be counted as part of your “estate” for estate tax purposes. They are includable in your estate, because you maintain control over them during your lifetime.

They are used to help manage assets as you age, or help you maintain control of assets, if you don’t believe the trustees are not ready to manage the funds.

Irrevocable Trusts cannot be changed once they have been implemented. If estate taxes are a concern, it’s likely you’ll consider this type of trust. The assets are given to the trust, thus removing them from your taxable estate.

Deciding whether to use an irrevocable trust is not always easy. You’ll need to be comfortable with giving up complete control of assets.

These are just two of many different types of trusts. There are trusts set up for distributions to pay college expenses, Special Needs Trusts for disabled individuals, charitable trusts for philanthropic purposes and more. Your estate planning attorney will be able to identify what trusts are most appropriate for your situation.

Here’s how to prepare for your meeting with an estate planning attorney:

List all of your assets. List everything you might want to place in a trust: including accounts, investments and real estate.

List beneficiaries. Include primary and secondary beneficiaries.

Map out the specifics. Who do you want to receive the assets? How much do you want to leave them? You should be as detailed as possible.

Choose a trustee. You’ll need to name someone you trust implicitly, who understands your financial situation and who will be able to stand up to any beneficiaries who might not like how you’ve structured your trust. It can be a professional, if there are no family members or friends who can handle this task.

Don’t forget to fund the trust. This last step is very important. The trust document does no good, if the trusts are not funded. You may do better letting your estate planning attorney handle this task, so that accounts are properly titled with assets and the trusts are properly registered with the IRS.

Creating a trust fund can be a complex task. However, with the help of an experienced estate planning attorney, this strategy can yield a lifetime of benefits for you and your loved ones.

Reference: The Street (July 22, 2019) “How to Set Up a Trust Fund: What You Need to Know”

Advance Planning Key for Alzheimer’s Patients

A retired physician and his wife have allowed a local television station to report their family’s journey with Alzheimer’s over the course of the last four years. The series continues with WCCO CBS Minnesota’s article “’All Lined Up Before You Need It’: Alzheimer’s Association Shares Steps for Estate Planning,” with four steps to take, if you notice that a family member is having memory lapses or trouble with simple tasks.

The Quinn family—Dr. Paul Quinn and his wife Peg—had some tough conversations years ago, when Paul’s memory was better, and when he was able to be completely honest with his wife about his wishes and what the couple would need to do moving forward.

Peg Quinn said that getting everything lined up long before it’s needed, is very important.

If there’s any sign of cognitive decline, there are legal and financial steps that must be pursued. Start with addressing the family budget and projected medical costs for long term care. If possible, gather all family members together for a planning session.

If they live in different parts of the state, or of the country, ask the family members to travel for a weekend family meeting. This is the kind of planning that is better when everyone is physically present.

Start by naming a power of attorney. It needs to be someone who is aware of the situation and will be able to make decisions on your behalf. An estate planning attorney can assist with making this decision.

Next, establish an advance directive with a focus on medical decisions. This may be the toughest part, since it is impossible to know how long someone will live with Alzheimer’s. The average patient lives four to eight years, according to the Alzheimer’s Association. The cost of care can add up fast—as much as $5,000 to $7,000 a month in some cases.

That’s why the next step—selecting an elder law estate planning attorney is so important. Planning for long-term care, qualifying for Medicaid and other benefits, is a complex challenge.

Dr. Quinn expressed his wishes to stay in his home as long as possible. However, his wife admits that he can’t stay focused on any projects for very long. The familiarity of their home makes life much easier for both of them, so they agreed early on to have in-home care, if it’s ever needed.

An estate planning attorney will help the family, by drafting estate planning documents and creating a plan as early as possible. A last will and testament must be created and executed before the person is legally incompetent. The same goes for a power of attorney and any health care power of attorney documents. Medicaid planning should be done as soon as possible, since there is a five-year look back period concerning transferring any assets.

Reference: WCCO CBS Minnesota (July 23, 2019) “’All Lined Up Before You Need It’ : Alzheimer’s Association Shares Steps for Estate Planning”

Estate Planning Smooths Life’s Bumpy Road

It’s too bad that this happened to the Franklin family, but it happens often. A family member dies unexpectedly or becomes incapacitated at a young age and they never did the right planning.  Sometimes worse, they did the right estate planning, but the documents are decades old, out of step with current laws and the power of attorney is so old, that no financial institution will recognize it.

The problems that these scenarios create for loved ones are stressful, expensive and take a fair amount of everyone’s time. Solutions are offered in the article “Planning for the unexpected–4 Steps to get your affairs in order” from the Post Independent.

These four steps will help make the unexpected events of life a little less challenging.

Have a will and other estate planning documents prepared.

A will is a list of instructions to the court that details how you want your possessions to be distributed after you die. It should be drafted by an estate planning attorney who is licensed to practice law in your home state. The will goes through the probate process, which takes care of your legal and financial matters. In some states, the probate process is a simple process. In others, it can be problematic. Your estate planning attorney will be able to advise you about the probate process in your area.

A revocable living trust is a useful estate planning document that is used to establish more control over your assets, while you are alive. It should also be created by an experienced estate planning attorney. At your death, assets held in your trust then pass to heirs and avoid the probate process.

Make sure you title your assets properly.

Once you have a will and any trusts in place, any assets you wish to have placed in the trust need to be titled correctly. If you own a property with someone else and want to be sure your share of that property goes to the other owner, you’ll need to title it jointly.

Don’t forget to review the beneficiary designations that are usually a part of your bank and investment accounts, retirement accounts and insurance policies. Any beneficiary designation will override the will. If you haven’t reviewed beneficiary designations in a long time, now is the time to do so. There is no way to undo a beneficiary designation, once you have died.

Have power of attorney agreements created.

These documents give another person, the “agent,” the power to act on your business, financial and legal affairs, if you are incapacitated. The laws vary from state to state, which is another reason to work with an estate planning attorney licensed in your state. You’ll need these documents:

  • A durable power of attorney
  • A medical durable power of attorney
  • A living will

Prepare a letter of instruction.

This is not a legally binding document, but it can provide loved ones with a great deal of clarity when you have passed. Consider including this information:

  • A list of financial accounts and account numbers and any online usernames and passwords.
  • A list of important documents and where they can be found.
  • The names and contact information for the legal and financial professionals with whom you work.
  • Your final burial and/or funeral wishes.

Once you’re done, review the documents every few years and when there are major events in your life, including births, marriages, divorces, deaths and other “trigger” events. Remember that the laws change, so don’t let too much time go by without a thorough review of your estate plan.

Reference: Post Independent (July 22, 2019) “Planning for the unexpected–4 Steps to get your affairs in order”

How to Plan for Long-Term Care Costs

The odds are that most of us will need long-term care. At least 52% of those over age 65 will need some type of long-term care at some point in our lives, according to a study conducted by AARP. As most of us are living longer, we’ll probably need that care for a longer period of time, as reported in the article “It’s best to plan for long-term care” from the Times Herald-Record.

Here’s the problem: ignore this issue, and it won’t go away. This is a fairly common response for people 55 and older. The size of the problem makes it a bit overwhelming, and the cost to tackle it seems unsolvable. However, not addressing it becomes even more expensive. How can we possibly pay for long-term care insurance?

Here’s a simple example: a 64-year-old woman who broke her ankle in three places. She was healthy and mobile. However, a badly broken ankle required extensive rehabilitation and she was not able to stay in her home. She has been living at a rehabilitation center and the costs are mounting. What could she have done?

There are two basic ways (with a number of variations) to pay for long-term care.

The first and most obvious: purchase a long-term care insurance policy. Only 2.7 million Americans own these policies. They are wise to protect themselves and their families.

Most families put off buying this kind of insurance, because it’s expensive at any age and stage. The average cost is about $2,170, according to the Kiplinger Retirement Report, for about $328,000 worth of insurance. That rate varies, and it should be noted that if you have a chronic condition, you may not be able to purchase a policy at all.

If a local nursing home costs $216,000 per year and you have $328,000 of coverage, you’ll run out of coverage. The average nursing home stay is about two years. As boomers age, the cost of long-term care insurance is rising, while benefits are becoming skimpier, says Kiplinger.

There are some alternatives: a hybrid life insurance plan that includes long-term care coverage.  However, those can be more expensive than regular long-term care insurance. Try about $8,000 a year for a 55-year-old, about $13,000 for a 65-year-old.

Another choice: a Medicaid Asset Protection Trust. You’ll need to work with an estate planning attorney to create and fund this trust long before you actually need it. Your assets must be placed in the trust five years before an application to Medicaid, which will then pay for your care. You don’t have to live in poverty to do this. If the care is for one person, the applicant is permitted to keep about $15,450 of assets. The spouse may also keep a home worth up to $878,000 and assets up to about $120,000. In New York State, you can keep the principle of retirement funds like an IRA or 401(k), as long as you are taking the required distribution withdrawals.

However, what if you have money to pay or need long-term care before you put assets in trust? If you live in New York, Florida and Connecticut, you have what is called “spousal refusal.” The spouse of the person in long-term care can choose not to pay for their cost of care. This can get complicated, and Medicaid will try to get funds for the care. However, an estate planning elder law attorney can negotiate the amount of payment, which may leave the bulk of your estate intact.

These are complicated matters that become very costly, often at a time when you are least able to deal with yet another issue. Speak with an estate planning attorney before you need the care and learn how they can help you protect your spouse and your assets.

Reference: Times Herald-Record (July 22, 2019) “It’s best to plan for long-term care”

What are the Details of the New SECURE Act?

The SECURE Act proposes a number of changes to retirement savings. These include changes to parts of IRAs and 401(k)s. The Act is expected to be passed in some form. Some of the changes look to be common sense, like broadening access to IRAs and 401(k)s, as well as including updating the rules to reflect that retirement is now a longer period of life. However, with these changes come potential limitations with stretch IRAs.

Forbes asks in its recent article “Are Concerns Over Stretch IRAs And The SECURE Act Justified?” You should know that an IRA is a tax-wrapper for your investment that is sheltered from tax. Your distributions can also be tax-free, if you use a Roth IRA. That’s a good thing if you have an option between paying taxes on your investment income and not paying taxes on it. The IRA, which is essentially a tax-shield, then leaves with more money for the same investment performance, because no tax is usually paid. The SECURE act isn’t changing this fundamental process, but the issue is when you still have an IRA balance at death.

A Stretch IRA can be a great estate planning tool. Here’s how it works: you give the IRA to a young beneficiary in your family. The tax shield of the IRA is then “stretched,” for what can be decades, based on the principle that an IRA is used over your life expectancy. This is important because the longer the IRA lasts, the more investment gains and income can be protected from taxes.

Today, the longer the lifetime of the beneficiary, the bigger the stretch and the bigger the tax shelter. However, the SECURE Act could change that: instead of IRA funds being spread over the lifetime of the beneficiary, they’d be spread over a much shorter period, maybe 10 years. That’s a big change for estate planning.

For a person who uses their own IRA in retirement and uses it up or passes it to their spouse as an inheritance—the SECURE Act changes almost nothing. For those looking to use their own IRA in retirement, IRAs are slightly improved due to the new ability to continue to contribute after age 70½ and other small improvements. Therefore, most typical IRA holders will be unaffected or benefit to some degree.

For many people, the bulk of IRA funds will be used in retirement and the Stretch IRA is less relevant.

Reference: Forbes (July 16, 2019) “Are Concerns Over Stretch IRAs And The SECURE Act Justified?”