A Will is the Way to Have Your Wishes Followed

A will, also known as a last will and testament, is one of three documents that make up the foundation of an estate plan, according to The News Enterprises’ article “To ensure your wishes are followed, prepare a will.” As any estate planning attorney will tell you, the other two documents are the Power of Attorney and a Health Care Power of Attorney. These three documents all serve different purposes, and work together to protect an individual and their family.

There are a few situations where people may think they don’t need a will, but not having one can create complications for the survivors.

First, when spouses with jointly owned property don’t have a will, it is because they know that when the first spouse dies, the surviving spouse will continue to own the property. However, with no will, the spouse might not be the first person to receive any property that is not jointly owned, like a car.  Even when all property is jointly owned—that means the title or deed to all and any property is in both person’s names –upon the death of the second spouse, a case will have to be brought to court through probate to transfer property to heirs.

Secondly, any individuals with beneficiary designations on accounts transfer to the beneficiaries on the owner’s death, with no court involvement. However, the same does not always work for POD, or payable on death accounts. A POD account only transfers the specific account or asset.

Other types of assets, such as real estate and vehicles not jointly owned, will have to go through probate. If the beneficiary named on any accounts has passed, their share will go into the estate, forcing distribution through probate.

Third, people who do not have a large amount of assets often believe they don’t need to have a will because there isn’t much to transfer. Here’s a problem: with no will, nothing can be transferred without court approval. Let’s say your estate brings a wrongful death lawsuit and wins several hundred thousand dollars in a settlement. The settlement goes to your estate, which now has to go through probate.

Fourth, there is a belief that having a power of attorney means that they can continue to pay the expenses of property and distribute property after the grantor dies. This is not so. A power of attorney expires on the death of the grantor. An agent under a power of attorney has no power, after the person dies.

Fifth, if a trust is created to transfer ownership of property outside of the estate, a will is necessary to funnel unfunded property into the trust upon the death of the grantor. Trusts are created individually for any number of purposes. They don’t all hold the same type of assets. Property that is never properly retitled, for instance, is not in the trust. This is a common error in estate planning. A will provides a way for property to get into the trust, upon the death of the grantor.

With no will and no estate plan, property may pass unintentionally to someone you never intended to give your life’s work to. Having a will lets the court know who should receive your property. The laws of your state will be used to determine who gets what in the absence of a will, and most are based on the laws of kinship. Speak with an estate planning attorney to create a will that reflects your wishes, and don’t wait to do so. Leaving yourself and your loved ones unprotected by a will, is not a welcome legacy for anyone.

Reference: The News Enterprise (September 22, 2019) “To ensure your wishes are followed, prepare a will.”

Do It Yourself Estate Planning Leads to Bad Outcomes

While the attraction of simplicity and low cost is appealing, the results are all too often disastrous, affirms Insurance News in the article “Mind Your Mouse Clicks: DIY Estate Planning War Stories.” The increasing number of glitches that estate planning attorneys are seeing after the fact has increased, as much as the number of people using online estate planning forms. For estate planning attorneys who are concerned about their clients and their families, the disasters are troubling.

A few clumsy mouse clicks can derail an estate plan and adversely affect the family. Here are five real life examples.

Details matter. One of the biggest and most routinely made mistakes in DIY estate planning goes hand-in-hand with simple wills, where both spouses want to leave everything to each other. Except this typical couple neglected something. See if you can figure out what they did wrong:

John’s will: I leave everything to my wife Phyllis.

Phyllis’ will: I leave everything to my wife Phyllis.

Unless John dies and Phyllis marries someone named Phyllis, this will is not going to work. It seems like a simple enough error, but the courts are not forgiving of errors.

Life insurance mistakes. Jeff owns a life insurance policy and has been using its cash value as a “rainy day” fund. He had intended to swap the life insurance into his irrevocable grantor trust in exchange for low-basis stock held in the trust. The swap would remove the life insurance from Jeff’s estate without exposure to the estate tax three-year rule, and the stock would receive a stepped-up basis at death, leading to tax savings on both sides of the swap.

However, Jeff had a stroke recently, and he’s incapacitated. He planned ahead though, or so he thought. He downloaded a free durable power of attorney form from a nonprofit that helps the elderly. The POA specifically included the power to change ownership of his life insurance.

Jeff put his name in the space designated for the POA. As a result, the insurance company won’t accept the form, and the swap isn’t going to happen.

Incomplete documents. Ellen created an online will leaving her entire probate estate to her husband. It was fast, cheap and she was delighted. However, she forgot to click on the space where the executor is named. The website address for the website company is the default information in the form, which is what was created when she completed the will. The court is not likely to appoint the website as her executor. Her heirs are stuck, unless she corrects this, hoping the court will understand. Hope is a terrible estate plan.

Letting the form define the estate plan. Single parent Joan has a 6-year-old son. Her will includes a standard trust for minors, providing income and principal for her son until he turns 21, at which point he inherits everything. Joan met with a life insurance advisor and applied for a $1 million convertible 20–year term life insurance policy. It will be payable to the trust. However, her son has autism, and receives government benefits. There are no special needs provisions in her will, so her son is at risk of losing any benefits, if and when he inherits the policy proceeds.

Don’t set it and forget it. One couple created online wills, when the estate tax exclusion was $2 million. They created a credit shelter, or bypass, trust to reduce their estate taxes, by allowing each of them to use their estate tax exclusion amount. However, the federal estate tax exclusion today is $11.4 million per person. With $4 million in separate assets and a $2 million life insurance policy payable to children from a previous marriage, the husband’s separate assets will go into the bypass trust. None of it will go to his wife.

An experienced estate planning attorney who is licensed to practice in your state is the best source for creating and updating estate plans, preparing for incapacity and ensuring that tax planning is done efficiently.

Reference: Insurance News Net (Sep. 9, 2019) “Mind Your Mouse Clicks: DIY Estate Planning War Stories”

More Reasons to Review Your Estate Plan

Every estate planning attorney will tell you that they meet with people every day, who sheepishly admit that they’ve been meaning to review their estate plan, but just haven’t gotten to it. Let the guilt go.

Attorneys know that no one wants to talk about death, taxes or illness, says Wicked Local in the article “Five Reasons to Review Your Estate Plan.” However, there are five times when even an appearance before the Queen of England has to come second to reviewing your estate plan.

You have minor children. An estate plan for a couple with young children must do two very important things: address the care and custody of minor children should both parents die and address the management and distribution of the assets that the children will inherit. The will is the estate planning document used to name a guardian for minor children. The guardian is the person who will determine where your children will live and go to school, what kind of health care they receive and make all daily decisions about their care and upbringing.

If you don’t have a will, the court will name a guardian. You may not like the court’s decision. Your children might not like it at all. Having a will takes care of this important decision.

Your estate is worth more than $1 million. While the federal estate plan exemptions currently are at levels that remove federal tax from most people’s estate planning concerns, there are still state estate taxes. Some states have inheritance taxes. Whether you are married or single, if your assets are significant, you need an estate plan that maps out how assets will be left to your heirs and to plan for taxes.

Your last estate plan was created before 2012. There have been numerous changes in state estate tax laws regarding wills, probate and trusts in Massachusetts. This is not the only state that has seen major changes. There have been big changes in federal estate taxes. Strategies that were perfect in the past, may no longer be necessary or as productive because of these changes. While you’re making these changes, don’t forget to deal with digital assets. That includes email accounts, social media, online banking, etc. This will protect your fiduciaries from breaking federal hacking laws that are meant to protect online accounts, even when the person has your username and password.

You have robust retirement plans. Your will and trust do not control all the assets you own at the time of death. The first and foremost controlling element in your asset distribution is the beneficiary designation. Life insurance policies, annuities, and retirement accounts will be paid to the beneficiary named on the account, regardless of what your will says. Part of a comprehensive will review is to review beneficiary designations on each account.

You are worried about long-term care costs. Estate planning does not take place in a vacuum. Your estate plan needs to address issues like your plan, if you or your spouse need care. Do you intend to stay in your home? Are you going to move to live closer to your children, or to a Continuing Care Retirement Community? Do you have long-term insurance in place? Do you want to plan for Medicaid eligibility?

All of these issues need to be considered when reviewing and updating your estate plan. If you’ve never had an estate plan created, this is the time. Put your mind at ease, by getting this off your “to do” list and contact an experienced estate planning attorney.

Reference: Wicked Local (Aug. 29, 2019) “Five Reasons to Review Your Estate Plan”

Living Together Isn’t as Simple as You Think

One reason for the popularity of living together without marriage, is that many in this generation have experienced one or more difficult divorces, so they’re not always willing to remarry, says Next Avenue in the article “The Legal Dangers of Living Together.” However, like many aspects of estate planning, what seems like a simple solution can become quite complex. Unmarried couples can face a variety of problematic and emotionally challenging issues, because estate planning laws are written to favor married couples.

Consider what happens when an unmarried couple does not plan for the possibility of one partner losing the ability to manage his or her health care because of a serious health issue.

If a spouse is rushed to the hospital unconscious and there is no health care power of attorney giving the other spouse the right to make medical decisions on his or her behalf, a husband or wife will likely be permitted to make them anyway.

However, an unmarried couple will not have any right to make medical decisions on behalf of their partner. The hospital is not likely to bend the rules, because if a blood relative of the person challenged the medical facility’s decision, they are wide open to liability issues.

Money is also a problem in the absence of marriage. If one partner becomes incapacitated and estate planning has not been done, without both partners having power of attorney, an illness could upend their life together. If one partner became incapacitated, bank accounts will be frozen, and the well partner will have no right to access any assets. A court action might be required, but what if a family member objects?

Without appropriate advance planning, courts are generally forced to rely on blood kin to take both financial and medical decision-making roles. An unmarried partner would have no rights. If the home was owned by the ill partner, the unmarried partner may find themselves having to find new housing. If the well partner depended upon the ill partner for their support, then they will have also lost their financial security.

Unmarried couples need to execute key estate planning documents, while both are healthy and competent. These documents include a durable power of attorney, a medical power of attorney and a living will, which applies to end of life decisions. A living trust could be used to avoid the problem of finances for the well partner.

Another document needed for unmarried couples: a HIPAA release. HIPAA is a federal health privacy law that prevents medical facilities and health care professionals from sharing a patient’s medical information with anyone not designated on the person’s HIPAA release form. Unmarried couples should ask an estate planning attorney for these forms to be sure they are the most current.

If one of the partners dies, and if there is no will, the estate is known as intestate. Assets are distributed according to the laws of the state, and there is no legal recognition of an unmarried partner. They won’t be legally entitled to inherit any of the assets.

If a married partner dies without a will in a community property state, the surviving spouse is automatically entitled to inherit as much as half the value of the deceased assets.

Beneficiary designations usually control the distribution of assets including life insurance policies, retirement accounts and employer-sponsored group life insurance policies. If the partners have not named each other as beneficiary designations, then the surviving partner will be left with nothing.

The lesson for couples hoping to avoid any legal complications by not getting married, is that they may be creating far more problems than are solved as they age together. An experienced estate planning attorney will be able to make sure that all the correct planning is in place to protect both partners, even without the benefit of marriage.

Reference: Next Avenue (Aug. 28, 2019) “The Legal Dangers of Living Together.”

Don’t Forget to Update Your Estate Plan

There are some people who sign their will once in their life and never change it. They may have executed their estate plan late in life, or after they were diagnosed with a serious disease. However, even if your family life and finances are pretty basic, there are still changes in the law that you may need to incorporate into your estate plan.  Some of the people that you named in your will could also have died or moved away.

Forbes’ recent article, “Why You Should Change Your Will Now,” warns us that if you’ve taken the “one and done” approach to your estate plan, think again. In addition to the reasons already mentioned, your assets may have changed dramatically since you signed your will. The plan you put in place years ago, may not have considered new federal and state estate taxes. Now that you’ve accumulated significant wealth that will be passed on to your children, you might need to review your plans for that wealth for your children.

You may want to include grandchildren to help pay for their college education.

It is also not uncommon for parents to want to protect their children from themselves. This can be because of addiction issues or a lack of financial literacy. If that’s an issue, some parents elect to hold monies in trust for adult children, as a way to ensure that the funds will be there throughout the child’s lifetime.

A person’s estate plan should grow with them over time. An estate plan for a twenty-something may be very basic, but a newly-married couple will want to include provisions for their spouse. Parents need to think about providing for and protecting their children. Adult children have another set of concerns and you need prepare for the possibility of divorcing spouses, poor life choices, addiction issues and just poor money management. There are many stages in life when you may need to readjust the provisions for your children in your estate planning documents.

If you haven’t looked at your will in a while, do it now.

Reference: Forbes (August 27, 2019) “Why You Should Change Your Will Now”

Why Wills Need to be Updated

Lives change, and laws change. People come and go in our lives, through birth, death, marriage and divorce. Change is a constant factor in everyone’s lives. If your estate plan doesn’t keep up to date, says Next Avenue in the article “8 Reasons You May Need to Update Your Will,” you could create real problems for those you love. Here are eight reasons why people need to review their wills to ensure that your estate plan reflects your current life.

Moving to a new home. If you’ve moved to a new state since the last time your will was written, your will needs a review. Remember, wills are administered under the laws of the state where you live, so the new state’s laws apply. An out-of-state will could present issues. If the number of witnesses required to make a will valid in your old state of residence was one, but the new state requires two witnesses, your will could be deemed invalid.

Selling one home and buying another. If your will does not reflect your current address, it’s going to be very difficult for your executor to properly transfer ownership or manage the sale of the house. Most wills incorporate specific language about homes that includes the address.

You’ve done a good job of downsizing. Kudos to you for cleaning out and getting rid of unwanted items. If you no longer own things that are itemized in a will, they’ll be skipped over. However, do you want to give heirs something else? Without specific instructions, they won’t know who gets what.

Did you already give away possessions? Avoid family conflicts by being clear about who gets what. If you already gave your oldest daughter an antique dining room set but your will says it goes to the youngest son, things could become awkward. Similarly, if you gave one child something with a higher market or sentimental value than what you gave to another, it could create tension in the family. Updating your will is an opportunity to adjust these gifts.

Charity relationships change. The same organization that mattered greatly to you ten years ago may not have as much meaning—or may have changed its focus. Update your will to reflect the charitable contributions that matter to you now.

Finances change. If a will spells out exact amounts and the money is gone, or if your accounts have increased, those numbers may no longer be accurate or reflect your wishes. The dollar amounts may create a challenge for your executor. What if you designated a gift of stock to someone that wasn’t worth much at the time, but is worth a small fortune now? Amending a will can ensure that your gifts are of the value that you want them to be.

One child is now your primary caregiver. If one child has dedicated the last five years to taking care of you, you may want to update the document to show your gratitude and compensate them for lost earnings or expenses. If you do, explain your reasons for this kind of change to other children, so that there’s no misunderstanding when the will is read.

A beneficiary has passed away. If you are a surviving spouse, that alone may not be reason to update your will, if—and this is a big if—your will included alternate recipients as a plan for this situation. If there were no alternate recipients, then you will need to revise your will after the death of a spouse. If you listed leaving items to a beneficiary who has died, instructions on how to distribute these items or assets to someone else can be done with an amended will.

Your estate planning attorney will be able to review your will and your estate plan with you to determine what items need to be updated. Your documents may need only a tune-up, and not a complete overhaul, but it is advisable to review estate plans every three or four years.

Reference: Next Avenue (August 22, 2019) “8 Reasons You May Need to Update Your Will”

Electronic Wills Are Here—But Should You Have One?

Florida is one of the early states permitting residents to have wills, along with some other types of estate planning documents, signed and completed electronically and online. This will require remote notarizations and witnesses to appear via certain approved secure video chat services, reports News Chief in the article “Electronic wills are coming, but are they a good idea?”

A movement to pass a similar law failed in 2017, as the result of a veto by then Governor Scott. However, a revised and approved version of the bill passed this summer and has already been signed into law by Governor DeSantis.

Under the new law, notaries will be required to undergo new training in order to be able to conduct executions of electronic wills. Certain qualified and state-approved custodians will oversee safeguarding the completed electronic wills for safekeeping, until the creator of the will dies, at which time the electronic wills may be electronically filed with the appropriate probate court.

Florida is only the fourth state to implement laws related to the execution and storage requirements for electronic wills. One concern is whether other states will honor these documents.

If other states will not accept the electronic wills, then a deceased person’s assets that are subject to probate administration in other states may not go to the person’s intended beneficiaries. Traditional, hard copy will executions typically occur in an attorney’s office, with proper procedures and safeguards put into place by a licensed attorney who practices in this area of the law. Many of these same procedures and safeguards will not be in place for electronic execution of electronic wills.

There is concern that these wills present an enticing target and that many family members will argue that the will is not valid, because of undue influence or a lack of capacity.

The 2019 version of the law has safeguards, that were not in the 2017 law, to protect vulnerable adults. However, until these electronic laws go through probate contests, there will not be much clarity for estate planning attorneys. One last concern—if the documents can be executed electronically, there are greater opportunities for criminals or people with bad intentions to more easily take advantage of vulnerable seniors.

Whether you agree that electronic wills are the future, this is still a very new process that has yet to be tried and tested. There will likely be more questions raised in the next few years about their safety and includes cases that will be taken to court to resolve issues and challenges.

For most people, this is the time to wait and see how the electronic will scenario works out. It may take a few years before the bumps are ironed out. In the meantime, meet with an estate planning attorney to create an estate plan that is on paper and follows a traditional process.

Reference: News Chief (August 23, 2019) “Electronic wills are coming, but are they a good idea?”

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”

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”