When Should I Start My Estate Planning?

Only 42% of Americans have a will or other estate planning documents, according to a 2017 Caring.com study. Among parents of children under 18, only 36% have created a will.

USA Today’s recent article, “Estate planning: 6 steps to ensure your family is financially ready for when you die,” explains that if you die without a will, state laws will decide what happens to your property or who should be legally responsible for minor children. That might be OK in some circumstances, but in others, a grandchild with special needs might not receive the resources you want him to have, or an estranged family member might get your house.

For some reason, people believe that if they don’t do anything, things will “work out.” They often do not. Here is what you should consider:

Create a will. This document states who should get your money and possessions, as well as who would become a guardian to your minor children, if both parents die.

A living will. This legal document states what medical procedures you want or don’t want, if you’re incapacitated and can’t speak for yourself, such as whether to continue life-sustaining treatment. Powers of attorney let you appoint someone you trust to make legal, financial and health care decisions for you, if you are unable.

Trust. This is a legal entity that holds any property you want to leave to your beneficiaries. With a trust, your family won’t have to go through probate. Trusts also let you to set up instructions for how and when property is distributed. A trustee will manage the trust. Make sure you let people know, when you’ve designated them as a trustee. Name a secondary trustee, in case the primary trustee cannot or will not serve.

Beneficiaries. If you have investment accounts and retirement plans like a 401(k), make certain that the individual you’ve listed as the beneficiary is the person you want to receive those funds.  Remember to appoint a contingency or secondary beneficiary, just in case.

Work with an experienced attorney. Estate planning can be complicated, so get some professional legal help.

End-of-life planning isn’t really fun, but it’s necessary, if you want to have full control over your life and your assets.

Reference: USA Today (April 1, 2019) “Estate planning: 6 steps to ensure your family is financially ready for when you die”

Estate Planning with Loved Survivors In Mind

There is a strong need for clarity regarding the rules about what happens when a spouse from a second marriage, who is not an owner of the home, wants to remain in the home after the death of the owner. A kind-hearted practice is to allow the surviving spouse to remain in the home and enjoy the memories the couple shared, says The Union in the article “Estate planning from the heart.”

Giving the surviving spouse the ability to remain in the home, honors the relationship of the spouse with the decedent. It is an act of kindness. However, it does need to be made legally enforceable, in case there are any challenges. Several considerations need to be evaluated in the estate plan:

Can the surviving spouse manage the cost of the home? This may include a monthly mortgage payment, property taxes, homeowner’s dues, insurance, yard upkeep, interior and exterior maintenance and any repairs that are needed to keep the home working.

Another concern is whether the surviving spouse will continue to be able to maintain the home in the immediate and distant future.

The surviving spouse’s health, including physical and mental abilities, needs to be considered. Will the survivor be able to manage if dementia strikes, or if they are afflicted by a serious illness and left in poor health? All of these challenges need to be considered, when drafting language regarding the rights of a person to remain in the decedent’s home. For instance, if a person is not mentally competent to live on their own, health problems or the declining condition of the property may arise.

A standard of care needs to be made regarding home maintenance and update. It may get very specific, including details like pet care and clean-up, internal cleanliness, the presence of roommates or boarders and an annual or semi-annual inspection to be sure that the home remains in good condition.

The most common problem for a surviving spouse is the financial ability to remain in the home and pay the bills. One solution may be to permit the survivor to stay in the house for two years, creating a trust that can support the cost of maintaining the home during the hardest period of mourning. This gives the surviving spouse time to recover and adjust to the loss.

If the surviving spouse does not have the mental capacity to remain in the house, the choices are difficult. Ideally, both spouses are involved in planning for this possibility, long before the owner of the property dies. There is nothing pleasant or easy about this. However, it must be done. Ignoring it, makes a bad situation worse. Will the person need care, how will that care be paid for, etc.? Don’t leave it for the family to manage.

In the case of a second marriage, leaving the house to an individual who does not have the ability to manage it, creates a difficult situation, unless the decedent is able to leave enough assets in trust for the surviving spouse to maintain the home. There should be no assumption of the ability of the surviving spouse to care for the home, as an unexpected illness or accident could make a person who is healthy at the time of the signing of the agreement, change to one who needs a great deal of help.

The key to a surviving non-owner spouse is to address the “what-if’s” early on, in the context of the estate plan. A plan should be put in place, which may involve trusts or other estate planning tools, to allow the surviving spouse to remain in the home, if that is the couple’s wish, and a plan “A,” “B,” and “C” for the unexpected events that occur in the course of aging.

An estate planning attorney will be able to create a plan that makes sense for the spouse, the surviving spouse and the heirs. A family meeting will be helpful to ensure that everyone involved knows what the plan is, so there are no misunderstandings, and all can act from a place of kindness.

Reference: The Union (April 7, 2019) “Estate planning from the heart”

How Do I Make the Right Estate Planning Moves When I Divorce?

The Journal Enterprise explains in its recent article, “5 Estate Planning Moves If You Are Getting Divorced,” that the following tips will help you get your plans in order, so your final wishes will be carried out later.

Medical Power of Attorney. This is also called a healthcare proxy. This person is named to make decisions on your medical care, if you’re ill or injured and can’t state your medical care decisions. Unless you make the change, your ex-spouse will have this right.

Financial Power of Attorney. Like a healthcare proxy, this is someone you select to take charge, if you become incapacitated. This person has authority over your financial decisions, and it means they have the authority to pay your bills, access your bank and investment accounts, collect and cash your paychecks and make financial decisions for you. You want to be certain that your assets are protected, and your financial obligations are met, while you’re unable to act on your own behalf. Most people name a spouse, but if you get divorced and don’t switch this designation, your spouse will still be your financial power of attorney and will retain access to your finances.

Create a List of Things to Change After Your Divorce. A divorce can freeze some assets and accounts, which remains in effect until it’s finalized. Therefore, you won’t be able to change the beneficiary on life insurance policies, pensions and other types of accounts. Ask your estate planning attorney to find out exactly what accounts will be affected. Once you know which ones are frozen, you should make a list to ensure you won’t neglect to change them, when the divorce is finalized.

Modify Your Will. In some states, you may not be permitted to create a new will, but your attorney should still be able to help you make the necessary changes. You’ll want to review your heirs. If you do have minor children and you have sole custody, you may want to designate another person as their guardian. If you named your spouse as executor of your will, you may want to consider changing that.

Modify Your Trust. You may have a revocable living trust, in addition to a will. One of the advantages of a revocable trust is that it doesn’t go through probate, so your heirs get a bigger inheritance more quickly. If you have a revocable trust, talk to your attorney about changing it after your divorce.

If you don’t make these changes at the time of your divorce, your assets may not go to the right beneficiaries, or your ex-spouse may end up with rights you didn’t intend.

Reference: Journal Enterprise (March 20, 2019) “5 Estate Planning Moves If You Are Getting Divorced”

Why Would a Guy Like Me Need a Will?
Wills do not have to be complicated, but they should be done correctly.

Why Would a Guy Like Me Need a Will?

Wills don’t have to be complicated, but it’s best to work with a seasoned estate planning attorney. Wills must be dated, signed, witnessed and notarized. If you don’t have a will, it delays the process considerably and may delay payment of the deceased’s assets to his or her heirs. To eliminate some of the mystery from the will creation process, here are several items that all wills need to have to be legally binding. The Daily Advertiser’s recent article, “Where there is a will, there is a plan in place“ provides some definitions for key concepts and reminders for the estate planning process.

Testator. The creator of the will must provide his name, address and intention to create a distribution process for his assets. He must also state that the will being made is his last will and testament, revoking any other prior wills. Revocation of prior wills is important to show that the decisions made in the current will are final and the recent date on the will evidences how current the will is and to know which will (if there are others) supersedes all others.

Debts. The will must explain how any outstanding bills will be paid. These include the funeral costs, medical costs, taxes, court costs for settling the estate, and any other expenses the deceased may have at his death.

Heirs. A will should detail who gets what. Specific bequests should state a full description of the physical asset or, if money is to be distributed, then a percentage of the estate’s value or specific amount should be listed. Most testators don’t know the effect that death taxes or final expenses will have on an estate. Therefore, percentages work better, because it’s a percentage of what is available to be distributed.

Executor. This is the person who will take the will through the probate process, account for the decedent’s personal property, pay taxes and debts, and distribute the assets to the heirs, according to the will. Choosing an executor is an important decision. He or she should be trustworthy and knowledgeable about financial matters.

Guardian. A guardian needs to be named to care for minor children. This person should mirror the parents’ values and ideas as to the care and raising of the minor children. A relative or parent shouldn’t be selected just based on kinship. If a guardian isn’t selected, the court will choose one, and that person may not be capable of handling young children over the long-term.

Funeral Arrangements. You may not want a big expensive funeral, but without specific instructions, your funeral arrangements might be overly grand and out of character with your personality. Just add a paragraph detailing your wishes.

Reference: Daily Advertiser (March 10, 2019) “Where there is a will, there is a plan in place“

Iconic Designer Leaves a Fortune for Beloved Cat

The Burmese cat owned by Lagerfeld stands to inherit a sizable amount of the designer’s fortune, estimated at some $300 million, according to a report from CBS News titled “Karl Lagerfeld’s cat to inherit a fortune, but may not be richest pet.” The cat, named Choupette, was written into his will in 2015, according to the French newspaper Le Figaro.

Before Lagerfeld died on Feb. 19, the cat already had an income of her own, appearing in ads for cars and beauty products. She has nearly 250,000 followers on Instagram and is an ambassador for Opel, the French car maker. She is also the subject of two books. Choupette has had her own line of makeup for the beauty brand Shu Uemura.

Lagerfeld was a German citizen, but he and Choupette were residents of France, where the law prohibits pets from inheriting their human owner’s wealth. German law does permit a person’s wealth to be transferred to an animal.

There are three approaches that Lagerfeld might have taken to ensure that his beloved cat would be assured of her lifestyle, after his passing. One would have been to create a foundation, whose sole mission is to care for the cat, with a director who would receive funds for Choupette’s care.

A second way would be to donate money to an existing nonprofit and stipulate that funds be used for the cat’s care. A third would be to leave the cat to a trusted individual, with a gift of cash that was earmarked for her care.

It is not uncommon today for people to have pet trusts created to ensure that their furry friends enjoy a comfortable lifestyle, after their humans have passed. Estate laws in the U.S. vary by state, but they always require that a human have oversight over any funds or assets entrusted to a pet. Courts also have a say in this. There are reasonable limits on what a person can leave to a pet. A court may not honor a will that seeks to leave millions for the care of a pet. However, it has happened before.

Real estate tycoon Leona Hemsley left many people stunned, when she left $12 million for her Maltese dog. In 1991, German countess Carlotta Liebenstein left her dog Gunther IV a princely sum of $80 million. To date, Gunther remains number one on the “Top Richest Pets” list.

For pets who are beloved parts of regular families and not millionaires in their own right, an estate planning attorney will be able to help you plan for your pet’s well-being, if it should outlive you. Some states permit the use of a pet trust, and a no-kill shelter may have a plan for lifetime care for your pet. You’ll need to make a plan for a secure place for your pet and provide necessary funds for food, shelter, and medical care.

Reference: CBS News (Feb. 21, 2019) “Karl Lagerfeld’s cat to inherit a fortune, but may not be richest pet”

Can A Cell Phone Video Become a Will?
Old woman making a statement with her smartphone

Can A Cell Phone Video Become a Will?

What if a grandmother made a statement, while in an intensive care unit, that she wanted everything she owned to go to a grandchild and a brother-in-law? What if that statement was captured on a cellphone as a video? The question was a real one, posed by a reader of My San Antonio in the article “Can a video be used as a Will?”

There are two reasons why a cellphone video is unlikely to be accepted as a will by any court. One is that the cellphone video does not follow the formality of how a will is created and executed. Another is the statute of frauds, which basically says that to be lawfully valid, certain promises must be in writing.

Not only does a will need to be in writing, it must show clear intent to dispose of assets after death. The writing must be dated and signed by the person who is making the promise (the testator). If the will is written by the testator in his or her handwriting, it is known as a “holographic” will. If the will is typed or in someone else’s handwriting other than the testator, which is known as a “formal will,” then it must also be signed by two independent witnesses and must be notarized. The person who is having the will created (again, the testator), must also have legal capacity for the will to be valid.

In some states, including Texas, there was a time when a spoken will, known an a “nuncupative will” could have been recognized. However, that is no longer the case and a verbal will is no longer valid. Even when a nuncupative will was accepted, it was only accepted for inexpensive personal effects, not large assets or real property.

Some states, including Florida and Nevada, now allow a person to make a will online or on their computer and never have it transferred to paper. These are called “digital” or “electronic” wills. In these cases, e-signatures are allowed to be used. Other states have considered bills allowing digital wills, but the bills did not pass. The Florida law allows the digital will to be e-signed, but it must be witnessed by two independent individuals and it must be e-notarized. It should be noted that the will process is not permitted to be used by a person, who is in an end-stage illness or who is legally considered a “vulnerable adult.”

In the state of Texas, the grandmother in the example above is considered to have died without a will, meaning that she died “intestate.” Texas law will determine how her assets are distributed, and that will depend on her relationships and her survivors. If she was married and all children are from that marriage, her assets go to her spouse. If she was married and had children from a prior marriage, her assets are split unevenly between those children and her spouse. If there is no spouse, assets go to her children. There is a tremendous burden placed on the heirs of those who die without a will, since it does take a long time to figure out who their heirs are.

If she had a properly executed legal will, all these issues would be moot. Anyone who owns a home needs to have a will, and this should have been something that was taken care of, long before she became ill.

For more information about Utah’s laws regarding video wills, consult an estate planning attorney.

Reference: My San Antonio (Feb. 18, 2019) “Can a video be used as a Will?”

Spare Your Family From a Feud: Make Sure You Have a Will

If for no other reason than to avoid fracturing the family, as they squabble over who gets Aunt Nina’s sideboard or Uncle Bruno’s collection of baseball cards, everyone needs a will. It is true that having an estate plan created does require us to consider what we want to happen after we have died, which most of us would rather not think about.

However, whether we want to think about it or not, having an estate plan in place, and that includes a will, is a gift of peace we give to our loved ones and ourselves. It’s peace of mind that our family is being told exactly what we want them to do after we pass, and peace of mind to ourselves that we’ve put our plan into place.

A recent article from Fatherly, “How to Write a Will: 8 Tips Every Parent Needs to Know,” starts with the basic premise that a will prevents family squabbles. Families fight, when they don’t have clear direction of what the deceased wanted. That’s just one reason to have a last will and testament. However, there are other reasons.

A will is one way to ensure that your property is eventually distributed as you wish. Without a will, your estate is administered as an “intestate estate,” which means the state’s laws will determine who receives your assets after you pass. In some states, that means your spouse gets half of your estate, with your parents getting the rest (if there are no children). If the parents have died and there are no children, the rest of the estate may go to your siblings.

Most people—some studies say as many as 60% of Americans—don’t have a will. It’s hard to say why they don’t: maybe they don’t want to accept their own mortality, maybe they don’t understand what will happen when they die without a will, or perhaps they want to wreak havoc on their families. However, having a will is essential.

Don’t delay. If you don’t have a will in place, stop putting it off. Creating a will gives you the opportunity to effectuate your wishes, not that of the state. What if you don’t want your long-lost brother showing up just to receive a portion of your estate? If you don’t want someone to receive any of your assets, you need to have a will. Otherwise, there’s no way to know how the distribution will play out.

Be thoughtful about how you distribute your assets. If you have children and your will gives them your assets when they reach 18, will they be prepared to manage without blowing their inheritance in a month? A qualified estate planning attorney will be able to help you create a plan for distributing your wealth to children or other heirs in a sequence that will match their financial abilities. You may want to create a trust that will hold the assets, with a trustee who can ensure that assets are distributed in a wise and timely manner.

Every family is different, and today’s families, which often include children from prior marriages, require special planning. If you have remarried and have not legally adopted your spouse’s children from a previous marriage, they are not your legal heirs. If you want to make sure they inherit money or a specific asset, you’ll need to state that clearly in your will. If you are not married to your partner, they will not have any rights to your estate, unless a will is created that directs the assets you want them to inherit.

Parents of young children absolutely need a will. If you do not, and both parents pass away at the same time, their future will be determined by the court. They could end up in foster care, while awaiting a court decision. Battling grandparents may create a tumultuous situation. The court could also name a guardian who you would never have chosen. A will lets you decide.

Speak with an estate planning attorney to make sure you have a will that is properly prepared and follows the laws of your state. You also want to have a power of attorney and a health care agent named. Having these plans made before you need them, gives you the ability to express your wishes in a way that can be legally enforced.

Reference: Fatherly (Feb. 6, 2019) “How to Write a Will: 8 Tips Every Parent Needs to Know”

When Was the Last Time You Talked with Your Estate Planning Attorney?
48479279 - what you need to know

When Was the Last Time You Talked with Your Estate Planning Attorney?

If you haven’t had a talk with your estate planning attorney since before the TCJA act went into effect, now would be a good time to do so, says The Kansas City Star in the article “Talk to estate attorney about impacts of Tax Cuts and Jobs Act.” While most of the news about the act centered on the increased exemptions for estate taxes, there are a number of other changes that may have a direct impact on your taxes.

Start by looking at any wills or trusts that were created before the tax act went into effect. If any of the trusts use formulas that are tied to the federal estate tax exemption, there could be unintended consequences because of the higher exemption amounts.

The federal estate tax exemption doubled from $5.49 million per person in 2017 to $11.18 million per person in 2018 (or $22.36 million per couple). It is now $11.2 million per person in 2019 (or $22.4 million per couple).

Let’s say that your trust was created in 2001, when the estate tax exemption was a mere $675,000. Your trust may have stipulated that your children receive the amount of assets that could be passed free from federal estate tax, and the remainder, which exceeded the federal estate tax exemption, goes to your spouse. At the time, this was a perfectly good strategy. However, if it hasn’t been updated since then, your children will receive $11.4 million and your spouse could be disinherited.

Trusts drafted prior to 2011, when portability was introduced, require particular attention.

Two other important factors to consider are portability and step-up of cost basis. In the past, many couples relied on the use of bypass or credit shelter trusts that pay income to the surviving spouse and then eventually pass trust assets on to the children, upon the death of the surviving spouse. This scenario made sure to use the first deceased spouse’s estate exemption.

However, new legislation passed in 2011 allowed for portability of the deceased spouse’s unused estate exemption. The surviving spouse’s estate can now use any exemption that wasn’t used by the first spouse to die.

A step-up in basis was not changed by the TCJA law, but this has more significance now. When a person dies, their heir’s cost basis of many assets becomes the value of the asset on the date that the person died. Highly appreciated assets that avoided income taxes to the decedent, could avoid or minimize income taxes to the heirs. Maintaining the ability for assets to receive a step-up in basis is more important now, because of the size of the federal estate tax exemption.

Beneficiaries who inherit assets from a bypass or credit shelter trust upon the surviving spouse’s death, no longer benefit from a “second” step-up in basis. The basis of the inheritance is the original basis from the first spouse’s death. Therefore, bypass trusts are less useful than in the past, and could actually have negative income tax consequences for heirs.

If your current estate plan has not been amended for these or other changes, make an appointment soon to speak with a qualified estate planning attorney. It may not take a huge overhaul of the entire estate plan, but these changes could have a negative impact on your family and their future.

Reference: The Kansas City Star (Feb. 7, 2019) “Talk to estate attorney about impacts of Tax Cuts and Jobs Act”

How Do I Prepare my Parents for Alzheimer’s?
Concerned aged mother and adult daughter discuss updating their estate planning documents and explore their options with regards to Alzheimer's

How Do I Prepare my Parents for Alzheimer’s?

Can your mom just sell her house, despite her diagnosis of Alzheimer’s?

The (Bryan TX) Eagle reports in the recent article “MENTAL CLARITY: Shining a light on the capacity to sign Texas documents” that the concept of “mental capacity” is complicated. There’s considerable confusion about incapacity. The article explains that different legal documents have a different degree of required capacity. The bar for signing a Power of Attorney, a Warranty Deed, a Contract, a Divorce Decree, or a Settlement Agreement is a little lower than for signing a Will. The individual signing legal documents must be capable of understanding and appreciating what he or she is signing, as well as the effect of the document.

The answer the question of whether the mom can sign the deed to her house over to the buyer.  is likely “yes.” She must understand that she’s selling her house, and that, once the document is signed, the house will belong to someone else. A terminal diagnosis or a neurodegenerative disease doesn’t automatically mean that an individual can’t sign legal documents. A case-by-case assessment is required to see if the document will be valid.

The fact that a person is unable to write his or her name doesn’t mean they lack capacity. If a senior can’t sign her name (possibly due to tremors or neurodegeneration), she can sign with an “X”. She could place her hand on top of someone else’s and allow the other person to sign her name. If this is completed before witnesses and the notary, that would be legal.

A hard part of Alzheimer’s is that a person’s mental clarity can come and go. Capacity can be fluid in the progress of a neurodegenerative or other terminal disease. Because of this, the best time to sign critical documents is sooner rather than later. No one can say the “window of capacity” will remain open for a certain amount of time.

Some signs should prompt you to move more quickly. These include things like the following:

  • Short-term memory loss;
  • Personality changes (e.g., unusual anger);
  • Confusing up or forgetting common-usage words and names; and
  • Disorientation and changes in depth perception.

Any of the signs above could be caused by Alzheimer’s, dementia, or many other problems. Talk to your, or your parent’s, physician and an elder law attorney. He or she can discuss the options, document your parent’s legal capacity, and get the right documents drafted quickly. Your elder law attorney can also give you information about planning for long term care options to consider and can help you understand the costs associated with long term care. 

Here’s Why You Need an Estate Plan in 2019

The New Year sees young adult clients calling estate planning attorney’s offices. They are ready to get their estate plans done because this year they are going to take care of their adult responsibilities. That’s from the article “Estate Planning Resolutions for 2019: How To Be A Grown-Up in The New Year” in Above The Law. It’s a good thing, especially for parents with small children. Here’s a look at what every adult should address in the New Year:

Last Will and Testament: Talk with a local attorney about distributing your assets and the guardianship of your young children. If you’re over age 18, you need a will. If you die without one, the laws in your state will determine what happens to your assets, and a judge, who has never met you or your children, will decide who gets custody. Having a last will and testament prevents a lot of problems, including costs, for those you love.

Power of Attorney. This is the document used to name a trusted person to make financial decisions if something should happen and you are unable to act on your own behalf. It could include the ability to handle your banking, file taxes and even buy and sell real estate.

Health Care Proxy. Having a health care agent named through this document gives another person the power to make decisions about your care. Make sure the person you name knows your wishes. Do you want to be kept alive at all costs, or do you want to be unplugged? Having these conversations is not pleasant, but important.

Life Insurance. Here’s when you know you’ve really become an adult. If you pass away, your family will have the proceeds to pay bills, including making mortgage payments. Make sure you have the correct insurance in place and make sure it’s enough.

Beneficiary Designations. Ask your employer for copies of your beneficiary designations for retirement accounts. If you have any other accounts with beneficiary designations, like investment accounts and life insurance policies, review the documents. Make sure a person and a secondary or successor person has been named. These designated people will receive the assets. Whatever you put in your will about these documents will not matter.

Long-Term Care and Disability Insurance. You may have these policies in place through your employer, but are they enough? Review the policies to make sure there’s enough coverage, and if there is not, consider purchasing private policies to supplement the employment benefits package.

Talk with your parents and grandparents about their estate plans. Almost everyone goes through this period of role reversal, when the child takes the lead and becomes the responsible party. Do they have an estate plan, and where are the documents located? If they have done no planning, including planning for Medicaid, now would be a good time.

Burial Plans. This may sound grim, but if you can let your loved ones know what you want in the way of a funeral, burial, memorial service, etc., you are eliminating considerable stress for them. You might want to purchase a small life insurance policy, just to pay for the cost of your burial. For your parents and grandparents, find out what their wishes are, and if they have made any plans or purchases.

Inventory Possessions. What do you own? That includes financial accounts, jewelry, artwork, real estate, retirement accounts and may include boats, collectible cars or other assets. If there are any questions about the title or ownership of your property, resolve to address it while you are living and not leave it behind for your heirs. If you’ve got any unfinished business, such as a pending divorce or lawsuit, this would be a good year to wrap it up.

The overall goal of these tasks is to take care of your personal business. Therefore, should something happen to you, your heirs are not left to clean up the mess. Talk with an estate planning attorney about having a will, power of attorney and health care proxy created. They can help with the other items as well.

Reference: Above The Law (Jan. 8, 2019) “Estate Planning Resolutions for 2019: How To Be A Grown-Up in The New Year”