Why Everyone Needs an Estate Plan

Financial planners know that most people need to have estate plans, no matter how much or even how little money they have, as explained in this recent article “I’m a financial planner, and there are 3 reasons everyone needs an estate plan no matter how much money you have” from Business Insider. An estate plan includes healthcare directives and identifies guardians for minor children in the event you and your spouse die unexpectedly. It also can be created to avoid your family from having to go through probate court.

Skipping this part of your overall financial and legal life could put you, your assets and your family members at risk. Estate planning is done to protect you and your loved ones. That’s just one reason why everyone needs an estate plan. Having an estate plan protects you while you are living.

An estate plan is more than just a will or a trust. The two most common tools in an estate plan are a will and trust, but that’s just the beginning. A will, or last will and testament, is the document that provides the instructions for your heirs and beneficiaries to follow after you die. Trusts are used to protect assets and enforce your wishes, after you’re gone. However, a good estate plan should also include these documents:

  • An advance healthcare directive or healthcare proxy. These documents stipulate how you want to be treated, if you are alive but so sick or injured that you can’t provide directions. You may want to have a Do Not Resuscitate Order (DNR).
  • Powers of attorney. This legal document outlines who can represent you in legal, medical or financial matters, if you are not able to do so.

The right documents help avoid probate court. If you don’t have a will, any property or possessions must go through the probate system. Your documents and information about your assets become part of the public record and can be seen by anyone. Going through probate opens the door to litigation and disputes, which can further delay settling your estate. Having a will and the proper trusts gives clarity to heirs about what you want.

An estate plan protects your children. If you don’t have a will, a court names the guardian who will raise your children. Instead, decide who you would want. Make sure the person you want to care for your children will accept this responsibility. Trusts are a way to preserve assets for your children. The trust is managed by a trustee after you die and can stipulate specific rules and uses for the assets. For instance, you can provide a certain amount of money for the children, until they reach age 18. At that point, your trust could instruct the trustee to use the money for college expenses. You can be as specific as you wish.

Meet with an estate planning attorney familiar with the laws of your state. An estate planning attorney will know the estate and tax laws that apply to you and your family.

Reference: Business Insider (June 12, 2020) “I’m a financial planner, and there are 3 reasons everyone needs an estate plan no matter how much money you have”

Grandson of Walt Disney’s Longstanding Inheritance Battle

Even visionary Walt Disney could not have imagined the struggle his grandson Bradford Lund has endured trying to claim his share of the Disney family fortune, reports the Daily Bulletin in a recent article titled “Walt Disney’s grandson locked in legal battle for personal freedom, millions in inheritance.”

It’s been fifteen years since the start of Lund’s estate battle with estranged family members, probate and courts to prove that he is mentally able to manage an inheritance of hundreds of millions of dollars. He’s had to repeatedly prove that he does not have Down syndrome and can manage this kind of money.

He is now fighting for his freedom. A Superior Court judge from Los Angeles County has appointed a temporary guardian ad litem to make legal decisions on his behalf.

Judge David Cowan said he was not going to give $200 million to someone who may suffer, on some level, from Down syndrome. Even after he was given evidence that Lund does not have Down syndrome, the judge refused to retract his statement.

Lund is fighting against a probate system with high profile attorneys–the former White House counsel Lanny Davis is one of three on his legal team. They have filed a federal civil rights lawsuit accusing Judge Cowan of appointing the guardian ad litem without due process. Suing a judge is almost never done, but the complaint alleges that a judgment was rendered that left them no choice but to take action.

One of Lund’s main opponents is his twin sister, Michelle Lund. The twins attended special-needs schools as children, reportedly for learning impairments. When Lund was 19, his mother created a trust fund now valued at $400 million for him, his sister and another sister, Victoria. She appointed four trustees. The grandchildren were to receive part of their shares at ages 35, 40 and 45, with the remainder kept in trust and then given to them gradually over time.

Lund’s mother died, as did his sister Victoria. Some of the trustees resigned, with others who did not know the family taking their places.

When Brad turned 35, the trustees voted against paying him part of his inheritance, saying they did not believe he was financially or mentally competent. Four years later, sister Michelle suffered a brain aneurysm, but she received her share as scheduled. In 2009, Michelle and her two half-sisters sought an order in an Arizona court that would place Brad under a guardianship for his legal decisions. They claimed that he had chronic deficits and mental disorders. The case went on for seven years and ended with a judge declaring Brad able to make his own decisions.

While the Arizona case was still underway, Lund filed a court petition in Los Angeles County to remove his trustees for various violations. That is when Judge Cowan entered the picture. The judge was presented with a settlement agreement between Lund and his trustees, in which he would pay them $14.5 million, in exchange for their removal and replacement.

The monetary exchange was approved, but Cowan would not agree to letting Lund replace the trustees. That’s when the temporary guardian ad litem was appointed.

While the size of the assets involved is larger than life, estate battles among siblings and half siblings are not unusual. When the family includes an individual whose capacity may be challenged, extra steps are needed in estate planning to protect their interests.

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Reference: Daily Bulletin (March 22, 2020) “Walt Disney’s grandson locked in legal battle for personal freedom, millions in inheritance”

Do You Need a Revocable Trust?

A will lets you determine how your property will be distributed when you die, and a revocable living trust also accomplishes that task. However, the owner of the trust can make strict stipulations about how specific assets should be distributed, says Barron’s in the article “Revocable Living Trusts Can Help Your Heirs Avoid Probate. Here’s How They Work.” Another advantage of a revocable trust—avoiding probate, which gives the trust owner far more control over asset distribution.

Remember, probate is a process that takes place under the supervision of a judge in a court. Things don’t always happen the way the decedent may have wanted.

It’s best for individuals or couples with complex estate planning needs to meet with an estate planning lawyer, who will discuss whether a living trust is the right option. One question couples should ask: does it make sense for them to have a living will, and should it be a joint trust, or should it be two separate ones?

When a trust is created, it needs to be funded. Assets such as real estate, bank accounts, taxable non-retirement investment accounts all need to be retitled so they are owned by the trust. The person who creates the trust has no restrictions as to how the assets within the trust are used while they are alive. The trust can also be revoked during the owner’s lifetime, but it’s more common for owners to make tweaks to the trust.

Trusts are very popular in states like California and Massachusetts, which have more restrictive probate laws than other states. Trusts are very good for people who own property in multiple states and would otherwise have to deal with probate in multiple states. Trusts are also excellent for people who wish to maintain privacy about their assets, since the trust’s contents remain private. A will, once it enters the probate process, becomes a public document.

Someone who does not own his or her own home and has limited assets may prefer to use a will, which is less expensive and simpler than a trust. Once they do own a home and have more extensive assets, they can always have a trust created.

A living trust is part of a larger estate plan. Other estate planning documents are still needed, including a durable power of attorney for finances, an advance health care directive, a nomination of guardianship for families with minor children and a living will.

People who have revocable trusts should ask their estate planning attorney about something called a “pour-over” will. This is a will that ensures that any assets accidentally left out of the trust are added to the trust after the death of the owner. If the majority of assets are in the trust, the probate of the pour-over will should be much simpler and there may even be a “fast-track” option for assets under a certain dollar level.

Reference: Barron’s (February 22, 2020) “Revocable Living Trusts Can Help Your Heirs Avoid Probate. Here’s How They Work”

Common Myths about Your Estate When You Die

There are many misconceptions about the law in general and about estate planning in particular. There are also many opportunities to use the law to protect those we love, when it comes to helping families navigate life and the legal processes that happen after the death or disability of a loved one. The best option is to plan ahead, reports the article “I’m dead, now what? Myths about deaths in Georgia” from the Cherokee Tribune & Ledger-News. Here are the top four myths about what happens when someone dies.

A Will. If there’s no will, my spouse gets everything. Well, no. While you are a team, and you may want your spouse to get everything, if there’s no will, the laws of your state will determine who gets what. Your spouse in some states will split your possessions with your children. Your spouse in some states will get no less than a third of your assets. If you want your spouse to inherit everything, you need a will.

You also need a will if you want your spouse to receive everything so they can take care of your children, if something unexpected happens to you. Without it, your spouse will have to create a budget for your children’s needs and present that to the court before they can spend any of the children’s money. That’s how it works in Georgia. Check with a local estate planning attorney to make sure that’s what you’re prepared to leave for your spouse to do, or what your state’s laws say.

Having a will allows you to determine who you want to inherit what.

A will means there’s no need for probate court. Wrong again! Having a will does not mean you avoid probate court and the legal process known as probate. A will is not legally effective, until the nominated executor presents your will to the probate court and the court accepts the will and declares it to be valid. This is a longer process in some jurisdictions. However, there are potential problems. If there’s a disgruntled family member or a need for privacy, the probate process creates a public record and information can and often is obtained by family members. To avoid making your life a public matter, you need an estate plan that includes trusts, which do not go through the probate process and do not become public records.

If I don’t have a will, the state will take it all. It’s very rare that any state will take everything, even if there is no will. The state only does that if absolutely no family members can be found, or if the state’s Medicaid program has an aggressive claw back policy that seeks to recover the cost of nursing home care provided to the decedent. If the person who died did not need Medicaid services, then it’s unlikely that the state will take the assets. More likely? A family member, determined by degree of kinship, will be entitled to inherit. Again, the law varies by state, so check with an experienced estate planning lawyer in your state.

The family gets stuck with the debts. That’s a yes and no answer. The debts of family members do not have to be paid by the family. However, they are paid by the deceased’s estate, which will be decreased by the amount of debt owed. Therefore, the family members will inherit less, but it’s not coming out of their own pockets. The debts of the deceased are to be paid by whatever assets he or she owned at the time of death. If there’s not enough in the estate, the family is not obligated to pay the debt. The exception is if the spouse was a joint borrower or otherwise legally obligated to pay the debt.

What you know and don’t know about estate planning can hurt you and your family. An easy way to address this: meet with an experienced estate planning attorney and make a plan that will distribute your assets according to your wishes.

Reference: Cherokee Tribune & Ledger-News (Feb. 1, 2020) “I’m dead, now what? Myths about deaths in Georgia”

How Can I Upgrade My Estate Plan?

Forbes’ recent article, “4 Ways To Improve Your Estate Plan,” suggests that since most people want to plan for a good life and a good retirement, why not plan for a good end of life, too? Here are four ways you can refine your estate plan, protect your assets and create a degree of control and certainty for your family.

  1. Beneficiary Designations. Many types of accounts go directly to heirs, without going through the probate process. This includes life insurance contracts, 401(k)s and IRAs. These accounts can be transferred through beneficiary designations. You should update and review these forms and designations every few years, especially after major life events like divorce, marriage or the birth or adoption of children or grandchildren.
  2. Life Insurance. A main objective of life insurance is to protect against the loss of income, in the event of an individual’s untimely death. The most important time to have life insurance is while you’re working and supporting a family with your income. Life insurance can provide much needed cash flow and liquidity for estates that might be subject to estate taxes or that have lots of illiquid assets, like family businesses, farms, artwork or collectibles.
  3. Consider a Trust. In some situations, creating a trust to shelter or control assets is a good idea. There are two main types of trusts: revocable and irrevocable. You can fund revocable trusts with assets and still use the assets now, without changing their income tax nature. This can be an effective way to pass on assets outside of probate and allow a trustee to manage assets for their beneficiaries. An irrevocable trust can be a way to provide protection from creditors, separate assets from the annual tax liability of the original owner and even help reduce estate taxes in some situations.
  4. Charitable Giving. With charitable giving as part of an estate plan, you can make outright gifts to charities or set up a charitable remainder annuity trust (CRAT) to provide income to a surviving spouse, with the remainder going to the charity.

Your attorney will tell you that your estate plan is unique to your situation. A big part of an estate plan is about protecting your family, making sure assets pass smoothly to your designated heirs and eliminating stress for your loved ones.

Reference: Forbes (November 6, 2019) “4 Ways To Improve Your Estate Plan”

What’s Better, A Living Trust or a Will?

Everyone knows what a last will and testament is. However, a will is not always the best way to distribute your assets, explains the Times Herald-Record in the article “Living trusts are better choice than wills.” Most people think that by having a will alone, they will make it clear who they want to receive their assets when they die. However, wills are used by the court in a proceeding called “probate,” if the only estate plan you have is a will. The court proceeding is to establish that the will is valid. Depending upon where you live, probate can take a year before assets are distributed to beneficiaries.

Certain family members must receive notifications, when a will is submitted to probate. Some people will receive notices, even if they are not mentioned in the will. This can lead to all kinds of awkward situations, especially from estranged or unknown relatives. The person who is the executor of the will is required to locate these relatives, and until they are found and notified, the probate process comes to a standstill.

There are instances where a judge will allow a legal notice to be published in a local newspaper, after valid attempts to find relatives aren’t successful. If there is a disabled beneficiary, a minor beneficiary, a relative or beneficiary who can’t be located, or a relative who has been incarcerated, the judge often appoints lawyers to represent these parties’ interests and the estate pays for the attorney’s fees.

Depending on the situation, the executor may be required to furnish a family tree, or a friend of the decedent must sign an affidavit attesting that the person never had any children.

Thinking of disinheriting a child? Anyone who is disinherited in a will, receives a notice about that and is legally permitted to contest the will. That can lead to years of expensive litigation, including discovery demands, depositions, motions and possibly a trial. Like most litigation, will contests usually end in a settlement. The disinherited relative often gets a share of the inheritance, even when the decedent didn’t want them to get anything.

For many families, a living trust is a better alternative. They also serve as disability planning, naming people who will manage the assets of the trust, in case of incapacity. They are private documents, so their information does not become public knowledge, like the details of a will.

A qualified estate planning attorney will help you determine what estate planning tools will work best to achieve your goals, while maintaining your privacy and ensuring that assets pass to heirs in a discrete manner.

Reference: Times Herald-Record (Oct. 26, 2019) “Living trusts are better choice than wills”

Americans Still Aren’t Planning for The After Life

Think Advisor reported on a survey conducted by a financial services firm that revealed good news and bad news about Americans and estate planning. In the article “Americans, Even Advisory Clients, Have a Big Estate Planning Problem: Survey,” the firm Edward Jones found that two-thirds of those with an advisor have not discussed estate goals and legacy plans. That’s the bad news. The good news is that 77% said estate and legacy strategies are important for everyone, not just wealthy individuals.

Most people do understand how a properly prepared estate plan puts them in control of what happens to the people that matter most to them, including minor children, their spouses and partners. It also indicates that they recognize how estate planning is necessary to protect themselves. That means having documents, like Power of Attorney and Medical Health Care Power of Attorney.

However, the recognition does not follow with the necessary steps to put a plan into place. That is the part that is worrisome.

Without a will, assets could be subject to the costly and time-consuming process of probate, where the entire will becomes a public document that anyone can look at. Nosy neighbors, creditors and relatives all having access to personal and financial information, is not something anyone wants to happen. However, by failing to plan, that’s exactly what happens.

The survey of 2,007 adults showed little sense of urgency to having legacy conversations. Only about a third of millennials and Gen Xers said they’d spoken with their advisors about the future. Surprisingly, only 38% of baby boomers had done so—and they are the generation most likely to need these plans in place in the immediate future.

Where do you start? Begin with the beneficiary designations. Check all investment accounts, bank accounts, insurance policies and retirement accounts. Most, if not all, of these financial documents should have a place to name a beneficiary, and some may permit a secondary beneficiary to be named. Make sure that you name a person you want to receive these assets, and that the person named is still in your life.

The beneficiary designation is more powerful than your will. The person named in the beneficiary designation will receive the asset, no matter what your will says. If you don’t want an ex to receive life insurance policy proceeds, make sure to check the names on your life insurance beneficiary designations.

Meet with an estate planning attorney to create an estate plan. If you haven’t updated your estate plan in three or four years, it’s time for an update. It’s equally important if you should become incapacitated and you want someone else to make financial and medical decisions on your behalf, to have up to date Power of Attorney and Health Care Proxy forms.

Reference: Think Advisor (September 16, 2019) “Americans, Even Advisory Clients, Have a Big Estate Planning Problem: Survey”

 

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?”

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”