Merry Christmas

We hope you have a wonderful Christmas.

Our office will be closed on Christmas Eve and Christmas Day. We will reopen on Wednesday, December 27.

Enjoy a few clips from the undisputed, all-time best Christmas movie ever. Irving Berlin’s White Christmas.

 

 

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Estate Planning Documents You Need While Living

Statistically, we know without a doubt that we are all going to die. That’s 100% certain. However, we know that the chances of becoming disabled are also high. For that reason, everyone should have a Power of Attorney, or POA, as well as a will. In fact, says nwi.com in the article “Estate Planning: 3 important estate planning docs, and 2 maybes,” everyone should have a POA, a will, an advanced medical directive and more specifically, a living will.

How many times have you heard the story about someone’s aging mom becoming disabled and the hospital asking if she has a POA? The problem is we’re so reluctant to ask mom about a POA, that we tend to neglect this difficult conversation. Then, when we are faced with a medical emergency, it’s too late.

The time to have a POA created, is before an emergency or health crisis, not afterwards!

In a medical emergency, people are actually far more likely to become disabled or incapacitated than they are to die. Therefore, you need a POA.

The living will is equally important to have in advance of an emergency. With a living will to provide instructions for when you are terminally ill, and death is expected to occur in the very near future, you will have had the opportunity to state your wishes regarding medical care in advance.

A living will should be part of your estate plan.

The related document, which is not as well known, is the “life prolonging procedure declaration,” which says, in a nutshell, “Do everything you can to keep me alive, because I’m not leaving until I absolutely have to.”

The third must-have estate planning document is a will. The will is the document where you tell your heirs exactly how you want your assets distributed. If you have children who are not yet of legal age, you name a guardian for them in your will.

One “maybe” document is a trust. Trusts are used to protect assets. There are many different types of trusts. An estate planning attorney, the same one who will help you with your POA, living will and will, can also help with trusts, if you should need one. They are not simple to set up and you’ll want to get the one that best fits your needs.

Another document is called a “letter of instruction.” This is a set of directions that you leave to your family that tells them what you would like to happen. It’s not legally binding, so it falls into the “maybe” document category. However, you may find it satisfying to put down on paper what you would like them to know, what you would like them to remember, etc.

If you want to dictate your funeral, memorial services and the like, work with an estate planning attorney to execute a funeral planning declaration. This document can be legally enforced.

Remember, the laws about estate plans vary by state, so you’ll want to speak with a local estate planning attorney to ensure that your wishes, your documents and your estate plan will be properly prepared.

Reference: nwi.com (Nov. 25, 2018) “Estate Planning: 3 important estate planning docs, and 2 maybes”

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Why Do I Need a Medical Directive?

An important part of estate planning is a medical directive. This can include a living will, which details your wishes for end-of-life care; and a health care power of attorney that appoints a person to make medical decisions, if you’re unable to do so. A medical directive addresses important issues that are inevitable. However, many people just don’t want to think about them or discuss them with family. As a result, they’re left for to family members and medical providers to work through without any guidance.

The Watertown Public Opinion’s recent article, “Keep medical directives up to date,” says that it’s not uncommon to find situations, where medical directives that were valid when they were executed, become potentially useless. A family member could choose to make end-of-life decisions but then fall victim to dementia, which impacted their competency to make those decisions.

If your medical directive names your spouse, you should also name an alternate since your spouse, who’s aging along with you, may not be the best person to make hard decisions when the time comes.

In addition, you should communicate your specific wishes to both your primary and alternate designees. Ask them if they think they’ll be able to carry out your wishes. These conversations aren’t easy, but they’re essential.

On one hand, it may not be really hard for a family member to consent to become the designated representative in a medical directive. However, if the agent named in a healthcare power of attorney is in good health, the need to make hard decisions is somewhere in the future and can feel almost theoretical. When a medical emergency or an extended final illness occurs, a family member who’s frightened, grieving, and exhausted may then find actually making those decisions to be the toughest thing they’ve ever had to do.

You should provide your family with clear directions to make end-of-life decisions for you. This means you need to do more, than simply write their names into a document.

It requires selecting a person who’s willing to carry out your wishes. Tell that person about your wishes in a robust and meaningful conversation, and check in periodically to make certain they remain willing and able to carry out the solemn promise that a living will entails.

Reference: Watertown Public Opinion (November 20, 2018) “Keep medical directives up to date”

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Is Your Estate Plan on Track?

Investopedia’s article from this fall, “How to Get Your Estate Plan on Track,” tells us what an estate plan accomplishes. A good estate plan accomplishes three objectives:

  • End-of-life health care decisions are documented in a legally binding document;
  • Assets will be distributed according to your instructions, rather than state law; and
  • Loved ones avoid the time, expense and stress of the probate process.

A basic estate plan should include advanced directives, such as a health care proxy and power of attorney, will (perhaps a “pour-over” will and a revocable living trust). If you want to ensure that you have a valid will that follows the laws of your state, avoid pitfalls and best protect your family, hire an experienced estate planning attorney to make certain you have professional legal knowledge, when considering the nuances of trusts and estate law.

A health care proxy, also called a health care power of attorney, accomplishes two goals. First, it authorizes a designated individual to make health care decisions on your behalf, if you are ill or otherwise can’t make these decisions on your own. Without this, a judge would decide who has this authority in those circumstances. A health care proxy also allows you to document specific decisions for your health care, such as end-of-life decisions.

Your estate plan should also include a power of attorney, which allows you to authorize a person to make financial decisions in your stead. It’s used, if you’re not in a position to handle such affairs on your own (like a health care proxy).

Probate is the legal process where the court approves the distribution of your assets and gives creditors an opportunity to collect your debts. Going through probate can be stressful for your heirs. There are costs incurred and procedures that must be followed before assets are distributed. The probate process can take months and can be dragged out for more than a year in some situations.

Probate can be avoided with the right planning. For example, you can title certain assets like bank accounts, brokerage accounts, and property, so they pass directly by operation of law to your heirs, and bypass probate. Retirement assets are required to have beneficiaries and likewise will bypass probate. Make sure to have contingent beneficiaries, so these assets continue to bypass probate, if your beneficiaries predecease you.

For people with minor children, designating their potential guardian is one of the most critical elements of an estate plan. It is part of your will in most states. Remember, if you don’t name guardians in your will, and both you and your spouse pass away, the court will appoint a guardian, which may not be ideal for your children.

There are other unique situations that may warrant creating additional documentation and planning. These include having a business, adult children from a previous marriage, a potential liability against your estate or a special needs child. In any of these situations, you’ll definitely need to review your circumstances with an attorney.

Those assets held jointly (your home perhaps) and assets that have a beneficiary (life insurance) aren’t included in the will. Each state has its own rules about where the property goes, when a person dies without a will.

Estate planning is an ongoing process. Review your plan every few years or if you’ve had any major life changes, like a birth or adoption of a child, a divorce or a death of a family member.

Having your affairs in order can help prevent making things worse after you pass away.

Reference: Investopedia (October 17, 2018) “How to Get Your Estate Plan on Track”

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Can I Contest a Will?

When a person contests a will, they’re arguing that the will isn’t valid. A will can be contested because an individual claims that the deceased person didn’t possess the required capacity to make a will, was unduly influenced or insane, made a more recent will, or there was fraud, duress or forgery. A will can also be contested because it contains technical flaws.

The Carroll County (MD) Times’ article, “Contesting a will is difficult; only an ‘interested party’ is eligible,” explains that to be eligible to contest a will in Maryland, you must be an “interested party.” This means you’re named in the will or would have been eligible to inherit by law, if the deceased hadn’t written a will.

In Mississippi, contested wills are heard by the Chancery Court.  Chancellors are tasked with hearing and deciding contested cases. They direct the actions of personal representatives (executors) and pass orders for administering an estate.

The person contesting a will has the burden of proof, meaning that she must show that the will isn’t valid. Other interested parties aren’t required to prove that the document is valid, but they may be called to testify, if they were present or involved when the deceased person made the will or signed and executed it.

Make no mistake: challenging a will is difficult. Courts regard a will as an expression of the deceased person’s wishes, and since he’s not around to tell the court, “No, that’s not what I meant,” judges are hesitant to make changes in the will as written.

This is a good reminder to be certain your will says what you want it to say. If it doesn’t, work with a qualified estate planning attorney to have revisions made or codicils (additions that modify or explain provisions in the will) added to reflect your intent accurately.

If a will is successfully contested, the estate is then treated as if the deceased died without a will or intestate. This doesn’t guarantee that the challenger will get some of the estate, because it’s based on where she is in the line of succession set out in state intestacy laws. If a person dies without a will, priority in the distribution of his estate will be as follows in Mississippi:

  • First, to the children and the descendant’s of children who died prior to the deceased individual (Under Mississippi’s laws of intestacy, a spouse is treated like a child as far as his or her share of the estate is concerned);
  • Second, to the decedent’s father, mother, brothers, sisters, and descendants of brothers and sisters who predeceased the deceased individual;
  • Third, to the grandparents and uncles and aunts.

If none of the relatives listed above exists, succession continues to any blood relatives of the highest degree defined by Mississippi law.

In the event there’s no qualifying relative, the estate goes to the State of Mississippi.  If the deceased was on Medicaid, the assets of the deceased may be required to be paid to the State of Mississippi Division of Medicaid.

Reference: Carroll County (MD) Times (November 23, 2018) “Contesting a will is difficult; only an ‘interested party’ is eligible”

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How Do I Find the Right Trustee for My Estate?

To be certain that your wishes are followed, many people create a trust. One of the tasks in this process is to designate the person who can best carry out your plans. That’s the trustee.

Kiplinger’s recent article, “How to Choose the Right Trustee for Your Estate,” explains that being a trustee means accepting specific duties and obligations. For example, this includes showing impartiality between the interests of the current and future beneficiaries, accurately accounting to all beneficiaries, wisely investing trust funds, managing trust property and adhering to the prohibition against self-dealing.

It’s important to understand the strengths and weaknesses of your trustee and that she appreciates her responsibilities and personal liability to the trust beneficiaries. When considering a trustee, ask yourself these questions:

  • Can your trustee separate her personal feelings and interests from those of the beneficiaries and exercise sound judgment?
  • Will your trustee treat all the beneficiaries impartially?
  • Is your trustee financially savvy enough to analyze investments?
  • Will a child who is balancing her family and career have enough time to devote to serving as trustee?

Family members are closer to the beneficiaries and are more likely to understand their needs. A family member trustee may charge her costs to the trust but typically doesn’t charge an administrative fee. When a sibling is selected as trustee, it can enflame feelings and resentments among the beneficiaries. A relative without any trust experience may run into trouble, because of his ignorance. He will also be liable for any damages.

If you choose an attorney, accountant, or financial adviser, ask yourself these questions:

  • Can she understand the unique dynamics of your family?
  • What experience does she have as a trustee?
  • What are the administrative fees and costs associated with being a trustee?

You can also select a corporate trustee. Banks and trust companies provide professional fiduciary services and act independently. Opting for a corporate fiduciary may eliminate some of the conflicts in the family, while providing experienced and professional investment and administrative management. Think about these questions:

  • Will they invest the time to understand my family and their needs?
  • What are the corporate trustee’s standards?
  • Does the trustee understand the goals of my trust?
  • What are the corporate trustee’s fees?

Corporate trustees follow specific procedures to ensure unbiased and professional services.

Many of the answers to these questions will depend on the size and the nature of your trust. Talk to a trust attorney about all of the details.

Reference: Kiplinger (November 20, 2018) “How to Choose the Right Trustee for Your Estate”

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Time for a Series of Conversations with Aging Parents

We are in the midst of the holiday season. It is when family calendars start filling up with holiday gatherings from baking cookies to unwrapping presents piled up under the Christmas tree. This is also the season to start talking with parents about their future care, reports News3LV in “Tough talks over turkey: Is it time to have “The Talk” with your parents?”

It is not easy to approach this topic, especially if you have a parent who is not open to discussing the harsh realities of aging. Even if you try your very best to be sensitive, they may still bristle. They may feel like they are too young to be spoken to about these issues or worry that they’ll be considered a burden to your family, or that you simply want to get them out of the way. It’s a tough topic.

Here are some tips for these conversations:

Don’t wait. It’s easier not to have the conversations at all. However, then when an emergency strikes the family is faced with a series of decisions and missing paperwork. Explore options before a crisis. Let your loved ones get comfortable with the concept of talking about these difficult issues and then explore the different topics.

It’s important to get up to speed with your parent’s health care benefits and their wishes. Do they have the right health care plan in place? Talk with them about the Medicare Advantage plans that are available to help them stay independent longer.

Be sensitive. Let them know clearly that, at some point during their visit, you want to discuss their future. Give that thought time to sink in. You don’t want them to get defensive. Remember that talking about aging and death (or, as we often hear, “end-of-life”) is difficult for everyone. Decide which topics to dig into and which you can leave for another time.

Be prepared and be specific. What topics do you want to cover and what are the most important ones to discuss first?

Long-term care wishes: do they want to try to live at home? If that is not possible, what would they like? Do they have the ability to pay for an in-home caregiver or would they be better off in an assisted living facility? Could they live with any family members?

End of life decisions: is a living will in place? Do they have a durable power of attorney? Have they thought about what they would like, if they are no longer able to communicate their wishes?

Medical coverage: what kind of long-term care insurance do they have? Are they able to afford it and what does it cover?

Listen. Really listen. Hear what they are saying. Listen to their fears and their wishes. Speak in a loving manner and be patient. Let them know you will do the best you can to honor their wishes.

Take a break. If at first the conversation is halting, and they are visibly uncomfortable, it may not be the right day for them. Or, they aren’t yet able to share their thoughts with you.

Remain respectful and be empathetic. It is important to be patient. This is not a one-time conversation but a series of conversations to work through all of the salient points and make sure that everyone is focused on the same thing: taking good care of each other.

Reference: News3LV (Nov. 12, 2018) “Tough talks over turkey: Is it time to have “The Talk” with your parents?”

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Keep it All in the Family For Estate Plan Success

If estate planning were just about some basic math tasks, people would not put off going to their estate planning attorneys every few years to make sure their estate plan is in order. However,, as accurately described in the article “Estate Planning: A Family Affair” from Kiplinger, this is a highly emotional process.

If it helps to get you to move on this, consider that if you don’t have a will, the decisions about what will happen to your property–and if you are a parent of minor children, what will happen to your kids—will be decided by the laws of your state and the courts. That should be enough to get you to overcome the fear of mortality, that often keeps people from moving their estate planning forward.

Don’t have a will yet? You need to do that right away. If you have an estate plan, but haven’t reviewed it in a while, and your life has become more complex, it’s time for a review. By the way, just because you review your plan, does not necessitate an overhaul. However, laws and lives do change and the same goals your will and estate plan addressed four years or 14 years ago, may not be the same as they are now.

Every two or three years or whenever there is a major change in your life, such as a divorce, inheritance, financial loss, birth or a change in estate laws, it’s time for a review. Reviews should take place more often, when you are in your 50s or 60s. At that time, your assets may have grown, your children may have children of their own and your goals may have changed.

Your focus may have switched from protecting your children in the event of a premature death of a parent, to transferring wealth from one generation to the next.

The large changes to the tax law may mean that you no longer need some of the tax planning strategies you put into place prior to 2017. Several states have made major changes to their own estate tax laws. New Jersey eliminated its estate tax in 2018 and New York boosted its state estate tax exemption to $5.25 million that same year. Delaware eliminated its estate tax at the end of 2017.

One couple looked at their estate plans from almost 20 years ago, before two of their children were even born. They realized that the plan was out of date, their estate had become much larger, more complicated and they wanted to build in significant charitable giving.

The first task: updating their wills, health care proxies and advance directives for end-of-life care. They created a trust that will donate 11% of their estate to a charity that matters to them. Trusts were set up that will pay out a certain percentage to their children at ages 30, 35 and 40, rather than giving their kids lump sums. They set up a plan whereby a trustee has the discretionary ability to make payments for education, health care, emergencies and even a down payment on a house, which will be subtracted from the child’s future distribution.

An additional benefit: Because of their use of trusts, their distribution of assets will be private.

Trusts are considered the “work horses” of estate planning, because they can be used to accomplish so many different tasks within an estate. However, it is important to note that there is no one-size-fits-all trust. An estate planning attorney should review your situation and then will be able to recommend what trusts, if any, will be most useful for you and your family.

Don’t forget to have the talk. Sit down with your family members and tell them, to the extent you are comfortable, what you have decided. You don’t have to discuss numbers. However, your family will appreciate being part of the conversation, so they understand the reasoning behind your decisions.

Make sure the information shared is keyed to your child(s) maturity. Some 18-year-olds are mature enough to understand the impact that an inheritance can have, while some 30-year-olds see a future inheritance as a license to slack off. You know your children best—make thoughtful decisions about how much to tell them and when.

Reference: Kiplinger (Nov. 1, 2018) “Estate Planning: A Family Affair,”

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Should I Give Access to My Checking Account to My Adult Son in Case of an Emergency?

It’s not uncommon for an elderly parent to go to the bank to add a child to his or her bank account “in case something happens to me.”

The reason why most parents do this, is to give their child access to their money during an emergency. It sounds like it should be a pretty easy process. With proper planning, it can be. However, parents should know that simply making a child the joint owner of a bank account (or investment account or safe deposit box) can have unintended consequences. Sometimes this isn’t the best solution during a family crisis.

As Kiplinger’s recent article, “The Trouble with Joint Bank Accounts ‘Just in Case’” explains, the vast majority of banks set up all of their joint accounts as “Joint with Rights of Survivorship” (JWROS). This type of account ownership typically says that upon the death of either of the owners, the assets will automatically transfer to the surviving owner. However, this can create a few unexpected issues.

If Mom’s intent was for the remaining assets not spent during the family crisis to be distributed by the terms of a will, that’s not happening. That’s because the assets automatically transfer to the surviving owner. It doesn’t matter what Mom’s will says.

Remember that adding anyone other than a spouse could create a federal gift tax issue, depending on the size of the account. Anyone make a gift of up to $15,000 a year tax-free to whoever they wish, but if the gift is more than $15,000 and the beneficiary isn’t the spouse, it could trigger the need to file a gift tax return.

For example, if a parent adds a child to their $500,000 savings account, and the child predeceases the parent, half of the account value could be included in the child’s estate for tax purposes. The assets would transfer back to the parent, and, depending on the deceased’s state of residence, state inheritance tax could be due on 50% of the account value. In some states, the tax would be 4.5%, which would mean a state inheritance tax bill of more than $11,000.

However, if Mom’s intent in adding a joint owner to her account is to give her son access to her assets at her death, there’s a better way to do it. Most banks let you structure an account with a “Transfer on Death,” or TOD. With a TOD, if the beneficiary passes before the account owner, nothing happens. There’s no possibility of a state inheritance tax on 50% of the account value. When the account owner dies, the beneficiary has to supply a death certificate to the bank, and the assets will be transferred. These assets are transferred to a named beneficiary, so the time and expense of probating the will are also avoided, because named beneficiary designations supersede the will. This is the same for pensions, IRAs and life insurance policies.

Setting up an account as TOD doesn’t give the beneficiary access to the account, until the death of the account owner. Therefore, the change in titling isn’t considered a gift by the IRS, which eliminates the potential federal gift tax issue.

There’s no such thing as a joint retirement account because IRAs, 401(k)s, annuities, and the like can only have one owner—it’s not possible to make someone a joint owner. However, if a parent becomes incapacitated, they still often would like their child to have access to all their assets, in addition to their bank accounts. The answer for these is a financial power of attorney. This is a document that lets one or more people make financial decisions on your behalf. This document should be drafted by a qualified estate planning attorney.

It is important to understand that many financial institutions require a review process of a financial power of attorney appointment. The bank’s legal department may want to review the document before allowing the designated person to make transactions. This can take several weeks, so be sure that all financial institutions where you have accounts have a copy of your executed financial power of attorney. Have it in place before it’s needed.

Talk to your estate planning attorney about what you’re trying to do and let her guide you. Planning in advance will make things much easy for your loved ones, in case of an emergency.

Reference: Kiplinger (November 14, 2018) “The Trouble with Joint Bank Accounts ‘Just in Case’”

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How Do I Set Up a Trust?

Trust funds are often associated with the very rich, who want to pass on their wealth to future heirs. However, there are many good reasons to set up a trust, even if you aren’t super rich. You should also understand that creating a trust isn’t easy.

U.S. News & World Report’s recent article, “Setting Up a Trust Fund,” explains that a trust fund refers to a fund made up of assets, like stocks, cash, real estate, mutual bonds, collectibles, or even a business, that are distributed after a death. The person setting up a trust fund is called the grantor, and the person, people or organization receiving the assets are known as the beneficiaries. The person the grantor names to ensure that his or her wishes are carried out is the trustee.

While this may sound a lot like drawing up a will, they’re two different legal vehicles.

Trust funds have several benefits. A trust can reduce estate and gift taxes and keep assets safe. With a trust fund, you can establish rules on how beneficiaries spend the money and assets allocated through provisions. For example, a trust can be created to guarantee that your money will only be used for a specific purpose, like for college or starting a business.

A trust fund can also be set up for minor children to distribute assets to over time, such as when they reach ages 25, 35 and 45. A special needs trust can be used for children with special needs to protect their eligibility for government benefits.

At the outset, you need to determine the purpose of the trust because there are many types of trusts. To choose the best option, talk to an experienced estate planning attorney, who will understand the steps you’ll need to take, like registering the trust with the IRS, transferring assets to the trust fund and ensuring that all paperwork is correct. Trust law varies according to state, so that’s another reason to engage a local legal expert.

Next, you’ll need to name a trustee. Choose someone who’s reliable and level-headed. You can also go with a bank or trust company to be your trust fund’s trustee, but they may charge around 1% of the trust’s assets a year to manage the funds. If you go with a family member or friend, also choose a successor in case something happens to your primary trustee.

It’s not uncommon for people to have a trust written and then forget to add their assets to the fund. If that happens, the estate may still have to go through probate.

Another common issue is giving the trustee too many rules. General guidelines for use of trust assets is usually a better approach than setting out detailed rules.

Reference: U.S. News & World Report (November 8, 2018) “Setting Up a Trust Fund”

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