Proper Estate Planning Can Prevent Family Fights

Research shows that about 60% of U.S. adults don’t have a will.

However, not all of your possessions pass through a will. 401(k)s, life insurance proceeds, pensions, and annuities pass by beneficiary designation.

The (Washington, PA) Observer-Reporter’s recent article, “Improper estate planning can lead to familial conflict” explains that some of your possessions will pass through probate. If you own property in several states, the process could become more difficult for your loved ones. A way to simplify the process for them, is by having an updated will.

For instance, even if your will states that all of your possessions are to be split equally between your two children, this may not be what actually occurs. If your life insurance lists only Bob as the beneficiary, he’ll walk off with 100% of the death benefit. Your younger son Doug will receive only half of the assets that don’t have a beneficiary designation. Assets that pass by designation are not controlled by the will. That is why Bob gets all the money from the insurance. As you can see, it’s vital that you review your accounts’ beneficiary designations regularly, to make certain they’re up to date. Check on them every few years or when there’s a family divorce, birth, or death. Once you’re gone, they can’t be changed.

In addition, your estate plan should include two powers of attorney (POA). The first POA is to make health decisions. The second POA is to make financial decisions, if you don’t have the capacity to do so. Your POA agent has your authority to make decisions, only when you do not have capacity and she can only exercise it for your own benefit. POAs end at the drafter’s death.

It’s common today for families to have blended elements. Many people were married before and may have had children. Here’s an example of a famous father who made his third wife executor of his estate, giving her control of his business. In this case, his equally famous son was the principal player in the father’s business. The son didn’t understand the implications of his father’s estate plan. When the father died, there was a long and expensive legal battle between the son and the third wife.

Who was it? It was Dale Earnhardt Jr.

Work with an experienced attorney and don’t let this happen to your family.

Reference: The (Washington, PA) Observer-Reporter (December 7, 2018) “Improper estate planning can lead to familial conflict”

Continue Reading

How Do I Add Livestock to my Estate Plan?

Ranchers may think estate planning involves only assets like the house and the land. We think a lot about how these assets will be divided between children. Consequently, many farming and ranching families use language in their estate plans to give the on-farm child the first chance to buy farm assets, if the other siblings want to sell.

A recent Beef Magazine article asks, “Are your livestock covered in your estate plan?” The article notes that this “first chance” needs to cover a wide range of assets like equipment, vehicles, personal items and livestock.

Maintaining an itemized list of these assets can help your family recognize their true value. This is especially important, when you consider the value of livestock. When you take the herd to the sale barn, they’ll all bring commercial price. However, do your heirs understand how much you paid for that purebred herd sire five years ago? How about the semen in the tank? Seedstock producers or commercial producers who paid premiums for specific animals, know that the value of these animals isn’t as obvious as the current market price at the auction barn. Therefore, the way in which these cattle should be handled after the current operator dies, needs to be included in the estate plan.

Many ranchers and farmers are looking at livestock trusts. These are written declarations of how the farm owner would like livestock to be cared for after the owner’s death, along with resources and instructions for handling such livestock. A livestock trust can help put aside money and/or resources, so an owner can still protect prized animals, long after the owner’s death.

Livestock trusts are particularly important, if a rancher’s heirs aren’t involved in the ranch operations. The trust can detail the cattle’s veterinarian and nutritionist contact info, as well as preparations for who will feed the livestock and for how long, if the rancher dies. It can also discuss what happens, if the death is during or immediately prior to calving season or at weaning, as well as how the hired hand is paid.

In addition, if the heirs elect to sell the livestock, the trust can instruct them on the best way to market these valuable cattle to ensure the best price, along with information about a trucking company to haul the livestock and a breed representative who could work with perspective buyers. The sale of semen and embryos must also be addressed.

With all of these questions, it’s best to get answers while the owner is still alive. Ask your estate planning attorney about a livestock trust for your estate plan to protect your valuable cattle.

Reference: Beef Magazine (December 14, 2018) “Are your livestock covered in your estate plan?”

Continue Reading

What Does George H.W. Bush’s Estate Look Like?

For a guy who was often derided as living in a bubble of “old money,” George H.W. Bush didn’t accumulate a whole lot of cash. However, he really didn’t need to. The whole point of dynastic wealth is that it creates a seamless support system from cradle to grave, says Wealth Advisor’s recent article, “American Dynasty: What G.H.W. Bush Leaves Behind (And Who Steps Up To Inherit).”

Bush begins near zero on paper, sells his oil company and lets the interest accumulate. When his father dies, he doesn’t record more than a $1 million windfall. At that time, these were still impressive numbers, but it wasn’t exactly dynastic money. For a Bush of his era, it’s just money. The real non-negotiable asset is the Maine summer home. He paid $800,000 cash for it when he joined the Reagan White House and sold his Texas place to raise the money. However, his 1031 exchange switching houses backfired, because he still claimed Texas residency and so got no tax break on the capital gain.

Interestingly, the Kennebunkport house hasn’t been passed on through inheritance for generations and has never been put into a trust. The relative willing to take on the house would buy it from the previous owner’s estate, but it’s currently assessed at $13 million. Purchasing it would trigger roughly a $12 million capital gain today and wipe out the entire estate tax exemption for he and Barbara.

However, President Bush had world-class tax planning, and the family lawyer in Houston has been with him since the 1980s. The house isn’t in a trust yet, but it’s owned by a shell partnership that plays a similar function.

Bush owned the partnership, and now that both George and Barbara are gone,  the partnership might roll into a trust to distribute shares in the house to the children. If that’s the case, provided the kids see value in keeping the house, the trust pays the bills. Otherwise, they will sell it one day and distribute the proceeds.

Presidential memorabilia is very valuable. Most of the President’s collection went to his library. Otherwise, there might not be a lot of cash because George didn’t live very lavishly. His government pension probably was used for his everyday expenses. Any cash left in that trust, might well have accumulated for the beneficiaries. However, interestingly, much of the income was given to the kids years ago. This may have made a big difference establishing them in lives of business and philanthropy.

Reference: Wealth Advisor (December 3, 2018) “American Dynasty: What G.H.W. Bush Leaves Behind (And Who Steps Up To Inherit)”

Continue Reading

Here’s a Happy Way to Start the New Year – A Gift of Estate Planning

If you think of estate planning as a gift to your loved ones, and not an obligation, then you will understand why the start of a new year is the perfect time to give your family the peace of mind that an estate plan can bring. The article “Give the gift of estate planning to loved ones this holiday season” from the Brainerd Dispatch describes how stress and guilt for the family can be alleviated just by having a good estate plan in place.

Your estate plan will provide your family with clear directions on where you want your assets to go when you have passed, but that’s just for starters. They will be dealing with many moving parts when you pass: funeral arrangements, notifying family members and grief, which can be overwhelming.

If you don’t have a will or haven’t done any planning, the process for your family to gain access to your assets becomes extremely problematic. The process is called probate, and it can take months and cost a great deal to unlock real estate ownership, account information or other assets for your spouse, children and grandchildren.

There’s also no way to ensure that your assets will be distributed as you wanted, if you do not have a will or an estate plan. Let’s say you have a non-traditional family. You’ve lived with your partner for decades, even raised children together, but never married. Your partner and your children may find themselves completely without any voice in your estate, and no right to any assets. Without a will, the state’s laws will determine who receives your assets, and that may be a sibling or a parent, if still living.

Your estate plan becomes your legacy, and it’s not just for family members. If there are causes or organizations that have meaning for you, they can be included in your estate plan. Lifetime giving or giving “with warm hands” is rewarding, because you get to see the impact of your generosity. However, you can use an estate plan to make a gift to an organization, which serves a dual purpose. It decreases the value of your estate, and can lessen the tax burden of your estate, giving your family more money.

There are many ways to make planned giving part of your estate. Donor advised funds are increasingly popular, or you may want to use a charitable trust or fund a scholarship. Your estate planning attorney will be able to help you determine the best way to structure your giving.

An experienced estate planning attorney has worked with families of all different types and will have the knowledge and skills to help you create an estate plan that works best for your family. The attorney will also encourage you to talk with your family members to make sure they know that you have put a plan into place. You may wish to have a family meeting with your estate planning attorney, to ensure that everyone understands why you made the decisions you did and ensure that the family understands that your estate plan is a gift from the heart.

Reference: Brainerd Dispatch (Dec. 8, 2018) “Give the gift of estate planning to loved ones this holiday season”

Continue Reading

How Do I Avoid the Three Biggest Estate Planning Mistakes?

The Street lists the “3 Worst Estate Planning Mistakes and How to Avoid Them.” These are issues that frequently mess up an estate plan:

Lack of Information. Unwinding the various pieces of your estate can be a monumental task. Some folks leave this all to chance. They fail to leave their executor and loved ones with a complete and updated list of where everything is located and how to get to it.

Think for a minute about all the assets you’ve accumulated in a lifetime: this will include your brokerage accounts, bank accounts, mutual fund holdings, IRAs, pensions and others. They’re hopefully all protected by a host of user names and passwords and maybe even by the answers to questions, like the hospital of your birth and your first pet’s name.

While things like insurance policies are likely online, some of your holdings are not available electronically. In addition, other possessions are totally digital, and you should guard against cyber-theft and hacking. Create a list of all your user names and passwords for investment accounts and other financial holdings.

Beneficiary Designations Issues. It’s not uncommon for people to forget that they’re required to name beneficiaries for their retirement accounts, annuity contracts and insurance policies. Messing this up is a guarantee that your assets will wind up in probate. It can be an expensive and time-consuming legal process, where your wishes may be disregarded.

Outdated Plans. Sometimes, decades pass after estate documents are executed and put away. In the meantime, divorces and other life events happen, radically impacting the original estate planning objectives. In addition, changes in tax laws might impact your initial intentions. It’s smart to periodically review what is in your will and your beneficiary designations.

Reference: The Street (November 29, 2018) “3 Worst Estate Planning Mistakes and How to Avoid Them”

Continue Reading

Savvy Ways for Seniors to Give Away Their Money

You do not have to be a millionaire for your loved ones to squabble about things you give away. Families have split up over who received a necklace or the candlesticks. You could try to give everyone an equal portion, but that is seldom possible. Sentimental value is hard to measure. You might also have reasons to help one person more than another.

There is no need to worry. There are strategies you can use to keep the peace, without feeling that your relatives are dictating what you can do with your assets. Here are some savvy ways for seniors to give away their money and other items.

Analyze the needs of your children. Let’s say you already put your older children through college, but you have a much younger child who is not yet college-age. While your older children might feel that it is unfair for you to give your younger child more money than them, your older children already received more than the younger child, and he will need the money for college.

If you have a child with special needs, you might want to set up a special needs trust for her support. Funding such a trust might require a disproportionate division of assets.

If you have circumstances like these, talk to all your children now or leave a letter explaining what motivated you to make an unequal distribution. Without sufficient communication, your children might think that you played favorites. Some families harbor grudges for years, because they made incorrect assumptions.

If you still have concerns about resentment over unequal distributions, you might be able to keep a disgruntled relative from filing a will contest. In many states, you can include a “no contest” clause in your will. In short, these clauses provide that if someone contests the will, the contesting person forfeits what he would have inherited through the will.

Funding a child or grandchild’s college education now. If you do not want to wait until an uncertain date in the future to contribute to your child or grandchild’s education, you can do so now through a 529 plan. The most strategic way to do this is usually through a plan the child’s parent sets up, but you should check with your tax advisor. If the funds are for your child, you can set up the plan. For your grandchildren, you can contribute to the plan the child’s parent started.

The best way to pass along your stocks or mutual funds. It is important to be aware that the tax laws are constantly changing, so you should always check with your tax advisor about the current tax considerations. This blog does not purport to give tax advice.

That said, usually, the way to minimize taxes on stocks and mutual funds that you give to your loved ones, is to wait and give them to your heirs through your will or trust. You might have reasons to give them the assets now, however, and you want to manage the transfer without Uncle Sam taking more than he should.

After all, the less that you or the recipient have to pay in taxes on the transfer, the more value that remains for your loved one’s benefit. Sometimes it is more advantageous to give the actual stock, rather than to sell it and give the proceeds, after capital gains tax. After talking with your tax advisor, contact your brokerage firm to find out the steps you have to take to transfer your investments.

The laws are different in every state, so you should talk with an elder law attorney near you.

References:

AARP. “How to Give Your Money Away.” (accessed November 28, 2018) https://www.aarp.org/money/investing/info-2018/giving-money-to-family.html

Continue Reading

How Do I Discuss Care With My Aging Parents?

Discussing the next steps isn’t an easy conversation, but if you plan ahead it can be less painful for everyone involved, says KARE 11 in Minneapolis in the article, “Making the best care decisions for aging parents.”

Many families find this out the hard way. When a parent requires immediate urgent care, the family must jump into “go” mode. It can be overwhelming. There are many options, which range from various levels of in-home care, to independent living, to assisted living and even to skilled nursing care. You should understand the level of care you need and what you can afford.

Unless you qualify for Medicaid, you’ll need to pay for assisted living out of your own pocket. For most of us, this could drain assets in short order. Many people also aren’t planning for long-term care in retirement.

It’s best to plan early. If you’re going to buy a long-term care policy, the best time to apply is in your 40s or 50s, when your health is good and the cost is cheaper.

Sit down with an elder law attorney, regardless of your assets, because the laws concerning Medicare and Medicaid are confusing. Every situation is also different.

Many people aren’t aware that Medicare doesn’t cover many long-term care services. In fact, that limited benefit is designed to get somebody back to independent living, not help them with basic activities of daily living. Therefore, if it becomes a situation where somebody is going to need help with such basics as dressing, bathing and other activities of daily life for the rest of their life, Medicare is not going to cover it.

If you believe gifting your estate away now will stop you from losing it in the future, remember that most states have a five-year look back period. Any gifts of money or property in the 60 months before applying for Medicaid, can be taken back to pay for the program or the applicant will be penalized.

It’s difficult enough to make the decision to place your parent in someone else’s care, let alone to fret about how you’re going to pay for it. Plan now, if you can.

Reference: KARE 11 (Minneapolis) (November 27, 2018) “Making the best care decisions for aging parents”

Continue Reading

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.

 

 

Continue Reading

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”

Continue Reading

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”

Continue Reading