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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The Right Documents for Estate Planning

Having a properly prepared estate plan, that includes all the important documents, including a will and power of attorney, is one of the most important ways to protect your family and yourself. Despite this fact, many adults still neglect to take care of this important task, reports Consumer Reports in its article “8 Essential Steps for Estate Planning.”

A survey from Caring.com showed that as many as 60% of adults don’t have estate planning documents. When they asked families with young children, fewer than one in ten have even designated a guardian to take care of their children, if both parents should die.

What happens when there’s no planning in place? Even the simplest things become more complicated, and complicated things become financial and legal nightmares. When there’s an emergency and decisions need to be made, the entire family is subjected to more stress and costs than would otherwise be necessary.

Here are the eight steps you need to take, right now, to protect your family:

  1. Get the professional help you need. The change to the tax law may or may not impact your family and your estate plan, but you won’t know until you sit down with an estate planning attorney. Trying to do this online, may seem like a simpler way, but you will not have the same peace of mind as when you sit down with an experienced attorney—and one who knows your state’s laws.
  2. Create a will. This is a legal document that explains how you want your assets to be distributed after you die. It names an executor to carry out your instructions. If you have minor children, this is an especially important document, since it is used to name their guardian. If you have no will when you die (called dying “intestate”), then the laws of your state determine how your assets are distributed and who rears your children. Depending on where you live, your spouse might not automatically inherit everything.
  3. Discuss whether you need a Revocable Living Trust. In most states, when you pass away, your estate goes through a process called “probate.” The courts basically review your estate plan and determine whether everything looks right. The problem is that your will becomes a public document—and so does information about your assets. Some people prefer to keep their lives private by transferring assets to a revocable living trust, which distributes assets according to your instructions at your death. Titles to the assets must be changed, so they are “owned” by the trust. This is known as “funding” the trust. You still retain complete control of your assets, since you are the trustee. However, if you fail to retitle assets, the estate goes through probate. You will also still need a will to protect your minor children.
  4. Review your beneficiaries. Whether you remember it or not, when you open many different kinds of accounts—banking, investment—you assign a beneficiary to receive the assets upon your death. Your will does not override the beneficiary designation. Therefore, if you haven’t changed your life insurance beneficiary, for instance, and your ex-wife is still named on the document, she’ll get the entire proceeds of the life insurance policy when you die. This is a very important task.
  5. Have a Durable Power of Attorney (DPOA) created. This is something that protects you, while you are living. If you should become incapacitated, having a durable power of attorney in place will allow that person to manage your financial affairs. Make sure the institutions that have your accounts accept your attorneys’ POA form; you may need to get the one that the institution uses.
  6. Don’t forget the Advance Directive. This is also known as a Living Will. It explains your wishes for medical procedures, if you are unable to communicate and explains what you want for end-of-life care. Make sure that your family members know that you have such a document and keep it accessible in case of an emergency.
  7. Pick a Healthcare Proxy. The Healthcare Proxy, also known as the Durable Power of Attorney for Healthcare, names someone to convey your healthcare wishes. It should include a HIPAA release clause. This allows medical personnel to release your medical records and speak with the named person about your care.
  8. Get it all organized. Think of this step as creating a user’s manual for yourself. All these plans won’t do any good, unless your loved ones know they exist and know where to locate them. Don’t put your estate planning documents and records in a bank safe deposit box, in case it is sealed on death. Your attorney will likely have an original, and you should have your original in a fire-proof safe in a secure location in your home.

Reference: Consumer Reports (Oct. 24, 2018) “8 Essential Steps for Estate Planning”

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Make Estate Planning Simpler with a Checklist

Ask an average person to define estate planning, and chances are good they’ll start describing long meetings with a lot of paperwork and complicated forms. However, that doesn’t have to be the case, says this article from InsuranceNewsNet.com, “A simple way to simplify estate planning.” It focuses on the use of beneficiary designations on a number of accounts that can make an estate plan a much simpler experience in many situations.

Beneficiary designations are primarily used on the following types of accounts:

  • Employer-sponsored retirement plans, like 401(k)s
  • IRAs
  • Life insurance policies
  • Annuities
  • Transfer on death investment accounts
  • Pay-on-death bank accounts
  • Stock options
  • Executive deferred compensation plans

Making sure to keep track of the person who has been named the beneficiary and keeping that information up to date is extremely important. It’s not always done correctly. The consequences of having the wrong person named on the asset can be infuriating and, unfortunately, permanent.

The importance of the beneficiary designation means you’ll want to:

  • Remember who you have named a beneficiary of what account. People usually name their spouse as a primary and a child as a contingent. If you only have a primary, consider a charity that has meaning to you as the contingent beneficiary.
  • Update your beneficiary designations, as life events occur. That includes births, deaths, marriages, divorces, etc.
  • Read the instructions on the beneficiary designation. Not all forms are alike.
  • Don’t name your estate as a beneficiary.
  • Understand the tax implications of naming the beneficiaries. Not every asset has the same tax treatment.

Speak with your estate planning attorney to ensure that your beneficiary designations align with your estate plan. Remember that beneficiary designations supersede any provisions in your will. You should also talk with your beneficiaries—you may learn that they don’t want to inherit your asset (i.e., a person who is considering a divorce may not want the additional complication of a large inheritance).

Reference: InsuranceNewsNet.com (Nov. 2, 2018) “A simple way to simplify estate planning”

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