Estate Planning Blog

A Love Letter to Your Family
estate plan is a love letter to family

A Love Letter to Your Family

A Love Letter to Your Family.

“A real love letter is made of insight, understanding, and compassion. Otherwise it’s not a love letter. A true love letter can produce a transformation in the other person, and therefore in the world. But before it produces a transformation in the other person, it has to produce a transformation within us. Some letters may take the whole of our lifetime to write.”
― Thich Nhat Hanh, Your True Home: The Everyday Wisdom of Thich Nhat Hanh: 365 days of practical, powerful teachings from the beloved Zen teacher

“Wish not so much to live long as to live well.” – Poor Richard’s Almanack, 1738

Now, to the 70% of Americans who do not have an estate plan, the article “Senior Spotlight: Composing the ‘family love letter’” from the Lockport Journal should help you understand why this is so important. One reason why people don’t take care of this simple task, is because they don’t fully understand why estate planning is needed. They think it’s only for the wealthy, or that it’s only for old people, or even that it’s only about death and taxes.

Consider this idea: an estate plan is about protecting yourself while you are alive, protecting your family when you have passed and leaving a legacy for the living.

Some of the main elements of an estate plan are to create and execute documents that provide for incapacity and death, as well as provide information about your assets, liabilities and wishes.

You’ve spent a lifetime accumulating assets. It is now time to sit down with family members and have a heart-to-heart talk about the details of the estate and what your intentions are with respect to its distribution. The subject of death can be challenging for all. However, discussing your estate plan is vital, if you want to protect your family from what might come after you are gone. Each family has its own goals, so it’s a good idea to talk about it frankly, while you still can.

Without discussions and an estate, the chances of a family split, assets not going where you had intended and unnecessarily higher costs in taxes and legal fees, are a very real possibility.

If speaking about these topics is too hard, you may want to write your family a love letter. It would contain all the information that your family would need at the time of your death or if you become incapacitated because of illness or injury.

Your estate plan should also include the documents needed, so your family can make decisions on your behalf, if you are incapacitated. That includes a power of attorney, a health care directive and may include others specific to your situation.

Ideally, all this information will be located in one convenient place. Don’t put it on a computer where you use a password. If the family cannot access your computer, all your hard work will be useless to them. Put it in a folder or a notebook, that is clearly labeled and tell family members where it is.

They’ll need this information:

  • A list of your important contacts — your estate planning attorney, financial advisor, CPA, insurance broker and medical professionals.
  • Credit card information, frequent flier miles.
  • Insurance and benefits including all health, life, disability, long-term care, Medicare, property deeds, employment and any military benefits.
  • Documents including your will, power of attorney, birth certificates, military papers, divorce decrees and citizenship papers.

Think of these materials and discussions as your opportunity to make a statement for the future generation. If you don’t have an estate plan in place already or if you have not reviewed your estate plan in more than a few years, it’s time to make an appointment for a review. Your life may have not changed, but tax laws have, and you’ll want to be sure your estate is not entangled in old strategies that no longer benefit your family.

Reference: Lockport Journal (Feb. 16, 2019) “Senior Spotlight: Composing the ‘family love letter’

Using Trusts to Maintain Control of Inheritances

Using Trusts to Maintain Control of Inheritances.

“The spendthrift robs his heirs the miser robs himself.” Jean De La Bruyere

“If the Nation is living within its income, its credit is good. If, in some crises, it lives beyond its income for a year or two, it can usually borrow temporarily at reasonable rates. But if, like a spendthrift, it throws discretion to the winds, and is willing to make no sacrifice at all in spending; if it extends its taxing to the limit of the peoples power to pay and continues to pile up deficits, then it is on the road to bankruptcy.” Franklin D. Roosevelt

Trusts, like estate plans, are not just for the wealthy. They are used to provide control, in how assets of any size are passed to another person. Leaving an inheritance to a beneficiary in a trust, according to the article from Times Herald-Record titled “Leaving inheritances to trusts puts you in control,” can protect the inheritance and the asset from being mishandled. Protection can be the main intention for creating a trust.

For many parents, the inheritance equation is simple. They leave their estate to their children “per stirpes,” which in Latin translates to “by roots.” In other words, the assets are left to children according to the roots of the family tree. The assets go to the children, but if they predecease you, the assets go to their children. The assets remain in the family. If the child dies after the parent, they leave the inheritance to their spouse.

An alternative is to create inheritance trusts for children. They may spend the money as they wish, but any remaining assets goes to their children (your grandchildren) and not to the surviving spouse of your child. The grandchildren won’t gain access to the money, until you so provide. However, someone older, a trustee, may spend the money on them for their health, education and general welfare. The inheritance trust also protects the assets from any divorces, lawsuits or creditors.

This is also a good way for parents, who are concerned about the impact of their wealth on their children, to maintain some degree of control. One strategy is a graduated payment plan. A certain amount of money is given to the child at certain ages, often 20% when they reach 35, half of the remainder at age 40 and the balance at age 45. Until distributions are made to the heirs, a trustee may use the money for the person’s benefit at the trustee’s discretion.

The main concern is that money not be wasted by spendthrift heirs. In that situation, a spendthrift trust restricts payments to or for the beneficiary and may only be used at the trustee’s discretion. A lavish lifestyle won’t be funded by the trust.

If money is being left to a disabled individual who receives government benefits, like Medicaid or Supplemental Security Income (SSI), you may need a Special Needs Trust. The trustee can pay for services or items for the beneficiary directly, without affecting government benefits. The beneficiary may not receive any money directly.

If an older person is a beneficiary, you also have the option to leave them an “income only trust.” They have no right to receive any of the trust’s principal. If the beneficiary requires nursing home care and must apply for Medicaid, the principal is protected from nursing home costs.

An estate planning attorney will be able to review your family’s situation and determine which type of trust would be best for your family because using trusts to maintain control of inheritances works best.

Reference: Times Herald-Record (Feb. 16, 2019) “Leaving inheritances to trusts puts you in control”

Using Trusts to Maintain Control of Inheritances.

Kids Grown Up? Protect Them with These Three Documents
Kids Grown Up? Protect Them with These Three Documents

Kids Grown Up? Protect Them with These Three Documents

Kids Grown Up? Protect Them with These Three Documents

“Right is right even if no one is doing it; wrong is wrong even if everyone is doing it.”  Saint Augustine of Hippo

“Everybody knows how to raise children except for the people that have them.” P.J. O’Rourke

Without the right documents in place, you do not have the legal right to protect your own children, once they turn 18, says The National Law Review in an unsettling but must-read article titled “Three Critical Legal Documents Every Parent Should Get in Place Now to Safeguard Their Adult Children.”

There are only three documents and they are fairly straightforward. There is no reason not to have them in place. If your adult child was incapacitated by an accident or an illness, you would want to speak with the medical staff to find out how they are and what decisions need to be made. Whether you were making a phone call or arriving at the hospital, a nurse or doctor would not be permitted to speak with you about your own adult child’s condition or be involved with making any medical decisions.

It sounds unreasonable, and perhaps it is, but that is the law. There are steps you can take to ensure that you are not in this situation.

HIPAA Authorization Form gives you the authority to speak with healthcare providers. This is a federal law (Health Insurance Portability and Accountability Act of 1996) that safeguards who can access an adult’s private health data. HIPAA prevents healthcare providers from revealing any information to you or anyone else about a patient’s status. The practitioners could face severe penalties for violating HIPAA.

This is why you want to have a HIPAA authorization signed by your adult child and naming you as an authorized recipient.  This will give you the ability to ask for and receive information about your child’s health status, progress and treatment. This is especially important, if your child is unconscious or in an unresponsive state. The alternative? Going to court. That’s not what you want to be doing during a health emergency.

A Healthcare Power of Attorney or health care proxy needs to be in place, so you can be named his or her “medical agent” and have the ability to view their medical records and make informed decisions on their behalf. Without this (or a court-appointed guardianship), healthcare decisions will be in the hands of healthcare providers only. That’s not a bad thing, if you implicitly trust your child’s doctor. However, if your child is incapacitated in an out-of-town hospital with healthcare providers you don’t know, you will want to be able to make decisions on his or her behalf.

Note that physicians prefer a single medical agent, not a handful. The concern is that if time is a critical factor and a group of family members do not agree on care, it may compromise the healthcare services that can be provided. You can name multiple agents in priority order. A mother might be listed as the medical agent, and if she is unable or unwilling to serve, the second person would be the father.

The third document is a General Power of Attorney. This would give you the right to make financial decisions on your child’s behalf, if they were to become incapacitated. You would have the legal right to manage bank accounts, pay bills, sign tax returns, apply for government benefits, break or apply a lease and conduct activities on behalf of your child. Without this document, you won’t be able to help your child without a court-appointed guardianship.

Keep in mind that these documents need to be updated every few years. If you try to use an older document, the bank or hospital may not accept them. Your adult child also has the ability to revoke these documents at any time, just by saying they revoke them or by putting it in writing. If you have an adult child living out of state, you want to have these documents prepared for your home state and their state of residence.

Finally, this is not a time to download forms and hope for the best. An estate planning attorney will know more specifically what forms are used in your state and help you make sure that they are prepared correctly.

Reference: The National Law Review (Feb. 11, 2019) “Three Critical Legal Documents Every Parent Should Get in Place Now to Safeguard Their Adult Children”

Have your kids Grown Up? Protect Them with These Three Documents: HIPPA authorization, health care proxy, General Power of Attorney.

Spare Your Family From a Feud: Make Sure You Have a Will
Without a Will there could be a Family Feud

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

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

“The problem with revenge is that it never gets what it wants; it never evens the score. Fairness never comes. The chain reaction set off by every act of vengeance always takes its unhindered course. It ties both the injured and the injurer to an escalator of pain…Why do family feuds go on and on?…the reason is simple: no two people, no two families, ever weigh pain on the same scale.” Lewis B. Smedes

“The family feuds or the village feuds often had to do with an idea of honor. Perhaps it was a peasant idea; perhaps this idea of honor is especially important to a society without recourse to law or without confidence in law.” V. S. Naipaul

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

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

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

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

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

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

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

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

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

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

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

Here’s Why You Need an Estate Plan

It’s always the right time to do your estate planning, but it’s most critical when you have beneficiaries who are minors or with special needs, says the Capital Press in the recent article, “Ag Finance: Why you need to do estate planning.”

 

While it’s likely that most adult children can work things out, even if it’s costly and time-consuming in probate, minor young children must have protections in place. Wills are frequently written, so the estate goes to the child when he reaches age 18. However, few teens can manage big property at that age. A trust can help, by directing that the property will be held for him by a trustee or executor until a set age, like 25 or 30.

 

Probate is the default process to administer an estate after someone’s death, when a will or other documents are presented in court and an executor is appointed to manage it. It also gives creditors a chance to present claims for money owed to them. Distribution of assets will occur only after all proper notices have been issued, and all outstanding bills have been paid.

 

Probate can be expensive. However, wise estate planning can help most families avoid this and ensure the transition of wealth and property in a smooth manner. Talk to an experienced estate planning attorney about establishing a trust. Farmers can name themselves as the beneficiaries during their lifetime, and instruct to whom it will pass after their death. A living trust can be amended or revoked at any time, if circumstances change.

 

The title of the farm is transferred to the trust with the farm’s former owner as trustee. With a trust, it makes it easier to avoid probate because nothing’s in his name, and the property can transition to the beneficiaries without having to go to court. Living trusts also help in the event of incapacity or a disease, like Alzheimer’s, to avoid conservatorship (guardianship of an adult who loses capacity). It can also help to decrease capital gains taxes, since the property transfers before their death.

 

If you have several children, but only two work with you on the farm, an attorney can help you with how to divide an estate that is land rich and cash poor.

 

Reference: Capital Press (December 20, 2018) “Ag Finance: Why you need to do estate planning”