The Impact of Addiction on Estate Planning

February 11, 2019

Families struggle with the damages created by alcohol or drug habits. Most families have had to work with a member or more with substance abuse issues. It is something that knows no boundary of age, gender or race. Now the leading cause of death of Americans under the age of 50 is now from opioid addiction and this is having an impact on estate planning, according to MarketWatch in “How to leave money to a family member with an addiction.” Addiction has been known to drive even good people to steal and lie to get money to support their habits. Parents of children are wracked by guilt and anger. The stories of families spending hundreds of thousands of dollars in an effort to help their children are growing in number—as are the number of families who exhaust their retirement savings paying for rehabilitation and related services. Trusted family advisors, including estate planning attorneys and financial advisors, find themselves working with families to protect the family finances and the well-being of their addicted family members. The fallout from addiction creates many secondary problems for families. Estate planning for a family grappling with addiction addresses many different issues, not just inheritance. For starters, deciding whether someone has a drug or alcohol problem is itself often a source of great discord and disagreement. Substance abuse issues often run in families, and across generations. The discord can be a huge impediment to putting planning in place. Lump sum distributions or full bequests to an adult struggling with addiction can be deadly, if the person uses the funds to purchase large quantities of drugs. At the same time, writing someone out of the will completely and withdrawing all support, can be devastating to the addicted adult and the family. Creating a trust can help to protect assets and ensure that there is some degree of accountability in how the distributions are made. Incentive trusts, where a certain behavior or accomplishment markers are determined, can be used to encourage behaviors. This may mean that the addicted adult does not receive funds, until after passing a drug test, attending a certain number of treatment sessions or entering a residential rehabilitation program. Incentive trusts are part of a special area of estate planning. Therefore, it is necessary to work with an attorney who has experience with trusts and with incentive trusts. Ideally, the attorney who helps your family, will be one who is also familiar with the impact of addiction on families. Creating incentives for positive outcomes includes having consequences when the person fails to meet the terms of the trust. In this situation, a trustee who is extremely trustworthy and not prone to being manipulated is necessary. They will need to make sure the person adheres to the requirements and while they may be given certain levels of discretion, this person needs to be strong-willed enough to withstand an addict. Naming one sibling to be trustee over another is a choice many clients make, but one we

Estate Planning Attorney Can Help Avoid Family Feuds

February 8, 2019

A daughter has some problems, as siblings are hurt by parent’s estate planning intentions. With the choices you make of who you put in charge, you set the table for great or horrible results. Failing to have any plan is setting the table for controversies and fights. Families can grow together with brothers and sisters under the same roof. As time goes by and aging parents must make tough decisions, things can get difficult with feuds developing. An estate planning attorney can help the family through these difficult times, according to a Faribault Daily News article “Attorney can smooth path for families making legal plans,” The article tells of a reader who faced a problem from siblings, when the parents wanted to create a power of attorney for health and care decisions. The difficulties came from siblings who live far away but felt as if they not being included in their parent’s plans. For this particular family, one sibling lives 500 miles away and another lives 800 miles in the opposite direction. The one daughter who lives in the same community is the logical choice for power of attorney. What can be done? The parent’s foresight in updating their estate plan and related legal documents is to be congratulated. The one adult child who lives in their community, is the best choice for power of attorney for medical and financial decisions, so they can quickly handle an emergency situation. The parents have assigned the other two adult children as secondary POAs and everyone has already been informed that they will all receive equal shares in the estate. The out-of-town siblings should be happy at how fairly and expeditiously their parents are taking care of in these matters. Adults need someone to be named to handle health care and financial decisions, if they become incapacitated and need someone else to make decisions. Having a POA puts others in place to take over any tasks. Having a secondary POA designates someone to step in, if the primary is unable to act. When someone choses a POA because they don’t want to hurt any feelings, the result is often disastrous. It’s important to pick the most competent and trustworthy candidate. Some states also allow what is known as a “co-agent,” so that decisions are made together. But in an emergency, if the other person is not immediately present and time is an issue, this can lead to critical situations being unresolved. One way to soften this kind of situation is to have the entire family meet with the estate planning attorney in a family meeting. With a professional who is not emotionally tied to the family dynamics, decisions can be explained, and cooler heads may prevail. An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and help smooth over family issues, if necessary. We spend the time in consultations helping to weigh out these choices. Reference: Faribault Daily News (August 28, 2018) “Attorney can smooth

What is Probate and Should You Avoid It? Part I

February 7, 2019

Probate is what’s left over I draw about ten frying pans a week on a legal pad. This is not due to my great artist ability. We offer fee consultations to our client’s named financial successor after a person dies. That would be the Personal Representative, or executor, of a Last Will and Testament, or the Successor Trustee of a Revocable Living Trust. For trust clients, they are almost always the same person(s). In those consultations, I draw a frying pan. You see, Wills work through a Court process called probate. They are not effective until a Court appoints you as the actual representative, in Maryland by passing an Order and issuing Letters of Administration. Probate is the process of “Proving” the Will, meaning that interests parties are notified, and have a chance to object to the will. It is not necessarily good or bad. It is necessary if a will is to be used to distribute assets. Assets don’t necessarily go through this process: Often nothing does. The process is avoided by either Title or Contract. Title is by the form of ownership: Most husbands and wives own virtually everything this way as tenants by the entireties (T by E). If your spouse dies and the house, bank accounts and vehicles are in both names, then they are not in the frying pan. They get diverted by the title. You can own assets jointly with rights of survivorship (JWROS). At the death of one joint owner, the assets go to the survivor. You can also own property with another person as tenants-in-common, meaning that title of your portion does not convey by title at death. Like everything in life, title transfer can be good and bad. It’s great because it’s free. It’s bad because it can have unintended consequences. I transfer my house to myself and my son as joint owners, to “avoid probate”. My son has a car accident, and suddenly I may lose my home because my son owns part of it. Adding someone to the deed is simple, but not necessarily a good idea. I had a client who had two nieces that she put on her two investment accounts, each with a balance of about $200,000. One niece was named as a joint owner of each account. She later entered a long-term care facility. Her one niece dutifully paid the bill for over a year. The other decided to wait and see. When my client died, the niece who was faithful to her got next to nothing, while the other got her full account. How do you think they are now getting along? Also, it may be that a beneficiary should receive their inheritance in a controlled manner. Special needs beneficiaries need may want their benefits preserved. Someone with a drug problem might be best served with specific controls. A child getting divorced might want to buffer their inheritance. Title transfers are simple but don’t allow for any controls. They say there is more than one

Don’t Fall for Estate Planning Myths!

February 6, 2019

Your work isn’t done just because you have a will. There are many myths floating around about wills, trusts and estate planning. Those myths can easily confuse people who haven’t taken the time to bust them, before getting on to the real work … taking care of the family, according to the Cleveland Jewish News in “Estate planning myths common, but debunkable.” One common myth is that a trust is completely creditor protected. While there are some trusts that achieve this goal, there are many that don’t. It is easier to provide that to your beneficiaries that to yourself. Another myth is that once an estate plan is completed, there’s no need to revisit or make changes. We look at the planning you put in place as essentially an ongoing rough draft. Perhaps the biggest myth around estate plans is that they are only needed by wealthy people. Actually, everyone needs a will. A property power of attorney can save your loved ones thousands of dollars and massive aggravation. People chat with their friends and neighbors and pick up snippets of information, which is usually incorrect. As with any kind of story, once a piece of information has moved through a few different people, it becomes confusing, even if it started out accurate. The value of such “Street lawyers” is usually what you pay for it. Unless it comes from an estate planning attorney, don’t get any legal advice at a neighborhood or family gathering. The results can be disastrous. If you think having a trust alone is enough to prevent your heirs from having to pay any taxes, your kids will be in for a big and expensive mistake. If you don’t set up guardianship for your minor children, then the court will appoint a guardian. It’s entirely possible that it may be a person you would never have wanted to raise your children. If a separate financial trustee is not named, there won’t be any checks and balances on how the money left for your children is spent. If you don’t have an estate plan in place, and especially if your family includes minor children, make an appointment to speak with an estate planning attorney who can advise you on an estate plan that fits your unique circumstances. Reference: Cleveland Jewish News (Sep. 20, 2018) “Estate planning myths common, but debunkable”

Remarriage Can Create Estate Plan Challenge

February 5, 2019

When a remarriage takes place late in life, potential problems can arise over an existing home. It may be hard to broach the subject of death when you are getting married later in life. If you have children from a prior marriage, what will happen with assets and control is a necessary difficult conversation. It’s not always an easy situation when a spouse moves into the home of their spouse when they marry. Would the surviving spouse receive the home when the other dies? Does the home go to children from a previous marriage or previous arrangement? A good estate plan can resolve many potential problems in a remarriage situation, according to the Times Herald-Record, in “How to preserve your home’s value when remarrying.” With poor planning, you might end up with your assets going to your second spouse and then, to his or her own children, leaving your own children empty-handed. A common approach is to leave the surviving spouse the right to use and occupy the residence, with a provision in a trust or a will that the surviving spouse pays taxes and home insurance costs and maintains the house. The right to live in the house can be for a limited number of months or years or until they pass away or enter a care facility. When the surviving spouse dies, or the time limit is reached, he or she leaves the house, the house is sold and the proceeds are divided among the children of the owner’s spouse. Some questions to consider: What if the house needs to be sold? Can the spouse use the proceeds to purchase another house? How long is the usage of time? Who can be there? There are other ways to provide more flexibility to the surviving spouse. If the house is too large or expensive to maintain, he or she may be given the right to use and occupy a substituted property, which may be purchased with the proceeds from the owner spouses’ home. Another arrangement allows the owner spouse’s home to be sold with the surviving spouse using the income from the proceeds of the sale of the house to pay for a rental. When the surviving spouse dies (or when the term expires), the children of the first spouse inherit what is left. A few important things to consider: how well the surviving spouse will be able to maintain the house, either for financial or physical reasons. If the surviving spouse is not taking care of the house and it falls into disrepair, the children may have to file an eviction proceeding. If the trust or will does not specifically instruct the surviving spouse to pay for home maintenance, the children of the owner spouse would be responsible for those costs, and depending on how long the surviving spouse lives, that could be a large burden for a long period of time. This situation requires thoughtful planning, with many “what if’s” to be asked. An experienced estate planning

Divorce Can Hinder Retirement for Women

February 4, 2019

‘Divorce gap’ can have an impact on income, as well as on retirement planning. In my prior life, a large part of my practice was as a divorce lawyer. I was involved with may stress filled conversations about the marital break-up. While the ending of a marriage is an emotionally devastating event for most people who experience divorce, it is also very much the ending of a business relationship. Intermingled efforts at saving, raising children and maintaining a home deserve the eyes of a third party who is knowledgeable about assets, alternative ways to negotiate, and what will likely happen in Court if you cannot agree. If you or a loved one is going through this process, seeing proper legal counsel about your rights, particularly as to retirement plans accumulated during the marriage, is critical. A competent divorce lawyer can be well worth their cost. A study from the Center for Retirement Research at Boston College found that divorced women historically are better off than single, never married women, because of the assets they have accumulated before divorce, primarily home ownership. However, that can have a negative impact on retirement, according to Money in “This is The Single Best Way Divorced Women Can Secure a Successful Retirement.” Many divorce lawyers and financial advisors say that keeping the house after divorce, isn’t always the best move. Many newly-single women find they don’t have the resources to keep up with mortgage payments, maintain the property, pay taxes and deal with unexpected crises. One advisor says she’s concerned that these new numbers will lead to women who can’t necessarily afford to maintain a home to hang on to their homes. However, a researcher involved in the study maintains that while the study mentions homeownership, there’s a bigger point being made. Married women who divorce benefit from receiving a share of marital assets. Single, never-married women do not and must rely solely on themselves for saving and accumulating assets that can be used to finance their retirement. A critical fact that women who are divorced must do: whatever assets they get in the divorce settlement, commit to keeping those assets intact for retirement. It’s easier to do this with a house. However, it’s tempting to dip into assets that are intended for retirement. Many of our clients put plans in place to protect the asset they leave to children from divorce. An estate planning attorney can advise you in creating an estate plan that meets your unique circumstances, including retirement planning. Reference: Money (Aug. 10, 2018) “This is The Single Best Way Divorced Women Can Secure a Successful Retirement”

Bankruptcy Is Down but Senior Filing Is Up

February 1, 2019

Careful planning can often avoid the traps that lead to bankruptcy. Filing for bankruptcy is a very difficult thing. However, the impact is even greater, if it is done in your senior years and should be avoided if possible, according to nwi.com in “Planning key to avoid becoming a bankruptcy statistic in retirement.” Many people think that estate planning attorneys also handle investment advice. Some attorneys cover both the law and how to handle your investments. I have always wanted to limit the area of possible malpractice to just specialty. To put your financial house in order, consider working with a Certified Financial Adviser. For starters, people need to do a complete financial analysis. This includes a hard look at current and potential future health care costs, which can decimate even the best retirement plan. That means planning for early retirement, long before Medicare is available. Resources may include a younger spouses’ COBRA, contributing to a Health Savings Account and any coverage gap that may occur between the time the person retires and when they reach age 65 and are eligible for Medicare. Planning needs to start early so include the cost of college education for your children and planning for retirement. Saving rates slow down during retirement, so getting started on saving early is critical. A financial plan can expose shortfalls. People may not want to consider themselves at risk. There is a strong tendency to procrastinate, thinking that there is enough time to catch up. The sooner you start planning, saving and facing reality, the better your chances of not filing for bankruptcy. Another reason for the increasing rate of bankruptcies is that we are all living longer. That’s a great thing but it also means that health care costs are increasing, especially long-term care. Medicare does not cover long-term care, including assisted living, memory care and the need for nursing home care. It does not cover routine eye care, dental care or hearing aids. The national average costs for long-term care in the U.S. in 2016 were $225 a day or $6,844 per month for a semi-private room and $253 a day or $7,698 per month for a private room. All other health care costs have been increasing 6% annually, according to the Center for Medicare and Medicaid. As a nation, we spent $3.2 trillion for health care in 2016. Those cost increases make planning a challenge for seniors and their families. Therefore, many unforeseen issues occur. Another reason for the increase in bankruptcies among seniors is the “unwanted retirement.” Many older workers were downsized during the Great Recession and 60% of retirements were unplanned, according to a survey from TransAmerica. Downsized workers took on debt to survive and are now entering the next phase with expenses they did not count on having. Many returned to the workforce, but at lower salaries. The Bureau of Labor Statistics says 36% of those 65 and older are still working—and 20% of those who are 70 and older are still

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February 2019