Why Review Your Estate Plan?

February 13, 2019

Life rarely remains the same and those changes mean it is time to take a fresh look at your estate plan. Time marches on and a person’s life changes. That creates the situation of there not being a doubt of whether an estate review is necessary but simply becomes a questions of when it will be reviewed, according to the New Hampshire Union Leader in “It’s important to periodically review your estate plan” Most people get their original wills and other documents from their estate planning attorney, put them into their safe deposit box or a fire-safe file drawer and forget about them. There are no laws governing when these documents should be reviewed, so whether or when to review the estate is completely up to the individual. That often leads to unintended consequences that can cause the wrong person to inherit, fracture the family and leave heirs with a large tax liability. A better idea: review the estate plan on a regular basis. For some people with complicated lives and assets, that means once a year. For others, every three or four years works. Some reviews are triggered by changes in life, including: Marriage or divorce Name Changes Death Large changes in the size of the estate A significant increase in debt The death of an executor, guardian or trustee Birth or adoption of children or grandchildren Change in career, good or bad Retirement Health crisis Changes in tax laws Changes in relationships to beneficiaries and heirs Moving to another state or purchasing property in another state Receiving a sizable inheritance Beneficiaries in need of protection due to Special Needs, creditors, or Tax Problems. What should you be thinking about, as you review your estate plan? Here are some suggestions: Have there been any changes to your relationships with family members? Are any family members facing challenges or does anyone have special needs? Are there children from a previous marriage and what do their lives look like? Are the people you named for various roles—power of attorney, executor, guardian and trustees—still the people you want making decisions and acting on your behalf? Does your estate plan include a durable power of attorney for healthcare, a valid living will, or if you want this, a DNR (Do Not Resuscitate) order? Has your estate plan addressed the possible need for Medicaid? Do you know who your beneficiary designations are for your accounts and are your beneficiary designations still correct? Your beneficiaries will receive assets outside of the will and nothing you put in the will can change the distribution of those assets. Have you aligned your assets with your estate plan? Do certain accounts pass directly to a spouse or an heir? Have you funded any trusts? Finally, have changes in the tax laws changed your estate plan? Your estate planning attorney should probably take a look at the impact of state law changes, as well as federal. Reference: New Hampshire Union Leader (Jan. 12, 2019) “It’s important to periodically review

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

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

A Revocable Living Trust Might Be a Good Fit

January 24, 2019

There are many kinds of trusts. They aren’t just for the wealthy. Our practice has featured the preparation of wills and trusts exclusively since 1995. In the intervening years, we have prepared thousands of each such plans, and now work extensively implementing them after a client has died. Our caseload is now about 45% administration of wills and/or trust. We are often asked by clients which is better. That depends on many factors. But Trusts seem like a much better choice often, after the time comes to use the planning. If maintained and funded, a trust can be more cost effective, private and easier to administer. On the other hand, I know many attorneys who scoff at the notion of using a trust for people who are not millionaires. Probate, they often assure, is not so bad. And is a trust necessary? Everyone needs an estate plan. However, everyone should also at least consider a trust, according to The New York Times in “Life After Death? Here’s Why You Should Have a Trust.”It turns out that many people who are not wealthy, can also benefit from having a trust. There are many different kinds of trusts which serve different purposes. One is a revocable trust, which the owner can change. They are considered by many to be the “work horse” of modern estate planning. A revocable trust can avoid the need for a public probate court proceeding after the person dies, saving time and keeping money from being immediately available to heirs and executors alike. Trusts are also useful for times when people become incapacitated and need someone else to take care of their finances. Because many more people are living longer and the number of people with dementia is increasing, there are more situations where trusts are useful to the family and caregivers. A will is different than a trust and is a public document. The probate process requires a disclosure of assets, bank and other financial accounts and the names of beneficiaries. That information remains private with a revocable trust. Other considerations regarding trusts: You should have any type of trust set up by an estate and trust attorney. A house, real property, bank or investment accounts can be placed into a trust. A revocable trust does not always end at the death of the original owner. However, just how long it may last, depends upon the laws of your state. People also use trusts to protect their assets from others or to assure the long-term care of someone who is disabled. You can have a professional manager, family member or friend as a trustee or co-trustee of a trust. Sometimes having a licensed professional who has federal reporting requirements can provide an extra layer of protection. An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may include taking a close look at trusts. Reference: The New York Times (March 22, 2018) “Life After Death? Here’s Why You Should

Growing Older-Don’t Avoid a Conversations

January 14, 2019

The talk may be difficult but may turn out to be necessary. When someone dies or becomes disabled, the people who support and love that person are often in the position of walking into the middle of a movie and trying to figure out “What is going on?” As we age, sharing information ahead of time can be a big help. It might not be the easiest conversation you have ever had. However, it is a good idea to have a talk with your loved ones about what steps to take as you go through the aging process, according to The Des Moines Register in “In 2019, resolve to have a difficult conversation.” The person who is contemplating needing help, may want to start the conversation but the person who may be called on to help may find it too difficult to consider. Who wants to think about their parents getting frail and needing help going to the bathroom? No one. The person who is starting to feel the impact of aging may already be aware of some limitations. However, talking with their children or potential caregivers may change the conversation from “someday” to “soon.” The loss of independence is one of the big milestones, just as gaining independence is a milestone earlier in life. That’s a hard thing to accept for both sides. Those who have lived through this process of needing to become caregivers say that it would have been easier if they would have known what their loved ones wanted. So, would have been knowing what kind of help their loved ones could afford. It’s better to have time to research available resources in advance, rather than operating in crisis mode. This is what your conversations need to address: Medications, physical health, emotional well-being and health care providers Their wishes, if their health declines slowly or rapidly. Do they want to stay at home? Who would they want to help with daily care? Finances: Can they afford to pay for care at home? Has any Medicaid planning been done? What government programs are they eligible for? Do they have a CPA or financial advisor? Estate plan: Where is their Last Will and Testament? Is there a Power of Attorney, Living Will or Medical Directive in place? Who is their estate planning attorney? Documents, including birth certificates, Social Security, insurance cards, safe deposit box keys, computer passwords, etc. Seven out of 10 people over age 65 will need help from others at some point. Most will need it for at least three years, so it might be wise to have the conversation before a difficult situation arises.Reference: The Des Moines Register (Dec. 19, 2018) “In 2019, resolve to have a difficult conversation”

Is a Guardian needed? Take a Look at All the Options

January 5, 2019

Some of the options are less intrusive than a guardianship or a conservatorship. Sometimes guardianships and conservatorships are necessary when some members of a family believe a loved one is becoming mentally or physically incapacitated. However, there are other options, according to On Common Ground News in the article “Alternatives to guardianship and conservatorship.” What is the difference between the two? These are legal proceedings that vary in name from State to State. In Maryland, these proceedings are guardianships and take two forms: Guardian of the person and guardian of the property. A Guardian of the person decides on living situation and most medical care: Guardian of the property handles the property and lets the appointed person their ward’s finances and assets, buy and sell businesses and enter into commercial transactions. Either process will involve a court proceeding, ordinarily with an attorney representing the family and a separate attorney representing the incapacitated person. Guardian of the person can sometimes be avoided by relying on the Maryland Health Care Surrogate law, that basically allows next of kin to make medical decisions for someone who does not sign a living will or health care power of attorney. This can be a good alternative to Court if the family is united in their decision making. It doesn’t work well if they are not. Alternative options to Guardian of the property include a Durable Power of Attorney (DPA), which permits a competent individual to name another person as their legal representative regarding finances and other matters. There can be specific instructions, and this also can include an agent who is named to make health care decisions. A DPA is broader in power than a living will and applies any time the individual becomes incapable of either making or communicating health care decisions on their own behalf. A second alternative is the creation and funding of a revocable living trust, where you can appoint a chain of command for the management of assets in the Trust. Many of our clients name a trustee child or other individual to be a Co-Trustee, to be in the wings to manage assets at disability. An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances. Reference: On Common Ground News (Nov. 29, 2018) “Alternatives to guardianship and conservatorship”

Reviewing Your Estate Plan in January

January 2, 2019

Put away the estate plan when it is completed. However, take a good look at it frequently. There are many reasons why an estate plan needs changing, because your life changes as do your goals, according to the Times Herald-Record in “5 steps to securing your elder estate plan.” What might be some of those changes? It could include your divorce, your marriage or even the marriage or divorce of your children. It can also be that your financial situation has changed, and you need to make changes. A ten-minute review at the beginning of a New Year will be an annual reminder, and can verify that you are still on the right course. The process of review may seem challenging but here are some steps to consider: Step One: gather up all your documents, which may take some time. This includes your will, powers of attorney, health care proxies, living wills, any trusts and any other documents. For clarity, here are some definitions. A will is the document that states where you want your assets to go when you die. It is reviewed by the court in a proceeding called probate, but only after your death. Assets in a living trust (or other types of trusts, depending on your situation) do not go through this process. Creating a trust results in a legal entity that owns the assets it contains. The trust assets go to beneficiaries upon death, as directed by you to the trustee. In many instances, trusts save time, money and avoid litigation over inheritances. Powers of attorney name the person you appoint to make any legal, business or financial decisions for you, should you become incapacitated. A health-care proxy names the person to make your medical decisions, if you are unable to do so. Living wills are used to express your wishes for end-of-life care. Step Two: review your documents. Make sure that everything is signed. You would be surprised how many important documents aren’t signed. Read the documents to see who was named as the executor of your will and who is the trustee of your trusts. Are those people still able to undertake these responsibilities? Do you still want them making decisions for you? Step Three: make a list of all of your assets. Note how they are titled—what names are on the accounts—and what are the values of each. Include retirement accounts like IRAs, 401(k)s, insurance policies and annuities and check to see if you named a beneficiary. Do you still want that person to be the recipient of the asset? Make sure that you have also named a contingent beneficiary. Step Four: what information would your loved ones need should you become unable to communicate? They’ll need information about your medications, the name and contact information for your primary care physician, your estate planning attorney, your CPA and your financial advisor. You may want to arrange for a “family meeting” with your healthcare team and your legal and financial team (two separate

Put Not Your Trust in Money, Put Your Money in Trust

December 14, 2018

“Put not your trust in money, put your money in trust”, per Oliver Wendell Holmes, Sr. is embraced by estate planning lawyers and shows that trusts are not a passing fad. Everyone needs an estate plan, and when you understand what a trust does, your plan should probably include one, at least conditionally. According to The New York Times in “Life After Death? Here’s Why You Should Have a Trust.” It turns out that many people who are not wealthy can also benefit from having a trust. I consider a trust essentially a box to manage assets. There are many different kinds of trusts which serve different purposes and can be effective now or at death. One is a revocable trust, which the owner can change. They are considered by many to be the “work horse” of modern estate planning. A revocable trust can avoid the need for a public probate court proceeding after the person dies, saving time and keeping money from being immediately available to heirs and executors alike. Such a trust is created and holds assets during your lifetime. Other considerations regarding revocable trusts: You should have any type of trust set up by an estate and trust attorney. A house, real property, bank or investment accounts can be placed into a trust. A revocable trust does not always end at the death of the original owner. However, just how long it may last, depends upon the laws of your state. People also use trusts to protect their assets from others or to assure the long-term care of someone who is disabled. You can have a professional manager, family member or friend as a trustee or co-trustee of a trust. Sometimes having a licensed professional who has federal reporting requirements can provide an extra layer of protection. They are not a public record, unlike your will. Trusts are also useful for times when people become incapacitated and need someone else to take care of their finances. Because many more people are living longer and the number of people with dementia is increasing, there are more situations where trusts are useful to the family and caregivers. A trust can also be created in your Last Will and Testament. We rarely create a will without a trust. A trust created in a will is a “Testamentary Trusts” because it is within your Last Will and Testament, but it can manage assets in much the same way as a revocable trust would. The difference is mechanical: the Testamentary Trust receives asset often through a probate process, because wills work through probate. A Testamentary Trust can be a designated beneficiary of life insurance, retirement plans and annuities. Care should be taken in drafting and when doing so because of issues like stretching out IRA withdrawals. An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may include taking a close look at trusts. Reference: The New York Times (March 22, 2018) “Life After Death? Here’s

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