Downs Law Firm, P.C.

Estate Planning

Do-it-yourself estate plan

Do-It-Yourself Estate Plan Creates More Problems

My idea: put our accounts in my wife’s name and put the land in our children’s names. The way I figure it, when something happens to me, they won’t need to do any of that courtroom mumbo jumbo that costs a few thousand dollars. What’s your take on the workaround idea?

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handling inherited investments

Taking a Couple’s Age Gap into Retirement Considerations

If you don’t marry someone close in age, your estate plan may require a closer look. When a couple has an age gap, there may be some special challenges ahead, when it comes to estate planning, according to The Washington Post in “How will a couple’s retirement look when there’s a big age gap?” Not only are men who have recently remarried more likely to have a spouse who is younger, said one researcher, in many cases they are marrying women who are much younger. Twenty percent of newly married men wed women who are at least 10 years younger than themselves and another 18% marry women who are six to nine years younger. By comparison, just 5% of men in their first marriage marry women who are 10 years younger. For women, the likelihood of having a far younger spouse is very low. That big age gap can be a big factor in decisions about when you retire, when spouses take Social Security and in planning how much money the couple needs to save and how to invest their savings. Since women tend to outlive men, it’s especially important for retirement savings to last longer, when the wife is much younger than her husband. When to retire is one of the big questions. Long-term care considerations, health insurance and other health costs become more significant, when there’s a younger spouse. Couples with big age gaps need to have a plan that accommodates the partner with the longest life expectancy. Therefore, a 70-year-old husband and a 56-year-old wife need to plan for their portfolio to last over the wife’s longer life span. That could be 30 years, especially if she has good health and a family history of longevity. If the older partner had a higher income level over his working career, delaying Social Security filing past full retirement age to age 70 could be extremely important. It will enlarge the higher-earning spouse’s benefit and it will also enhance the lifetime benefits for the surviving spouse. If there is a big age gap between you and your partner, you’ll need to have a lot of discussions about the issues that retirement and retirement planning brings. An estate planning attorney, coordinating with a financial advisor well versed in Social Security options, can advise you in creating an estate plan that fits your unique circumstances. Reference: The Washington Post (Oct. 22, 2018) “How will a couple’s retirement look when there’s a big age gap?”

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super-agers

Remarriage Can Create Estate Plan Challenge

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

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Charitable giving

Passing on Assets? Perhaps Some Can Be Given Away

Want to make a big impact? Consider passing on some of your assets through charitable giving. While many people transfer their assets to the next generation, there are many who want to give some, or even all, of their assets away through charitable giving. That can make a big impact, according to MarketWatch in “Giving your money away when you die: 10 questions to ask.” If you haven’t thought about charitable giving or estate planning, these 10 questions should prompt some thought and discussion with family members: Should you give money away now? Don’t give away money or assets you’ll need to pay your living expenses, unless you have what you need for retirement and any bumps that may come up along the way. There are no limits to the gifts you can make to a charity. Do you have the right beneficiaries listed on retirement accounts and life insurance policies? If you want these assets to go to the right person or place, make sure the beneficiary names are correct. Note that there are rules, usually from the financial institution, about who can be a beneficiary—some require it be a person and do not permit the beneficiary to be an organization. Who do you want making end-of-life decisions, and how much intervention do you want to prolong your life? A health care power of attorney and living will are used to express these wishes. Without these documents, your family may not know what you want. Healthcare providers won’t know and will have to make decisions based on law, and not your wishes. Do you have a will? Many Americans do not, and it creates stress, adds costs and creates real problems for their family members. Make an appointment with an estate planning attorney to put your wishes into a will. Are you worried about federal estate taxes? Unless you are in the 1%, your chances of having to pay federal taxes are slim to none. However, if your will was created to address federal estate taxes from back in the days when it was a problem, you may have a strategy that no longer works. This is another reason to meet with your estate planning attorney. Does your state have estate or inheritance taxes? This is more likely to be where your heirs need to come up with the money to pay taxes on your estate. Maryland has a 10% tax for gifts to people who are not close relatives. This would include nieces and nephews. There is no such tax on life insurance proceeds. Your decisions of “Who gets what” can include significant tax consequences. A local estate planning attorney will be able to help you make a plan so that your heirs will have the resources to pay these costs. Should you keep your Roth IRA for an heir? Leaving a Roth IRA for an heir, could be a generous bequest. You may also want to encourage your heirs to start and fund Roth IRAs of their

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Estate plan

An Estate Plan Should be in Writing

Make plans for handling an issue, before it becomes an issue. A plan not written down is really just a wish. I wish my son could handle my affairs. I wish my friend could speak for me in the hospital if need. I wish my special needs child would be eligible for needed government aid. Without committing something property to writing, these become more of what paves the road to hell. The legal issues that may surround a health problem, can go from bad to worse if you are not protected by legal documents expressing your wishes, according to the New Jersey Herald in “The importance of putting plans in writing.” The message hits home especially hard, when the friends experience problems that could have been resolved earlier with correct planning. In one example, a woman’s friend began to experience unexpected health problems. Her husband is incapacitated and there are no children to step in and help. The couple’s lack of legal documents has made a difficult situation even worse. Although discussing concepts like end-of-life care can be challenging, all adults should have specific plans in place, even if their estate plan is basic: a last will and testament, a living will and a power of attorney. It is never to early to put these documents into place. If you are a student about to enter college, your parents ability to help or get information may disappear legally at age 18. That newly minted adult should at least have a designated power of attorney and a medical directive, in case they are unable to manage their own affairs or make healthcare decisions. Unfortunately, many people still think estate planning is only for wealthy people who want to pay less taxes. Tax planning can help lighten tax liability for some. However, there are far more important reasons to do estate planning. The main reason for estate planning is to set down expectations and wishes, while you are alive and after you pass. An estate planning attorney will help review the benefits of having a power of attorney and a healthcare directive. They can help, if the situation occurs where your loved ones have to make decisions for you. The amount of time, expense and frustration of going through a guardianship process can be avoided, if these items are in place. An estate planning attorney can also help you with completing beneficiary forms for non-probate assets, preparing a funeral plan, planning a personal property memorandum and discussing elder care and planning for incapacity. Making decisions in advance regarding who will care for minor children, if young parents cannot and who will be the person’s executor and handle all the details of their estate, are all necessary. Many couples choose joint ownership and consider that their estate planning. However, that’s not enough. What happens when the last “surviving” joint owner passes? There are many other issues that need to be addressed. An estate planning attorney can advise you in creating an estate plan

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fraud

Intestate Law is the State Writing a Will for You

Do you really want the state to determine where your assets end up? A key concept to planning your estate is that you already have a plan in place, whether you know it or not. If you die without a will, or die “intestacy”, meaning “without a Will”, the laws of your state essentially write a will for you. That may not result in your assets going where your would have preferred, according to The Daily News in “’Are You My Heir?’-Who Inherits When You Die Without a Will,” Each state has laws called “intestacy laws” that govern how probate assets are distributed, if someone dies without having a will and establishes the inheritance hierarchy based on a person’s family structure. For example, if you are married but have no children and no grandchildren, your estate will be passed to your spouse. If two people die and there are no descendants (children or grandchildren), their parents, if living, will inherit their assets. A child who is legally adopted has the same rights of inheritance as biological children. Children born outside of the marriage may not. If a child should predecease a parent, the living descendants of the child (if there are any) will inherit their share. In some states, heirs are limited to family members who share the same grandparents. If your family is not geographically or otherwise close, you may have heirs you have never met. Intestacy can become extremely complex, when there are children and grandchildren. Descendants inherit from their parents and grandparents in percentages dependent upon the total number of children and the number of children in each generation that follows. If a grandfather has three adult children who are living and one adult child who has passed, then the estate will be divided by three—a third each to each of the two living children and the final third to the grandchildren of the third (deceased) child. The children of the deceased child are heirs, even if the parent has died. Add non-marital children—children born outside of a legal marriage or step-children—and things start to get complicated. A court will have to determine the intestate inheritance, based on proof that the child is a descendant and if that relationship is established in a timely manner. If the father’s name is on the child’s birth certificate, that is generally enough proof of the relationship. It doesn’t matter if they have a close relationship or have never met. The same applies to marital children—whether they have been close and caring or are estranged. An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and makes reliance on state law unnecessary.Reference: The Daily News (Sep. 7, 2018) “’Are You My Heir?’-Who Inherits When You Die Without a Will”

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Planning for digital assets

Estate Plan? Don’t Forget Digital Assets!

The world has changed, and it really isn’t a good idea to ignore your digital assets when estate planning. Estate planning has generally been about tangible assets through the years. However, now attention needs to be also focused on the digital world in order to be thorough, according to the North Bay Business Journal in “Your digital life likely will outlive you, so here’s how to bring your estate plan into the modern age.” Don’t think you have a digital identity and digital assets? For most of us, we need to take a closer look. Here are a few of your digital assets to consider: bank accounts, email accounts, Facebook page, Linked In profile, online photo albums, blogs and websites. They’re likely to be around long after you are gone. This is still a relatively new area of estate planning. What often happens is that heirs think they can simply find and use the decedent’s user name and passwords to access their accounts.  However, what they learn, is that they are legally not permitted to do so.   A new law was passed in 2017 in California that attempted to bring order to this chaos. The Revised Fiduciary Access to Digital Assets Act allows executors and trustees to obtain disclosure of a person’s digital assets, after the original owner dies but only under certain conditions. In the recent past, federal and state laws have made it hard for executors and trustees to gain access to these assets without a court order. Just being the executor or trustee does not automatically give you the right to access assets. There must be evidence that the decedent consented to disclosure. Having these access provisions in wills, trusts and powers of attorney is an evolving area. The new law mainly gave social media platforms and privacy advocates what they wanted: a requirement of prior consent before disclosure. However, the end result is that it is easier to gain access to digital assets, if executors and trustees can show that the decedent did consent to disclosure. However, it’s still not that simple. Here are a few steps to help your loved ones deal with your digital assets: Inventory every digital asset that you have. Create a list of log-in and password information, plus any “secret questions/answers.” Having a password program like “Lastpass” can be a great tool to allow for access and control for your decision maker. Tell your trusted family member or friend where that list is. Store it with your other estate planning documents, possibly in your attorney’s vault. Do not include your digital asset inventory, as part of your will. If your estate goes through probate, all of your account information will become part of the public record. An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and will most likely include digital assets. If you already have an estate plan, revisit the package with your estate planning attorney and take your digital assets

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