Monthly Archives: August 2012

Don’t Fall Victim to These Common Estate Planning Myths

The following five myths continually frustrate estate planners. This is not only because we know that not only are they patently untrue, but because their continued circulation can be actually be harmful to your family and your estate.

1. Estate Planning is only for rich people. This is probably the single most common estate planning myth there is—and it is a myth. If you were to add up the value of your home, your life insurance, savings, retirement account, etc., etc., etc. you will likely find that you are much closer to being a “rich person” than you thought. Not only this, but as we’ll get into in more detail below, estate planning is not only about saving on estate taxes, it’s also about controlling your wealth and protecting your own needs when the unexpected occurs.

2. “I have plenty of time.” (AKA: Only old people need estate plans.) First of all, just because you’re young doesn’t mean bad things can’t happen to you. Unexpected tragedies aside, an estate plan is useful even when you’re young because an estate plan is not just about death. A good estate plan will include not only a will, but also a healthcare directive and HIPAA Authorization (both of which are useful if you find yourself facing a surprise stay in the hospital), Power of Attorney documents (which you may need if you ever travel outside the country or are otherwise unable to sign for yourself on financial or legal documents), and legal documents relating to minor children (such as medical authorizations—an essential document if you leave your minor child with a babysitter for any extended period of time.)

3. Married people don’t need estate plans. You may think you don’t need an estate plan because under normal circumstances, any jointly held property will pass automatically to your surviving spouse… But what happens if your surviving spouse gets re-married? What about the property you would specifically like to go to your children, or to your parents or siblings? And what if both you and your spouse die together? These are the reasons why even married people should consider drawing up a simple plan.

4. All I need is a quick will and I’m done. A quick will is certainly better than no will. But there is a saying that “anything worth doing is worth doing well,” and we believe that this goes for wills (or any other legal document) as well. If you want the basics you can have the basics. But if you want the best, you’re going to need to spend a little more time on it.

5. Estate Planning is only about money. While money is one of the main motivating factors behind the creation of an estate plan, money is absolutely not what estate planning is all about. Estate planning is about people. It’s about your family and doing what’s right for them. A well thought-out will or trust saves them from a lengthy probate process, and reassures siblings that they are doing what mom or dad really would have wanted. An estate plan is full of documents designed not just to save you or your heirs money, but to allow you to express your wishes and values even after your death. Estate Planning is about more than just money—it’s about family, legacy, and love.

Share Your Passions As Well As Your Assets

Do you have a hobby that you feel passionate about?

Do you love reading and collecting books? Are you a rabid coin or stamp collector? Do you find peace and tranquility out tending your garden?

Whatever it is that you love; you can bet the people who love you are aware of it. These are the people who join you on your wilderness hikes; the one who might give you a rare baseball card for your birthday; or the friend who goes with you to the antique car show because he knows hobbies are better when you have someone to share them with. These friendships last a lifetime, and yet these friendships are often forgotten when people create their wills and divvy up their estates.

Many people go to their estate planner with their descendents and their financial assets foremost in their minds, and that is as it should be; but your estate plan can be more than a just a way to distribute property to the next generation, it can also be an opportunity to say thank you to the people who have touched your life—by sharing with them the accoutrements and paraphernalia of your hobbies and passions.

You can express how much you appreciate your best chess opponent by leaving her your favorite chess board, or encourage the interest of a young philatelist nephew by bequeathing to him your extensive stamp collection. All you need is an estate plan which includes a personal property memorandum—and which is correctly designed to recognize and refer to that memorandum.

Our office can help you create an estate plan that not only ensures the protection of your heirs and property; it also helps you leave a meaningful ‘thank you’ to the people who matter most.

Four Steps to Creating Your Estate Plan

You’ve heard all the arguments in favor of estate planning, you know it’s the right thing to do, you want to get your planning done… you just aren’t sure how to get started. Estate planning can feel like an overwhelming endeavor when you’re presented with everything at once—the trick to getting started with your planning is to take it one step at a time:

1. Write down your goals. You may have a number of intertwined goals for your estate plan (this is especially true for blended and multigenerational families), or one simple-but-important goal such as “ensure my minor children have a place to go” or “keep the family business intact.” Knowing your goals from the outset will make all subsequent decisions much easier.

2. Make a list of the people you trust. Throughout your estate plan you’ll be nominating people to take over financial, healthcare, and guardianship responsibilities if something happens to you. Have a rough list of people you would trust in these roles. Begin with your initial goal and go from there. For example, if your initial goal was guardianship of minors, make a list of people you would trust with the care your child, and move from there to financial decision-makers, etc.

3. Know your assets. Make a list of all your assets and their approximate values. This will help your estate planner determine what kind of asset protection you need in your plan. Assets include: Your Home, Investment/Vacation Property, Bank Accounts, Savings/Investment Accounts, Retirement Accounts, Life Insurance, Family Owned Business, and others.

4. Bring In the Professionals. Estate planning is a very technical process, and the laws may frequently change, so you’ll definitely want professional help with the details of the process. The good news is that now that you’ve completed the beginning steps, the follow-through with your chosen professional advisor will be a snap! If you already have a relationship with a trusted attorney, insurance agent, financial advisor or CPA you’ll want to start there. Let that person know your goals and that you’re ready to begin planning in earnest; he or she will be able to guide you onto the next steps, or give you the name of an estate planning professional who will help you build your ideal plan.

Although it looks overwhelming from the outset, estate planning is really just a series of small steps, each of which leads you to the achievement of your ultimate goal: Preserving your assets and protecting your loved ones. Now that you know it’s so easy… what are you waiting for?

Why Women Need to Think About Estate Planning

Gender equality has come a long way in the past few decades and years, but still, when most people think of estate planning they think of wealthy older men along the lines of Joe Kennedy or John Rockefeller. The truth is, however, that estate planning is a subject which has a significant impact on women. Why? Here are just a few reasons:

* Older women (65+) outnumber older men by 22.4 million to 16.5 million.

* Poverty rates tend to be higher among older women than older men.

* On average, it is the woman of the family who will end up putting her career on hold for caregiving duties at various times in her life (either to care for young children or aging parents.)

* Not to mention that women’s longer life expectancy, combined with their tendency to marry older mates and their lower lifetime earnings means they are far more likely to see their living standards compromised in retirement if proper estate planning isn’t done.

How can women ensure that this doesn’t happen to them? The best answer is for every woman to take an active part in planning her estate—not just the typical “women’s issue” of guardianship of the children, but the financial issues as well. If you are married, talk to your partner about what will happen to your assets if your spouse passes away first, leaving you a widow.

Most modern women have some assets in their name only (and if you don’t have assets in your own name you will if your spouse is the first to pass away) and it’s important not only to create a will for these assets, but also to talk to your family about how these assets should be distributed upon your death. Because estate planning is all about the details, be sure to bring your estate planner into the conversation so you can discuss the issue in specifics, not just generalities.

There are many reasons for being reluctant to start planning your estate: You don’t have time, your partner or spouse generally takes care of the finances, you’re just not “a numbers person.” But there’s one overwhelming reason to take the plunge: to protect your assets and your future. This isn’t a job any woman should leave to someone else. Taking charge of your estate means taking charge of your life. If you can get the ball rolling, our firm can help with everything else.

What Does Back to School Have to do with Estate Planning?

As summer comes to an end and kids and parents both start getting ready for back-to-school week, estate planning may be the last thing on anybody’s mind; but the beginning of a new school year can actually be the perfect time to give your estate planner a call. Whether your baby is heading off to preschool or college, our office can help you plan for the future and ensure he or she is protected as the school year unwinds.

Any parent of a grade-, middle-, or high-school student knows that the first thing sent home during back-to-school week is the emergency contact forms. These are the forms on which you list who the school should call in case of an emergency when parents can’t be reached, and who might be authorized to make medical decisions for your child if the parents are unavailable. The names you put on these forms can be a perfect starting point for considering who you (and your children) love and trust enough to serve as guardians of your minor children should anything happen to you.

Parents of college-age students (currently or soon to be 18) have a whole different set of legal issues to consider. Although you may still think of your 18 year as your baby, he or she is looked upon as an adult under the law. This means that hospitals and medical personnel are no longer required to ask the parent’s permission before performing medical procedures. In fact, once your child is 18 health care providers are no longer required to share information with the parents at all.

Most college students (and parents) are unaware of this side-effect of turning 18, and parents and children alike can run into frustrating roadblocks should an accident occur. You can avoid these roadblocks by simply having your young adult execute two documents before heading off to school: a healthcare directive nominating you as his or her healthcare agent, and a HIPPA Authorization Form listing you as one of the people who have permission to receive information about his or her medical records and status.

Back-to-school is an exciting time for both parents and children. Taking care of legal and estate-planning business at this time can lift a heavy burden of stress from both parents and children, leaving you all free to enjoy the new year together.

To Tell or Not to Tell About Inheritance; Sharing Your Estate Plan with Your Heirs

Should you talk to your heirs about your estate plan?

The subject of inheritance is one that most people studiously avoid for a number of different reasons: superstition, fear, lack of knowledge, or a desire for secrecy. Many adults were raised to believe that money was a private affair, and that talking about it was inappropriate; but beyond that, many people simply fear that if they talk about their estate plan with their heirs they will meet with resistance, disagreement, or in a worst-case scenario—their heirs will try to counter the estate plan with legal action of their own.

While in some families and circumstances these fears are justified, in most circumstances being silent about your estate plan can have disastrous consequences. A refusal to talk about money or your estate plans with you children means that they will have a difficult time following your wishes in regards to your medical treatment or protection of your assets should disaster strike. Most adult children are actually eager to fulfill their parents’ last wishes, regardless of how it may or may not impact their own inheritance.

Furthermore, your plans for leaving a legacy for your children or grandchildren may clash with their own needs or plans. For example, you may want to leave extra money to a grandchild with special needs, but if that child is receiving government benefits, leaving a significant inheritance in their own name could disrupt that. Discussing your plans with your children ahead of time can prevent situations like this from occurring.

So the answer to the question above is yes, you should talk to your children or heirs about your estate plan if you can. Talking about it will not only make it easier for them to follow your wishes, it may even help you determine how you want to make the best difference in the lives of your heirs.

How a Trust Can Help Protect and Pass Real Estate to Your Heirs

You may think that trusts and estate plans are only for the wealthy, but if you own real estate (including the home you live in) then your family could benefit from the protection and direction a revocable living trust provides. When it comes to real estate, a revocable living trust provides a benefit to your family and heirs in a number of ways; not the least of which is giving you as the owner/grantor flexibility and options for the preservation or distribution of your valuable property.

A recent article in the U.S. News and World Report Money Section describes four different ways to use a revocable living trust to pass your real property on to your heirs. Which of these strategies you may choose to employ (or if you choose to employ a different strategy) will depend largely on the value of the property, the purpose of the property, and the legacy you want to leave to your heirs.

If your property is your primary residence you may choose to have your trustees sell the property and distribute the proceeds equally between your children. If your children are still minors the home can be kept in trust for them to live in with their guardians, or until they come of age and choose to sell the property and split the proceeds. Furthermore, if you are married or in a committed relationship, “It’s not uncommon… for bequests to include a provision allowing a surviving spouse to stay in the home until they die or move out, and then convey the home to children or sell it.”

If your property is a vacation home you can have the deed held by the trust itself, with your children as trustees. This gives your loved ones the opportunity to keep the property in the family for as long as they would choose to use it, with no one person having more ownership or responsibility than another. Alternatively, through a trust you can “give a named heir the option to purchase the home and, if he or she declines, this option is then conveyed to a second named heir and so on. ‘These options can keep going down to other children or descendants.’”

If your property has been in your family for generations you can use a trust to specify that ownership or trusteeship passes down through a family line, protecting the property from the effects of possible divorce or remarriage. “It could transfer the house to one or more family members, for example, with instructions that the home is never to be sold or must stay within the family under certain terms. Such a trust will continue to exist after your death and your appointed trustee will have continuing obligations.”

If your property is a second or third property you may wish to donate the property itself—or the proceeds from the sale of the property—to a favorite charity. A trust can be used to “convey the home or instruct the trustee to sell it and donate the proceeds to the named charity. The trust also could include provisions to allow a surviving spouse or other family members to use the residence for a period and then convey it to the charity.”

An Advance Healthcare Directive Can Make a Difficult Conversation a Little Bit Easier

Does your family know your preferences for end-of-life care in case of emergency? Are you sure? If you haven’t created an Advance Healthcare Directive or spoken to your loved ones specifically about this issue, then chances are they don’t know your wishes, no matter how close you believe you are.

Our firm understands that opening up a conversation about DNR directives or end-of-life care can be difficult and awkward. Thinking about your own death, or the death of someone you love is painful. But the arguments—and potentially lengthy court battles—that can occur between caring relatives when these issues are not discussed will be even more painful. If the tragic Terri Schiavo case taught us anything it should have taught us that a difficult conversation now can save our loved ones years of pain and hardship later on.

We may not be able to save you from a difficult conversation, but this article from ABC News might help you get the conversation started. The first suggestion is to put your wishes in writing and then mail a copy of those wishes to your loved ones or to your healthcare agent. The article suggests a resource workbook which can be found online, but an even better option would be to execute an Advance Healthcare Directive with your estate planning or elder law attorney.

Executing and Advance Healthcare Directive not only provides you with an opportunity to say to your loved ones “I want to talk about this;” it also ensures that there will be no legal obstacles if tragedy should strike and you are unable to make your own healthcare decisions.

Once your loved ones know your preferences for end-of-life care this opens the door for them to ask questions if they have any, and even perhaps express their own views and preferences. Your primary care physician should receive a copy of your Advance Healthcare Directive as well. Confirm that your physician will be able to honor and respect your wishes if and when the time comes.

For more information about Advance Healthcare Directives, or talking to your family and friends about end-of-life decisions, please contact our office.

Changes in Estate Tax Law Require Regular Review of Estate Plans

The past few years have seen a number of significant changes in estate tax law; so much so that estate planners—as well as anyone with a will, trust, or estate plan themselves—have had to stay on their toes! The most significant event in recent estate tax history was the lapse of the estate tax in 2010. This lack of tax was so momentous, and was such a surprise, that we are still seeing the effects of it two years later.

A recent article from Reuters describes the ongoing saga of the Tweten family of California, and how the disappearance of the federal estate tax in 2010 caused (and may still be causing) a lengthy legal battle between father and daughters. Leonard Tweten and his wife of 58 years, Eileen, founders of Magnolia Audio Video, established a trust in 2008 which utilized a common formula clause to help minimize estate taxes.

“The formula clause typically divides the estate so that children get the amount of assets in the federal estate tax exclusion (currently $5 million per person), with the rest going to a marital trust for the surviving spouse. This allows the full amount of the exclusion to pass to the heirs tax-free.”

This formula clause is a wonderful tool when the estate tax exclusion amount hovers around $2 million, exactly the amount it was in 2008 when the Twetens set up their trust. Unfortunately, “in 2010, the exclusion was unlimited, because there was no estate tax. So when Eileen died in April of that year, her whole estate, rather a few million dollars, would have gone to the kids, leaving Leonard out of the money.”

The Twetens were not unaware of the exclusion, and made an eleventh hour change to their trust only 12 days before Eileen Tweten’s death. Unfortunately, their efforts were not enough. “The couple’s adult daughters, Nancy Crowe and Janet Houston, petitioned the court to invalidate that amendment on grounds of forgery and incapacity, while their father petitioned to allow the trust’s modification.”

The court eventually had to throw out the amendment, “noting that it had not been notarized as required by the trust”, but sided with Leonard Tweten in spite of this, letting the original intent of the Tweten’s estate plan stand. The Tweten’s daughters, however, plan to appeal the court’s decision.

The lesson we can all take away from the Tweten’s experience is that no matter how safe you may feel with your current estate plan, it is absolutely essential to review your trust regularly, and consult your estate planning attorney about any changes to estate tax law that may have been enacted since your last review. Contact our office for more information.

Tax Law Allows Married Couples to Reduce Their Estate Taxes

Married couples take note: Congress passed a law in 2010 that can significantly reduce the amount your estate pays in estate taxes. Unfortunately, most couples are either completely unaware of this opportunity for savings, or they find out about it too late to take advantage of it.

This recent article in the Wall Street Journal gives an example to explain the law both under the previous law and the newer, 2010 law: “A husband and wife together have $7.5 million of assets, $6 million of it in a business owned by him and the rest owned by her. Under prior law, if they died and each partner left everything to the other (with no trusts), the estate of the second-to-die partner would owe federal tax on $2.5 million—even though the law gave each spouse a $5 million exemption. Under the new rules, when the first partner dies—say it’s the wife—the executor files an estate-tax return preserving the value of her $5 million exemption. The result: At the husband’s death, the wife’s exemption is added to his, and the entire $7.5 million passes to heirs tax-free.”

Taking advantage of this opportunity isn’t difficult to do… but only if married couples (or their financial/legal advisors) are aware of the law. And in this case it’s not enough to be simply aware of the law, couples will need to be made aware of the law in time to take advantage of it within the limited time frame. “An estate-tax return must be filed soon after the first partner’s death—usually within nine months—in order for a couple to get this new benefit.”

For more information about this beneficial tax law, or to find out how to take advantage of it before it’s too late, please contact our office.