Estate Planning Practice Blog

Dogs, Cats and Bequests.

One of the topics that comes up fairly often is how do I plan for my pets in the event of my demise? There are many ways to approach this as part of your estate plan. Here are two of the most common ways.

1. If you are comfortable naming a caregiver for your pets and giving that person a small donation to help care for your pet, it is something that can be incorporated into your Will or Living Trust. For example:

"I hereby give my dog,  Bear, to Jane Smith, and the sum of $1,000, which shall be expended for the care of my dog during its remaining lifetime; provided, however, that this gift shall lapse if my cat is not living at the time of distribution according to this provision or if Jane Smith does not undertake to use the funds gifted herein for the care of my dog."

2. Another option would be to give a donation to a local animal rescue organization for them to take in your pet and find a good home.  For example:

"If I have pets then living upon my death, it is my wish that these pets be given to the [Name Your Rescue Organization] along with a $5,000 gift to find a good home for my pets."

Please consult with your estate planning attorney for more information about including your pets in your estate plan.

The Death Tax is Far From Dead

The federal estate tax remains up in the air, but the states that traditionally piggybacked on the federal tax are rewriting their rules so they don't lose their cut.

When it comes to death and taxes, most of the focus in 2006 centered on Congress' ongoing battles over the federal estate tax.

But many states impose their own taxes and costs when residents die. Estates too small to trigger the federal tax can easily rack up thousands of dollars in state death taxes and probate costs. Far from being repealed if the federal tax is rescinded, this state burden is on track to rise over time.

Some states have their own estate- or inheritance-tax systems that are independent of the federal estate tax system.

Another group of states is imposing new estate taxes to make up for revenue from the waning federal tax.

Finally, some states have expensive and lengthy probate systems that apply to an increasing number of estates.

Read the Full Article Here by Liz Pulliam Weston

3 Legal Papers You Shouldn't Live Without

You may not need a trust, an elaborate estate plan or even a will. But unless you want a stranger making important decisions for you and your family, there are some things you do need.

Most Americans don't have wills, but that's not the crisis many in the estate-planning industry would have you believe. With a few exceptions -- which we'll talk about below -- most people's quality of life won't be much improved by a will.

That's because your state already has a basic plan for distributing your stuff when you die. You're dead, so what do you care? If who got your CD player and your comic book collection wasn't important enough for you to bother with a will while you were alive, it certainly won't matter to you after you're gone.

What your state doesn't have, though, is an efficient way to take care of you if you're still breathing but unable to make your own decisions because of incapacitating illness or injury.

So if you get in a car accident and die, your estate will be distributed more or less efficiently. Get in a car accident and end up in a coma, and you could be in a world of hurt.

Read the  Full Article Here  by Liz Pulliam Weston.

A Special Needs Child Requires Special Planning

While planning for the care of a special needs child certainly tops the list of emotionally-charged topics, the peace of mind parents gain from a well-designed estate plan, more than compensates them for having to plan for the unthinkable.

The mere idea wrenches the heart of any parent: if untimely death or disability strikes, who will care for your children? Because no one is immortal, most of us recognize the need for an estate plan, preferably one that appoints a suitable guardian for our children, sees to their financial needs, and avoids probate.

In the best of circumstances, it’s a task requiring clear thinking and good legal advice. But when a child has special needs, the challenge intensifies.

Before we explore estate planning strategies for parents of special needs children, let’s look at why all parents need an estate plan.

“A ward of the court” may sound like something out of the nineteenth century. But that’s precisely what becomes of children whose legally disabled or deceased parents have failed to plan for their care. Unless you’ve created an estate plan that spells out who should assume responsibility for your child, the courts will step in. And that’s true whether you’ve left behind an estate worth millions or nothing at all.

When children take center stage in probate court, it’s because the court wants to ensure that a responsible person is supervising their physical needs and financial affairs. The court will appoint a guardian to assume responsibility for your child’s personal care. To oversee your child’s financial affairs, the court will appoint a financial guardian. Often, the financial guardian is not one person, but an entity, such as a bank or a professional money management institution.

Because the court is involved in supervising their activities, guardians frequently hire attorneys to help them navigate through the legal system. The fees for these attorneys—as well as the fees charged by the guardian and the probate court itself—all come out of the estate you’ve left behind for your child’s benefit. These expenses leave less money to provide for your child’s care, education, and other requirements.

The most critical reason why parents of a special child need a special estate plan: it is the only way to ensure that you can provide for your child without jeopardizing the child’s eligibility for government and private benefit programs.

The Special Needs Trust allows a parent, grandparent or guardian to provide funds for a disabled child without disrupting the child’s eligibility for government aid. Setting one up is a fairly simple process.

Working with your estate planning attorney, you appoint trustees for your child’s trust. The trustees will manage the assets you transfer to the trust for your child’s benefit. In the event of your disability or death, the trustees will also supervise your child’s finances.

During your lifetime, you can serve as trustee and remain in complete control over your child’s finances. Should you die, however, your successor trustees will step in and take care of your child’s finances on your behalf.

Unlike the guardian, a probate court might appoint, your successor trustee is someone you know and trust. Relatives or close family friends can be appointed to supervise your child’s finances. To work with financial institutions and manage the estate, you may also want a trusted financial advisors to serve as trustee.

As part of setting up your child’s Special Needs Trust, you will provide detailed written instructions to direct your trustees’ activities. By law, trustees must follow these instructions. So you can rest assured your child’s education, housing, and other needs are being taken care of.

Best of all, the Special Needs Trust will preserve your child’s eligibility for federal, state and charitable benefit programs. This is accomplished by providing that the funds can only be withdrawn from the Special Needs Trust for purposes other than those covered under the governmental and private benefit programs.

As difficult a subject as it might be, all parents owe it to their children to ensure that they’re well cared for, come what may. Parents of special needs children face an even greater imperative to do this essential planning.

Updating Your Estate Plan?

Say you have an estate plan done a long time ago or even just a few years ago. First, congratulations on having your estate plan in place to protect your loved ones. It's a major emotional endeavor that gives you and your family a great peace of mind.

But does it need to be updated?

Yes.

But when? Well, that depends. A few things trigger the need to update your estate plan. They come in two flavors:
1. Changes in the law
2. Changes in your family structure or your wishes

Changes in the law -- for example, a power of attorney for health care has been replaced by an Advance Health Care Directive. The Economic Growth and Tax Relief Reconciliation Act of 2001 caused many legal changes. The federal estate tax exemption is also influx.

Changes in your family structure -- for example, someone is born, dies or gets divorced. Or maybe gets married, becomes disabled, retires and so on.

You get the picture. How do you know if the changes in the law or your personal situation require updating your estate plan? If you worked with an attorney to prepare your plan in the first place, please contact them to schedule a consultation to review your estate plan. You might have to pay a consultation fee. Ask when you schedule the appointment. Bring in all of your papers and your questions... ask away and see what your attorney says. Also, if you take the time to read your estate plan and recognize that people you nominated as successor trustees or named as beneficiaries have died or are no longer part of your life -- this is a very good reason to update your estate plan.

Living Trusts are easily updated by an amendment or a restatement. An amendment just changes, deletes or adds sections to your document. A restatement is a complete re-do if your Living Trust keeping the original effective date as not to disturb already completed asset transfers into your Living Trust.

Durable Powers of Attorney and Advance Health Care Directives should just be completely replaced with your original versions formally revoked where appropriate.

Wills are either completely redone or changed by adding a codicil (the term for amending a Will).

If your documents are not in a binder, they should be organized. Copies should be kept in the binders with originals kept in a safe deposit box or other safe location like a fireproof box at home.

If you make decisions on funeral or burial plans, consider typing up a letter of instruction to include with your documents. If you purchase a plot or other resting place, your deed should be included so your loved ones will have everything in one place.

Estate Planning 101.

Estate planning is one of those phrases that both scare and confuse individuals. 

What does it mean exactly?

Estate planning is also a catch-all term that means taking care of your affairs in a way that your wishes can be carried out if you pass away.

Estate planning is also taking care of contingencies or what ifs in life. A big what if is what if something happens to me and I become incapacitated? Who will manage my financial affairs and help me make medical decisions in accordance with my wishes?

By putting together an estate plan, you can protect yourself and your loved ones by ensuring that your wishes are known and nominate those who can help you carry them out.

Generally, for most individuals, estate planning means having the following documents in place:

1. Will
2. Living Trust
3. Durable Power of Attorney
4. Advance Health Care Directive

Most individuals start with a Living Trust. This is where you name someone to privately manage your assets upon your death or incapacity. In your Living Trust, you state who should get what and how it should be given to your loved ones. Say, you have two kids -- teenagers. In your Living Trust, you can nominate your sister to manage the trust for your kids until they turn age 25.  If your assets such as your home are in your Living Trust, probate is usually avoided.

The Will then becomes the back-up to your Living Trust. It is a pour-over Will that can transfer assets not into your Living Trust to your Living Trust. This will require a probate proceeding in most instances, but at least your wishes will be honored.

Also, your Will is the only document where you can nominate guardians for your minor children.

A Durable Power of Attorney is where you nominate someone to manage your financial affairs while you are still living, but unable to do so.

An Advance Health Care Directive is a document where you state your choices for end-of-life wishes and nominate someone to carry out those wishes or make medical decisions for you in the event you are unable to do so.

Together, these four documents comprise of estate planning for most individuals, whether single, married or life partners.

A good estate planning attorney will explain how these documents work for you, your life and can prepare them in accordance with your wishes. A good estate planning attorney will also spot other issues or concerns involving your affairs and make suggestions for you to consider. A good estate planning attorney will, most of all, listen to you and understand all of your concerns whether it be about your family, time or money.

Minor Children and Your Life Insurance Policies.

One thing that you should do periodically is to check the beneficiaries listed for your life insurance policies.

First, you want to make sure that your current beneficiaries reflect your wishes.

Second, if you have minor children, you will want to consider the impact of naming them as beneficiaries.

Many parents have life insurance policies in place in case something happens to them before their kids turn of age. Think twice, though, before naming your minor children directly as beneficiaries for your life insurance policies.

If you die before your children turn age 18 and they are listed as beneficiaries, the surviving parent or other loved one will need to be appointed guardian (of the estate) for the children to receive the death benefit from the life insurance policies.

I've seen this in my practice where a young Mom lost her husband (in the line of duty) and had to petition the court for guardianship to receive the life insurance proceeds to manage them for her kids.

One way to avoid this is to name your Living Trust as the beneficiary for your life insurance policies. Your Living Trust names successor trustees to manage the trust assets if something happens to you. If you name the Living Trust as the beneficiary of the life insurance policy, the company will pay the death benefit directly to your trust for the private management by your named successor trustee in accordance with your trust terms.

It goes without saying that not having a beneficiary listed on financial products can potentially create problems for your loved ones later on.

Please seek the advice of an attorney if you have questions or need assistance with estate planning for your family.

What If Something Happens To You? Do You Have Identification?

One of things about being an estate planning attorney is that I am always hearing stories.

You know, the ones where clients recount how something happened to my Mom, my friend, my Uncle when they were out walking, home alone or at the mall... So it makes me think about what if something happens to me in a similar situation? What would happen?

First, I realize that while I walk my dogs often when I am home, I often have no identification on me other than a cell phone in my pocket. Are the cell phone address book entries labeled so that the Mark in your address book is your husband or the Susan is your wife? Or that the Brittany's and Josh's are your children to an outsider peering into your cell phone?

Second, would it waste precious time for the paramedics or good Samaritan to try to fiddle with my cell phone to find my identity or emergency contact person?

I guess good estate planning attorneys are naturally worrywarts. We have to be. We worry about our clients and consequently we worry about ourselves as well.

So, when I came across this advertisement in the latest issue of Cooking Light magazine for RoadID (TM), I instantly knew I had to order one for myself and immediate family members. Check it out here. Sounds like a great way to keep an identification on your person whether it be your wrist, ankle or shoe.

I am not endorsing this product nor am I affiliated with the company in any form. It is just a good idea for a small peace of mind.

Scholarly Article -- Conditional Love: Incentive Trusts and the Inflexibility Problem

Joshua C. Tate, Assistant Professor of Law, Southern Methodist University, has written a very informative and yet interesting scholarly article on using trusts inventively as incentives as Mom and Dad wish for their children.

"This Article examines the contemporary phenomenon of incentive trusts: trusts that use money to encourage or discourage certain behaviors. Using evidence from Internet websites, practitioner articles, and newspaper articles, the Article considers the likely provisions that a typical incentive trust might have, and explains how such trusts might lead to a problem of inflexibility when they are not drafted so as to take into account the possibility of changed circumstances. The Article also examines current law regarding trust modification and termination as well as recent reform proposals, and suggests some alternatives that might better take into account the particular characteristics of incentive trusts."

Click here to get the article for your reading pleasure. You will want to download it from the Social Science Research Network link at the bottom of the page.

If you like, the author will welcome your email inquires about his scholarly work directly.

Witnessing Your Medical Directive.

If you have an Advance Health Care Directive in place, please make sure that it is either notarized or witnessed by two qualified adult witnesses. If you use witnesses rather than a notary public, the law prohibits using the following as witnesses:

1. The persons you have appointed as your agent or alternate agents.

2. Your health care provider or an employee of your health care provider.

3. An operator or employee of an operator of a community care facility or residential care facility for the elderly.

4. And, at least one of the witnesses cannot be related to you by blood, marriage or adoption, or be named in your will, or by operation of law be entitled to any portion of your estate.

So, who is your best witness? Your friends, your neighbors or your attorney if they are not receiving a bequest or money from your will or estate.  If you have these documents prepared by an attorney, your attorney will usually act as one witness along with a staff member from that attorney's office.

You might ask why use witnesses when you can get it notarized. Notarization by a notary public is usually not free and you might have a harder time finding a notary public when you need one rather than finding two impartial witnesses.