Category Archives: Uncategorized

December 29, 2023 admin

When Should an Estate Plan Be Reviewed?

Like a car, home, or garden, estate plans require ongoing care. Estate plans reflect the wishes and goals at a particular time in a person’s life. For example, when drafting a last will and testament during a person’s 30s or 40s, two key goals are protecting minor children by naming a guardian and ensuring the surviving spouse’s legal and financial protection, if the chief breadwinner should die unexpectedly.

Time brings changes to life and laws.

You may divorce and remarry, have children from a second marriage, or wish to be sure that children from your first marriage are not disinherited. Adult children don’t need guardians, but a developmentally disabled adult may require Special Needs Planning to protect their eligibility for government benefits, while having access to money from the family to maintain their quality of life.

Life’s changes are one reason why estate plans need reviewing and updating on a regular basis. An annual review may be necessary for more complex estates, while for more straightforward, more modest estates, a review every three to five years should suffice.

Recent years have seen dramatic changes in state and federal laws regarding taxes and retirement accounts. An estate plan created ten years ago will likely contain many out-of-date strategies and missed opportunities.

Changes in relationships impact estate plans.

Most last wills include people with roles like executors and guardians who are alive and well at the time of the last will’s drafting. However, if the executor of your last will has died, moved to another state, or isn’t a part of your life and refuses to serve, an out-of-date last will presents several problems. Did the last will include the name of a secondary executor, and is the second executor still available to serve? If not, your family may have to accept decisions a court-appointed administrator makes. Your family may petition the court to have a family member appointed. However, there’s no guarantee the court will honor this request.

Changing tax laws call for estate plan reviews.

Changes to tax laws in recent years have dramatically altered the estate planning landscape. Any estate plan created before the SECURE Act (January 1, 2020) needs a review.

The 2017 Tax Cuts and Jobs Act dramatically raised the federal estate tax exemption levels. However, this is expected to be cut by half when the law sunsets on January 1, 2026. An estate plan based on the 2017 TCJA with no provision for a federal estate tax exemption sliced in half may present significant estate tax issues for many Americans.

Last-minute changes create challenges.

Procrastination is part and parcel of estate planning, even for the most diligent people. Planning for incapacity and mortality is far better than putting family members in the position of guessing what their loved one would have wanted or battling with the court or each other over property distribution. Promptly updating a comprehensive estate plan also avoids the stress of needing last-minute changes.

November 30, 2023 admin

Blended Families and Minor Children

When a blended family includes minor children, several layers of protection can be implemented through the estate plan for the children’s well-being. The most important is for each spouse’s last will to nominate a guardian for any minor children, with a secondary guardian named in case the primary guardian cannot or will not serve.

Preparing for the Worst and Hoping for the Best

The estate planning process should include a detailed review of the separation agreement for each minor child’s parent, as the guardian nominated in the estate plan may need to be aligned with the separation agreement. If a parent should die without a plan for custody of the minor, the result could be life-changing trauma for the child’s life.

Stepparenting is challenging enough, so preparing for the worst-case scenarios is best. In addition to clarifying who will raise the child if one biological parent dies while the child is a minor, how will the child be financially supported? Will financial support be made available to the stepparent through a trust if the parent dies and the child continues to live in the blended household? These are issues to be explored and documented in an estate plan.

Distribution of Property in a Blended Family

It is commonplace for the children of the first spouse to die to be disinherited, even when this is not the couple’s intention. If the couple has a simple will giving all assets to the surviving spouse upon the first spouse’s death, there is nothing to compel the surviving spouse to give their stepchildren any part of their parent’s estate.

If the biological parent dies and all of their assets are left to the second spouse, what happens to the inheritance of the minor child? Since minor children may not legally receive inheritances until adulthood, proper estate planning is required to avoid disinheriting minor children. One way to address this is with a trust for their benefit. The biological parent could be the trustee, with a secondary trustee named in case the parent predeceases the child. The terms of the trust would determine how the trust assets are to be used for support, education, etc.

Clarifying Intentions With an Estate Plan to Protect the Children of Both Spouses

Trusts may allow the surviving spouse to maintain their lifestyle without disinheriting stepchildren. Depending upon the situation, the couple may choose to place their primary residence in a life estate to give the surviving spouse the right to remain in the home until they die, when the home can be sold, and proceeds distributed according to the terms of the trust.

Planning in Advance to Anticipate the Future

If there is no will, the laws of intestacy will govern the distribution of assets. In some states, the surviving spouse receives half of the estate, and the remaining estate is distributed between the children of the decedent. Just as important as the distribution of assets are the questions of what happens to minor children in a worst-case scenario, hence the importance of estate planning.

October 31, 2023 admin

Discussing Long Term Care with Aging Family Members

With an estimated 70% of Americans needing long-term care after age 65, planning for long-term care is an integral part of an estate plan. It’s better to talk about long-term care and make a plan before the family is confronted with an emergency situation. Advance planning means that you’ll have more options to secure proper care, protect family wealth and ensure that the community or surviving spouse will not become impoverished.

Start With a Calm Discussion About the Future.

Aging parents may be reluctant to discuss the possibility of needing long-term care, so it must be addressed thoughtfully. If one or both parents have chronic illnesses, they may be more receptive to the discussion. If the discussion is kept short and pleasant, you’ll be more likely to have follow-up conversations, which will be needed.

Financial Concerns for Long-Term Care

Most people’s first concern about long-term care, in-home or facility, concerns its impact on their finances. While costs vary from region to region, long-term care costs are expensive. Living full-time in a skilled nursing facility can easily cost $100,000 a year. Home health care is less costly. However, there are limits to the level of care that can be provided at home, and staffing shortages often make home health care complex.

Do You Have Long-Term Care Insurance?

Find out if your parents bought long-term care insurance and ask to see a copy of the policy. If you don’t understand it, ask a professional for help. There are waiting periods for most policies before coverage begins. If they are not in good health or are too old, premiums for a new policy may be prohibitive.

Are They Eligible for Medicaid?

If the family anticipates relying on Medicaid to cover the cost of long-term care, a Medicaid Asset Protection Trust (MAPT) should be discussed. Trying to simplify qualifying for Medicaid by transferring assets to children, including the family residence, creates many unexpected problems. Medicaid has a five-year look-back period. Any transferred assets will be uncovered, resulting in coverage being denied. A MAPT protects assets from being counted for Medicaid eligibility. However, this trust must be created and assets transferred five years before applying for benefits.

Long-Term Care in a Continuing Care Community

Moving from the family home to a continuing care residence is another solution. These communities offer different levels of care, which change as the individual or couple’s needs change. Finding the right one requires considerable due diligence. The financial health of the organization, whether or not there is a doctor on premises, what local hospitals are affiliated with the community, whether or not the apartment will be guaranteed to be sold and money returned to the family upon the passing of the individual or surviving spouse, etc., are all questions to be asked.

Plan for the Legal Aspects of Aging

If your aging parents have an estate plan, when was it last reviewed? They should address this (if they don’t have one) as soon as possible. Their estate plan should include several documents addressing incapacity. These include Power of Attorney, so a designated person can manage financial and business affairs. A Medical Power of Attorney is also needed if the parent cannot express their wishes for medical care. A Living Will is a separate document containing their wishes for treatments they do and do not want to be used to be kept alive.

September 29, 2023 admin

What is the Advantage of a Buy-Sell Agreement?

A buy-sell agreement is a legally binding contract outlining a business owner’s plan for transferring control and ownership of their enterprise. It is often created in conjunction with estate planning, since the business is usually the owner’s most significant asset. A buy-sell agreement prepares the company to continue operations if and when the owner retires, becomes incapacitated, or dies, and is most commonly used by sole proprietorships, privately-held corporations and partnerships.

The buy-sell agreement typically involves the company owner, owners, shareholders, partners, and key employees. If family members work in the business, it is even more critical to have a buy-sell agreement. The family and the business might easily be embroiled in expensive, time-consuming litigation without a buy-sell agreement.

The buy-sell agreement must identify the parties involved, establish the trigger events, formalize the type of buy-sell structure used, how the transaction will be funded and address all taxation consequences.

Planning for Taxes Upon the Sale of a Business

The buy-sell agreement must align with both estate and tax planning. The sale of a business almost always leads to a long-term capital gain for the seller. There are also federal capital gains taxes, and, depending upon the state, there may be a state income tax on the capital gains. A business can be sold at a profit, only for those profits to evaporate because of taxes.

Common Structures of Buy-Sell Agreements

An entity-purchase agreement. The business entity and owners agree to have the business buy the owner’s interest at a triggering event (retirement, death, disability) at an agreed-upon price.
A cross-purchase agreement. A buy-sell agreement between business owners where the remaining owners agree to buy out the departing owner’s interest at an agreed-upon price when a trigger event occurs.
A hybrid or wait-and-see agreement. The buyer of the business isn’t identified in the agreement and could be the entity, other owners, or both. The buyers and the number of shares each will purchase are not determined until after a triggering event. The company has the first option to purchase the departing owner’s shares. If it doesn’t, the remaining owners may purchase the shares, but if they do not, the company itself is obligated to buy all the remaining shares.

Valuing the Business Before the Sale

An objective professional, usually a CPA with advanced valuation credentials, establishes the purchase price and valuation of shares. The value of any business fluctuates over time, so the agreement will include when the valuation should be done, which may be once when the agreement is first created and annually after that or at another designated time.

How is a Buy-Sell Agreement Different from a Succession Plan?

A buy-sell agreement is a legally binding contract setting forth the terms and conditions of a sale, while a succession plan focuses on the business operation and management. It’s a blueprint for how the company should be run, clarifying responsibilities for executives and managers and detailing how the enterprise will run during and after the transition to new ownership.

August 31, 2023 admin

The Importance of Beneficiary Designations

A beneficiary designation on an investment account, bank account, IRA, life insurance policy, or any other asset determines who will receive the asset on the owner’s death, regardless of directions in their last will and testament. The assets pass directly to the designated beneficiary and are not included in the owner’s estate, avoiding unnecessary delays caused by probate.

An Optimal Way to Pass Assets Directly to Heirs, Promoting Privacy and Efficiency

If the account owner neglects to update beneficiary designations, family members may face a painful surprise on the owner’s death. Ex-spouses, estranged children, or people no longer in close relationship with the account owner may inherit an unexpected (unintended) windfall. The family or current spouse will have little or no recourse. If they decide to pursue the asset through litigation, there’s no guarantee of a successful court outcome.

Do not designate a minor child as a direct beneficiary of an investment account, bank account, IRA, life insurance policy, or other asset. By law, a minor child may not inherit assets. As a result, a guardian or conservator may need to be appointed through probate to oversee the inheritance, until the minor child reaches legal adulthood. That is age 18 in most states.

If the institution permits naming a second and a third beneficiary, do so. If the primary beneficiary predeceases the account owner or cannot be located, the secondary beneficiary will receive the assets rather than having the account included in the probate estate.

Update Beneficiary Designations Regularly

A complete list of accounts should be created to identify which accounts have beneficiary designations. Review the designations as each account is added to the list. If the information is maintained on a personal computer, the list should be encrypted. A hard copy should be kept in a fire and waterproof safe at home. A trusted person or an advisor should be told the location of the list and any passwords to access it.

This information should never be included in a last will and testament. Why? Last wills become public documents during the probate process. Consequently, account numbers, account titles, etc., need to be treated as protected information.

In addition to compiling a list with the company contact information, account name, number, and the names of the primary and secondary beneficiaries, it will be helpful for designated beneficiaries to have company contact information and, if available, any forms used by the institution to claim their inheritance.

Providing Information for Executors

For those who prefer not to provide heirs with detailed information, an alternative is to provide it to an executor. While the accounts are outside of your probate estate, the executor will be able to notify beneficiaries and give them the information needed to obtain their inheritance.

Completing the Estate Plan

Failing to update beneficiary designations is like failing to fund trusts by retitling assets. Changes cannot be made after the account owner’s death, so both of these tasks must be completed in advance to achieve the goals of the estate plan.

July 31, 2023 admin

Special Needs Planning: Gifting and Future Care Considerations

Planning for family members with special needs addresses present and future needs, including planning for the disabled adult’s life after their parents have died.

The process begins with an overview of the child’s current status concerning government benefits and the family’s ability to provide additional support. This must be done carefully, since means-tested benefits will be at risk if assets are transferred or inherited.

What is a Special Needs Trust?

A Special Needs Trust (SNT) places assets into a trust benefiting the child, while preserving their eligibility for government benefits, like Medicaid and Supplemental Security Income (SSI). The child doesn’t own the assets in the trust, so they remain eligible. Acceptable uses of funds from an SNT are expenses not covered by government benefits, including medical and dental care, transportation and other things adding to the quality of their life. There are two basic types of SNT: the first party SNT, funded with assets or income belonging to the child with special needs, and a third-party SNT, funded with assets from another person. If possible, an SNT should be set up before the child turns 18, and you should become familiar with the rules and restrictions.

Achieving a Better Life Experience (ABLE) Accounts

ABLE accounts are similar to College Savings 529 Accounts. However, they are for disabled individuals as long as the disabled condition begins before age 26. Funds from an SNT can be moved into an ABLE account and used for any qualifying disability expense. The disabled individual can manage the ABLE account, although the parent can limit how much can be spent at any time.

Parent’s Own Estate Plan Impacts Their Loved One

Parents of a child with special needs must ensure that their estate planning is in order. In most states, if the child is a minor, their parents must nominate a guardian under their last will. This guardian should be someone they trust to raise and care for their child. Parents must be careful not to leave any assets outright to a disabled child, since this will disqualify the child from means-tested government benefits.

When the disabled child reaches legal age, their parents must apply for guardianship to continue to help their child. Obtaining guardianship allows the parent to continue to speak with healthcare providers, make medical decisions, manage the child’s finances and make important decisions regarding their care.

Creating a Letter of Intent

Parents should also create a “letter of intent” concerning their child as part of their plan for the future. This document provides as much detail as possible about their child, including their functional abilities, routines, likes and dislikes and all information only a parent knows. A letter of intent should be updated every few years to stay current with the child’s life.

Plan for Future Housing Needs

If a child with special needs lives at home, the parents can leave the house to the child in an SNT. However, the SNT must be well-funded to cover the cost of upkeep, property taxes, etc. Another option would be to purchase a coop or condo apartment, which would be held in the SNT.

Planning and Peace of Mind

Planning for the future of a child with special needs, regardless of their age, requires looking at short and long-term challenges to achieve the family’s goal—securing the future for your loved one.

June 30, 2023 admin

Young Adults and College Planning

College and estate planning intersect at several points that should be considered when planning for the future.

Planning for College Costs

Opening and funding a 529 College Savings Account to benefit a child or grandchild helps family members invest tax-free for educational expenses. Each state has its own plan. If you invest in your own state’s plan, you may get a healthy deduction on state income taxes. In addition, funds in the account grow tax-free, and there are no taxes on capital gains. For grandparents, funding a 529 account is an excellent way to help pay qualified education costs, while reducing their taxable estate. However, there are limits to contributions, which vary from state to state.

Another means of funding a family member’s educational expenses while reducing the taxable estate is for grandparents to pay for tuition and other qualified expenses. These payments must be made directly to the educational institution to qualify for an exception to the annual gift exclusion limit of $17,000.

Estate Planning for Young Adults

Preparing young adults for the future includes planning for the unexpected. Once young adults become of legal age under state law, their parents lose legal authority to be involved in the children’s financial or legal matters. Parents do not automatically inherit a child’s estate, so those who have inherited family wealth or are entrepreneurially minded may have enough assets to warrant having a last will.

Once their children are legally adults, parents also lose legal authority to be involved in their children’s health care, even in an emergency. Parents may not speak with doctors of their children, access their medical or health insurance records, or make health care decisions if a young adult child is incapacitated. This may seem cruel. However, it is the law. Physicians and hospital systems today don’t have the flexibility to bend the rules as they may have done in the past.

Parents and their young adult children can prepare for worst-case scenarios with several estate planning documents: General Durable Power of Attorney, Healthcare Power of Attorney, Living Will and HIPAA form.

A General Durable Power of Attorney allows another person to manage finances. The Health Care Power of Attorney allows another person to discuss medical care and be involved in decision-making. HIPAA forms are needed to permit another person to access health care and insurance records.

An 18-year-old seems like the last person needing a Living Will. However, it is necessary. A Living Will is used to give directions about the kind of care they would want if they had a terminal illness or were critically injured in an accident and unable to convey end-of-life wishes. The Living Will should be specific, especially relating to CPR, resuscitation, the use of a ventilator, or the use of a feeding tube.

Most young adults aren’t thinking about final wishes or handing over the ability to manage their finances. However, these documents are still just as necessary for a newly minted adult as for a senior. They provide peace of mind, make difficult situations more manageable and are an emblem of maturity—planning for the future, whatever it may bring.

May 31, 2023 admin

Celebrity Estate Planning Mistakes

Celebrity estate planning mistakes are just as messy as those of regular people. However, they are on a far bigger and more public scale. As a result, they can serve as cautionary tales to people who might otherwise neglect their estate planning.

High Profile Names and Family Matters

The most recent high-profile estate battle concerns the estate of Lisa Marie Presley. Shortly after her death, her mother, Priscilla Presley, contested an amendment to Lisa Marie’s trust. Priscilla claims the amendment is fraudulent because it was never delivered to her, the document misspelled her name and Lisa Marie’s signature is inconsistent with her usual signature.

This is an example of how taking a shortcut to change a will through codicils or a trust through amendments can lead to serious problems. Revisions to estate plans or trusts are best done by drafting entirely new documents.

Prince died at 57 with no will and a $300 million estate. He wasn’t married and had no children. However, he did have six siblings who spent six years battling over the estate and numerous individuals claiming kinship. During probate, two siblings died, making the estate even more complicated. In addition, the estate paid tens of millions in federal and state estate taxes, all of which could have been protected by an estate plan.

Actor James Gandolfini had a will but should have paid more attention to tax planning. He gave his wife 20% of his estate and the rest to his children and other family members. There were trusts for the children, so some effort went into the estate. However, more was needed. Had he left his estate to his wife, the estate tax could have been avoided. Instead, 55% of his total estate went to pay estate taxes.

Protecting Privacy and Heading Off Possible Litigation

Estate taxes are only a part of the reason to have an estate plan. Maintaining privacy and preventing family litigation are reasons for high-profile and ‘regular’ people to have estate plans.

Most people don’t realize how much their personal life becomes part of the public record after death. Wills going through the probate process are accessible to anyone who wants to see them, including estranged family members, criminals and anyone who asks. This is why families experiencing a loss are often flooded by letters and calls from people who want to know if the family home is for sale, offering investment opportunities, etc. Some of these are legitimate, but many seek to take advantage of surviving spouses during difficult times.

When wealth passes through a fully funded revocable living trust, there are no court records for journalists, family members, or thieves to pore over. Such trusts can be contested but usually less successfully than wills. Passing wealth through inheritance trusts, whether created under a will or a revocable living trust, also enables you to set terms for when your wealth will be distributed. For example, the inheritance can be distributed in whole or in part after certain life milestones are reached.

We will continue to read about the celebrities who fail to put estate plans in place or neglect to update their wills or trusts to reflect changes in their lives. It is better to read about their mistakes than to make your own.

April 28, 2023 admin

Retirement Realities

America’s retirement today is completely different than in the past. Gone are the days of employer-funded pensions, life-long employment with retirement and a golden watch presented at age 65. Today’s 65-year old is more than likely still working and still saving for retirement, or a retirement that includes part time work. However, retirement is about more than money.

Retirement Planning is Multi-Faceted

Planning for retirement should start with a comprehensive estate plan to address incapacity, long-term care, end-of-life directions and the eventual distribution of property. Wills, trusts, advance health care directives, financial powers of attorney and other documents need to be prepared, executed and shared with all relevant parties. Your estate planning legal documents should be updated at least every three to five years, and certainly whenever changes during this time of life require adjustments. These changes include births, marriages, divorces, mental and physical disabilities and deaths in the family.

A fulfilling, rewarding retirement does not happen automatically. The years before retirement will ideally include time exploring interests, determining specific goals and creating a road map for the three stages of retirement: an early and active initial stage, a second slower but still active stage and the slow and reflecting stage, sometimes called the “no-go” stage.

Each of these stages has different financial needs. The first part of retirement is usually more expensive, including bucket list items, travel, new experiences, and hobbies. Multi-generation trips create lifelong memories for family members. Work may continue, but on a part-time or consulting basis.

The second phase of retirement usually shifts to spending more time with family members, relocating to live closer to family or moving to a continuing care community. The sale of the family home often occurs at this time, when retirees sift through a lifetime of possessions and determine what they wish to take with them, what they want to give to family members and what they can let go.

The last phase of retirement is likely to have the lowest cost, since big ticket items like travelling and relocating have already occurred. Activities are closer to home. A senior community offering a wide range of social activities, including clubs, volunteer opportunities and classes, can promote a fulfilling and busy schedule, even as the physical restrictions of aging begin to be felt.

Preparing for Large Changes

The elephant in the retirement room is mortality. Neither you nor your spouse will elude death. One spouse may die before the other. Consequently, an unflinching look at finances for the surviving spouse is a major retirement reality. What will happen when the household cash flow drops from two Social Security checks to one? Will there be enough assets to fund the same quality of life for the surviving spouse?

Incapacity and serious illnesses also are more likely to occur in the last phase of retirement. Advance planning for long-term care, whether at home or in a nursing facility, becomes critical before an urgent health crisis triggers the need for permanent long term care. In a perfect world, tools including long-term care insurance, Medicaid Asset Protection Trusts, Pooled Trusts and other estate planning strategies have been put into place in the early stages of retirement to protect the quality of life for both spouses, regardless of their health status.

Planning Makes All the Difference

Every stage of retirement has its own personal, legal and financial considerations. Planning for everything, from recreation to long-term care, will allow for more enjoyment in what should be one’s golden years.

March 31, 2023 admin

Estate Planning and Divorce

Estate planning is very important to address both during and after a divorce. Divorces typically take several years to be finalized. Consequently, waiting to update every part of your estate plan until a divorce is completed can lead to unintended consequences. Spouses still have legal rights while a divorce is in process. Therefore, it is wise to take steps during this time to create legal and financial distance between you and your soon-to-be ex-spouse.

Laws regarding wills and certain retirement plans, such as pensions and some 401(k) plans, vary from state to state. These require due diligence before changes may be made.

Health Care Proxy, Living Will and HIPAA Release Forms

Once divorce proceedings are under way, new documents should be created naming a new agent under your health care proxy, living will, any other advance directives and HIPAA release form. You may choose a trusted friend, sibling, or other person to take control of your healthcare decisions in the event of an emergency or incapacity. The last person you want to make healthcare or end-of-life decisions is your future ex, even in an amicable divorce.

Update Your Power of Attorney

The same steps must be taken for power of attorney forms. Start by revoking any prior power of attorney documents and have a new power of attorney document created, naming a primary and secondary agent to act on your behalf. the power of attorney will only be effective for assets directly titled in your name alone. However, it is necessary to protect these assets. Depending on your state laws, you may need to provide formal notification to your ex of this change.

Changing Beneficiary Designations

Certain states do not permit spouses to be removed from beneficiary designations for pension plans or some retirement accounts until a divorce is finalized. Make a comprehensive list of all accounts with beneficiary designations and make the beneficiary changes, wherever possible.

If your estate includes a trust, then the trust document needs to be reviewed. Is your ex a beneficiary? This should be changed immediately. If you were generous with members of your ex’s family, you may also want to remove them as beneficiaries.

If you have minor children and the goal of the trust is to provide for them, is your ex named as trustee? If yes, you may want to remove your ex from the role of trustee and name a sibling, close friend or perhaps a professional to serve as trustee.

Revising Your Will

Laws regarding ex-spouses and wills are state specific. However, the best option is always to start with a completely new will. In some states, failing to update a will after a divorce leads to wills being declared invalid, and the estate is treated as if there was no will. Assets are distributed according to the laws of intestacy.

Most importantly, if your spouse is listed as an executor, revoke the will and name a new primary and a new secondary executor.

Your will is used to name guardians for minor children. Your ex will most likely be named guardian if you should die. However, if you have questions about their ability to be a safe and effective parent or are concerned about their choice of future partners, you can nominate an alternate guardian in your new will.

General Concerns

Divorce can be a stressful process and adding more tasks may seem onerous. However, these estate planning steps are extremely important. In the long run, getting them done may help avoid unpleasant, larger problems for you and your loved ones.

Estate Planning Updates